Good day, and welcome everyone to the Thomson Reuters, First Quarter 2022, Earnings Call. My name is Matt, and I will be your Operator today. During the presentation, your lines will remain on listen-only. [Operator Instructions]. I'd like to advice all parties that this conference is being recorded. And with that, let me hand it over to Gary Bisbee, Head of Investor Relations. Please go ahead, sir.

Thank you, Matt. Good morning, everyone, and thank you for joining us today for our first quarter 2022, Earnings Call. I'm joined by our CEO, Steve Hasker, and our CFO, Michael Eastwood, each of whom will report our results and take your questions following their remarks. Today, we'll have to get through as many questions as possible. We'd appreciate it if you'd limit yourself to one question and one follow-up when we open the phone lines later. Throughout today's presentation, when we compare performance period-on-period, we discuss revenue growth rates before currency, as well as on an organic basis. We believe this provides the best basis to measure the underlying performance of our business. Today's presentation contains forward-looking statements and non-IFRS financial measures. Actual results may differ materially due to a number of risks and uncertainties discussed in reports and filings that we provide from time-to-time to regulatory agencies. You may access these documents on our website or by contacting our Investor Relations Department. Let me now turn it over to Steve Hasker.

Thank you, Gary and thanks to all of you for joining us today. Before I begin with a review of our Q1 results, I must recognize a Reuters news colleagues and express our great appreciation for the difficult but important work that they're doing on the ground in Ukraine to provide a school with unbiased and reliable news, video imagery. Their efforts, which comments significant personal risk exemplify the best of our company purpose, which as you know, is to inform the way forward in the principles of trust and transparency that all of us at Thomson Reuters, a chart aspire to achieve. Now on to our Q1 highlights. I'm pleased to report that the momentum that built throughout 2021 continued in the first quarter of 2022, with by sales and revenue exceeding our expectations. Four of our five business segments again, recorded organic revenue growth of 6% or greater and the total company organic revenues grow 7%. A big three business segments also grew 7% organically. We have growing conviction that our businesses are benefiting from a significant prevailing tailwind driven by a step change in the complexity of regulation and compliance in our legal tax and risk related markets. The resulting need to trusted, accurate, and actionable content and technology plays to our strengths. As to the accelerating trends of digitization and changing ways of work. When combined with our Change Program progress to date, and an increased focus on innovation, these tailwinds position as well in our recent momentum. Due to the Q1 revenue strength and healthy book of business or ACV growth, we are rising our full-year revenue outlook. We now see total revenue rising by 5.5% and Big Three revenue by 6.5%, up from our prior views of 5%, 6, and 6.5% respectively. We maintained…

Thank you, Steve. And thanks for joining us today. As a reminder, I will talk to revenue growth before currency and on an organic basis. Let me start by discussing the fourth quarter revenue performance of our Big three segments. Revenues rose 7% organically and at constant currency for the quarter. This marks the fourth consecutive quarter of Big three segments have grown at least 6% Legal Professionals total revenues increased 5% and organic revenues increased 6%. Organic growth was driven by Practical Law, Fine Law, and our government RFC, systems. Westlaw Edge continues to add about 100 basis points to Legal’ s organic growth rate is maintaining a healthy premium and is expected to continue to contribute at a similar level going forward, supported by the planned release of Westlaw Edge 2.0 during the second half of this year. In our corporate segment, total and organic revenues increased 8% for the quarter, with both recurring and transactional growing 8%. Corporate’s growth benefited from transactional revenue strength that is unlikely to recur at Q1 levels. However, recurring revenue growth of 8% continues the momentum that began in the second half of 2021. Recurring revenue was driven by clear Practical Law and indirect tax. And finally, Tax and Accounting's total and organic fourth quarter revenues grew 11% with Latin America again, leading the momentum. Please note the return to April tax filing deadlines last from May in 2021, increased growth by approximately 1.5%, which will be first in Q2. Moving to Reuters News, total and organic revenues increased 9%, primarily due to our professional business, and the increase in our LSEG user agreement. Lastly, global [Indiscernible] total and organic revenues were flat to prior year period ahead of expectations. Higher third-party revenues for printing services, and timing of new sales growth…

Thanks, Steve and Mike. Matt, we're ready to begin the Q&A portion of the talk.

Thank you, Gary. [Operator Instructions]. And the first one is coming from the line of Vince Valentini from TD Securities. Please go ahead.

Yes, thanks very much great quarter. I'll leave it to others to ask about that, just given the environment in the tech sector and multiples collapsing and a lot of spaces, I'm wondering if you can give us any update on acquisition targets. I assume this is potentially good news scenario for you guys with the cash rich with a strong balance sheet and looking for strategic acquisitions that will bolster your growth. Is there any hope that these things are getting more eminent given what valuations we're doing?

Thanks Vince Valentini, thanks for the question. Look, I think we're closer for two reasons. One, we're now quarter through the Change Program and building confidence in the capabilities with building, and our execution will be contained. And we think that the further we get along that journey, the more an open advantage to acquire [Indiscernible]. And so we're making good progress there. And secondary, as you say, there's been some pretty significant changes in public valuations and but potentially towards the end of this year, private technology-related valuations. So I think both of those two things provide us with some optimism that we'll be able to one or more acquisitions that additive to the customer experience that we provide.

I will just supplement that as a reminder to everyone, the first tranche to the El Sachs date, the lockup expires too on 2023 as we've previously stated, it's our intent to monetize the first day, which is approximately one-third in Q1 on '23. The second item I would emphasize, that as Steve mentioned in his prepared remarks, depending on the cadence to sequencing of acquisitions, we still have the option of considering additional share buybacks comparable to what we did in 2021.

Could I just clarify one thing you said, Steve, that public valuations have come down and you're expecting private valuations could come down later this year. Does that comply while you haven't seen them come down yet?

Well, there's always a gap between the expectations of sellers which tend to lag, and the expectations of buyers which price in any declines pretty quickly. So we haven't seen any significant transactions that would indicate just yet that that correction has occurred, but we think it might.

Thank you.

And the next question is coming from Heather Balsky from Bank of America. Please go ahead.

Hi. Can you share some color in terms of the demand you're seeing from your customer base in legal and accounting as well? And there's general concerned about state of the economy and things slowing with rising rate. I'm curious, just what you've seen in the past in terms of your customers demand in a slower economic environment. Thanks.

Yeah. Let me start -- it's Steve, let me start and perhaps Mike can provide some more historical context because he was the TR during the [Indiscernible] financial prices. We continue -- I alluded to this in my remarks, we continue to see robust demand for our solution in all Big three segments. And it's really being driven by the need to automate and simplify their workflows. And excess content that gives them a competitive advantage and allows them to be more efficient and effective in their work. We can sort of coming through and coming out of COVID, that trend continues uninvited. So far this sort of turbulence in the broader geopolitical and macroeconomic environment has not translated into any sort that demand in any of the three segments. And I just point to the fact that 80% of our revenues are recurring. And so that gives us, I think real confidence through the rest of this year and justification for rising our revenue guidance. So all of the businesses you follow, we're in the robust category because of that 80% recurring revenue. But let me ask Mike to supplement based on our historical I experienced through difficult economic times.

And Heather, I'll add an additional two points addition to Steve's point on 80% recurring growth. The key factor with that 80% recurring is that Multiyear Contracts as a reminder, approximately 60% of our Legal revenues under Multiyear Contracts, about 40% of our Corporate's revenue multiyear and 10% of Tax and Accounting is multiyear as a key point. The second point, Heather, we saw really strong Q1 net sales, and that's far early indicators of a strong April results there. So based on that, Heather, remain positive, we'll have to continue to monitor it, obviously, throughout Q2 and the full year. But I think the strength of our multiyear contracts certainly helps us.

Thank you. And a follow-up question on the margin guide. You talked about inflation being one of the factors that led you to maintain at this quarter for the full year. But curious of your ability to take price against that, and is it a timing issue? I'm just curious of what's going on there.

Yeah. Certainly, Heather, in regards to the margin I'll mention a few items. You touched on the potential for inflationary headwinds but another key factor for us is the opportunity to make additional investments in our businesses to support our customers. That's something that we'll continue to assess. Specifically regards to inflation. I'll touch on two aspects. The pricing that you mentioned, I'll also add some color in regards to the cost side. On pricing, our pricing in Q1 was fairly consistent with prior year as it was up slightly. But the strength of the revenue was really the underlying performance of the business. So a slight uptake in pricing as we go through the full year, our current estimate is a slight uptake versus 2021, but not hugely significant as a reference point in 2021, our price increases which vary by segment tax and accounting was 5%. Our corporate segment 3%, and legal 2.5%, yielding the weighted average there. On the cost side, we did provide higher merit increases in April of this year, which is our annual increase there and if you look at the supply, traditional supply-chain impact, our print business, we refer to it as the 3Ps print, paper and postage, certainly we are seeing higher price and costs there in the print business, which is about 10% of our total revenue. Given all of those potential inflationary factors Heather we have considered those in our updated guidance for 2022, and when we reaffirmed our guidance for 2023. So based on what we know on the potential inflationary factors, Heather, we think we've been prudent in factoring into our margin and full guidance for '22 and '23.

Okay. Thank you.

The next question is coming from Drew McReynolds from RBC Capital Markets. Please go ahead.

Yes. Thanks very much. I have two follow-ups, sir, for me, just following upon Vince's M&A question. First, thanks for the drill down on the legal and particularly Legal Solutions business. Very helpful. I think for those that have followed some of your M&A over the years, finding things like Practical Law are just amazing assets that generate that kind of growth over years and years. Wondering, I guess for you, Steve, if you've identified Practical Law like assets out there, or are these more difficult to find just in general, just with love to get that context and then second follow-up we have all known kind of complexity drives the end markets for legal tax and accounting. You're going through a kind of post COVID work from home period, just even bigger picture than that. Where else is the complexity growing in these end markets? I just wanted to just better understand more of that bigger picture structural tailwind. Thank you.

Thanks, Drew. Great questions. no two acquisitions are the same obviously, but what we're seeing amongst our law firm customers in particular, but increasingly the General Counsels offices as well, is a real need to invest in technology and workflow software. And to have the content flow seamlessly through that software. So we think there's combination of unique content, AI machine learning, and software is a very valuable play at this time. And it plays to some degree in your second question. The law firms, financial institutions and Thomson Reuters and business information services product are finding their footing in a post COVID world. But certainly a world that involves more time back in office than the last two years. And with that comes more technology investment, in a potentially less real estate investment in more technology investment. So we think that there will be quite a few opportunities for us to build organically and buy inorganically in the space. I think the one while not a direct parallel to Practical Law is Fortress. We look at this area of contract analysis its enormously time consuming for General Counsels, and for law firms turns to go through 100s, if not 1,000s of contracts when the law and the regulation changes. And be able to quickly and seamlessly update them and have confidence that that process has been effectively and correctly done, and so it's a big area of demand. I've had a conversation with a number of our legal customers and described for [Indiscernible] the investments that we're going to make in it and what the outcomes of that will be and they are excited about it, so we'll see how that plays out. In terms of your second question, look I -- whether the good [Indiscernible] or not, we certainly see lots of examples of increasing compliance related complexity. So cyber is one area where getting comfortable with data management projects [Indiscernible] and management of cyber related risks. The legal landscape gets more complicated in terms of rules and regulations, not less for corporations, big, small, and medium. And we don't know of many tax codes that are getting simpler. And so it really is across our business that we see this rising complexity. And what that presents in a inflationary environment and a talent constrained marketplace is that company -- companies need reliable partners to help them handle that complexity. [Indiscernible], take it off of their plate, and that's what we're here to do. And we think we're one of the few players who can do it effectively at scale in a truly trusted, and transparent manner.

Yes, that's helpful. Thank you.

Thanks, Drew.

And the next question is coming from Kevin McVeigh from Credit Suisse. Please go ahead.

Great. Thanks so much and congratulations on the Change Program. Hey, I'm wondering, can you give us a sense? Because obviously things have changed a lot since you started the Change Program. I want you to talk about maybe retention a little bit across the enterprise. Can we talk about that and then maybe pricing expectations today versus when you started the Change Program? Maybe just a little more color around again, retention in pricing as we're working our way through change.

Sure, Kevin. Let me start with the regards to retention. I believe Kevin back March of '21 at Investor Day, we estimated that we could improve our overall retention for total TR by roughly 100 basis points over the time horizon. We're at approximately 91% today, which is a slight uptick over the last 12 to 15 months. We remain optimistic, Kevin, in regards to being able to achieve that full 100 basis points left. And I think it's directly correlated to the work that we're doing with Kirsty Rob, Andrew Pierce, Crystal and others in regards to our customer experience, and we're continuing to do that. So I think we're on the right trajectory Kevin, on improving our retention. As we've discussed before, our retention does vary by customer size with significantly higher retention for large customers, lower retention for the smallest customers. But that's where the work that we're doing with digital self-serve in the overall end-to-end customer experience, we remain optimistic that will help us not only with retention, but also attract new customers and new logos. Our second question there on regards to pricing, consistent with what I shared with Heather. Let me just repeat that for everyone's benefit, Kevin, a slight uptick in our pricing in Q1 versus 2021, It does vary by segment, as I mentioned, tax and accounting about 5%, corporate is 3% and legal 2.5%. Based on what we see right now over the course of the year, we see a slight uptick for the full year compared to last year. One factor there is the multiyear contracts that we talked about earlier in one of the questions. As we do implement some price increases for multiyear contracts, will certainly be a timing impact as to when that price is realized. Kevin I think those were the two questions on retention and pricing. And Steve may want to touch on the last one. Steve -- Kevin, you initially talked about the change in program. If we largely look at the work streams that we started on the Change Program 15 months ago, we're continuing to march on each of those. Certainly, have we learned things in our various puts and takes there are, and we pivot along the way. As you would expect us to there. But we're remain on track and a lot of heavy lifting remaining for the year, but I think we'll be in a really good spot. Kevin, at the end of '22 on the Change Program, Steve may want to have some comments.

Yeah. Tim, just to supplement, I think [Indiscernible] Mike, [Indiscernible] with the Change Program, I am surprised at how correct our assumptions were going in, that’s [Indiscernible] any arrogance, but when you design one of these programs, there's a lot of you don't know and there's a lot of assumptions you have to make. And I think credit to Kirsty Roth and Andrew Pierce and many others for that initial design work. But in each of the works-range, this customer experience upgrade, the modernization ops and tech, in the [Indiscernible] location [Indiscernible], all of those have changed in some degree and all of those have required problem-solving and some pivots. Perhaps the biggest one has been the [Indiscernible] Design and location. I think we're staring at a very significantly more fluid and flexible working environment than we were when we launched the program through the pandemic. There was an assumption that things would return to some version of what they were before. Whereas I think as we sit here today, we realize that we're in a hybrid working environment that just won't resemble the 2019 work environment. We've got very significant -- we're providing our colleagues with much more flexibility in terms of where they -- from work and how they work together in service of our customers. And that affords us -- the company more flexibility in terms of investing in real estate and physical locations.

Kevin, last point I would make with some of the town like [Indiscernible] that we've joined and looking at our product development roadmaps and the timing of the leases and frequency thereof. To me, that's probably one of the positive factors that we have as we think about our product development roadmap over the next couple of years. So I think that's a key factor.

Thank you so much.

The next question is coming from Andrew Steinerman from JP Morgan. Please go ahead.

Hi. Good morning. This is Stephanie Yee sitting in for Andrew. Just a question on your public cloud migration, can you give us an update there? Is it progressing on track, is it accelerating just any color you can provide on that front?

Yeah. Stephanie, it's ahead of track. So as you may remember, we got to about 33%, I think by the end of last year and that continues to accelerate. And we're looking at -- we're at about 50% now. We're looking to get 90% plus up by the back end of 2023. So we're on track with that. I think what it does, is it provides us a bit of flexibility as to whether to continue to invest in that and accelerate it further, or to use some of that progress that's a little ahead of where we thought we'd be to accelerate some other areas. And that's one of the areas that we'll solve for the next few months. But we are very happy with the way that's going and it's ahead of track. And I think it provides us with increased confidence that we can use it to support the rate of innovation, particularly for our top couple dozen products.

Okay, great. If I can just ask one more on Practical Law. Can you talk about the geography difference in terms of the traction you're gaining? I think it had great adoption in the UK. It was a little bit more nascent and the U.S. a few years ago. Have you seen most of the pickup and adoption being in the U.S. or can you just comment on the geographic split in terms of the customer mix.

Yeah. I made a mistake, when we bought the company, it was predominantly, if not entirely, UK based offering, though it was built on practical know-how of UK law, and one of the things that Thomson Reuters has been able to do is bring that the United States and ramp it up very significantly. So we've done the same in other markets like Australia and so forth. So I think a big -- it's an interesting proof point for us because it does just that we can take an acquired asset that's perhaps a bit constrained, to our single markets, geographic market and we can really make great, great value by bringing it to other markets. I think the other example where we are well underway and doing that is High-IQ, which we bought back in 2019 and one of the things was also a UK focused work legal workflow software offering. And some of the biggest growth we've seen for IQ expat with both terms and general counsel's office this year, the tech. So we've taken out replicated that with IQ as well.

Yeah, Stephanie, I'd add one additional dimension. You asked specifically about geography and maturity and penetration there, kind of a dual path, there is the maturity level with law firm sources, General Counsels that Steve just referenced. We have stronger growth right now with General Counsels as there is additional opportunity, the further the penetration there. So think of as a dual access, Stephanie, geographic expansion, but also General Counsel versus law farm.

Okay. Great. That's awesome. Color. Thank you.

And the next question is coming from Aravinda Galappatthige, from Canaccord Genuity. Please go ahead.

Good morning. Thanks for taking my question. I wanted to ask you a little bit about SME exposure, staying within the subject of some concerns around macro level slowdowns. I wanted to get a sense of how you seeing the attraction in the SME space. And can you just update us or remind us about the exposure you have to SME level customers. And then a quick follow-up. To the extent that you can discuss this on Westlaw Edge 2.0. Very generally, how much of a step-up are we talking about in terms of the product? Obviously, that would manifest itself in pricing and ARPA as well. But any kind of color you can provide on that front will be useful. Thank you.

I'll start and Michael supplements you and so on SME. We have strong presence amongst small law firms, strong presence amongst small tax, particularly small tax and accounting. We have, I think modest but very promising presence amongst small to medium enterprises in the corporate sector. So you have to differentiate as to the talking about that professional services firms and base size versus the corporates. We think the SME sector itself and that's would incorporates is led by an executive Brad ROA. Our brand-news team are doing a good job, but it's a modest. We have a modest starting point. We think there's lots from upside there. We're not overly exposed to that segment should it take a disproportionate hit, hitting more difficult economic climate. I'm sure Michael will supplement that. Hits on Westlaw Edge -- What we want to today is to sort of go into any significant detail as to what that product is for sort of kick competitive reasons. But the early testing we've done with customers have very good processing and suggests that will continue the trajectory that we've, that we and our customers have enjoyed in terms of Westlaw Edge rate, 1.02 will be at least that sort of value add to customers in the experience that headwind product.

Aravinda, we plan to launch our Westlaw Edge 2.0 in the second half of this year. At time, Paul Fischer, our President of Legal Professionals, David Wong, our Chief Product Officer, will do some external launches there with and we'll share more there. I think from a financial lens perspective, Westlaw Edge 1.0, we've been sharing consistently has been generating about 100 basis points of organic growth for us, very consistently, over the last four years since we launched it in July of 2018, we fully assume and we have strong confidence that Westlaw Edge 2.0 will continue that. So the 6% organic growth that legal has now achieved for four consecutive quarters, we believe will continue for the full year, 22 and into 2023. So we do not believe there will be any drop-off and legal Professionals organic growth as we shift into Westlaw Edge 2.0.

Thank you.

The next question is from Toni Kaplan from Morgan Stanley. Please go ahead.

Is Greg Parrish on for Toni. Thanks for taking our question and congrats on a strong quarter. Wanted to ask about government has been a strong growth driver for you for some time now. Do you talk about what's driving this strong growth? What you're expecting for the next few years and just maybe broadly about the sustainability of the growth? Thanks.

Yes, thanks. Thanks Greg. So look, I think what sort of drives the growth, and will sustain the growth is an extraordinarily -- extraordinary, and enduring set of relationships with key government agencies. Steve, we believe and his team have been at it for a long time and have fantastic general relationships, that are by-partisan, that are enduring. And they've built on trust, and they've built on delivery. So we think that that sort of positioning and growth trajectory are eminently sustainable. The business today includes a number of things, including the CLIA franchise, which is a unique dataset, a unique franchise. Thomson Reuters Special Services, TRSS, through a security clean set of analysts, very, very talented set of analysts, with a track record of highly impeccable work. And of course, the Pondera acquisition that we made in 2020 among other things. We'd see -- we see real growth and upside in all three of those. And in fact, we'd love to further invest in those businesses within the rubric about risk fraud and compliance broader franchise. We both apply that to government agencies and to the paint to the corporate sector. The last part of it is the acquisition of case lines, which is the automation of the activities of the courts. And we see lots of promise and activity outside of the United States important even in the court systems. And we see some inside the United States stage like Arizona reflect quickly. A number of other states core systems are very much analog in appearance today and moving quite slowly towards a digital future. So we'll be there with important when they're ready. But certainly the progress we've seen in the UK, in Canada, and in places like South Africa has been more robust in the court systems.

Greg, I'll add two additional points. Westlaw is also a contributor to the government growth. Steve [Indiscernible] and team have done a great job of penetration of Westlaw Edge into Q4, at the state and federal level. You specifically asked Greg about sustainability in the next few years, we have strong confidence there based on the visibility of current pipeline, the product road maps, etc. At 9% organic growth for government in Q1, we anticipate double-digit for the full year. And if you look into 2023, we would expect a similar 10% type organic growth for government Greg.

Great, that's very helpful. Thank you. And for my follow-up, I wanted to about cross-sell. I think Mike, you talked about the 15% of your revenue being generated from cross-sell. This is maybe a year ago that you said that, want you -- maybe there's an update there and broadly, where do you think that figure could get to over time, how big of a driver can it be? Does digital self-serve -- can that bring that number higher and then maybe you just talk about how much can that contribute to organic growth? Thanks.

Yes, Greg, about 15 months ago I shared the roughly 15% of our gross sales activity driven by cross-sell activity. That's in the 20% range today, Greg, and we do see that continuing to rise. We've made additional investments in talent and tools and systems in regards to our commercial excellence, commercial policy area that will help fuel that. A little early today, Greg, for me to give you a long-term view on what it could be but I can safely say I see sustained increased opportunity as we move over the time horizon in each of our segments there. You mentioned the digital self-serve that will definitely help us with cross-sell activity, but also the work that we're doing with product. Once again, with David Wong, probably [Indiscernible] on the design side, so I think it's part of that product innovation that's also an element of cross-sell that will definitely help us, [Indiscernible] Greg.

Great, thanks so much and congrats again.

Thank you, Greg.

And the next question is coming from Douglas Arthur from Huber Research. Please go ahead.

Yes, thank you. Steve, a lot of your information services list of lowered guidance for 2022. Are your really -- your business mix is a lot more resilience as shown by your guidance change. So I guess the question is, on the margin, what's sort of -- if some softness in demand developed later in the year in legal or corporates, particularly, what's sort of areas would you be tracking to see if there was any softness in demand? I assume that's mostly on the project side.

Yes. You have [Indiscernible] It's worth remainder of reminding me IDs of our revenues are recurring. So I understand your question, but it is a very small portion of our business and that's not to say we're not focused on weeding every customer every day and increasing our retention thinking process where we can fundamentally Permian customer experience to drive bit our NPS and more receptivity to our innovation. We're focused on all those things. And I don't want to let the 30% recurring revenue, via source of [Indiscernible] or licensee. It's not placed on tech then from apps, but this is a business that provides an enormous amount of forward visibility. So I can't give you a good answer. I don't think there are particular areas that we look at and say that could be a problem. Reuters used to the extent we're selling advertising will always involve a transactional nature to it and rise and fall as Ed markets do. And print courses long-term secular decline. And so we're carefully monitoring trajectory of that and we see that being on a fairly manageable glide path at the moment. Then our transactional revenue. Yes, there's a degree of variability to it. We had some benefits from that in the first quarter. But gentlemen, these are all low, they are transactional there, they are essential services and software and content for our customers so much of it it's not optional so that gives us some confidence as well.

Okay, makes sense. I appreciate the answers. Thank you.

And there are no further questions in the queue.

Okay. Great. Well thanks everyone for their time and we're around for follow-ups as needed. Have a nice day.

Thank you so much, everyone. That marks the end of your conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of your day.