Thomson Reuters Corporation Q2 FY2025 earnings call

Key Points

• Good momentum in Q2 with 7% organic revenue growth, Big 3 segments growing 9%, margins ahead of expectations.
• Reaffirming full-year 2025 outlook for organic revenue (7%-7.5%), adjusted EBITDA margin (39%), and free cash flow ($1.9 billion), with updated interest expense and depreciation/amortization outlooks.
• Significant product launches with agentic AI in Legal (CoCounsel Legal, Westlaw Advantage) and Tax & Accounting (CoCounsel for tax, Ready to Review, Ready to Advise), automating complex tasks and improving efficiency.
• Repaid a $1 billion maturing bond issue, with net leverage of 0.5x at quarter end. Capital capacity of $10 billion through 2027 for inorganic opportunities.

Second quarter organic revenues grew 7%. The Big 3 segments delivered 9% organic revenue growth. Legal organic revenue grew 8% for the second consecutive quarter, driven by Westlaw, CoCounsel, and Government. Corporates organic revenue grew 9%, driven by Legal, Tax, Risk portfolios, and International Businesses. Tax & Accounting organic revenues grew 11%, driven by Latin American and U.S. businesses. Reuters News organic revenues rose 5%. Global Print organic revenues declined 7%. The percent of annualized contract value (ACV) from GenAI-enabled products was 22% at the end of Q2, up from 20% last quarter.

Forward-Looking Statements

• Reaffirm full-year 2025 organic revenue growth in 7%-7.5% range, Big 3 segments ~9%.
• Adjusted EBITDA margin to rise to ~39%, up 75 basis points year-over-year.
• Free cash flow expected to be ~$1.9 billion.
• Q3 organic revenue growth expected to be ~7%, adjusted EBITDA margin ~36%.
• Confident in 2026 financial framework with organic revenue growth targets: Legal Professionals 8%-9%, Corporates 9%-11%, Tax & Accounting 11%-13%.

No significant risks discussed in detail during the call.

Q: Can you give us a sense as of today, the percentage of workflow that's currently being automated versus what could be theoretically automated end-to-end?

A: Stephen Hasker notes that automation is relatively modest currently, varying by profession. Tax & Accounting has large portions automated but ancillary tasks, while Legal is at an earlier stage with potential to automate large portions of first draft processes.

Q: What percentage of your internal workflows are automated with AI or something equivalent at this point?

A: Stephen Hasker mentions internal AI tools are available to colleagues, with early successes in software engineering and customer support, but no exact percentage provided as it's early days.

Q: You mentioned the percent of ACV from products that are GenAI-enabled was 22% this quarter. Can you break it down directionally by segments?

A: Stephen Hasker states Legal has a larger portion, but Tax & Accounting and Audit have more interest due to acute talent shortages in those professions, presenting more uptake potential.