Thomson Reuters Corp. Q3 FY2024 earnings call

• Good momentum in third quarter with organic revenues up 7% and Big 3 up 9%. Modestly increasing full-year 2024 organic revenue growth outlook to approximately 7%, including ~8.5% for Big 3 segments.
• Key products like Practical Law, Confirmation, Pagero, indirect tax and international businesses had double-digit growth. Interest in Generative AI offerings remains strong with Westlaw Precision and CoCounsel momentum.
• Investments in AI running at over $200 million annualized. Acquisitions of Safe Sign Technologies and Materia to accelerate Generative AI roadmap. Sale of FindLaw business to focus on strategic priorities.
• Made progress on product roadmap with launch of CoCounsel 2.0, CoCounsel Drafting, Checkpoint Edge with CoCounsel and Claims Explorer tool in Westlaw Precision.

The Big 3 segments delivered 9% organic revenue growth. Legal organic revenue grew 7%, driven by Westlaw Precision and CoCounsel. Corporates organic revenue grew 10%, with Trust, Practical Law, Direct and Indirect Tax and international businesses as key contributors. Tax & Accounting had 10% organic revenue growth, with Latin America business, ONESOURCE, UltraTax and Confirmation as key drivers. Reuters News organic revenues rose 8%, boosted by transactional revenue from additional Generative AI content licensing agreements. Global Print organic revenues declined 6%, in line with expectations. The Big 3 segments contribute significantly to overall revenue, with their organic growth rates being a major factor in the company's performance.

• Modestly increasing full-year 2024 organic revenue growth outlook to approximately 7%, including ~8.5% for Big 3 segments.
• 2025 planning: Expect effective tax rate to be approximately 19%-19.5%, up from ~18% in 2024. Cash tax rate expected to increase similarly but remain ~5% below effective tax rate.
• Fourth quarter outlook: Expect organic revenue growth of approximately 5% and adjusted EBITDA margin to be approximately 37%.

• Risks and uncertainties in reports and filings, including impact of interest rates on share buybacks. Integration risks associated with acquisitions like Safe Sign Technologies and Materia. Seasonal mix of revenue affecting segments like Corporates and Tax & Accounting.

Q: Question on M&A, specifically about being more comfortable with larger AI deals and risk-reward.

A: Steve Hasker mentioned they've spent $2.2 billion on recent deals, will be rigorous in identifying larger deals meeting criteria. Mike Eastwood added about financial capacity and integration capacity.

Q: Question on 15% of ACV from GenAI-enabled products and where it should grow.

A: Steve Hasker said 15% primarily relates to Westlaw Precision AI, Practical Law Dynamic, and growing CoCounsel, expecting continuous expansion with acquisitions.

Q: Question on margin impact from organic vs inorganic in Q3.

A: Gary Bisbee indicated there was a combination of organic and inorganic impact but would follow up later.

Q: Question on NCIB program and Casetext performance.

A: Mike Eastwood said no NCIB expected in Q3/Q4, timing in 2025 based on interest rates; Steve Hasker said Casetext is on track with good growth in CoCounsel and extensions into other suites.

Q: Question on FindLaw sale and strategy with small law firms.

A: Steve Hasker said no shift away from small law firms, Aaron Rademacher's team is doing well, and FindLaw was a distraction. Mike Eastwood emphasized small law firms are a significant part of legal revenues.

Q: Question on CoCounsel pricing and monetization of GenAI.

A: Steve Hasker said pricing is based on value, prefers enterprise-wide pricing, and focused on customer benefit with GenAI capabilities driving growth.