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01/11 03:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong growth in key segments like Tax & Accounting and Corporates, with solid EBITDA margins and free cash flow. The Q&A reveals a positive outlook on AI adoption and strategic M&A, while maintaining guidance. Despite some unclear responses, the overall sentiment is positive due to revenue growth, strategic focus on AI, and potential shareholder returns through dividends and buybacks. The absence of negative surprises or lowered guidance further supports a positive stock price movement.
Total company organic revenues Rose 7% year-over-year, driven by growth in the Big 3 segments (9% growth).
Adjusted EBITDA Increased 5% to $678 million, reflecting a 70 basis point margin increase to 37.8%, attributed to healthy operating leverage and timing of expenses.
Legal organic revenue Grew 8% year-over-year, driven by continued momentum from Westlaw, CoCounsel, and solid Government growth.
Corporates organic revenue Grew 9% year-over-year, driven by offerings in Legal, Tax, and Risk portfolios and the segment's International Businesses.
Tax & Accounting organic revenues Grew 11% year-over-year, driven by Latin American and U.S. businesses.
Reuters News organic revenues Rose 5% year-over-year, with contributions from all major lines of business.
Global Print organic revenues Declined 7% year-over-year, meeting expectations.
Adjusted EBITDA for Big 3 segments Was $621 million, up 7% year-over-year, with the margin rising 130 basis points to 42.3%.
Reuters News Adjusted EBITDA Was $45 million, with a margin of 20.8%.
Global Print Adjusted EBITDA Was $41 million, with a margin of 36%.
Adjusted EPS Was $0.87, up from $0.85 in the prior year period, with no currency impact.
Free cash flow (first half of 2025) Was $843 million, up 4% from $812 million in the prior year period, driven by higher EBITDA.
Agentic AI: Thomson Reuters introduced agentic AI capabilities into their legal and tax accounting portfolios, enabling complex multistep tasks and improving efficiency and effectiveness.
CoCounsel for Tax, Audit, and Accounting: Launched in June, this platform automates tasks like client file review and compliance checks, leveraging proprietary content and AI.
Ready to Review and Ready to Advise: New AI-powered tools for tax preparation and advisory services, aimed at automating manual tasks and generating incremental revenue for CPA firms.
CoCounsel Legal: A unified AI offering combining Westlaw, Practical Law, and other tools to enhance legal workflows, including new capabilities like Deep Research and guided workflows.
International Business Growth: Tax & Accounting organic revenues grew 11%, driven by Latin American and U.S. businesses.
Government Sector Expansion: Achieved in-process status for the U.S. FedRAMP program, enhancing cloud security compliance for federal agencies.
Revenue Growth: Total company organic revenues rose 7%, with the Big 3 segments growing by 9%.
Profitability: Adjusted EBITDA increased 5% to $678 million, with a margin rise to 37.8%.
Free Cash Flow: Free cash flow for the first half of 2025 was $843 million, up 4% from the prior year.
Capital Allocation: Repaid a $1 billion maturing bond issue and maintained a net leverage of 0.5x, with $10 billion capital capacity through 2027 for potential investments.
AI Integration: Focused on embedding AI capabilities deeper into product offerings to enhance customer workflows and efficiency.
Market Conditions: The company faces a decline in print revenue, which decreased by 7% year-on-year. This indicates a potential challenge in adapting to the digital transformation of the industry.
Regulatory Hurdles: The company is working to meet the rigorous cloud security requirements of U.S. federal agencies through the FedRAMP program. Achieving compliance is critical but poses a challenge due to the stringent standards.
Economic Uncertainties: The company’s financial performance is subject to risks from currency fluctuations, as highlighted in the discussion of revenue growth before currency adjustments.
Strategic Execution Risks: The company is heavily investing in agentic AI and other innovations. While these initiatives are promising, they carry execution risks, including the ability to successfully integrate AI into workflows and achieve customer adoption.
Competitive Pressures: The company is introducing advanced AI-driven products like CoCounsel and Westlaw Advantage. However, the competitive landscape in AI and legal-tech solutions is intense, which could impact market share and profitability.
Organic Revenue Growth: The company reaffirms its full-year 2025 organic revenue growth guidance of 7% to 7.5%, with the Big 3 segments expected to grow approximately 9%. For Q3 2025, organic revenue growth is projected to be approximately 7%.
Adjusted EBITDA Margin: The adjusted EBITDA margin for 2025 is expected to rise by 75 basis points year-over-year to approximately 39%. For Q3 2025, the adjusted EBITDA margin is projected to be approximately 36%.
Free Cash Flow: The company expects free cash flow of approximately $1.9 billion for 2025.
Depreciation and Amortization: Depreciation and amortization of computer software is now expected to be slightly lower, in the range of $825 million to $835 million, with $625 million to $635 million related to internally developed software.
Net Interest Expense: Net interest expense is expected to be approximately $130 million for 2025, down from the previous guidance of $150 million, due to higher-than-forecast interest rates benefiting interest income.
2026 Financial Framework: The company remains confident in its 2026 financial framework, targeting organic revenue growth of 8% to 9% for Legal Professionals, 9% to 11% for Corporates, and 11% to 13% for Tax & Accounting professionals.
Dividend Program: No specific mention of a dividend program or changes to dividend policies was made in the transcript.
Share Buyback Program: No specific mention of a share buyback program or repurchase activities was made in the transcript.
The earnings call highlights strong financial performance with increased EBITDA and EPS, despite a slight decline in free cash flow. Positive customer response to new products and confidence in achieving growth targets bolster sentiment. The Q&A reveals management's optimism about overcoming sales challenges and maintaining essential government contracts. While there are some uncertainties in government spending, the overall outlook, including AI investments and margin improvements, is positive. Given these factors, a positive stock price movement is expected over the next two weeks.
The earnings call highlights strong growth in key segments like Tax & Accounting and Corporates, with solid EBITDA margins and free cash flow. The Q&A reveals a positive outlook on AI adoption and strategic M&A, while maintaining guidance. Despite some unclear responses, the overall sentiment is positive due to revenue growth, strategic focus on AI, and potential shareholder returns through dividends and buybacks. The absence of negative surprises or lowered guidance further supports a positive stock price movement.
The earnings call shows steady financial performance with organic revenue growth and stable cash flow. However, the decline in margins and print revenue, along with unclear management responses on future opportunities, temper positive sentiment. The Q&A reveals no immediate demand changes but highlights uncertainties in the economic backdrop. Overall, the mixed signals from financials and management's cautious outlook suggest a neutral sentiment for the stock price movement.
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