Q2 2021 Thomson Reuters Corp Earnings Call
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Good day, everyone and welcome to the Thompson Reuters.
Q2, 2021 and earnings call. My name is Sue and I'm. Your event manager joined the presentation. Your lines will remain on listen only.
Need assistance at any stage. Please key star Zero, and then operator will be happy to assist you.
I'd like to advise hope artists. The conference is being recorded for replay purposes, and now I'd like to hand over to Frank Golden Head of Investor Relations. Please go ahead.
Good morning, and thank you for joining us today for the second quarter of 2021 earnings call.
Joined today by our CEO of speed faster and our CFO Mike Eastwood.
Each of whom or what are the result will.
I'll take your questions following our presentation.
To enable us to get to as many questions as possible. We would appreciate it if you would limit yourselves to 1 question each and 1 follow up when we open the lines.
Throughout today's presentation, when we compare periods of performance period on period, we discuss revenue growth rates before currency as well as on an organic basis.
And believe this provides the best basis to measure of the underlying performance of the business.
On today's presentation contains forward looking statements and non <unk> financial measures actual results may differ materially due to the number of risks and uncertainties related to the COVID-19 pandemic and other risks discussed and reports and filings that we provide from time to time.
And the 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 <unk>.
Thank you Frank and thanks to all of you for joining us today.
Before I speak to our performance for the quarter.
I wanted to take a moment to acknowledge the loss of our much loved colleague and outstanding pull it surprised winning journalist Donnish siddiqi.
Donny was tragically killed while on assignment and Afghanistan last month.
The impact of his loss has been significant for all of us.
Especially as Reuters news colleagues and we will continue to on a memory.
Thank you for your respect and acknowledgment of done its just passing.
Now, we'll move to our financial performance for the second quarter and.
I'm pleased to report the momentum we saw and the first quarter the accelerated in the second quarter.
The strong performance was above our expectations.
And positions us well for the second half of the year.
The strong performance reflects several things.
First the.
The solidity of the valve franchises and must have products and our market positions.
Second the strength of the information services market itself.
Which is presenting us with opportunities to expand out positions and further accelerate growth.
Third the realization and conviction by our customers that they need to reapportioning their spend towards our products and solutions that can fit the workflow and drive growth and productivity and.
And finally customers of growing confidence and both and improving economic environment.
And their own future prospects.
So we're pleased with our first half performance, which increases our confidence in our prospects for the second half of the year and for 2022.
Now to the results.
Prevailing Taiwan, and the playing to our strength and contributing to strong revenue and sales growth.
The second quarter's total company organic revenue growth of 7%.
It was the highest and over a decade.
And the Big 3 businesses also grew at 7%.
This revenue growth was mirrored by strong sales growth across the company.
And as customers positioning themselves to meet expected demand.
We also continue to execute aggressively on our change program and achieved run rate savings of $19 million as of June 30th.
The program is on track.
And we will continue to ramp it up in the second half.
Given the strong first half performance, we are raising our full year guidance. We now forecast total company organic revenue growth between 4% and 4 of 5% and organic revenue growth for the big 3 of between 5.5% and 6%.
Total company EBITDA margin is forecast to range between 31% and 32% and the big 3 EBITDA margin is now forecast to be approximately 39%.
And free cash flow is now expected to range between 1.1.
And 1.2 billion.
Lastly, today, we announced a new $1.2 billion share buyback program.
If we were able to complete the buyback program this year.
We will of returned over $2 billion to shareholders in 2021, including dividends.
Quarter reported revenues were up 9% with organic revenue was up 7%.
Revenue growth was solid for each business segment, including strong growth from our Latin American and.
And Asia and emerging markets businesses.
And which grew organically more than 20% and 10% respectively.
Adjusted EBITDA increased 5% to $502 million.
Reflecting a margin of 32, 7%.
Excluding cost related to the change program. The adjusted EBITDA margin was 35, 4%.
The strong performance resulted in adjusted earnings per share of <unk> 48, compared to <unk> 44 per share in the prior year period.
Turning to the results for the segments.
As I mentioned the big 3.
<unk> organic revenue growth of 7% per the quarter of very strong performance.
Legal second quarter performance was impressive with organic revenue growth of 6% the.
The highest quarterly growth since 2008.
And building on 5% growth for the first quarter. The U S. Legal market is quite healthy, particularly and small law with sentiment continues to be strong.
And as attorneys anticipate solid demand over the next 12 months.
But the strong growth isn't the isolated small law, it's across the business small.
Mid and large firms government and across our product lines and geographies.
A few examples.
First with Florida continues to achieve strong sales growth.
And ended the quarter at 57% the ACB penetration compared to 52% at year end 2020.
We continue to forecast and ACB.
Trace and rate between 50% between 60% and 65% by year end.
And practical law as reported in the legal segment continued its strong performance growing double digits.
We forecast similar growth going forward.
And we continue to invest in the key growth initiatives.
Third our government business, which is managed within our legal segment continues to see good momentum and grew 8% organically with.
We forecast government's growth to accelerate in the second half of the year.
And fourth find law, and our businesses and Canada, Europe and Asia, All grew mid to upper single digit in the quarter.
Finally, legal also achieved very strong sales for both the quarter.
And half year recording double digit recurring sales growth, reflecting the strength and health of the legal market and our customers' willingness to spend.
Turning to the corporate business organic revenues grew 4% with.
We forecast revenues will accelerate in the second half of the year with healthy growth expected from our direct and indirect businesses risk the legal products sold into corporates and from Europe, Latin America, and Asia and emerging markets.
Tax and accounting of organic revenues grew 15%.
And then benefiting from a 43.
Percent increase and transactional revenues, primarily driven by the year over year timing of individual tax filing deadlines.
The recurring revenue growth was also strong at 9%.
Reuters news organic revenues grew 6% and the quarter of very good performance driven by the professionals business, including strong Reuters events of growth as it begins to recover from the negative impact from COVID-19 and 2020.
And global print organic revenues also grew 6%.
Partly due to an easier prior year comparable.
But also attributable to.
2 of gradual return to office by our customers and higher third party revenues.
In summary, it was the very strong quarter, and our businesses are and a solid position.
But we take nothing for granted and we still have much hard work to do and executing our change program.
Solid organic revenue growth this year and be able to achieve the growth of 6% to 8% by 2023. So.
So in closing.
And working to transform Thomson Reuters into a leading content driven technology company.
We're making good progress, but we still have much to accomplish.
We're off to a strong start and we're confident the 2021 is setting the foundation to position us to be able to consistently and sustainably drive strong operating and financial performance the builds value for our customers colleagues and shareholders the long term.
Let me now hand, it off to Mike who will discuss the second quarter's results in detail.
Thank you, Steve and thanks for joining us today.
As a reminder, I will talk to the revenue growth before currency and on on organic basis.
Let me start by discussing the second quarter revenue performance of our big 3 segments.
Organic revenues and revenues at constant currency were both up 7% for the quarter.
This marks the fourth consecutive quarter, our big 3 segments have grown at least 5% and.
And represents the highest growth of our bakery segments and over a decade.
Legal professionals revenue increased 7% and organic revenues were up 6%.
Recurring organic revenue grew 6% and transaction revenue increased 14% due to our west La practical law and government businesses.
Please note 60% of practical law of revenues are recorded and the legal professionals segment and 40% is recorded and the corporate segment.
Westwood all edge continue to contribute about 100 basis points, the legals organic revenue growth, while continuing to maintain a healthy premium.
And edge has now been adopted by all of U S Federal government courts, and by courts and 44 states.
Our government business, which is reported within legal and includes much of a risk fraud and compliance offerings had a strong quarter with total revenue growth of 10% and organic growth of 8%.
And our corporate segment total and organic revenues increased 4% led by recurring organic revenue growth of 5%.
Transactions organic revenue grew 1% due to a difficult prior year comparison, when <unk> 4 million of onetime clear revenue was recorded and did not reoccur this year.
We forecast corporate revenue to accelerate and the second half of the year.
And finally tax and accounting total and organic revenues grew 15%.
Growth was driven by the Latin the Ericsson businesses.
Audit solutions, which includes confirmation and a 43% increase and transaction revenues, resulting from the year over year timing of individual tax filing deadlines.
I will remind you last year pay per return on revenue shifted from the second quarter to the third quarter.
Normalizing for this timing organic revenues for tax and accounting or up 10% in Q2.
Moving to the orders news.
Total and organic revenue increased 6%.
Primarily due to our professional business, which includes orders events.
This performance was slightly better and we had anticipated.
And global print total and organic revenues increased 6% and the quarter.
This performance was better than expected driven by higher third party revenues were printing services.
And a gradual return to office by our customers.
Despite the higher performance, we still forecast full year revenues to decline between 4% and 7%.
On a consolidated basis second quarter total and organic revenues each increased 7%.
Before turning to profitability, let's look closer at recurring and transaction revenue results for the second quarter.
Starting on the left side total company organic revenue for the second quarter of 2021 was up 7% compared to a 2% decline and the second quarter of 2020 due to the impact of COVID-19.
If we look at Q2.2021 performance for the Big 3 you will see organic revenues increased 7%.
A strong performance and well above the 2% performance in Q2.2020.
Total company recurring organic revenues grew 5% and Q2.
210 basis points above Q2, 2020, and the big 3 recurring organic revenue grew 6%, which was above last year's second quarter growth of 4%.
Turning to the graph on the bottom right of the slide transaction revenues were up significantly year over year as the second quarter of 2020 was impacted by COVID-19, which affected our implementation services and the Reuters events business.
We continue to remain encouraged by the momentum in 2021, especially for recurring revenues given us confidence and the trajectory of the business and the sustainability of higher revenue growth beyond 2021.
We are also providing guidance for the third quarter, given the various impacts related to COVID-19.
Starting with the total TR chart on the top left.
We estimate third quarter total and organic revenues will grow between 3.5% and 4%.
The big 3 total and organic revenues are forecast to grow between 5% and 5.5% and the third quarter.
Victory growth will be slightly depressed due to the timing of tax and accounting of pay per return revenues in 2020 that shifted 6 million from Q2 to Q3 due to the delay and the tax filing deadline.
We forecast third quarter revenue growth of low single digit for tax and accounting.
On a normalized basis, we expect revenue growth of mid single digit for tax and accounting.
Moving to Reuters news, we forecast third quarter total and organic revenues to grow between 2% and 3%.
Driven by all the orders news business lines.
Finally, global print third quarter revenues are expected to decline between 5% and 8%.
And we forecast full year revenues to decline between 4% and 7%.
Turning to our profitability performance and the second quarter.
Adjusted EBITDA of the Big 3 segments was $487 million.
Up 14% from the prior year period, and the related margin increased 180 basis points due to strong margin improvement across each of the segments.
The strong EBITDA margin improvement for each of the 3 businesses was driven by higher revenue growth and a benefit from 2020 cost savings initiatives.
I will remind you the change program operating cost are recorded at the corporate level.
Moving to borders news.
Adjusted EBITDA was $35 million $10 million more than prior year period, driven by revenue growth 2020 cost savings initiatives and timing.
Global Print's adjusted EBITDA was $56 million with the margin of 37, 9% a decline of about 260 basis points due to higher costs and the dilutive impact of lower margin third party print revenue.
So in aggregate total company adjusted EBITDA was $502 million, a 5% increase versus Q2.2020.
The increase resulted from higher revenues, partially offset by change program costs, which I'll address in a moment.
The second quarter's adjusted EBITDA margin was 32, 7% and was 35, 4% on an underlying basis.
Excluding costs related to the change program.
This slide provides more granularity regarding our expectations for our reported adjusted EBITDA margin for the full year 2021.
For the first 6 months total company adjusted EBITDA margin was 34, 1% and the big 3 segments adjusted EBITDA margin was 45%.
On an underlying basis, excluding change program cost total company adjusted EBITDA margin was 35, 7%.
And as Steve mentioned, we are increasing our full year total company guidance for adjusted EBITDA margin to a range of 31% to 32% and for the big 3 segments to approximately 39%.
And while first half performance is impressive we continue to recommend you assess our adjusted EBITDA margin on a full year basis as we expect the margin to decline and the second half for several reasons.
First.
We expect to increase our investment and the change program.
And we'll have a negative impact of between 150 to 200 basis points for the total company.
Second we forecast additional business as usual investments outside of the change program and advance of 2022.
For example, we will invest more and go to market initiatives enterprise technology and data and analytics capabilities.
And this will dilute the margin between 150, and 200 basis points for the total company and between 202 hundred 50 basis points for the big 3 segments.
And finally savings from the change program are forecast to provide a benefit to total company and big 3 of adjusted EBITDA margin of 100 to 150 basis points.
We believe we have good visibility into the levers at our disposal to achieve our updated full year margin guidance and are confident and our ability to achieve our target of 31% to 32%.
Now, let me turn to our earnings per share free cash flow performance and change program cost.
Starting with earnings per share adjusted EPS was <unk> 48 per share versus <unk> 44 per share and the prior year period.
A 9% increase the.
The increase was mainly driven by higher adjusted EBITDA.
Currency had no impact on adjusted EPS and the quarter.
Let me now turn to our free cash flow performance for the first half.
Our reported free cash flow was $618 million versus $340 million and the prior year period.
And improvement of $278 million.
Consistent with previous quarters. This slide removes the the starting factors impacting free cash flow performance.
Workings on the bottom of the page upwards, the cash outflows from discontinued operations component of our free cash flow was $36 million more than the prior year period.
This was primarily due to payments to the UK tax authority related to the operations of our former refunded of business.
Also in the first half we made $28 million of change program payments as compare to refinish of related separation costs of $76 million and the prior year period.
So if you adjust for these items comparable free cash flow from continuing operations was $692 million.
311 million and better than the prior year period.
This increase primarily due to higher EBITDA.
Favorable working capital movements and dividends from our interest and <unk>.
Now and update on our change program costs for the second quarter and the rest of 2021.
Let me start by saying none of the annual estimates have changed from what we provided last quarter for the full year.
Standard and the second quarter was within the range provided last quarter at $71 million, including $41 million of Opex plus $29 million of Capex.
This brings the first half total spend to $91 million.
We now anticipate spending between 210 and $260 million and the second half Opex plus capex.
Spend is forecast the step up related to cloud migration and streamlining internal systems third party contractors to support the change program and higher capital expenditures.
For the full year, we expect change program spend opex plus capex to be at the lower end of the range of $300 billion to $350 million.
And there is no change and the anticipated split of about 60% of Opex and 40% Capex.
We will continue to provide quarterly updates on our change program spend as we move through the year.
Now and update on our run rate change program savings for the second quarter.
And the second quarter, we achieved $71 million of annual run rate operating expense savings.
This brings the total annual run rate operating expense savings up to $90 million will the change program.
We are currently on track with our run rate savings expectations.
As a reminder, we anticipate operating expense savings of $600 million by 2023, while reinvesting $200 million back into the business for a net savings of $400 million.
We will continue to provide quarterly updates on our annual run rate change program savings as we move through the year.
And as Steve outlined.
We increased our full year outlook for revenue growth margin and free cash flow, which is reflected on the slide.
Lastly, we reaffirm the balance of our full year 2021 guidance.
As well as our 2022 and 2023 guidance previously provided.
And we remain confident in achieving the targets for all metrics.
Let me now turn it back to Frank for questions.
Thank you, Mike and that concludes our presentation for the second quarter, So and we would now like to open the lines for questions. So Sue will bring it up the first question. Please.
Thanks Keith.
First question is from the line of Gary Bisbee.
From the BSA Securities. Please go ahead.
Hey, guys good morning.
Encouraging set of results here I guess, a couple of things stood out to me was the first I wanted to ask is just you talked about having had the strongest first half bookings and a while and yet a lot of.
The investments and change, we're making to improve the user experience and improve and innovate around the products haven't really taken hold yet so what's driving or are there any sort of either big areas of success are the themes, you're seeing that are driving the strong new bookings.
Yes.
Gary Thanks for the question I'd say, 2 things and I'm sure Michael supplement.
So the first is.
And we've seen.
A pretty.
The gradual but pretty constant and sort of improvement.
True.
Second quarter and the sentiment of our customers.
More confidence.
And making longer term investments and their own businesses.
And so that I think has helped.
The second having said that the last 2 weeks, obviously, there's been a bit of a shake the confidence, but we don't see any impact on net sofa.
On our businesses.
I think the second thing is the 7 growth initiatives that we called out at our Investor Day, We're starting to see I think the green shoots from from those investments and the focus on those areas.
And and we are increasingly optimistic about.
Those of those growth initiatives.
Gary I would just supplement with the little additional granularity and regards to the 7 strategic initiative practical law, which is split between legal professionals and corporate so as I mentioned.
10% organic growth and the second quarter Gov.
Government risk fraud, and compliance, which I mentioned, 8%.
Organic growth and the second quarter and that businesses driving to nearly 500 million for the full year.
Confirmation that we acquired in July of 19, along with high <unk> in July of 19 continued to perform very well confirmation part of the overall audit offerings that we discussed during Investor Day, Gary you mentioned in regards to the bookings very pleased with the overall net sales for the first and second quarter of this year.
The across the board, including within our corporate business corporate was up 4% and the second quarter as we go into Q3 Q4 based on the net sales improvement that we've seen in recent quarters. There we have high confidence that corporate will accelerate into Q3 Q4, but very pleased with the overall performance of our sales and account.
Management teams and the first half of the year on year.
Great. Thanks, and then the quick follow up just what changed and Youre thinking around the buybacks, obviously thats, a very positive announcement and it sort of a change from how you framed it historically and should we read into that any less optimism around near term M&A potential. Thank you.
The optimism is as high as ever Gary we're very blessed and fortunate to have a lot of optionality and being able to balance both buybacks with also acquisitions. We continue to look at acquisitions, primarily within our big 3 segments. So we are prepared ready and willing Gary to put additional capital to work with the <unk>.
Acquisitions and the big 3 as we identify candidates that we are very comfortable with but that has to include.
Candidates that we can certainly integrate the very quickly that meets the needs of our customers and accelerate our organic growth, but Gary. Please do not read the buybacks is any less optimism equal to higher optimism, but we just have the ability to do both buybacks and acquisitions Gerry.
And key so your next question is from the line of true Mcreynolds.
BC capital markets. Please go ahead.
Yes. Thank you very much share good morning, and couple of my questions already answered out of the Kate here, Steve just cutting it may be slightly different and just looking for a.
Probably the simple answer here.
<unk> seen 2 consecutive increases in year and 2021 outlook.
And both of those coming.
A quarter after you provided the initial outlook.
And with your kind of 4 drivers of growth here.
Is the 1 single driver here that is really lifting the trajectory.
And if there is 1 or 2.
Does that just continue to lift as we kind of go forward here.
And then second question.
Just around I guess renewed COVID-19 impacts last quarter, you talked about still some uncertainty.
Internationally as of.
A bit more uncertainty now domestically here and.
And in North America, and particularly the U S maybe talk too.
Your working assumptions here as to what unfolds and the back half of the year. Thank you.
Yes.
Thanks drew.
The.
<unk> sufficient.
The the first part.
And not the beauty of this business is we're not unduly rely on it on any 1 lever.
And we've got.
We've got strength across the big 3 and within the Big 3 we have.
Multiple.
Gross bits and so we're pleased with the trajectory, we see against those gross bit but we're not.
Not unduly relying on any 1 of them to fire to fire on all cylinders for us too.
Has to achieve.
And we're exceeding our guidance going forward.
And in terms of the your question will <unk> continue to lift.
We're now 6 months into the change program.
Mike and I outlined in the comments, where we are happy with the start that we've made but having said that.
The next 6 months will be crucial execution, so with very focused on on that execution.
Led by just the Roth and standard Pearson and people across across the businesses.
And so I would say lips, let's focus on net let's get through that before we.
Shifting of guys.
Sort of true.
The lift sort of further optimism.
And what we're trying to do is fundamentally reinvent the customer experience.
To your point, we still got and awful lot of work to the.
To get to that but.
But we are very optimistic that and success is going to create much higher customer satisfaction and gives us the ability to grow our business and.
Compelling and interesting ways.
And then in terms of the.
And the sort of uncertainty around COVID-19 and the filter variant.
And we saw the impacts of Covid on our business in 2020, particularly.
Brian as Vince.
The ship and built holds and print and softness and transactional.
In 2021, we've seen strength on a.
A rebound and all of those areas.
And so I think as we go forward and we're sort of cautiously optimistic the things we will continue to improve but certainly when we talk to our colleagues and places like Brazil, India and Indonesia.
We don't see any improvement yet so we are keeping our expectations appropriately modest there.
And we are watching very carefully as to what happens in the United States and if things continue to open up the confidence continues to increase or if there is a.
Applause and.
And net improvement, but as we sit here today.
We are confident that.
And our products and solutions will be more relevant.
And more valuable to our customers across the big 3 P&I and no matter, what environments and move to the particularly sort.
And of hybrid more flexible working environment.
And.
That's great. Thank you.
Thanks, Keith Your next question is true and online of caffeine fee Credit Suisse. Please go ahead.
Great.
Actually I wanted to start with just extending our sympathies share loss and congratulate you folks on the results.
Hey, I wanted to talk a little bit about change program, specifically as it relates to kind of the cloud conversion and how we should think about that within the context of the retention.
Specifically within the legal Steve if we could because I think there's a real big opportunity kind of mid down market on the legal side. So just how are we thinking about that.
In terms of retention around those initiatives and are you starting to see the signs of that already just given the strength of you've already seen and legal is that the strength of the clients relative to the last cycle is that product does that change program, maybe just help us understand because obviously really really nice outcome on the legal side.
Yes.
So just as a reminder, in terms of our cloud migration, we started the year of 20% of our revenues and.
And the public cloud went out of 33.
And we are on track to get to our stated target of.
The of 90% of more.
In the 2023, so on track from that perspective and credit too.
And how technology and operations team all of the hard work and.
And guiding us through that so.
So I think the.
The the impacts.
Of.
That just.
Starting to be felt so to your to your point Kevin.
Within the legal.
The strength of our legal business is based on.
Couple of things firstly.
West flow rich.
And secondarily practical law.
Certainly high cube.
And so.
In other words of product bets are paying off and we've acquired a lot of talent and a lot of investment to those product bits and it's paying off and we continue and we can.
And we plan to continue that focus and that level of investment the most key of niche.
Firstly, secondly, I think we're seeing a very fibrin legal market, particularly in the United States.
Can you speak with the heads of Wolf of himself talk about shortage of.
The associates.
The biggest challenge is hiring talent and meeting the needs of their customers scheduling the meetings and the calls that they have with their clients.
So there's a there's a pretty robust level of activity going on across the mid.
Mid and large firms.
Don't think that the impact of of the change program and the improvement and customer experience has been felt and legal and yet we're just at the stock and so I think that is.
As I said earlier that requires great execution for us and we're very focused on that and.
And we're cautiously optimistic that once we execute well see some.
We'll see some upside benefits.
Hey, Kevin and I would supplement and addition to the cloud conversion being an enabler for our retention by the way the league.
Illegals overall retention and was slightly over 90% year to date, the digital work that we're doing and cleaning up David 1 on care and strips areas. There will also help us Kevin, especially within small wall I think as you're aware and would have lower retention and a small wall higher retention and the global law of led by the deals starting Paul West La and <unk>.
For the 95% so the combination of that Steve mentioned and cloud conversion digital Omnichannel work that we're doing I'm optimistic optimistic that we'll see the improvement in retention I've stated on prior calls that we're forecasting 100 basis points per total TR.
Over the time horizon, certainly remain confident with that.
Great and then just real quick a follow up.
The buyback.
This does woodbridge participate and that where it'll be open market or just it sounds like you also referenced <unk>, Mike the 1 point, but just any thoughts in terms of clarity on.
On the buyback.
Sure, Kevin and certainly of Woodbridge will have the opportunity to participate just like all shareholders and Woodbridge has always been a great shareholder and great support of hours. So they have the opportunity to participate.
Kevin.
Okay.
Thanks, so much great job.
Yeah.
Thank you your next.
And is from the line of untreated tie demand and J P. Morgan. Please go ahead.
Hi, all.
I heard the west La <unk> edge penetration numbers for the quarter and for the year and I wasn't sure if I heard the west Lora edge revenue organic revenue growth contribution to legal and remember in the past that and like 100 basis points to legal and how.
How long do you think west La edge.
<unk> to add at this range and maybe make of mentioned about the Westwood edge product roadmap as you add more module walls.
That the.
The additional revenues for current Westwood edge customers.
Yes, Andrew Great series of questions. There are 57% ACB penetration as of June 30th.
The forecast that very confident will be and the 60% to 65% per year and that continues into 2022.
Well before we peak out there as we approach the latter part of 2022, Andrew I would anticipate us launching what we refer to internally is less of all edge to the auto and Thats. The next version of <unk> edge, Andy Martin briefly referenced it during the March Investor day, but the 100 per 100 base.
Points of lift and the second quarter, which is consistent with what we've been seeing Andrew and prior quarters. There. So no no change there we anticipate that continuing for several more quarters, and we think west La <unk> edge to the auto can help continue with that momentum. So we do not see any decrease in less law overall and and.
On the mid term time horizon and toward very comp in the payer, we Steve and I were and Minneapolis, St. Paul with the Andy Martin David Long, Mike Day, recently, and making good progress on less LOL edge to the other.
Well said thank you.
The key you next question is from the line of tiny caps on ethanol can stand. The please go ahead.
Thank you.
Corporate <unk> was a little bit lighter than I was expecting and I think there's still a way to go to get to the 7% and 9% target that you mentioned.
You mentioned, the corporate will accelerate and the back half of the year. So just maybe what's going on and corporate and what are the main drivers that are going to help and accelerate and get up to the target level by 'twenty 3.
Yeah. Thanks, Thanks, Tony Thanks for the question so on.
Just by way of context in the.
And sort of history of Thomson Reuters corporate says as a distinct segments is the relative newcomer and so I think it's fair to say that when <unk>. The president corporate stepped into that role in December of last year.
In the context of <unk>, it's something of a startup.
And so he has been working hard on a number of things. The first is I think he's assembled a world class team.
Pulling together a bunch of folks who have extensive experience.
With with some very very talented newcomers from.
And predominantly software environments.
The environments.
And secondarily it here and that team and spent the last 6 months.
Prioritizing the.
The big areas of opportunity within corporate and serving general counsels and hedge attacks and the heads of risk.
And we see I think some some pretty significant growth opportunities which is reflected.
Not only you know sick and projections, but also our outlook for the for the next couple of years and I include indirect tax and the recently announced partnership with Oracle.
They also.
And also includes the.
The increased penetration of some of the key legal products like wish flow and practical world to the general Counsel's office, and then last but certainly not least.
Our risk fraud, and compliance business, which which previously has been more focused on government agencies through Steve <unk> and his team.
A pretty big opportunity to better serve the heads of risk risk and compliance with the within cooperations with with clear and <unk> and.
And some of the other products, we have been and so all of that adds up to the accelerating growth rate that you see.
And.
The commentary.
Great.
Wanted to ask about what Youre seeing in terms of your on hiring we've heard from some of the other info services companies that turnover is maybe a little bit higher right now because of the better labor market.
And in terms of what are you seeing and.
<unk> of voluntary turnover and ease of finding good people.
Yes, Tony So 1 of the things that on.
I think very proud of and out.
And our last night and months or so has been our ability to attract world class talent, we have and objective.
And to create.
And the best team and business information services and <unk>.
And we started that journey. Our most recent addition to the team of share of Wilkinson and is now.
Chief Information Officer.
She joined from NHS digital wish he was previously the CEO and Vince.
And here is the latest in a long line of of I think Craig and talent that we've added to the existing <unk>.
Long tenure.
Our bench of talent.
And just.
And I look at that vital sign of are we getting the people that we need and want.
Externally.
The answer is yes, I think secondarily is our talent development and new talent development.
Approach working for.
Existing talent and I think on give of cautiousness to that with more work to do we are seeing up and down our organization and uptick.
In the.
And attrition and voluntary attrition of the market the labor market is hot.
And of course, the virtual working the virtual working environment and I think it's given people not only of TR, but across the industry a little broaden their aperture a little bit in terms of the kinds of opportunities the prepared to during the time and the types of coals that for periods of time. So we are remaining very vigilant.
To make sure that.
And the attrition doesn't become a problem for us it's not Tonight, it's ticked up but it's still manageable and we'll we'll put in place all of the measures we need to to ensure the best notification.
Perfect. Thank you.
Your next question is from the line of George Tong Goldman Sachs. Please go ahead.
Hi, Thanks, Good morning, you're seeing very good traction with your change program with respect the efficiency gains and benefits to the top line as well this was the.
The explore the potential for margins longer term certainly you have the 2023 targets up there for the EBITDA margins.
And that were reiterated but as you think longer term, where do you think overall corporate EBITDA margins and <unk>.
And then too.
Given your.
The progress so far with change initiatives.
Yes, George we're certainly of remaining very Comped in regards to the guidance that we provided for 22 and 23. So for 2023 is 38% to 40%. We remain very confident on that we're not prepared today, Dave George to talk about 24 of 25 day I would just say as we go into 'twenty.
4 we should certainly see continue the sustainability of potential increases given the operating leverage on that we have on our business.
As discussed before once we hit the 3% organic growth, which we are the operating leverage kicks and given that about 60% to 65% of our cost of our fixed in nature. So.
And we'll focus on 'twenty 2 'twenty 3 guidance now George.
Understood and then.
Let me be of follow up question on the corporate side.
You talked about various drivers and accelerate the growth 2 to your longer term targets and for.
And by 2023 of 79% as you think about cross selling how big of of the levers that cross selling.
Legal and tax and accounting within corporate.
In terms of.
And your goal of getting to that 2023 target how big of a driver of cross selling.
Yeah, it's sort of a try address the cross sell question I would just the supplement Tony's question previously that Steve addressed 1 of the reasons, we of optimism with our Q3 Q4 uptick and corporate overall organic revenue is the underlying book of business that we built in Q1 Q2, so the net sales outperformed really.
Well on the first half half of the year and regards to cross sell George we're at the early stage. The early innings right now and cross sell we are optimistic there and especially with Snoep and dense as Steve mentioned earlier and the chair of about 7 to 8 months now so we still believe we have.
Good optimism and regards to accelerating its a relatively small portion now for total key are about 15% of our gross sales are generated via cross sell activity comparable within corporate so we have significant opportunity over the time horizon to generate more cross sell activity and thats something that <unk>.
<unk> is working with David Wong and Sean Mahatir and product and engineering to ensure that as we enhance our products and build new products that they will enhance our opportunities for further cross sell and George.
The other thing I would add to that is is the.
We're excited about the the possibilities that will accrue to the Tia from the.
Partnership and.
And.
It's a learning experience for us its partnerships and not something that the company has done a lot of and the past.
And we are cautiously optimistic that with those learnings we can.
Both expand that relationship with the consider others of different parts of all of our products.
And George just 1 final point us E statements and on US here well puts on personally Andrew others working on the change program of core component thereof is expanding our salesforce dot com and and common instances there of our sales force and that will certainly help us think about the infrastructure and underlying business systems.
It makes it easier for our go to market teams led by Brian Peck of rally to drive cross sell.
Great. Thank you very much.
Yeah.
Thank you. So your next question is really the only.
And of Turkey.
And the net TBA Securities. Please go ahead.
I assume Thats for me can you guys hear me.
Yes, yes, we can.
Yes.
And the bench the.
Balance sheet so.
First off congrats on the results and the share price today I assume the new all time high will help with that of employee retention that you were talking about earlier.
My question really is is quite simple and there's a ton of optimism and the results here and and your and your commentary so far to several of the questions whether it's west of our extraction, whether it's the improvement and corporate demand across the board.
Is there a reason youre not increasing your 2023 targets yet is that just simply you think thats still a ways off and you want to be conservative of the have to assume there is an upward bias to true those targets now unless theres, some unforeseen sort of macro negative event between now and then is that a fair conclusion.
Yeah, Vince I would address the this follows on our optimism is balance with the reality that we have to execute like Hill every day and we have to win every day, but that's our approach today and thats going to be our approach tomorrow, and we're not going to take anything for granted and we have to earn it. So there are a lot of quarters between now and 2023, so and alert.
Confident and our team, but we also are grounded in the reality that we have a lot of work to do with our change program and.
And as Steve referenced earlier and the rest of this year and into 2022.
So what I would say Vince we reaffirm.
Confident today and on 2023 and will provide an update in February on 22, and 23. So we're going to continue to to work on our change program, we're going to work on accelerating the top line, we're going to work on improving our customer experience and we take care of our employees and we take care of our customers I think our confidence level in 2023.
And that will just continue to increase that would be my viewpoint Vince.
I'll leave it there thanks.
The operator, we'd like to take 1 final question. Please.
Thank you. Your final question is from the line of Ken Casey BMO capital markets. Please go ahead.
The 2 for me can we just revisit.
The change in the buyback.
Messaging.
And Mike you've been pretty consistent that you wanted to retain a certain level of flow and whatnot. Just if you could walk us through.
How youre thinking has changed there and and what.
Investors should think about in terms of how much you plan to execute on the on the buyback program and the second 1 for you Steve 1 of the levers you haven't talked about is is pricing power.
Could you just from a high level, maybe walk us through your thinking on that in terms of how that factors and in.
In terms of the organic growth assumptions.
Yeah, Tim Let me focus on the first question first and then let me give you a 2 part answer first of historically, we've talked about 70% being an important threshold in regards to the Woodbridge ownership.
Higher to today's announcement on the buyback, 66% ownership by Woodbridge, and we've talked about maintaining it at around 70%.
Based on our recent analysis.
A different way to look at it is the availability of public float.
Given that our market cap now exceeds $50 million.
Working with our outside advisors, they felt like $10 million up $10 billion $10 billion of public float.
It's really a sufficient amount so right now we have $20 billion. So that gives us great confidence and being able to do the $1.2 billion today Tam and we could certainly consider more.
If the board agrees over the time horizon, and certainly balancing that with M&A. So I think it's the combination of Tam of that kind of 70% threshold that we've discussed in the past, but also balancing that with the availability of public float, which exceeds the $20 billion today and and our advisers.
I believe that we are and a very good position to be able to the additional buybacks like today Jim.
And then Tim and the second part of your question with regard to pricing as you know.
We are of good.
The.
A good record of.
Getting price.
And as appropriate and particularly as we add new features and functionality to our to our products the.
The change program is about transforming the customer experience.
And where we're more focused on improving our retention.
On taking opportunities where they exist.
Around cross sell as Mike outlined and.
And growing the number of net new customers were more focused on those leave us and we are on price.
Thank you.
And that will be our final question and we'll conclude our call we'd like to thank you all for joining us.
And do any follow ups that you may have and look forward to speaking with you over the course of the next couple of months and when we reported Q3 and early November and the good day.
Thank you list price.
And thank you and everyone for joining that concludes our call. Please disconnect your lines I mean jewelry and the risk if you would day.
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Yeah.
Yes.
And.