By Helen Coster
NEW YORK (Reuters) -Thomson Reuters Corp on Wednesday reported higher sales and operating profit in the second quarter, helped by strong performance at its "Big 3" segments: Legal Professionals, Corporates and Tax & Accounting Professionals.
The provider of information and tools for lawyers, accountants and other professionals reported adjusted earnings of 84 cents per share, 6 cents ahead of estimates.
Shares were up 1.8% Wednesday to slightly below the June 2023 all-time high.
Total revenue rose 2% in the quarter to $1.65 billion, slightly missing sales expectations, according to Refinitiv. The company said net divestitures negatively impacted revenue.
Thomson Reuters (NYSE:TRI), which owns the Westlaw legal database, Reuters news agency and the Checkpoint tax and accounting service, said organic revenue was up 7% for the "Big 3" segments that together account for the lion's share of revenue and profit.
Chief Executive Steve Hasker told investors, “Since discussing AI on our Q1 call, our conviction around our opportunity to leverage generative AI has strengthened. As a result, we're accelerating our investment in the short term as we work to leverage these exciting capabilities for the benefit of our professional markets.”
Generative AI is a type of artificial intelligence that generates new content or data in response to a prompt, or question, by a user.
It is “an interesting opportunity for Thomson across its businesses … There’s definitely interesting prospects,” Edward Jones analyst Matt Arnold said Wednesday.
“It’s just early days. It’s all talk at this point and no one truly knows how it can develop into a profitable growth driver or where disruption could happen.”
STEADY OUTLOOK AMID CAUTION ON ECONOMY
Thomson Reuters maintained its full-year 2023 outlook for organic revenue, adjusted EBITDA margin and free cash flow. It said the first half of the year gave it "increasing confidence" about its financial outlook but cautioned that "many signs that point to a weakening global economic environment" could impact its guidance.
It adjusted its forecast for full-year capital expenditure (capex) as a percentage of revenue to approximately 8%, up from 7%, incorporating its accelerating investment in generative AI. In the call with investors, Hasker said it will start to see “meaningful revenue uptick” from AI next year.
Organic revenue in the Reuters News division was up 1% in the quarter, driven by a lower contractual year-over-year price increase in the company’s news agreement with LSEG, slower events growth and lower digital revenues.
Organic revenues in the Print division – which provides information to legal and tax professionals, government, law schools and corporations – fell 4%, in line with the company’s expectations.
In June, the company announced plans for two acquisitions: Britain-based Imagen, a digital content asset management company, for an undisclosed price; and Casetext, a California-based AI company that helps legal professionals conduct research, analysis and prepare documents using generative AI, for $650 million.
The company sold 15.5 million shares of the London Stock Exchange Group (LON:LSEG) in the second quarter, for gross proceeds of $1.6 billion.
As of July 31, Thomson Reuters indirectly owned approximately 31.8 million LSEG shares, which had a market value of approximately $3.5 billion, based on LSEG’s closing share price on that day.
"It was good to see a nice balance of returning some of that cash to shareholders and also deploying some back into the business to fuel growth down the road,” said Edward Jones' Arnold.