RELX PLC (REL) Earnings Call Transcript & Summary

Good morning, and welcome to the RELX 9-Months Trading Update Call. [Operator Instructions] Please note, this conference is being recorded. I will now hand over to Nick Luff, CFO of RELX. Please go ahead.

Thank you, operator. Good morning, everyone. Thanks for joining us today. As you will have seen from our press release this morning, RELX delivered underlying revenue growth of 7% in the first 9 months of 2024, in line with the first half of the year. For electronic revenues, which represent 85% of the total, underlying growth was also 7%, with strong growth in face-to-face revenues offsetting print declines. Our improving long-term growth trajectory continues to be driven by the ongoing shift in business mix towards higher-growth analytics and decision tools that deliver enhanced value to our customers across market segments. The full year outlook remains unchanged, both at the group level and for each of the 4 business areas. We continue to see positive momentum across the group and expect another year of strong underlying growth in revenue and adjusted operating profit as well as strong growth in adjusted earnings per share on a constant currency basis. Turning to the performance of each business area. In Risk, underlying revenue growth was 8%, in line with the first half. Growth continues to be driven by our deeply embedded analytics and decision tools across segments. In Business Services, which represents around 45% of revenue, growth continued to be driven by Financial Crime Compliance and digital Fraud & Identity solutions, with strong new sales. In Insurance, representing nearly 40% of revenue, growth was driven by the further extension of solution sets across insurance markets as well as continued positive market factors and new sales. In Specialized Industry Data Services, representing just over 10% of revenue, growth was led by Commodity Intelligence. In STM, underlying revenue growth was 4%, in line with the first half. Growth continues to be driven by the evolution of the business mix towards higher-growth segments. Electronic revenue growth continues to be offset by print declines, with print continuing to shrink at twice the usual rate this year. Growth in Databases, Tools & Electronic Reference, represents around 40% of divisional revenue, was driven by higher value-add analytics and decision tools. Primary Research continues to be driven by volume growth, with article submissions growing very strongly across the portfolio, especially in pay-to-publish. In Legal, underlying revenue growth was 7%, up from 6% in the full year 2023 and in line with the first half of this year. The strong growth continues to be driven by the shift in the business towards higher-growth, higher value-add legal analytics and tools. Lexis+, our integrated platform leveraging extractive AI, continues to perform well. The rollout of Lexis+ AI, our new platform leveraging generative AI, continues to make good progress in the U.S., and recent launches in international markets have been positively received. In Exhibitions, underlying revenue growth was 13%. The strong growth reflects the improved growth profile of the events portfolio and a favorable comparison with the early part of the prior year. We continue to make good progress on value-enhancing digital initiatives. And with that, we are ready for questions.

[Operator Instructions] Your first question comes from Nick Dempsey with Barclays.

I've got 3 questions, please. So first of all, at the half year stage in STM, you talked about print declining roughly double its usual rate of mid- to high-single digit. Has that pattern continued since we heard from you in July and what you can see going forward? And do you have any color for us on whether that weaker trend might continue into 2025 or whether we should flip back to that usual rate? Second question, positive market factors in Insurance within Risk. Is there a point maybe in 2025 where you face tougher comps on those market factors, and so those factors stop boosting Insurance growth inside the Risk calculation? And the third question, just on Lexis+ AI, you talked at the first half positively about your competitive positioning that you were doing at least as well as anyone else, I think, is what you said. Is that still the case that you feel very positive about your competitive situation there?

Okay. Nick, thanks for those. Yes, taking each in turn, the STM print decline, yes, it's continued at much the same pace. So the position at the third quarter and the third quarter cumulatively was very similar to what it was at the half year. So no particular change. As you say, that is double the normal rate than we've seen in recent years, certainly. What that means for next year, I don't know, too early to say. Obviously, the comps will be -- reflect this year's numbers, but we'll have to see. It can be a little unpredictable and a little lumpy. But of course, given the rate of decline, it will be smaller. So the print drag will continue to diminish over time. And the improving electronic growth, which, of course, is key to the overall growth trajectory in STM, hopefully, you'll see that coming through. And then your second question on Insurance, the positive market factors, yes, it has been strong, particularly in auto. Shopping and switching in auto have been strong. Obviously, that does mean next year, we'll be lapping that. But you've seen that the overall growth rate in the Risk division has been very consistent for a number of years. You've got dynamics with Insurance end market and the Business Services being influenced by different factors. We are seeing Business Services gradually improve. And so we'll have to see how those -- how they interact during next year. But certainly, up to now, they've been very balanced, and that's why you see that consistent growth we've seen overall for Risk. And your last question, on Lexis+ AI, yes, I think we're pleased with the progress we're making, pleased with the enhancements that we're adding to the product, pleased with the quality of it. And I think our market position remains as good as anyone's. I would remind you that we have a seminar on legal coming up next week. I'm sure you'll be listening into that with Mike Walsh. So I won't say too much more now, I'll be stealing his thunder. So perhaps he'll -- I'm sure he'll give you a good sense of where we've got to in that seminar next week.

Your next question comes from George Webb with Morgan Stanley.

Two from my side. Firstly, I guess we saw in the third quarter, in the U.S., the launch of a small class action against some of the research publishers, including Elsevier, mostly around on the structure of peer-review system, but maybe the publishing model more broadly. Wondering if you had any thoughts around that you could share. And then just secondly, on Legal, maybe next week, we have to wait for it, but are you seeing any effects possibly or negatively from Lexis+ AI on your ability or the rates at which you've been cross-selling some of those other legal analytics products? I guess we can see the growth in Legal has obviously been stronger this year, but is it proving purely accretive to spend with clients? Or is there any element of it taking the budget away from spend around some of those other legal analytics areas?

Yes, I guess the first question on STM and the business model there, look, I think it's important to say that the -- what our role is here, we're always working to support authors and our customers in a way that is sustainable. Our overall strategy is to provide higher quality at a better value to customers every year. The publishing process is -- scientific publication is well established. You do sometimes get legal cases around various aspects of the process from time to time. But I would say we haven't seen any new issues raised in recent times and remain confident that the process is sustainable and effective for the integrity and the advancement of science. Your second question on Legal plus AI and cross-selling, obviously, Lexis+, which is the integrated platform, really helps to get -- enable customers to buy and consume the analytic modules by bringing them all together in a single platform. Lexis+ AI is adding generative AI functionality on top of that across the whole platform and is very effective in terms of helping lawyers become more efficient, help them make better decisions. And so it's not really a question of the budgets within law firms. If it's an effective economic thing for them to do, they're economic actors and they'll take up the product. But that's -- if you want to sort of dive into that a bit more, rather than me talking about it now, Mike Walsh, I'm sure, will cover that in the seminar next week.

Your next question comes from Tom Singlehurst with Citi.

First one, U.S. government exposure across each of the divisions, I was wondering whether you could quantify that. And then just whether you see any particular different implications on outcomes of the presidential elections and the change of federal government, if that happens, that would be very useful. And then the second question, and I suspect you're going to say wait until next Thursday, but on Lexis+ AI, can you give a sense of the delta in cost if -- and I know it's going to be a little bit tricky, but if there's a sort of box standard sort of price for Lexis+, how much of an uplift is it to get the full generative AI capabilities? I'm conscious I might have to wait a week for that.