Q1 2021 Thomson Reuters Corp Earnings Call
Parts and filings that we provide from time to time to 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.
I am pleased to report our first quarter performance reflects the strong start to the year.
We're encouraged by the momentum we're seeing build across the business.
Our customers are more confident and both of an improving economic environment and in the trajectory of the businesses.
Positive prevailing tayo wins drove strong sales across the business as customers brushed off the restraint and caution exhibited in 2020.
And bought our solutions in preparation for an expected rebound through the year.
However, despite the improving outlook risks remain given that the global pandemic is still significantly impacting many parts of the world.
Notwithstanding this we are encouraged by the first quarter's results.
And debt increasing confidence is reflected in our outlook for the second quarter and also in the increase to the lower end of our full year revenue guidance.
Now to the results.
As I stated at our Investor day, we operate in a robust and growing legal tax.
And risk fraud and compliance markets.
And our first quarter results reflect the strength of those markets and our businesses.
And within our core markets, we have advantaged positions in high growth verticals, including the seven strategic growth initiatives, we outlined at IR day, which.
Each contributed to our strong first quarter results.
The strong performance is reflected in 5% organic growth by our big three businesses now.
The best first quarter.
Post the sale of refinish.
This performance was led by legal <unk>, 5% organic growth the highest quarter since 2018.
Strong sales across our businesses was driven by strong prevailing tailwind and.
Great performances across the board from our sales people.
Law firms see growing demand with small loss segment in particular increasingly positive the.
The large and mid sized firms have done well throughout the past year and continue to do so taxing.
Tax <unk> accounting professionals are also busy advising clients on a host of challenges several of which are related to the U S federal stimulus programs.
And governments across the U S and the world of now modernizing the systems and protocols in an effort to improve access to justice and reduced fraud motivated by what they've learned during the COVID-19 related lockdowns over the past year.
We believe the strong tayo wins position us well for the balance of the year.
The first quarter's reported revenues were up 4% with organic revenues up 3% adjusted EBITDA increased 16% to $558 million, reflecting a margin of 35, 3%.
Excluding costs related to the change program the adjusted EBITDA margin was 36%.
The strong performance resulted in adjusted earnings per share of <unk> 58.
Compared to 48 per share in the prior year period.
Turning to the segments as.
As I mentioned, the big three businesses achieved organic revenue growth of 5% for the quarter of <unk>.
Strong performance to start the year, we've seen good momentum in our seven strategic growth priorities with particularly strong sales performance from high Q confirmation and practical law.
Legal built on last year's organic growth, 3% reported 5% organic revenue growth in Q1.
Legal also had a strong sales quarter recording double digit revenue sales growth.
Recurring sales growth and it saw good growth across the businesses, including Whistler edge, which continues to drive strong sales growth and ended the quarter at of 54% ACB penetration versus 52% at year end 2020 until.
And to reiterate we expect to achieve the penetration rate of between 60% and 65% by year end 2021 share.
The second practical law had a strong start to the year growing 13% as we continue to invest behind these key growth initiatives and third our government business, which is managed within our legal segment continues to see good momentum and grew 12% or 8% organically.
Turning to the corporate business organic revenue grew 4% despite of 2% reduction in revenue growth due to a loss of revenues impacted by the affordable Care Act that was recorded in the prior year quarter, but did not reoccur in 2021 and.
In tax and accounting of Q1 organic revenues grew 5%. Despite the extension of the U S tax filing deadline from April to May resulting in lower transactional revenues revenue growth was also negatively impacted due to the acceleration of ultra Tech software from January 2020.
One to December 2020.
Organic growth in Q1 would have been 8% normalized for the ultra tax state release timing, we're expecting tax and accounting for revenue growth to the very strong in the second quarter, which Michael will discuss.
Reuters news organic revenues grew 2% in the first quarter of good performance and global print organic revenue declined 9% better than expected and helped by higher third party revenues.
You've heard me say that it is imperative that we elevate our value proposition to customers and enhance the customer experience and maximize outperformance.
To achieve success, we must execute on our four key focus areas.
And achieved the operational and financial goals and targets that we've set.
It's early days for our change program, but I'm pleased with the progress, we're making and happy to report that we are on track.
And the further strengthen our bench, we continue to supplement our existing teams with seasoned experienced talent with new additions and product development.
Digital technology strategy and change management.
This combined leadership team is executing well within a new operating company structure and he's focused on the four key focus areas outlined in the slide.
First reimagining the customer experience by making it easier for our customers to do business with us.
Second optimizing and modernizing by simplifying our product portfolio and product development processes.
Third simplifying operations and leverage the leveraging technology.
Reducing complexity in our operations and technology organization.
The finishing the shift to cloud in 2023.
And lastly, creating an inclusive culture of world class talent.
Over the course of the first quarter I've shared with our employees that similar change programs has been successfully implemented at many many companies over the past decade, we have not first in line and that's a positive from the learning standpoint, as we continue to drive growth and improve efficiencies in fact.
There are numerous success stories, we can draw including refinished successful program as we implement our unchanged program.
And I'm confident we'll achieve similar success.
Let me now turn it over to Mike who will provide more detail on the first quarter results. Thank you, Steve and thanks to all of you for joining us today.
As a reminder, I will talk to revenue growth before currency and on an organic basis.
Let me start by discussing the revenue performance of our big three segments.
Total and organic revenue at constant currency were both up 5% for the quarter.
This marks the third consecutive quarter of big three segments have grown 5%.
Legal professionals revenue increased 5% and organic revenues were also up 5%.
Recurring organic revenue growth of 4% was supplemented by a 17% increase in transaction revenue related to our government and in linked businesses.
Lastly, all edge continues to drive over 100 basis points of Legals organic growth, while continuing to maintain a healthy premium.
Our government business, which is reported within legal and includes much of our existing risk fraud and compliance offerings had a strong start to the year with total revenue growth of 12% and.
And organic growth of 8%.
In our corporate segment total and organic revenues increased 4%. Despite the loss of $3 million in revenue related to the Affordable Care Act, which Steve mentioned earlier.
Recurring and transaction organic revenues were up 4% driven by our legal and tax solutions.
And finally tax <unk> accounting as total revenues grew 5% with organic revenues also up 5% driven by audit product and Latin America businesses.
As previously mentioned, we accelerated the release of some of the Ultra tax state software from January to December two in line with the traditional December release of our U S federal of software.
Normalizing for this timing organic revenues for tax and accounting, we're up 8% in Q1.
Moving to the orders news.
Total and organic revenues increased 2%, primarily due to our professional business, which includes Florida events.
This performance was slightly better than we had anticipated.
And global print total and organic revenue declined 9% in the quarter.
This performance was better than we had expected drill.
Driven by higher third party revenues for printing services.
Despite this higher performance, we still forecast full year revenues to decline between 4% and 7%.
On a consolidated basis.
First quarter of total and organic revenues each increased 3%.
Similar to last quarter, we are providing color regarding our expectations for the second quarter.
We believe second quarter revenue growth will be the high point for the year given the impact of COVID-19 on our results in the second quarter of last year.
Starting with the total TR chart of the top left we estimate second quarter total and organic revenues will grow between five 5% and six 5%.
The big three total and organic revenues are forecast to grow 6% to 7% in the second quarter.
Growth will benefit from tax and accounting of pay per return revenue that shifted from Q1 to Q2 due to the delay in the tax filing deadline.
We forecast second quarter revenue growth between 10% and 15% pretax of accounting.
In 2020. These revenues were shifted from the second quarter two of the third quarter.
Moving to waters news, we forecast second quarter, total and organic revenues to grow between 2% and 3%.
This increase is primarily related to the borders events.
The events team is currently holding all events virtual.
We continue to assess when we can resume in person events based on the local health expert advice and feedback from our customers.
Finally, global print second quarter revenues are expected to grow between 1% and 3% driven by the COVID-19 impact in the prior year and shipment delivery old releases.
Turning to our profitability performance in the first quarter.
Adjusted EBITDA for the Big three segments was $523 million up 21% from the prior year period and the related margin was up 540 basis points.
First legal professionals adjusted EBITDA margin in the first quarter grew 510 basis points to 41, 8% compared to the prior year period.
Second Corp.
Adjusted EBITDA margin was up 620 basis points to 38, 1%.
And third tax and accounting adjusted EBITDA margin increased 500 basis points, the 43, 7%.
The strong EBITDA margin improvement each of the three businesses was driven by higher revenue growth and a benefit from 2020 cost savings initiatives.
Moving to <unk> orders nears.
Adjusted EBITDA was $28 million.
9 million more than the prior year period, driven by revenue growth.
<unk> thousand 20 cost savings initiatives and timing.
Global print adjusted EBITDA was $57 million with the margin of nearly 40% and.
The decline of about 60 basis points due to the decrease in revenues.
So in aggregate total company adjusted EBITDA was $558 million.
The 16% increase versus Q1 2020.
The higher revenues, partially offset by change program force, which I will address in a moment.
This slide provides more color on the various factors impacting our first quarter of 2021 reported adjusted EBITDA margin.
If we exclude the impact of change program cost in order to provide you with the understanding of the underlying trajectory of the adjusted EBITDA margin.
As you can see the first quarter's adjusted EBITDA margin was 35, 3%.
Which represents a 370 basis points improvement over Q1 2020.
There were two main factors in 2021 that drove the significant increase over the prior year period.
First the permanent acceleration of ultra tax revenue to Q4 2020.
Out of about a 30 basis point negative impact.
And second the savings from the cost savings initiatives in 2020 provided a benefit to the margin of 490 basis points.
On an underlying basis, excluding change program paused in the first quarter. The adjusted EBITDA margin was 36%.
While this performance.
Performance is impressive we continue to recommend you to assess our adjusted EBITDA margin on an annual basis.
We will continue to increase our investment in the change program throughout the year, which will depress margin.
We have good visibility into the levers at our disposal to achieve our full year margin target of 30% to 31%.
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> 58 per share in the first quarter versus <unk> 48 per share in the prior year period.
The increase was mainly driven by higher adjusted EBITDA, partially offset by an increase in depreciation and amortization higher income taxes and interest expense.
Currency had a <unk> <unk> positive impact on adjusted EPS in the quarter.
Let me now turn to our free cash flow performance for the quarter.
Our reported free cash flow was $239 million versus $35 million in the prior year period and.
An improvement of over $200 million.
Consistent with previous quarters. This slide removes the storing factors impacting our free cash flow.
Working from the bottom of the page upwards, the cash outflows from the discontinued operations component of our free cash flow was $22 million more than the prior year period.
This was primarily attributable to the payments to the UK tax authority related to the operations of our former definitive business.
Also in the current quarter, we made $12 million of change program payments as compared to refine the dip related separation costs of $63 million in the prior year period.
So if you adjust for these items.
Comparable free cash flow from continuing operations was 288 million.
$175 million higher than the prior year period, primarily due the higher EBITDA and favorable working capital movements.
Next I'd like to provide an update on the financial components of our change program.
First in the first quarter, we invested $20 million of the $300 million to $350 million estimated to be incurred in 2021.
Second we have achieved $19 million of annual run rate operating expense savings.
As a reminder, we anticipate savings $600 million by 2023, while reinvesting $200 million back into the business for a net savings of $400 million.
And third as I previously shared our first quarter adjusted EBITDA margin, excluding change program costs was 36%.
<unk> of our 2023 target of between 38% and 40%.
Now an update on our change program costs for the first 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 into the fourth quarter was lower than we expected at $20 million, including $11 million of Opex, plus $9 million of Capex and was primarily timing related.
We expect change program spend to pick up in the second quarter and over the balance of the year.
We now anticipate to have about 85% to $110 million total spend in the first half and.
And $215 million to $240 million in the second half.
For the full year, we continue to expect to spend between $300 million and $350 million related to the change program.
The scan will vary quarter to quarter, but we do not expect to change to the full year estimate at this time.
And there is no change in the anticipated split of about 60% Opex and 40% of Capex.
We will continue to provide quarterly updates on our change program spend as we move through the year.
And finally as I mentioned, we are providing revenue guidance for the second quarter and we are increasing the bottom end of our full year revenue guidance for total TR and the big three.
We are also reaffirming the balance of our full year of 2021 guidance based on the strong start to the year and our confidence in the trajectory of the business and markets.
And we also reaffirm our 2022 and 2020 per guidance.
Let me now turn it back to Frank for questions.
Thanks, Brian amongst Mike and that concludes our formal remarks, and we would now like to open the call for questions. So of per annum, if we'll get out the firm.
First question.
Thank you so just to advise its still one of your telephone should you wish to ask a question. The first question is coming from the line of Kevin Mcveigh of Credit Suisse. Please go ahead your line of Nicole.
Great. Thanks, so much and congratulations on the results.
I don't know if this would be for Steve or Mike, but I Wonder if you could just compare and contrast, a little bit the recovery of shape today versus the GSE because my sense is you folks you're better positioned coming out of the COVID-19 and maybe the GSE, but maybe some of the puts and takes and the reason I mentioned Mike.
EBITDA was four <unk> at home, but any thoughts from either one of them.
Helpful.
Yes happy to start with that Kevin Im sure Steve would want to to supplement I think the thing that we're seeing right. Now is just really great relentless performance from our sales and account management teams I think reported emerged of.
Our non Kevin if you look back over the last debt.
Debt cash decade, and I think that was really amplified in 2020. So I think the performance net sales will be of key barometer that I would focus on Kevin in the first quarter, we were up over $20 million in the first quarter net sales versus the prior year and we see that momentum continuing.
Into Q2.
In regards to the print business, Kevin you see that continuing to chip away in regards to when customers get back to the office. So those will be some initial thoughts, Kevin, but really kudos to our sales and account management team.
I think the relationships with our customers are stronger than ever.
In regards to one other additional point structural changes that we've had and legal if you go back to 2000, 2008 and 2009 as another factor of Kevin.
And just to add to that I think Kevin.
Brian I'd frame. It is we're cautiously optimistic obviously the vast majority of our business and our revenues are in the United States, where we're starting to see sort of real signs of a return of the confidence and activity.
Third is to invest amongst the customers in their businesses.
Putting many of our solutions.
I think thats.
Of the optimistic side I think were cautious for obvious reasons as in places like Brazil, and Argentina and India.
They are in the thick of it.
And our businesses in those the heritage.
Oh and performed well in the first quarter, but we're not naive.
They've got a tough few quarters ahead of the so there is lots and lots of work to do and lots of business continuity planning to get through the nice places.
Thanks, Jim.
Very helpful. And then just a quick follow up I was surprised it seems like the the small law firms sentiment.
The shifted up a little faster than what would of thought.
Any thoughts around that and then just.
Thoughts on the pension as it relates to maybe the legal or accounting.
Yes.
Smaller as you remember was to be pretty sick.
The sector was pretty hard hit when the pandemic started all of the sort of work around personal injury and a lot of.
Work around divorce and accidents and so forth just went away as people were treated to the student loans.
Stop going to the places of work in zone, and so forth. So I think we've seen a pretty notwithstanding that I think GAAP teams on the market debt did a great job.
Throughout 2020, and ensuring that our level of activity state stated at good levels, but we've seen a return to activity and confidence amongst a small wolfman Kevin I would just supplement we attempted during 2020 to support our customers lots of as possible and I think thats showing in 2021.
Thanks again.
Thank you. Your next question is coming from Toni Kaplan of Morgan Stanley. Please go ahead, you will know the line of Nicole.
Okay.
Okay.
Okay.
Okay.
Okay.
Just to advice, Tony we may be high.
Hi, there hopefully that's better I picked up.
The first quarter EBITDA margins were really strong up over 350 basis points can you just help us bridge to the 30% to 31% guidance for the year is it that peony or other costs are coming back can you just help us with that.
Cost spread.
Sure Tony a couple of things of the biggest factor Tony would be the.
The change program investments that will make of only $20 million in Q1 in total of portion of that being expedited that will significantly accelerate as we go into Q2.
First the royalty.
Investor Day, as recently completed engagements with our partner to complete the migration of our <unk> and data center to the cloud Kirstie.
<unk> also completed the contract with one of our partners in reverse of the content modernization that we also talked about so those are the two of the key initiatives.
<unk> leads our.
Our digital self serve we're making good progress there Tony So the biggest factor is the acceleration of our change program investments.
Through the remainder of this year certainly in Q1 did we receive some continued benefits from the discretionary cost like TNA, we certainly expect those to pick up as we go through the year and we also have some additional investments in areas like in the indirect tax practical law, Tony that will make to help accelerate.
<unk> sustain and accelerate growth in those areas of change program is the biggest factor of Tony.
That's great.
Steve just given your new operating strategy, maybe give us an update on how you're thinking about M&A, what you're looking for.
In terms of assets.
That you'd be interested in Macquarie. Thanks.
Yeah. Thanks, Tony.
So we made a couple of small acquisitions in 2020.
And we've got an active pipeline of.
Of opportunities that we continue to sort of the SaaS.
And turnover and replenish.
I'd sum it up by saying.
With that pipeline is focused.
In and around the big three so we don't have plans to make any acquisitions beyond the <unk> at this point.
The acquisitions are mostly if not entirely sort of bolt on complementary to both the big three and the change program. So we're looking at just to give you a sense of the kinds of areas. We're looking at and it's building on our on our sort of Greg stock and risk fraud, and compliance with clear and Trs <unk>.
<unk> and <unk>.
Places, where we can help our customers automate.
Within the big three activities.
We're interested in supplementing.
Some of the outgrowth plays.
Like indirect tax and legal software moving on high Q.
And we're always on the lookout for SMB and <unk>.
The national opportunity, so there's a sort of a sense for the kinds of things we're looking at.
But as you know valuations of full at the moment and the NOI that's healthy because it just means that we have to we have to be very confident that we are in advantaged Donna.
And in many places those acquisitions can be helpful to more than one of our segments.
At all of that up we're going to continue to be very rigorous and prudent as it pertains to.
Two of our M&A activity, but we are hopeful in the back half of this year that will have.
Our candidates to bring forward.
Okay.
For the next question please.
Thank you we have your next question coming from David Chu of Bank of America. Please go ahead.
Just one moment please.
Yeah.
Hello.
So just with the lines. We're taking your next question at the moment from Andrew Steiner of J P. Morgan. Please go ahead hi, Dan.
Andrew Steinman I don't think I heard you're.
Your expectation for organic revenue growth for each of each of the big Big three I definitely heard of tax of accounting comment for a second the second quarter. So that's my first my first question.
Second question is I was intrigued by the Reuters announcement around <unk>.
Introducing a paywall.
I wanted to know if you feel like this is going to be a revenue needle mover for news.
This year and maybe what the capture rate.
Frank will be at the at the subscription price you are proposing.
The Andrew I'll take the first one in regards to organic growth rates for the big three we do not break that down on a recurring basis, Andrew we stick to the big three back on Investor Day, We did provide.
Some of the lifecycle trends for each of those up of victory, we'll stick with that I would say that we're quite optimistic.
Each of them as we progressed during the year as Steve mentioned earlier and I did legal had a really great Q1, and we see that continuing to build throughout the year.
And then on the Reuters payroll entered the couple of thoughts one is.
We've noticed of as I think everyone in the news business has noticed that the sort of consumer.
And prosumer preparedness to pay for very high quality news.
Non op.
Landscape has changed over the last couple of years I think the Reuters team have done a wonderful job in sort of getting the hard part which is.
Ensuring that our content is ease of the sufficient premium to justify.
The price point and secondarily, putting all of the machinery in place to enable us to move to a paywall.
Later later this quarter.
But let me just finish by saying we're moving.
Very very conservative debt as to what the.
The financial.
Implications of the smoothly.
We want to launch the paywall, we want to learn.
From our audiences and look at those uptake numbers in <unk>.
And review of the pricing and then move from the certainly this year.
The very limited financial expectations, I think we view it as a very promising initiative and one that the.
That we'll learn a lot from but from a financial standpoint.
Really nothing to say.
Okay. Thank you.
Okay.
Thank you. Your next question is coming from David Chu of Bank of America. Please go ahead.
I think we are continuing and have some audio difficulties with David.
The Caribbean connect.
Okay. No problem. Thank you we have your next question from Vince Valentini. Please go ahead Youll note of lines in the Corp.
Yes, thanks, very much if I come back to the the EBITDA margin for this year question again from a slightly different angle given that you've set these.
Sort of targets through 2023 can you fill the thing on how management compensation is working day, if theres Big Beach on EBITDA in 2021 does that drive the bulk of management bonuses or as the targets for 2023 now more impactful to to how you guys.
Get paid and a second question, sorry, if I, Kevin Mike given the proposed corporate tax changes.
Can you give us any update on your ability to sort of move of intellectual property around the world and thank you for your tax rate lower or should we be expecting directionally.
Share with whenever it gets approved by the U S government.
Sure Vince let me tackle the first one in regards to our long term incentive plan just for everyone's benefit we are of a three year long term incentive plan for 2021, 22, and 'twenty three and consist of two levers of 50% based on organic growth rate, 50% on free cash flow per share sort of equal.
Waiting Vince in regards to 'twenty, one 'twenty two 'twenty three.
The management to earn out just on the core baseline.
We have to earn out each year Vince there the so thats how the long term incentive plan works. So the targets that we provided to you during investor day, we have to hit those for the long term incentive for all three years in regards to the taxes is something that we're watching.
On a daily basis, it's Jim.
The call to quantify it today, Vince will ultimate too.
As in the legislation actually passes will provide real time updates on these calls I will give you one directional measure of Vince in case of helps in the U S is the 21% were increased to 28% the impact on our effective tax rate would be between 1% to 2% kind of directionally. The other piece of.
We are monitoring closely that you references potential global minimum tax.
Our intellectual property, we are watching closely there internally with our tax team and tax advisors too early to speculate on that one yet.
But we're watching all of those all of those items for 2021.
Feel very confident in achieving the ETR that we provided.
Thank you.
Sure.
Thank you Vince.
Thank you. Your next question is kind of coming from the line of drew Mcreynolds. Please go ahead your line for Nicole.
Yeah. Thanks, good morning, Thanks for taking the questions I guess two two for me of.
A clarification.
Maybe over to you Mike on the legal side last quarter, you said Q1 would be of low point for for legal.
Think of us 3% to 4%.
And you did 5% just wondering if that's still a low point for legal for the remainder of the year and then secondly, maybe over to you Steve you talked about.
Where you are cautious with the overall business, but certainly strong out of the gate here in Q1, an easier comp in Q2.
Just wondering.
Are you being.
Somewhat conservative with the full year guidance here.
Or.
DSC.
Certainly the tougher comp in the second half of this year.
Kind of kick in and just want to level set expectations here. Thank you.
It's true I'll start with regards to the legal question. The way you summarized it is correct. We do the Q1 non organic as the low point for the full year. We spent a lot of time with Paul Fischer and just for the management team.
Very encouraged by the momentum coming out of Q1, both of the sales and revenue activity and as we look at the pipeline West La <unk> edge continues to do really really well, we're getting the 100 basis points of lift there, which we've had been their practical law, which which Steve mentioned the government business in the 10.
Percent nearly 10% organic growth in Q1, Steve really is driving that business. So through very very pleased with legal for Q1 and encouraged equally encouraged as we look out with that said we have to monitor the sales every day as we move forward, but the recurring net.
Sales from Q1 that gives us encouragement there.
And true.
With regard to your point about sort of strong out of the gate and we probably being somewhat conservative I think kind of <unk>.
Yes.
We are being somewhat conservative.
And as of few reasons for that I mean, firstly, we're all learning as it pertains to this pandemic.
And I think where we are optimistic we are hopeful we're upbeat about where the United States was headed.
But our headquarters is in.
As in Toronto as you know in Canada still got some some progress to make we don't have significant exposure to the countries that are really struggling but we have some exposure.
I think things will get harder before they get better in places like Brazil, and Argentina and India.
In addition to that our folks are sort of poised in the second half of the year to return to office, but we've got to execute against that in scenarios of your chicken out people team of very focused on it but we are going to get that done.
A lot of our business.
The fourth quarter was an important quarter for us.
And then lastly, where are the line with tank program and we're very excited about the first quarter of saw progress in the channel program, but as you've seen from mikes comments on the investment.
Tensity that ramps up through the rest of this year. So we're going to out of the line of lot of change.
On the team here as well.
The other reasons per hour of sort of <unk>.
Now conservative approach, but as I said, we are we are optimistic and we're pleased with how we Scott of the year and where we're headed but I think.
Sort of a bit of conservatism.
As healthy.
Understood. Thank you Bob.
Thank you. Your next question is coming from Morrison of bogus of Barclays. Please go ahead Vince.
The call.
Okay.
Can you guys hear me.
Yes.
Okay. So I guess that is near the.
Okay. That's all of my name, but anyway, Hey, guys.
I just got one question one was great and that was around just talking about the competitive environment.
I was just curious you know in you know with all of the changes you're making of getting you know.
Your competitor make note of it take notice of their reaction and just any thoughts there would be appreciated.
Yes, correct.
Alright Christian so.
Thinking of.
A lot of respect for per our competitors, but but the the folks who've been around a long time of.
If completed.
<unk>.
In legal and tax of the risk reward coupons and we also watch carefully what some of the with some of the newer players are doing in some of the sort of pure digital in the universe of doing.
The competitive intensity is as it is the same today as it was.
When I started the third.
Third in 14 months ago.
It's not more of and it's certainly not place.
So.
I don't think we've seen the market change.
The my time at the company, Mike can provide you obviously a much longer time horizon.
But we are one of the reasons that we're sort of so aggressive in pursuing the change program.
We do wanted to create a much better customer experience and we want to lead our sectors in terms of the customer experience, we provide and we're pretty confident that if we get that right.
We're always going to be very diligent.
The about about competitive dynamics in the market, but if we get that right we'll be in good shape.
Alright, Thank you Bob.
Thank you. Your next question is coming from Arvind <unk> gallon per se.
The <unk> of Canaccord Genuity. Please go ahead your line of and Nicole.
Yeah.
Good morning, Thanks for taking my question just.
Just going back to the.
Some of the out of the comments you made with respect to legal I was wondering if you can develop with respect to international growth. There I know that previously you had talked about traction of the UK, obviously, the practical as part of that as well as Canada. I was wondering if you can sort of expand a little bit on the international growth element.
Okay.
And secondly, just sort of follow up with respect of the tax comment is there an update on the UK tax dispute I know that the.
And the additional component, that's where revenue for a larger component I think of course $600 million.
Mike had alluded to.
The prior conference call I was just looking for an update there. Thank you.
Sure Evan let me touch on each of those irregardless of the international I'll kind of the more more expansive than just legal.
Outside of North America, we're about 20% of our revenue we would certainly like to see that expand maybe as much as 30% in the years to come I think the ascend and the team is doing a great job in regards to use AI that you referenced there certainly.
Certainly practical law.
<unk> is very very important for us in the U K, but if you look at Latin America and other territories I think we're continuing to do a good job there with the agent Panini, leading our efforts in Latin America. So I think we'll continue to be very surgical here than day in regards to identifying the potential acquisition targets that would help us.
Spanned our legal and really our full suite of products.
Very specific geographic areas in regards to tax for U K HRC very consistent with the last update that I provided in Q1, we did make the initial roughly 100 million debt related back to the 2016.
The position of the intellectual property of science business. We currently are forecasting that we may emphasize may we may have to make a payment in Q3 related to the 2018.
Divestiture of other refunded the business, we're continuing to work through it.
And we factor that into our forecast as a potential payment that we would have to make potentially have to make in Q3.
Thanks, Brian we'd like to take one final question. One final question. Please.
Thank you. Your final question is coming from George Tong of Goldman Sachs. Please go ahead your line of Nicole.
Hi, Thanks, good morning.
Just wanted to dive into the legal segment you mentioned.
<unk> should be the low watermark growth should accelerate organically from the five per cent you saw in the first quarter.
Flow edge practical law government of tailwind just wanted to perhaps of you elaborate on the growth drivers I mean, if we go above 5% certainly that would be the strongest level of organic growth. We've seen from the legal settlement in some time and perhaps holding the increasing contribution you're expecting from the change program.
And how that's kind of lift organic growth in legal to true.
The recent highs.
Yeah. Good morning towards thanks for the question.
No.
Look a couple of things of driven.
Of driven I think of strong start to the year first and foremost the work with Paul Fisher and his teams have done.
And their outreach to our customers throughout 2020 and in the 2021, I think I cannot say enough about the wide, which by the wrap their arms around customers in support of them throughout.
A very difficult period of time, and as and as the sort of level of activity of out legal customers picks up so to the sale our business. So that's the first thing I think the second thing is you know any mountains took you through.
Ms Laura Jim.
And we also profiled the.
The progress with practical law.
We have made I think very solid historically very solid product bits around those products.
And as a group, we're very focused on making sure that we continue to out invest our competition in those products to ensure that their value is.
Is distinctive relative to any competitive offering so thats.
But it's from a product perspective that really driven performance, we acquired high Q.
In the last couple of years.
<unk> had a good first quarter and we're excited about what <unk> can do and we're excited about the way in which the team any of you getting across the world of embraced IQ and we're excited about the way the corporate team under Samuel Penn Vida have embraced <unk> pleasure.
If I sort of few of the building blocks, but what I would say is that.
There's been a change in the legal.
In the sort of the mindset of our legal customers and it started early in the pandemic amongst the largest of the firms and it's really starting to flow down into the medium to the mid and small.
Groups and and that is that they are reviewing of real estate experience and they are starting to look at increasing their investments in information and technology and I think that provides a real opportunity for us if we get it right.
Work to figure out what additional products and services and potentially what acquisitions, we might make to serve that it's early days.
George and so I think we're happy with where we are but but there's some there's some real potential upside if we get it right and we've got some work to do.
Execution of Oncotype to get the anything to add to that line.
Okay.
That's without <unk>.
PRASM.
Alright.
Good morning, guys.
One more.
Quick follow up.
The analyst day your medium term target for the corporate segment was the highest among all your segments and so given the strength that we're seeing the legal could you perhaps touch on corporate.
What's been the drive the growth in corporate keep out of legal over the next two to three years.
Yes.
Corporate business, a few thoughts George Smith, and Denso joined US in December of 2020.
We look forward for him joining us too in some investor conferences coming up if you think about the corporate business practical law that we've discussed quite a bit today of the direct tax indirect tax we're very enthused about global trade management.
For portfolio. There this is where at Investor day, Aaron Brown, and Brian deck of rally that's.
<unk> talked about our full suite of one source. So if you really focus on the the one source suite of products specifically the indirect tax we're very excited about that if you look over the time horizon I think youll see a sort of a very significant increase.
In our corporate growth as we go through 'twenty two 'twenty three.
To achieve the ranges that we discussed with Investor day.
Got it very helpful. Thank you.
Okay, Okay, well that will conclude our of our first quarter earnings call. We appreciate you all joining us. This morning. It's afternoon wherever you may be you of any follow up questions feel free to reach out to me or to Megan and we look forward is thinking of review of the number of upcoming conferences over the course of the next several weeks and will also speak to you again in early August.
Have a good day thanks, everyone. Thank you.
Thank you so just to advise everyone that concludes your conference call for today you may now disconnect. Thank you for joining and have the very good day.
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