Q1 2022 Thomson Reuters Corp Earnings Call
Good day and welcome everyone to the Thomson Reuters first quarter of 2022 earnings call. My name is Matt and I will be your operator today during the presentation. Your lines will remain on listen only.
Quite assistance at any time, please press star zero on your telephone and a coordinator will be happy to assist you.
Thank you Matt.
Everyone and thank you for joining us today for our first quarter 2022 earnings call.
Joined by our CEO , Steve <unk>, and our CFO , Mike Eastwood, each of whom will report our results and take your questions. Following their remarks to enable us to get through as many questions as possible. We would appreciate it if you limit yourself to one question and one follow up when we open the phone lines later throughout today's presentation. When we compare performance period on period, we discuss.
Revenue growth rates before currency as well as on an organic basis. We believe this provides the best basis to measure the underlying performance of our business.
Today's presentation contains forward looking statements and non <unk> financial measures actual results may differ materially due to a number of risks and uncertainties discussed in reports 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.
Thank you Gary and thanks to all of you for joining US today before I begin with a review of our Q1 results I must recognize our ROI just used colleagues and express a great appreciation for the difficult but important work. They are doing on the ground in Ukraine to provide us all with unbiased.
Reliable news video and imagery.
Our efforts, which comment significant personal risk exemplify the best about company purpose, which as you know is to inform the rifle the principles of trust and transparency, but all of us at Thomson Reuters The chart spun out to achieve.
Now onto our Q1 highlights.
I'm pleased to report that the momentum that built throughout 2021 continued in the first quarter of 2022.
But sales and revenue exceeding our expectations.
For about five business segments again recorded organic revenue growth.
6% or greater.
Total company organic revenues growing 7%.
Our big three business segments also grew 7%.
<unk>.
We have growing conviction that our businesses are benefitting from a significant prevailing Taiwan driven.
Driven by a step change in the complexity of regulation and compliance.
Legal tax and risk related markets.
The resulting need for trusted accurate and actionable content and technology plays to our strengths as to the accelerating trends of Digitization and changing ways of work.
When combined with our change program progress to date and an increased focus on innovation.
These tie wins position us well to continue our recent momentum.
Due to the Q1 revenue strength and healthy book of Christmas or ACB growth.
We are raising our full year revenue outlook, we now see total revenue rising by five 5%.
Big three revenue by six 5% up from our prior views of 5%.
Six 6.5% respectively.
We maintained our margin outlook, because we continue to invest in our businesses and customer success and also absorbed heightened inflationary pressures.
Overall, the strong start to the year provides confidence that we're on the right path to achieve our 2022 and.
In 2023 targets.
Turning to our change program, we continue to make steady progress on key initiatives.
As of March 31st we've achieved annualized operating expense run rate savings of $305 million and we're on a path to achieve $500 million per year end.
And a full targeted $600 million by year end 'twenty.
'twenty two 'twenty three.
And lastly, we remain in a strong position ample capital capacity.
We continue to assess inorganic opportunities to strengthen our big three customer.
<unk>.
And share repurchases remain another option based on the timing of these inorganic opportunities.
After the results for the quarter.
First quarter reported revenues by 6%.
Organic revenues up 7%.
Mike will explain in more detail.
So revenue growth benefited by close to 1% from transactional revenue that is unlikely to procure level and to a lesser extent timing.
But even adjusting for these items organic revenue grew at a healthy 6% driven by organic recurring revenue growth 7%.
This recurring revenue prices an improvement from 6% in Q3 and Q4 2021.
Adjusted EBITDA increased to $600 million.
Collecting 50 basis point margin improvement.
35, 9%.
Excluding costs related to the change program the <unk>.
Adjusted EBITDA margin was 37, 9%.
This strong performance resulted in adjusted earnings per share of 66 cents.
<unk> <unk> cents in the prior year period.
Turning to first quarter results by segment.
The big three businesses achieved organic revenue growth Syn rift.
Reflecting broad strength.
Legal continued its recent bantam, delivering our fourth consecutive quarter of 6% organic growth.
The legal market remains healthy across all key segments small.
Pete had large sites U S firms corporate general counsel government bonds.
Overseas markets.
For instance, Westmore edge adoption continues to drive revenue.
And we continue to expect annual contract value for ICB penetration to approach, 75% by year end from 65% at the end of 2021.
Second practical law as reported in our legal segment had a terrific quarter growing mid teens, we forecast this growth to continue for the remainder of the year and I will discuss practical or more detail shortly.
Third our government business, which is managed within our legal segment.
<unk> grew 9% organically Q1.
We see acceleration is likely the balance of the year.
Fourth our legal business is in Canada Asia also grew organically at double digit rates.
Turning to corporates organic growth momentum continued with revenue up 8%.
While transactional revenue contributed underlying growth trends continue improvement seen in the second half of 2021.
We remain confident the corporate segment, achieving 7% to 9% organic growth 2023 as discussed during our March 2021 yesterday.
Tax and accounting had another healthy quarter.
With organic revenue growth of 11%, 10%, excluding timing benefit of a return to historical tax filing deadlines, our Latin American business Dominion.
Grew nearly 30% in the quarter and remains a key right rod.
Reuters news organic revenues increased 9% in Q1.
Growth occurred across all lines of business, particularly benefiting from the segments professional business, which includes digital advertising custom content and Reuters events and the increase in our London stock Exchange group.
Cig use.
Finally, global print organic revenues were flat compared with the prior periods, which were better than expected due to higher third party revenues and timing benefits that we expect to normalize in the remainder of 2022.
One other update we recently closed the acquisition of <unk>, which brings key talent and legal contract analysis technologies, we believe forthright accelerate.
Time to market with a key capability sick.
Hi, based contract analysis, which we see as a powerful combination.
Editorial content.
We see these capabilities bolstering, both our legal workflow and practical law offerings over time.
We also recently closed the acquisition of gesture.
The accounting focused software provider in Brazil that enhances client automation.
Integrate seamlessly without <unk> offering.
We welcomed a false choice and just the teams to tee off.
We look forward to working with them to build a very significant potential.
In summary, we're very pleased with our results we're excited about the momentum bill.
Building within our businesses.
Now, let me take a few minutes to discuss several key contributors to the recent dimension and the legal professionals segment and why we are confident in its forward prospects.
I want to provide a bit more transparency around our legal professionals revenue mix and what is driving the strength strengthening performance.
Background organic revenue growth of illegal has accelerated to 4% in 2019 and 19% to 6% in 2021 in Q1 2022, driven by several factors.
First we have seen solid acceleration in recent years from now with a key wistful brand, which has benefited from rising adoption of our higher value wastewater offering.
Second we have several other offerings within legal they are increasingly contributing to our growth.
This includes three of our seven T G growth focus hearings practical law risk fraud and compliance.
Legal workflow solutions in total.
Don Westleigh businesses comprised nearly half global Eagle's revenue and are growing at high single digit pace like wistful. These businesses have accelerated in recent years.
Looking forward, we remain confident in the growth.
Attention, but wasteful and the non western or offerings.
Supported by healthy market demand.
A robust product roadmap.
The Westwood all key drivers include continued penetration of the premium edge offering.
The future launch of West, Florida, two daughter.
Outside of West La we continue.
<unk> continued double digit growth caramel RFC franchise.
Workflow practicable offerings as a result, we believe the positive mix shift toward a higher growth unwished-for offerings.
Likely to continue in the next few years.
And which we expect to sustain our recent revenue.
Building upon this legal professionals discussion I will extend expand a little bit on practical law, which has been a terrific and in many ways underappreciated story.
An important growth driver for our legal professionals and corporate segments.
Like Westworld practical law provides strong value to basketball fans and corporate general counsels through a blend.
Premium content and technology.
Analytics.
Our 650 practical attorney additives, they bring very significant practice experience.
Cover a broad range of practice areas jurisdictions paint industry.
Leveraging technology.
Unique search capabilities and analytics, they create and maintain.
Wealth of know how resources, including standard documents clauses <unk>.
Guides and explanations checklists and legal and regulatory updates among others practical law has proven to be a key resource for Bud lawyers and corporate uses as it helps these professionals with more effectively and efficiently.
Both firms and corporations facing tight labor markets and cost prices the efficiency benefits of practical law resonate, particularly well.
Hi.
However, practical success is not a recent phenomenon since its acquisition by Thomson Reuters in 2013 press the Lloyd's grown revenue at a 16% compound annual growth rate more than tripling.
This includes mid teens, but 2021.
Q1, 2022 today, the business approaching $500 million in revenue.
Roughly 60% legal professionals and 40% corporates looking forward, we remain bullish on practical laws potential.
We expect revenue growth to.
To continue in addition to opportunities to further penetrate the wall.
Corporate pockets.
Product innovation in content enhance the key drivers there.
This includes two recent major upgrades.
<unk>, but enhanced and expanded content technology and analytics.
We've recently launched the global customer experience, which brings expanded international editorial content global product integration.
An improved user experience.
Also.
The practical work dynamic package that launched last summer.
<unk> incremental content improved search capabilities and advanced or enhanced analytics in both cases, the expanded content and enhance capabilities to command a premium price point, which like the west, Florida rollout should contribute nicely to growth as adoption is expected to increase over the next few years.
With meaningful wide spacing, but legal and corporate markets executing our go to market strategies remains another key driver practical.
Slide 12 illustrates the broad appeal of practical law across customer pool.
Rather than going through these details I'll wrap up my commentary by explaining a real World example.
How practical law can drive meaningful ROI.
<unk> customers in our scenario a large corporate client needs to understand noncompete was in all 50 states with a modest labor and employment practice and associate lawyer is assigned to research statutes and typhoons and prepare it 50 state survey on non competes.
So it could easily spend in excess of 100 hours on this project.
Partner spending several more reviewing the work.
The same work with practical law will take four hours.
And using the quik compared to from the practical with dynamic package.
All of them could illustrate the findings and our compelling visual schematic.
As this example illustrates the efficiency and accuracy benefits from practical law can be very significant we believe they provide a growing tayo, we put demand given rising pressure on law firms to do more with less while managing increasing risk and complexity.
Let me now turn it over to Mike who will provide more details on the.
Financial results.
Thank you, Steve and thanks 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 fourth quarter revenue performance of our big three segments.
Revenues rose, 7% organically and at constant currency for the quarter.
This marks the fourth consecutive quarter, our big three segments have grown at least 6%.
Legal professionals total revenues increased 5% and organic revenues increased 6%.
Organic growth was driven by practical law fine law and our government RFC.
West La edge continues to add about 100 basis points to legals organic growth rate.
Is maintaining a healthy premium and is expected to continue to contribute at a similar level going forward.
Ported by the planned release of West La edge to data during the second half of this year.
In our corporate segment total and organic revenues increased 8% for the quarter with both recurring and transactional growing 8%.
Corporate growth benefited from transactional revenue strength that is unlikely to recur at Q1 levels.
However, recurring revenue growth of 8% continues the momentum that began in the second half of 2021.
Recurring revenue was driven by clear practical law and indirect tax.
And finally tax <unk> accounting total and organic fourth quarter revenues grew 11% with.
With Latin America again, leading the momentum.
Please note the returned to April tax filing deadlines glass from PE in 2021.
<unk> rose by approximately one 5%, which will reverse in Q2.
Moving toward this news.
Total and organic revenues increased 9%, primarily due to our professional business and an increase in our al Sag music Raymond.
Lastly, global print total and organic revenues were flat to prior year period ahead of expectations.
Our third party revenues for printing services and timing of these sales rose the outperformance.
We expect both to normalize in the remainder of 2022.
On a consolidated basis fourth quarter total and organic revenues each increased 7%.
One last note on revenue.
As it relates to the Russia, Ukraine conflict.
Our exposure to the region is immaterial at less than $10 million annually.
Turning to our profitability adjusted EBITDA, the big three segments was $584 million.
Up 11% from the prior year period, a 42, 9% margin rising 190 basis points.
Improvement was driven by legal and tax and accounting due to higher revenues and change program savings.
I will remind you the change program operating cost are recorded at the corporate level.
Moving to reorder skews adjusted EBITDA was $37 million.
$9 million more than the prior year period, driven primarily by revenue growth.
Global Print's adjusted EBITDA was 53 million a margin of 37%.
A decline of 290 basis points due to the dilutive impact of lower margin third party revenue.
In aggregate total company adjusted EBITDA was 600 million, a 7% increase versus Q1 2021.
Excluding costs related to the change program in both periods adjusted EBITDA increased 11%.
The first quarter's adjusted EBITDA margin was 35, 8% or 37, 9% and underlying basis.
Excluding cost related to the change program.
Moving on to earnings per share first quarter, adjusted EPS was <unk> 66 cents.
Up from 58 cents in the prior year period.
The increase was mainly driven by higher adjusted EBITDA.
Let me now turn to our free cash flow performance for the fourth quarter.
Reported free cash flow was $86 million versus $239 million in the prior year period.
Consistent with previous quarters. This slide removes a distorting factors impacting our free cash flow.
Working from the bottom of the page up.
And cash outflows from the discontinued operations component, our free cash flow was $22 million more than the prior year period.
This was due to payments to the UK tax authority related to the operations of our former <unk> business.
Also in the current quarter, we made $114 million of change program payments as compared to $12 million in the prior year period.
If you adjust for these items comparable free cash flow from continuing operations was $259 million.
<unk> 9 million lower than the prior year period, primarily due to annual incentive plan bonuses.
We reaffirm our 2022 full year free cash flow outlook of approximately one 3 billion.
Speaking of our free cash flow I wanted to provide an update to a disclosure. We initially made at our 2018 Investor day.
We continue to expect our free cash flow to exceed our adjusted earnings by a comfortable margin as it has in recent years.
This pattern of converting more than 100% of our adjusted earnings into free cash flow backs up well versus our information services peers.
And indicates a high quality earnings stream as the earnings of more than backed up by our free cash flow.
Three factors drive the strong conversion.
First.
We expect our capital expenditures will be less than our depreciation and amortization by approximately $140 million to $170 million in 2023.
The reduction in capital intensity has a quicker impact free cash flow.
Two the timing of the depreciation runoff.
Second we expect our cash taxes to be lower in our P&L taxes by approximately $100 million to $150 million in 2023.
As mentioned last quarter.
In fact, our effective tax rate to decline to the upper teens in 2023.
And as a rule of thumb, our cash tax rate is forecast to be approximately 5% below our effective tax rate.
Lastly, we expect $25 million to $50 million of miscellaneous items that drive the variance between the P&L and cash.
<unk>.
We expect annual pension cash contributions to be lower than annual pension expense.
In addition expenses related to our employee stock purchase plan and equity based compensation at no impact on free cash flow.
We also expect to receive dividends from outside.
<unk> of our free cash flow.
I will now provide an update on the progress related to our change program.
In the first quarter, we achieved $88 million of annual run rate operating expense savings.
This brings the cumulative annual run rate change program operating expense savings to $305 million.
This increases our confidence in reaching approximately 500 million of annualized savings by year end and $600 million gross operating expense savings by 2023.
As a reminder, we anticipate reinvesting $200 million of the projected $600 million of savings back into the business for a net savings of $400 million.
Now an update on our change program costs for the fourth quarter and remainder of 2022.
Let me start by saying none at the annual estimates have changed from what we provided last quarter.
Spend during the fourth quarter was $62 million.
Price of $34 million of Opex and $28 million of Capex.
We anticipate $130 million to $150 million of total spend in the first half.
$160 million to $180 million in the second half of 2022.
For the full year, we continue to expect 305 Milligan of change program investments.
Which would bring total 2021 and 'twenty two.
Cumulative investments of approximately $600 million.
We also continue to anticipate a split of approximately 60.
60% Opex, 40% FX.
Let me conclude with our outlook for 2022 and 2023.
As Steve outlined we have increased our full year 2022, the outlook for total TR and big three revenue growth.
We now forecast total organic revenue rising by approximately five 5% and three by approximately six 5%.
Up from the prior 5% and 6% six 5% respectively.
We are maintaining our adjusted EBITDA margin outlook of approximately 35% as we continue to monitor potential inflationary impacts.
NSS investment opportunities to drive continued success and revenue momentum.
There is no change to either 2022 outlets items, and we reaffirm our 2023 targets.
Looking to the second quarter.
We expect revenue growth for total TR and the big three to be comparable to our updated full year forecast of approximately five 5% and six 5% respectively.
We expect our adjusted EBITDA margin to be approximately 200 basis points. It was the full year outlook of approximately 35%.
Due to the normal seasonality in our tax and accounting segment and the cadence of change program investments.
We also see our effective tax rate at the midpoint of our 19, 21% full year range.
In summary, we remain confident in achieving our 2022 and 2023 targets.
Aided by the strong start to the year and help the underlying momentum in our key businesses.
Over time, we continue to believe we can achieve faster revenue growth.
Higher profitability and significantly higher free cash flow as we benefit from transforming to a content driven technology company.
That means I'll turn it back to Gary for questions.
Thanks, Steve and Mike, Matt, we're ready to begin the Q&A portion of the call.
Thank you Gary if.
If you would like to ask a question. Please press Star then one on your telephone.
And the first one is coming from the line of least Valentina from TD Securities.
Go ahead, yes.
Yes, thanks, very much great quarter, I'll leave it to others to ask about that just given the environment.
In the tech sector and multiples collapsing in a lot of spaces I'm wondering if you can give us any update on <unk>.
On acquisition targets I assume this is potentially a good news scenario for you guys, which being cash ratio with a strong balance sheet and looking for strategic acquisitions that will bolster your growth.
Is there any hope that these things are getting more eminent given where value what valuations are doing.
<unk>. Thanks for the question look I think.
We are close shop.
For two reasons one.
We're not a quarter through the change program in building competency now in the capabilities with building in the <unk>.
And our execution.
And we think that the further we get along that journey.
More of it.
If an advantaged acquirer, we will be.
And so we're making good progress there and secondary as you say there has been some pretty significant changes in.
In public valuations and.
And the potentially towards the end of this year.
Private technology related valuation selling points of those two things provide us with some optimism that we'll be able to.
To do one or more acquisitions that are additive to the customer experience that we provide.
Yeah, Vince I will just supplement just as a reminder to everyone. The first tranche of the <unk> state.
Lockup expires Q1 2023 as we've previously stated it's our intent to monetize the first stage, which is approximately one third.
Q1, 'twenty three the second item I would emphasize Vince as Steve mentioned in his prepared remarks, depending on the cadence of sequencing of acquisitions, we still have the option of considering additional share buybacks comparable to what we did in 2021.
Can I just clarify one thing you said, Steve that pub.
Public valuations have come down you're expecting private valuations could come down later this year does that imply you haven't seen them come down yet.
Well, there's always a.
The gap between the sort of the.
The expectations of sellers, which tend to.
Tend to lag and the expectations of buyers, which.
The pricing.
Any declines pretty quickly so.
We haven't seen any significant transactions that would indicate just yet.
The correction has occurred but.
We think we think in mind.
Thank you.
And the next question is coming from Heather Basket from Bank of America.
Please go ahead.
Hi.
Can you share some color in terms of the demand youre seeing from your customer base.
In legal and accounting as well.
And are there.
General concern about where it is.
State of the economy and things slowing with rising rate I'm curious just sort of what you've seen in the past in terms of your customers' demand in a slower economic environment.
Yes.
Let me start Steve let me start and pension Mike can provide some more historical context, because he was.
He was at <unk> during the <unk>.
Nine financial prices, we continue I alluded. This in my remarks, we continue to see robust.
Demand for our solutions in all big three segments, and it's really being driven by.
The need to automate and simplify their workflows.
Access content that keeps them a competitive advantage and allows them to be more efficient and effective in the euro.
Sort of coming through and coming out of Covid that that trend continues.
Unabated.
So far this sort of.
Turbulence in the brought up.
Geopolitical and macroeconomic environment has not translated into any softness that demand in any of the three segments.
And I would just point to the fact that 80% of our revenues are recurring.
And so that gives us real confidence through the rest of this year and justification for raising our revenue guidance.
If all of the businesses you fall out we're in a robust category because of that 90%.
Revenue.
Recurring revenue, but let me, let me ask Mike to supplement based on our historical.
Our experience through through difficult economic times.
At additional two points. In addition to Steve's point on 80% recurring growth a key factor was at 80% recurring is multiyear contracts as a reminder, approximately 60% of our legal.
Revenues under multi year contracts about 40% of our corporate revenue multi year and 10% of tap a tax and accounting is multiyear S&P point. The second point Heather we saw really strong Q1 net sales and thus far early indicators of a strong April results. There so based on.
That have their remain positive we will have to continue to monitor it obviously throughout Q2 and the full year, but I think the strength of our multi year contracts certainly helps us.
Thank you and a follow up question on the margin guide.
You talked about inflation being one of the factors that led you to maintain at this quarter for the full year.
Curious just turning to your ability to take price against that and.
Is it a timing issue I am just curious turned out what's going on there.
Yes, certainly Heather in regards to the margin I'll mention a few items you touched on the potential for inflationary headwinds, but another key factor for US is the opportunity to make additional investments in our businesses to support our customers that's something that we'll continue to.
To assess specifically in regards to inflation I'll touch on two aspects of pricing that you mentioned and I'll also add some color and we launched in regards to the cost side on pricing our pricing in Q1 was fairly consistent with prior years. It was up slightly but the strength of the revenue that was really the underlying performance.
The business saw a slight uptick in pricing as we go through the full year. Our current estimate is a slight uptick versus 2021, but not hugely significant as a reference point in 2021, our price increases which vary by segment tax and accounting was 5% our corporate segment three.
Percent.
Legal two 5%, yielding the weighted average there.
On the cost side, we did provide higher merit increases in April of this year, which is our annual increase.
Sure.
And if you look at the supply traditional supply chain impact our print business, we refer to it as the three-piece print paper and postage certainly we're seeing higher price and cost there in the print business, which is about 10% of our total revenue given all of those potential inflationary factors and other we have considered those.
In our updated guidance for 2022, and when we reaffirmed our guidance for 2023, so based on what we know on the potential inflationary factors. Heather we think we've been prudent in factoring into our margin and full guidance for 'twenty, two and 'twenty three.
Okay. Thank you.
The next question is coming from drew Mcreynolds from RBC capital markets. Please go ahead.
Yes, thanks very much two follow ups for me just following upon Vincent M&A question first thanks for the drill down on the legal and particularly legal solutions business very very helpful.
I think for those that have followed some of your M&A over the years finding things like practical law are just amazing assets.
That generate that kind of growth over years and years wondering I guess for you Steve.
You have identified practical law like assets out there.
Or are these more difficult to find just in general just would love to get that that context, and then second follow up.
We've all known kind of complexity drives the end markets for.
Legal tax and accounting.
You are going through a kind of post COVID-19 work from home period.
Even bigger picture than that where else is the complexity growing in these end markets just wanted to just better understand more of that.
Bigger picture structural tailwind thank you.
Yeah, Thanks, Greg Great question.
But now two acquisitions are the same obviously, but.
But.
What we're seeing amongst al.
Law firm customers in particular.
But increasingly the general counsel's offices, as well is a real need to invest in technology and workflow.
<unk> software.
And to have the content.
Flow seamlessly through that software. So we think theres sort of a combination of unique content AI machine learning and software is a very valuable play at this time.
And it plays to some degree.
Your second question.
Things like like law firms financial institutions, and Thomson Reuters and business information services projects.
Finding their footing in a.
And I don't know, whether it's a post COVID-19 world, but certainly it will but it involves more time back in office than the last two years.
With that comes more and more technology investment and a potentially less real estate investment and more technology.
We think that there will be.
Quite a few opportunities for us to build organically and <unk>.
And by Inorganically in the space. So I think the one while not a direct parallels to practical law is thought trace.
We look at this.
This area of contract analysis, it's enormously time consuming for general counsels painful orphanages.
Third through hundreds if not thousands of contracts when the law and the regulation changes and be able to treat.
To quickly and seamlessly update them and have confidence that that process has been.
It has been effectively correctly done.
So it's a.
It's a big area of demand I've had a conversation with a number of our legal customers and sort of described before <unk> described the investments that we're going to make in it and what the outcomes will be and they are excited about it. So we'll see how that how that plays out in terms of your second question look.
With a good for humanity or not we certainly see lots of examples of increasing.
Compliance related complexity.
So cyber is one area, we are getting comfortable with sort of data management and privacy and management of cyber related risks.
The legal landscape gets more complicated in terms of rules and regulations not less for corporations big small and medium.
And we don't know of many tax codes that are getting simpler.
And so it really is across.
Cross sell business that we see this sort of <unk>.
Rising complexity and what that presents.
Inflationary environment and a talent constrained.
Marketplace is.
Company companies need reliable partners to help them handle that complexity and either taken off of their plate.
And that's what we're here to do.
We were one of the few players who can do it effectively at scale in a truly trusted and transparent manner.
Yes, that's helpful. Thank you.
Thanks Jordan.
And the next question is coming from Kevin Mcveigh from Credit Suisse.
Please go ahead.
Great. Thanks, so much and congratulations on that.
The change program.
I Wonder can you give us a sense because obviously things have changed a lot. Since you started the change program.
I wanted to talk about maybe retention a little bit across the enterprise can we talk about that and then maybe pricing expectations.
Today versus kind of when you started the change program, maybe just a little more color around again retention and pricing as we're kind of working our way through change.
Sure Kevin Let me start with regards to retention I believe Kevin back at March 21 at Investor Day, We estimated that we could improve our overall retention for total TR by roughly 100 basis points over the time horizon.
Horizon, we're at approximately 91% today, which is a slight uptick over the last 12 months to 15 months, we remain optimistic Kevin in regards to being able to achieve the full 100 basis points lift.
I think it's directly correlated to the work that we're doing with Kirstie, Rob Andrew Pierce Crystal and others in regards to our customer experience and we're continuing to do that so I think we're on the right trajectory Kevin on improving our retention as we've discussed before our retention does vary.
<unk> by customer size with significantly higher retention for large customers lower retention for the smallest customers, but thats, where the work that we're doing with digital self serve and the overall end to end customer experience. We remain optimistic that will help us not only with retention, but also attract new customers.
And new logos.
Question, there with regards to pricing consistent with what I shared with Heather to me just repeat that for everyone's benefit Kevin.
<unk> uptick in our pricing in Q1 versus 2021.
It does vary by segment as I mentioned tax and accounting about 5% corporates, three and legal two and a half based on what we see right now over the course of the year, we see a slight uptick for the full year compared to last year. One factor. There is the multiyear contracts that we talked about earlier in one of the.
The questions as we do implement some price increases for multiyear contracts, there will certainly be a timing impact as to when that price is realized.
I think those were the two questions on retention and pricing and Steve may want to touch on the last one <unk> and Kerr.
When you initially talked about the change in the program. If we largely look at the work streams that we started on the change program 15 months ago, We're continuing to March on each of those certainly heavily learn things and there are various puts and takes there are and we pivot along the way as you would expect this to there.
We remain on track and a lot of heavy lifting remaining for the year, but I think we'll be in a really good spot Kevin at the end of 'twenty two on the change program, Steve May want to add some comments, yes, just to supplement I think Chris.
Chris anything much.
With the change program I'm sort of surprised at how correct our assumptions we're going here.
Any arrogance, but when you design one of these programs.
No. There's a lot of assumptions you have to make.
And I think credit to credit to cresting, Roth and Andrew <unk> and many others.
Sure.
That sort of initial design work.
In each of the work streams custom.
Customer experience.
Upgrade.
The modernization of ops and tech in the sort of Oregon location, where both all of those in a change to some degree and all advisors required problem solving and some pivots.
The biggest one has been the.
All design and location I think we're staring at a very significant people fluid and flexible working environment than we were.
When we when we launched the program.
Through the pandemic there was an assumption that things would return to some level. Some version of what they were before.
Whereas I think as we sit here today, we realize that we are in a hybrid environment that just one per symbol for 2019, we're involved with.
Very significant we're providing our colleagues with much more flexibility in terms of.
From where they work and how they work together in service of our customers.
And that affords us the company flexibility in terms of.
Investing in real estate and physical locations.
Last point I would make with some of the talent accretive Sharma that we've joined and looking at our product development Roadmaps and the timing of the releases and frequency thereof to me that's probably one of the positive factors that we have as we think about our product development roadmap over the next couple of years. So I think that's a key factor.
Thank you so much.
The next question is coming from Andrew <unk> from Jpmorgan. Please go ahead.
Hi, good morning.
Stephanie filling in for Andrew.
Just a question on your public cloud migration.
And I think they're.
Progressing on track and accelerating any call.
There you can provide on that front.
Yes.
Tiffany.
It's ahead of track.
As you May remember, we got to about 33% I think by the end of last year and that continues to that continues to accelerate and we're looking at we're at about 50 channel now we're looking to get 90% plus.
Bobby.
The back end of 2023, so we're on track with that and I think what it does is provide us a bit of flexibility as to.
With it too.
We continue to invest in that and accelerated further.
<unk> two.
To use some of that.
Some of that sort of power.
Progress that's a little ahead of where we thought we'd be to accelerate some other areas and thats one of the areas that will that will solve for the next few months, but.
We are very happy with the way that's going and it is ahead of track and I think it provides us with increased confidence.
Can use it to support the rate of innovation, particularly for our top couple of dozen products.
Okay, Okay great.
If I can just ask one more.
<unk> can you talk about the geography difference in terms of the traction you're gaining so I think it had great adoption.
And it's a little bit more nascent in the U S. A few years ago have you seen most of the pickup in adoption being in the U S. Can you just comment on kind of day.
Geographic split.
In terms of the customer mix.
Yes.
We bought when we bought the company. It was a predominantly if not entirely U K based offering. So it was built on practical Knowhow U K law.
One of the things that Thomson Reuters has been able to do is bring that to the United States and and ramp it up very significantly. So we've done the signing of the other markets like like Australia et cetera.
So I.
I think a peak.
It's an interesting proof point for us because it does suggest.
Debt that we can take in.
An acquired asset that's.
Perhaps a bit constrained to a single market geographic market.
We can really make create great value by bringing it to two other market I think the other example, where we're well underway in doing that is by Q.
Alright, which we bought back in 2019 and one of the things is also a UK focused.
Legal workflows software offering and some of the biggest growth we've seen for high speed with <unk>.
<unk> in general Counsels office here in the United States. So we've taken up.
Replicated with IQ as well.
It's definitely I would add one additional dimension you asked specifically about geography, and maturity and penetration there kind of a dual path. There is the maturity level with law firms versus the general counsels that Steve just referenced and we have stronger growth right now with general counsels as there is additional opportunity.
Further the penetration there so think of it as a dual axis, Stephanie geographic expansion, but also general counsel versus law firm.
Okay, Okay, great that's awesome color. Thank you.
Okay.
And the next question is coming from Doug <unk> from Canaccord Genuity.
Please go ahead.
Good morning, Thanks for taking my question.
Wanted to ask you a little bit about.
SME exposure.
Staying within the subject of some concerns around macro level slowdowns.
To get a sense of how you're seeing sort of the traction in the SME space and can you just update us or remind us about the exposure you have to SME level customers and then a quick follow up.
To the extent that you can discuss this.
On west La edge to play Doh.
Generally how much of a step up are we talking about in terms of the product, obviously that to manifest itself into pricing and RFA as well, but any kind of color you can provide on that front will be useful. Thank you.
Yes, I'll start.
Michael supplement.
On SME.
We have a strong presence amongst small law firms strong presence among small, Texas, particularly small tax and accounting systems, we have I think modest but very promising presence amongst small to medium enterprises in the corporate sector. So you have to sort of differentiate.
With you talking about the professional services firms and their size versus the corporates, we think the SME sector itself.
Within corporates is led by an executive co broke bread ruler, Brad and his team are doing good job, but it's a modest we have a modest starting point, we think there's lots of upside.
Upside there, we're not overly exposed to that segment segment showed a taker disproportionately hit.
A few more difficult economic climate control Michaels supplement that hits on with Floorage, what we want to today's to sort of go into any.
Significant detail as to what that product.
Sort of.
Competitive reasons, but.
The.
So in early testing we've done with customers is very very promising and suggests that.
That will sort of continue the trajectory that we saw.
We and our customers have enjoyed in terms of wish Florida, one point on that.
Just to point out will be at least at least that sort of value add to customers and the experience they have with the product.
Yes, even though we plan to launch <unk> in the second half of this year at that time, Paul Fischer.
President of legal professionals, David long, our Chief product Officer will do some external launches there with and we'll share more there I think from a financial lens perspective, less low edge. One auto we've been sharing consistently has been generating about 100 basis points of organic growth for us very consistently over the last four years since.
We launched it in July of 2018, we fully.
Assume and we have strong confidence that west wall edge to it. Although we will continue that so the 6% organic growth that legal has now achieved for four consecutive quarters.
We believe we will continue for the full year.
'twenty two and into 2023, so we do not believe there will be any drop off and legal professionals.
Ganic growth as we shift into less fall edge to data.
Thank you.
The next question.
<unk> is from Toni Kaplan from Morgan Stanley .
Please go ahead.
Hey, This is Greg parish on for Tony Thanks for taking my question and congrats on the strong quarter.
I wanted to ask about government. It has been a strong growth driver for you for <unk>.
Some time now.
You talk about what's driving the strong growth.
What are you expecting for the next few years and just maybe broadly about the sustainability of the growth.
Yeah. Thanks.
Thanks, Greg.
Look I think what sort of drives the growth that will sustain the growth.
An extraordinarily extraordinary an enduring set of relationships with.
With key government agencies.
<unk> team have been out of the long time and have a fantastic set of relationships.
Better.
That a bipartisan that are enduring and that built on trust and built on delivery. So we think that that.
That sort of positioning in <unk>.
The growth trajectory of eminently sustainable.
The business today includes a number of things, including the clear franchise.
Franchise, which is unique.
A unique dataset and unique franchise.
Special services Trs Sis.
Security clean set of analysts.
Very very talented set of analysts with a track record of highly impactful work.
And of course, the <unk> acquisition that we made in 2020.
Amongst other things.
We see we see real sort of growth.
<unk>.
And upside in all three of those and in fact wed love to further invest in our efficiencies.
Within the sort of rubric about risk frozen compliance, Florida franchise, both apply that to government agencies and two.
And to the.
Corporate sector. The last part of it is out.
It was the acquisition of case lines, which is which is the automation of.
The activities courts, and we see.
Lots of promising activity outside of the United States.
In the court systems, while we see some gamestop, United States, Texas, Arizona, particularly a number of other state school systems.
So we're very much analogue and there are periods today.
Kind of moving quite slowly towards a digital future. So we'll be there with them for them when they are ready for <unk>.
Certainly the progress we've seen in the UK and.
In Canada and in places like South Africa is being as people.
Just on the core systems, Greg I'll add two additional points West La is also a contributor to the government growth steep rudely and team have done a great job penetration of westfall edge.
Once at the.
State and federal level and you specifically asked Greg about sustainability in the next few years, we have strong confidence there.
Based on the visibility of current pipelines product roadmaps et cetera at 9% organic growth for government in Q1, we anticipate double digit for the full year and look into 2023, we would expect a similar 10% type organic growth for government Greg.
Great. That's very helpful. Thank you.
For my follow up I want to talk about cross sell I think Mike you talked about the.
15% of your revenue being generated from cross sell and this is maybe a year ago that you said that I guess.
Maybe there's an update there and then I guess.
Broadly, where do you think that figure it could get to over time, how big of a driver can it be.
Digital self serve can add sort of.
That number higher and then if you could just talk about kind of how much Quebec.
Contribute to organic growth.
Yes, Greg about 15 months ago, I shared the roughly 15% of our gross sales activity driven by cross sell activity. That's in the 20% range today, Greg and we do see that continuing to rise we've made additional investments in talent and tools and systems in regards to our commercial excellence.
Policy area.
<unk> will help fuel that.
Little early today, Greg for me to give you a long term view on what it could be but I can safely say I see a sustained increased opportunity as we move over the time horizon and in each of our segments. There you mentioned the digital self serve that will.
Definitely help us with cross sell activity, but also the work that we're doing with product once again with David wine Charlie <unk> on the design side. So I think as part of that product innovation. That's also an element of cross sell that will definitely help us on correct.
Great. Thanks, so much and congrats again.
Thank you Greg.
And the next question is coming from Douglas Arthur from Huber Research.
Please go ahead.
Yes. Thank you.
Steve a lot of your information service peers have lowered guidance for 2022.
Arguably.
Your business mix is a lot more resilience.
As shown by your guidance change so I guess the question is on the margin.
What sort of if some softness in demand develops later in the year and legal or corporate.
Particularly what sort of.
Areas would you be tracking to see if there was any softness in demand.
Mostly on the project side.
Yeah.
Yes.
Got it thanks.
Okay.
Got it.
It's worth remainder remains.
Our revenues are recurring.
So I understand your question, but it is a.
A very small.
A portion of our business and that's not to say, we're not focused on winning every customer every day and increasing our retention taking price where we can.
And fundamentally improving the customer experience to sort of drive.
Our NPS and more receptivity to our innovations we've touched on all of those things.
And I don't want to let the 80% recurring revenue sort of be a source of.
Arrogance of complacency, it's not so please don't take that from <unk>.
This is a business that provides an enormous amount of forward visibility.
So.
Can't give you a good answer I don't think there are.
Particular areas that we look at site.
That could be a problem.
We just used to the extent, we're selling advertising will evolve.
We will always involve a sort of a transactional nature to it in horizon four was that market too.
And in print causes long term secular decline and so we're always carefully monitoring sort of the trajectory of that and we see that being on a <unk>.
On a fairly manageable glide path at the moment.
Our transactional revenue.
Yes, there is a degree of variability to it we had some benefits from that in the first quarter.
But you have to remember I mean these are although they are transactional.
They are essential.
They are essential.
Services.
Software and content for our customers.
Much of it is not known option.
So that gives us some confidence as well.
Okay. It makes sense I appreciate the answers thank you.
And there are no further questions in the queue.
Okay, great well, thanks, everyone for their time and.
We're around for follow ups as needed have a nice day.
Thank you so much everyone that mark at the end of your conference call for today you May now disconnect. Thank you for joining and enjoy the rest of your day.
Yes.
Yeah.