Q4 2024 Thomson Reuters Corp Earnings Call
Good day, everyone and welcome to the Thomson Reuters fourth quarter earnings call. Today's conference is being recorded at this time I'd like to turn the call over to Gary Bisbee head of Investor Relations. Please go ahead.
Speaker Change: Thanks Jenny.
Speaker Change: Good morning, and thank you all for joining us today for our fourth quarter 'twenty 'twenty four earnings call I'm joined by our CEO, Steve pastor and our CFO, Mike Eastwood, each of whom will discuss our results and take your questions. Following their remarks to enable us to get to as many questions as possible. We would appreciate it if you'd limit yourself to one question and one follow up each.
Speaker Change: When we open the phone lines.
Speaker Change: 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.
Speaker Change: Today's presentation contains forward looking statements and non I FRS and other supplementary financial measures, which are discussed on this special note slide <unk>.
Speaker Change: Actual results may differ materially due to a number of risks and uncertainties discussed in reports and filings that we provide to regulatory agencies. You may access these documents on our website or by contacting our Investor Relations Department.
Speaker Change: Turn it over to Steve answer Thank you, Gary and thanks to all of you for joining us today.
Steve Pastor: 2024, which are Europe continued progress at Thomson Reuters. So let me start by reviewing some of our key accomplishments.
Steve Pastor: We delivered another good another year of good financial results meeting or exceeding key financial targets full year organic revenue grew 7% up from 6% in the prior year. The big three segments also accelerated growing 9% for the year versus 7% in 2020.
Steve Pastor: Three amid organic and inorganic investments our margins eased year over year as expected, but came in modestly ahead of our expectations and we delivered just over $1 $8 billion of free cash flow.
Steve Pastor: We continue to see healthy momentum for many areas in our portfolio.
Steve Pastor: Uptake about generally, but AI offerings remained strong with west la precision and co counsel momentum continuing.
Steve Pastor: And we have many other products and regions delivering double digit revenue growth, including practical law confirmation Shaw prep Yarrow indirect tax.
Steve Pastor: In our international businesses.
Steve Pastor: 2024, so a significant and important progress from an innovation perspective, as we continue to work to deliver on the product vision, we shared at our 2024 Investor day we.
Steve Pastor: We had several important product launches last year, featuring generative AI capabilities inclusion, including co counsel to Dot O co counsel drafting and checkpoint edge with co counsel.
Steve Pastor: We also had dozens of other enhancements across the portfolio and we're progressing with efforts to drive more seamless integration between our products.
Steve Pastor: We continued without build partner by approach to investing in AI, including the strategic bolt ons of site sign and material, which bolstered AI capabilities for our legal and tax <unk> accounting businesses.
Steve Pastor: All in our investments in AI grew meaningfully to more than $200 million in 2020 for.
Steve Pastor: Our pace, we expect to continue in 2025 and beyond.
Steve Pastor: This continued AI investment is included in our outlook and financial framework that Mike will discuss later.
Steve Pastor: Our capital capacity and liquidity remain a key asset that.
Steve Pastor: We are focused on deploying to create shareholder value and we made strong progress on this during 2024, we completed the monetization of our <unk> stake in May.
Steve Pastor: Repurchased $639 million about shares.
Steve Pastor: And we will raise our common dividend by 10% in 2025, the fourth consecutive year at this price.
Steve Pastor: Since the beginning of 2024, we have invested approximately $1 6 billion and five acquisitions, including <unk> and <unk>.
Steve Pastor: We also completed defined Lora divestiture and sold two smaller noncore businesses in December.
Steve Pastor: These moves bolster key franchises and improve the quality and growth prospects of our portfolio.
Steve Pastor: Looking forward our conviction around the medium term growth potential, but Thomson Reuters remains strong.
Steve Pastor: As Mike will discuss in more detail guiding for organic revenue growth of seven to seven 5% in 2025 and updating our financial framework for 2026, 275% to 8% an improvement over the six 5% to 8% for 2020.
Steve Pastor: 5% in 2026.
Steve Pastor: We discussed one year ago.
Steve Pastor: We're also raising the 2026 revenue growth targets for each of the big three segments by 1% from our prior view.
Steve Pastor: Now to the results for the quarter fourth quarter organic revenues grew by 5% organic recurring revenues grew 8% and transactions revenue decreased 4%, while print revenues declined 6% in line with expectations of tough comparison at Reuters from significant transactional generally.
Steve Pastor: Licensing revenue in the prior year impacted growth rates, adjusted EBITDA increased 2% to $718 million, reflecting a 130 basis point margin decline to 37, 6%. This lower profitability was expected and.
Steve Pastor: <unk> from investments to position the company for improving growth and the difficult comparison at Royce's as I previously mentioned, we achieved our full year 2020 for EBITDA margin outlook.
Steve Pastor: Turning to the fourth quarter results by segment, the Big three segments delivered 8% organic revenue growth. This is the fifth consecutive quarter of 8% or better growth for the big three legal organic revenue grew 7% driven by continued momentum from Westwood precision and co counsel corporates organic.
Steve Pastor: Revenue grew 10% driven by offerings from our legal tax and risk portfolios tax and accounting organic revenues grew 7%, our Latin American business and tax compliance offerings were key contributors Reuters news organic revenues declined 3% driven by the difficult comparison of the prior year period.
Steve Pastor: Lastly, global print organic revenues met our expectations declining 6% year on year in summary, we're pleased with our results.
Steve Pastor: Full year organic revenues grew 7% organic recurring and transactional revenue grew 8% and 10% respectively. While print revenues declined 7% in line with expectations adjusted EBITDA increased 4% to $2 $8 billion.
Steve Pastor: Yielding a margin of 38, 2% and adjusted earnings per share for the year was $3 77 compared to $3 51 per share in the prior year.
Steve Pastor: Let me finish on the results for the full year by noting we met or exceeded nearly all of our 2024 guidance metrics alone exception was the big three adjusted EBITA margin, which fell slightly short of meat investments, including dilutive M&A and other higher incentive compensation based on the strong.
Steve Pastor: <unk> 2020 for performance.
Steve Pastor: Now I'll spend a few minutes discussing our tax <unk> accounting professionals business, including the recent <unk> acquisition <unk>.
Steve Pastor: Our tax and accounting professional segment, which we refer to as tech.
Steve Pastor: He is a great business that one could argue we havent discussed enough with you.
Steve Pastor: It has been our fastest growing segment for many years, driven by a large and attractive market opportunity deeply embedded offerings and market leadership positions in both the U S and Brazil.
Steve Pastor: At our Investor Day last March we detailed a favorable industry backdrop that benefits our tap business.
Steve Pastor: <unk> faced ongoing talent shortages, increasing regulatory complexity and growing demand, including for advisory services.
This is fueling a relentless drive for efficiency and automation and rising technology investments by our customers as they transform their practices.
Steve Pastor: Our organic product investments M&A strategy and open ecosystem approach.
Steve Pastor: Focus squarely on helping our customers thrive in this complex environment by automating tax and audit workflows, bringing.
Steve Pastor: Bringing enhanced efficiency and freeing up time for higher value work.
Steve Pastor: One important aspect of tax <unk> accounting growth has been its strong track record of M&A.
Steve Pastor: As illustrated through the success of <unk>.
Steve Pastor: Confirmation and Shaw <unk> acquisitions.
Steve Pastor: In the 10 five in two years since we acquired these businesses all three have compounded their revenue in excess of 20% growth annually given.
Steve Pastor: Given this history of success, we are very excited about the latest additions to our tech portfolio material, which we discussed last quarter and <unk>, which we acquired on January 2nd.
Steve Pastor: <unk> is a best in class provider of tax workflow automation software, it's cloud native SaaS offerings automate the last mile of the tax return workflow, including Assembly review E signature and secure delivery for both the individual.
<unk> entity returns, we see safe send is a compelling strategic fit that continues our tax automation strategy building on the successful 2023 acquisition of <unk>, which provides first smile automation.
Steve Pastor: Similar to assure safe send solves key pain points for our customers and their clients by eliminating time consuming manual tasks.
Steve Pastor: Through the use of modern software, we expect <unk> to deliver approximately $60 million of 2025 revenue.
Steve Pastor: The fair value adjustment to acquired deferred revenue that Mike will discuss in a few minutes.
Steve Pastor: <unk> also solidly profitable before integration costs and expected growth investments were focused on executing our proven TR acquisition playbook to drive significant growth from <unk> over time.
Speaker Change: Let me now discuss the forward product vision for our business and why we remain bullish on its growth prospects.
Speaker Change: This slide shows key steps in the tax preparation workflow and how our offerings help with each step Shaw prep and <unk> have four important first mile and last mile automation capabilities, which in combination with our leading research and compliance software.
Speaker Change: Allows us to provide a truly automated into an <unk> workflow solution that is unmatched in the market.
The October acquisition of material.
Speaker Change: Which has developed a gentex and generative AI capabilities for tax audit and accounting meaningfully accelerates our roadmap and we will power co council for the Tech segment.
Speaker Change: We are especially excited about material agenda capabilities.
Speaker Change: Which we see as a key to enhancing and connecting a leading content and software offerings into a unified automated and intelligent customer experience across tax audit and advisory workflows.
Speaker Change: This provides several opportunities for further innovation that we believe will increase the value we provide to customers.
Speaker Change: In 2025, we expect to pilot a new review ready offering that.
Speaker Change: That brings significant automation to the tech workflow addressing some of the most time consuming tasks or tax professionals and their clients. We also plan to introduce additional AI powered audit automation capabilities building on our 2020 launch of boarded intelligence analyze.
Speaker Change: As we free up our customers for manual low value tasks, we plan to bring additional advisory capabilities, starting with tax planning later this year through allogeneic AI assistant that allows our customers to provide incremental value to their clients, while generating additional revenue for their practices.
Speaker Change: Looking forward.
Speaker Change: Number of growth opportunities to continue the strong momentum.
Our tech franchise. This includes executing our M&A playbook on material and <unk> and delivering on a deep innovation roadmap across our tax and audit businesses to both enhance existing capabilities and extend into new product categories like advisory services.
Speaker Change: Our <unk> business in Brazil remains a key contributor both as it grows its core offerings to CPA and also introduces new adjacent capabilities.
Speaker Change: We are focused on executing against these opportunities and believe our tax and accounting segment is positioned to continued double digit revenue growth and strong profits over the next few years.
Speaker Change: I'll now turn it over to Mike to review our financial performance.
Mike Eastwood: Thanks, Steve Thanks, again for joining us today.
Mike Eastwood: As a reminder, I will talk to revenue growth before currency and on an organic basis.
Mike Eastwood: Let me start by discussing our fourth quarter revenue performance for our big three segments.
Mike Eastwood: Organic revenue grew 8% for the fourth quarter, continuing the trend of 8% or better growth. We have delivered in recent quarters.
Mike Eastwood: Legal professionals organic revenue grew 7%.
Mike Eastwood: Key drivers from a product perspective remain less law co counsel practical law and our international businesses.
Government grew 4% in the quarter.
Mike Eastwood: Legal professionals revenue growth continued to benefit from the migration of customers from a global print product to west La.
Mike Eastwood: This added nearly $5 million to year over year revenue growth in the quarter.
Mike Eastwood: Our corporate segment had a another strong quarter with organic revenue growth of 10%.
Mike Eastwood: Recurring revenues grew 10% while transactions rose 12%.
Mike Eastwood: Practical wall direct tax indirect tax for Gara Trust and our international businesses were key contributors.
Mike Eastwood: Tax and accounting organic revenue increased 7%.
Mike Eastwood: In addition to the expected impact of revenue mix seasonality.
Mike Eastwood: <unk> growth was also affected by the unfavorable revenue adjustment.
Mike Eastwood: This adjustment impacted growth by approximately 2% in the quarter.
Mike Eastwood: Recurring and transactional revenue grew 5% and 21% respectively.
Mike Eastwood: Our Latin America business and ultra tax were key drivers.
Mike Eastwood: Moving to Reuters news.
Mike Eastwood: <unk> revenue decreased 3% for the quarter.
Mike Eastwood: Driven by a difficult comparison to the prior year period, which included $18 million of generative AI related transactional content licensing revenue.
Mike Eastwood: Adjusting for this war.
Mike Eastwood: Orders organic revenue increased approximately 6%.
Mike Eastwood: On a full year basis, we have recorded $34 million of transactional revenue and the AI content licensing agreements.
Mike Eastwood: From $18 million in 2023.
Mike Eastwood: As a reminder, we will face difficult comparisons for Reuters and for total <unk> in the first quarter of 2025, as we lap the $25 million of transactional revenue that occurred in the first quarter of 2024.
Mike Eastwood: Lastly, global print organic revenues declined 6% or 4% when excluding the impact of the migration of customers from a global print product to us law.
Mike Eastwood: This was in line with our expectations.
Mike Eastwood: On a consolidated basis.
Mike Eastwood: Quarter organic revenues increased 5%.
Mike Eastwood: At year end the percent of our annualized contract value or ACD from products that are gen. AI enabled was 18%.
Mike Eastwood: Up from 15% last quarter.
Mike Eastwood: As a reminder, we began to provide this metric with our Q3 results as a way to help you assess our success at bringing gen AI capabilities to our portfolio.
Mike Eastwood: One point of the sequential increase resulted from divestitures being removed from the calculation with the remainder from growth.
Mike Eastwood: Most notably at Westfall precision.
Mike Eastwood: And co cancel.
Mike Eastwood: Turning to our profitability adjusted EBITDA for the Big three segments was $648 million.
Mike Eastwood: Up 4% from the prior year period, with a 41, 7% margin.
Mike Eastwood: The lower year over year margin results from organic and inorganic investments we made in 2024 to position the company for improving profitable revenue growth.
Mike Eastwood: In addition to higher incentive compensation costs, driven by 2020 for performance.
Mike Eastwood: Moving to waters news adjusted EBITDA was $45 million with a margin of 28%.
Mike Eastwood: Global Print's adjusted EBITDA was $55 million with a margin of 38, 2%.
Mike Eastwood: In aggregate total company adjusted EBITDA was $718 million, a 2% increase versus Q4 2023.
Mike Eastwood: Turning to earnings per share adjusted EPS was $1 <unk> for the quarter versus <unk> 98 in the prior year period.
Mike Eastwood: Currency had a <unk> <unk> positive impact on adjusted EPS in the quarter.
Mike Eastwood: Let me now turn to our free cash flow.
Mike Eastwood: For the full year 2024, our free cash flow was 183 billion, leading our approximately $1 8 billion outlook.
Mike Eastwood: The slight year over year decline in free cash flow resulted from higher cash taxes and capex.
Mike Eastwood: And lower <unk> dividends as we had previewed at the beginning of the year.
Mike Eastwood: I will now provide an update on our capital structure and several capital allocation items.
Mike Eastwood: From a liquidity and capital structure standpoint, we remain in an enviable position with the low target leverage and healthy cash flow.
Mike Eastwood: This strong financial position as illustrated by our December 31 capitalization.
Mike Eastwood: We had $2 billion of cash on hand at year end.
Mike Eastwood: We have an undrawn $2 billion revolving credit facility.
Mike Eastwood: And we also have $2 billion available for issuance under our commercial paper program.
Mike Eastwood: Our December 31 leverage ratio was 0.4 times below our two five times internal target as noted in our value creation model.
Mike Eastwood: When we pro forma for the $600 million of cash paid on January 2nd to complete the sale sand acquisition or.
Mike Eastwood: Our leverage remains well below our target zero six times.
Mike Eastwood: And we continue to estimate approximately $10 billion of capital capacity through 2027 after accounting for the safe.
Mike Eastwood: Acquisition.
Mike Eastwood: We remain focused on value creation, and we expect to continue with our balanced capital allocation approach that includes annual dividend growth.
Mike Eastwood: T J M&A and capital returns.
Mike Eastwood: We have ample capacity to pursue all three of these strategies in 2025 and beyond.
Mike Eastwood: In the first half of 2024, we acquired $639 million of our shares completing the $1 billion and CIB, We had announced in November 2023.
Mike Eastwood: For the year, we have returned 87% of our 2020 for free cash flow through dividends and buybacks.
Mike Eastwood: Meeting the 75% return commitment we made last February.
Mike Eastwood: Our focus since completing the NCI b has been on strategic M&A and we are excited about the safe sign material and save sand acquisitions.
Mike Eastwood: While strategic M&A remains a key focus we are likely to repurchase shares in the future, which align with our dividend with allow us to deliver to the 75% capital return we discussed at the 2020 for Investor Day.
Mike Eastwood: And finally today, we announced a 10% increase in our annual dividend to $2 38 per share.
Mike Eastwood: 22, <unk> from $2 16, and.
Mike Eastwood: In 2024.
Mike Eastwood: This marks the 32nd consecutive year of annual dividend increases for the company.
Mike Eastwood: The fourth consecutive 10% increase.
Mike Eastwood: The increase will be effective with our Q1 dividend payable next month.
Mike Eastwood: I will conclude with a few thoughts on the financial impact of recent M&A.
Mike Eastwood: And our outlook.
Mike Eastwood: As Steve mentioned, we closed the <unk> acquisition on January <unk>.
Mike Eastwood: We expect <unk> to deliver approximately $60 million of revenue in 2025.
Mike Eastwood: However, due to the timing of their collections areas, a meaningful fair value adjustment to acquired deferred revenue.
Mike Eastwood: We estimate this haircut will reduce the reported revenue in 2025 by approximately $22 million.
Mike Eastwood: As a reminder, we add back this haircut to our adjusted profit metrics.
Mike Eastwood: And it is excluded from our organic revenue growth calculation.
Mike Eastwood: We are already have been recognized in the approximately $5 million of revenue from commission sharing agreements through our partnership with <unk>.
Mike Eastwood: As a result of these two items, we expect the acquisition to add approximately $30 million to $35 million of incremental revenue in 2025 <unk>.
Mike Eastwood: Rising in 2026 as the deferred revenue haircut is lapped.
Mike Eastwood: <unk> is solidly profitable, though with expected integration costs and investments, we expect it to be roughly neutral to adjusted EBITDA. This year.
Mike Eastwood: We expect healthy profits from the business in 2026 with its margins rising towards the overall tier level over the next few years.
Moving beyond safety and I am happy to confirm the final divestiture closed on December 2nd.
Mike Eastwood: Note. We also completed two much smaller divestitures at year end, both in corporates, which contributed approximately $30 million to full year 2020 for revenue.
Mike Eastwood: Lastly, following the success of our Thomson Reuters ventures team I am pleased to announce we will be launching a $150 million.
Fine.
Mike Eastwood: Now I will turn to our outlook.
Mike Eastwood: Starting with 2025, we forecast organic revenue growth in a range of seven to seven 5%.
Mike Eastwood: We see total revenue growth of 3% to three 5%.
Mike Eastwood: Below the organic growth rate, primarily due to the fine law divestiture.
Mike Eastwood: We see the big three segments growing revenue by approximately 9%.
Mike Eastwood: Which is at the high end of the framework, we provided last February or 8% to 9% growth in 2025 and 2026.
Mike Eastwood: Our outlook calls for continued modest organic revenue growth acceleration again in 2025.
Mike Eastwood: This acceleration will be driven by underlying improvement from our Gen AI initiatives.
Mike Eastwood: Scaling revenue from acquisitions, and a slight benefit from the fine law divestiture.
Mike Eastwood: <unk> more than offset a tough comparison from the meaningful <unk>.
Mike Eastwood: <unk> content licensing transactional revenue of $34 million earned in 2024.
Mike Eastwood: This tough comp is expected to be a roughly 50 basis point drag to our year over year revenue growth in 2025.
Mike Eastwood: We are forecasting a 2025 adjusted EBITDA margin of approximately 39%.
Mike Eastwood: Up 75 basis points from 38, 2% in 2024 and.
Mike Eastwood: And in line with our prior outlook.
The improving profitability comes despite continued investment including dilution, we have absorbed from the strategic tuck ins of safe sign material and save send.
Mike Eastwood: As I mentioned last quarter, we expect our effective tax rate to rise this year from approximately 18% in 2024 due.
Mike Eastwood: Due to the full impact of the global minimum tax regulations.
Mike Eastwood: We have refined our forecast and now expect a 2025 and 2026 tax rate of approximately 19% from the prior 19 to 19, 5% here.
Mike Eastwood: We continue to expect our cash tax rate to be approximately 5% below this book tax rate.
Mike Eastwood: Moving to capital intensity, we see 2025 accrued capex as a percent of revenue of approximately 8%.
Mike Eastwood: <unk> slightly from 2024, but broadly in line with the trend in recent years.
Mike Eastwood: This level of investment is supportive of our continued focus on investing in product innovation as we strive to deliver stronger revenue growth.
Mike Eastwood: We expect 2025 free cash flow to be approximately $1 9 billion.
Mike Eastwood: Up modestly from 2024, as growing profitability and stable capital intensity more than offset higher cash taxes.
Mike Eastwood: The impact of the fine law divestiture and higher incentive compensation based on 2020 for performance.
Mike Eastwood: Looking beyond 2025, we have sharpened our financial framework for 2026.
Mike Eastwood: Now see organic revenue growth of seven 5% to 8%.
Mike Eastwood: Driven by baked three growth of approximately nine 5%.
Mike Eastwood: This is the upper end of the prior six 5% to 8% range for total TR.
Mike Eastwood: And above the prior 8% to 9% range for the big three.
Mike Eastwood: We continue to expect 50 or more basis points of adjusted EBITDA margin expansion in 2026.
Mike Eastwood: I would note this is an organic outlook and could be impacted by future M&A.
Mike Eastwood: We expect our capital intensity to remain at approximately 8%.
And we continue to expect our free cash flow to be in a range of 2 billion to $2 1 billion in 2026.
Mike Eastwood: This is in line with our initial view provided last February despite the fine law divestiture of reducing our free cash flow.
Mike Eastwood: I would also like to provide an update on the 2026 organic revenue growth targets that our big three segments provided at our 2020 for Investor Day.
Mike Eastwood: We are raising the initial ranges for each of the big three segments by 1%.
Mike Eastwood: And now see 2026 legal professionals growth of 8% to 9%.
Mike Eastwood: Corporates of 9% to 11% and tax <unk> accounting professionals of 11% to 13%.
Mike Eastwood: Turning to the first quarter, we expect organic revenue growth in the range of 5% to 6%.
Mike Eastwood: And our adjusted EBITDA margin to be approximately 40%.
Mike Eastwood: As a reminder, Q1 revenue growth will be impacted by more than 1% from a tough comparison driven by the $25 million of borders generative AI transactional content licensing revenue.
Mike Eastwood: <unk> in the first quarter of 2024.
Gary: Let me now turn it back to Gary for questions.
Gary: Thanks, Mike Danny and we'd like to begin the Q&A session.
Gary: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure your mute function.
Gary: Turned off to allow your signal to reach our equipment again press star one to ask a question, we'll pause for just a moment.
Gary: Let everyone know.
Scott: And our first question is going to come from Scott <unk> from CIBC. Please go ahead.
Hi, good morning, Thanks for the details on the 2025 and 2026 outlook.
Scott: Want to ask on the 26 outlook youre, taking the organic growth.
Scott: Numbers up a percent in each of the segments can you just dig into what's giving you the confidence to take those numbers up.
Scott: Sure Scott I'm happy to start there certainly the foundation is the performance in 2020.
Scott: 2020 for performance is not only the revenue, but more importantly, as we look into 'twenty five and 26 is the underlying book of business our net sales.
Scott: Very pleased with the overall book of business and net sales for each of the big three segments as we closed out December as I've mentioned in prior call Scott.
Scott: Q4 in December.
Scott: Always a heavy quota period for us and each of our teams did a terrific job there.
Scott: That in regards to the overall demand and what our customers are needing and seeking especially in this gen AI enabled world.
We are quite optimistic with it certainly take nothing for granted with it but coupled with our underlying our results in 2024 book of business.
Scott: Our forecast for 2020, both sales and renewals and ongoing.
Scott: Conversations with our customers those are the level of optimism.
Speaker Change: Well said Mike.
Speaker Change: Okay. Thanks, and then sort of a follow up on the journey Ips of that of that adoption.
Speaker Change: Can you sort of give us has anything changed since we spoke last in terms of what customers are looking for what they're reacting to positively as they sort of take a look and get a better look at your.
Speaker Change: Product suite.
Scott: Scott No we continue to be pleased with the with the adoption of <unk> products now and <unk>.
Scott: Translation of those into revenue growth so specifically.
Scott: As we've talked about Whistler precision II.
Scott: ICB is now up above 40%.
Scott: Co counsel and co counsel drafting adoption has been.
Scott: Ben.
Exciting for us since we launched an improved those products.
Scott: And Jane I am more broadly across our customer segment sits at about adoption. So it's about 18% of the.
Scott: <unk>.
Scott: Of the ICB or book of business, and Thats and Thats ticked up from the last time.
Scott: We reported out.
Scott: No.
Scott: For each about NII offerings, we like the trajectory and the customer uptake and the feedback we're getting.
Scott: The only sort of additional color I'd provide as you know as we said at our Investor day in March of last year. The thing Thats uncertain is the sort of broader pace of change management within the professional services that.
Scott: That we serve.
Scott: FEMSA.
Scott: Wolfing their business models and <unk>.
Scott: <unk>.
Scott: Broadly adopting technologies changing their practices.
Scott: That remains a work on for most of our customers. Some are moving very quickly saw more cautious.
Scott: And so I don't think we have full visibility into sort of what that broader adoption curve looks like but certainly as I said for the specific offerings that we've put into the marketplace. We are very pleased with with.
Scott: With the traction to date and the trajectory of those offerings.
I will just supplement if you look at the adoption of the products, Steve mentioned and I would just add checkpoint with co counsel that's in the market.
Scott: We're pleased with the adoption and to further supplement that we're making incremental investments in 2025, and what we refer to as customer success, who.
Scott: Who will work directly with our customers on the adoption and usage of our Gen AI enabled products.
Scott: Okay, great color I appreciate it.
Speaker Change: Thanks Scott.
Speaker Change: Our next question is going to come from Tim Casey from BMO.
Speaker Change: Thanks.
Speaker Change: Steve could you talk a little bit about if youre seeing any or expecting any increased demand.
Speaker Change: Given.
Speaker Change: What appears to be an accelerated pace of change from the new administration in Washington, I realize we're in the usual cycle in every new administration bring change, but I'm wondering if if you think that is going to be at an accelerated pace and that will work its way back to demand for you and second question is you've talked to.
Speaker Change: About 2025, as a year of execution that theirs.
Speaker Change: Items that you would like to do better at internally and I'm. Just wondering how you measure success on that initiative in 2025. Thank you.
Tim Casey: Yes, thanks, Thanks, Tim.
Tim Casey: Appreciate the questions.
Tim Casey: But we're cautiously optimistic that.
Tim Casey: As we always are witnessed a change of administration and a whole slew of new.
Tim Casey: New rules and regulations and stance towards.
Tim Casey: Taxation and Bud will try it and so forth. So I would say cautiously optimistic but it is too early to tell I think similar to the other folks that you follow we're all sort of index in that stance.
Tim Casey: Understanding how this is going to play out, but certainly as an example, our offerings.
Tim Casey: In and around global trade are very very important for companies that.
Tim Casey: Have a changing tariff environment.
Tim Casey: Our content in and around <unk>.
Tim Casey: Taxation schema in various countries.
Tim Casey: Critical to tax and accounting professionals.
Tim Casey: Serve their clients in a changing environment.
Tim Casey: And then.
Tim Casey: The sort of broader offerings that we serve the U S government.
Tim Casey: And certainly on issues of security.
Tim Casey: See some bumps some some potential there so I would say, yes, Tim but too early to tell.
Tim Casey: In terms of better execution.
Tim Casey: We are very focused.
Tim Casey: As you know on.
Tim Casey: On Costa on for example, customer success supporting Al how software offerings across the portfolio, we're very focused on increasing.
Tim Casey: Our ratio of product innovation.
Tim Casey: And we're very focused on rolling <unk> out across our entire <unk>.
Tim Casey: <unk> base in and being able to improve the.
Tim Casey: The productivity and efficiency of everything we do.
Tim Casey: We're going to apply the same sort of rigor of execution in each of those amongst others that we apply to the change program. So.
As you know Christy Rossi saw that programming and.
Tim Casey: And these world class it sort of putting the right metrics in place.
Tim Casey: And holding each and every one of us accountable.
Tim Casey: And Mary Alice future KOL support that process in her role as Chief people officer. So it's really the same playbook for us as we think about executing in 2025 and beyond as it was in in 'twenty, one 'twenty two.
Tim Casey: And we've got a bit of confidence around that I hope not overconfidence, but we've got some confidence that we will we will keep each other accountable and make the improvements that we need to make.
Speaker Change: Yes, Tim I would just add two additional items in that year of execution and laser focus certainly our retention is which is not a new topic for us and also solution selling which is being led by lower Clayton Mcdonald, who leads our corporate segment that applies across TR. The.
Tim Casey: She has been the leader there.
Thank you.
Tim Casey: Okay.
Speaker Change: And our next question is going to come from towards Tong from Goldman Sachs. Please go ahead.
Speaker Change: Alright, thanks, good morning.
Tong: You've talked about in the past the goal to drive an acceleration in legal organic revenue growth.
Speaker Change: Can you just elaborate on some of the traction you're seeing with that acceleration.
Speaker Change: With rounding and reporting it's difficult to see just based on reported numbers of 7%, but talk about that and how you expect the acceleration curve play out over the next one to two years.
Speaker Change: Sure George Happy to start there certainly in Q4 and in the second semester of 2024 on a rounded basis legal professionals was stable at 7%.
Speaker Change: Did see a modest improvement in the recurring revenue within legal professionals.
Speaker Change: Full transparency there were two drags to legal professionals organic revenue in Q4 first we had a slight decrease in transactional revenue.
Speaker Change: Second we did sunset too small.
Speaker Change: But if you look at it in the big and take a step back excluding the impact of migrating that global print product to online.
Speaker Change: Year over year legal professionals improved 40 basis points in Q4, 24 versus Q4 2003 and on a full year basis, it's about 95 basis points improvement call. It 100 basis points.
Speaker Change: Year over year. So that provides momentum that provides confidence certainly as we go into 2025, we're optimistic.
Speaker Change: Legal revenue growth will continue to accelerate in 2025.
Speaker Change: Driven by some of the point, Steve mentioned earlier with our Gen AI offerings and the continued adoption of the west La precision on NII enabled product I think Steve mentioned 40, plus percent there'll be a little more precise 43% penetration there.
Speaker Change: Is very comparable if you go back to the west La edge product on a timeline basis, it's very comparable with regards to adoption so more runway.
Speaker Change: Sure.
Speaker Change: George.
Speaker Change: That's helpful context, and then your corporate segment has now sustained double digit growth for several quarters can you talk about the sustainability of that growth trajectory and what you think are the top tailwind that should support it.
Speaker Change: Yes, I'll start with leadership there with incorporates with Lark late Madonna, who I just mentioned just did an amazing job leading the group in 2024, we had 300 basis points improvement in corporates going from 7% organic in 2023 up 10%.
Speaker Change: Kevin George that we increase the 2026 range earlier in my prepared remarks.
Speaker Change: Confidence remains in that sustainability.
Speaker Change: From our perspective, there's no meaningful change in the external environment, we talk many quarters ago.
Speaker Change: The prolonged sales cycle has the external environment change meaningfully probably not what has changed is Lars leadership in driving the internal operational improvement, which includes really rigorous daily management of our sales pipeline.
Speaker Change: Proved connections with our customers. Additionally towards Youll remember that we acquired the Gara one year ago. So we did get modest benefit in 2024 from the <unk> acquisition that will continue into 2025, so we're quite confident and optimistic on the continued.
Speaker Change: The.
Speaker Change: Trajectory of the corporate segment.
Very helpful. Thank you.
Speaker Change: Yes, Thanks George.
Speaker Change: And our next question is going to come from.
Speaker Change: Jason Haas with Wells Fargo. Please go ahead.
Speaker Change: Hey, Good morning. This is <unk> on for Jason Haas, Thanks for taking our questions.
Speaker Change: The color you guys gave around the ACB penetration.
Speaker Change: Across both CRM and then for the West Mall can you just give us a sense for how youre ECB penetration varies across the different client sizes, and then just any sort of.
Speaker Change: Update on your ability to price with each nei products versus some of the pricing that you guys have taken historically.
Speaker Change: Sure. If you look at the I'll call. It the lifecycle value change with regards to the launches when we launched something like west La precision normally the penetration is strongest in earliest with what we referred to us our large law within legal professionals as a reminder.
Speaker Change: We break it between large law medium law small law based on the number of our attorneys in the given firm. So we have consistently historically and even now with less law precision in NII enhancement, we see adoption and penetration first and the largest law firms that's holding true today.
Speaker Change: Followed by net law and small law. So we do follow the penetration curve and adoptions.
Speaker Change: By a sub segment and even a more granular level. There. So once again thats very consistent with what we saw with the west La edge adoption, what we're seeing now with some of the Gen. AI enabled products Youll see a smoother adoption across the different sizes of the firms and as not as much.
Speaker Change: Two.
Speaker Change: Differentiated.
Speaker Change: The newer products.
Speaker Change: And so if he wants to add just to answer that I mean I think.
Speaker Change: The.
Speaker Change: Sort of cautiously optimistic and I think we're seeing positive signs in the marketplace.
Speaker Change: Around the pricing the ability to sort of get more price from our G&A AI offerings.
Speaker Change: And one of the primary reasons for that is they enable us to play an expanded role in the success of our customers. So.
Speaker Change: So let me give you a couple of examples if you think about wish for and wistful precision.
Speaker Change: One of the big.
Speaker Change: Big innovations that Mike <unk>.
Speaker Change: Has driven.
Speaker Change: As you know the product leader for the Westphal franchise.
Speaker Change: One of the big things that <unk> done has extended into the Westborough precision II research very much. So in other words instead of providing the synthesized and most accurate list.
Speaker Change: Relevant case law.
Speaker Change: Product now produces a first draft of the resource so that has an expanded role for us that's a big time saver for four litigators and legal researches.
Speaker Change: And enables us to.
Speaker Change: To drive more value within our within our customer base. That's one example, the extension of practical among other tools into drafting as another example, previously haven't been in the drafting space and obviously dropping is very important.
Speaker Change: For legal practitioner, so that enables us.
Speaker Change: To charge Accordingly, and then on the tax and accounting side with the acquisition of material.
Speaker Change: As I mentioned in my prepared remarks.
Speaker Change: Our customer base is looking to automate every piece of the tax and accounting workflows or the tax preparation workflow that they can in order to meet increasing demand from their clients to provide advisory services and some material is a key piece of enabling us to <unk>.
Speaker Change: And extend expanded role in that growth, but tax and accounting.
Speaker Change: Practitioners will experience and thats the basis on which we're able to.
Speaker Change: <unk>.
Speaker Change: Increased process sensible ways.
Speaker Change: Got it appreciate the color there it's super helpful. And then just had a follow up on the back of some of the comments you guys gave earlier when your expectations under the New administration can you maybe just remind us.
Speaker Change: Of your government exposure both of them legal I think maybe some.
Speaker Change: Sort of why you guys would or wouldn't be concerned about this business under the new administration with dose. Thank you.
Speaker Change: Yes, I think if you look at our government business overall will approach nearly $600 million in revenue for full year 2024, if you look forward we're.
Speaker Change: Looking at about 8% organic growth would be our expectations for 2025 and 2026 as a reminder, if you look at the government business. It is quite diverse in regards to the product offerings that we provide.
Government customers, which are at the federal state and local level.
Speaker Change: The by far the largest portion of that is within what we call less law our legal research.
Speaker Change: <unk>.
Speaker Change: Offering there we also have a sizable position of print within government business and we also have our Thomson Reuters special services business and as a component there along with our risk fraud and compliance with clear so we have quite a diverse.
Speaker Change: On a portfolio of offerings within government overall, so hopefully that's helpful.
Speaker Change: Yes, its definitely helpful. Thank you and congrats on the strong results and updated forward outlook.
Speaker Change: Thank you.
Speaker Change: And once again, if you have a question please press <unk>.
Speaker Change: One on your telephone keypad.
Speaker Change: And I have no questions in the queue at this moment.
Speaker Change: Alright, thanks, everyone. Thanks, Jamie Thank you.
Speaker Change: And this will conclude today's call. Thank you for your participation you may now disconnect.