Q1 2025 Thomson Reuters Corp Earnings Call
Please standby.
Speaker Change: Good day and welcome to the Thomson Reuters first quarter earnings call. Today's call is being recorded at this time I would like to turn the call over to Gary Bisbee head of Investor Relations. Please go ahead.
Gary Bisbee: Thank you Ruth.
Speaker Change: And thank you all for joining us today for our first quarter 'twenty 25 earnings call I'm joined by our CEO, Steve <unk>, and our CFO, Mike Eastwood, each of whom will discuss our results to 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 when we opened up.
Gary Bisbee: Our phone lines.
Gary Bisbee: Today's presentation, when we compare performance period on period, we discuss revenue growth before currency as well as on an organic basis. We believe this provides the best basis to measure the underlying performance of our business.
Gary Bisbee: Today's presentation contains forward looking statements and none I FRS and other supplementary financial measures, which are discussed on this special note slide.
Gary Bisbee: Actual results may differ materially due to a number of risks and uncertainties discussed in reports and filings that we provide to regulatory agencies.
Gary Bisbee: You may access these documents on our website or by contacting our Investor Relations Department.
Gary Bisbee: I'll turn it over to Steve Patrick.
Steve Patrick: Thank you Gary and thanks to all of you for joining US today 2025 has started out on a positive note with revenue at the high end of our outlook and profits exceeding expectations.
Steve Patrick: Total company organic revenues rose eight 6% with the big three segments growing by 9%. In addition, healthy revenue flow through and favorable expense timing boosted margins driving profit ahead of expectations.
Steve Patrick: We are reaffirming our full year 'twenty twenty-five outlook, calling for organic growth in a range of seven to seven 5%, including approximately 9% for the big three segments and for our margins to rise by 75 basis points year over year.
Steve Patrick: Ultimately 39%.
Steve Patrick: Good momentum continues for many areas in our portfolio.
Steve Patrick: This includes double digit growth from key products, including co counsel Shaw prep Garo indirect tax safes, and co counsel drafting and our international businesses.
Steve Patrick: We continue to invest heavily in innovation and we remain focused on delivering against our robust product roadmaps.
Steve Patrick: In the first quarter, we launched co council tax audit and accounting and <unk> AI assistant powered.
Steve Patrick: Powered by the 2020 for acquisition of material.
Steve Patrick: This new solution automates critical workflows and brings an enhanced user experience, perhaps checkpoint authoritative content.
Steve Patrick: In April we launched the co counsel chat experience within both west La and practical law enhancing capability and user experience through a more connected suite of legal offerings.
Steve Patrick: Looking forward to the remainder of 2025, we are focused on delivering new adjourn tick expert guided workflows grounded in our trusted authoritative content and subject matter expertise.
Steve Patrick: Council West La practical law and other offerings.
Steve Patrick: Our capital capacity and liquidity remain a key asset with focused on deploying to create shareholder value and we made solid progress on this during the first quarter.
Steve Patrick: In January we completed the acquisition of sites send.
Steve Patrick: For $600 million and safe sand is off to a strong start with the integration going smoothly in February we raised our 2025 annual dividend by 10% for the fourth consecutive year to $2 38 per share.
Steve Patrick: We remain committed to a balanced capital allocation approach.
Steve Patrick: And we continue to assess additional inorganic opportunities without estimated $10 billion of capital capacity through 2027, we are positioned to be opportunistic.
Steve Patrick: A volatile environment.
Steve Patrick: Now to the results for the quarter.
Steve Patrick: First quarter organic revenues grew 6% organic recurring revenues grew 9% and transaction revenues grew 1% while print revenues declined 5% inline with expectations of tough comparison at Reuters impacted growth rates adjusted EBITDA was.
Steve Patrick: <unk> unchanged year over year at $809 million, reflecting a 40 basis point margin decline to 42, 3%.
Steve Patrick: Turning to the first quarter results by segment, the big three segments organic revenue growth accelerated sequentially from 8% to 9% legal organic revenues grew 8% up from 7% in recent quarters, driven by continued momentum from Westwood precision and co Council.
Steve Patrick: And stronger government growth.
Steve Patrick: Corporates organic revenues grew 9% driven by offerings from our legal tax and risk portfolios and the segments International businesses.
Steve Patrick: Section accounting organic revenues grew 11% and our Latin American business and tax compliance offerings with key contributors Reuters news organic revenues declined 7% driven by a difficult comparison from significant transactional generative II licensing revenue in the prior year period and lastly.
Steve Patrick: Global print organic revenues met our expectations declining 5% year on year and in summary, we're pleased with our Q1 results now let me discuss our improving revenue mix, which is contributing to the revenue growth acceleration that we have delivered.
Steve Patrick: Over the velocity five years, we have been on a journey to become a more innovative and faster growth company.
Steve Patrick: We have made significant strides towards this goal as our current outlook for 7% to seven 5% organic revenue growth illustrates in meeting with investors. We are frequently asked two questions about our revenue growth first what has driven our organic revenue growth acceleration in recent years and second what pre.
Steve Patrick: <unk> just with confidence in our ability to continue our improved growth trajectory into the future.
Steve Patrick: To shed a bit more light on this topic, we've updated a slide from 2024 Investor day.
Steve Patrick: Which illustrates the improvement in our revenue mix since 2019.
Steve Patrick: The proportion of our revenue from products growing at double digit rates as more than doubled from 11% in 2019 to 20% to 25% in 2024 on a much larger revenue base at the same time the mix from our declining global print business has fallen.
Steve Patrick: We have taken many actions in the last five years to deliver this improving revenue mix, but I'll briefly mentioned the three most important first we have prioritized resource allocation behind our best businesses and opportunities for example, our heavy investment in West La has resulted in this key franchise growing at the fast.
Steve Patrick: This rate in more than a decade second we have meaningfully increased our investment and focus on innovation.
Steve Patrick: Especially with AI in combination. These efforts have organically increased the number of our existing products growing at double digits and third our portfolio optimization optimization efforts have paid dividends. This includes both the acquisition of strategic and complementary growth businesses as.
Steve Patrick: As well as select divestitures of non core and typically lower growth assets.
Steve Patrick: Our stable of double digit growth offerings.
Steve Patrick: Spans the big three segments and includes.
Steve Patrick: Firstly co counsel and high Q professionals practical law indirect tax and <unk> at corporates.
Steve Patrick: And thirdly Domingo confirmation Shaw prep cloud audit suite and more recently <unk> protection accounting professionals.
Steve Patrick: As these products continue to scale and our print mix declines are improving revenue mix positions us well for continued strong revenue growth going forward I'll now turn it over to Mike to review our financial performance.
Mike: Thanks, Dave Thanks, again for joining us today.
Speaker Change: As a reminder, I will talk to revenue growth before currency and on an organic basis.
Speaker Change: Let me start by discussing the first quarter revenue performance for our big three segments organic revenue.
Speaker Change: Revenues grew 9% for the first quarter.
Speaker Change: Accelerating from 8% in the fourth quarter of 2024.
Speaker Change: Legal professionals organic revenues grew 8%.
Speaker Change: A new high watermark for the segment.
Speaker Change: Key drivers from a product perspective remain less law co counsel practical law, our international businesses and government, which grew 9% in the quarter.
Speaker Change: The final divestiture also contributed modestly so.
Speaker Change: Benefit was offset by the impact of several small products Sunset I mentioned last quarter.
Speaker Change: As it relates to the U S government, we remain focused on helping our government customers in areas, including efficiency National security and fraud prevention.
Speaker Change: Our corporate segment organic revenues increased 9%.
Speaker Change: Recurring revenues grew 11% while transactions rose, 5%, despite a tough comparison in the year ago period.
Speaker Change: Practical law direct and indirect tax.
Speaker Change: <unk> and our international businesses were key contributors.
Speaker Change: Tax and accounting had a strong quarter with organic revenue growth of 11%.
Speaker Change: Hiring and transactional revenues grew 8% and 15% respectively.
Speaker Change: Our Latin American business sure prep safe <unk> and ultra tax were key drivers.
Speaker Change: Moving to Reuters news organic revenues decreased 7% for the quarter driven by a difficult comparison to the prior year period, which included $25 million of generative AI related transactional content licensing revenue.
Speaker Change: Adjusting for this <unk>.
Speaker Change: Orders organic revenues increased approximately 5%.
Speaker Change: Lastly, global print organic revenues declined 5%, which was in line with our expectations.
Speaker Change: On a consolidated basis first quarter organic revenues increased 6%.
Speaker Change: At the end of Q1 the percent of our annualized contract value or ACD from products that are gen. AI enabled was 20%.
Speaker Change: Up from 18% last quarter.
Speaker Change: As a reminder, we began to provide this metric with our Q3 2024 results as a way to help you assess our success at bringing gen AI capabilities to our portfolio.
Speaker Change: Turning to our profitability adjusted EBITDA for the Big three segments was $759 million.
Speaker Change: Up 6% from the prior year period, with a 47, 3% margin.
Speaker Change: Segment margins rose across all big three segments, driven by healthy revenue growth and the timing of expenses.
Speaker Change: Moving to Reuters news adjusted EBITDA was $39 million with a margin of 20%.
Speaker Change: Year over year profit decrease at borders was due to the same difficult comparison I mentioned earlier.
Speaker Change: Global Print's adjusted EBITDA was $44 million with a margin of 37, 8%.
Speaker Change: In aggregate total company adjusted EBITDA was essentially unchanged at 809 million, reflecting a 40 basis point margin decline to 42, 3%.
Speaker Change: This was nicely ahead of our prior expectations.
Speaker Change: Excluding the impact of the warders transactional AI licensing revenue in the prior year period margins would have risen versus the first quarter of 2024.
Speaker Change: Turning to earnings per share adjusted EPS was $1 12 for the quarter versus $1 11 in the prior year period.
Speaker Change: Currency had no impact on adjusted EPS in the quarter.
Speaker Change: Let me now turn to our free cash flow performance for the first quarter.
Speaker Change: Reported free cash flow was $277 million up 3% from $271 million in the prior year period.
Speaker Change: I will conclude with our 2025 outlook and several other updates.
Speaker Change: As Steve outlined we are reaffirming our full year 2025 guidance.
We continue to expect organic revenue growth of 7% to seven 5% with the baked three growing approximately 9%.
Speaker Change: We see 2025, adjusted EBITDA margins of approximately 39% up.
Speaker Change: Up 75 basis points versus 2024.
Speaker Change: And we expect free cash flow of approximately $1 9 billion.
Speaker Change: Turning to the second quarter, we expect organic revenue growth of approximately 7%.
Speaker Change: And our adjusted EBITDA margin to be approximately 36%.
Speaker Change: As a reminder, the sequential decline in our margin into Q2 is due to the normal seasonality of our tax and accounting professionals business segment and to a lesser extent to the timing of certain expenses.
Speaker Change: Let me close with a few final thoughts.
Speaker Change: First for your models, we plan to pay down the approximately $1 billion bond that matures later this month with cash on hand.
Speaker Change: Second and in light of recent questions around the potential for weaker economic activity I want to remind you we have a highly recurring and resilient business with more than 80% recurring revenues, a healthy mix of multiyear contracts and relatively non discretionary or.
Speaker Change: Offerings.
Speaker Change: Transaction revenues are 12% of our mix.
Speaker Change: A bit more than half of this is what we internally refer to as repeat transactions revenue, which are recognized on a transactional basis, but where customer volumes tend to recur over time based on the cadence of tax filing our audit cycles.
Speaker Change: This includes revenues from confirmation sure prep and safe send among others.
Speaker Change: In combination with our recurring revenues this highly quality repeat transactional revenue provides a resilient and predictable revenue mix.
Speaker Change: Add in our strong capitalization with net leverage at zero six times and healthy cash flow. We believe we are well positioned to weather a range of market environments.
Gary Bisbee: Let me now turn it back to Gary for questions.
Gary Bisbee: Thank you Ruth we're happy to begin the Q&A session.
Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
Speaker Change: Thank you speaker phone. Please make sure your mute function is turned off to allow your signal Shrewsbury.
Speaker Change: Again, Please press star one to ask a question, we'll pause for just a moment.
Speaker Change: Okay.
We'll go first to Scott <unk> with CIBC.
Speaker Change: Hi, good morning.
Scott: I wanted to ask a question on the demand environment, and if you've seen any changes to buying patterns or willingness to spend or closed yield since obviously the trade war heated up over the course of this year.
Steve Patrick: Yes, Scott, it's Steve I'll start and I'm sure Michael will add I mean, we are.
Scott: <unk>.
Scott: Doubling down our efforts to meet and exceed our customers' needs.
Speaker Change: As you've seen from our results we have not yet seen a change in the demand environment and as you know our businesses is very recently with 80 plus.
Scott: Plus percent of our revenues recurring.
Speaker Change: With a highly diversified customer base and largely non discretionary.
Scott: Products.
Scott: In the content driven technology space, having said that.
Scott: I think most of our customers across the spectrum are wondering what the sort of economic backdrop for the rest of this year will be wondering what the tariff picture.
Scott: When it settles if it settles we will look like and what the implications would be so I think there is a level of nervousness.
Mike: But but we havent yet seen that play through Mike.
Scott: Ill supplement Scott if you look at our new sales pipeline, our renewal pipeline no changes there both those new sales and recur renewal pipelines remain encouraging just.
Scott: Just looking at April velocity, and average order value. They remain very consistent so we're not seeing any changes Scott.
Scott: Okay. That's good to hear and then if I think about if you think about historically are there.
Scott: Any of the segments, we had legal tax or corporate that you think would be more impacted in a scenario where.
Scott: Find does slow down.
Scott: Well, we don't think so Scott I'll focus in the scenario of a softer economy, certainly given 80% of our revenue recurring the resilience that I talked about in the prepared remarks. There are three areas that we would focus on Scott and a.
Scott: In a software environment number one the transactional revenue, which as I mentioned is 12% of our total but remember as I mentioned in our prepared remarks over 50% of that is what we refer to as repeat if you look at the tax and accounting professional business. That's over 80%. So that it gives us comfort within the transactional <unk>.
Scott: Area. The second area to focus on is global print within global print, which is roughly 7% of our total <unk>.
Scott: Revenue, 45% of that revenue is governed by multiyear contracts is what Jen Prescott refers to as library maintenance agreement that gives us comfort and then the third area of focus would be Reorders news, specifically digital advertising and Reorders advance those two business areas are only about one 5% of.
Speaker Change: Our total revenue so in the software economy, Scott those are the three areas that we would focus on and provide you with.
Scott: Continuous updates.
Speaker Change: Okay. That's really helpful. Thank you.
Speaker Change: We'll go next to Manav Patnaik with Barclays.
Manav Patnaik: Thank you good morning.
Speaker Change: First question just to focus on that growth slide.
Speaker Change: 68% the other products I was just hoping you could help us.
Speaker Change: Smith <unk>.
Speaker Change: Average growth and the opportunity to accelerate those into that high growth bucket.
Speaker Change: Sure one data points out there would be about.
Speaker Change: The 20% to 25% would be below 5% for us in case that's helpful for us.
Speaker Change: And that leaves about 40% to 42% that are in that 5% to 10% growth rate hopefully that segmentation is helpful.
Speaker Change: And I think that.
Speaker Change: The second part of your question as to sort of how we shift those I think we are at the start of that playbook and.
Speaker Change: The answer every question is not generally VII, but to the extent that we can.
Speaker Change: Add more generative capabilities to our content shifts.
Speaker Change: Expand the role we play in the success of our customers and what I mean by that is.
Speaker Change: Not all but typically those slower growth products are sort of more static content.
Speaker Change: And the addition of <unk> for example.
Speaker Change: At the time, too, which lowered wistful precision has enabled us to getting the business of the first draft of a research memo and as we move through to expert guided workflows. It really expands the role we play in the life of a legal professional.
Speaker Change: We think about injecting gen II into more and more parts of our portfolio and more and more of these content shifts we think that that order.
Speaker Change: Shift shift the dial in healthy ways in terms of the underlying growth rate.
Speaker Change: Got it thank you and Mike I think your comments around government.
Speaker Change: Just curious any update you can give us on the exposure.
Speaker Change: <unk> sure obviously lost a lot of contracts here and there that would be helpful.
Speaker Change: Right.
Manav Patnaik: Yes, we're certainly familiar with the Doe's website Manav overall, we've had no material impact to our government business as reflected in the 9% organic growth in Q1, a few data points. It is helpful for you and others Manav government represents about 8% of our total TR revenue that revenues.
Manav Patnaik: Reported and legal professionals externally you could break that 8% down further 60% is state and local 40% is U S. Federal government. If you look at it by product or offering perspective, $60 to 65% of our legal products, including West La and then if.
Manav Patnaik: Look the remainder 35% to 40% would be risk and for all products, including clear.
Manav Patnaik: Another trs's products I'll, just emphasize as I've mentioned in the prepared remarks, the opportunities that we see and supporting our government customers are in three vectors efficiency opportunities National security fraud prevention take nothing for granted Manav, but no material impact today.
Speaker Change: Got it thank you so powerful.
Speaker Change: We'll go next to Vanda telepathic.
Speaker Change: Canaccord Genuity.
Speaker Change: Good morning, Thanks for taking my question.
Speaker Change: I was wondering whether you could maybe just revisit the drafting side of the opportunity I know that you launched sort of the core console drafting product last year.
Speaker Change: Maybe just remind us sort of see the Tam there and the progress you've been able to make instead of the outlook that you see with near term.
Speaker Change: Yes sure.
Speaker Change: So.
Speaker Change: There's a point of view that that suggest the drafting as one of the most important.
Speaker Change: Tasks that are legal professional undertakes and therefore, the opportunity to sort of automate that to varying degrees and introduce us.
Speaker Change: Step change.
Speaker Change: In terms of the efficiency and the accuracy of our first dropped.
Speaker Change: There's a big opportunity I don't have a Tam for you because I think there's if you can throw around some big numbers on the basis of Av Av.
Speaker Change: The head count and the time spent today.
Speaker Change: We are very happy with the start.
Speaker Change: We've made and it's a it's.
Speaker Change: It's a credit to Emily Colbert.
Speaker Change: Creating sharma, our product executives, who sit across the co council.
Speaker Change: Westwood practical.
Speaker Change: Products.
Speaker Change: And we think that differentiation is.
<unk> unique and proprietary content fits so the opportunity to lean into Westwood practical law.
Speaker Change: And is the basis of sort of creating the most accurate.
Speaker Change: Draft, we think positions us very well.
Speaker Change: <unk> and <unk>.
Speaker Change: Emerging space, but nevertheless, a pretty exciting one.
Speaker Change: Thank you and just a quick follow up I think.
Speaker Change: On the last call you mentioned that the AI related investments.
Speaker Change: Sort of like the $200 million level through 2024 I was wondering is has that been an uptick as we looked at 25 or is it.
Speaker Change: Much the same run rate. Thank you.
Speaker Change: Just a slight uptick are vendor for calendar year 2025, we remain committed just as a reminder, that roughly 200 million plus investment is split roughly 50 50.
Speaker Change: <unk> operating expenses and capital expenditures that $200 million investment is reflected in our results and full year guidance.
Speaker Change: Frankly.
Speaker Change: We'll go next to Vince Valentini with TD Cowen.
Vince Valentini: Hey, Thanks, very much two questions I'll throw at you and you can take whatever order you want.
Speaker Change: The margin impact from foreign currency, you mentioned that was a tailwind in.
Speaker Change: In Q1 can you just remind us what the main drivers of that or is it simply that you have.
Speaker Change: Lesser cost in U S dollars versus the percentage of revenue are there any key currency exposures, we should keep our eye on for Q2 and in Q3 margin impacts.
Speaker Change: Second question going back to your good slide number nine that already been referenced here.
Speaker Change: That 25% bucket, that's growing 10% or more.
Speaker Change: Can you identify what percentage of that 25% bucket or businesses that you did not own in 2019, so you've been able to augment the growth through acquisition and I'm thinking of that as a way of you have a huge amount of cash you can use for acquisitions, perhaps things are going to get cheaper.
Speaker Change: The macro environment.
Speaker Change: It is choppy.
Speaker Change: Can we think about that 25% bucket.
Speaker Change: Getting to 50% in the next five years and.
Speaker Change: Partially by using your new acquisition funds in a savvy way. Thanks.
Speaker Change: Yes, let me try to attack each of those questions and I'll ask Steve to supplement first in regards to your question on Q1 in regards to FX that was about 40 basis points for Q1, if you think about currencies that have the biggest impact on us as the British pound.
Speaker Change: <unk> peso and the Brazil real is theres, others that have less significant impact, but those are the three that would have the <unk>.
Speaker Change: Larger impact in a given period.
Speaker Change: We would expect smaller FX impact in Q2, assuming stable FX rates. So hopefully that addresses your questions. On FX. Then if you go into the questions on the revenue mix, Gary that's probably one that we can follow up in the analyst calls later today, if that's okay.
Steve Patrick: Gary's events will take that as an action item when Gary speaks with each of you later today he'll share that breakdown in regards to products that we did not have at 2019. So you have additional visibility and just I mean, it's a great question Vince.
Speaker Change: I would say a couple of things the first is.
Steve Patrick: The growth the sort of growth improvement.
Speaker Change: The.
Speaker Change: Improvement in that trajectory has been driven both by.
Speaker Change: Product.
Speaker Change: Organic product investments so investments in existing franchises I talked in my prepared remarks about wish Laura enjoying its highest growth rate in a decade.
Speaker Change: In addition to.
Speaker Change: In addition to sort of the portfolio moves.
Speaker Change: That that we've made.
Speaker Change: I share your view in terms of the M&A pipeline, we've gone up.
Speaker Change: A rock solid balance sheet and therefore can.
Speaker Change: Afford to be opportunistic.
Speaker Change: And we're somewhat optimistic that we will start to see some some pretty interesting opportunities through the backend of this year, but you may remember, we said the same sort of coming out of the pandemic and as the interest rate environment changed.
Speaker Change: And the best assets.
Speaker Change: We need to be full.
Speaker Change: <unk> fully priced so I think we've got some optimism, but we're not we're not going to promise anything today in terms of what we might see coming to coming to you from an M&A perspective. It is I'll just add a couple of tidbits and Gary will be more fulsome later today, we acquired confirmation and <unk> in July of 2019.
Speaker Change: Two are included on the higher growth.
Speaker Change: Likewise, we acquired Shaw Prep case tax in 2023. They are included and figure out acquisition in 2024 saves in 2025. They are all included in the list, but Gary will go into more detail.
Speaker Change: Thank you.
Toni Kaplan: We'll go next to Toni Kaplan with Morgan Stanley.
Toni Kaplan: Thanks, so much.
Speaker Change: Hoping to ask maybe a broad question on your investment spend strategy.
Speaker Change: If you did start to see a slow down which it sounds like you have not so far but if you saw a slowdown in that.
Speaker Change: And demand in the pipeline would you pull back on investment or because of the resiliency of your business.
Speaker Change: Some future growth does it make sense to sort of spend through that so just wanted to get sort of your head on where you are with regard to that strategy.
Yes, I think 'twenty, just given the resiliency of our business I would not anticipate much change in regards to our strategic investment certainly we always have to be prudent and the discretionary areas. So would we be more rigorous there, yes, but if you look at our overall strategic.
Speaker Change: Investments in our priorities, we would continue those both organically.
Speaker Change: Organically and Inorganically and then we have the confidence there and the resiliency of our business with the recurring revenue, but also if you look at that the transactional revenue that I mentioned earlier, such a large portion of that being repeat gives us gives us confidence so I would not see any significant impact in our investment strategy.
Speaker Change: Yeah, and just to add to that Tony I think.
Speaker Change: Yes.
Speaker Change: Sort of one of the principal proposition value propositions of our content driven technology.
Speaker Change: Is is efficiency and so whether that's within a government agency or whether that's in overcoming talent shortages.
Speaker Change: In in.
Speaker Change: In the tax accounting and audit spaces.
Speaker Change: And the sort of broader transformation of the legal profession.
Speaker Change: Yes.
Speaker Change: These are.
Speaker Change: Tools and software.
Speaker Change: Can and do create significant efficiencies within the within our customer base and so to the extent that the environment gets difficult, we actually see that the sort of medium to longer term demand.
Speaker Change: Let alone the shorter term.
Speaker Change: <unk> will increase so we would it's a much pointed.
Speaker Change: Is it sort of investing through that.
Speaker Change: Boy.
Speaker Change: Yep.
Garo: I had to ask my follow up on Hey, Garo.
Wanted to it sounds like that is in your higher growth bucket.
Wanted to just get a sense on the additional demand that youre seeing there and the integration and I guess, all the uncertainty and things that are going on or are actually a big help.
Garo: In that area, just what's what's the opportunity you're seeing there. Thanks.
Garo: Yes, so Tony the as you know.
Speaker Change: <unk> has the leading sort of singular Ian pushing platform that applies to multiple jurisdictions. So for any company that operates across multiple geographies multiple countries <unk> has a pretty unique value proposition relative to its competitors.
Speaker Change: And so the Taiwan and here is the is the rollout of E invoicing mandates.
Speaker Change: Which.
Speaker Change: Particularly prevalent in Europe, but we are increasingly starting to see movement from governments and tax authorities in southeast Asia, and Latin America, and so that tailwind we think continues to provide.
Speaker Change: Having said that the data to move around a little bit. So there might be a 26 mandates that gets pushed into 'twenty seven or bought back.
Speaker Change: But but but by and large the.
Speaker Change: The demand characteristics are exactly what we envisaged when we bought that business and perhaps even a little a little bit better.
Speaker Change: Integration is on track I think we've got lots of lessons learned from the integration of acquiring.
Speaker Change: A public company.
Speaker Change: Resident in golf and <unk> suite is not something we've done before so lessons learned from that and things we've done well and things we've done not so well, but it's on track and we are very excited about the future of that business. Both in terms of its application to the core.
Speaker Change: Markets in Europe, but also extending into Latin America, and maybe most excitingly southeast Asia as we go forward over the next few years.
Speaker Change: Tony I'll, just confirm that the gara is in our high growth category and then also our one source indirect tax product has also continued to perform well.
Speaker Change: Thank you.
Speaker Change: Thanks, Tony.
Speaker Change: We'll go next to Jay Mccanless with RBC.
Jay Mccanless: Yes, thanks very much good morning.
Speaker Change: Stole my question on the now famous slide nine which is great.
Speaker Change: Another question on that slide and Mike you May have addressed this I may have missed it but the 68%.
Speaker Change: I guess slice of the pie or their products and their debt.
Speaker Change: Underperforming.
Speaker Change: From your perspective, and the lens you put on these businesses and then just with respect to kind of lower growth businesses, what's the latest and greatest thoughts on just the strategic.
Importance of Global Clinton Reuters News and then a second question Steve just for you on your comments on a slowdown and the importance of efficiency for your customers just taking it one step further.
Speaker Change: With respect to AI, and <unk>, AI and <unk> AI.
Speaker Change: DSC.
Speaker Change: The scenario and I'm, not saying, we're going down this path, but a scenario of a recession that does lead to more structural change in your customers.
Speaker Change: At potentially an accelerant to get them to change and shifts more quickly to kind of automation.
Speaker Change: Ryan kind of driving more of.
Speaker Change: Your advanced products and services. Thank you.
Vince Valentini: Hey, Vince I think they are at least three questions. There I'll take the first two in regards to the infamous slide nine now our position in regards to portfolio optimization, we do not foresee any significant divestitures like we had in 2023 with the lead or fine law in two.
Vince Valentini: 24 with that said, we will we continue to refine our portfolio as we move forward we will there is.
Vince Valentini: Nothing specific to report on today, but any continued refinement would be small in nature consistent with the two divestitures that we completed in Q4 of 2024 and we also had a few other smaller ones in 'twenty two 'twenty three so any refinements to the portfolio it would be small in nature.
Vince Valentini: Second question was related to global print and borders no change in our position from prior calls that we have there as a reminder, global print will generate about $165 million of free cash flow in.
Vince Valentini: In full year calendar 2025.
Steve Patrick: Certainly important for US and then the Reuters business no change there Steve I think the last question was for you.
Steve Patrick: Yes, I would tell you on that on that portfolio forget to last question all at all parts of our business have to perform and they have to contribute across the portfolio and global print Reuters news and no different than any other part portfolio and as Mike said, we don't envisage any significant divestitures, but with the virus is high.
Steve Patrick: As you would expect it to be true in terms of the.
Steve Patrick: Yeah.
Steve Patrick: Sort of a potential recession, leading to an acceleration of a structural change in terms of the adoption of <unk> II and particularly at <unk>. The answer to that is we do not see that yet.
Steve Patrick: But but but certainly.
Steve Patrick: If we look back through all of our careers. It's been in the sort of the moments of economic stress that things have changed the fastest so so we're certainly looking at that and making sure that our product Roadmaps and al.
Speaker Change: Sales pitches.
Speaker Change: Really bring to life the efficiency based on ROI of our tools such that if we start to see that that accelerated structural change will be well positioned but I think at the moment, it's too early to call.
Speaker Change: Okay. Thank you.
Speaker Change: We'll go next to Andrew <unk> with Jpmorgan.
Speaker Change: Hi.
Speaker Change: Andrew a couple of questions first Mike you talked about expense timing, maybe lower expenses in the first quarter getting shifted so if you could tell us how much expenses shifted from the first quarter and like that.
Speaker Change: That what's going to land.
Speaker Change: Second quarter any other comments around the second quarter guided margin and then Steve one for you.
Speaker Change: When you look at law firms and in house legal clients.
Speaker Change: They're already paying for Thomson Reuters AI products, so thats lingo products.
Speaker Change: Ours and user adoption been so far.
Speaker Change: Andrew I'll start on your first question I will emphasize that we reaffirm today, our EBITDA margin guidance for the full year of approximately 39% our confidence remains very high and delivering on it. Your specific question regards between Q1 Q2, certainly there were some expense items that we had.
Speaker Change: <unk> planned to incur in Q1 that shifted into Q2, if you look at the first semester Q1, Q1, together with 42% 36, if you balance those out it's roughly at 39%, which is consistent with our full year. So that's how I would look at our focus on the full year theres going to be some variation.
Speaker Change: By quarter, especially with the impact of our tax and accounting professionals business with the seasonality, but if you ship those items into Q2.
Speaker Change: That did not occur in Q1, Andrew I think you are pretty close to what you would've expected for Q2.
Speaker Change: And then Andrew with regard to.
Speaker Change: The adoption of <unk>.
Speaker Change: Of our tools.
Speaker Change: And the in house legal environment. As you know this is this is sort of an opportunity for us we have not typically been focused on an in house relative to.
Speaker Change: Two outside counsel and therefore, I think we see more.
Speaker Change: We see more.
Speaker Change: Greenfield opportunity.
Speaker Change: Upside in the corporate legal departments, having said that we are seeing healthy adoption of co council.
Speaker Change: Good demand for co counsel, both in terms of.
Speaker Change: The accuracy of the product built on our content and also its potential to drive efficiency and the use to your question. The end user adoption is health one of the things we watch very carefully is post sale.
Speaker Change: What sort of usage, we're seeing how many people have frequently and what specific use cases, and we like the look of those trends and we are supporting that.
Speaker Change: With with some pretty big investments in customer success.
Speaker Change: Which is not entirely new to us as a company, but certainly.
Speaker Change: Probably run a knife and it runs legal and Laura Macdonald corporates.
Speaker Change: Revenue came from Asia.
Speaker Change: Laura from service now as you know they really bought.
Speaker Change: What that DNA with them and have been.
Speaker Change: Very forceful in terms of getting those <unk>.
Speaker Change: Customer success investments up and running and having impact.
Speaker Change: Within the customer base.
Speaker Change: Thank you.
Speaker Change: We'll go next to Jason <unk> with Wells Fargo.
Speaker Change: Hi, good morning, and thanks for taking my questions.
Speaker Change: Curious if you could talk about what drives the implied acceleration in organic growth through the remainder of the year.
Speaker Change: Sure Jason I'll start there if you look at our underlying book of business. Today Q1, we had a very good net sales and bookings. So that's the starting point in regards to our.
Speaker Change: Excuse me our acceleration into the remainder of the year that really is across each of our big three segments. As a reminder, Jason for 2026, we had committed for legal 8% to 9% organic growth Corporate's nine to 11 in 2026 and tax and accounting professionals.
Speaker Change: 7% to 13%. So if you look at our.
Speaker Change: Current performance, our bookings coupled with our product roadmap and the recent acquisitions that we've made will continue to scale those acquisitions and we'll continue to get a tailwind from our product portfolio.
Speaker Change: Got it. Thank you and then as a follow up could you talk to us about if theres any more opportunity for Jan AI licensing revenue and the broader generic segment. Thanks.
Speaker Change: There is a possible Jason we certainly do not have any in our forecast we do not have any in our guidance. The approach that we have taken over the last 18 months is when we have those opportunities. We will provide updates on these calls but hand on heart today, we do not have any.
Speaker Change: <unk> in the bag, but could additional ones materialize, possibly.
But I do not have any visibility on specific timing that I could share today, we will keep you updated.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: We'll go next to Doug Arthur with Huber Research.
Speaker Change: Yeah, Mike can you take me take us through the.
Speaker Change: Organic.
Speaker Change: Dynamics of legal in the first quarter and not so much organic because that obviously was very strong but the divestiture it looks to be about 11% impact is that likely to linger for a couple of quarters until you annualize it was a little larger than I expected.
Speaker Change: Sure make sure I address each of the points there Doug for legal professional it was 8% organic growth, which was the high watermark as I mentioned the <unk>.
Speaker Change: Our prepared remarks, let me take the fine law divestiture, there did that provide a tailwind yes, but it was fully offset.
Speaker Change: Bye.
Speaker Change: Headwinds from the recent product sunsets that I mentioned last quarter. So for clarity fine law provided a tailwind that was completely offset with headwinds from the product sunsets that I mentioned last quarter. If you look at the acceleration in legal professional from 7% up to 8%.
Speaker Change: Two key factors one was the government business performance at 9% and the second was to continuing scaling of our AI offerings onto our legal professional customers. If I take it one step further into second quarter do we expect that 8% to continue we do and we expect it to.
Speaker Change: Continue that for the full year 2025.
Speaker Change: And in terms of the impact of fine law is is that likely to linger in the magnitude. It was in Q1 for the rest for the next couple of quarters.
Speaker Change: Yes that would be a reasonable directional estimate.
Speaker Change: For the remainder of the year given that that divestiture closed in December of 2024, that's a reasonable estimate.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And date.
Speaker Change: We'll go next to George Tong with Goldman Sachs.
George Tong: Hi, Thanks, Good morning, Youre seeing good adoption of <unk> products across the business can you broadly talk about your strategy of Gen. AI monetization, if you deploy different strategies.
George Tong: Across different segments or experimenting with different monetization strategies.
George Tong: Yeah happy to start George and then.
Speaker Change: Well I'll ask Steve to supplement consistent with prior conversations you know first and foremost our overall mantra is to price to value, we're continuing with our enterprise wide pricing versus the per seat. So enterprise wide is continued to be our focus.
Speaker Change: As we look at the pricing, we're certainly very focused on all of the variable costs, including costs associated with the large language models. So we are always prudent as we look at each offering each use case, each customer base, but fairly consistent with our conversations previously and I'm pleased with the overall pricing George.
George Tong: Yes, I think Thats got it the only thing I would add this.
Speaker Change: Is ah.
Speaker Change: As best we can of price to value and that is.
Speaker Change: To the extent that the tools are driving.
Speaker Change: A reduction in hours to perform specific tasks or a reduction in hours over the course of a week. Both professional we try as best we can to sort of match that that pricing up to that value, it's still pretty early days.
Speaker Change: Sort of get an accurate read on that but we are monitoring it closely.
Speaker Change: And I think it built in enough flexibility that we can move things around as we see.
Speaker Change: As we see the impact improve.
Speaker Change: Makes sense and then for my follow up I wanted to focus on the tax and accounting business.
Speaker Change: That segment grew the fastest this quarter four of 2026 framework. It's also guided to grow the fastest can you talk about what secular trends youre seeing that's fueling that kind of growth.
Speaker Change: That allows taxes and just surpassed all the other segments and growth.
George Tong: Yeah. So look it's a combination of a couple of things George I think the most important is.
George Tong: Is that something you've talked about a little bit which is a pretty chronic talent shortage.
George Tong: The tax and accounting and audit industries.
George Tong: And.
George Tong: Bold with.
George Tong: The continual increases in the complexity of returns and the complexity of audits both in the United States and in Brazil, which is where our biggest business. So when you put those two things together we've got.
George Tong: Our highly diversified.
George Tong: And robust customer base, who have high talent.
George Tong: A shortage problem and the technology.
George Tong: Needs to and must stepped into that void over the next couple of years. So that's that's driving I think that's sort of underlying demand. In addition to that we have invested heavily in this business over the last couple of years and I'll give you a couple of examples.
George Tong: First and foremost we've invested in the sort of underlying health of.
George Tong: Stability of the product and the support.
George Tong: A number of years ago, we had a you had a few outages and we had some some.
George Tong: Some issues, we have invested heavily to sort of get ourselves.
George Tong: Into into a very strong position as it pertains to serving our valued customers.
George Tong: Second is we've made a number of.
George Tong: Our highly targeted acquisitions.
Speaker Change: Sure prep and <unk> seen that material.
Speaker Change: Amongst others as well as some much smaller bolt ons in in Brazil.
Speaker Change: And those have been I think.
Speaker Change: Each and every one of them have added.
Speaker Change: The purpose of product set.
Speaker Change: Roadmap going forward and on top of that we have.
Speaker Change: What we think is an exciting.
Speaker Change: Roadmap in terms of ready to review and ready to advise going forward, which we think will take the industry.
Speaker Change: Into new territory in terms of efficiency. So that's what's driving both our recent performance and our optimistic going forward and it's really up to us to execute.
Speaker Change: That roadmap and deliver against it.
Very helpful. Thank you.
Speaker Change: We will take our last question from Joshua <unk> with Bank of America.
Joshua: Yeah, Hey, guys. Thanks for the time I just wanted to go back to slide nine that product growing 10% or more segment is there do you have any color on how long lake.
Joshua: Once product starts growing 10% or how long it typically stays in there so I'm very focused on like duration of growth.
Speaker Change: Yes. It certainly is going to vary Josh with that if you look at these products that have been with if you go back to Vince's question I think it was Vince who asked for additional color in regards to <unk>.
Speaker Change: Maturity longevity there if you look at practical law for example, practical law within our corporate segment, we acquired it in 2013. It continues to grow in excess of 10% would be a great example, if you look at our direct tax business that we part of the one source that we've had for many years deca.
Speaker Change: Right.
Speaker Change: That is growing more than 10% I mentioned indirect tax a portion of one source there I'm just giving you a few examples domingo.
Speaker Change: We acquired in 2014 continues to be a very high growth now.
Speaker Change: 20, 20% plus CAGR for 11 consecutive years, that's just a few examples Josh prana.
Products that have been with us over over a decade.
Speaker Change: Okay I appreciate that color.
Speaker Change: Yes.
Speaker Change: So that's how I'd add just to that I think.
Speaker Change: My read is that these sort of growth trends that are under more durable side relative to.
That would you.
Speaker Change: To turn fallout elsewhere.
Speaker Change: I talked about the talent shortage in tax and accounting that.
Speaker Change: That is not something that's going to disappear quickly I think the broader transformation in legal.
Speaker Change: Both on the in House counsel side of our law firm the court systems the judiciary so forth.
Speaker Change: That's going to be a multi year or even even decades long product transition. So we feel like these trends are durable.
Speaker Change: And I come back to my point to the earlier question, which is it's up to us to execute and I think the early signs and execution are giving us cause for some optimism, but we got the work ahead of us.
Speaker Change: Awesome I'll leave it there thanks guys.
Speaker Change: Thanks, Josh good to hear from you.
Speaker Change: Alright, I think I think that was the end of the queue. So thanks, everybody for tuning in and reach out to me and the IR team anytime.
Speaker Change: If we can help with follow ups.
Speaker Change: Okay. Thanks Ruth.
Speaker Change: Thank you. This does conclude today's conference call. Thank you for your party dissipation you may now disconnect.
Speaker Change: [music].