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.
Ruth: Thank you Ruth.
Speaker Change: Good morning, and thank you all for joining us today for our first quarter 2025 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 open.
Ruth: On the phone lines.
Ruth: 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.
Ruth: Today's presentation contains forward looking statements and none I FRS and other supplementary financial measures, which are discussed on this special note slide.
Ruth: 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.
Steve Patrick: 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 2025 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 card council tax audit and accounting and <unk> AI assistant powered.
Steve Patrick: Powered by the 'twenty 'twenty four 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're focused on delivering new at Gentex expert guided workflows grounded in a 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%.
Steve Patrick: While print revenues declined 5% inline with expectations of tough comparison at Reuters impacted growth rates adjusted EBITDA was essentially unchanged year over year.
Steve Patrick: $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: Action accounting organic revenues grew 11% and our Latin American business and tax compliance offerings were key contributors Reuters news organic revenues declined 7% driven by a difficult comparison from significant transactional generative AI 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: However, 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 seven to seven 5% organic revenue growth illustrates in meeting with investors. We are frequently asked two questions about how 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 our 2024 Investor day.
Steve Patrick: Which illustrates the improvement in our revenue mix since 2019.
Steve Patrick: 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 Westphal has resulted in this key franchise growing at the <unk>.
Steve Patrick: Pastas rate in more than a decade second we have meaningfully increased our investment and focus on innovation, especially with AI in combination. These efforts have organically increase the number of our existing products growing at double digits and third our portfolio optimization optimization efforts.
Steve Patrick: <unk> paid dividends. This includes both the acquisition of strategic and complementary growth businesses.
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: Especially co counsel in haiku professionals practical law indirect tax and peguero at corporates.
Steve Patrick: And thirdly Domingo confirmation Shaw prep cloud audit suite and more recently <unk> for tax and 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 Eastwood: 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 let.
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 this 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: Corrine and transactional revenues grew 8% and 15% respectively.
Speaker Change: Our Latin American business sure prep safe, San 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 role.
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.
Moving to Reuters news adjusted EBITDA was 39 million with a margin of 20%.
Speaker Change: Year over year profit decrease at <unk> 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 declined to 42, 3%.
Speaker Change: This was nicely ahead of our prior expectations.
Speaker Change: Excluding the impact of the Reuters 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: Ported 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.
Speaker Change: We continue to expect organic revenue growth at 7% seven 5% with the base three growing approximately 9%.
Speaker Change: We see 2025, adjusted EBITDA margins of approximately 39%.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Dairy 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 sharp prep and safe <unk> 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 0.6 times and healthy cash flow. We believe we are well positioned to weather a range of market environments let.
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: Are you seeing a 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: Yeah.
Speaker Change: We'll go first to Scott <unk> with CIBC.
Speaker Change: Hi, good morning.
Speaker Change: 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, where we are.
Speaker Change: 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 recent.
Speaker Change: A D plus.
Speaker Change: Plus percent of our revenues recurring.
Speaker Change: With a highly diversified customer base and largely non discretionary.
Speaker Change: Products.
Speaker Change: In the content driven technology space, having said that.
Speaker Change: 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.
Speaker Change: When it settles if it settles we will look like and what the implications would be so I think theres a level of nervousness.
Speaker Change: 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.
Scott: Just looking at April velocity, and average order value. They remain very consistent so we're not seeing any changes Scott.
Speaker Change: Okay. That's good to hear and then if I think about if you think about historically are there.
Speaker Change: I need the segments, we had legal tax or corporate that you think would be more impacted in a scenario where.
Speaker Change: Buying does slow down.
Speaker Change: 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 and.
Speaker Change: In a softer environment number one.
Speaker Change: <unk> 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 thats over 80%. So that it gives us comfort within the transactional area. The second area to focus on is <unk>.
Speaker Change: Global print within global print, which is roughly 7% of our total.
Speaker Change: Revenue, 45% of that revenue is governed by multi year 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 five.
Speaker Change: Of our total revenue so in the software economy. Scott those are the three areas that we would focus on and provide you with the continuous.
Speaker Change: Updates.
Speaker Change: Okay. That's really helpful. Thank you.
Speaker Change: We'll go next to Manav Patnaik with Barclays.
Thank you and good morning.
Speaker Change: First question just to focus on that growth cloud.
Speaker Change: The 68% of the other products I was just hoping you could help us with kind of the average growth and the opportunity to accelerate those into that high growth bucket.
Speaker Change: Sure one data point, there would be about.
Speaker Change: 20% to 25% would be below 5% for us in case that is helpful for us 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 the.
Speaker Change: Answer to every question has not generated by high but to the extent that we can.
Speaker Change: Add more generative capabilities.
Speaker Change: Two our content sits at.
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 sets.
Speaker Change: And the addition of <unk> for example.
Speaker Change: <unk>.
Speaker Change: <unk> wistful precision has enabled us to get into 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 so as we think about injecting gen II into more and more parts of our portfolio and more and more of these content shifts.
Speaker Change: That that order.
Speaker Change: <unk> 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 Gaza.
Speaker Change: <unk>.
Speaker Change: Just curious.
Speaker Change: Any update you can give us on the exposure.
Speaker Change: Dillard's website sure obviously lost a lot of contracts here and there that would be helpful.
Speaker Change: Right.
Speaker Change: Yes, we're certainly familiar with the Doe's website Manav overall, we've had no material impact so 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 revenue as reported.
Speaker Change: Got it and legal professionals externally.
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 you look at the remainder 35% to 40% would be rich.
Speaker Change: And for all products, including clear and now.
Speaker Change: Other trs's products I would 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 but no material impacts today.
Speaker Change: Got it thank you so powerful.
Speaker Change: Well go next to.
Speaker Change: Our package with Canaccord Genuity.
Speaker Change: Good morning, Thanks for taking my question.
I was wondering whether you could maybe just revisit the drafting side of the opportunity I know that you launched surgical console drafting product last year.
Speaker Change: Maybe just remind us as citizens.
Speaker Change: <unk>, there and the progress you've been able to make in sort of the outlook that you see in the near term.
Speaker Change: Yes.
Speaker Change: Yes sure.
Speaker Change: So.
Speaker Change: There is a point of view that that suggests 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 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.
Speaker Change: We can throw around some big numbers on the basis of Av.
Speaker Change: <unk>.
Speaker Change: Head count and the time spent today.
Speaker Change: We are very happy with the start.
Speaker Change: We've made and.
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 there is is that you.
Speaker Change: 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 draft, we think positions us very well in a new.
Speaker Change: New and 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 investment.
Speaker Change: What about the $200 million level through 2024 I was wondering is has that been an uptick as we look at 25 or is it pretty much the same run rate. Thank you.
Speaker Change: Just a slight uptick airbender.
Speaker Change: Calendar year 2025, we remain committed just as a reminder, that roughly $200 million plus investment is split roughly 50 50 between 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 them.
Speaker Change: <unk> with TD Cowen.
Speaker Change: 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.
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 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 <unk>.
Speaker Change: Terrify, 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 where you have a huge amount of cash you can use for acquisitions, perhaps things are going to get cheaper if 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.
Speaker Change: 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.
Speaker Change: For Q1, if you think about currencies that have the biggest impact on us as the British pound Argentine peso and the Brazil real is theres, others that have less significant impact, but those are the three that would have the larger impact in a given period, we would expect smaller FX impact.
Speaker Change: 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 thats, okay, Gary events will take that as an action item.
Speaker Change: 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.
Speaker Change: The growth the sort of growth improvement.
Speaker Change: The improvement in that trajectory has been driven both by.
Speaker Change: <unk>.
Speaker Change: Product <unk>.
Speaker Change: <unk> product investments so investments in existing franchises I talked in my prepared remarks about wished lore enduring its highest growth rate in a decade.
Speaker Change: In addition to <unk>.
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 got a Ah.
Speaker Change: Our 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.
Speaker Change: 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: <unk> continued 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 view from an M&A perspective 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 States. 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 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 started here on where you are with regard to that strategy.
Speaker Change: Yes, I think Tony just given the resiliency of our business I would not anticipate much change in regards to our strategic investments 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 it gives us gives us confidence so I would not see any significant impact in our investment strategy.
Toni Kaplan: Yes, just to add to that Tony I think.
Speaker Change: Yes.
Speaker Change: This 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 <unk>.
Speaker Change: Becoming talent shortages.
Speaker Change: 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: <unk> 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 will increase so we would much pointed.
Speaker Change: It's sort of investing through that.
Speaker Change: Boy.
Speaker Change: Yep.
Speaker Change: I had to ask my follow up on Hey, Garo.
Speaker Change: Wanted to it sounds like that is in your higher growth bucket and wanted to just get a sense on the additional demand that youre seeing there and the integration.
Speaker Change: I guess all of the uncertainty and things that are going on or are actually a big help.
Speaker Change: In that area, just what's what's the opportunity you're seeing there. Thanks.
Speaker Change: 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 to garo has a pretty unique value proposition relative to its competitors.
Speaker Change: And so the Taiwan 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 South East Asia, and Latin America, and so that tailwind we think continues to provide.
Speaker Change: Having said that the dates do move around a little bit so they might be at 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 <unk>.
Jay Mccanless: Now famous slide nine which is great.
Jay Mccanless: 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.
Jay Mccanless: Our underperforming.
Jay Mccanless: From your perspective, and the lens you put on these businesses.
Jay Mccanless: Then just with respect to kind of lower growth businesses, what's the latest and greatest thoughts on just the strategic.
Jay Mccanless: Importance of Global Clinton Reuters News and then the second question, Steve just for you on your comments on a slowdown and the importance of efficiency for your customers.
Jay Mccanless: One steps further.
Jay Mccanless: With respect to AI, and <unk>, AI and <unk> AI.
Jay Mccanless: Do you see 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.
Jay Mccanless: That potentially an accelerant to get them to change and shift more quickly to kind of automation.
Speaker Change: Brian kind of driving more of your advanced products and services. Thank you.
Speaker Change: 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.
Speaker Change: 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 2024 with that said, we'll we continue to refine our portfolio as we move forward we will.
Speaker Change: 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 would be small in nature.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Yes, I would tell you on that on that portfolio forget to last question.
Steve Patrick: <unk> all parts of our business.
Steve Patrick: 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 put the bar is high.
Steve Patrick: We would expect it to be true in terms of the.
Steve Patrick: A 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>.
Steve Patrick: 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.
Steve Patrick: Things have changed the fastest so we're.
Steve Patrick: We're certainly looking at that and making sure that our product Roadmaps and al.
Steve Patrick: Sales pitches.
Steve Patrick: 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 will position, but I think at the moment, it's too early to call.
Steve Patrick: Okay. Thank you.
Speaker Change: We'll go next to Andrew <unk> with Jpmorgan.
Speaker Change: Hi, It's 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 end.
Speaker Change: What is going to land.
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: Already paying for Thomson Reuters AI products.
Speaker Change: <unk> products.
Speaker Change: I always end 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: Lee.
Speaker Change: <unk> 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: Nice quarter, especially with the impact of our tax <unk> 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.
Speaker Change: Of our tools and.
Speaker Change: In the in house legal environment as you know this is this is it.
Speaker Change: Sort of an opportunity for us we have not typically.
Speaker Change: <unk> been focused on an in house.
Speaker Change: <unk> to two.
Speaker Change: 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.
Speaker Change: 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.
What sort of usage, we're seeing how many people have frequently and what specific use cases, and we like to look at 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.
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: Makes sense. Thank you.
Speaker Change: We'll go next to Jason <unk> with Wells Fargo.
Jason: 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 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 we 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 can you just talk about if theres any more opportunity for gen AI licensing revenue and the broader.
Speaker Change: Reuters news 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 handle on heart today, we do not have any.
Speaker Change: <unk>.
Speaker Change: In the bag, but could additional ones materialize, possibly.
Speaker Change: 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.
Doug Arthur: Yes, Mike can you take me take us through the.
Speaker Change: Organic.
Speaker Change: Dynamics of legal in the first quarter not so much organic because that obviously was very strong, but the divestiture it looks to be about.
Speaker Change: 11% impact is that likely to linger for a couple of quarters until you annualize it was a little larger than I expected.
Doug Arthur: Sure I'll make sure I address each of the points there Doug for legal professional at 8% organic growth, which was the high watermark as I mentioned the.
Doug Arthur: Our prepared remarks, let me take the fine law divestiture, there did that provide a tailwind yes, but it was fully offset.
Doug Arthur: Bye.
Doug Arthur: 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%.
Doug Arthur: Two key factors one was the government business performance at 9% and the second one was to continuing scaling of our AI offerings to 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.
Doug Arthur: <unk> for the full year 2025.
Doug Arthur: And in terms of the impact of fine law.
Doug Arthur: Is that likely to linger in the magnitude. It was in Q1 for the rest for the next couple of quarters.
Doug Arthur: Yes that would be a reasonable directional estimate.
Doug Arthur: For the remainder of the year given that that divestiture closed in December of 2020 forward, that's a reasonable estimate.
Doug Arthur: Okay helpful. Thank you.
Doug Arthur: And date.
Doug Arthur: Well go next to George Tong with Goldman Sachs.
George Tong: Hi, Thanks, Good morning, Youre seeing good adoption of Gen AI 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 I'll.
George Tong: Ill ask Steve to supplement.
George Tong: 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 has continued to be our focus as we look at the pricing. We're certainly very focused on all of the variable costs, including costs associated.
George Tong: <unk> with the large language models. So we're always prudent as we look at each offering each use case, each customer base, but fairly consistent with our conversations previously.
George Tong: I'm pleased with the overall pricing George.
Speaker Change: Yes, I think Thats got it the only thing I would add this is ed.
Speaker Change: As best we can of price to value and that is.
Speaker Change: The extent that the tools are driving.
A reduction in hours to perform specific tasks through a reduction in hours over the course of a week professional we try as best we can to sort of match that that pricing up to that value. It's still pretty early days to 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 to surpass all the other segments and growth.
George Tong: Yeah. So look it's just a culmination 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: <unk> with.
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.
Have a 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 first and foremost we've invested in the sort of underlying.
George Tong: Health.
George Tong: Stability of the product and the support.
George Tong: A number of years ago, we had a we had a few outages and we had 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: The second is we've made a number of.
George Tong: Our highly targeted acquisitions.
Sure preferences change of criteria.
George Tong: Amongst others as well.
George Tong: So much smaller bolt ons in in Brazil.
George Tong: And those have been I think.
George Tong: Each and every one of them have added.
George Tong: The purpose of the product set and the roadmap going forward and on top of that we have.
George Tong: What we think is an exciting.
George Tong: Roadmap in terms of ready to review and ready to advise going forward, which we think will take the industry.
George Tong: Into new territory in terms of efficiency. So that's what's driving both our recent performance and our optimism going forward and it's really up to us to execute.
George Tong: That roadmap and deliver against it.
George Tong: Very helpful. Thank you.
Speaker Change: We will take our last question from Joshua dinner line with Bank of America.
Speaker Change: Yeah, Hey, guys. Thanks for the time.
Speaker Change: 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.
Speaker Change: 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 it keeps 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.
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 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.
2020% plus CAGR for 11 consecutive years, that's just a few examples Josh <unk>.
Speaker Change: 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 around the more durable side relative to.
Speaker Change: Which you.
Speaker Change: Monitor and fallout elsewhere.
Speaker Change: And I talked about the talent shortage in tax and accounting.
Speaker Change: That is not something that's going to disappear quickly I think the broader transformation in legal.
Speaker Change: That both on the in House counsel side of the law firm the court systems the judiciary so forth.
Speaker Change: That's going to be a multi.
Speaker Change: Multiyear 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: We can help with follow ups.
Speaker Change: Have a good day thanks Ruth.
Speaker Change: Thank you. This does conclude today's conference call. Thank you for your purchase participation you may now disconnect.
Speaker Change: [music].