Q3 2025 Thomson Reuters Corp Earnings Call

Speaker #2: Good day, everyone, and welcome to the Thomson Reuters third-quarter earnings call. Today's conference is being recorded at this time. I'd like to turn the call over to Gary Bisbee.

Operator: Good day, everyone, welcome to the Thomson Reuters Q3 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Gary Bisbee, Head of Investor Relations. Please go ahead.

Speaker #2: Head of Investor Relations, please go ahead.

Gary Bisbee: Thanks, Jenny. Good morning, and thank you for joining us today for our Q3 2025 earnings call. I am joined today by our CEO, Steve Hasker, and our CFO, Mike Eastwood, each of whom will discuss our results and take your questions following their remarks. To enable us to get to as many questions as possible, we would appreciate it if you'd limit yourself to 1 question and 1 follow-up each when we open the phone lines. Throughout today's presentation, when we compare performance period on period, we discuss revenue growth rates before currency, as well as on an organic basis. We believe this provides the best basis to measure the underlying performance of the business. Today's presentation contains forward-looking statements and non-IFRS and other supplemental financial measures, which are discussed on this special note slide.

Speaker #3: Thanks, Jenny. Good morning and thank you for joining us today for our third-quarter 2025 earnings call. I'm joined today by our CEO, Steve Hasker, and our CFO, Mike Eastwood.

Speaker #3: Each of whom will discuss our results and take your questions following their remarks. To enable us to get to as many questions as possible, we would appreciate it if you'd limit yourself to one question and one follow-up each.

Speaker #3: And we open the phone lines. Throughout today's presentation, when we compare performance period-on-period, we discuss revenue growth rates before currency as well as on an organic basis.

Speaker #3: We believe this provides the best basis to measure the underlying performance of the business. Today's presentation contains forward-looking statements and non-IFRS and other supplemental financial measures, which are discussed on this special note slide.

Speaker #3: 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.

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. You may access these documents on our website or by contacting our investor relations department. Let me now turn it over to Steve Hasker.

Speaker #3: Let me now turn it over to Steve Hasker.

Speaker #4: Thank you, Gary, and thanks to all of you for joining us today. Momentum continued in the third quarter, with revenue in line and margins modestly ahead of our expectations.

Steve Hasker: Thank you, Gary Bisbee, and thanks to all of you for joining us today. Momentum continued in Q3, with revenue in line and margins modestly ahead of our expectations. Total company organic revenues rose 7%, with the big three segments growing by 9%. Healthy revenue flow through, beneficial revenue mix, and good cost discipline boosted margins, driving profit ahead of expectations. We are reaffirming our full year 2025 revenue and profit outlook, including our expectation for approximately 9% organic revenue growth for the big three segments. For the full year, our total and organic revenue growth is trending closer to 3% and 7% respectively, rather than the higher ends of the ranges at 3.5% and 7.5%, for three reasons that are unrelated to our AI innovation momentum. First, a slower ramp of commercial print volumes.

Speaker #4: Total company organic revenues rose 7%, with the Big Three segments growing by 9%. In addition, healthy revenue flow-through, beneficial revenue mix, and good cost discipline boosted margins, driving profit ahead of expectations.

Speaker #4: We are reaffirming our full year 2025 revenue and profit outlook, including our expectation for approximately 9% organic revenue growth for the Big Three segments.

Speaker #4: For the full year, our total and organic revenue growth is trending closer to 3% and 7% respectively, rather than the higher ends of the ranges at 3.5% and 7.5%.

Speaker #4: The three reasons that are unrelated to our AI innovation momentum. First, a slower ramp of commercial print volumes. Secondly, several recent U.S. federal government cancellations and downgrades.

Steve Hasker: Secondly, several recent US federal government cancellations and downgrades. Third, slightly softer bookings trends at corporates following internal sales organizational changes aimed at improving future cross-selling. We see these as temporary factors not related to our growing innovation and AI-driven momentum, which continues to build. This is best illustrated by our Legal Professionals segment accelerating to 9% organic revenue growth in the quarter, up from 8% in H1 2025 and 7% last year. This is driven by continued Westlaw momentum and strong double-digit growth from both CoCounsel and CoCounsel Drafting. Outside of legal, we continue to see double-digit growth from a number of key franchises, including SafeSend, Confirmation, Pagero, Indirect Tax, and our international businesses, to name a few. Looking to next year, we're updating our 2026 financial framework.

Speaker #4: And third, slightly softer bookings trends at corporates following internal sales organizational changes aimed at improving future cross-selling. We see these as temporary factors, not related to our growing innovation and AI-driven momentum, which continues to build.

Speaker #4: This is best illustrated by our legal professional segment accelerating to 9% organic revenue growth in the quarter, up from 8% in the first half of 2025 and 7% last year.

Speaker #4: And this is driven by continued Westlaw momentum and strong double-digit growth from both co-counsel and co-counsel drafting. Outside of legal, we continue to see double-digit growth from a number of key franchises, including SafeSend, Confirmation, Peguero, Indirect Tax, and our international businesses to name a few.

Speaker #4: Looking to next year, we're updating our 2026 financial framework. We continue to expect organic revenue of $7.5 to 8%, including approximately $9.5 for the Big Three.

Steve Hasker: We continue to expect organic revenue of 7.5% to 8%. Including approximately 9.5% for the big 3. We now see larger year-over-year margin expansion and higher free cash flow than in our prior outlook. On the product front, customer feedback on the agentic AI launches over the summer has been very positive, and initial sales trends are encouraging, especially for the CoCounsel Legal integrated offer, Westlaw Advantage, and CoCounsel for tax, audit, and accounting. The competitive dynamics for our core content-enabled technology offerings for Westlaw, Practical Law, and our tax engines remains stable. We see incremental competition in the AI assistance space, which is an exciting white space growth opportunity in which CoCounsel remains a clear market leader. Our capital capacity and liquidity remain an asset that we are focused on deploying to create shareholder value.

Speaker #4: And we now see larger year-over-year margin expansion and higher free cash flow than in our prior outlook. On the product front, customer feedback on the agentic AI launches over the summer has been very positive.

Speaker #4: An initial sales trend is encouraging, especially for the co-counsel legal integrated offer, Westlaw Advantage, and co-counsel for tax, audit, and accounting. The competitive dynamics for our core content-enabled technology offerings for Westlaw, practical law, and our tax engines remain stable.

Speaker #4: We see incremental competition in the AI assistance space, which is an exciting white-space growth opportunity in which co-counsel remains a clear market leader. Our capital capacity and liquidity remain an asset that we are focused on deploying to create shareholder value.

Steve Hasker: We recently completed the $1 billion share repurchase program announced in mid-August, and we remain extremely well capitalized with a net leverage of only 0.6 times at quarter end. We remain committed to a balanced capital allocation approach, and we continue to assess additional inorganic opportunities. With our estimated $9 billion of capital capacity through 2027 after the completion of the buyback, we are positioned to be both aggressive and opportunistic. Now for the results for the quarter. Q3 organic revenues grew 7% in line with our expectations. Organic recurring and transactional revenue grew at 9% and 4% respectively, while print revenue declined 4%.

Speaker #4: We recently completed the $1 billion share repurchase program announced in mid-August, and we remain extremely well capitalized with a net leverage of only 0.6 times at quarter-end.

Speaker #4: We remain committed to a balanced capital allocation approach. And we continue to assess additional inorganic opportunities. With our estimated $9 billion of capital capacity through 2027, after the completion of the buyback, we are positioned to be both aggressive and opportunistic.

Speaker #4: Now to the results for the quarter. Third-quarter organic revenues grew 7% in line with our expectations. Organic recurring and transactional revenue grew at 9% and 4% respectively, while print revenue declined 4%.

Speaker #4: Adjusted EBITDA increased 10% to $672 million, reflecting a $240 basis point margin increase to $37.7%, higher than anticipated due to healthy operating leverage and good cost discipline.

Steve Hasker: Adjusted EBITDA increased 10% to $672 million, reflecting a 240 basis point margin increase to 37.7%, higher than anticipated due to healthy operating leverage and good cost discipline. Turning to the Q3 results by segment, the big three segments delivered 9% organic revenue growth. Legal organic revenue grew 9%, improving from 8% in the H1 of 2025 and 7% for all of last year. Continued momentum from Westlaw and CoCounsel were key drivers. Organic revenues in Corporates grew 7%, driven by offerings in our legal, tax, and risk portfolios, and the segment's international businesses. Tax & Accounting organic revenues grew 10%, driven by our Latin American and US businesses. Reuters News organic revenues rose 3%, driven by growth in the agency business and our contract with LSEG.

Speaker #4: Turning to the third-quarter results by segment, the Big Three segments delivered 9% organic revenue growth. Legal organic revenue grew 9%, improving from 8% in the first half of 2025 and 7% for all of last year, continued momentum from Westlaw and co-counsel were key drivers.

Speaker #4: Organic revenues in corporates grew 7%, driven by offerings in our legal, tax, and risk portfolios. And the segments international businesses. Tax and accounting organic revenues grew 10%, driven by our Latin American and US businesses.

Speaker #4: Reuters News organic revenues rose 3%, driven by growth in the agency business and our contract with LSEG. And lastly, global print organic revenues declined 4% year on year.

Steve Hasker: Lastly, Global Print organic revenues declined 4% year on year. In summary, we're pleased with our Q3 results. I'll now comment briefly on questions that we've heard in recent months about the value of our content, specifically Westlaw, in an AI environment, and whether it could be replicated by large language models or newer AI competitors. We remain very confident in Westlaw's differentiation, which we believe has increased significantly with the development of deep research and agentic AI and the recent launch of Westlaw Advantage. It is very important to understand that litigation is high-stakes work with no room for error and significant consequences for being wrong. As a result, professional-grade legal research and workflow tools need to deliver comprehensive, accurate, and up-to-date outputs through trusted solutions with robust data privacy commitments.

Speaker #4: In summary, we're pleased with our Q3 results. I'll now comment briefly on questions that we've heard in recent months about the value of our content specifically Westlaw in an AI environment and whether it could be replicated by large language models or newer AI competitors.

Speaker #4: We remain very confident in Westlaw's differentiation, which we believe has increased significantly with the development of deep research and agentic AI. And the recent launch of Westlaw Advantage.

Speaker #4: It is very important to understand that litigation is high-stakes work with no room for error and significant consequences for being wrong. As a result, professional-grade legal research and workforce tools workflow tools need to deliver comprehensive accurate and up-to-date outputs through trusted solutions with robust data privacy commitments.

Speaker #4: This is a very high bar, particularly given the scale, complexity, and constant change of the legal ecosystem. In the United States, there are hundreds of court systems and tens of millions of annual rulings.

Steve Hasker: This is a very high bar, particularly given the scale, complexity, and constant change of the legal ecosystem. In the United States, there are hundreds of court systems and tens of millions of annual rulings. We collect content from more than 3,500 sources in multiple formats, and it is completely unstructured. On an annual basis, we process more than 300 million documents into Westlaw. In addition, we have valuable and proprietary second-source content, including Practical Law. Collection of source content is just step one. Our more than 1,500 attorney editors, armed with cutting-edge technologies, turn the massive volume of unstructured data into structured proprietary content and intelligence. This includes linking cases, codifying statutes and regulations, authoring headnotes, and increasingly creating new content for our AI offerings. In total, our team delivers more than 1.6 million editorial enhancements per year.

Speaker #4: We collect content from more than 3,500 sources in multiple formats and it is completely unstructured. On an annual basis, we process more than 300 million documents into Westlaw.

Speaker #4: In addition, we have valuable and proprietary second-source content including practical law. Collection of source content is just step one. Our more than 1,500 attorney editors armed with cutting-edge technologies turn the massive volume of unstructured data into structured proprietary content and intelligence.

Speaker #4: This includes linking cases codifying statutes and regulations authoring headnotes and increasingly creating new content for our AI offerings. In total, our team delivers more than 1.6 million editorial enhancements per year.

Speaker #4: Primary law content including case law, statutes, and regulations is a significant majority of what users search in Westlaw. And 85% I repeat, 85% of this content has been editorially enhanced.

Steve Hasker: Primary law content, including case law, statutes, and regulations, is a significant majority of what users search in Westlaw. 85% of this content has been editorially enhanced. 85% is editorially enhanced. These enhancements are proprietary to Westlaw and make the source content far more valuable. Let me provide a few brief examples. First, the West Key Number System is our proprietary taxonomy or subject classification of the law. It covers more than 140,000 precise legal topic categories, capturing the law at an extremely granular level.

Speaker #4: So 85% is in editorially enhanced. These enhancements are proprietary to Westlaw and make the source content far more valuable. Let me provide a few brief examples.

Speaker #4: First, the West key number system is our proprietary taxonomy. Or subject classification of the law. It covers more than 140,000 precisely legal topic categories capturing the law at an extremely granular level.

Speaker #4: The organization of case law, statutes, and regulations against this taxonomy is key to the delivery of comprehensive and accurate results, allowing Westlaw users to zero in on very specific points of law.

Steve Hasker: The organization of case law, statutes, and regulations against this taxonomy is key to the delivery of comprehensive and accurate results, allowing Westlaw users to zero in on very specific points of law. Second, KeyCite, our proprietary citation network, has more than 1.4 billion connections linking legal matter with the taxonomy. KeyCite verifies whether a case, statute, or regulation is still good law and finds accurate citing references to support legal arguments. Lastly, headnotes are summaries of the important issues of law within a case and are indexed against the West Key Number System. This allows users to efficiently and accurately pinpoint the cases that best match their facts and desired outcome. To illustrate how the Westlaw content and editorial capabilities deliver value in an AI world, this slide outlines the key steps in our agentic approach for Westlaw Advantage.

Speaker #4: Second, Keysight, our proprietary citation network, has more than 1.4 billion connections linking legal matter with the taxonomy. Keysight verifies whether a case statute or regulation is still good law and finds accurate citing references to support legal arguments.

Speaker #4: And lastly, headnotes are summaries of the important issues of law within a case and are indexed against the key number system. This allows users to efficiently and accurately pinpoint the cases that best match their facts and desired outcome.

Speaker #4: To illustrate how the Westlaw content and editorial capabilities deliver value in an AI world, this slide outlines the key steps in our agentic approach for Westlaw Advantage.

Speaker #4: As you can see, our AI agents leverage Westlaw's breadth and depth of content and critically, the extensive expertise of our editorial teams and the significant editorial enhancements that we create differentiates our agents the output of which is delivered as professional-grade research that lawyers can trust.

Steve Hasker: As you can see, our AI agents leverage Westlaw's breadth and depth of content, and critically, the extensive expertise of our editorial teams and the significant editorial enhancements that we create differentiates our agents, the output of which is delivered as professional-grade research that lawyers can trust. This graphic highlights another important differentiator for Westlaw. When doing legal research, validating research results is a key final step in the process. This is doubly important with any AI outputs which need to be checked for inaccuracies and hallucinations. In Westlaw, we have the leading toolset to deliver these validations, bringing confidence to our users that their citations are accurate and their legal arguments are correctly characterizing the law. The validation process leverages several tools I've already mentioned, including West Key Number System, KeyCite, and headnotes.

Speaker #4: This graphic highlights another important differentiator for Westlaw. When doing legal research, validating research results is a key final step in the process. This is doubly important with any AI outputs which need to be checked for inaccuracies and hallucinations.

Speaker #4: In Westlaw, we have the leading tool set to deliver these validations bringing confidence to our users that their citations are accurate, and their legal arguments are correctly characterizing the law.

Speaker #4: The validation process leverages several tools I've already mentioned including key number system, Keysight, and headnotes. In addition, litigation document analyzer reviews legal briefs before they are submitted to the court identifying inaccurate citations and misstatements of law.

Steve Hasker: In addition, Litigation Document Analyzer reviews legal briefs before they are submitted to the court, identifying inaccurate citations and misstatements of law. Combined with the industry's most robust editorial curated content set, the Westlaw tools provide lawyers with assurance that their legal arguments are on point and they have done all that they can to prepare for court. While general-purpose models can find cases and potentially make a legal argument, delivering against the industry's need for comprehensive, accurate, and current research is an extremely high bar. Our market-leading content, our editorial enhancement, and our sophisticated toolset have been built over decades to consistently deliver this standard while meeting the industry's data privacy and security needs.

Speaker #4: Combined with the industry's most robust editorial curated content set, the Westlaw tools provide lawyers with assurance that their legal arguments are on point and they have done all that they can to prepare for court.

Speaker #4: While general purpose models can find cases and potentially make a legal argument, delivering against the industry's need for comprehensive accurate and current research is an extremely high bar.

Speaker #4: Our market-leading content our editorial enhancement and our sophisticated tool set have been built over decades to consistently deliver this standard while meeting the industry's data privacy, and security needs.

Speaker #4: Looking forward, we see the evolution of AI for an information retrieval and summarization to more complex agentic workflows as an opportunity for Thomson Reuters that reinforces the value and critical importance of our content and editorial expertise.

Steve Hasker: Looking forward, we see the evolution of AI from information retrieval and summarization to more complex agentic workflows as an opportunity for Thomson Reuters that reinforces the value and critical importance of our content and editorial expertise. In complex multi-step work, quality content to ground the outputs and subject matter expertise to train and fine-tune the AI are critical to delivering professional-grade results. Our innovation focus is squarely on leveraging these assets, leading content, and the deepest bench of domain experts in our end markets to deliver agentic solutions that are difficult, if not impossible, to replicate. I'll now turn it over to Mike to review our financial performance.

Speaker #4: In complex multi-step work, quality content to ground the outputs and subject matter expertise to train and fine-tune the AI are critical to delivering professional-grade results.

Speaker #4: Our innovation focus is squarely on leveraging these assets leading content and the deepest bench of domain experts in our end markets to deliver agentic solutions that are difficult if not impossible to replicate.

Speaker #4: I'll now turn it over to Mike to review our financial performance.

Speaker #2: Thanks, Steve. Thanks again for joining us today. As a reminder, I will talk through revenue growth before currency and on an organic basis. Let me start by discussing the third quarter revenue performance for our big three segments.

Mike Eastwood: Thanks, Steve. Thanks again for joining us today. As a reminder, I will talk through revenue growth before currency and on an organic basis. Let me start by discussing the Q3 revenue performance for our big three segments. Organic revenue grew 9% in the Q3, continuing the strong trend from recent periods. Legal Professionals' organic revenue grew 9%, improving from 8% in the H1, driven primarily by Westlaw, CoCounsel Drafting, and our international businesses. Government grew 9% in the quarter. In our Corporate segment, organic revenues grew 9%. Recurring revenue grew 9%, while transactional rose 5%. Direct and indirect tax, Pagero, Practical Law, and our international businesses were key contributors. Looking forward, the Corporate segment growth rate is likely to moderate in the Q4 due to the softer-than-planned bookings growth Steve mentioned.

Speaker #2: Organic revenue grew 9% in the third quarter continuing the strong trend from recent periods. Legal professionals organic revenue grew 9% improving from 8% in the first half driven primarily by Westlaw co-counsel co-counsel drafting and our international businesses.

Speaker #2: Government grew 9% in the quarter and our corporate segment organic revenues grew 9% recurring revenue grew 9% while transactional rose 5%. Direct and indirect tax Figaro practical law and our international businesses were key contributors.

Speaker #2: Looking forward, the corporate segment growth rate is likely to moderate in the fourth quarter due to the softer-than-planned bookings growth Steve mentioned. Tax and accounting delivered another strong quarter with organic growth of 10%.

Mike Eastwood: Tax and accounting delivered another strong quarter with organic growth of 10%. Recurring and transactional revenues grew 9% and 12% respectively. Our Latin America business, SafeSend, UltraTax, and the Cloud Audit family of products were key drivers. Moving to Reuters News, organic revenue rose 3% for the quarter, driven primarily by growth at the agency business and from the news agreement with the data and analytics business of LSEG. Reuters revenue included approximately $7 million of transactional generative AI content licensing revenue in the quarter, compared to $8 million in the prior year quarter. Finally, global print revenues decreased 4% on an organic basis. On a consolidated basis, Q3 organic revenues increased 7%.

Speaker #2: Recurring and transactional revenues grew 9% and 12% respectively. Our Latin America business safe send ultra tax and the cloud audit family of products were key drivers.

Speaker #2: Moving to Reuters news, organic revenue rose 3% for the quarter driven primarily by growth at the agency business and from the news agreement with the data and analytics business of LSAG.

Speaker #2: Reuters revenue included approximately 7 million of transactional generative AI content licensing revenue in the quarter compared to 8 million in the prior year quarter.

Speaker #2: Finally, global print revenues decreased 4% on an organic basis. On a consolidated basis, third quarter organic revenues increased 7%. At the end of Q3, the percent of our annualized contract value for ACV from products that are GenAI enabled was 24% up from 22% last quarter.

Mike Eastwood: At the end of Q3, the percent of our annualized contract value for ACV from products that are GenAI-enabled was 24%, up from 22% last quarter. Turning to our profitability, adjusted EBITDA for the Big Three segments was $606 million, up 9% from the prior year period, with the margin rising 220 basis points to 41.7%. Moving to Reuters News, adjusted EBITDA was $42 million with a margin of 19.9%. Global Print's adjusted EBITDA was $46 million with a margin of 37.1%. In aggregate, total company adjusted EBITDA was $672 million, a 10% increase versus Q3 2024, reflecting a 240 basis point margin increase to 37.7%.

Speaker #2: Turning to our profitability, adjusted EBITDA for the big three segments was 606 million, up 9% from the prior year period with the margin rising 220 basis points to 41.7%.

Speaker #2: Moving to Reuters news, adjusted EBITDA was 42 million, with the margin of 19.9%. Global prints adjusted EBITDA was 46 million, with the margin of 37.1%.

Speaker #2: In aggregate, total company adjusted EBITDA was 672 million, a 10% increase versus Q3 2024, reflecting a 240 basis point margin increase to 37.7%. Turning to earnings per share, adjusted EPS was 85 cents for the quarter versus 80 cents in the prior year period.

Mike Eastwood: Turning to earnings per share, adjusted EPS was $0.85 for the quarter versus $0.80 in the prior year period. Currency had a +$0.01 impact on adjusted EPS in the quarter. Let me now turn to our free cash flow. For the first nine months of 2025, our free cash flow was approximately $1.4 billion, down 3% from the prior year. Changes in working capital, which are largely timing related, were the largest driver of the decrease. I will also provide a quick update on our capital allocation. In late October, we completed the $1 billion NCIB or share repurchase program we announced in mid-August, acquiring approximately 6 million of our shares. I will conclude with a discussion of our 2025 outlook and 2026 financial framework. As Steve outlined, we are reaffirming our 2025 outlook across all metrics.

Speaker #2: Currency had a one cent positive impact on adjusted EPS in the quarter. Let me now turn to our free cash flow. For the first nine months of 2025, our free cash flow was approximately 1.4 billion, down 3% from the prior year.

Speaker #2: Changes in working capital which are largely timing related were the largest driver of the decrease. I will also provide a quick update on our capital allocation.

Speaker #2: In late October, we completed the $1 billion NCIB or share repurchase program we announced in mid-August, acquiring approximately 6 million of our shares. I will conclude with a discussion of our 2025 outlook and 2026 financial framework.

Speaker #2: As Steve outlined, we are reaffirming our 2025 outlook across all metrics. Our total and organic revenue growth is trending closer to 3% and 7% respectively.

Mike Eastwood: Our total and organic revenue growth is trending closer to 3% and 7% respectively, rather than the higher ends of the ranges at 3.5% and 7.5% for three reasons unrelated to our AI innovation momentum, as Steve mentioned. I will provide a bit more color. First, our Global Print segment has seen a slower than expected ramp in commercial print volumes thus far in 2025, which we believe will impact total organic revenue growth by approximately 25 basis points for the year. As a reminder, 10% of our print revenue is from commercial, where we print books for third-party publishers. Second, our Government business, while holding up well overall, has faced a handful of recent downgrades and losses related to the federal efficiency programs that we believe will be an approximate 20 basis point drag to full-year organic revenue growth.

Speaker #2: Rather than the higher ends of the ranges at 3.5% and 7.5% for three reasons unrelated to our AI innovation momentum as Steve mentioned. I will provide a bit more color.

Speaker #2: First, our global print segment has seen a slower-than-expected ramp in commercial print volumes thus far in 2025, which we believe will impact total organic revenue growth by approximately 25 basis points for the year.

Speaker #2: As a reminder, 10% of our print revenue is from commercial, where we print books for third-party publishers. Second, our government business, while holding up well overall, has faced a handful of recent downgrades and losses related to the federal efficiency programs that we believe will be an approximate 20 basis point drag to full year organic revenue growth.

Mike Eastwood: Third, as I mentioned earlier, we have seen softer bookings trends at our Corporate segment, reflecting the impact of internal sales organizational changes aimed at supporting an increasingly integrated product proposition and driving improved future cross-selling. While these changes have contributed to a slower sales build in 2025 versus our initial expectations, we remain confident in our Corporate's product portfolio and the segment's growth potential. Note these organizational changes were only made at our Corporate segment and do not impact our Legal Professionals or Tax & Accounting segments, which have separate sales organizations. Despite these headwinds, we remain confident in achieving our 9% Big Three organic revenue growth outlook for the year with strong innovation-led momentum continuing in our Legal Professionals and Tax & Accounting Professionals businesses and from our international markets.

Speaker #2: Third, as I mentioned earlier, we have seen softer bookings trends at our corporate segment, reflecting the impact of internal sales organizational changes aimed at supporting an increasingly integrated product proposition and driving improved future cross-selling.

Speaker #2: While these changes have contributed to a slower sales build in 2025 versus our initial expectations, we remain confident in our corporate product portfolio and the segment's growth potential.

Speaker #2: Note, these organizational changes were only made at our corporate segment and do not impact our legal professionals or tax and accounting segments which have separate sales organizations.

Speaker #2: Despite these headwinds, we remain confident in achieving our 9% big three organic revenue growth outlook for the year, with strong innovation-led momentum continuing in our legal professionals and tax and accounting professionals businesses and from our international markets.

Speaker #2: Turning to the fourth quarter, we expect organic revenue growth of approximately 7%, including approximately 9% for the big three. Legal professionals is likely to again deliver a 9% organic revenue growth, assuming no incremental government headwinds materialize.

Mike Eastwood: Turning to Q4, we expect organic revenue growth of approximately 7%, including approximately 9% for the Big Three. Legal Professionals is likely to again deliver a 9% organic revenue growth, assuming no incremental government headwinds materialize. We expect a Q4 adjusted EBITDA margin to be approximately 39%, which includes select one-time investments we're making to transform and increasingly automate how we work. Looking beyond 2025, we are updating our 2026 financial framework to incorporate a more positive margin expansion and free cash flow outlook. We reiterate our outlook for 7.5% to 8% organic revenue growth, driven by approximately 9.5% growth at the Big Three segments.

Speaker #2: We expect the Q4 adjusted EBITDA margin to be approximately 39%, which includes select one-time investments we are making to transform and increasingly automate how we work.

Speaker #2: Looking beyond 2025, we are updating our 2026 financial framework to incorporate a more positive margin expansion and free cash flow outlook. We reiterate our outlook for 7.5% to 8% organic revenue growth, driven by approximately 9.5% growth at the big three segments.

Speaker #2: We are confident in delivering the revenue acceleration this implies driven by positive underlying momentum, the execution of our innovation roadmaps, and to a lesser extent, easier comparisons in several areas including at Reuters news and corporates.

Mike Eastwood: We are confident in delivering the revenue acceleration this implies, driven by positive underlying momentum, the execution of our innovation roadmaps, and to a lesser extent, easier comparisons in several areas, including at Reuters News and Corporate. We now expect to deliver approximately 100 basis points of adjusted EBITDA margin expansion, up from our prior view of 50 or more basis points. Healthy operating leverage combined with early benefits from using AI and technology to reengineer how we work provide confidence in this outlook. We are also raising our free cash flow outlook for 2026 to approximately $2.1 billion, which is the upper end of the prior range of $2 to 2.1 billion. Our expectations for capital intensity and tax rate remain unchanged.

Speaker #2: We now expect to deliver approximately $100 basis points of adjusted EBITDA margin expansion, up from our prior view of 50 or more basis points.

Speaker #2: Healthy operating leverage, combined with early benefits from using AI and technology, to re-engineer how we work, provide confidence in this outlook. We are also raising our free cash flow outlook for 2026 to approximately 2.1 billion.

Speaker #2: Which is the upper end of the prior range of 2 to 2.1 billion. Our expectations for capital intensity and tax rate remain unchanged. We are currently in our 2026 planning cycle and will provide more detailed 2026 guidance on our Q4 conference call in February.

Mike Eastwood: We are currently in our 2026 planning cycle and will provide more detailed 2026 guidance on our Q4 conference call in February. I will now turn it back to Gary for any questions.

Speaker #2: I will now turn it back to Gary for any questions. Thanks, Jenny. We're ready to start the Q&A.

Gary Bisbee: Thanks, Jenny. We're ready to start the Q&A.

Speaker #3: Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Operator: Thank you. Our first question is gonna come from Drew McReynolds from RBC. Please go ahead.

Speaker #3: Again, press star one to ask a question. And our first question is going to come from Drew McReynolds from RBC. Please go ahead.

Speaker #4: Yeah, thanks very much, good morning. And appreciate all the detail as usual. Two questions for me. I guess first on the government and corporate headwinds, I guess the question is ultimately what's kind of recurring into next year and for corporates, I believe the organic revenue growth target is 9 to 11%.

Drew McReynolds: Yeah, thanks very much. Good morning, and appreciate all the detail as usual. Two questions for me. I guess first on the government and corporate headwinds. I guess the question is ultimately what's kinda recurring into next year. For corporates, I believe the organic revenue growth target is 9% to 11%. Just wondering how comfortable you still are with that. Then secondly, Steve, great, kinda rundown, essentially of the moat, within Westlaw. I know it's early days on agentic AI. Can you comment on the customer kinda reaction to, you know, what agentic is doing from their perspective?

Speaker #4: Just wondering how comfortable you still are with that. And then secondly, Steve, great kind of rundown essentially of the moat within Westlaw. I know it's early days on Agenta KI.

Speaker #4: Can you comment on the customer kind of reaction to what Agenta is doing from their perspective and are they able in these first iterations to notice the difference between what you're offering and maybe some others that don't have the deep content access?

Drew McReynolds: You know, are they able in these first iterations to notice the difference, you know, between, you know, what you're offering and maybe, you know, some others that don't have the deep content access? Thank you.

Speaker #4: Thank you.

Speaker #2: Yeah, Drew, great questions. Let me start with corporates and then I'll ask Mike to supplement that. Then I'll go to government, then I'll go to Westlaw.

Steve Hasker: Yeah, Drew, great questions. Let me start with Corporates, and then I'll ask Mike to supplement that. Then I'll go to government, then I'll go to Westlaw. Please be patient, but we'll work our way through these questions. Look, the Corporates' sales softness is a bit frustrating because it's temporary and it's self-inflicted. So, 2 points. One, we remain even more confident in the end market opportunity. We've said for a while that the TAM is the biggest opportunity for us in Corporates relative to the other segments, and it's the area in which we have the lowest penetration of our legal tax and risk products. We think it's our biggest opportunity. And our product set is, we think, pristine and well received by customers.

Speaker #2: So please be patient, but we'll work our way through these, these questions. So look, the corporates sales softness is a bit frustrating because it's temporary and it's self-inflicted.

Speaker #2: So two points. One, we remain even more confident in the end market opportunity we've said for a while that the TAM is the biggest opportunity for us in corporates relative to the other segments.

Speaker #2: And it's the area in which we have the lowest penetration of our legal tax and risk products. So we think it's our biggest opportunity.

Speaker #2: And our product set is we think pristine and well received by customers. And so we started to see glimpses of this promise last year as you'll remember with 10% growth.

Steve Hasker: We started to see glimpses of this promise last year, as you'll remember, with 10% growth. Underpinning that, we've seen a really nice escalation in our NPS scores across the segments, but including in corporates. What we haven't seen is an uptick in cross-sell. At the start of this year, we expanded our global account footprint, and we asked our sales people to sell more than one product grouping. I think in retrospect, we got a little ahead of our sort of commercial systems and our infrastructure in doing that. We, we left some of our sales people, I think, a little disorganized relative to the opportunities and relative to where they were last year. Not up to our high standards.

Speaker #2: And underpinning that, we've seen a really nice escalation in our NPS scores. Across the segments, and including in corporates. But what we haven't seen is an uptick in cross-sell.

Speaker #2: So at the start of this year, we expanded our global account footprint and we asked our salespeople to sell more than one product grouping.

Speaker #2: And I think in retrospect, we got a little ahead of our sort of commercial systems and our infrastructure in doing that. So we've left some of our salespeople, I think a little disorganized relative to the opportunities and relative to where they were last year.

Speaker #2: So not up to our high standards. We're through this; we'll learn from it and we'll be better for it. We've got no more changes in the pipeline.

Steve Hasker: We're through this. We'll learn from it, and we'll be better for it. We've got no more changes in the pipeline and very confident in the 9% to 11% for next year. That's on the corporate side. Mike, what would you add to that before we go to government?

Speaker #2: And very confident in the 9 to 11% for next year. So that's on the corporate side. Mike, what would you add to that before we go to government?

Mike Eastwood: Terrific summary, Steve.

Speaker #4: Terrific summary, Steve.

Speaker #2: Okay, all right. So government, so I would say a couple of things. Our solutions in government, whether they be related to the legal side or the sort of law enforcement and risk side, are very well aligned with the administration's agenda.

Steve Hasker: Okay. All right. Government, I would say a couple of things. Our solutions in government, whether they be related to the legal side or the sorta law enforcement and risk side, are very well aligned with the administration's agenda around efficiency and law enforcement. We've seen good growth in state and local. On a federal level, I think the teams have done a very good job this year in asserting the must-have status of our solutions. I think up until the end of Q3, it was so far so good. We had a couple of downgrades and cancellations at the end of Q3, which I think has us watching this one vigilantly.

Speaker #2: Around efficiency, and law enforcement. And we've seen good growth in state and local. And on a federal level, I think the teams have done a very good job this year in asserting the must-have status of our solutions.

Speaker #2: And so I think up until the end of the third quarter, it was so far so good. We had a couple of downgrades and cancellations at the end of the third quarter.

Speaker #2: Which I think had us watching this one vigilantly. In the medium to long term, Drew, we are very confident in the value proposition, both the federal, state, and local.

Steve Hasker: In the medium to long term, Drew, we are very confident in the value proposition, both the federal, state, and local, because tools like Westlaw Advantage and CoCounsel, and our various tax solutions drive efficiencies for the government agencies. Of course, our law enforcement work through CLEAR and TRSS is very well aligned with the agenda of this administration, as I said. Medium to long term, we're confident about government, but it is a turbulent environment, and we just wanted to signal that. Unclear as to what it will look like for the next 12 months, but medium to longer term, we're very confident. Let me turn to Westlaw.

Speaker #2: Because tools like Westlaw Advantage and CoCounsel and our various tax solutions drive efficiencies for the government agencies. And of course, our law enforcement work through clear and TRSS is very well aligned with the agenda of this administration as I said.

Steve Hasker: So as you know, we put in the marketplace Westlaw Advantage, which is the first deep research in agentic research product. The reaction has been very strong from customers, as it has been to CoCounsel Legal and the integration of those products. I'll give you the example of one customer that I've spent some time with that I think is emblematic of the broader environment. He is the managing partner of a major firm in New York City. He spent his career as a litigator and is well-known as such. He was describing how his career has been spent in conference rooms, going back and forth with his colleagues and his partners, refining his arguments.

Steve Hasker: Since he's had access to Westlaw Advantage, he is doing much more of that back and forth with our tool than he is with his partners. In the early going, there is a change to his behavior, in terms of getting to the best, most refined arguments, anticipating the opponent's rebuttals and arguments, and anticipating the likely judge's reaction. We're very excited by the work that Mike Dahn and Omar and others have done in developing this product, and we're gonna keep investing behind it so that the verification and validation tools that I alluded to get better and better, and the product itself gets richer and deeper. Mike, would you add anything there?

Mike Eastwood: Nothing to add, Steve.

Steve Hasker: All right. Thanks, Drew. I hope that addresses the questions.

Vince Valentini: Yeah. That's great context. Thank you.

Operator: Our next question is gonna come from Vince Valentini from TD Cowen.

Vince Valentini: Can I just go back to the government for a second? I just want to make sure I am clear on what the driver is. Is the government shutdown having an impact, or these cancellations happened before that? Can you clarify, do you do work for ICE?

Mike Eastwood: Vince, in regards to the first question, the downgrades cancellations occurred prior to the shutdown. The shutdown has very minimal impact on our monthly, quarterly revenue based on what we know today. This occurred prior to the government shutdown. Steve, do you want to address the ICE question?

Steve Hasker: Yeah. I mean, we, Vince, I won't go into the specifics of the work we do with various government agencies because it's subject to confidentiality clauses. We do work with a number of departments on a range of law enforcement matters, and we do that consistent with our trust principles at all time.

Vince Valentini: Can I maybe rephrase it? Maybe I shouldn't have been so specific. Is there any chance that the government spending is being temporarily redirected, and that's impacting some of the contracts with you, and that will ebb and flow over time, but should come back?

Uh, then in regards to the, uh, first question, the downgrades cancellations occurred prior to, um, shut down. The shutdown has very minimal impact on our monthly, uh, quarterly Revenue based on what we know today. So, this occurred prior to the government shutdown. Steve, you want to address the ice question? Yeah. I mean, we um, uh, V I won't go into the specifics of the work we do um, with with various government agencies because uh it's subject to confidentiality causes. But we um we do work with the with uh with a number of departments um uh on on a on a range of law enforcement matters and we do that consistent with our trust principles at all times.

You know, maybe rephrase it, maybe I shouldn't have been so specific, is there any chance that the government's spending is being temporarily redirected? And that's impacting some of the contracts with you and, and that will have been flow over time but but should come back.

Steve Hasker: I mean, I mean, I definitely think this administration is putting much more emphasis on some things rather than others, and there is a sort of a process of adjustment to that, Vince. As I said, in response to Drew's question, you know, our tools achieve 2 things for government agencies. One is efficiency, and the other is they are essential tools for law enforcement. We're confident that our must-have status will be enhanced, be maintained and enhanced over time. There is a level of turbulence as some programs get cut and adjusted.

um, it's a little I mean I

I mean, I definitely think that this this Administration is putting much more emphasis on some things rather than others and there is a a sort of a process of adjustment to that Vince. But as I said um in response to Drew's question you know our our tools achieve 2 things for government agencies 1 is efficiency and the other and the other is they are essential tools for law enforcement so we're confident that that that our must-have status

Vince Valentini: Okay.

Mike Eastwood: Yeah, Vince, we'll continue to work with our federal customers on kind of three big areas: efficiency, national security, and fraud prevention. We are confident, our tools and offerings will be able to support them, you know, midterm, long-term.

Will be enhanced uh, be maintained and enhanced over time, but there is a level of turbulence as some programs get cut adjustment.

Vince Valentini: I'm gonna count that as 1, Gary. I apologize, but it was 1 A and 1 B. Just the second question.

Okay, yeah, that's we're continuing uh yeah we'll continue to work with our federal customers on kind of 3, big areas efficiency, National Security and and fraud prevention, we are confident, um, our tools and offerings will be able to support them at midterm long term.

Steve Hasker: Okay.

Vince Valentini: You got a nice call-out on the Amazon call last week on being one of their key customers for their AWS Transform product they call it. They say Thomson Reuters has been able to manipulate 1.5 million lines of code per month, 4 times faster than they could with previous systems. Is this part of an initial effort to automate more of your internal cost structure and processes, and is there more of this to come over the next couple of years, and what could that potentially mean for future margins?

Steve Hasker: Yeah. Thanks, thanks, Vince. We're determined to be on the forefront of this AI transformation in two ways. One, in terms of our product development, particularly in and around agentic AI and deep research. It's first example in the legal space with the launches back at ILTACON in August. Second example, Ready to Review and then in December, January, Ready to Advise in our tax and accounting, and we're excited about those. We were pleased to see the reference from Amazon. This relates to the internal application of AI and automation tools.

Uh, product. They call it that. They say Thompson, Reuters has been able to manipulate a million and a half lines of code per month, uh, 4 times faster than they could. With, with previous systems, I'm wondering. Is this part of an initial effort to automate more of your internal cost structure and and processes, and is there more of this to come over the next couple of years? And and what could that potentially mean for for future margins?

Steve Hasker: We are applying our own tools, CoCounsel Legal and CoCounsel for tax accounting and audit to Norie Campbell's general counsel team and also to Mike Eastwood's finance audit and accounting teams, and we're seeing really promising results from the application of our own tools. We're also, as Amazon alluded to, working with the best tools available to drive automation. I'll defer to Mike Eastwood as to the sort of financial implications of this, Vince. Rest assured we're gonna be at the forefront in terms of automating everything we do with a singular goal of being able to scale faster and more efficiently and deliver better products and services to our customers.

Yeah, thanks um thanks man. So so um we're determined to be on the Forefront of this AI transformation in 2 ways 1 in terms of our product development particularly in and around agentic, Ai and deep research. And it's, you know, example in the um, first example in the legal space, with the launches back at Tan in August 2nd example, ready to review and and then in December January, uh ready to advise in our tax and accounting and we're excited about those. Um, we were pleased to to see the reference, uh, from from Amazon, this relates to the internal application of AI and automation tools. So, um, we are applying our own tools, so co-consul legal and co-consul, uh, for tax accounting and audit to Nori Campbell's. Uh, general counsel team and also to Mike's uh, Finance audit um and uh and accounting teams and we're seeing really promising results from the

Application of our own tools. We're also as Amazon alluded to working with the best tools available to uh to drive automation. I'll I'll defer to Mike as to um the sort of financial implications of this Vince. But um, rest assured. We're going to be at the Forefront.

Mike Eastwood: Yeah, Vince, a few thoughts. As noted in my prepared remarks, we do anticipate some one-time investment in Q4 2025 to help us transform and increasingly automate how we work. To Steve's point, as we look into 2026, certainly we view the example that you questioned and Steve addressed as opportunities to help us expand our EBITDA margin. It's one of the reasons why we were able today to expand our EBITDA margin expectations for 2026 by 100 basis points. We're not discussing guidance today beyond 2026, but I think these developments certainly are encouraging for the long term.

Mike Eastwood: Vince, while we have the mic, it might be helpful for everyone if I just clarify, when we say for 2026, increasing margin by 100 basis points, that will be 100 basis points off the actual result for fiscal year 2025. Just wanted to clarify that point.

In terms of automating everything we do with a, with a singular goal of, uh, being able to scale faster, uh, and more efficiently, and deliver better, um, products and services to our to our customers. Yeah. Vanessa, a few thoughts, as noted in my prepared remarks, we do anticipate some 1-time investment in Q4 2025 to help us transform and increasingly automate, um, how we work uh, to Steve's Point as we look into 2026. Certainly we view the example that you question and Steve addressed as opportunities to help us expand. Our ibida margin, it's 1 of the 1, 1 of the reasons why we were able to today. Um, to expand our ibida margin expectations for 2026 by 100 basis points. We're not discussing guidance today uh Beyond 2026 but I think these developments certainly um are encouraging for the long term. Uh that's why we

Vince Valentini: Thanks. I was gonna make that a third question, but I was trying to be nice. Thanks. Thanks a lot, Mike.

Have the mic. It might be helpful for everyone if I just clarify. When we say for 2026 increasing margin by 100 basis points, that will be a 100 basis points off the actual result for physical year. Uh, 2025 just wanted to clarify that point

Mike Eastwood: Indeed.

Steve Hasker: You Vince.

Indeed, You Vince.

Operator: Our next question is gonna come from Jason Haas from Wells Fargo.

And our next question is going to come from Jason hos from Wells Fargo.

Jason Haas: Hey, good morning, and thanks for taking my questions. In the prepared remarks, you made a comment about seeing some incremental competition in AI assistance space. I was curious if you could just unpack that comment a little bit more. What was meant by that exactly? Thank you.

Steve Hasker: Yeah. Jason, thanks for the question. The point that I'm trying to make is that we are not seeing any additional competition in our core franchises. That's legal research and legal know-how and the tax calculation engines, whether that's UltraTax, GoSystem Tax, or ONESOURCE. Those core franchises have the same competitive dynamics today as they did 12 months ago or 3 years ago. Where we have seen the entrance of new players is in the AI assistance space. That is a greenfield sort of white space opportunity for us. And it was the reason that we went out and acquired Casetext and then added Materia and the fantastic team from Materia on the top of that.

Hey, good morning, and thanks for taking my questions and the prepared remarks that you made a comment about seeing some incremental competition in AI assistance space. So I was curious, if you could just unpack that comment a little bit more, what was meant by that? Exactly, thank you.

Yeah, I Jason. Thanks for the question. So I the the, the point that I'm trying to make is that we are not seeing

Any any additional competition?

In our core franchises. So that's legal research and legal know-how.

And uh, the tax calculation engines, whether that's Ultra tacks, ecosystem, tax or 1 Source. So those core franchises are in to have the same competitive Dynamics today. As they did 12 months ago or or 3 years ago, um, where we have seen the entrance of new players is in the AI assistance space. Now that is a green field sort of white space opportunity for us. Um,

Steve Hasker: That's a wide space opportunity for us around CoCounsel, and that's where we see the entry of new players. We're happy with where we sit in that marketplace. We've got some very aggressive product development plans. I think most importantly, customers are responding well to CoCounsel and its various offerings. I hope that clarifies.

And it was the reason that we went out and acquired case text and and then uh, added material and the Fantastic Team for material on the top of that. So that's a white space opportunity for us around co-consul and that's where we see the entry of of of new players. We're happy with

Uh, where we sit in that Marketplace. We've got some very aggressive product development plans and I think most importantly customers are responding well, uh, to co-consul, in its various, uh, it's it's very softing. So I hope that clarifies

Jason Haas: Thank you. That did. That's very helpful. Then I wanted to follow up on the Tax & Accounting business. It looks like the organic growth decels from 11% to 10%. I know those are rounded numbers. I was curious if you could comment on that and then just talk about your confidence in that accelerating to the 11% to 13% organic growth that you expect in 2026. Thanks.

Mike Eastwood: Jason, we do have some fluctuations quarter by quarter within the Tax & Accounting Professionals business. We remain confident in delivering the 11% for calendar year 2025. For 2026, as a reminder, our guidance is 11% to 13%. We work very closely with Elizabeth Beastrom and her team there. We have very strong confidence in delivering 11% to 13% for 2026. We referenced SafeSend in our prepared remarks, which was the acquisition January of this year, which is performing incredibly well. We expect that to continue into 2026. Steve mentioned Materia, their Additive, which is the recent acquisitions that we did. We remain quite confident, Jason, with Tax & Accounting Professionals.

Detailed, uh, from 11% to 10% and it was a rounded numbers, but I was curious if you could comment on that and then we just talked about your confidence um in that accelerating to the 11 to 13% organic growth that you expect in 2026. Thanks.

Steve Hasker: Yeah. I would just supplement that the end market is a very healthy one. We start our SYNERGY customer conferences down in Florida tomorrow. We're very much looking forward to that and getting excited about getting together with thousands of our customers in person. The tax and accounting and audit spaces remain a very robust end market with a critical need, and that's shortages of talent. Jason, as we develop Ready to Review and Ready to Advise and continue to refine those propositions, we think that is going to meet or even exceed the needs of our customers. That gives us confidence around the 11% to 13% going forward.

Jason, we do have some uh, fluctuations quarter by quarter within the tax and accounting, professional business. Uh we remain confident in delivering the 11% for talent a year, uh, 2025 and then for 2026 as a reminder, our um, guidance is 11 to 13, um, percent. Uh, we work very closely with Elizabeth bystrom and her team there. Uh, we have very strong confidence in delivering 11 to 13% for 2026. Uh we reference safe, send in our prepared remarks, which was the acquisition uh January of this year uh which is performing incredibly well. We expect that to continue into uh 2026 uh Steve mentioned Materia. Their additive, which is just a recent um Acquisitions that we did. So we remain quite confident. Uh Jason with tax and accounting professionals. Yeah, I would just Implement that the End Market is very healthy 1. We start our um,

Synergy customer conferences down in Florida tomorrow, we're very much looking forward to that and getting an excited about getting together with, with thousands of our customers, uh, in person, um, the tax and accounting and audit spaces, uh, remain a very robust, uh, in Market, with, with a critical need and that's, um, shortages of talent.

And so Jason as we develop ready to review and ready to advise and continue to refine those propositions, we think that that is going to meet or even exceed the needs of our customers and that gives us confidence around the 11 to 13% going forward.

Jason Haas: Great to hear. Thank you.

It's great to hear. Thank you.

Steve Hasker: Thanks, Jason.

Thanks Josh.

Operator: Our next question is going to come from Manav Patnaik from Barclays.

Manav Patnaik: Thank you. Good morning. Steve, I appreciate the slide with the data and the moats there, 'cause I think we've heard that as well. To your earlier answer on, you know, the competition is more on the workflow side, and that's why you acquired Casetext, et cetera. Can you help us with, you know, any sense of sizing of workflow for you guys and the growth rates there? You know, obviously a lot of these legal tech companies are raising a lot of money at high valuations, citing higher growth rates. Just trying to get a sense of, you know, your business there.

Steve Hasker: Yeah. Manav, I mean, it's, it's all a bit squishy at the moment, right? We sort of probably monitor the same source as you do in terms of how competitors are performing and what sort of growth rates they're seeing, what their ARR levels are at the moment. What I would tell you is that CoCounsel is at least on par or outpacing everybody else in terms of its size and its growth rate. You know, it is, it is a competitive landscape insofar as there are lots of promises being made by lots of different new entrants. Where we differentiate ourselves is in the integration of our content and our expertise. It's not only the content, Westlaw, Practical Law, and so forth, Checkpoint on the tax and accounting side.

Thank you. Good morning, Steve. Appreciate the slide with the data and, and, and the more stack is, I, I think we we've heard that as well, but Tio earlier answer on, you know, the competition is more on the workflow side and that's why you're quite case, text Etc, can you help us with, you know, any any sense of sizing of workflow for you guys and the growth rates there because, you know, obviously a lot of these legal test legal Tech, uh, companies are raising a lot of money at high valuations, citing higher, growth rates are just trying to get a sense of uh, you know, your your business there.

Yeah, I mean I've I mean it's it's all a bit squishy at the moment, right? We we sort of probably monitor the same sources you in terms of, in terms of how competitors are performing and what sort of growth rates they're seeing what their ARR levels are at the moment. And, and what I would tell you is that go council is, um, is at least on par or outpacing, uh, everybody else in terms of its size and its growth rate. So, um, you know, it is, it is a competitive landscape in. So far as there are lots of promises being made

Um, by lots of different uh new entrance where we uh differentiate ourselves is.

Steve Hasker: It's the expertise that 1,500 reference attorneys bring that are able to train the behaviors of an agent to produce a more accurate, more reliable outcome that is supported by data privacy, pristine data privacy and protection. Long way of saying, in the early going, we're at or outpacing the newer competitors. We're very confident, I hope not arrogant, but we're very confident about the sort of medium to longer term prospects, given the assets that we bring to this competition. Mike, what would you add?

Mike Eastwood: That's a good summary.

Steve Hasker: Okay. All right. Thanks, Manav. I hope that helps.

Manav Patnaik: Yeah, that was helpful. I guess just on, I just had one question on M&A. I think we all get a sense of all the tuck-in type of deals that you guys are doing, and probably that continues. In the past, Steve, you've talked about, you know, potentially larger ones. Just trying to get an update on, you know, where the market is at. Is it, you know, valuation, timing? Like, you know, just some more thoughts there.

Uh is in the in the integration of our content and our expertise. So it's not only the content, Westlaw practical law and so forth. Checkpoint on the tax and accounting side. It's the, it's the expertise that 1500 reference attorneys, bring that are able to train the behaviors of an agent to produce a more accurate more reliable outcome, that is supported by, um, uh, data private pristine data, privacy and protection. So long way of saying, um, in the early going, we're at or outpacing, uh, the, the newer competitors and they're very confident. I hope not arrogant, but we're very confident about the sort of, uh, uh, medium to longer term prospects, given the assets that we bring, uh, to this, uh, to this competition. Mike, what would you add? That's a good summary. Okay, all right. Thanks man. I hope that helps

Yeah, that was helpful and and I guess just on uh I just had 1 question on m&a. So I think I think we all get a sense of all the tuck in type of deals that you guys are doing and probably that continues. But in the past you've talked about, you know, potentially larger ones. So just trying to get an update on, you know, where where, where the market is at is it, you know, valuation timing like, you know uh just just a more thoughts there.

Steve Hasker: you know, we're very happy with the tuck-ins that we've done over the last couple of years. Each and every one of them, in different ways, has performed and been additive to the experience that we're providing in the big three. We'll, Manav, continue to look for those opportunities centered around our big three segments. If we were to do something larger, it would be in the areas where we really see great promise. Areas like risk, fraud, and compliance, building on CLEAR, the CLEAR data set. Areas like IDT, indirect tax and e-invoicing, where Pagero is showing really good growth and growth that looks to be pretty considerably above some of the market comparables.

Steve Hasker: Those are the areas where we'd be prepared to go a bit bigger. I think at the moment, the assets that are of interest are still fully valued in the sort of portfolios in which they sit. The question is, you know, do we see a bit of an adjustment and some price that would allow us to create value for our shareholders, not just the exiting shareholders? That's what we'll just continue to monitor and stay rigorous and disciplined around.

When I've continued to look for those opportunities, um, centered around how, how big 3 segments, um, if we were to do something larger, it would be in the areas where we really see, great promise. Um, so areas, like Risk, fraud and compliance building on clear, the clear data set. Um, and uh, areas like uh IDT, uh, indirect tax and E invoicing where, um, Pajero is uh, is showing really good growth and growth that that looks to be pretty considerably above some of the, some of the market comparables. Um, and so, those are the areas where we'd be prepared to go a bit bigger. I think, at the moment, the, um, the assets that are of Interest are still fully valued in the in the the sort of portfolios in which they sit. So the question is, you know, do do we do we see, um, uh, a bit of an adjustment

Mike Eastwood: Steve, in addition to indirect tax, risk, fraud, and compliance, I would just add international. Certainly we'll be very selective in that area as we've discussed in the past. Adrian Fanini, who leads our international business, we are looking at a few potential assets internationally.

Uh, and um, and some price, that would allow us to create value for our shareholders, not just the exiting shareholders, and that's what we'll just continue to Monitor and, uh, stay rigorous and disciplined around. Um, Steve in addition to indirect tax risk, providing compliance, I would just add um International. Uh certainly will be very selective and out there as we've discussed in the past. But um Adrian fenini who leads our international business. Um we are looking at a few uh potential assets internationally.

Manav Patnaik: Thank you.

Thank you.

Steve Hasker: Thanks, Manav.

Thanks.

Operator: Our next question is gonna come from George Tong from Goldman Sachs.

And our next question is going to come from George Tong from Goldman Sachs.

George Tong: Morning. You're continuing to target 9% to 11% organic growth in corporates next year. Can you elaborate on how achievable that growth is without any additional changes to the sales organization or the pace of cross-selling?

Morning, you're continuing to Target, 911 organic growth in corporates next year. Can you elaborate on how achievable that growth is without any additional changes to the sales organization or the pace of cross-selling?

Mike Eastwood: Sure, George. Happy to start there. I think we've discussed with you and others in the past that Q4 is our largest quota period for a given year. That applies to Q4 2025 for corporates. October net sales and bookings were quite encouraging, George. If we look at our sales pipeline coverage ratio for both the remainder of Q4 and also Q1 2026, once again, encouraging. Given that those changes have now been solidified and the focus is on execution, the way I think about it, George, a very simple formula, if you have great products and you have strong customer demand and you have a growing TAM, the likelihood of success is pretty damn good if you execute and have the right talent.

Mike Eastwood: I think you can check the boxes on each of those variables in the formula that I just mentioned there. That gives me quite confidence. If you look very tangibly, the October net sales and bookings, secondly, again, the November-December pipeline coverage, then also the Q1 pipeline coverage, gives us confidence in achieving that 9% to 11% as we go into 2026, George.

Um, sure, George happy to start there. I think, uh, we've discussed with you and others in the past that Q4 is our largest quota, uh, period for, uh, a given year that applies to Q4 2025 for corporate. Um, October, um, net sales and bookings were quite encouraging George. And if we look at our sales pipeline coverage ratio for both the remainder of Q4 and also q1 2026. Once again, encouraging given that those changes have now been solidified and the focus is on execution. The way I I think about it. Um George, a very simpler, simple formula. If you have great products and you have strong customer demand and you have a growing Tam, the likelihood of success is pretty damn good. If you execute and have the right talent, I think you can check the boxes on each of those

George Tong: Got it. Very helpful. Can you.

Uh, variables in the formula that I just mentioned there. So that gives me quite a bit of confidence. But if you look very tangibly, the October net sales and bookings, secondly, again the November-December pipeline coverage, and then also the Q1 pipeline coverage, um, gives us confidence in achieving that 9% to 11% as we go into 2026, Georges.

Got it very helpful.

Mike Eastwood: Yeah

George Tong: talk a bit about your pricing strategy, in light of the increasing value that you're providing with your AI products? Do you have plans for accelerated pricing increases, for example, in your multi-year contracts? How overall do you expect pricing to evolve going forward?

Steve Hasker: Yeah. George, look, it's a great question, and it's one we are very focused on, and we have some fairly vigorous debates amongst ourselves, particularly between the product folks and the commercial excellence folks and our salespeople. Our principle is to price to value. The extent to which we're driving significant efficiencies in the practice of law or in the practice of audit for tax and accounting, we wanna make sure that, you know, products and services are aligned to that. We, as just a reminder, we do not price on a per seat basis. To the extent to which, you know, work is able to be done by fewer people, we will be a beneficiary of that, not a victim of that, if you like.

And then, can you, uh, talk a bit about your pricing strategy in light of the increasing value that you're providing with your AI products? Do you have plans for accelerated pricing increases, for example, in your multi-year contracts? And how, overall, do you expect pricing to evolve going forward?

Yeah, George. It's look it's a great question and it's 1 that we are very focused on and we have some fairly um uh vigorous debates amongst uh amongst ourselves, particularly between the product folks and the commercial. Excellent folks and our sales people um our our principle is to price to Value. So the extent to which we're driving significant efficiencies in the practice of law or in the practice of order for tax and accounting. We want to make sure that um, the, the the, you know, our products and services are aligned to that. Um, we it's just a reminder, we do not price on a per seat basis. So, to the extent, to which, um, you know, work is able to be done by fewer people, so we, we will be a beneficiary of that. Not a

Steve Hasker: It's a work in progress. I think in the early going, our pricing has proven to be competitive and is driving growth for us. It is profitable growth. I would say so far so good, but this is one of those ones where we're just constantly looking for signals from the market and refining our approaches.

Mike Eastwood: Yeah, George, I would just supplement. As we go into 2026, I'm somewhat optimistic that we could have some additional opportunity over the spectrum.

Uh, not not not a uh, a victim of that if you like and so it's a work in progress. I think in the early going, our pricing has proven to be uh competitive and and is driving growth for for us. It is profitable growth. So I would say so far so good. But this is 1 of those ones where we're just constantly looking for signals from the market and refining our approaches

Yeah, George. I I would just supplement as we go into 26, I'm not optimistic. That we have could have some additional, um, opportunity of the spectrum.

George Tong: Very helpful. Thank you.

Very helpful. Thank you.

Steve Hasker: Thanks, George.

Thanks George.

Operator: Our next question is gonna come from Aravinda Galappathige from Canaccord Genuity.

Next question is going to come from Arab and the Gallup path age from canaccord genuity.

Aravinda Galappathige: Good morning. Thanks for taking my question. I wanted to discuss sort of the, you know, where we are in terms of the rate of innovation and product intensity. Obviously, we've seen a lot of activity from Thomson and even the industry in general. Is it fair to sort of characterize the present sort of, position as sort of, you know, getting close to peak in terms of new product launches and so forth, and sort of the next phase will be more about penetration? I mean, I am trying to sort of connect that with sort of the underlying tone of margin expansion you are talking about. I know that you've been, I think, last disclosed number was about $200 million in incremental investments to sort of drive these growth opportunities.

Um,

Aravinda Galappathige: I'm trying to sort of assess whether we may be at sort of that, you know, the sort of the crest of that. Any thoughts that you care to share on that front?

You know where we are in terms of the, the the rate of innovation and product intensity. Obviously we've seen a lot of activity from from Thompson and even the industry in general. Um, is it fed instead of characterized the present set of, uh, position is, you know, getting close to Peak in terms of new product launches and so forth. And sort of the next phase will be more about penetration. I mean, I'm trying to set of connect that with the with sort of the underlying tone of margin expansion. You're talking about. I know that you've been. I think the last disclosed number is about 200 million dollars in uh, incremental Investments, to sort of Drive these growth opportunities. I'm trying to sort of assess, whether we may be at sort of that, you know, the sort of the crest of that. Um, any any thoughts that you care to share on that front?

Steve Hasker: Yeah, Aravinda. I'll start, and Mike may wanna add. I, you know, obviously stay very close to David Wong and Joel Herron's product innovation plans and also, you know, our TR Ventures fund who are looking across the landscape at different startups and also the sort of e-everything that our partners are doing. I would say our You're gonna see our rate of innovation accelerate and improve over the next few quarters and well into 2026 and 2027 based on, you know, that which we've previously invested in and that which is coming through the pipeline.

Um yeah if you don't I'll I'll start and Mike may want to add. I you know obviously stay close. Very close to David Wong and Joel Heron's um product Innovation plans.

And um and also, you know, our TR Ventures fund who are looking across the landscape at different.

Steve Hasker: What I think though will happen in the broader landscape, and it's hard to tell, so this is, you know, my looking at a crystal ball, is that the rate of innovation for the highly specialized tools like ours that are trained on reservoirs of content and thousands of expertise will continue to improve. I think where things might flatten out is in the sort of general purpose horizontal tools. Certainly our customers are starting to understand the difference. You know, that I think will be one change in the sort of landscape. Again, you know, I think anyone who will tell you they know exactly what's gonna happen in this environment is probably slightly deluded.

Uh, different startups and also the sort of everything that our partners are doing. I, I would say our you're going to see our rate of innovation, um, accelerate and improve, uh, over the next few quarters and well into 26, and 27 based on, you know, that that which we've previously invested in and that which is coming through the pipeline. Um, what I think though will will happen in the broader landscape and it's hard to tell. So this is, this is, you know, my looking at a crystal ball is that um the rate of innovation for the highly specialized tools, like ours that are trained on reservoirs of content and thousands of expertise will continue to improve. I think where things might flatten out is in the sort of general purpose, horizontal tools.

Um, and certainly our customers are starting to understand the difference and so, um, you know, that that I think will be 1 change in the sort of landscape. But, but again, um, you know, I think anyone who, who will tell you, they know exactly what's going to happen in this environment is probably

Mike Eastwood: Yeah, Aravinda, a couple of points there. Please, please do not correlate our confidence in expanding our margin in 2026 with us investing less. We will invest over $200 million this year, calendar year 2025 in AI, GenAI. That will continue into 2026. We're able to expand our margins in 2026. One, you're aware of our operating leverage, but we have opportunity, back to the prior questions, to automate how we work. I think it was Vince who asked the question illustratively about the AWS reference. We will continue to invest. To Steve's point, the rate of innovation and intensity will continue. That $200 million plus will continue into 2026.

Uh, slightly diluted. Yeah. Are vendor a couple of points there, please. Please do not correlate. Um, our um, confidence and expanding our margin in 2026 with us. Investing less, we will invest over 200 million this year, calendar year. 25 in AI, gen AI, that will continue.

Menu into, um, 2026. We're able to expand our margins in 2026 Juan, you're aware of our operating leverage, but we have opportunity back to the prior questions to automate how we work. I think it was Vince, who asked the question, um, illustratively about the AWS, um, reference. So, we will continue to invest and to Steve's point the rate of innovation and intensity will continue, uh, that 200 million plus will continue into 2020, um, 6.

Aravinda Galappathige: Thanks very much. Maybe my follow-up for Mike. I mean, on the last call, Mike, I think you talked about sort of your framework for capital allocation and how that potentially leaves $40 to 500 million for buybacks. You know, obviously, given the movement in the stock, you've sort of shown the flexibility to step up beyond that. You know, should we sort of take that forward, you know, even in the, you know, going into 2026 that, you know, notwithstanding that framework, you have the ability and the willingness to sort of step up in terms of your repurchase program?

Thanks very much and and maybe my uh, follow-up. So, so Mike, I mean, on the last call, Mike, I think you talked about sort of your framework, uh, for Capital allocation and how that potentially leaves 4 to 500 million dollars for um, BuyBacks. You know, obviously given the movement in the stock, you know, you've you've sort of shown the flexibility to to step step up beyond that, you know, is is, should we sort of take that forward, um, you know, even in the, you know, going into 26 it. Uh, you know, notwithstanding that framework. You know, you, you have the, the, the, the ability and the willingness to sort of Step Up in terms of your repurchase, uh, program,

Mike Eastwood: Yeah. I think, Aravinda, I would maintain the framework when you think about mid-to-long-term, but I think the key there is when we see the opportunity to step up, we will, which I think that was very tangible with our decision in mid-August to announce the $1 billion NCIB share buyback, which we completed at the end of October. We constantly discuss capital strategy, capital allocation with our board. In our next board meeting, we'll have the next discussion in regards to capital strategy, capital allocation. Could we step up? Again, possibly. No decision has been made there. I would maintain the framework of the $400 to 500 million, but also I would kind of supplement that framework with our ability and willingness to step up when we deem appropriate.

Mike Eastwood: On the topic of capital allocation, I would just remind you, Aravinda and others, that as we go into the January board meeting, we will propose another, 10% increase in our common dividend, which would be the fifth year, consecutively on that.

Into the January board meeting, we will propose another 10% increase in our common dividend, which would be the fifth year um, consecutively on that.

Aravinda Galappathige: Thank you.

Steve Hasker: Thanks, Aravinda.

Thank you.

Thanks very much.

Operator: Our next question is gonna come from Meir Yagi from Sumitomo Bank. Please go ahead.

And our next question is going to come from mayor yagi from Scotia Bank? Please go ahead.

Meir Yagi: Great. Thank you for taking my question. Steve, you have, you know, very well articulated why Westlaw has a strong standing to benefit from AI, but can you tackle maybe how you see AI advances affecting your tax business? Do you believe that business has similar defensive capabilities to continue to gain market share, as well as you're doing in legal? The second question is the revenue acceleration you're expecting in 2026 versus 2025. I know it's maybe too early, but can you just let us know which segment of the big three you're expecting to see most of the acceleration coming from? Thank you.

Great. Thank you for taking my question. Uh, Steve you have, uh, you know, very well articulated by Westlaw, has a strong standing to benefit from AI, but can you talk Me Maybe how you see AI advances, uh, affecting your tax business? Do you believe that business has similar defensive capabilities, uh, to continue to gain market, share, um, as well as you're doing in legal. And the second question is the the revenue acceleration You're Expecting in 2026 versus 2025? I know it's maybe too early but can you uh maybe just let us know which segment of the Big 3. Uh you're expecting to see most of the acceleration coming from. Thank you.

Steve Hasker: Thanks, Meir. I'll defer the second question to Mike. On the first one, yeah, we're sort of equally excited about the application of AI, agentic AI deep research to our tax business as we are legal for a couple of reasons. In terms of the end market, the tax and accounting profession does not need to undertake the same sort of magnitude of change management. For example, many tax and accounting and audit engagements are not priced on a per hour basis and not on a billable hour. They are value-based, there's not that same business model hurdle to overcome that the legal profession is currently working its way through, firstly. Secondly, there is, as I said before, a pretty acute talent shortage that technology needs to address.

Uh, thanks, Mayor. I'll take further questions to Mike on the first one. Um, yeah, we're sort of equally excited about the application of AI, agentic AI, and deep research to our tax business as we are to legal for a couple of...

Steve Hasker: We actually think our tax and accounting customers are even more receptive to AI and technology in terms of improving their outputs and work and enabling, for example, tax professionals to automate the tax return process and move to more value-added advisory services for their clients, and the technology enables that. That's the first part. As we think about applying AI, particularly agentic AI, to our product set, you know, the sort of narrative up until now is that generative AI doesn't do math.

Reasons. So in terms of the End Market, um, the tax and accounting, profession does not need to undertake the same sort of, um, uh, magnitude of change management. So for, for example, many tax and accounting and audit engagements are not priced on a per hour basis and not on a billable hour, they are value based. And so there's not that same business model hurdle to overcome the legal profession is currently working its way through firstly. Secondly, there is, as I said before a pretty acute Talent shortage that technology needs to address. So we actually think our tax and accounting customers, um, are even more receptive to Ai and technology in terms of improving, uh, their outputs and work. And enabling, for example, tax professionals to automate the tax return process and move to more value. Added advisory services from their for their clients.

Steve Hasker: Well, our tax calculation engines do the math, and what the agents enable us to do is automate all of the shoulder activities, so the document ingestion, all of the preparation, and then they work with the tax calculation engine, whether it's UltraTax, GoSystem Tax, or ONESOURCE, and then they're able to do the follow-up, all of the calculation checks, and the e-filing. That's really what Ready to Advise is. It's, it's the, it's the addition of agents to our preexisting tax calculation engine. Ready to Advise is the use of agents to find all of the opportunities for a tax and accounting professional to provide advisory services on more efficient tax strategies for their clients.

And the technology enables that. So that's the first part as we think about applying uh AI, particularly agentic AI to our product set. Um, you know, the sort of narrative up until now is that generative AI doesn't do math.

Steve Hasker: What we think that the AI will enable us to expand the role that we play in the success of the tax and accounting profession, enable them to get into more advisory services and achieve growth on that basis, while at the same time overcoming this talent shortage. Mike, the question on revenue acceleration.

Pull out tax calculation engines, do the math. And what the agents enable us to do is automate all of the shoulder activities. So the document ingestion, all of the the preparation, and then they work with the tax calculation engine, whether it's Ultra tacks, ecosystem, tax or 1 Source, and then they're able to do the follow-up, all of the calculation, checks and the e-filing. And so that's really what ready to uh, advise is. It's, it's the it's the addition of agents to our pre-existing tax calculation engine and then ready to advise is the use of agents to um to find all of the opportunities or a tax and accounting, professional to provide advisory services on more efficient Tax Strategies for their clients. And so um what we think that the AI will enable us to expand the role that we play in the success of of the tax.

Accounting, profession enable them to get into more advisory services and Achieve growth on that basis. While at the same time, overcoming this Talent shortage.

Mike Eastwood: Sure, Meyer, in regards to 2026, just to remind everyone, we do have ranges for 2026 for each of our big three segments. Legal for 2026 is 8% to 9%. Corporates is 9% to 11%. Tax and Accounting, 11% to 13%. Part of your question, Meyer, is in regards to which segment would have the largest absolute growth. Tax and Accounting Professional, I believe, will have the largest absolute increase in organic growth rate for 2026 versus 2025. Just to reiterate those reasons, number one, the recent acquisitions of SafeSend and Additive Materia will continue to scale for us. Next, Steve's mentioned Ready to Advise and Ready to Review, which are new launches for us. We consistently talk about our Latin America business, Domínio, which we remain quite optimistic about.

Mike, the question of revenue. All right, sure. Mary, in regards to 2026, just to remind everyone, we do have ranges for 2026 for each of our Victory segments. Legal for 2026 is 8 to 9%.

Mike Eastwood: Over the last 11 years, it's grown 20% CAGR over that time horizon. We expect that to continue. Lastly, kinda underpinning UltraTax continues to perform well.

Think about over the last 11 years, it's grown uh 20% kager. Um over that time Horizon, we expect that to continue and then lastly kind of underpinning, the ultra tacks continues to perform uh well

Meir Yagi: Thank you.

Thank you.

Operator: Our next question is gonna come from Kevin McVeigh from UBS.

And our next question is going to come from Kevin McVay.

Yes.

Kevin McVeigh: Great. Thanks. Hey, I think in the slide deck you talked about AI-driven innovation, the momentum continuing. On the legal side, I guess just the timing, like the agentic launches you did over the summer of 2025, are they already starting to kinda permeate the base, or is that something that continues to scale over H2 2025 and into 2026? I guess, you know, just trying to understand the sequencing of, you know, maybe things that have already been launched as opposed to, you know, things that were launched over the summer.

Great thanks. Hey you think in the slide deck you talked about AI driven Innovation the momentum continuing on the legal side. I guess just the timing like the agentic launches you did, over the summer of 25 are they already starting to to kind of permeate the base? Or is that something that continues to to scale over the back half of 25 and into 26? I guess it was just trying to understand that the sequencing of, you know, maybe things that have already been launched as opposed to, um, you know, things that were launched over the summer.

Mike Eastwood: Yeah, Kevin, really good question. Great timing there. For everyone's benefit, we launched those in mid-late August, as part of ILTACON. We're already seeing the benefit, and we'll just see more penetration, Kevin, in Q4 and out throughout 2026. I would call out each of our general managers within Legal Professionals that are really driving hard, which is indicative of the 9%. Erin Rodemeier, who is driving the small law firm. Liz Zimick in mid-law. Steve Asey with our largest firms. And then we have John Shatwell in Europe. Which I think each of these segments, we're seeing progression already with the launches and with the momentum we have with the launches of CoCounsel Legal, Westlaw Advantage. That will continue.

Yeah, uh, Kevin, uh, really good question. Great timing. There for everyone's benefit, we launched those, uh, in mid late August. Um, as part of Hilton, we're already seeing the benefit, uh, and we'll just see more penetration Kevin in Q4 and out throughout 2020 uh6. I would call out each of our general managers within legal professionals that are are really, uh, driving hard, which is indicative of the 9% um Aaron Rod of who, um is driving the small Law Firm lives, uh, zimic and mid law. Steve

Mike Eastwood: October, we had another great month of sales with these new product launches. We expect that to continue for the remainder of Q4 and then throughout 2026. We're already reaping the benefits, Kevin.

Kevin McVeigh: It's super helpful. Then just the comments on the tax and accounting, you know, is there any way to think about the experiences of maybe the Big Four as opposed to, you know, maybe the top 10 and maybe mid-market as you think about the go-to-market motion with the enhanced, you know, product from a GenAI perspective?

They see with our largest, um, firms. And then we have John shatwell in Europe. Uh, which I think each of these segments, we're seeing progression already um, with the launches. And with the momentum we have with the launches of co-consul legal West law Advantage. Uh that will continue October, we had another great month of sales with these new product. Launches, we expect that to continue for the remainder of Q4 and then throughout 2026. So we're already reaping the benefits. Kevin

it's too powerful and then just the comments on the, on the tax and accounting, you know, is there any way to think about the experiences of maybe the Big 4 as opposed to, you know, maybe that that the top 10 and maybe mid-market as you think about the go to market motion with the enhanced, you know, product from a g perspective

Mike Eastwood: Yeah, Kevin, just to remind everyone, the big four and the next three largest firms, we call it the G7, they are included within our Corporate segment, not Tax & Accounting Professionals. Steve, you may want to comment in regards to the different motion as you think about those G7 versus the remainder of Elizabeth's Tax & Accounting.

Steve Hasker: Yeah. I mean, what I would say is, there's increasing similarity across the G7, as we call them, relative to the big four. In other words, you know, firms five, six, and seven are very sophisticated, increasingly global and investing heavily in technology. We think we'll be a beneficiary to that going forward.

Yeah. Kevin just to remind um everyone the Big 4 and the next 3 largest firms, we call it the global 7 they are included within our corporate segment not tax and accounting professionals. Um but see if you may want to comment in regards to the different motion if you think about those G7 versus uh the remainder of Elizabeth's tax and accounting. Yeah. I mean what I would say is um this increasing similarity across uh this the G, the G7 as we call them uh relative to the the Big 4. In other words, you know firms. Um, 5 6 and 7 are very sophisticated increasing.

Steve Hasker: I think, though, the mix does change a little bit as you get to the sort of top of the ladder there, in that they're more likely to take an API from us and build on the top of it versus take the sort of full end-to-end product. The kinds of work we do in the go to market motion is slightly different, Kevin, but the opportunity, I think, is equally weighted across that customer base. You know, if you go all the way into the smaller firms, which Brian Peccarelli serves from a go-to-market perspective, and he and his teams, you know, they're ready for turnkey solutions that work, that are reliable, and that build upon their existing tax calculation engine.

Steve Hasker: And so there's a lot of receptivity at that end as well.

Kevin McVeigh: Terrific. Thank you.

Recently, Global and investing heavily in technology. And uh, and and we think will be a beneficiary of that going forward. I think that the mix does change a little bit as you get to the, the sort of top of the the ladder there in that, they're more likely to take, um, an API from us and build on the top of it versus take the sort of full end-to-end product. So that the kinds of work we do in the go to the go, to go to a market, uh, motion is slightly different. Uh, Kevin but the opportunity I think is is a equally weighted across, uh, across that that that customer base, um, you know, and if you go all the way, uh, into the the smaller firms, which Brian Wilson, uh, uh, uh serves from a go to market perspective and he and his teams, you know, they're they're ready for Fraternity solutions, that work that are reliable and that build upon their existing tax calculation engine. Um, and so uh, and so there's a lot of receptivity uh at that end as well.

All right. Thank you.

Operator: Our next question is gonna come from Andrew Steinerman from J.P. Morgan.

And our next question.

Is going to come from Andrew Steiner from JP Morgan.

Justin Lemley: Hey, guys. This is Justin Lemley on for Andrew. Most of my questions have been answered. Maybe I'll circle back on the government headwinds just to clarify. Am I correct in saying-

Mike Eastwood: Yeah

Justin Lemley: your updated guidance only contemplates cancellations that you saw at the end of Q3? I guess maybe just to give us a little bit more comfort on the go forward, could you maybe talk a little bit more about if those cancellations were driven by reductions in spending at certain departments you serve, or was it layoffs? Just any color there would be great.

Hey, guys. This is Justin Lemley on for Andrew. Uh, most of my questions have been answered, so maybe I'll I'll Circle back on the government. Headwinds just to clarify. Uh, am I correct in saying your updated guidance only contemplates cancellations that you saw at the end of the third quarter uh and I guess maybe just to give us a little bit more Comfort on the go. Forward, could you maybe talk a little bit more about if those cancellations?

Since we're driven by reductions in spending at certain departments, you serve or was it layoffs? Um just any color. That would be great.

Mike Eastwood: Certainly in regards to our forecast, and we always contemplate what has occurred, plus we always look at the upcoming pipeline. We have contemplated within our forecast any other activity that might transpire in Q4. We believe that has been reflected already. In regards to the reasons for it, there's been a reduction in the actual spending levels in these agencies, which was the main driver.

Uh, certainly in regards to our forecasts, we always contemplate what has occurred. Um, plus we always look at the upcoming pipeline, so we have contemplated, uh, within our forecast.

Q4. So we believe that has been um, reflected already.

And then in regards to the reasons for it, there's been a reduction, um, in the actual spending levels um, in these uh agencies uh, which was the main driver.

Justin Lemley: Great. Thank you very much.

Great, thank you very much.

Mike Eastwood: Indeed.

Operator: Our next question is gonna come from Stephanie Price from CIBC.

and our next question is going to come from Stephanie Price from CIBC

Stephanie Price: Hi, good morning. Just a few quick clarifications for me. Mike, I think you've kind of alluded to it for a few times in the call, but can you talk about the drivers that are causing the increase to the fiscal 2026 EBITDA guide to 100 basis points versus 50 basis points prior? I think you mentioned some efficiencies, but anything else you wanted to add on there?

Hi. Good morning. Just a few quick clarifications for me. Um Mike. I think you've you've kind of alluded to it for a few times in the call. But can you talk about the drivers that are causing the increase to the fiscal? 26, uh, EBA guide to 100 basis points versus 50 basis points prior. I think you mentioned some efficiencies, but anything else you wanted to add on that?

Mike Eastwood: I would say 2, Stephanie, 2 primary drivers. One is the operating leverage. At roughly 7%, 7.5%, we generate about 110 basis points of natural operating leverage, which is sustained in our business. The second key factor is our focus on transforming and automate how we work. If you take those 2, that would be more than 100 basis points, but leads to a third key factor, which relates to a question earlier, is we're continuing to make investments. We'll continue to make investments wherever we see the returns are sufficient there. The 2 key drivers of margin expansion, operating leverage, and then our internal initiative to transform and automate how we work.

Uh, I would say to Stephanie to primary drivers 1 is the operating leverage at roughly 7, 7, 7 and a half percent. We generate about 110 basis points of natural operating leverage, uh, which is sustained in our business. The second key factor is our focus on, uh, transforming and automate, how we work. So, if you take those 2, that would be more than 100 basis points, but leads to a third, a third key factor. Uh, which it relates to a question earlier is we're continuing to make, um, Investments and we'll continue to make investments wherever we see, um, the returns. Um,

Are sufficient there. But the 2 key drivers of margin expansion, operating, leverage, and then our internal initiative to transform and automate how we work.

Stephanie Price: Perfect. Thank you. For the Legal Segment, organic growth accelerating quarter over quarter to 9%. I think in the prior question you'd mentioned some new product launches. Just curious if there was anything else you wanted to call out there in terms of shifts in demand or adoption rates within Legal.

Perfect, thank you. And then for the legal segment we're going to growth accelerating quarter over quarter to 9%. Um I think in the prior question you've mentioned some new product launches just curious, if there was anything else you wanted to call out there in terms of shifts in demand or adoption rates within legal,

Mike Eastwood: I think the new product launches certainly, help us significantly there. Retention rates continue to be very good within that business. Pricing is relatively stable there. You know, certainly Stephanie, we always add talent as part of our operating mechanism. I think those are the key drivers for us. Steve, you may wanna add-

Steve Hasker: Yeah, Stephanie, the only thing I'd add is, you know, way back at our Investor Day a couple of years ago, you know, where we started to talk about this AI journey, we did at that time speculate that the TAM in legal would grow and it would grow on a sustained basis. I think we're starting to see that. What we're starting to see is law firms wrestle with the idea of spending more on technology and potentially less on real estate and, you know, still trying to sort of work their way through the headcount implications.

I think the the new product launches certainly, um, help us, uh, significantly their retention rate. Uh, continue to be, uh, very good within that business pricing, is relatively, um, stable. There, you know, certainly Stephanie. We always add Talent as part of our operating, uh, mechanism. So I think those are the, um, key drivers uh, for us. Um, Steve you may want to. Yeah, Stephanie, the only thing I'd add is, you know what? Way back at our invest today, A couple of years ago,

Steve Hasker: I think it's too early to sort of call that one way or another. We're starting to see that TAM expand and we think that that's going to be a multi-year phenomenon and one that we plan to have the products and the propositions to fully benefit from.

Um, you know, where we started to talk about this, AI Journey, we we did at that time speculate that um, The Tam in legal would grow, uh, and it would grow on a sustained basis. I think we're starting to see that. What what we're starting to see is law firms. Um, wrestle with the idea of spending more on technology and, uh, potentially Less on real estate. Uh, and uh, and, you know, still trying to sort of work their way through the head count implications. I think it's too early.

Operator: Great. Thank you very much. Our next question is going to come from Doug Arthur from Research.

Sort of call that 1 way or another. Um, but we're starting to see that Tam expand and uh, and we think that that's going to be a a multi-year, uh, phenomenon and 1 that we um, that we plan to have the the, the products and the propositions to fully benefit from.

Great, thank you very much.

Doug Arthur: Yeah, thanks. I think most things have been covered. Steve, you mentioned the acute talent shortage issues in some of the big accounting firms. Is there a similar narrative in legal or not so much?

And our next question is going to come from Doug. Arthur from For Research.

Yeah. Thanks. I I think most things have been covered. Uh Steve you mentioned uh the acute Talent shortage issues and some of the big accounting firms is that.

A is there a similar narrative and legal, or not so much?

Steve Hasker: Not so much, Doug. It's, you know, as someone who started my career at PW as it was called then, Mike did the same, kids are just not as enamored of the profession as they were in our day. Whether it's the big accounting firms or the midsize or even the smaller shops, they're just having a really hard time getting talent into the door at the entry level and then, you know, going through the apprenticeship that's required. It's an acute problem, and it's been growing for a number of years. If you look at the number of people who are getting qualified as CPAs, it has fallen dramatically in recent years.

Steve Hasker: All the while the number of audits goes up, the complexity of audits goes up, the number of tax returns goes up, the complexity of those returns go up, and the advice that small, medium, and large businesses need from their tax and accounting professionals intensifies. You know, the demand characteristics are really healthy. It's the supply of talent that's the problem, and that's where the technology has a really, I think, exciting and important role to play, and that's why we're investing heavily to meet or exceed those demands.

Not so much Doug. It's um, you know, uh, as someone who started, started my career at PW as it was called, then Mike did the same. Um, kids are just not as enamored of the profession as they were in our day. Um, and, uh, and so whether it's the big accounting firms or the, the midsize, or even the, the, the smaller, uh, shops, they're just having a really hard time getting talent in into to, to, to, uh, in the door at the entry level. And then, um, you know, going through the apprenticeship, uh, that's required and, uh, it's an acute problem and it's been it's been growing for a number of years. If you, if you look at the number of people who are getting qualified as CPAs, it has fallen dramatically uh, in recent years. And

All the while the number of audits goes up the complexity of audits goes up the number of tax returns goes up the complexity of those returns go up.

Doug Arthur: Thank you.

Multiply. And that's why we're investing heavily to to meet or exceed those demands.

Thank you.

Steve Hasker: My pleasure, Doug.

My pleasure, Doug.

Operator: Our next question is gonna come from Toni Kaplan from Morgan Stanley. Please go ahead.

Toni Kaplan: Thanks so much. Your large competitor in legal has talked about one of the benefits of its partnership with Harvey as increasing distribution. I was hoping you could talk about, Steve, how you're thinking about partnerships right now. Doesn't seem like you need to partner with others, but is there an advantage to doing that because of increasing distribution, or is there a disadvantage of going that route? Thanks.

And our next question is going to come from Tony Kaplan from Morgan Stanley? Please go ahead.

Thanks so much. You're a large, competitor and legal has talked about 1 of the benefits of its partnership with Harvey as increasing distribution. I was hoping you could talk about Steve, how you're thinking about Partnerships right now. You have the content you have the AI capabilities so doesn't seem like you need to partner with others. But is there an advantage to doing that because of increasing distribution or is there a disadvantage of going that route? Thanks.

Steve Hasker: Toni, I won't comment on their approach. What I will say is that we're very confident in our position of having a CoCounsel Legal, which is now fully integrated with our content and editorial expertise. We don't see the need for partnerships, the likes of which one of our competitors has entered into, or two of our competitors have entered into together. Where we are partnering is where there are point solutions, AI-driven point solutions, for example, in sort of the debt capital markets and its application to legal profession, or in very specific area of the law, where we think, you know, an innovative team has developed a solution that can work in with CoCounsel.

Um, Tony, I I won't comment on, on, on their approach. Um, but what I will say is that, uh, we're very confident in our position of having, um, a uh, a co-consul for legal, which is now fully integrated with our content and and editorial uh expertise

Steve Hasker: We're keen to explore that ecosystem. But in terms of distribution, you know, we obviously have the leading distribution in the industry at the moment, so we don't see a need there.

Um, and so we don't see the need for Partnerships. Um, the likes of which uh, 1 of our competitors has has entered into or 2 of our competitors entered into together. Um, where we are uh, partnering is where there are point point Solutions AI driven Point solutions. For example in sort of the debt Capital markets and its application to Legal profession um or in very very specific area of the law where we think, um some, you know, an Innovative team has developed a solution that can work in with Co Council. So we're keen to explore that ecosystem.

Toni Kaplan: Thanks.

Steve Hasker: Thanks for the question, Toni.

Toni Kaplan: Thank you.

But thanks for the question, Tony.

Thank you.

Gary Bisbee: All right. I think that brings us to the end of our time. Thanks, everybody. Have a good day.

Operator: Thank you.

Steve Hasker: Thank you.

All right, I think that brings us to the end of our time. So, thanks everybody, have a good day. Thank you. Thank you.

Operator: This concludes today's call. We appreciate your participation. You may now disconnect.

and this concludes today's call, we

We appreciate your participation. You may now disconnect