Thomson Reuters Corporation

standby. Good day, everyone, and welcome to the Thomson Reuters first quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the call over to Gary Bisbee, head of investor relations. Please go ahead, sir.

Thanks, Margo. Good morning, and thank you all for joining us today for our first quarter 2026 earnings call. I'm joined today by our CEO, Steve Hasker, our CFO, Mike Eastwood, and our incoming CFO, Gary Bishoping. Steve and Mike will discuss our results, and then we'll take your questions following our prepared remarks. To enable us to get to as many questions as possible, we would appreciate it if you'd limit yourself to one question and one follow-up each when we open 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 underlying performance of the business. Today's presentation contains forward-looking statements and non-IFRS and other supplementary financial measures, which are discussed on this special note slide. 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 can access these reports on our website or by contacting our Investor Relations Department. Let me now turn it over to Steve Hasker.

Thank you, Gary, and thanks to all of you for joining us today. Before I begin our prepared remarks, I'd like to Recognize our colleagues at Reuters who learned yesterday that they have won two 2026 Pulitzer Prizes for journalism, bringing the total Pulitzer Prizes to 15 since 2008. So congratulations to Alessandra and everyone at Reuters. We have had a strong start to 2026 with revenue growth ahead of our prior expectations and margins in line. Total company organic revenues rose 8%. up from 7% throughout 2025, driven by 9% growth from the big three segments. We are reaffirming our full year 2026 outlook for organic growth in a range of 7.5% to 8%, including approximately 9.5% for the big three segments, and for our margins to rise by 100 basis points year over year to approximately 40%. Good momentum continues from many areas in our portfolio. This includes double digit growth from key products, including CoCouncil, Peguero, SafeSend, SurePrep and our international businesses. We continue to invest heavily in innovation and we remain focused on delivering against our robust product roadmaps. Commercial momentum across our AI enabled offerings continues to build. highlighted by strong adoption trends for Westlaw Advantage. Later in my remarks, I will discuss why we are uniquely positioned to provide producery-grade AI and provide an update on adoption and usage trends. We also remain excited by the development of Thompson, our proprietary legal-focused large language model. Thompson has begun to outperform leading frontier models on specific legal tasks. and provides us with important optionality as we continue to execute our AI innovation roadmap. Our capital capacity and liquidity remain a key asset we have focused on deploying to create shareholder value, and we made solid progress on this during the quarter. In February, we raised our annual dividend by 10% for the fifth consecutive year. We repurchased $250 $62 million of our shares in the first quarter, and yesterday we completed the previously announced $605 million return of capital and concurrent share consolidation. Together, these transactions have reduced our share count by approximately 2%. We remain committed to a balanced capital allocation approach, and we continue to assess a number of inorganic opportunities. With more than $9 billion of estimated capital capacity through 2028, we are positioned to be both aggressive and opportunistic. Now to the results for the quarter. First quarter organic revenues grew 8%. Organic recurring and transactional revenue grew 8% and 10% respectively, while print revenues declined 5% in line with our expectations. Adjusted EBITDA increased 9% to $881 million with a margin of 42.2%. Turning to the first quarter results by segment, the big three segments delivered 9% organic revenue growth. Legal organic revenue again grew 9% despite softer government growth. Legal excluding government accelerated to 11% in Q1 from 9% last quarter. Continued momentum from Westlaw and Co-Counsel Legal were the key drivers. Corporate's organic revenue grew 9%, driven by offerings in our legal, tax, and risk portfolios, and the segment's international businesses. Tax, audit, and accounting organic revenues grew 10%, driven by Co-Counsel for Tax and Audit, our Latin American business, and SafeSend. Reuters' organic revenues rose 6%, driven by growth in the agency business and our contract with LSEG. Lastly, global print organic revenues declined 5% year on year. In summary, we're pleased with our start for 2026. I'll now discuss a concept we've recently coined, what we call fiduciary-grade AI, and provide a few updates on customer adoption and usage. The AI workflow market is evolving rapidly and we see three tiers of solutions emerging. First, general purpose productivity tools that are broadly useful but lack domain depth. Second, professional grade AI built for specific fields but operating environments where some error is tolerable. And third, the one that defines our business, which is producery grade AI. Work in law, tax, and audit operates under strict regulatory and professional standards because the consequences of being wrong are severe. A small error can mean a lost case, a failed audit, a meaningful financial exposure, or worse, the loss of customer trust. And that's why professionals in these fields cannot rely on probabilistic answers. They need deterministic solutions that produce work that they can verify, validate, and stand behind. We believe that the winners in fiduciary grade AI will be those who train agents to automate complex work with the accuracy and accountability that fiduciary professions demand. This is a difficult standard, but one we are equipped to meet. In fact, one where we believe we have met with Westlaw Advantage because we bring four key assets which set a standard that cannot be matched. The first asset is our proprietary authoritative content. Without authoritative data, you have no source of truth and thus cannot ground or validate your AI outputs. General purpose models trained on broadly available information lack this source of truth. We have spent decades building and curating unique, proprietary content repositories in legal, tax and compliance, including Westlaw, Practical Law, Checkpoint and Clear. These are not easily replicable. The second asset is our deep domain expertise. We have the largest team of subject matter experts in our markets, totaling approximately 2,600 people. This domain expertise is critical as our experts not only help create our content, but also play a key role in training our AI agents and evaluating and validating their outputs. Let me share an example. Since last July, teams of seasoned attorneys and data scientists have invested thousands of hours building the Co-Counsel Bench evaluation framework, a growing repository of gold standard answers to real world legal queries. Co-Counsel Bench is used to evaluate and improve the performance of our AI products throughout development so that our AI solutions meet the exacting standards legal professionals require. The third is data privacy and governance. Our messaging to customers is very clear. Their inputs will not become part of our AI output. When a client's privacy is paramount, we protect their workflows, strategic approaches, and confidential information. The idea that a fiduciary is training a third party platform with their clients' confidential information is a third rail issue for the professions that we serve, which makes our commitment in this area an important trust factor with our customers. The fourth is our customer support infrastructure. When a litigator is working through a complex research matter in Westlaw, or a CPA needs help understanding intricate tax regulations as they prepare a tax return, they can call our expert reference attorneys and tax analysts. We invest heavily in these capabilities to support our customers and their outcomes in real time. No frontier model or AI-focused startup offers this. In summary, our authoritative content, trained domain experts, data privacy and governance, and our customer support Together, you uniquely positioned Thomson Reuters to deliver producer-grade AI solutions to the standards our professional customers demand. Let me next share a few updates on the success we're having with customer adoption of our AI products. I'll start with an update on Westlaw Advantage. As is shown on the left side of the slide, customer feedback has been strong, supporting our view that the new agentic deep research capabilities offer a meaningful step forward in performance. Through eight months, adoption is running faster than what we have seen with the two prior Westlaw upgrade cycles, contributed to our revenue growth from law firms accelerating to 11% in the quarter. Last quarter, we mentioned our work on the next generation version of co-counsel legal. which incorporates a similar agentic framework that has been so successful with Westlaw Advantage. Rebuilt from the ground up, it delivers on the vision we set out from the start, an AI companion that works alongside lawyers through every task and every stage of a matter, grounded in the trusted sources of knowledge that they can rely on. On the right half side of the slide, we share feedback, from three customers that have participated in the alpha development stage, which supports our optimism. We recently entered beta with a broader set of customers using the product and look forward to a full launch of next generation co-counsel legal in the third quarter. In February, we announced an important milestone, achieving 1 million users for the advanced AI features in our product portfolio through co-counsel. On the topic of usage, let me share several other statistics to describe the growing customer interaction with our AI features and offerings. Firstly, monthly co-counsel skill users in legal have quadrupled year over year, with strong growth in both the US and international markets. Secondly, we've seen significant growth following the Westlaw Advantage launch, with the number of Advantage users and deep research searches both up more than 7x in the last six months. And thirdly, co-counsel for tax and audit weekly conversation volume has grown approximately 5x since September, reflecting accelerating adoption. And in summary, we remain excited about the building momentum from our AI solutions and the opportunities ahead as we execute against our innovation roadmaps. Before turning to the financials, I'd like to acknowledge a very important leadership transition. Our Chief Financial Officer, Mike Eastwood, will be retiring at the end of this week after 26 years with Thomson Reuters. Mike has been a trusted partner to me and the board and has played a central role in strengthening the company's financial discipline, capital allocation, and operational execution through a period of significant transformation. I want to sincerely thank Mike for his many contributions and wish him well in his retirement. At the same time, I'm pleased to welcome Gary Bishoping, as our incoming Chief Financial Officer. Gary is an accomplished tech executive and finance leader who brings deep financial expertise, strong operational experience, and a long and successful track record of driving growth. Gary has been working closely alongside with Mike, me, and the leadership team to ensure a seamless transition. We're confident in Gary's leadership and look forward to partnering with him as we continue to execute our strategy.