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.

I'll now turn it over to Mike for a review of our financial results. Thanks, Steve. Thanks again for joining us today. As a reminder, I will talk to revenue growth before currency and on an organic basis. Let me start by discussing the first quarter revenue performance for our big three segments. Organic revenue grew 9% in the first quarter, continuing the strong trend from recent periods. Legal professionals' organic revenue grew 9% again this quarter, despite the slower growth from government we discussed last quarter. Key drivers from a product perspective remain Westlaw and Co-Counsel. While government slowed to 1% year-over-year growth, legal professionals excluding government accelerated to 11% growth, up from 9% in the fourth quarter. The strength was broad-based with our large, mid, and small law segments all growing at double-digit growth rates. Our corporate segment grew 9% organically, driven by 8% recurring and 12% transactional growth. Figueroa, Confirmation, Westlaw, Co-Counsel, and our international businesses were key contributors. Tax, audit, and accounting organic revenue increased 10%. Recurring and transactional revenues grew 10% and 11% respectively. Our Latin America business, Co-Counsel for Tax and Audit, SafeSend, and SurePrep were key drivers. The tax, audit, and accounting first quarter growth rate was impacted by two product updates that shifted revenue recognition towards the second half of the year. For the full year, we remain confident in our 11% to 13% revenue growth outlook, with acceleration from Q1 levels driven by rising revenue contribution from our newer AI-driven offerings in the U.S., a key product line extension at Domenio in Brazil, and the product updates I just mentioned. Moving to Reuters, organic revenue rose 6% for the quarter, driven primarily by growth from the news agreement with the data and analytics business of LSAC and our agency business. The latter included $3 million of intercompany transactional licensing revenue related to Reuters news content being used for other Thomson Reuters products. Finally, global print revenues decreased 5% on an organic basis. On a consolidated basis, first quarter organic revenues increased 8%, up from 7% throughout 2025, and slightly ahead of our expectation from a quarter ago. At the end of Q1, the percent of our annualized contract value, or ACV, from products that are GenAI enabled was 30%, up from 28% last quarter. Turning to our profitability, adjusted EBITDA for the big three segments was $829 million, up 9% from the prior year period, with a margin of 46.7%. Broaders adjusted EBITDA was $34 million, with a margin of 16.1%. Global Prince adjusted EBITDA was $43 million with a margin of 38.6%. In aggregate, total company adjusted EBITDA was $881 million, a 9% increase versus Q1 2025, reflecting a flat-ish year-over-year margin of 42.2%. Our Q1 results included $12 million of severance expense related to our initiatives to reimagine how we work. Turning to earnings per share, adjusted EPS was $1.23, up 10% from $1.12 in the prior year period. Currency had no impact on adjusted EPS in the quarter. Let me now turn to our free cash flow. For the first quarter, our free cash flow was $332 million, up 19% from $277 million in the prior year. EBITDA growth was the primary driver of the year-over-year increase in free cash flow. I will also provide a quick update on several capital allocation items. In the first quarter, we repurchased $262 million of our shares through the NCIB announced in February. Yesterday, we completed the previously announced 605 million return of capital and concurrent share consolidation. Together, these transactions reduced our share count by approximately 9 million shares, or 2%. I will conclude with a few thoughts on our outlook. As Steve outlined, we are largely reaffirming our full year 2026 guidance. We continue to expect organic revenue growth of 7.5% to 8%, with the big three growing approximately 9.5%. Within the big three, we now expect legal professionals to grow by approximately 9% or the upper end of the prior 8% to 9% framework. We see 2026 adjusted EBITDA margins of approximately 40% up 100 basis points versus 2025. And we expect free cash flow of approximately 2.1 billion. We are raising our interest expense outlook by 30 million to a range of 180 to 190 million to incorporate the $1.2 billion share repurchase and return of capital we announced on February 25th. Inclusive of the higher interest, we expect these transactions to be accretive to our per share earnings and cash flow. We continue to expect the tax rate for the full year to be approximately 19%. I would also note we plan to pay down the $500 million bond that matures later this month with cash and commercial paper borrowings. Turning to the second quarter, we expect organic revenue growth in a range of 7% to 8%, and our adjusted EBITDA margin to be approximately 38%. As a reminder, the sequential decline in our margin into Q2 is primarily due to the normal seasonality of our tax, audit, and accounting professionals business segment. I would like to thank you all for your trust and engagement over my six years as CFO. It has been an honor to lead such a strong team, and I am really excited for and confident in the company's future. Let me now pass to Gary Bishopman.

Thank you, Mike. I'm truly excited to be joining Thomson Reuters at such a pivotal moment in the company's evolution. Throughout my career, from my years at Dell to my CFO roles at Varian Medical Systems and Finastra, and most recently as an operating partner at Hellman and Friedman, I've been drawn to organizations at the intersection of innovation, transformational growth, and value creation. Thomson Reuters is exactly that. What brought me here is the unique position this company holds, a trusted global content-driven technology company with strong competitive advantages, a clear strategic vision, a dynamic innovation engine, and an extraordinary opportunity ahead in the AI era. I look forward to partnering with the leadership team to drive the next chapter of growth and value creation for our customers, our people, and our shareholders. Now I'll turn it to Gary Bisbee for the Q&A.

Thanks. Margo, we're ready to move ahead with the Q&A.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. And again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. But we will go to our first question from Drew McReynolds with RBC. Please go ahead.

Yeah, thanks very much. Good morning. And Mike, congrats on everything. Real powerhouse. And appreciate all the transparency just in your role as CFO. It's been great working with you. The two questions that I had, I think first, maybe for you, Steve, on the legal LLM or the proprietary LLM Thompson, can you just kind of flush that out a little bit? Just obviously getting good results from it, but how it kind of integrates into, you know, your product roadmap and maybe a little bit more granularity around that. And then secondly, as you look at the fiduciary grade AI segment of the market, you know, at a high level, obviously, in terms of potential TAM expansion within that segment, as you roll out new AI capabilities, just comment on, you know, some of the moving parts and how you're viewing TAM overall. Thank you.

Yeah, thanks, Drew, and thanks for your comments about Mike. I share your thoughts on his transparency. So with regard to the Thompson model, so you may remember we made a very small acquisition a number of years ago of a business called SafeSign, as distinct from SafeSend. And SafeSign is a collection of scientists working under the direction of scientists Jonathan Swartz, who's a Google DeepMind researcher. And they're split between Cambridge and Harvard and Imperial College. And essentially what they had done, we thought, was some very early exciting work in building a large language model for legal. And Jonathan was attracted to Thomson Reuters because of the access to our data and our experts. And we are attracted to the quality of the team that Jonathan had built. And so we've really poured fuel on that fire and Jonathan, his team, to their credit, have built a model which, as I mentioned in my prepared remarks, is outperforming the frontier, the very latest frontier models for certain legal tasks. And I think the punchline here, Drew, is it provides us with optionality. So, for example, we've built a series of AI products that are model agnostic. So that's co-counsel at Westmore Advantage. we may decide to put some or all of the tasks performed by those agents across to the Thompson model, particularly if it continues to develop at the rate that it has been. So that's one option for us. I think one of a number of other options is we've attracted a significant amount of interest from our largest and most sophisticated customers, so law firms and general counsel's offices, as to whether they can access models and start to use those models in conjunction with their own information. And so I think the punchline there, Drew, is we're very excited about the work that Jonathan is doing and the early results. And I think toward the back end of this year, we'll start to make some of the calls as to exactly how we're going to exercise the options I described amongst others. In terms of fiduciary grade AI and the TAM expansion, I think for some time, as you know, we've been talking about the idea that law firms would replace some of their real estate spend with increased technology spent. And that ultimately, as these tools develop and the change management within the firms starts to take hold, that they may be able to automate significant tasks, particularly at the sort of entry levels and particularly some of the. Some of the some of the research and document preparation document analysis work and with Co Council next, the next version of Co Council legal, which, as I mentioned, is now in beta and is testing very, very strongly. We're starting to see. I think that the process whereby the very high stakes work that has to be right that can't hallucinate. They're starting to feel real confidence in and around co-counsel next as a tool to support that. And with that, we think that the TAM expansion is just starting. I think we're starting to see it with the 11% organic growth in legal in the first quarter. And we're confident that that is a trend that will continue for a number of years to come. And so you couple that with our product roadmap and the sort of change management support that we're increasingly providing to law firms and to general counsel's offices. And I think our confidence is growing in the sort of organic growth characteristics of that legal professional's business and of the legal portion of our corporate's business. That's great.

Thank you. Thanks. And we'll next go to Stephanie Price with CIBC. Please go ahead.

Good morning. Two questions for me. Just on the 2026 revenue guide, I'm hoping you could talk a little bit about the cadence of revenue here. With the Q2 outlook, it does look like H1 revenues are kind of tracking a bit ahead of the full year guide. Can you kind of think about what gets you to the top and bottom end of that revenue guide? And then my second question is just on Anthropic. Obviously, VIEWS TRI is a key client. Just curious how you think about vendor relationships here that you have with the LLMs and how you envision these partnerships evolving over time. Thank you.

Yeah, Stephanie, I'll start and then ask Steve and Gary to supplement. I'll provide a few different viewpoints in regards to your question on the 2026 revenue guidance. First, you alluded to our Q1 at 8% was slightly higher than the guidance. that we provided in February at 7%, two key factors there. First, legal professionals had really strong demand for Westlaw Advantage, which we launched back in August of 2025 at ILTACON. And second, we continue to have strong demand from our co-counsel lead product. Secondly, within corporates, we had really strong growth from Peguero, thanks to Laura Clayton McDonald, Ray Grove, and the full team there, Gustav. And then secondly, within corporates, we had higher transactional revenue growth in Q1. A portion of that, we had a few million dollars that shifted of transactional revenue from Q2 into Q1. Second part of your question you alluded to in regards to Q2, our revenue guide for total is 7% to 8% organic revenue growth for Q2. Obviously, we're pleased with the Q1 start. A couple of factors to consider for Q2. Q2 does not include any forecasted additional content licensing deals in Q2, which means more modest revenue growth for orders. And then secondly, in Q2, we expect corporate transactional growth to moderate from the Q1 levels that we saw. That takes us into, I think, the third element of your question in regards to our total revenue guide of 7.5% to 8%. We remain very confident in delivering on that 7.5% to 8%. For each of the big three legal professionals, as noted in my prepared remarks today, approximately 9% corporates Our revenue guide for the full year is 9% to 11%, and then for tax audit and accounting professionals, 11% to 13%. So for the big three, we remain very confident there. In regards to factors to consider, Stephanie, in regards to that range of 7.5% to 8%, big three, once again, is approximately 9.5% is the quarterly net sales income. If you look at our quarterly distribution of sales quota, Q1 is traditionally the lowest sales quota quarter, which was again Q1 2026. Q4 traditionally is our highest sales quota quarter. It will be again in 2026. So we're really pleased with the momentum of the Q1 sales. And as we go into Q2, we're very pleased with the pipeline across the big three. So I think that is a key factor, Stephanie, if you think about that 7.5% to 8% range. Certainly we have transactional revenue. Transactional revenue varies by quarter and also by the segment. But the biggest factor for me is the continued momentum in the net sales or bookings throughout the remainder of the year, which we have very strong confidence in. Westlaw Advantage, as we discussed in February, had a strong December, strong Q4, which helped drive that increase in legal professionals. Revenue growth in Q1, we expect that to continue. Co-counsel legal, if you go through each of the segments, overall confidence, Stephanie. I'll pause before we go into the anthropic question to see if that was helpful.

It was. Thank you.

Okay. Yeah, Stephanie, the – so – As I mentioned, our AI platforms and agents have been built to be model agnostic. And so what we do is sort of constantly evaluate the latest frontier model releases to see which are best suited. And currently, you know, we think for products like Westlaw Advantage and Co-Counsel Legal that the anthropic flawed models are best suited. But as I said, we can and we are model agnostic and we can and have in the past changed the models out. So we've been, Anthropic are an important vendor to us. We were one of the earliest enterprise customers to Anthropic and continue to work closely with them in terms of the co-development in our products. But we have a level of independence there as we go forward.

Thank you very much. And, Mike, all the best.

Thank you. Very kind, Stephanie.

Thank you. And next we'll go to Kevin McVeigh with UBS. Please go ahead.

Kevin?

Kevin.

We might come back to Kevin.

We'll next go to Vince Valentine with TD Cowan. Please go ahead.

Hey, thanks very much. And my congrats to Mike as well on a well-deserved retirement. It's been great working with you. Stephen, everything seems so good. The overall results seem strong. You obviously are going to call out areas of the business where you're doing well and where there seems to be a lot of them. Is there anything that's worrying you these days? Do you see any customers who have left your platform, either in legal or in tax? And if so, have you done exit interviews to sort of say what What are you leaving for? Anybody going to, you know, Harvey or Legora or, you know, maybe just a native AI service like Quad and thinking that's good enough? Are you seeing any, I don't know, what's the opposite of a green shoot, a dark shoot here of anything that worries you that if more customers started doing that, it could be problematic in the future? Or is it just simply nothing and you're still winning across the board?

Yeah. Yeah. Yeah, thanks, Vince. It's a great question. So everything worries me. The team here will tell you that I'm paranoid about a lot of things. So I won't bore you with everything there. But what I would say is a couple of things. As you know, we've been focused on retention since the change program. And I think we're finally starting to see the green shoots and things tick up in terms of our customer retention. And that's across, it varies across the different segments, but we're seeing broad-based positive signs in terms of retention. So there is nothing new or worrying in terms of customers moving away from our content-driven technology products across the big three. What I would say is I think we're at a phase where there's lots of law firms trialing lots of different tools. So if you speak with a law firm, they'll be running a trial or they'll have implemented co-counsel, they've implemented one or two other tools. And I think that's why we're so excited about co-counsel next. We think that it's a big step forward and it represents the combination of content, expertise, data privacy and support in ways that none of our competitors can match. And so we're increasingly confident that as we put that into full release and scale it up in the U.S. and beyond, that we'll start to separate from some of the competitors that exist.

Okay, fair enough. And can I just try to clarify something? I'm not sure I understand the seven times and the five times figures you gave. Both Westlaw, Advantage, Deep Research, and the Co-Counsel for Tax, were not available a year ago, so I assume that's not a year-over-year figure and it wouldn't be relevant if you measured it from day one to now. It's obviously going to increase exponentially, but I assume you wouldn't have given us the number if there wasn't some relevance to it. So can you just help me unpack it? Do you want to expand on each of those?

Yeah. Hey, Vince. So on the Westlaw Advantage, what Steve mentioned was over the last six months, And so that began a few months after launch. And for co-counselor tax and audit, it was the number of customer conversations in the product has gone up 5x since September.

Yeah. And let me sort of expand on it, Vincent, to explain why we mentioned those stats and why we're excited. I think, you know, to an earlier question, we see the TAM expanding. from law firms, from general councils, from tax and audit firms for different reasons, but basically spending more on technology and starting to get to levels that are comparable with other professions in terms of the percent of revenues that are spent on technology. We think over the next few years, they're gonna start to approximate or at least get within the same zip code as some of the other professions. So that's the first sort of TAM expansion. I think the second is, you know, we've talked since our last Investor Day about AI being the means with which Thomson Reuters can play a larger role in the success of our customers. And if you take something like prior versions of Westlaw, which was the leading sort of point solution for litigation research, and you compare that to Westlaw and Practical Law integrated in co-counsel, We envisage a world where the first thing a lawyer does when they get into the office in the morning is switch co-counsel on. And it's a companion throughout the entire day, whether they're doing litigation research, whether they're drafting, whether they're drafting a motion to compel or a motion to dismiss, whether they're doing an SEC filing, whatever it might be. And it's similar with ready to review and ready to advise in the context of our tax and accounting business. So We really do believe this is the vehicle for a pretty significant increase in the number of touch points with our customers and the users. And that, I think, is an exciting growth vector that we plan to fully explore in terms of the product roadmap in the coming couple of years.

Thank you.

Thanks, Vince. And we'll next go back to Kevin McVeigh with UBS. Please go ahead.

Great. Thanks so much. And let me add my congratulations, Mike. You've obviously done an exceptional job helping set you folks on the path today, and I wish you well. I guess maybe can we talk about the AI-related ACV? You're seeing pretty good momentum there. I think the number is 30%, which is up from last quarter. Any sense of where that ultimately settles? And I guess the spirit of my question is, you know i think there's been so much concern which we think is overdone we think there's a real big opportunity beyond the core so maybe talk about just the acv growth and then ultimately steve maybe some of the other addressable markets whether it's mid to down market you can really start to to to to focus on with the technology uh kevin happy to start there and thank you for your kind remarks there i'll just go back in time five quarters ago we introduced the uh

AI-enabled ACB metric, we were at 15% five quarters ago. As you stated, we're now at 30% as of March 31st, 2% increase versus year-end. We expect that to continue to increase each month, each quarter. Kevin will continue to provide that on a quarterly basis. Gary will there. We think that's a really important signal for us. As we've discussed in the past, Westlaw, Westlaw Advantage, the high end of practical law, co-counsel legal, co-counsel tax and audit are some of the drivers there. As we launch co-counsel next later this year, we think that'll be a further stimulus for this AI-enabled metric. Also, I think we mentioned in prior quarters, some of our products, especially in the one source a way or suite of products as they become AI enabled. At some point in time, I speculate, Kevin, there's going to be more of a step change. Right now, we're seeing two to three percentage points increase on a quarterly basis. I think that certainly continues to increase over the time horizon. We're very encouraged by our product pipeline, innovation pipeline, and as that continues to go forward, the underlying ACV metric will continue to increase. You specifically asked, Kevin, about maybe a point in time, where does it get to? I think it just continues to increase over time on a quarterly basis.

Yeah, let me talk about some of the dynamics to your point, Kevin, about mid to down market opportunities. I'd point to a couple of things. So typically, when we put out a new version of Westlaw, It was the largest firms with the biggest budgets and the most sort of one of a better term, sophisticated procurement organizations, whether that was a chief knowledge officer or a CTO that would evaluate the tool and adopt it first. And then we'd sort of grow the ACV number as it penetrated further and further down market. If you look today at co-counsel, we get sole litigators and sole transaction attorneys in the Midwest of the US and and in Canada and Australia, the UK, elsewhere, who will take one look at it and say, okay, sign me up. And Aaron Rademacher, who runs the small law segment, Liz Zimmick, who runs mid-law, have done a wonderful job of getting these tools in the hands of customers of all sizes. And that's a fundamentally new dynamic, and I think is starting to contribute to that growth acceleration that we saw in the first quarter. So that's the first one. I think the second one is, At the very most sophisticated end, you have legendary litigators and transaction attorneys, a litigator whose entire profession has been based on sitting in conference rooms with a collection of peers, partners, and refining their arguments over hours or even days in advance of a trial. Those same attorneys are increasingly using Westlaw Advantage for that process and decreasingly spending the time of their partners. And that certainly exceeded my expectations in terms of the sophistication of the products that we're putting into the marketplace and the kind of the sophistication of work that we're able to, in a sense, automate and supplement. And then I think in the tax space, we're saying the same thing. Typically, it was the largest firms with the biggest budgets But with products like Ready to Review and Ready to Advise, these are appealing, at least in the early going, and it's still early for those products. These are appealing to the smallest firms that have a collection of clients in one particular geography. So AI, as I said, I think the TAM is growing on the back of these firms spending more money on technology, but it's also growing in terms of as you said, the mid to down market opportunities and the opportunity at the very top end. So we see sort of multiple vectors of growth, as I said, that we're planning to explore in the coming years. Great. Thanks so much.

Thank you. And next we'll go to Tim Casey with BMO. Please go ahead.

Thanks. Good morning. Could you talk a little bit about EBITDA margins going forward? I mean, you kept the the guide stable. I'm just wondering about the balance between operating leverage and business mix and so forth. And as a follow on, how should we think about transactional revenues? Are they similar margins to recurring revenues or are they lower margin? Thank you.

Yeah, Tim, I'll start with each of those. First, in regards to EBITDA margin, I'll share a few comments in regards to both Q2, but for the full year. In regards to the Q2 margin, as noted in my prepared remarks, 38% EBITDA margin for Q2. We remain confident in our full year outlook for 100 basis points margin expansion. Two key drivers there, the underlying operating leverage that we continue to have and achieve. And second is the growing benefits from our efforts to reimagine how we work through AI-driven automation. Andrew Pierce, Liz Bank, Jason Williams, Mike Goddard, Kirstie Roth, various leaders with our business continue to drive our productivity initiatives in regards to reimagining how we work. So if you look at the full year, Tim, that's why we're confident in 100 basis points. If we look at just Q2 separately, three factors to consider. We do have increased LLM costs. Second, we have some modest M&A dilution in Q2. And as I mentioned in my prepared remarks, the tax audit and accounting professional business led by Elizabeth Bistrom has seasonality there. So then that takes us naturally into H2. And why are we confident with higher margins for the second half of 2026? One, we have continued productivity from the AI automation, reimagining how we work that I just mentioned. That is building in Q1, Q2. That continues to build and have an uplift in Q3, Q4. Second, the M&A dilution that occurred both in Q1, Q2. that begins to lap in Q3, Q4, meaning it goes away. And then the third item I would mention is the LLM cost. We saw LLM costs begin to increase in August of 2025 with the launch of Westlaw Advantage. As we go into Q3, the degree of increase for the LLM costs lessens because it, in essence, begins to lap and begins to normalized there. So hopefully, Tim, that was helpful in regards to really the evolution of our margining too. And there will be a step up in Q3, Q4, which we have line of sight on, as I mentioned, which gives us confidence to deliver the 100 basis points improvement for the full year. Your second question related to transactional revenue, Transactional revenue profitability does vary. Areas like professional services will traditionally have a lower margin than some other products, say some of the AI content licensing revenue that we have in borders would be at the high end. And then if you look at the continuum on the left side, the lowest piece would be things like professional services. On the right side, the high end would be the Reuters AI content licensing revenue, and then you have a distribution across that. So there is a pretty good wide distribution on the transactional revenue, Tim. Hopefully that was helpful.

Yeah, it was. Thanks, Mike. Just to follow up, is there not a concern that LLM costs will continue to increase as you lean into your proprietary Thompson model?

With the LLM cost, as we have more and more AI offerings, certainly that increased on a variable basis. But if you look at LLM costs, although they're increasing, they remain a relatively small for all costs for Thompson Reuters. So we have it appropriately factored into our forecast and in our guidance. Steve talked about the Thompson LLM earlier. As we go through the end of 26 into 27, could that be an avenue to help us manage the LLM costs? The answer is yes there, but I'll emphasize the LLM costs overall for total TR is a relatively small cost, but what's happening is why I mentioned it for Q1 and Q2. It began in Q3 of 2024 and is building. Steve, anything to add?

No, I think, you know, as I said, that the Optionality around the Thompson model is twofold. One, the quality and accuracy of that model, given that it's been specifically created for legal tasks. And secondly, the fact that we can run it on a per-unit basis at a fraction of accessing a frontier model. So those two things are attractive, and we're going to keep investing in it as we have been and update you as we go.

Thank you.

Thank you. And next we'll go to Andrew Steinerman with JP Morgan. Please go ahead.

Hi there. I just wanted to know within the revenue guide, particularly for legal professionals for the year, what's assumed in terms of the government practice as we move through 26 and then also overall for the 26 revenue guide, are you assuming a contribution from co-counsel legal next?

First, in regards to government, Andrew, we expect the growth to remain subdued near term. We are optimistic regarding the reacceleration of government revenue led by Pat Evelyn once we lap the losses and downgrades that occurred last fall. So we'll see as we approach the end of 2026. and uptick in the overall government revenue. So we have assumed, when we think about legal professionals overall, that the government growth rate remains subdued near term and then begins to increase towards the end of 2026. And then that will increase as we go into 2027. And can you repeat the second part of your question, Andrew?

Sure. I just was asking in the 2026 review guide, are you assuming any revenue contribution from the new product co-counsel legal next?

Yeah, certainly we're very pleased with the progression of co-counsel legal. And when it's launched sometime in Q3, we're very optimistic with the sales momentum there. So it will provide some degree of revenue for us in the latter part of 2026. But the larger contribution from co-counsel next will happen in 2027, just with the revenue recognition. I would call out Emily Colbert and Ravi Ashraf in regards to the work that they're doing on it. Very pleased with beta. I think now we're in the third week of beta for co-counsel next. So good momentum and progress there. And we expect really good sales momentum Q3, Q4, Andrew, but then the REVRAC really beginning to take hold as we go into the latter half of 26 and then 27. Makes sense. Thank you very much.

Thank you. And next we'll go to our vendor, Gallup Haptici, with Canaccord Genuity. Please go ahead.

Morning. Thanks for taking my questions and I want to offer my best to Mike as well. An outstanding 10-year CFO from my vantage point. All the best, Mike. Thank you. And I just wanted to start on the capital allocation side. Obviously, you announced a sizable buyback and return on capital. Is it, correct me if I'm wrong, you bought back 262 million worth of shares as of March 31st. Am I correct in assuming there haven't been any more utilization of that block since the remaining 340 or whatever since April? And then perhaps generally your view on stepping that up. I mean, the companies that have seen sell-offs in their stock, including some of your comps, have announced more sizable buybacks, and you certainly have the flexibility to do that. I wanted to get your thoughts on that.

Sure. I've entered multiple questions there. First, just a reminder, we did complete the $605 million return of capital yesterday and with the cash distribution being executed. Your question in regards to the NCIB, we have not done any additional purchases beyond the $262 million that occurred in Q1. We do plan, Aravinda, to complete the remaining $338 million in the second quarter. That is our intent. In regards to our overall balance capital allocation approach, certainly we have the annual dividend increase five years in a row now at 10%. still focused on strategic M&A. And that leads to your point in regards to the optionality to consider additional capital returns. It is something that we will continue to discuss with our board. The next meeting is in June, followed by September. So certainly with the very strong balance sheet that we have, our vendor is something that we will continue to have discussions with our board with. No specific commitments today to announce or to discuss, but we agree that it is certainly an option for us to consider additional NCIB sharebacks. We agree that they are accretive today, and we certainly have to balance it with strategic M&A opportunities.

Thank you. And just a quick follow-up, smaller question on Westlaw Advantage deep research. I forget, Mike, if you had given any numbers on adoption there, any targets or any sort of recent adoption numbers that you've quoted. I was wondering if you could speak to that.

Yeah, we have not quoted specific adoption numbers on Westlaw Advantage five quarters ago when we pivoted to the overall Gen AI approach. We thought that was more encompassing of our total portfolio. I can share some additional points on Westlaw Advantage. It is definitely trending faster, that being the ACV penetration, trending faster than the prior to Westlaw upgrade cycles that we had there. We're certainly very encouraged with the fast start on sales and very strong customer usage there. I can confirm, again, very strong sales for Westlaw Advantage in the first eight months since it was launched, August of 2025. As I look at the pipeline for Q2, whether it be global large law, midsize firms, or small law Europe, very strong pipelines. We would anticipate and forecast that Westlaw Advantage continues to have a strong Q2 and a strong – 2026 overall and 2027. Very encouraged with the progress there. I think Steve may have mentioned Mike Dane earlier, Emily Colbert, who'd lead Westlaw Advantage. Just a hell of a job there. Thank you very much. Indeed.

And next, we'll go to Jason Haas with Wells Fargo. Please go ahead.

Hey, good morning, and thanks for taking my question. I'm curious, was there any negative impact to sales cycles or anything from the conflict in the Middle East in 1Q? Thanks.

Yeah, go ahead, Mike.

Negative impact, Jason, in regards to the conflict.

It certainly, amongst other global events, caused an uptick in the Reuters subscription business. And I think put the spotlight on the quality of that coverage, Jason, but as we've described over the years, our business, we're fortunate enough to have a business that is largely immune to the cycles.

Okay, that's great to hear. And then just as a follow-up, on the tax audit and accounting professionals business, Can you just reiterate why that was slower at 10% organic growth in one Q and what drives acceleration through the year?

Thanks. Sure. I'll take each of those, Jason. First, in regards to tax and accounting, 10% organic growth in Q1. It was impacted by revenue recognition timing shift for two products that will normalize in H2. In simple words, we had some revenue recognition that shifted from Q1, Q2 into Q3, Q4. If you look at it on a full year basis, it normalizes or harmonizes. That was the biggest factor. If you look at the full year in regards to why we're confident, once again, Elizabeth Beech and team drives that. We're confident in delivering the 11% to 13% range that we have previously provided. I would emphasize three factors. First, The revenue recognition timing that I just mentioned, that normalizes. Second, Adrian Fanini has a key product line extension with our Domenio business in Brazil. I can confirm that Domenio continued to grow approximately 20% again in Q1, but with the key product line extension and launch for Domenio, that will provide incremental growth in revenue internationally for the TAP portion of the business. And then thirdly, Jason, is the newer AI-driven offerings in the U.S. will provide additional lift as we go through this year. But once again, very confident in achieving 11% to 13% for the full year.

Okay, great. Thank you.

Thank you. And next we'll go to Doug Arthur with Huber Research. Please go ahead.

Yeah, Mike, just staying with tax and accounting for a second, the costs in the quarter were up quite a bit. I know you had mentioned that on the fourth quarter call. Was that partly or mostly the SafeSend acquisition impact?

We had three factors, Doug. First, we had some modest dilution from the additive acquisition that we closed last fall. Second, we made some additional investments in our product line in Dominio that I just mentioned that has an upcoming launch. And then thirdly, a portion of the $12 million of severance that are referenced for total VR, that impacted TAP. So the convergence of those three factors was the reason for the lower margin for TAP in Q1.

Great. Very helpful. Thank you.

Yep. Thank you. And next we'll go to Mayor Yagi with Scotiabank. Please go ahead.

Great. Thank you for squeezing me in. And congrats, Mike, on great tenure at Thomson. Thank you. I wanted to ask you, I know you disclosed the ACB on Gen AI, but could you provide some KPIs that prove that AI is lifting net revenues and not just increasing usage? Example, like, you know, Westlaw Advantage upgrade attachments versus co-counsel paid expansion into new horizontal segments of the market. Something that can give us some sense of that AI is adding upline revenue growth, not just on your existing subscription basis that you used to have in the past, but expansion into new segments of the market.

Yeah, I think, Myra, the most prominent metric that I provide, both Steve and I mentioned in our prepared remarks, legal professionals or law firms revenue excluding government, 11% organic growth in Q1, up from 9% Q4, really speaks to the penetration that we're getting across every segment of legal professionals and law firms that's led by Raghu Ramanathan and his team. there. We had double-digit organic growth in global large law firms, mid-sized firms, and small law firms, and we had the highest growth ever in each of these segments in Q1. I apologize if that's overly simplistic, Mayor, but driving that 11% growth in Q1 up 9% I think is a pretty tangible metric for us to just continue to monitor. And we have confidence as we go into Q2 in the fourth year in regards to that 11%.

Okay, great. And just one follow-up question on the margin expansion in the second half. Can you give us maybe some, like a bridge that helps us understand where the improvement in the margins year-on-year will be coming from in the second half? Is it all from the imagine how we work approach? business productivity improvement that you have, or some of it can also come from AI revenue growth?

Yes, certainly as we continue to expand our overall revenue growth, that will help us on margin, just given the significant operating leverage that we have. Secondly, I'll just reemphasize the work that we're doing and reimagine how we work That will accelerate as we go into Q3, Q4. So that continued operating leverage, higher revenue, the benefits from reimagining how we work. And then also, just sorry to be repetitive, I mentioned earlier the M&A dilution lapse or decreases in the second half of 2026. That also helps us. And then also, free of LLM costs since we had them last year also helps. when you do a year-over-year, and if you look at a bridge on the four-year margin expansion.

Thank you.

Next, we'll go to Toni Kaplan with Morgan Stanley.

Please go ahead. Thanks so much, and I'll add my congrats to Mike. It's been really terrific working with you over the years, so all the best. Thank you. Steve, I wanted to go back to your comment that many customers are utilizing multiple AI and technology tools, which is something we've seen as well. And I see the advantage of having your AI product utilizing the Westlaw legal data and research. And so I guess my main question is, if you have the strong AI product, which I think you do, and I guess why isn't it more compelling that And you are seeing success, so I don't want to take that away. But I guess it seems like a natural that someone would want to choose a strong AI product with a really strong legal research. And so I just wanted to understand why this hasn't taken off across the top 100 law firms, for example.

Thanks. Yeah, Tony, I think as we recently published, we've got to a million co-counsel users across the various instances of the product. You know, we're proud of that. We're sort of happy with, if you like, the starting point as we sit here today. I think, though, you know, back to Vince's questions to what worries me, I think if I were giving us a hard grade, I would say that within the legal realm, it has taken us too long to really unleash the sort of power, if you like, and the authority of our content, Westlaw, Practical Law, and so forth, and our experts. And that's why we're excited about Co-Counsel Legal. We think it's a big step forward. It's fully agentic. It's a deep research built product. It's been built by, in large part, the same engineers and data scientists that did Westlaw Advantage. And I think for the first time, what the market's going to see is an agentic legal assistant that is grounded in that authoritative content. The prior versions in the legal realm were built on the case text methodology without full access to our content. And so you could critique us for taking a while to do that, but we wanted to get it right. And we think we have, and certainly the early beta testing suggests that we have. So we'll keep refining it. We'll keep learning and investing and scaling it. But Tony, I think that explains why you've got to a pretty sort of fragmented market with multiple tools being measured and why we're increasingly confident going forward.

That makes sense. Thank you.

Thanks, Tony.

Next, we'll go to Curtis Nagel with Bing of America. Please go ahead.

Great. Thanks so much. Maybe just staying on that topic, Steve, just elaborate a little bit more on the feedback you're hearing from clients on next-gen version of co-counsel, underlying demand, and I guess, you know, how material an upgrade cycle do you think we could see, you know, and, you know, to what degree that, I guess, factors and guidance? It doesn't sound like much at this point.

Yeah, I mean, Curtis, we're, you know, I think we've got to sort of look at exactly where the marketplace is at. And in my view, and this is a view that's shared by many of the managing partners that I interact with on a daily basis, the tools... including ours, and we think especially ours now that we've got co-counsel next in the marketplace, are ahead of the change management within the firms. It's one thing to sort of give a lawyer access to one of these tools and have him or her save a few hours a day, in this case, many hours a day. It's another thing to rewrite the basis on which a young attorney produces a work product, runs that up the chain, gets feedback, refines it and eventually it goes from a partner to a client for review and discussion. That process I think is just beginning. And that's why from a revenue standpoint, as I said, we're proud of the million users. I think we're off to a good start. Co-counsel, the next version of legal is a really exciting step forward for the entire industry in our view. But it's going to take the change management to sort of mirror that for this sort of virtuous circle to really kick in. And as that happens, we are confident in the revenue and the growth prospects, and we like the margin profile, but I think it's still fairly early days.

Okay. I appreciate it. Thank you, Steve.

Thanks, Curtis. And next we'll go to George Tong with Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. I'll add my congrats, Mike, on your retirement. Thank you. In terms of the legal ex-government organic growth acceleration from 9% to 11%, can you discuss how much of that acceleration came from volumes versus upsell versus pricing?

George, I don't have at my fingertips the breakdown between those three components, what I can reiterate. is that we had really strong performance across all of our segments. As I've mentioned before, in prior releases of new versions of Westlaw, we would see first the traction in the large law firms, and then it would begin to evolve in the mid and small. With Westlaw Advantage, we're seeing consistent traction across large law, mid law, and small law. And we're seeing the retention rates continue to hold there, George. I think that given seeing strong performance across, and I should also mention John Shutwell in Europe, across all geographies, across all segments of legal professionals and law firms, we're seeing really strong adoption of Westlaw Advantage and co-counsel legal. And that's what's driving that 11% for legal excluding governments.

Got it. That's helpful. And as a follow-up, can you share how legal government performed in the quarter?

Legal had a 1% growth in Q1. That was down from Q4. As I mentioned in the February earnings call, we had the cancellations and downgrades in government in the second half of 2025. So we also indicated in February – that Q1 would have a lower growth rate for government in Q1, given that RevRec impact. And as a follow-up to one of the questions I received earlier, as we go into Q3 and Q4 and we begin to lap those cancellations and downgrades, we're very confident that Patty, the London team, will drive accelerated organic growth for government in the latter part of 26 and then into 27. Very helpful. Thank you. Thank you.

Thanks, George. And at this time, I'd like to turn the call back over to Gary Bisbee. Please go ahead.

Yep. Thanks, everybody. We're around if you want to follow up. Have a good day. Thank you.

Thank you. And this does conclude today's call. We thank you for your participation. You may now disconnect.