Thomson Reuters (TRI) Q3 2025 Earnings Transcript

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Date

Tuesday, Nov. 4, 2025, at 9 a.m. ET

Call participants

• President and Chief Executive Officer — Stephen John Hasker
• Chief Financial Officer — Michael Eastwood
• Senior Vice President, Investor Relations — Gary Bisbee

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Risks

• Chief Financial Officer Michael Eastwood disclosed that "our Global Print segment has seen a slower than expected ramp in commercial print volumes" and estimated this will reduce total organic revenue growth by about 25 basis points for fiscal 2025 (ending Dec. 31, 2025).
• Michael Eastwood also stated that the company has faced several recent downgrades and losses related to federal efficiency programs, which are expected to be roughly a 20 basis point drag on full-year organic revenue growth.
• Softer bookings trends in the Corporates segment, attributed to recent internal sales organizational changes, contributed to a slower sales build and are expected to moderate growth in the fourth quarter.

Takeaways

• Total company organic revenue growth -- Organic revenue grew 7%. The Big Three segments (Legal Professionals, Corporates, and Tax & Accounting Professionals) delivered 9% organic revenue growth.
• Legal Professionals segment -- Achieved 9% organic growth in the third quarter, accelerating from 8% in the first half. Growth was driven by continued momentum in Westlaw, CoCounsel, and international operations.
• Corporates segment -- Posted 7% organic revenue growth, with recurring revenue up 9% and transactional revenue up 5%. International businesses and offerings in legal, tax, and risk portfolios contributed significantly.
• Tax & Accounting Professionals segment -- Registered 10% organic growth in the third quarter, led by Latin American and U.S. businesses, and the adoption of SafeSend, UltraTax, and Cloud Audit products.
• Reuters News segment -- Reported 3% organic revenue growth in the third quarter, supported by agency business expansion and the LSEG contract. Included $7 million in generative AI content licensing, down from $8 million in the prior year.
• Global Print segment -- Organic revenues declined 4% year-over-year in the third quarter, primarily due to slower-than-anticipated commercial print recovery.
• Adjusted EBITDA -- Adjusted EBITDA rose 10% to $672 million in the third quarter, as adjusted EBITDA margin expanded 240 basis points to 37.7% for the total company. Big Three segment margin reached 41.7% in the third quarter.
• Adjusted earnings per share (EPS) -- Adjusted EPS increased to $0.85 from $0.80 in the third quarter, with a $0.01 positive impact from currency movements on adjusted EPS.
• Free cash flow -- $1.4 billion for the first nine months, down 3% from the same period last year due to timing-related changes in working capital.
• GenAI-enabled product adoption -- Annualized contract value from GenAI-enabled products reached 24% at the end of the quarter, up from 22% in the prior quarter.
• Share repurchase program -- The $1 billion NCIB was completed, with approximately 6 million shares repurchased as of late October.
• Outlook reaffirmed for 2025 -- Management reaffirmed targets for approximately 9% organic growth in the Big Three segments for the full year and guided toward approximately 7% organic revenue growth company-wide in the fourth quarter, with the Big Three expected at 9%.
• 2026 financial framework update -- Management now expects 7.5%-8% organic revenue growth for fiscal 2026 (ending Dec. 31, 2026), 9.5% growth for the Big Three in 2026, roughly 100 basis points of adjusted EBITDA margin expansion for fiscal 2026, and free cash flow of $2.1 billion (upper end of prior guidance) for 2026.
• AI and editorial investments -- Over $200 million invested in AI and GenAI for the calendar year, with spend to continue at this level into 2026. More than 1,500 attorney editors provide proprietary content, and over 1.6 million editorial enhancements are made per year.

Summary

Thomson Reuters (NASDAQ:TRI) reported broad-based organic revenue growth across its major business segments for the third quarter. The Legal Professionals and Tax & Accounting Professionals segments both accelerated sequentially in the third quarter on an organic revenue growth basis. Management cited operational efficiencies, favorable revenue mix, and cost discipline as drivers for higher-than-anticipated margins and profit in the third quarter, while maintaining robust investment in artificial intelligence and editorial expertise. Strategic capital allocation continues with the completion of a $1 billion share repurchase program in late October, and management stated a commitment to pursue further inorganic growth given $9 billion in capital capacity through 2027.

• Chief Executive Officer Stephen John Hasker emphasized the sustained differentiation of Westlaw in the AI era, asserting, "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."
• Michael Eastwood clarified that government contract cancellations affecting revenue growth "occurred prior to the government shutdown" in the third quarter and were primarily attributable to reductions in agency spending levels rather than layoffs.
• Customer adoption of CoCounsel, Westlaw Advantage, and tax AI offerings is reported as growing rapidly, with customer feedback on recent AgenTik AI launches described as "very positive."
• Management indicated that AI-driven automation is already being deployed internally to finance, audit, legal, and accounting teams, supporting expectations for improved operating leverage and margin expansion into 2026.
• The company highlighted that generative AI-enabled product offerings represented 24% of annualized contract value at the end of the quarter, evidencing measurable market demand for advanced AI solutions embedded in core platforms.

Industry glossary

• GenAI: Short for Generative Artificial Intelligence, referring to machine learning models and solutions capable of generating original content, insights, or outputs such as legal research, document summaries, or calculations.
• NCIB: Normal Course Issuer Bid; a Canadian regulatory term for a share repurchase program enabling a company to buy back its own shares on the open market within set limits.
• Westlaw: Thomson Reuters’ flagship legal research platform featuring vast, editorially enhanced legal content, proprietary taxonomies, and advanced workflow tools.
• AgenTik AI: Thomson Reuters’ suite of AI-driven legal and tax solutions that automate advanced research, drafting, and advisory tasks through agentic workflows.
• CoCounsel: An integrated AI-powered offering for legal, audit, and tax professionals, providing advanced research, drafting, and advisory support embedded within core Thomson Reuters platforms.
• ACV: Annualized Contract Value, representing the annual revenue run-rate from all active contracts at a given time, used to measure recurring revenue momentum.
• Keysight: Proprietary citation network technology in Westlaw that verifies case law, statutes, and regulations to ensure legal research is current and accurate.
• SafeSend: A recent Thomson Reuters acquisition and product suite for automating document workflows in tax preparation and client communications.

Full Conference Call Transcript

Stephen John Hasker: 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. 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. 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 37%, respectively, rather than the higher ends of the ranges at 3.5-7.5%.

For three reasons that are unrelated to our AI innovation momentum. First, a slower ramp of commercial print volumes. Secondly, several recent US federal government 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. This is best illustrated by our legal professional segment accelerating to 9% organic revenue growth in the quarter, up from 8% in the 2025 and seven percent last year. And this is driven by continued West 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, Pagero, indirect tax, and our international businesses to name a few. 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. 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 AgenTik AI launches over the summer has been very positive. And initial sales trends are encouraging. Especially for the co counsel 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 assistant space, which is an exciting white space growth opportunity in which CoCouncil remains a clear market leader. Our capital capacity and liquidity remain an asset that we are focused on deploying to create shareholder value. We recently completed the $1 billion share repurchase program. Announced in mid August. 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. Third quarter organic revenues grew 7%, in line with our expectations. Organic recurring and transactional revenue grew at 94%, respectively, while print revenue declined 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. 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 2025 and seven percent for all of last year. Continued momentum from Westlaw and co counsel 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 and 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. And 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. 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.

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 turned the mass 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. Primary law content, including case law, statutes, and regulations, is this is a significant majority of what users search in Westlaw. And 85% I repeat, 85% of this content has been editorially enhanced. So 85% is in editorially enhanced. These enhancements are proprietary to Westlaw. Make the source content far more valuable. Let me provide a few brief examples. First, the West Key number system is our proprietary taxon taxonomy or subject classification of the law.

It covers more than a 140,000 precise legal topic categories, capturing the law at an extremely granular level. 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, Keysight our proprietary citation network, has more than 1.4 billion connections linking legal matter with the taxonomy. Ecite verifies whether a case statute, or regulation is still good law. And finds accurate citing references to support legal arguments. 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. 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. 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 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. 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, 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 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. 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. In complex multistep 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.

Michael 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 third quarter revenue performance for our Big three segments. 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. 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, Figuero practical law, and our international businesses were key contributors.

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 organic growth of 10%. Recurring and transactional revenues grew 912%, respectively. Our Latin America business SafeSen 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 LSAC, 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, 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. Turning to our profitability, adjusted EBITDA for the big three segments was $6.00 6 million up 9% from the prior year period, with the margin rising two twenty 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 two forty basis point margin increase to 37.7%. Turning to earnings per share. Adjusted EPS was $0.85 for the quarter versus $0.8 in the prior year period. Currency had a $01 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. 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. Our total and organic revenue growth is trending closer to 37% 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 revenues from commercial where we print books were 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.

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 product portfolio and the segment's growth potential. Note, these organizational changes only made at our corporate segment and do not impact our legal professionals, or tax and accounting segments, 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 and accounting professionals businesses and from our international markets. 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 9% organic revenue growth, assuming no incremental government headwinds materialize. We expect the 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. We are confident in delivering the revenue acceleration 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. 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 2026 to approximately 2.1 billion which is the upper end of the prior range of 2 billion 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. I will now turn it back to Gary for any questions.

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

Operator: Thank you. 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. Again, press 1 to ask a question. And our first question is gonna come from Drew McReynolds from RBC. Please go ahead.

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 kind of recurring into next year. And for corporates, I believe the organic revenue growth target is nine to 11%. Just wondering how comfortable you still are with that. And then secondly, Steve, great to kinda run down essentially, of the moat within Westlaw. I know it's early days on Agencik AI.

Can you comment on the customer kind of reaction to you know, what AgenTic is doing from their perspective and you know, are they able in these first iterations to notice the difference know, between, you know, what you're offering and maybe, you know, some others that don't have the deep content access. Thank you.

Stephen John Hasker: Yeah, Drew. Great questions. I'll let me start with corporates, and then I'll ask Mike to that. Then I'll go to government, then I'll go to Westlaw. So please be patient, but we'll work our way through these questions. So the corporates sales softness is a bit frustrating because it's temporary, and it's self inflicted. 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. And it's the area in which we have the lowest penetration of our legal tax and risk products.

So think it's our biggest opportunity, 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, we're 10% growth. And underpinning that, we've seen a really nice escalation in our NPS scores. Across the segments and including in corporate. What we haven't seen is an uptick in cross sell. 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. 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 a little disorganized relative the opportunities and relative to where they were last year. So not up to our high standards. We're we're 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 the nine to 11% for next year. So that's on the corporate side. Mike, what would you add to that before we go to government?

Michael Eastwood: Terrific summary, Steve. Okay. Alright. So government

Stephen John Hasker: 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 risk side are very well aligned with the administration's agenda. 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. And so I think up until the end of the third quarter was so far so good. We had a couple of down downgrades and cancellations at the end of the third quarter. Which I think has had us has 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. 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. So 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 as to what it will look like for the next twelve months, medium to longer term, we're we're very confident. So let me turn to Westlaw.

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, very strong. From customers as it has been to co counsel legal and the integrated the integration of those 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 of a major firm in New York City. He spent his career as a litigator and is well known as such.

And he was describing how his career was being spent in conference rooms going back and forth with his colleagues and his partners refining his arguments. 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.

And so 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 So we're we're very excited by the work that Mike Dane 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?

Michael Eastwood: Nothing to add, Steve. Alright. Thanks, Drew. I hope that addresses the questions.

Drew McReynolds: Yeah. That's great context. Thank you.

Operator: And our next question is going to come from Vince Valentini from TD Cowen.

Vince Valentini: Can I can I just go back to the government for a second? Just wanna make sure I'm clear on what the driver is. Is the government shutdown having an impact? Or these cancellations happened before that, And can you clarify, do you do work for ICE?

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

Stephen John Hasker: Yeah. I mean, we, Mitch, I won't go into the specifics of the work we do with various government agencies because it's subject to confidentiality clauses. But we do work with the with a number of departments. On a 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?

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

Vince Valentini: K. Yeah. Vince, we're continuing

Michael Eastwood: We'll continue to work with our federal customers on kinda three big areas, efficiency, national security, and fraud prevention. We are confident our tools and offerings will be able to support them mid term, long term.

Vince Valentini: I'm gonna count that as one, Gary. I apologize, but it was one a and one b. Just the second question, you got a nice you got a nice call out on the Amazon call last week. On being one of their key customers for their transform, product, they call it. They say Thompson Reuters has been able to manipulate a million and a half lines of code per month four times faster than they could with previous systems. I'm wondering, 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?

Stephen John Hasker: Yes. Thanks. Thanks, Minh. So 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 AgenTik AI and deep research, and it's you know, example in the 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. So we are applying our own tools. So co counsel legal, and co counsel for tax accounting and audit.

To Norrie Campbell's general counsel team and also to Mike'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 I'll defer to Mike as to the sort of financial implications of this. Vince. But rest assured, we're we're gonna be at the forefront in terms of automating everything we do with a with a singular goal of being able to scale faster and more efficiently and deliver better products and services to our to our customer. Yeah, Vance. So

Michael Eastwood: a few thoughts. As noted in my prepared remarks, we do anticipate some onetime 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.

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.

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

Michael Eastwood: Indeed.

Gary Bisbee: You, Vince.

Operator: And our next question is going to come from Jason Haas from Wells Fargo.

Jason Haas: In the prepared remarks, you made a comment about seeing some incremental competition in AI assistance space So curious if you could just unpack that comment a little bit more. What was meant by that exactly? Thank you.

Stephen John Hasker: Yeah. Jason, thanks for the question. So the point that I'm trying to make is that we are not seeing any additional competition in our core franchises. So that's legal research and legal know how. And the tax calculation engines, whether that's UltraTax, GoSystemTax, or OneSource. So those core franchises are in have the same competitive dynamics today as they did twelve months ago or three years ago. Where we have seen the entrance of new players is in the AI assistant space. Now that is a greenfield sort of white space opportunity for us.

And it was the reason that we went out and acquired Casetex and then added Materia and the fantastic team from Materia on the top of that. It's a wide space opportunity for us around co counsel, 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. And I think most importantly, customers are responding well. To co counsel and its various its various offerings. So I hope that clarifies.

Jason Haas: Thank you. That's it. That's very helpful. Then I wanted to follow-up on the tax and accounting business. It looks like the org the organic Consequence Group desells from 11% to 10%, and then these are rounded numbers. But 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.

Michael Eastwood: We remain confident in delivering the 11% for calendar year, 2025. Then for 2026, as a reminder, our guidance is 11% to 13%. Percent. We work very closely with Elizabeth Bistrom 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. Which is performing incredibly well. We expect that to continue into 2026. Steve mentioned materia there. Additive, which is the recent acquisitions that we did. So we remain quite confident Jason, with tax and accounting professionals.

Stephen John Hasker: Yeah. I would just supplement that the end market is 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. And so 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. And that gives us confidence around the 11 to 13% going forward.

Jason Haas: Great to hear. Thank you. Thanks, Jess. And our next question is going to come from Manav Patnaik from Barclays.

Manav Patnaik: Thank you. Good morning. Steve, I appreciate the side, and that's why you acquired CaseText, etcetera. Can you help us with you know, any sense of sizing of workflow for you guys and the growth rates there? Because, you know, obviously, a lot these legal tech legal tech companies are raising a lot of money at high valuations, citing higher growth rates. So just trying to get a sense of you know, your business there.

Stephen John Hasker: Yeah. I mean, I've I mean, it's it's all a bit squishy at the moment. Right? We sort of probably monitor the same sources you think in terms of in terms of how competitors are performing and what sort of growth rates they're seeing what their IRR levels are at the moment. And what I would tell you is that her counsel is at least on par or outpacing everybody else. In terms of its size and its growth rate. So you know, it is it is a competitive landscape insofar as there are lots of promises being made. Lots of different new entrants. Where we differentiate ourselves is in the in the integration of our content and our expertise.

So it's not only the content, Westlaw practical and so forth, checkpoints on the tax and accounting side. It's the 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. So long way of saying in the early going, we're at or outpacing the newer competitors. And 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?

Michael Eastwood: That's a good summary. Okay. Alright. Thanks, Manav. I hope that helps.

Manav Patnaik: Yeah. That was helpful. And I guess just on I just had one question on m and a. So 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, Steve, you've talked about you know, potentially larger ones. So 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.

Stephen John Hasker: Yeah. You know, we've we're we're sort of happy we're 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. So we'll 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.

So areas like risk fraud compliance, building on CLEAR, the CLEAR dataset, and areas like IDT, indirect tax, and e invoicing, where Aguero is showing really good growth and growth that looks to be pretty considerably above some of the some of the market comparables. So those are the areas where we'd be prepared to go a bit bigger. Think at the moment, the assets that are of interest are still fully valued in the in the sort of portfolios in which they sit.

So the question is, you know, do we 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, And that's what we'll just continue to monitor, and stay rigorous and disciplined around.

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

Manav Patnaik: Thank you.

Gary Bisbee: Thanks, Manav.

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

George Tong: Good morning. You're continuing to target nine 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?

Michael 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.

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 think about it, George, a very simpler 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 and have the right talent. I think you can check the boxes on each of those variables in the formula that I just mentioned there. So that gives me quite 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 gives us confidence in achieving that 9% to 11% as we go 2026, George.

George Tong: Got it. Very helpful. And then can you talk a bit about your pricing strategy in light of the increasing value that you're providing with your AI products? So do you have plans for accelerated pricing increases, for example, in your multiyear contracts? And how overall do you expect pricing to evolve? Going forward?

Stephen John Hasker: Yeah. George, it's 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 excellent folks and our sales people. Our principle is price to value. So 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 the, you know, our products and services are aligned to that. We it's just a reminder. We do not price on a per seat basis.

So to the extent to which you know, work is able to be done by fewer people, that we will be a beneficiary of that, not a not 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 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 just constantly looking for signals from the market. And refining our approaches.

Michael Eastwood: Yeah. George, I would just supplement. As we go into '26, I'm somewhat optimistic. That we had could have some additional, opportunity over the spectrum.

George Tong: Very helpful. Thank you.

Gary Bisbee: Thanks, George.

Operator: And our next question is going to come from Aravinda Galapathige from Canaccord Genuity.

Aravinda Galapathige: Good morning. Thanks for taking my question. I wanted to 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 Thompson and even the industry in general. Is it fair to sort of characterize the present sort of, position as sort of, you know, getting closer to peak in terms of new product launches and so forth. And so the next phase will be more about penetration. I mean, I'm trying to sort of connect that with the a with sort of the underlying tone of expansion you're 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. I'm trying to sort of assess Any thoughts that whether we may be at sort of that, you know, the sort of the crest of that you care to share on that front?

Stephen John Hasker: Yeah. I heard. I'll I'll start, and Mike may wanna add. I you know, obviously stay very close to David Wong and Joel Heron'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 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 '26 and '27 based on know, that which we've previously invested in and that which is coming through the pipeline.

What I think, though, 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 are trained on reservoirs of content and thousands of expertise. Will continue to improve. Think where things might flatten out is in the sort of general purpose horizontal tools. And certainly, our customers are starting to understand the difference. And so, you know, that, I think, will be one change in the sort of landscape. But, but, again, you know, I think anyone who will tell you they know exactly gonna happen in this environment is probably slightly diluted.

Michael 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 'twenty five, in AI, Gen AI, that will continue into, 2026. We're able to expand our margins in twenty six 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 AWS. Reference. So we will continue to invest, and as Steve point, the rate of innovation and intensity will continue. That 200 million plus will continue into 2026.

Aravinda Galapathige: Thanks very much. And 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 4 to $500 million for buybacks. You know, obviously, the movement in the stock, you know, you've you've sort of shown the flexibility to step up beyond that. You know, is should we sort of take that forward, you know, even in the you know, going into '26. It, you know, notwithstanding that framework, you know, you have the ability and the willingness to sort of step up in terms of your repurchase program.

Michael Eastwood: Yeah, 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 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.

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

Aravinda Galapathige: Thank you.

Gary Bisbee: Thanks, Aravinda.

Operator: And our next question is going to come from Maher Yaghi from Scotiabank. Please go ahead.

Maher Yaghi: Steve. You have, you know, very well Westlaw has a strong standing to benefit from AI. But can you tackle maybe how you see AI at 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? And the second question is the revenue acceleration you're expecting in 2026. Versus 2025, I know it's maybe too early, but can you maybe just let us know which segment of the big three you're expecting to see most of the acceleration coming from. Thank you.

Stephen John Hasker: Thanks, Meyer. I'll defer the second question to Mike. On the first one, yeah, we're we're 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. So in terms of the end market, the tax and accounting profession does not need to undertake the same sort of magnitude of change management. So 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 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 we actually think our tax and accounting customers are even more receptive to AI and technology 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 from there. For their clients. And the technology enables that. So that's the first part. As we think about applying AI, particularly AgenTik AI to our product set, You know, the sort of narrative up until now is that generative AI doesn't do math. Well, our tax calculation engines to 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 ecosystem Tax, or OneSource. And then they're able to do the follow-up all of the calculation checks, and the efiling. And so that's really what Ready two advise is. It's it's the it's the addition of agents to our preexisting tax calculation engine. And then 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 so 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? Sure, Mary. In regards to 2026,

Michael Eastwood: 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 nine to 11. Tax and accounting, 11 to 13%. Percent. 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 Domenio, which we remain quite optimistic about over the last eleven years. It's grown 20% CAGR, over that time horizon. We expect that to continue And then lastly, kinda underpinning, Ultratax continues to perform well.

Maher Yaghi: Thank you.

Operator: And our next question is going to come from Kevin McVeigh from UBS.

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, AgenTeq launches you did over the '5, are they already starting to kind of permeate the base, or is that something that continues scale over the back half of '25 and into '26? I guess, I'm just trying to understand that the sequencing of, you know, maybe things that have already been launched as opposed to, you know, things were launched over the summer. 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% Aaron Roddenmeicher, who is driving the small law firm, Liz Zemick in mid law, Steve Acy. 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 Co Council Legal, Westlaw Advantage, that will continue. October, we had another great month of sales with these new product launches.

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 about the go to market motion with the enhanced, you know, product from a GenAI perspective? Yeah. Kevin, just to remind, everyone, the big four and the next three largest firms, we call it the Global Seven, they are included within our corporate segment, not tax and accounting professionals. But, Steve, you may wanna comment in regards to the different motion as you think about those G7 versus the remainder of Elizabeth's tax and accounting? Yeah. I mean, what I would say is

Stephen John Hasker: there's increasing similarity across the g the g seven 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 and think we'll be a beneficiary of that going forward. 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. So that the kinds of work we do in the go to go to market motion is slightly different, Kevin.

But the opportunity, I think, is equally weighted across that customer base. You know? And if you go all the way into the smaller firms, which Brian Wilson serves from a go to market perspective, and he and his teams you know, they're they're ready for turnkey solutions that work, that are reliable, and that build upon their existing tax calculation engine. And so there's a lot of receptivity at that end as well.

Kevin McVeigh: Thank you.

Operator: And our next question is going to come from Andrew Steinerman from JPMorgan.

Andrew Steinerman: Hey, guys. This is Justin Lendly on for Andrew. Most of my questions have been answered, so maybe I'll I'll circle back on the government headwinds just to clarify. I correct in saying your updated guidance only contemplates cancellations that you saw at the end of the third quarter? 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 were driven by reductions in spending, certain departments you serve? Or was it layoffs? Just any color there would be great. Certainly, in regards

Michael Eastwood: to our forecast, and we always contemplate what has occurred. Plus, we always look at the upcoming pipeline So we have contemplated, within our forecast, any other activity that might transpire in Q4. So we believe that has been reflected already. And then 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.

Andrew Steinerman: Great. Thank you very much. Indeed.

Operator: And our next question is going to come from Stephanie Price from CIBC. Just a few quick clarifications for me. 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 twenty six 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?

Michael Eastwood: I would say two, Stephanie. Two 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 So if you take those two, that would be more than 100 basis points, which leads to a third key factor which relates to a question earlier, is we're continuing to make investments and we'll continue to make investments wherever we see the returns are sufficient there. But the two key drivers of margin expansion, operating leverage and then our internal initiative to transform and automate how we work.

Stephanie Price: Perfect. Thank you. And then 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 just in demand or adoption rates within legal?

Michael Eastwood: I think the new product launch is certainly help us, significantly there. Retention rates continue to be very good within that business. Pricing is relatively stable there. Certainly, Stephanie, we always add talent as part of our operating mechanism. So I think those are the key drivers, for us. Steve, you may want to add? Yes. Stephanie, the only thing I'd add

Stephen John Hasker: 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 it's too early to sort of call that one way or another.

But we're starting to see that TAM expand and we think that's going to be a multiyear phenomenon and one that we plan to have the products and the propositions to fully benefit from.

Stephanie Price: Great. Thank you very much. Our next question is going to come from Doug Arthur from Research. Yeah. Thanks. I think most things have been covered.

Doug Arthur: Steve, you mentioned the acute talent shortage issues in some of the big accounting firms. Is that a is there a similar narrative in legal or not so much?

Stephen John 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. And so 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 in to in the door at the entry level and then you know, going through the apprenticeship. That's required. And 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.

In recent years. And all the while, the number of audits goes up, the 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. So 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.

Doug Arthur: Thank you. My pleasure, Doug.

Operator: And our next question is going to 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 it doesn't seem like you need to partner with others, but is there an advantage to doing that because of is there a disadvantage of going that route? Thanks.

Stephen John Hasker: Tony, I won't comment on their approach. But what I will say is that we're very confident in our position. Of having a co counsel for legal, which is now fully integrated with our content and editorial expertise. So 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, very specific area of the law.

We think, some you know, an innovative team has developed solution that can work in with co counsel So we're we're keen to explore that ecosystem But in terms of distribution, you know, we obviously have the leading distribution in the in the industry at the moment, so we don't see a need don't there. But thanks for the question, Tony.

Toni Kaplan: Thank you.

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

Michael Eastwood: Thank you.

Stephen John Hasker: Thank you.

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

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