Earnings call transcript: Thomson Reuters Q2 2025 sees AI-driven growth

Thomson Reuters Corp reported its Q2 2025 financial results, showcasing robust performance driven by innovation in AI-enabled products. The company achieved a 7% organic revenue growth, aligning with expectations, and reported an adjusted EPS of $0.87, a slight increase from the previous year. Despite the positive earnings report, the stock’s price fell by 8.99% to $199.82. According to InvestingPro data, the stock currently trades above its Fair Value, with a market capitalization of $81.69 billion. The company maintains strong financial health with an overall GOOD rating, reflecting investor concerns about future growth amidst a competitive landscape.

Key Takeaways

• Thomson Reuters achieved 7% organic revenue growth in Q2 2025.
• Adjusted EPS rose to $0.87, slightly up from the previous year.
• The stock price dropped by 8.99% amid market concerns.
• Significant investments in AI and innovation continue.
• Free cash flow increased by 4% to $843 million.

Company Performance

Thomson Reuters reported steady growth in Q2 2025, with a 7% increase in organic revenue, consistent with market expectations. The company’s focus on AI-driven product innovation, particularly in its "Big Three" segments—Legal, Tax & Accounting, and Corporates—contributed to a 9% organic revenue growth in these areas. This positions the company strongly in a competitive market that is increasingly embracing AI solutions.

Financial Highlights

• Revenue: $1.78 billion in Q2 2025, a 7% increase YoY.
• Adjusted EBITDA: $678 million, up 5% YoY.
• Adjusted EPS: $0.87, compared to $0.85 in the previous year.
• Free Cash Flow: $843 million, a 4% increase YoY.

Outlook & Guidance

For the full year 2025, Thomson Reuters expects organic revenue growth between 7% and 7.5%, with its Big Three segments projected to grow by approximately 9%. The company maintains its 2026 financial framework and anticipates an adjusted EBITDA margin of around 39%. Continued investment in AI and product innovation is a key focus, with over $200 million allocated for GenAI initiatives in 2025.

Executive Commentary

CEO Steve Hasker emphasized the company’s growth prospects, stating, "We continue to see organic revenue growth in the range of seven to 7.5%, including approximately nine percent for the big three segments." Chief Product Officer David Wong highlighted the capabilities of their AI systems, noting, "AgenTic AI systems can complete complex multistep assignments," underscoring the company’s commitment to technological advancement.

Risks and Challenges

• Competitive pressures in AI and professional services.
• Talent shortages in the tax and accounting sectors.
• Potential market saturation in AI-enabled products.
• Macroeconomic uncertainties affecting global markets.
• Continued need for substantial investment in innovation.

The earnings call highlighted Thomson Reuters’ strategic focus on AI and innovation as key drivers of future growth, despite the immediate negative market reaction. With a beta of 0.43, the stock generally trades with low volatility, as noted by InvestingPro analysts. The company’s strong financial performance, including an EBITDA of $2.04 billion in the last twelve months, and forward-looking investments position it well to navigate industry challenges and capitalize on emerging market opportunities. For detailed insights and a comprehensive analysis of Thomson Reuters’ financial health and growth prospects, investors can access the exclusive Pro Research Report, available to InvestingPro subscribers.

Full transcript - Thomson Reuters Corp (TRI) Q2 2025:

Conference Operator: Day, everyone, and welcome to the Thomson Reuters Second Quarter Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the call over to Gary Bisbee, Head of Investor Relations. Please go ahead.

Gary Bisbee, Head of Investor Relations, Thomson Reuters: Thank you, Ruth. Good morning, and thank you for joining us today for our second quarter twenty twenty five earnings call. I’m joined by our CEO, Steve Hasker our CFO, Mike Eastwood and our Chief Product Officer, David Wong, who will discuss our results and a number of recent product launches and take your questions following our remarks. To enable us to get to as many questions as possible, we would appreciate it if you would 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 for currency as well as on an organic basis.

We believe this provides the best basis to measure the underlying performance of the business. Today’s presentation contains forward looking statements and non IFRS and other 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 we provide to regulatory agencies. You may access these documents on our website or by contacting our Investor Relations department. Let me now turn it over to Steve Hasker.

Steve Hasker, CEO, Thomson Reuters: Thank you, Gary, and thanks to all of you for joining us today. Good momentum continued in the second quarter, 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 and favorable expense timing boosted margins, driving profit ahead of expectations. We are reaffirming our full year 2025 outlook for organic revenue, adjusted EBITDA margin, and free cash flow while improving our interest expense and depreciation and amortization outlooks.

We continue to see organic revenue growth in the range of seven to 7.5%, including approximately nine percent for the big three segments and for our margins to rise by 75 basis points year over year to approximately 39%. Good momentum continues for many areas in our portfolio. This includes double digit organic growth from key products, including co counsel, co counsel drafting, Shore Prep, SafeSend, Piguero, indirect tax, and our international businesses. We continue to invest heavily in innovation and are pleased to have announced meaningful product launches in recent weeks. As our chief product officer, David Wong, and I will discuss shortly, we are leveraging Agentic AI to bring significant new capabilities to our legal and our tax and accounting portfolios.

These offerings leverage our authoritative content and deep domain expertise to complete complex multistep work, helping our customers increase efficiency and effectiveness. Our capital capacity and liquidity remain a key asset that we are focused on deploying to create shareholder value. In the quarter, we repaid a $1,000,000,000 maturing bond issue and remain extremely well capitalized with net leverage of only point five times at quarter end. We remain committed to a balanced capital allocation approach, and we continue to assess additional inorganic opportunities. With our estimated $10,000,000,000 of capital capacity through 2027, we are positioned to be both aggressive and opportunistic.

Now to the results for the quarter. Second quarter organic revenues grew 7% in line with our expectations. Organic recurring and transactional revenue grew 97%, respectively, while print revenue declined 7%. Our adjusted EBITDA increased 5% to $678,000,000, reflecting a 70 basis point margin increase to 37.8%, higher than anticipated due to healthy operating leverage and timing of expenses. Turning to second quarter results by segment.

The big three segments delivered 9% organic revenue growth. Legal organic revenue grew 8% for the second consecutive quarter, driven by continued momentum from Westlaw and co counsel and solid government growth. On the topic of government, we are pleased to achieve to have achieved in process status for The US FedRAMP program, demonstrating our strong commitment to meeting the rigorous cloud security requirements of US federal agencies. Corporates organic revenue grew 9% driven by offerings in our legal, tax, and risk portfolios and the segment’s international businesses. Tax and accounting organic revenues grew 11%, driven by our Latin American and US businesses.

Reuters News organic revenues rose 5%, with all major lines of business contributing. And lastly, global print organic revenues met our expectations, declining 7% year on year. In summary, we’re pleased with our q two results. Let me close my prepared remarks with a few thoughts on the exciting pace innovation that continues here at Thomson Reuters. We continue to make good progress executing against our product vision as we work to build AI more deeply into our offerings.

In recent months, we have taken an important step forward introducing a number of agentic AI offerings across our legal and tax and accounting portfolios. As David will cover, we are really excited by these agentic offerings, which embed our AI capabilities deeper into customer workflows and more meaningfully leverage our key content assets and deep subject matter expertise. By enabling our solutions to complete more complex tasks, AgenTik AI creates an opportunity for Thomson Reuters to play a larger role in the success of our customers. Initial customer feedback on our new offerings is encouraging, and we look forward to providing updates as we continue to deliver against our road maps in the remainder of 2025 and beyond. Now let me hand it over to David to discuss these developments in more detail.

David Wong, Chief Product Officer, Thomson Reuters: Thanks, Steve. I share your excitement over the accelerating pace of innovation. Let me start with a few thoughts on AgenTic AI, which is a key capability driving the new offerings I’ll discuss. There are many of agentic, so let me share what we believe are the core characteristics of agentic systems. They use advanced reasoning models supported by an AI assistant that can help orchestrate complex work.

They have access to tools, and they can use these tools to complete tasks. And they can adapt and respond to new information, changing course as needed to achieve their outcomes. And due to these capabilities, AgenTic AI systems can complete complex multistep assignments. Our AgenTic platforms have been in development for more than a year, and we see them as transformational to our ability to serve our professional markets. We also believe Thomson Reuters is uniquely positioned to deliver professional grade agentic AI solutions since we bring those four essential capabilities.

First, we offer leading AI assistance with advanced reasoning capabilities in co counsel legal and co counsel for tax audit and accounting. Second, we have comprehensive proprietary content and insights in Westlaw, Practical Law, and Checkpoint. Third, we have a portfolio of leading workflow software tools and analytics. And finally, we have substantial domain expertise through our more than 2,500 legal and tax editors and subject matter experts. In our agentic workflows, our agents initially follow predetermined steps and guidelines mapped out by our domain experts, leveraging our content, software, and tools along the way.

This approach allows them to deliver on real world tasks, helping professionals move beyond prompting and start delegating. I’ll now highlight several key recent product launch. In June, we launched CoCounsel for Tax, Audit, and Accounting, an agentic AI platform powered by the 2024 acquisition of Materia. CoCounsel for TACS automates a growing number of complex, multistep tasks ranging from client file review to memo drafting to compliance checks. It leverages training by our subject matter experts and Thomson Reuters’ authoritative checkpoint content to eliminate manual work, increase efficiency, and improve accuracy, all with the transparency, precision, and accountability professionals require.

In mid July, we announced two exciting new software tools powered by co counsel for tax, Ready to Review and Ready to Advise. Ready to Review is an agentic AI powered tax preparation solution that automates the creation of the first draft of a tax return. AI agents autonomously work to extract and map data, run that data through our tax engines, and diagnose and resolve errors that come up. This results in a quality first draft return while eliminating significant manual effort and improving accuracy. Ready to Advise is an AgenTic AI powered tax planning advisory solution for CPA firms.

The solution leverages our tax expertise and authoritative content and analyzes the client’s data to identify tax planning strategies tailored to that client, which are ranked by relevance and potential impact. It provides step by step guidance, supporting authoritative knowledge, and workflow tools that enable CPA firms to take a scalable approach to tax advisory services, generating incremental revenue for their businesses. Used together, accountants can save time through Ready to Review automation, which can be redirected to the delivery of higher value services, including revenue generating advisory work with the help of advise. Ready to advise is in the market today, and ready to review is currently in beta with a commercial launch scheduled for the fourth quarter. Yesterday, we announced a series of exciting new capabilities for our law firm and general counsel customers with the launch of co counsel legal, a next generation AI offering that combines a new Westlaw experience, practical law, co counsel core, and CoCounsel Drafting into a single, unified solution.

With this new offering, CoCounsel orchestrates complex workflows leveraging our Westlaw and Practical Law content and tools to deliver unique and valuable outcomes across litigation, transactional work, and regulatory analysis. And in addition to deeper product integration, there is significant incremental capability and innovation in co counsel legal, including deep research and guided workflows, which I’ll briefly explain. Deep research, which is integrated into co counsel legal and is also available through the new Westlaw Advantage product, is our latest and largest step change in legal research capabilities. Deep Research is the legal industry’s first professional grade agentic AI research capability built to mimic the work of experienced legal researchers. Planning, reviewing, and adapting when encountering new information during a research process.

This is not just generic AI layered on top of legal content. We’ve built something fundamentally more advanced. AI agents trained, equipped, and trusted to use Westlaw’s exclusive research toolset with the curated and up to date content of Westlaw and Practical Law to move through complex legal research workflows with unprecedented speed and precision. With Westlaw Advantage, what used to take hours now takes minutes, and what used to be manual is now orchestrated by AI agents designed specifically for the legal domain. The resulting outputs are highly structured and detailed legal research reports that outperform other AI research capabilities and set a new standard when compared to our market leading AI assisted research tool in Westlaw Precision.

A second significant advancement is the introduction of our agentic guided workflows to co counsel. These new workflows leverage our AI agents to execute multistep tasks scripted by our experts drawing on Westlaw and practical law knowledge. In the third quarter, we plan to launch more than 15 of these guided workflows spanning both litigation and transactional law and including a number of practice areas. We believe they will resonate strongly with law firms, in house legal teams, courts, and district attorneys. Let me share an example of a new guided workflow.

The analyze merger control filing requirements workflow streamlines complex multi step compliance obligations for M and A transactions by analyzing deal information against practical laws global content to then identify potential risks and requirements, generate automated filing checklists, and provide actionable insights. I’ll now turn it over to Mike to review our financial performance.

Mike Eastwood, CFO, Thomson Reuters: Thanks, David. 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 second quarter revenue performance for our big three segments. Organic revenue grew 9% in the second quarter, stable with the first quarter and continuing the strong trend from recent periods.

Legal Professionals organic revenue grew 8% for the second consecutive quarter, driven by Westlaw, co cancel, co counsel drafting, FLIR, and our international businesses. Government grew 7%. In our corporate segment, organic revenues grew 9%. Recurring revenue grew 9%, while transactional rose 4%. Direct and indirect tax, practical law, Pagaro, and our international businesses were key contributors.

Tax and Accounting delivered another strong quarter with organic growth of 11%. Recurring and transactional revenues grew 914% respectively. Our Latin America business, SafeSend, UltraTax and SurePrep were key drivers. Moving to Reuters News, organic revenue rose 5% for the quarter, driven by growth at the professional and agency businesses and from the news agreement with the data and analytics business of LSEG. Finally, Global Print revenues decreased 7% on an organic basis.

On a consolidated basis, second quarter organic revenues increased 7%. At the end of Q2, the percent of our annualized contract value, or ACV, from products that are GenAI enabled was 22%, up from 20% last quarter. As a reminder, we began to provide this metric with our Q3 twenty twenty four results as a way to help you assess our success at bringing Gen AI capabilities to our portfolio. With Westlaw Advantage now in market and in recognition of the growing number of AI driven revenue drivers, we no longer plan to comment on Westlaw Precision penetration and will instead focus on the GenAI AC metric. Turning to our profitability, adjusted EBITDA for the big three segments was $621,000,000 up 7% from the prior year period with the margin rising 130 basis points to 42.3%.

Moving to Reuters News, adjusted EBITDA was $45,000,000 with a margin of 20.8%. Global Print’s adjusted EBITDA was $41,000,000 with a margin of 36%. In aggregate, total company adjusted EBITDA was $678,000,000 a 5% increase versus Q2 twenty twenty four, reflecting a 70 basis point margin increase, 37.8%. Turning to earnings per share, adjusted EPS was $0.87 for the quarter versus $0.85 in the prior year period. Currency had no impact on adjusted EPS

: in the quarter.

Mike Eastwood, CFO, Thomson Reuters: Let me now turn to our free cash flow. For the 2025, our free cash flow was $843,000,000 up 4% from $812,000,000 in the prior year period. Higher EBITDA was the largest driver of the increase. I will conclude with an updated 2025 outlook. As Steve outlined, we are largely reaffirming our full year 2025 guidance.

We continue to expect organic revenue growth of 7% to 7.5%, with the Big three growing approximately 9%. We see a 2025 adjusted EBITDA margin of approximately 39%, up 75 basis points versus 2024. And we expect free cash flow of approximately $1,900,000,000 We are updating two guidance line items. We now see slightly lower depreciation and amortization of computer software of August, with $6.25 to $635,000,000 related to internally developed software. We expect net interest expense to be approximately $130,000,000 below our previous guidance of approximately $150,000,000 due to higher than previously forecast interest rates benefiting interest income.

Turning to the third quarter, we expect organic revenue growth of approximately 7% and our adjusted EBITDA margin to be approximately 36%. Looking forward, we remain confident in the previously provided 2026 financial framework and organic revenue growth targets for our big three segments all for 8% to 9% growth at least professionals, 9% to 11% at corporates, and 11% to 13% at tax and accounting professionals. Let me now turn it back to Gary for questions.

Gary Bisbee, Head of Investor Relations, Thomson Reuters: Thank you, Ruth. We’re ready to go ahead with Q and A.

Conference Operator: We’ll pause for just a moment to allow everyone an opportunity to signal for questions. We’ll go first to Drew McReynolds with RBC.

Drew McReynolds, Analyst, RBC: Yeah. Thanks very much, and good morning. And I appreciate the AgenTeq AI deep dive, from David. That’s, definitely helpful. And on that topic, I guess two questions.

One, can you give us a sense as of today? And I know it’s early innings. The percentage of workflow that’s currently being automated, you know, versus kind of what could be theoretically automated end to end? And just a follow-up, maybe for you, Steve, just in terms of the TAMs that you outlined back in the March 2024 Investor Day related to GenAI, just how should we think about the evolution of those TAMs as we embed kind of the agentic AI offerings into the equation? Thank you.

Steve Hasker, CEO, Thomson Reuters: Yeah. Thanks, Drew. Great questions. Look. In terms of the the amount of automation today, I think I’d I’d make two comments.

The first is that in the overall scheme of things, it’s still relatively modest, in legal, less so in tax and accounting. And the second is to that point, it it does vary by profession. So if if you look at the sort of the life of a tax professional, our tax calculation engines have traditionally you know, they they are lightning fast. They have been in place for many years, and they’re very effective in terms of producing the the calculations. What we’re doing with ready to review and ready to advise and the application of co counsel to tax and accounting and orders is automating a lot of the sort of shoulder tasks and the ancillary tasks that take an awful lot of time.

So this is this is, for example, all of the sort of document ingestion and preparation to produce the first version of a tax return, the e filing process and the follow-up, and then the advisory services that that are queued off of that that tax return cycle. And so, you know, I would say tax and accounting is it there are large portions that are automated today, but it really is some very time consuming ancillary and important tasks that are being automated as part of this end to end, ready to review, ready to advise cycle. The legal profession is different. I think legal profession is, by some some counts, 350 years old in its current form. And, you know, other than ediscovery and word processing and and and a number of other tools that have been implemented over time, the process is still fairly similar and has been for centuries.

And so we think that that generative AI and agentic AI hold promise to fundamentally automate large portions of the of the first draft process and preparation. And that’s what we mean when we talk about the the ability for TR to be performing more and more complex tasks and to play a larger role in the success of our customers. Now what we haven’t done since Investor Day early last year is update our TAMs. I think we talked about a 20% increase in the TAMs at that time. We’re certainly, we believe, on track for that.

We we we haven’t sort of externally updated those since since we sized them in the twenty twenty four Investor Day, but we’re gonna remain sort of vigilant here. And as we execute on our product vision and our road maps and we make progress, build confidence internally with our customers, we’ll be in a position, I think, to to to revise those as we head through 2026. David, anything to add?

David Wong, Chief Product Officer, Thomson Reuters: No. I would I would just add that I think our approach when thinking about our agentic investments is to start with the customer and really ask them what is the most valuable for us to be able to automate, to provide a solution. And ready to review and ready to advise are perfect examples of that, where when we talk with our customers, they’ve always said the tax preparation process is time consuming, very labor intensive, and where they want want support. And AgenTic AI just happens to be, I think, one of the the unique and perfect technologies to help those customers to to get efficiencies because the technology can problem solve, it can use tools, and it also can address the big gap, which is numeracy in AI systems. So instead of having to instead of having to teach the AI how to do math, we’ve taught instead how to use a calculator.

We’ve taught it how to use our tax engine, and that’s allowed us to be able to deliver the solution, which, again, helps help the customer. So, again, I agree with everything you said said, Steve. But, again, I would say that the way that we approach, again, identifying, the the opportunities for, where we invest with the agent to guide is starting with the customer and what their demands are.

Gary Bisbee, Head of Investor Relations, Thomson Reuters: That’s really helpful. Thank you both.

Steve Hasker, CEO, Thomson Reuters: Thanks, Drew.

Conference Operator: We’ll go next to Manav Patnaik with Barclays.

Manav Patnaik, Analyst, Barclays: Thank you. You know, I I I guess a lot of the product line of innovation is obviously a great thing to see from you guys. But I was hoping you could help us just frame, you know, your solution set versus the competition out there. You know, obviously, one of your main competitors just had a partnership with with the with one of the legal tech competitors of yours, what the internal law firms are doing themselves. Just trying to understand, like, how ahead of the curve, you know, you are perhaps with all these innovations.

Steve Hasker, CEO, Thomson Reuters: Yeah. Thanks, Manav. Again, I’ll start, and I’m sure David might may may add. So I think as I read the landscape in tax and accounting and order, I think we’re with without ready to review and ready to advise and co counsel announcements, I I would say we’re ahead of of of of competitors in terms of the announcements that may they may or may not have made. In legal, I think to your question, what we’re seeing is a sort of new era of of of competition with with a bunch of startups, particularly in in the sort of legal AI assistance space, and number of our traditional competitors sort of making announcements and and putting new offerings in the marketplace.

I think where we are differentiated and where our confidence is, if anything, growing is, first and foremost, in our content as a differentiator. So the depth and breadth of Westlaw and practical law and the deep expertise of our subject matter experts, 2,500 or more in total, gives us, we think, a differentiation, and it’s a durable one. Secondly, we believe that having a single integrated solution that includes content and a best of breed AI assistant is a winning strategy, and it gives us a sort of a single strategic play and puts us, we think, on a faster innovation and development road map. And I think some of the moves we’ve seen from from competitors is a response to that single integrated solution, and and and and and, therefore, it it helps build our confidence.

David Wong, Chief Product Officer, Thomson Reuters: Yeah. I I agree agree with you, Steve, there. Again, I I would say that, again, in tax and accounting, I think we are ahead of the competition with co accounts for tax audits and accounting as well as ready to review and ready to advise. I think that they are unique solutions in the market. On the legal side, I would just highlight one one additional thing, is deep research in Westlaw.

We believe that this is setting a new standard in the marketplace for legal research. And if you compare and contrast our deep research capability versus those available from others in the market, ours is the only one which is a legal deep research, agent technology, where we have trained, built, and taught these AI agents to perform research like a legal researcher. And that’s an important distinction because, the general solutions from an OpenAI or a Gemini or what have you, they perform generic research, like doing, you know, a college book report or something like that. What we’ve built with Westlaw Deep Research is a researcher which has been trained like an experienced lawyer to explore the law, to look at arguments and counterarguments, and to be able to consider and explore issues which we related to how you might prepare for a litigation. And that’s something which I think we’re we’re one of the only in the market that have actually created.

So we’re really proud of the the work we’ve done there, that that we have set a a new standard for for research with with this technology.

Manav Patnaik, Analyst, Barclays: Got it. Thank you.

: Thanks, Manav.

Conference Operator: We’ll go next to Scott Fletcher with CIBC.

: Good morning. Another good quarter from you guys. I was wondering if we could dig into the margin performance in the quarter and what some of the drivers were there. And then with guidance unchanged, why that might not be flowing through to the rest of the year?

Mike Eastwood, CFO, Thomson Reuters: Sure, Scott. I’ll break that down by second quarter and then also for the full year. If you look at our second quarter margin performance, we were very pleased with the three key factors for Q2, Scott. First, we had good operating leverage. As I’ve shared in the past, at that roughly 7% to 7.5% organic revenue growth range.

We’re generating about 110 basis points of operating leverage, so good leverage in Q2. Second, we did have some timing of expenses in Q2 that will reverse during the second half of the year. And third benefit in the second quarter was revenue mix, including some of our print products. If I now go into the third quarter, EBITDA margin at 36% is less than Q2, three factors that I would mention there. We have the normal seasonality of our tax and accounting professional business in Q3 that we experience each year.

Second item, some of the timing benefit that we experience in Q2 and the first half of the year will reverse, including some integration costs associated with SafeSyn and other recent acquisitions. The third item is in regards to the tough comp at Reuters, given that Q3 twenty twenty four did include some one time NAI revenue that has a profitability and revenue flow through. To your question in regards to not increasing our full year guidance, most importantly, I would say we remain very confident in delivering our full year guidance of approximately 39%. And we are not raising it for the three reasons in regards to the favorable revenue mix in the first half of the year. We do not anticipate that continuing.

The timing of expenses will reverse in the second half of the year, including those integration expenses. But I and we do have good line of sight, Scott, into Q3, Q4 EBITDA margin. And once again, we’re very confident in delivering to the guidance of approximately 39%. Just on the topic of margin, I’ll take it into 2026. We have committed, which I reaffirmed today, for 2026, we said margin will expand by at least 50 basis points.

We remain confident in delivering on the 2026 margin expansion also.

: Okay. Great. Great color there. And and then as a follow-up, maybe maybe potentially for David. Sure.

Can you touch on the expense profile of some of the newer products, like be like something like a deep research? And if there is a potential impact to margin if if adoption of those does, you know, meet or exceed targets?

Mike Eastwood, CFO, Thomson Reuters: Scott, I’ll I’ll start there. We have certainly contemplated, all of the costs, both operating expense and capital for all of the product launches that David and capabilities that David discussed today. We remain very confident with our capital intensity, which is roughly 8% for calendar year 2025. And then also if you look at our investments in GenAI of approximately 200,000,000 plus, if you look at all of the products today, including deep research, we have all of those costs, OpEx and CapEx built into our forecast and into our guidance, and we remain very confident. David?

David Wong, Chief Product Officer, Thomson Reuters: Yeah. I I think that’s well said, Mike. I think it’s only other thing is, Mike keeps us very diligent on, managing our our pricing and profitability for new product offerings. And so, we are also confident that, we’re, we’re able to, provide this additional value to our customers, price effectively and earn price for it, and continue to earn healthy healthy margin off of that. But we we generally don’t comment about what the the cost profile looks like for those new features.

Mike Eastwood, CFO, Thomson Reuters: Yeah. Scott, David makes a really excellent point in regards to if you look at the variable cost, we’re doing a terrific job in regards to managing the flow through, associated there with including the cloud cost.

: Alright. Thank you very much. Yep. Thanks, Scott.

Conference Operator: We’ll go next to Vince Valentini with TD Cowen.

Vince Valentini, Analyst, TD Cowen: Hey. Thanks very much. First, I misunderstood Drew’s question, but I’m gonna ask it the way I thought he asked it in in a different way. What percentage of your internal workflows are automated with AI or something equivalent at this point? And and where is the opportunity set there over the next couple of years to actually just make your own margin better and and become more efficient.

Question one question two, just to tag on the on the last one on margins. Just just to be clear, Steve, here or sorry, Mike. Your margins not changing for this year is just those factors you laid out. You’re not putting in any sort of buffer for maybe there’s some macro weakness or maybe there’s some weakness in pricing from what competitors are doing or maybe there’s another acquisition that comes with a bit of integration cost and drag on margin. Those are not factors in why you’re you’re staying with the margin guidance.

It’s only the ones you you cited. Thanks.

Steve Hasker, CEO, Thomson Reuters: Yeah. Vince, it’s Steve. I’ll I’ll I’ll start, and I’m sure Michael answered the second part of your question. So with regard to the internal application of GenAI, I can’t give you referring back to Drew’s question, I can’t give you the sort of percentage of tasks that are performed across the company that are that are being automated by GenAI. What I can say is that we have been very aggressive in making a set of internal AI tools available to every single one of our colleagues, and we’re very pleased with the uptake on a daily basis by the majority of our of our colleagues.

We in the in the in that spirit, we continue to pilot many proof of concepts. And in terms of the the application of DNA across across go to market, across the support functions, across product and engineering, and so forth. And we’re optimistic about the future potential to drive increased speed, higher quality, and productivity from our operations. I’m not gonna give you a, you know, a quantification of the benefits today because I think it’s a little bit too early, but we are seeing some early successes, particularly, for example, within our software engineering team and in our customer support application. So there’s some upside there, Vince, but but how much how much and over what period of time?

I think it’s a bit too early to to to give you a guide on that.

Mike Eastwood, CFO, Thomson Reuters: Mike? Vince, in regards to your second question, my response to Scott’s questions on EBITDA margin, I think touched on the key drivers there. Your direct question, there are no weaknesses in pricing that we have assumed. To David’s point earlier, we’re confident in regards to our pricing and the related flow through.

Conference Operator: We’ll go next to Next

: question, please.

Conference Operator: We’ll go next to Tim Casey with BMO.

Gary Bisbee, Head of Investor Relations, Thomson Reuters0: Hi. Good morning. Just you continue

Steve Hasker, CEO, Thomson Reuters: to

Gary Bisbee, Head of Investor Relations, Thomson Reuters0: generate strong free cash flow, and your balance sheet is relatively underlevered. I wonder how you’re thinking about excess capital. I mean, given the valuation on your shares, I assume share buybacks are are not a priority. But, Mike, maybe if you could update us on how you’re thinking about a potential return of capital transaction Sure. Before q two next year.

And then, Steve, you know, given your free cash flow profile, you know, you you do have the option to turn up the CapEx intensity to drive growth or also maybe an update on the M and A environment given the balance sheet? Thanks.

Mike Eastwood, CFO, Thomson Reuters: Sure, Tim. I’ll start The $10,000,000,000 of capital capacity by the 2027 holds. Certainly, if you were to go into 2028, which we’re not today, that $10,000,000,000 would further increase. As you referenced, balance sheet remains very strong, net leverage of 0.5 times.

In regards to the potential deployment of that $10,000,000,000 of capital capacity, First priority remains strategic M and A. We think the strategic M and A has the highest return potential from our lens. We remain very focused on our existing big three and bolstering those similar to what we’ve done in the last two point five years. I think we have deployed about $2,600,000,000 of capital via acquisitions in the last two point five years there. We do not see a need for a fourth leg, but we remain very interested in expanding our areas such as risk fraud and compliance, growing our indirect tax business, and also growing our international business.

So strategic M and A is top priority. With that said, we will, I believe, continue to grow our dividends. In the out years, we have four consecutive years of dividend growth at 10%. The next cycle will be our January board meeting, so I’ll hold any speculation on what that increase might be until then. In regards to share buybacks, we made a commitment at the March 2024 Investor Day to return 75% of our free cash flow.

Our dividends cover about 55% of that. That would leave about $400,000,000 that we’d need at 75%. When I provided that 75% framework, that was over a time horizon there. For calendar year 2025, would we consider an NCIB share buyback potentially? We have our next board meeting in September.

We have our annual capital strategy discussion with the board in September. That is a topic. So could there be an NCIB yet this year? Potentially, if so, I think it would be within that four hundred to five hundred million dollars range. And I think you also asked about NCIB share buybacks into 2026.

My response there would be, I think that 75% return of free cash flow is a good framework for both twenty five-twenty six. So that would indicate, Tim, we would need roughly 4 to 500,000,000 of share buybacks in the calendar year to achieve that.

Steve Hasker, CEO, Thomson Reuters: And then, Tim, with regard to capital intensity and m and a, so capital intensity, as you can imagine, we we have some pretty vigorous debates internally on both the absolute number and the way we quantify it, the way Mike thinks about it is percentage of revenue and also the efficiency. In other words, the bang for the buck we’re getting, and and particularly how much of that capital is being spent on new new, you know, innovations and builds versus keeping the lights on and service health remediation type activities. I I would say the the biggest sort of cap or or or or throttle on that absolute number is is the availability of top flight engineering talent because a lot of it is capitalized software development. And so we’re always looking to expand our our talent in that area, but I’d say that’s one that’s one cap that sort of prevents it getting far out and and too large. And then, you know, Jason Escaravage has done a great job of of improving efficiency of our KTLO and service health remediation work.

And Joel Horan, our head of engineering, continues to to attract, retain, develop great talent. So it but it’s a it’s a a vigorous, I think, healthy and ongoing debate as to what the right level is and how much should go to new versus versus remediation and so forth. On on m and a, you know, I I I use the the language we can be both aggressive and opportunistic, and that is our stance. You know, we’re we’re looking for acquisitions that that that better serve our enhance our proposition to customers in the big three. I would point, you know, particularly to areas like risk, AI, further further forays into the sort of generative and agentic AI area, and also in indirect tax.

But we’re starting to see, I think, some signs that we’re outgrowing some of the some of the competition on the back of the Paguero acquisition. So those are a few of the areas we’ll be both aggressive and opportunistic and just make sure that it’s very much in our big three customers’ interests in

Mike Eastwood, CFO, Thomson Reuters: anything we do. Tim, just to round this out, for 2026, capital intensity, I would assume 8%. We will have capital intensity for 2025 of approximately eight. We just completed what we call our enterprise prioritization committee, which is our prioritization process for ’26, which is ongoing, but we spent a lot of time on ’26 this time of the year. Very comfortable saying that it will be approximately 8% capital intensity for, 2026, and we’ll continuously assess the level of AI, Gen AI investment, which is $200,000,000 plus this year.

David Wong, Chief Product Officer, Thomson Reuters: Thank you.

: Thanks, Jim.

Conference Operator: We’ll go next to Andrew Steinerman with JPMorgan.

Gary Bisbee, Head of Investor Relations, Thomson Reuters1: Hi. Two questions on Westlaw Advantage. Is Westlaw Advantage a separate module for PRECISION, meaning you have to buy, the agentic, deep research capabilities in addition to Precision, so there’ll be a penetration story there? And then second question, this is for you, David. Is there, not just with Advantage, but broadly this year with the product upgrades, a better integrated user interface across the whole Westlaw co counsel suite?

I asked because I was at a demo of the Westlaw co counsel products earlier this year, and it just felt like separate modules with separate user logins at the various, kiosks at that time.

David Wong, Chief Product Officer, Thomson Reuters: Yeah. Thanks for the the the question. The on the first, Westlaw Advantage is a new subscription tier for Westlaw. So we’ve also had some coverage about how it’s also, quote, unquote, the final Westlaw final Westlaw tier. You do need to to upgrade.

You need to adopt Westlaw Advantage to get, the deep research capabilities. So Westlaw Advantage includes a number of, of new innovations, and new AI features. Deep research is the is the the sort of the crown jewel in this in the in the selection of new features which are included in Westlaw Advantage. So but you do need to subscribe to Westlaw Advantage to get access to deep research. So that’s, just to clarify that, on your first question.

On the, the experience interface, this is the second priority for us, which is to continue to improve and to enhance the user experience for for our customers. With the launch of co counsel legal, which we just announced this, this week, we are introducing a much more integrated offering where co counsel, Westlaw, and Practical Law are, are more seamlessly integrated into a single experience, and the capabilities of, Westlaw are available via co counsel and and vice versa. So, I think if you were to see a demo, or to visit us at Ilta, for example, you’d probably see a much more integrated experience. And we’re gonna get going to continue to iterate and to improve that experience over over the next next quarters. But, it is a it is a top priority for us to, to continue to improve and and, enhance the user experience, for both co counsel and Westlaw.

Gary Bisbee, Head of Investor Relations, Thomson Reuters1: That makes total sense. Thank you.

: Great.

Conference Operator: We’ll go next to Aravinda Galappasich with Canaccord Genuity.

Manav Patnaik, Analyst, Barclays: Good morning. Thanks for, taking my questions. On tax and accounting, obviously, very strong EBITDA growth yet again, similar to what we saw in Q1. Perhaps for Mike, is that predominantly sort of that timing benefit or the the the the timing of the integration cost with respect to SafeSend that you were referring to, or was there another component to that that probably deserve to be called out? Maybe that’s sort of the the my quick follow-up.

And and and more generally, perhaps for Steve, can you just talk to what your client cohorts look like? I mean, when you think of the the, you know, the density of the new product innovations, I’m sort of wondering what proportion of the clients are sort of open to quickly sort of gravitating towards the latest product and perhaps paying up for it. And I assume there is a cohort that that’s probably, you know, more, you know, more more of a laggard from that perspective. I was wondering if you can give us a sort of high level description on that front as well. Thank you.

Mike Eastwood, CFO, Thomson Reuters: Erwenda, I’ll start with your question in regards to Tax and Accounting Professional EBITDA. You are correct in your assumption in regards to Q2 EBITDA margin. It’s the timing of the SafeSend integration. Those integration expenses that were initially planned for Q2 will now occur in the second half of the year. With that said, tax and accounting professional on a full year basis, along with legal professionals, will continue to have very strong full year EBITDA margins, fairly comparable within a percent or two of each other on a full year basis.

But your core question, SACE and integration expenses flipped into the second half of the year.

Steve Hasker, CEO, Thomson Reuters: And then, Aravinda, thanks for the question with regard to the sort of customer cohorts. Look, it does vary between legal and tax accounting audit and risk customers. What I would say, though, is that it’s very rare to find a customer who is not interested in our AI offerings. So almost all, you know, wanna hear about those offerings, wanna test, kick the tires on those offerings. And what we see is lots and lots of proof of concept trials comparison with with some of the competitive products, so on and so forth.

And we’re happy with the the way we show up through through that process. I would say 20 to 30% of, for example, are looking to aggressively lean into AI as a means to differentiate their firm in various ways, And that’s, you know, the the and that’s firms of all different shapes and sizes, whereas the rest of the firms have accepted that they need to adopt AI, that that they need to provide the best tools to to their to their talent and to their lawyers and are going through, you know, various waves of adoption, and that’s sort of starting to pick up. It’s still still pretty early days, but that’s, I think, where we where we sit. And it’s a similar picture in the tax and accounting and audit where, you know, it’s very rare to find a firm, large, medium, or small, that isn’t interested and isn’t sort of thinking through and adopting, but probably a minority of firms are are really aggressively moving at this stage.

Manav Patnaik, Analyst, Barclays: Thank you. I’ll pass the line.

Conference Operator: Thanks, We’ll go next to Toni Kaplan with Morgan Stanley.

Gary Bisbee, Head of Investor Relations, Thomson Reuters2: Thanks so much. You mentioned the percent of ASV from products that are Gen AI enabled was 22% this quarter. I was wondering if there was a way to break that into legal, tax and accounting, and corporates. If you don’t wanna sort of give the specific numbers just, I guess, directionally, have you seen more adoption in, you know, specific areas versus others? And then maybe just as a follow on, we talk so much about legal AI products, but I know that you see a big opportunity in the tax and accounting side as well.

Maybe, you know, as big if not bigger. And so just wondering what you think unlocks that value, in the tax and accounting space. So two separate questions there, but thank you.

Steve Hasker, CEO, Thomson Reuters: Yeah. Tony. Mike, let me start. I it’s worth stating. I think, Tony, you’ve heard this from us before.

There’s a particular sort of characteristic within the tax and accounting and audit spaces, which is an acute talent shortage. So as the number of audits goes up and the complexity of audits goes up, the number of tax returns goes up and the complexity of those returns goes up, there is not the supply of young talent coming through undergraduate and graduate programs who want to become CPAs. And so the the the the profession faces a very significant challenge, and that is talent shortages. And the technology, therefore, has a really important role to play in addressing that fundamental issue. And so if anything, we see more interest and potentially more uptake.

I think it’s too early to call it, but uptake from our tax and accounting and audit customers than we do in the other professions we serve. So, Mike?

Mike Eastwood, CFO, Thomson Reuters: Tony, on your first question, we don’t break down externally that 22% of Gen AI enabled. I would say to date, the larger portion of that 22% is legal. I don’t think you’ll be surprised because of the Westlaw precision that was Gen AI enabled, and so we had a really great start with that. As we progress now going forward, I think you’re gonna see an increase in each of the three segments, Legal, Corporates and TAP, just given the number of product launches in Q3 of this year. With that said, although corporates will increase with co counsel for corporates and other products and TAP will increase for all the products that David discussed today, legal over the time horizon will continue to have the larger portion of that just because of the scale of legal, the scale of Westlaw Advantage.

And as we go forward, we’re gonna be talking more and more about the suite of products, not just about Westlaw Advantage, Westlaw co counsel, practical law, kinda all in. Hopefully, that’s helpful, Toni.

Conference Operator: Thank you. We’ll go next to Samir Yaghi with Scotiabank.

Gary Bisbee, Head of Investor Relations, Thomson Reuters3: Hi. Good morning. Thank you for taking my question. I wanted to ask you a question on free cash flow. As we roll into the second half, so far, generated close to $840,000,000 Your guidance is 1,900,000.0 Could give you know, provide us some puts and takes on on working cap and and the payments and and and lower payments, I guess, that you will have less to pay, maybe taxes that we should be aware of in order to model the back half?

And and also on the guidance again, you know, so far this year, you have in first half, your revenue growth has been 2%. Your guidance is three to three and a half. Can you maybe just help us understand what’s going to accelerate in the back half to close that gap? Thank you.

Mike Eastwood, CFO, Thomson Reuters: Sure, Meyer. In regards to free cash flow, I’ll start with full year. Our guidance is approximately $1,900,000,000 We’re very confident in achieving the $1,900,000,000 There are some variance between H1 and H2. In March of each calendar year, we pay our annual incentive plan bonuses, which is a drag on free cash flow in Q1 and the first half of the year. If you look at individual items that impact working capital, that is the single largest item.

But I have strong confidence in the full year on the 1,900,000,000 If I take free cash flow one step further to 2026, our guidance is $2,000,000,000 to $2,100,000,000 I have strong confidence also in delivering on the 2026 free cash flow. In regards to your question on revenue, you referenced percentages associated with total revenue growth. I want to focus on organic growth. Once again, for the full year, it’s 7% to 7.5%, 9% for the big three, which we have confidence in delivering. From my chair, if I look at the second half of the year and the bookings that we incurred for the first semester, I have strong confidence in regards to the revenue for Q3, Q4.

Also with the healthy pipelines that we have in Q3, Q4, I have very strong confidence. Another key factor is in H2, we have significantly easier comps for both the Reuters business and Tax and Accounting Professional. You’ll remember in the 2024, we had some significant OrdersGenerAI revenue, and we also had some factors with TAP that makes it an easier comp this year. So those are some of the key items that we have as we look at the second half of the year revenue and the full year, but we have strong confidence on delivering to that 7% to 7.5% for total TR and 9% for the big three. The key factor there is the book of business, the underlying bookings is very strong, the pipeline is strong, we have easier comps in the second half of the year.

Manav Patnaik, Analyst, Barclays: Thank you.

Conference Operator: We’ll go next to Jason Haas with Wells Fargo.

Gary Bisbee, Head of Investor Relations, Thomson Reuters4: Hi. Good morning, and thanks for taking my questions. I’m curious if you could talk about what sort of price increase your customers will see if they upgrade from Westlaw Precision with AI to Westlaw Advantage. If you don’t wanna be too specific on the percentage, which I understand, know, how how does it compare from the the step up to Westlaw Precision with AI? I’m trying to understand, you know, this is a a big step up in value, and you’ll be able to price, you know, even more for it than the price increases we’ve been seeing previously.

Thank you.

Mike Eastwood, CFO, Thomson Reuters: Yeah. Jason, I’ll provide, some color on that. We’ll continue, no surprise, to price for value, over the time time horizon. As we move forward, and I’ll intentionally use the phrase commercial packages to my comment earlier versus point solutions looking at the collection of offerings, it will include a combination of a premium at the initial sale, but then also higher out year price increases. So you’ll see a continued opportunity for sustained acceleration from all of our businesses.

As a result of that, that gives us confidence in delivering for ’26 ’25 and 2026 guidance. But I would encourage you to focus on the overall suite of versus products. So there will be a step up, and there will be, out year increases.

Gary Bisbee, Head of Investor Relations, Thomson Reuters4: Got it. That’s very helpful. Thank you. And as a follow-up, I was curious if you could comment on the size and growth of co counsel. So Harvey recently disclosed they’re doing $100,000,000 of ARR.

So I was curious how co counsel compares to that. Thank you.

Mike Eastwood, CFO, Thomson Reuters: Yeah. We don’t disclose on an individual product, level. I would say we are very, very pleased, with the progress of co counsel across the, total TR.

Gary Bisbee, Head of Investor Relations, Thomson Reuters4: Got it. Okay, thank you.

: Sure. Thanks, Josh.

Conference Operator: Our next question comes from George Tong with Goldman Sachs.

Gary Bisbee, Head of Investor Relations, Thomson Reuters5: Hi. Thanks. Good morning. Sticking with the topic of AI, are you seeing different adoption curves for AI tools between large enterprise clients versus mid market or smaller firms? And how are you tailoring your go to market strategies accordingly?

Steve Hasker, CEO, Thomson Reuters: Yeah. Thanks, George. So I think what’s interesting in this sort of AI revolution is that we’re seeing a pretty even demand curve across the different segments. So relative to when we would put out a new version of Westlaw or a new version of practical law in the legal segment, and it would very much be the sort of the largest, most sophisticated firms with the most the most evolved sort of chief knowledge officer groups and so forth, they were the first customer set. Whereas now we see sole proprietor, you know, sole operator lawyers taking up co counsel and and wanting to hear about the latest version of of Westlaw if they’re if they’re in a litigation business.

And so, you know, I think that’s true of of the tax and accounting side of things as well. So it’s a slightly different and and potentially more attractive dynamic for us.

Gary Bisbee, Head of Investor Relations, Thomson Reuters5: Got it. That’s helpful. And then can you talk a little bit about what internal benchmarks or KPIs you’re using to measure the ROI of AI investments, particularly in terms of, customer retention or customer upsell rates or the percentage of ACV that’s coming from AI?

Mike Eastwood, CFO, Thomson Reuters: Yeah. George, I think it’s a combination or convergence of all the items that you mentioned there. I certainly look at it from a gross margin perspective, just given in the last two and a half years, we have a different type of cost in regards to the large lingual model, pings or searches associated with that, the cloud cost, etcetera. Customer retention, we’ve talked a lot about in the last few quarters. That continues to be a key focus item.

And then also the adoption rate because some of these new offerings are really important for us and we track the adoption and usage on a monthly, quarterly basis. So it’s really a convergence, George, of the items that you mentioned, not solely one item.

Steve Hasker, CEO, Thomson Reuters: Very helpful. Thank you.

Drew McReynolds, Analyst, RBC: Alright. Great. I think

Gary Bisbee, Head of Investor Relations, Thomson Reuters: we’ll end we’ll end the call there. So thanks, thanks, everybody, for your time.

: Have a good day.

Conference Operator: This does conclude today’s call. Thank you for your participation. You may now disconnect.

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