Thomson Reuters Corp /Can/ Q1 FY2026 Earnings Call

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

Thanks, Margo. Good morning, and thank you all for joining us today for our first quarter 2026 earnings call. I'm joined today by our CEO, Steve Hasker; our CFO, Mike Eastwood; and our incoming CFO, Gary Bischoping. Steve and Mike will discuss our results, and then we'll take your questions following our prepared remarks. Throughout today's presentation, when we compare performance period-on-period, we discuss revenue growth rates before currency as well as on an organic basis. We believe this provides the best basis to measure underlying performance of the business. Today's presentation contains forward-looking statements and non-IFRS and other supplementary financial measures, which are discussed on this special note slide. Actual results may differ materially due to a number of risks and uncertainties discussed in reports and filings that we provide to regulatory agencies. You can access these reports on our website or by contacting our Investor Relations department. Let me now turn it over to Steve Hasker.

Thank you, Gary, and thanks to all of you for joining us today. Before I begin our prepared remarks, I'd like to recognize our colleagues at Reuters, who learned yesterday that they have won 2 2026 Pulitzer Prizes for journalism, bringing the total Pulitzer Prizes to 15 since 2008. So congratulations to Alexander and everyone at Reuters. We have had a strong start to 2026 with revenue growth ahead of our prior expectations and margins in line. Total company organic revenues rose 8%, up from 7% throughout 2025, driven by 9% growth from the Big 3 segments. We are reaffirming our full year 2026 outlook for organic growth in a range of 7.5% to 8%, including approximately 9.5% for the Big 3 segments and for our margins to rise by 100 basis points year-over-year to approximately 40%. Good momentum continues from many areas in our portfolio. This includes double-digit growth from key products, including CoCounsel, Pagero, SafeSend, SurePrep and our international businesses. We continue to invest heavily in innovation, and we remain focused on delivering against our robust product road maps. Commercial momentum across our AI-enabled offerings continues to build, highlighted by strong adoption trends for Westlaw Advantage. Later in my remarks, I will discuss why we are uniquely positioned to provide production-grade AI and provide an update on adoption and usage trends. We also remain excited by the development of Thomson, our proprietary legal-focused large language model. Thomson has begun to outperform leading frontier models on specific legal tasks and provides us with important optionality as we continue to execute our AI innovation roadmap. Our capital capacity and liquidity remain a key asset we are focused on deploying to create shareholder value, and we made solid progress on this during the quarter. In February, we raised our annual dividend by 10% for the fifth consecutive year. We repurchased $262 million of our shares in the first quarter. And yesterday, we completed the previously announced $605 million return of capital and concurrent share consolidation. Together, these transactions have reduced our share count by approximately 2%. We remain committed to a balanced capital allocation approach, and we continue to assess a number of inorganic opportunities with more than $9 billion of estimated capital capacity through 2028. We are positioned to be both aggressive and opportunistic. Now to the results for the quarter. First quarter organic revenues grew 8%, organic recurring and transactional revenue grew 8% and 10%, respectively, while Print revenues declined 5%, in line with our expectations. Adjusted EBITDA increased 9% to $881 million with a margin of 42.2%. Turning to the first quarter results by segment. The Big 3 segments delivered 9% organic revenue growth. Legal organic revenue again grew 9% despite softer government growth. Legal, excluding government, accelerated to 11% in Q1 from 9% last quarter. Continued momentum from Westlaw and CoCounsel Legal were the key drivers. Corporate's organic revenue grew 9% driven by offerings in our legal, tax and risk portfolios and segments' international businesses. Tax, audit and accounting organic revenues grew 10% driven by CoCounsel for tax and audit, our Latin American business and SafeSend. Reuters' organic revenues rose 6%, driven by strength within the agency business and our contract with a major partner. Lastly, Global Print organic revenues declined 5% year-on-year. In summary, we're pleased with our start for 2026. I'll now discuss a concept we've recently coined, what we call fiduciary-grade AI, and provide a few updates on customer adoption and usage. The AI workflow market is evolving rapidly, and we see 3 tiers of solutions emerging. First, general-purpose productivity tools that are broadly useful but lack domain depth. Second, professional-grade AI built for specific fields, but operating environments where some error is tolerable. And third, the one that defines our business, which is fiduciary-grade AI. Work in law, tax and audit operates under strict regulatory and professional standards because the consequences of being wrong are severe. A small error can mean a lost case, a failed audit, a meaningful financial exposure or worse, the loss of customer trust. And that's why professionals in these fields cannot rely on probabilistic answers. They need deterministic solutions that produce work that they can verify, validate and stand behind. We believe that the winners in fiduciary-grade AI will be those who train agents to automate complex work with the accuracy and accountability that fiduciary professions demand. This is a difficult standard, but one we are equipped to meet. In fact, one where we believe we have met it with Westlaw Advantage because we bring 4 key assets, which set a standard that cannot be matched. The first asset is our proprietary authoritative content. Without authoritative data, you have no source of truth and thus cannot ground or validate your AI outputs. General-purpose models trained on broadly available information lack this source of truth. We have spent decades building and curating unique proprietary content repositories in legal, tax and compliance, including Westlaw, Practical Law, Checkpoint and CLEAR. These are not easily replicable. The second asset is our deep domain expertise. We have the largest team of subject matter experts in our markets, totaling approximately 2,600 people. This domain expertise is critical. Our experts not only help create our content, but also play a key role in training our AI agents and evaluating and validating their outputs. Let me share an example. Since last July, seasoned attorneys and data scientists have invested thousands of hours building the CoCounsel bench evaluation framework, a growing repository of gold-standard answers to real-world legal queries. CoCounsel Bench is used to evaluate and improve the performance of our AI products throughout development so that our AI solutions meet the exacting standards legal professionals require. The third is data privacy and governance. Our messaging to customers is very clear: their inputs will not become part of our AI outputs. When a client's privacy is paramount, we protect their workflows, strategic approaches and confidential information. The idea that a fiduciary is training a third-party platform with their clients' confidential information is a third rail issue for the professions that we serve, which makes our commitment in this area an important trust factor with our customers. The fourth is our customer support infrastructure. When a litigator is working through a complex research matter in Westlaw or a CPA needs help understanding intricate tax regulations as they prepare a tax return, they can call our expert reference attorneys and tax analysts. We invest heavily in these capabilities to support our customers and their outcomes in real time. No frontier model or AI-focused start-up offers this. In summary, our authoritative content, trained domain experts, data privacy and governance, and our customer support together uniquely position Thomson Reuters to deliver fiduciary-grade AI solutions to the standards our professional customers demand. Let me next share a few updates on the success we're having with customer adoption of our AI products. I'll start with an update on Westlaw Advantage. As is shown on the left side of the slide, customer feedback has been strong, supporting our view that the new agentic deep research capabilities offer a meaningful step forward in performance. Through 8 months, adoption is running faster than what we have seen with the 2 prior Westlaw upgrade cycles, contributing to our revenue growth from law firms accelerating to 11% in the quarter. Last quarter, we mentioned our work on the next-generation version of CoCounsel Legal, which incorporates a similar agentic framework that has been so successful with Westlaw Advantage. We built it from the ground up; it delivers on the vision we set out from the start: an AI companion that works alongside lawyers through every task and every stage of a matter grounded in the trusted sources of knowledge that they can rely on. On the right side of the slide, we share feedback from 3 customers that have participated in the alpha development stage, which supports our optimism. We recently entered beta with a broader set of customers using the product and look forward to a full launch of next-generation CoCounsel Legal in the third quarter. In February, we announced an important milestone, achieving 1 million users for the advanced AI features in our product portfolio through CoCounsel. On the topic of usage, let me share several other statistics to describe the growing customer interaction with our AI features and offerings. Firstly, monthly CoCounsel SKUs in legal have quadrupled year-over-year with strong growth in both the U.S. and international markets. Secondly, we've seen significant growth following the Westlaw Advantage launch with the number of Advantage users and deep research searches, both up more than 7x in the last 6 months. And thirdly, CoCounsel for tax and audit weekly conversation volume has grown approximately 5x since September, reflecting accelerating adoption. In summary, we remain excited about the building momentum from our AI solutions and the opportunities ahead as we execute against our innovation road maps. Before turning to the financials, I'd like to acknowledge a very important leadership transition. Our Chief Financial Officer, Mike Eastwood, will be retiring at the end of this week after 26 years with Thomson Reuters. Mike has been a trusted partner to me and the Board and has played a central role in strengthening the company's financial discipline, capital allocation and operational execution through a period of significant transformation. I want to sincerely thank Mike for his many contributions and wish him well in his retirement. At the same time, I'm pleased to welcome Gary Bischoping as our incoming Chief Financial Officer. Gary is an accomplished tech executive and finance leader who brings deep financial expertise, strong operational experience and a long and successful track record of driving growth. Gary has been working closely alongside Mike, me and the leadership team to ensure a seamless transition. We're confident in Gary's leadership and look forward to partnering with him as we continue to execute our strategy. I'll now turn it over to Mike for a review of our financial results.

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

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

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

We'll go to our first question from Drew McReynolds with RBC.

And Mike, congrats on everything, real powerhouse and appreciate all the transparency just in your role as CFO. It's been great working with you. The 2 questions that I had. I think first, maybe for you, Steve, on the legal LLM or the proprietary LLM Thomson. Can you just kind of flesh that out a little bit, just obviously getting good results from it, but how it kind of integrates into your product roadmap and maybe a little bit more granularity around that? And then secondly, as you look at the fiduciary-grade AI segment of the market, at a high level, obviously, in terms of potential TAM expansion within that segment as you roll out new AI capabilities, just comment on some of the moving parts and how you're thinking about TAM overall.

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

And we'll next go to Stephanie Price with CIBC.

Two questions from me. Just on the revenue guide. Hoping you could talk a little bit about the cadence of revenue here. With the Q2 outlook, it does look like H1 revenues are kind of tracking a bit ahead of the full year guide. Can you kind of think about what gets you to the top and bottom end of that revenue guide? And then my second question is just on Anthropic. Obviously, you view Anthropic as a key vendor. Just curious how you think about vendor relationships here that you have with the LLM providers and how you envision the partnerships evolving over time?

Yes. Stephanie, I'll start and then ask Steve and Gary to supplement. I'll provide a few different viewpoints regarding your question on the 2026 revenue guidance. First, you alluded to our Q1 at 8% was slightly higher than the guidance that we provided in February at 7%. Two key factors there: our legal professionals had really strong demand for Westlaw Advantage, which we launched back in August of 2025 at ILTACON. Second, we continue to have strong demand from our CoCounsel legal product. Secondly, within Corporate, we had really strong growth from Pagero, thanks to Laura Clayton McDonnell, Ray Grove and the full team there, Gustav. And then within Corporate, we had higher transactional revenue growth in Q1. A portion of that was a few million dollars that shifted of transactional revenue from Q2 into Q1. Regarding Q2, our revenue guide is for Q2 at 7% to 8% organic revenue growth. We're pleased with the Q1 start. A couple of factors to consider for Q2: Q2 does not include any forecasted additional content licensing deals in Q2, which means more modest revenue growth for orders. And then secondly, in Q2, we expect Corporate transactional growth to moderate from the Q1 levels that we saw. That takes us into the third element in regards to our total revenue guide of 7.5% to 8%. We remain very confident in delivering on that 7.5% to 8% for the Big 3, as noted in my prepared remarks today—approximately 9.5% for the Big 3. Within segments, our guidance for Corporate is 9% to 11%, and for tax, audit and accounting professionals it's 11% to 13%. So for the Big 3, we remain very confident. In regards to factors to consider in that range: the Big 3 at approximately 9.5% is the quarterly net sales trend, and if you look at our quarterly distribution of sales quotas, Q1 is traditionally the lowest sales quota quarter, which was again Q1 2026. Q4 traditionally is our highest sales quota quarter; it will be again in 2026. We're pleased with the momentum of Q1 sales, and as we go into Q2, we're very pleased with the pipeline across the Big 3. So I think that's a key factor if you think about that 7.5% to 8% range. Certainly, transactional revenue varies by quarter and also by segment, but the biggest factor for me is the continued momentum in net sales or bookings throughout the remainder of the year, which we have very strong confidence in. Westlaw Advantage had a strong December and strong Q4, which helped drive that increase in legal professional revenue growth in Q1. We expect that to continue with CoCounsel Legal. If you go through each of the segments, we have overall confidence. I'll pause before we go into the Anthropic question to see if that was helpful.

Yes, Stephanie. The AI platforms and agents have been built to be model-agnostic. We constantly evaluate the latest frontier model releases to see which are best suited. Currently, we think for products like Westlaw Advantage and CoCounsel Legal that the Anthropic models are best suited. But as I said, we are model-agnostic and we can and do change the models out. Anthropic are an important vendor to us. We were one of the earliest enterprise customers to Anthropic and continue to work closely with them in terms of co-development on our products. But we maintain a level of independence there as we go forward.

And next, we'll go to Kevin McVeigh with UBS.

Congrats to Mike as well on a well-deserved retirement; it's been great working with you. Stephen, everything seems so good that the overall results seem strong. You obviously are going to call out areas of the business where you're doing well and where there seems to be a lot of them. Is there anything that's worrying you these days? Do you see any customers who have left your platform, either in legal or in tax? And if so, have you done exit interviews to sort of say what are you leaving for, are they going to other vendors or maybe just a native AI service like a frontier provider and thinking that's good enough. Are you seeing any dark shoots here of anything that worries you that if more customers started doing that, it could be problematic in the future? Or is it just simply nothing and you're still winning across the board?

Yes. Thanks, Vince. It's a great question. Everything worries me—I'm sure the team here will tell you we're paranoid about a lot of things—so I won't bore you with everything. But a couple of points: we've been focused on retention since the change program and I think we're starting to see green shoots and things tick up in terms of customer retention across different segments. We're seeing broad-based positive signs in terms of retention. There's nothing new or worrying in terms of customers moving away from our content-driven technology products across the Big 3. That said, we're at a phase where lots of law firms are trialing many different tools. If you speak with a law firm, they'll be running a trial of or have implemented CoCounsel or one or two other tools. That's why we're so excited about CoCounsel Next. We think it's a big step forward, and it represents the combination of content, expertise, data privacy and support in ways that none of our competitors can match. We're increasingly confident that as we pull that into full release and scale it up in the U.S. and beyond, it will start to accelerate from some of the competitors that exist.

Okay. Fair enough. I just tried to clarify something. I'm not sure I understand the 7x and the 5x figures you gave. Both Westlaw Advantage deep research and CoCounsel for tax were not available a year ago. So I assume that's not a year-over-year figure, and it wouldn't be relevant if you measured it from day 1 to now. I assume you wouldn't have given us the number if there wasn't some relevance to it. So can you just help me unpack that?

Yes. Vince, on Westlaw Advantage, what Steve mentioned was over the last 6 months. That began a few months after launch. For CoCounsel tax and audit, the number was the number of customer conversations in the product, which has gone up 5x since September.

Let me expand on that, Vince, to explain why we mentioned those stats and why we're excited. We see the TAM expanding from law firms and general counsels for different reasons: firms are spending more on technology and starting to get to levels comparable with other professions in terms of percent of revenue spent on technology. We think over the next few years they'll approximate or at least get within the same ZIP code as some other professions. That's one TAM expansion. Second, we've said AI is the means with which Thomson Reuters can play a larger role in the success of our customers. If you take prior versions of Westlaw, the leading point solution for litigation research, and compare that to Westlaw plus Practical Law integrated with CoCounsel, we envisage a world where the first thing a lawyer does when they get into the office is switch CoCounsel on. It's a companion throughout the entire day—litigation research, drafting motions, SEC filings, whatever it might be. Similarly in tax, products like Ready to Review and Ready to Advise appeal to smaller firms with clients in particular geographies. So we really do believe this is a vehicle for a significant increase in the number of touchpoints with our customers and users. That's an exciting growth vector we'll explore in the coming years.

We'll next go back to Kevin McVeigh with UBS.

And let me add my congratulations, Mike. You've obviously done an exceptional job helping set you folks on the path today, and I wish you well. I guess, maybe can we talk about the AI-related ACV; you've seen pretty good momentum there. I think the number is 30%, which is up from last quarter. Any sense of where that ultimately settles? And I guess in the spirit of my question, I think there's been so much concern, which we think is overdone. We think there's a real big opportunity beyond the core. So maybe talk about just the ACV growth? And then ultimately, Steve, maybe some of the other addressable markets, whether it's mid- to down-market, you can really start to focus on with the technology.

Kevin, happy to start there, and thank you for your kind remarks. I'll just go back in time five quarters ago: we introduced the AI-enabled ACV metric at 15% five quarters ago. As you said, we're now at 30% as of March 31, a 2 percentage point increase versus year-end. We expect that to continue to increase each month and each quarter, and we'll continue to provide that on a quarterly basis. We think that's an important signal. Westlaw Advantage, high-end Practical Law, CoCounsel Legal, and CoCounsel tax and audit are some drivers. As we launch CoCounsel Next later this year, we think that will further lift this AI-enabled metric. Some ONESOURCE suite products as they become AI-enabled will also add. At some point I speculate there will be a step change. Right now, we're seeing 2 to 3 percentage points increase on a quarterly basis, and we expect it to continue increasing over time. We're very encouraged by our product and innovation pipeline.

Let me talk about dynamics for mid- to down-market opportunities. Traditionally, when we put out a new version of Westlaw, the largest firms with the biggest budgets adopted first and then we penetrated further down market. Today with CoCounsel, customers large and small in many geographies are signing up quickly. Aaron Rademacher, who runs small law, and Lucy Mackin, who runs mid law, have done a wonderful job getting these tools into the hands of customers of all sizes. That's a new dynamic contributing to the growth acceleration we saw in the first quarter. Also, at the most sophisticated end, legendary litigators and transactional attorneys are increasingly using Westlaw Advantage for processes that used to take many hours. That has exceeded my expectations in terms of the sophistication of the products we're putting into the market and the kind of work we're able to automate and supplement. So multiple vectors of growth exist: mid- to down-market and the very top end. We see many opportunities to pursue in the coming years.

And next, we'll go to Tim Casey with BMO.

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

Tim, I'll start with each of those. First, regarding EBITDA margin, I'll share a few comments about Q2 and the full year. For Q2, our margin guide is 38%. We remain confident in our full year outlook for 100 basis points of margin expansion. Two key drivers are the underlying operating leverage we continue to achieve and the growing benefits from our 'reimagine how we work' initiatives driven by AI-driven automation. Andrew Pearce, Liz Bank, Jason Winn, Mike Goddard, Kirsty Roth and others continue to drive productivity initiatives. For Q2 specifically, three factors to consider: increased LLM costs, some modest M&A dilution in Q2, and the tax, audit and accounting professional business seasonality. Moving into H2, reasons for margin improvement include continued productivity from AI automation, M&A dilution lapsing in H2, and LLM cost increases beginning to normalize as we lap their introduction. That gives us line of sight to deliver the full year 100 basis points improvement. Regarding transactional revenue, profitability does vary. Professional services traditionally have lower margins than some other products; AI content licensing or Reuters content licensing would be at the higher end. So transactional revenues span a wide distribution in margin profile.

I'll add that the optionality around the Thomson model could help manage LLM costs as we develop our own proprietary models. That said, we see value both from the quality and accuracy of such a model, given it's created for legal tasks, and from the potential to run it on a per-unit basis more cost-effectively than frontier models. We're continuing to invest in the Thomson model and will update you as we go.

And next, we'll go to Andrew Steinerman with JPMorgan.

I just wanted to know within the revenue guide, particularly for legal professionals for the year, what's assumed in terms of the government practice as we move through 2026. And then also overall for the 2026 revenue guide, are you assuming a contribution from CoCounsel Legal Next?

First, regarding government, Andrew, we expect growth to remain subdued near term. We are optimistic regarding reacceleration of government revenue led by Pat Eveland. Once we lap the losses and downgrades that occurred last fall, we'll see an uptick in government revenue toward the end of 2026. For the full-year legal professionals guidance, we have assumed government growth remains subdued near term and then begins to increase toward the end of 2026 and into 2027. Regarding CoCounsel Legal Next, we are pleased with its progression. When it's launched sometime in Q3, we're optimistic about sales momentum and it will provide some degree of revenue in the latter part of 2026. The larger contribution from CoCounsel Next will happen in 2027 due to revenue recognition timing. Emily Colbert and Rawia Ashraf have led excellent beta efforts; we're in the third week of beta for CoCounsel Next and have good momentum for Q3 and Q4.

And next, we'll go to Aravinda Galappatthige with Canaccord Genuity.

Wanted to offer my best to Mike as well—an outstanding tenure as CFO from my vantage point. All the best, Mike. I wanted to start on the capital allocation side. You announced a sizable buyback and return of capital. You bought back $262 million worth of shares as of March 31. Am I correct in assuming there haven't been any more utilization of that block since, meaning the remaining roughly $338 million since April? And then perhaps generally your view on stepping that up. Companies that have seen sell-offs in their stock, including some comps, have announced more sizable buybacks and you certainly have the flexibility to do that. I wanted to get your thoughts on that.

Sure, Aravinda. Multiple points. First, a reminder: we did complete the $605 million return of capital yesterday with the cash distribution executed. Regarding the NCIB, we have not done any additional purchases beyond the $262 million that occurred in Q1. We do plan to complete the remaining approximately $338 million in the second quarter; that is our intent. Regarding our overall balanced capital allocation approach, we increased our annual dividend for five years in a row, still focus on strategic M&A, and have the optionality to consider additional capital returns. It's something we'll continue to discuss with our Board; the next meetings are in June and September. We agree it's an option to consider additional NCIB share buybacks. They are accretive today but must be balanced with strategic M&A opportunities. No specific commitments to announce today.

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

We have not quoted specific adoption numbers on Westlaw Advantage. Five quarters ago when we pivoted to the overall GenAI-enabled metric, we thought that was more encompassing of our total portfolio. I can't share additional specific adoption numbers for Westlaw Advantage, but it is trending faster than prior Westlaw upgrade cycles in terms of ACV penetration. We're very encouraged with the fast start on sales and strong customer usage. We expect Westlaw Advantage to continue to have a strong Q2, a strong 2026 overall and into 2027. Emily Colbert and the Westlaw team have done an excellent job.

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

I'm curious, was there any negative impact to sales cycles or anything from the conflict in the Middle East in 1Q?

No negative impact on sales cycles, Jason. The conflict did cause an uptick in the Reuters subscription business, which put the spotlight on the quality of that coverage. Our business is largely resilient to such cycles.

Okay. That's great to hear. And then just as a follow-up, on the tax, audit and accounting professionals business, can you just share why that was slower at 10% organic growth in 1Q and what drove the deceleration through the year?

Sure. First, tax, audit and accounting at 10% organic growth in Q1 was impacted by revenue recognition timing shifts for two products that will normalize in H2. In simple terms, some revenue recognition shifted from Q1 and Q2 into Q3 and Q4. On a full-year basis that normalizes. We're confident in our 11% to 13% range for the year. Three factors give us confidence: the revenue recognition timing normalizes; a key product line extension at Dominio in Brazil—Dominio continued to grow approximately 20% in Q1 and the product line extension will provide incremental growth internationally; and third, newer AI-driven offerings in the U.S. will provide additional lift as we go through the year. We're confident in delivering on our guidance.

And next, we'll go to Doug Arthur with Huber Research.

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

We had three factors, Doug. First, modest dilution from the Additive acquisition that we closed last fall. Second, additional investments in our product line at Dominio ahead of a launch. Third, a portion of the $12 million of severance referenced for total Thomson Reuters impacted TAP. The convergence of those three factors was the reason for the lower margin for TAP in Q1.

And next, we'll go to Maher Yaghi with Scotiabank.

Great. And congrats, Mike, on a great tenure at Thomson. I wanted to ask—you disclosed the ACV on GenAI—but could you provide some KPIs that prove AI is lifting net revenues and not just increasing usage? Example: Westlaw Advantage upgrade attachments versus CoCounsel paid expansion into new horizontal segments of the market—something that can give us some sense that AI is adding top-line revenue growth, not just on your existing subscription base but expansion into new segments of the market.

Maher, the most prominent metric is legal professionals or law firms' revenue excluding government at 11% organic growth in Q1, up from 9% in Q4. That penetration across large, midsize and small law is led by Raghu Ramanathan and his team. We had double-digit organic growth in global large law, midsize and small firms—the highest growth ever in each of these segments in Q1. That 11% for legal, excluding government, is a tangible metric to monitor and supports the view that AI-enabled products are contributing to revenue growth.

Okay. Great. And just one follow-up question on the margin expansion in the second half. Can you give a bridge that helps us understand where the improvement in margins year-over-year will be coming from in the second half? Is it all from 'reimagine how we work' productivity improvements or can some come from AI revenue growth?

Certainly, as revenue grows, that helps margins given our operating leverage. Second, 'reimagine how we work' productivity initiatives accelerate into Q3 and Q4. Third, M&A dilution that occurred in Q1 and Q2 will begin to lap in H2. And fourth, LLM costs that increased last year begin to normalize year-over-year. So the bridge includes higher revenues, productivity gains, lapping M&A dilution, and LLM cost normalization.

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

And I'll add my congrats to Mike. It's been terrific working with you. Steve, you commented many customers are utilizing multiple AI and technology tools. I see the advantage of having your AI product using Westlaw legal data and research. My main question: if you have a strong AI product and the strong legal research, why hasn't it taken off across the top 100 law firms, for example?

Toni, we've reached 1 million CoCounsel users across various instances of the product, and we're proud of that start. That said, I think we've taken too long to fully unleash the power of our authoritative content paired with agentic AI; that's changing with CoCounsel Next. CoCounsel Next is fully agentic and a deep research-built product from the same teams that did Westlaw Advantage. For the first time, the market will see an agentic legal assistant grounded in authoritative content. Prior versions in legal were built without full access to our full content stack. You could critique us for taking longer, but we wanted to get it right, and early beta suggests we have. We'll keep refining, learning, investing and scaling. That helps explain a fragmented market with multiple tools and why we're increasingly confident going forward.

Next, we'll go to Curtis Nagle with Bank of America.

Maybe just staying on that topic, Steve, can you elaborate a little more on feedback from clients on the next-gen version of CoCounsel, underlying demand, and how material an upgrade cycle you think it could be? And to what degree is that factored into guidance?

Curtis, we're seeing strong early feedback in beta and robust interest across firm sizes. That said, the market is still undergoing change management. It's one thing to give a lawyer a tool and save them time; it's another to rewrite how junior attorneys produce work, iterate with partners and deliver to clients. That process is just beginning. We're proud of 1 million users but still in early days. CoCounsel Next is an exciting step forward for the industry, but the change management will take time to produce the virtuous circle where usage converts into a larger, persistent revenue uplift over time.

And next, we'll go to George (Keen Fai) Tong with Goldman Sachs.

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

George, I don't have at my fingertips a precise breakdown between those three components. What I can reiterate is that we had really strong performance across all segments. With prior releases of new Westlaw versions, we saw initial traction in large law firms and then adoption in mid and small firms; with Westlaw Advantage we're seeing consistent traction across large, mid and small. Retention rates are holding. Strong performance across geographies and segments of legal professionals is driving that 11% for legal excluding government. If you need a more granular breakdown, we'll follow up offline.

Got it. That's helpful. As a follow-up, how did legal government perform in the quarter?

Legal government grew 1% in Q1. That was down from Q4. As we noted in the February call, we had cancellations and downgrades in government in the second half of 2025, and Q1 would have a lower growth rate given the revenue recognition impact. As we lap those cancellations and downgrades in Q3 and Q4, we're confident Pat Eveland's team will drive accelerated organic growth for government later in 2026 and into 2027.

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

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

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