Earnings Call Transcript - TRI Q2 2021

Operator, Operator

Good day, everyone, and welcome to the Thomson Reuters Q2 2021 Earnings Call. My name is Simone. I’m your event manager. I’d like to advise all parties that the conference is being recorded for replay purposes. And now, I’d like to hand over to Frank Golden, Head of Investor Relations. Please go ahead.

Frank Golden, Head of Investor Relations

Good morning, and thank you for joining us today for our second quarter 2021 earnings call. I’m joined today by our CEO, Steve Hasker; and our CFO, Mike Eastwood, each of whom will report our results and will take your questions following our presentation. To enable us to get to as many questions as possible, we’d appreciate it if you would limit yourselves to one question each and one follow-up when we open the phone lines. Throughout today’s presentation, when we compare performance period-on-period, we discuss revenue growth rates before currency as well as on an organic basis. We believe this provides the best basis to measure the underlying performance of the business. Now today’s presentation contains forward-looking statements and non-IFRS financial measures. Actual results may differ materially due to a number of risks and uncertainties related to the COVID-19 pandemic and other risks discussed in reports and filings that we provide from time to time 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

Thank you, Frank, and thanks to all of you for joining us today. Before I speak to our performance for the quarter, I wanted to take a moment to acknowledge the loss of our much-loved colleague and outstanding Pulitzer Prize-winning journalist, Danish Siddiqui. Danish was tragically killed while on assignment in Afghanistan last month. The impact of his loss has been significant for all of us, especially his Reuters News colleagues, and we will continue to honor his memory. Thank you for your respect and acknowledgment of Danish’s passing. Now we’ll move to our financial performance for the second quarter. I’m pleased to report the momentum we saw in the first quarter accelerated in the second quarter. Our strong performance was above our expectations and positions us well for the second half of the year. This strong performance reflects several things: First, the solidity of our franchises, our must-have products, and our market positions. Second, the strength of the information services market itself, which is presenting us with opportunities to expand our positions and further accelerate growth. Third, the realization and conviction by our customers that they need to reapportion their spend towards our products and solutions that can fit their workflow and drive growth and productivity. And finally, customers have growing confidence in both an improving economic environment and their own future prospects. So we’re pleased with our first half performance, which increases our confidence in our prospects for the second half of the year and for 2022. Now to the results. Prevailing tailwinds are playing to our strengths and contributing to strong revenue and sales growth. The second quarter’s total company organic revenue growth of 7% was the highest in over a decade, and the Big 3 businesses also grew at 7%. This revenue growth was mirrored by strong sales growth across the company as customers position themselves to meet expected demand. We also continued to execute aggressively on our Change Program and achieved run rate savings of $90 million as of June 30. The program is on track and we will continue to ramp it up in the second half. Given this strong first half performance, we are raising our full year guidance. We now forecast total company organic revenue growth between 4% and 4.5% and organic revenue growth for the Big 3 of between 5.5% and 6%. Total company EBITDA margin is forecast to range between 31% and 32%. And the Big 3 EBITDA margin is now forecast to be approximately 39%. And free cash flow is now expected to range between $1.1 billion and $1.2 billion. Lastly, today, we announced a new $1.2 billion share buyback program. If we are able to complete the buyback program this year, we will have returned over $2 billion to shareholders in 2021, including dividends. Second quarter reported revenues were up 9% with organic revenues up 7%. Revenue growth was solid for each business segment, including strong growth from our Latin American and Asia and emerging markets businesses, which grew organically more than 20% and 10%, respectively. Adjusted EBITDA increased 5% to $502 million, reflecting a margin of 32.7%. Excluding costs related to the Change Program, the adjusted EBITDA margin was 35.4%. This strong performance resulted in adjusted earnings per share of $0.48 compared to $0.44 per share in the prior year period. Turning to the results for the segments. As I mentioned, the Big 3 achieved organic revenue growth of 7% for the quarter, a very strong performance. Legal second quarter performance was impressive with organic revenue growth of 6%, the highest quarterly growth since 2008, and building on 5% growth for the first quarter. The U.S. legal market is quite healthy, particularly in small law, where sentiment continues to be strong as attorneys anticipate solid demand over the next 12 months. But this strong growth isn’t isolated to small law, it’s across the business: small, mid, and large firms, government, and across our product lines and geographies. A few examples. First, Westlaw Edge continues to achieve strong sales growth and ended the quarter at 57% ACV penetration compared to 52% at year-end 2020. We continue to forecast an ACV penetration rate between 60% and 65% by year-end. Second, Practical Law, as reported in the Legal segment, continued its strong performance, growing double-digit. We forecast similar growth going forward, and we continue to invest in this key growth initiative. Third, our Government business, which is managed within our Legal segment, continues to see good momentum and grew 8% organically. We forecast Government’s growth to accelerate in the second half of the year. And fourth, FindLaw and our businesses in Canada, Europe, and Asia all grew mid- to upper single digit in the quarter. Finally, legal also achieved very strong sales for both the quarter and half year, recording double-digit recurring sales growth, reflecting the strength and health of the legal market and our customers’ willingness to spend. Turning to the Corporates business, organic revenues grew 4%. We forecast revenues will accelerate in the second half of the year with healthy growth expected from our direct and indirect tax businesses, risk, Legal products sold into Corporates, and from Europe, Latin America, and Asia and emerging markets. Tax & Accounting’s organic revenues grew 15%, benefiting from a 43% increase in transactional revenues, primarily driven by the year-over-year timing of individual tax filing deadlines. Recurring revenue growth was also strong at 9%. Reuters News’ organic revenues grew 6% in the quarter, a very good performance driven by the Professionals business, including strong Reuters Events growth as it begins to recover from the negative impact from COVID-19 in 2020. And Global Print organic revenues also grew 6%, partly due to an easier prior year comparable, but also attributable to a gradual return to office by our customers and higher third-party revenues. In summary, it was a very strong quarter and our businesses are in a solid position. But we take nothing for granted, and we still have much hard work to do in executing our Change Program. With this in mind, I would like to express my gratitude to our employees, our colleagues for a strong first half performance, which will allow us to intensify our investments in the health and growth of our businesses, enabling us to further support our customers in the second half and into next year. A final point before I turn it over to Mike. The increase in our full year 2021 organic revenue guidance puts us on a path to exceed our pre-COVID 2019 organic revenue growth rates for both total company and the Big 3. And it also increases our confidence to achieve our 2023 revenue growth target of 5% to 6%. Our confidence is also increasing as our Legal business is now achieving 5% plus organic growth. We believe Legal has multiple levers to pull to drive organic growth to between 5% and 6% by 2023. And the Corporates segment is expected to build on its first half 2021 results over the balance of this year. We continue to forecast organic growth for Corporates between 7% and 9% by 2023. And we forecast Tax & Accounting will achieve solid organic revenue growth this year and be able to achieve a growth of 6% to 8% by 2023. So in closing, we’re working to transform Thomson Reuters into a leading content-driven technology company. We’re making good progress, but we still have much to accomplish. We’re off to a strong start, and we’re confident that 2021 is setting the foundation to position us to be able to consistently and sustainably drive strong operating and financial performance that builds value for our customers, colleagues, and shareholders for the long term. Let me now hand it off to Mike, who will discuss the second quarter’s results in detail.

Mike Eastwood, CFO

Thank you, Steve, and thanks 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 of our Big 3 segments. Organic revenues and revenues at constant currency were both up 7% for the quarter. This marks the fourth consecutive quarter our Big 3 segments have grown at least 5% and represents the highest growth for our Big 3 segments in over a decade. Legal Professionals revenues increased 7%, and organic revenues were up 6%. Recurring organic revenue grew 6%, and transaction revenues increased 14% due to our Westlaw, Practical Law, and Government businesses. Please note, 60% of Practical Law’s revenues are recorded in the Legal Professionals segment and 40% is recorded in the Corporates segment. Westlaw Edge continued to contribute about 100 basis points to Legal’s organic revenue growth while continuing to maintain a healthy premium. And Edge has now been adopted by all U.S. federal government courts and by courts in 44 states. Our Government business, which is reported within Legal and includes much of our risk, fraud, and compliance offerings, had a strong quarter with total revenue growth of 10% and organic growth of 8%. In our Corporates segment, total and organic revenues increased 4%, led by recurring organic revenue growth of 5%. Transactions organic revenue grew 1% due to a difficult prior year comparison when $4 million of one-time CLEAR revenue was recorded and did not reoccur this year. We forecast Corporates revenue to accelerate in the second half of the year. And finally, Tax & Accounting’s total and organic revenues grew 15%. Growth was driven by the Latin American businesses, audit solutions, which includes Confirmation, and a 43% increase in transaction revenues resulting from the year-over-year timing of individual tax filing deadlines. I will remind you, last year, pay-per-return revenue shifted from the second quarter to the third quarter. Normalizing for this timing, organic revenues for Tax & Accounting were up 10% in Q2. Moving to Reuters News. Total and organic revenues increased 6%, primarily due to our Professional business, which includes Reuters Events. This performance was slightly better than we had anticipated. And Global Print total and organic revenues increased 6% in the quarter. This performance was better than expected, driven by higher third-party revenues for printing services and a gradual return to office by our customers. Despite this higher performance, we still forecast full year revenues to decline between 4% and 7%. On a consolidated basis, second quarter total and organic revenues each increased 7%. Before turning to profitability, let’s look closer at recurring and transaction revenue results for the second quarter. Starting on the left side, total company organic revenue for the second quarter of 2021 was up 7% compared to a 2% decline in the second quarter of 2020 due to the impact of COVID-19. If we look at Q2 2021 performance for the Big 3, you will see organic revenues increased 7%, a strong performance and well above the 2% performance in Q2 2020. Total company recurring organic revenues grew 5% in Q2, 210 basis points above Q2 2020. And the Big 3 recurring organic revenues grew 6%, which was above last year’s second quarter growth of 4%. Turning to the graph on the bottom right of the slide, transaction revenues were up significantly year-over-year as the second quarter of 2020 was impacted by COVID-19, which affected our implementation services and the Reuters Events business. We continue to remain encouraged by the momentum in 2021, especially for recurring revenues, giving us confidence in the trajectory of the business and the sustainability of higher revenue growth beyond 2021. We are also providing guidance for the third quarter given the various impacts related to COVID-19. Starting with the total TR chart on the top left, we estimate third quarter total and organic revenues will grow between 3.5% and 4%. The Big 3 total and organic revenues are forecast to grow between 5% and 5.5% in the third quarter. Big 3 growth will be slightly depressed due to the timing of Tax & Accounting’s pay-per-return revenues in 2020 that shifted $6 million from Q2 to Q3 due to the delay in the tax filing deadline. We forecast third quarter revenue growth of low single digits for Tax & Accounting. On a normalized basis, we expect revenue growth of mid-single digits for Tax & Accounting. Moving to Reuters News. We forecast third quarter total and organic revenues to grow between 2% and 3%, driven by all Reuters News business lines. Finally, Global Print third quarter revenues are expected to decline between 5% and 8%, and we forecast full year revenues to decline between 4% and 7%. Turning to our profitability performance in the second quarter. Adjusted EBITDA for the Big 3 segments was $487 million, up 14% from the prior year period, and the related margin increased 180 basis points due to strong margin improvement across each of the segments. The strong EBITDA margin improvement for each of the 3 businesses was driven by higher revenue growth and a benefit from 2020 cost savings initiatives. I will remind you the Change Program operating costs are recorded at the corporate level. Moving to Reuters News. Adjusted EBITDA was $35 million, $10 million more than prior year period driven by revenue growth, 2020 cost savings initiatives, and timing. Global Print’s adjusted EBITDA was $56 million with a margin of 37.9%, a decline of about 260 basis points due to higher costs and the dilutive impact of lower-margin third-party print revenue. So in aggregate, total company adjusted EBITDA was $502 million, a 5% increase versus Q2 2020. The increase resulted in higher revenues partially offset by Change Program costs, which I will address in a moment. The second quarter’s adjusted EBITDA margin was 32.7% and was 35.4% on an underlying basis, excluding costs related to the Change Program. This slide provides more granularity regarding our expectations for our reported adjusted EBITDA margin for the full year 2021. For the first 6 months, total company adjusted EBITDA margin was 34.1%, and the Big 3 segment’s adjusted EBITDA margin was 40.5%. On an underlying basis, excluding Change Program costs, total company adjusted EBITDA margin was 35.7%. And as Steve mentioned, we are increasing our full year total company guidance for adjusted EBITDA margin to a range of 31% to 32%, and for the Big 3 segments to approximately 39%. And while first half performance is impressive, we continue to recommend you assess our adjusted EBITDA margin on a full year basis as we expect the margin to decline in the second half for several reasons. First, we expect to increase our investment in the Change Program, which will have a negative impact of between 150 to 200 basis points for the total company. Second, we forecast additional business-as-usual investments outside of the Change Program in advance of 2022. For example, we will invest more in go-to-market initiatives, enterprise technology, and data and analytics capabilities. This will dilute the margin between 150 and 200 basis points for the total company and between 200 and 250 basis points for the Big 3 segments. And finally, savings from the Change Program are forecast to provide a benefit to total company and Big 3 adjusted EBITDA margin of 100 to 150 basis points. We believe we have good visibility into the levers at our disposal to achieve our updated full year margin guidance and are confident in our ability to achieve our target of 31% to 32%. Now let me turn to our earnings per share, free cash flow performance, and Change Program cost. Starting with earnings per share. Adjusted EPS was $0.48 per share versus $0.44 per share in the prior year period, a 9% increase. The increase was mainly driven by higher adjusted EBITDA. Currency had no impact on adjusted EPS in the quarter. Let me now turn to our free cash flow performance for the first half. Our reported free cash flow was $618 million versus $340 million in the prior year period, an improvement of $278 million. Consistent with previous quarters, this slide removes the distorting factors impacting free cash flow performance. Working from the bottom of the page upwards, the cash outflows from discontinued operations component of our free cash flow was $36 million more than the prior year period. This was primarily due to payments to the U.K. tax authority related to the operations of our former Refinitiv business. Also in the first half, we made $28 million of Change Program payments as compared to Refinitiv-related separation costs of $76 million in the prior year period. So if you adjust for these items, comparable free cash flow from continuing operations was $692 million, $311 million better than the prior year period. This increase is primarily due to higher EBITDA, favorable working capital movements, and dividends from our interest in LSEG. Now an update on our Change Program costs for the second quarter and the rest of 2021. Let me start by saying none of the annual estimates have changed from what we provided last quarter for the full year. Spend during the second quarter was within the range provided last quarter at $71 million, including $41 million of OpEx plus $29 million of CapEx. This brings the first half total spend to $91 million. We now anticipate spending between $210 million and $260 million in the second half, OpEx plus CapEx. Spend is forecast to step up related to cloud migration, streamlining internal systems, third-party contractors to support the Change Program, and higher capital expenditures. For the full year, we expect Change Program spend, OpEx plus CapEx, to be at the lower end of the range of $300 million to $350 million. And there is no change in the anticipated split of about 60% OpEx and 40% CapEx. We will continue to provide quarterly updates on our Change Program spend as we move through the year. Now an update on our run rate Change Program savings for the second quarter. In the second quarter, we achieved $71 million of annual run rate operating expense savings. This brings the total annual run rate operating expense savings up to $90 million for the Change Program. We are currently on track with our run rate savings expectations. As a reminder, we anticipate operating expense savings of $600 million by 2023 while reinvesting $200 million back into the business for a net savings of $400 million. We will continue to provide quarterly updates on our annual run rate Change Program savings as we move through the year. And as Steve outlined, today, we increased our full year outlook for revenue growth, margin, and free cash flow, which is reflected on the slide. Lastly, we reaffirmed the balance of our full year 2021 guidance as well as our 2022 and 2023 guidance previously provided, and we remain confident in achieving the targets for all metrics. Let me now turn it back to Frank for questions.

Frank Golden, Head of Investor Relations

Thank you, Mike. And that concludes our presentation for the second quarter. So we would now like to open the lines for questions.

Operator, Operator

Your first question is from the line of Gary Bisbee from BofA Securities.

Gary Bisbee, Analyst

Encouraging set of results here. I guess a couple of things stood out to me. The first I wanted to ask is just you talked about having had the strongest first half bookings in a while, and yet a lot of the investments and change you’re making to improve the user experience and improve and innovate around the products haven’t really taken hold yet. So what’s driving? Are there any sort of either big areas of success or themes you’re seeing that are driving those strong new bookings?

Steve Hasker, CEO

Yes, Gary, thank you for the question. I would mention two points, and I'm sure Mike will add to this. First, we have observed a steady yet gradual improvement in our customers' sentiment throughout the second quarter. They are gaining more confidence in making long-term investments in their businesses, which I believe has been beneficial. However, in the last two weeks, there has been a slight dip in confidence, but we haven’t seen any effects on our businesses so far. The second point is that we are beginning to see positive results from the seven growth initiatives we highlighted during our Investor Day, and we are becoming increasingly optimistic about these initiatives.

Mike Eastwood, CFO

Yes, Gary, I would just supplement with a little additional granularity in regards to the 7 strategic initiatives: Practical Law, which is split between Legal Professionals and Corporates, as I mentioned, 10% organic growth in the second quarter. Government risk, fraud, and compliance, which I mentioned, 8% organic growth in the second quarter, and that business is driving to nearly $500 million for the full year. Confirmation that we acquired in July of ‘19 along with HighQ in July of ‘19 continue to perform very well. Confirmation, part of the overall audit offerings that we discussed during Investor Day. Gary, you mentioned in regards to the bookings. Very pleased with the overall net sales for the first and second quarter of this year across the board, including within our Corporates business. Corporates was up 4% in the second quarter. As we go into Q3, Q4, based on the net sales improvement that we’ve seen in recent quarters there, we have high confidence that Corporates will accelerate into Q3 and Q4, but very pleased with the overall performance of our sales and account management teams in the first half of the year, Gary.

Gary Bisbee, Analyst

Great. And then the quick follow-up is what changed in your thinking around the buybacks? Obviously, that’s a very positive announcement and sort of a change from how you’ve framed it historically. And should we read into that any less optimism around near-term M&A potential?

Mike Eastwood, CFO

The optimism is as high as ever, Gary. We’re very blessed and fortunate to have a lot of optionality in being able to balance both buybacks with also acquisitions. We continue to look at acquisitions, primarily within our Big 3 segments. So we are prepared, ready, and willing, Gary, to put additional capital to work with acquisitions in the Big 3 as we identify candidates that we are very comfortable with. But that has to include candidates that we can certainly integrate very quickly, that meet the needs of our customers and accelerate our organic growth. But Gary, please do not read buybacks as any less optimism equal to higher optimism, but we just have the ability to do both buybacks and acquisitions, Gary.

Operator, Operator

Your next question is from the line of Drew McReynolds of RBC Capital Markets.

Drew McReynolds, Analyst

My question’s already answered out of the gate here. Steve, just cutting it maybe slightly different and just looking for a probably simple answer here. We’ve seen 2 consecutive increases in your 2021 outlook, and both of those coming a quarter after you provided the initial outlook. So with your kind of 4 drivers of growth here, is there 1 single driver here that is really lifting the trajectory? And then if there is 1 or 2, does that just continue to lift as we kind of go forward here? And then second question just around, I guess, renewed COVID impacts. Last quarter, you talked about still some uncertainty internationally. There’s a little bit more certainty now domestically here, in North America, in particular, in the U.S. Maybe talk to your working assumptions here as to what unfolds in the back half of the year.

Steve Hasker, CEO

Thank you, Drew. Regarding the first part of your question, the strength of our business lies in its diversified nature; we are not overly dependent on any single factor. We have strong performance across our key areas and multiple growth initiatives within those areas. We are pleased with the progress of those initiatives, but we do not rely on any one of them to fulfill or exceed our guidance moving forward. As for whether conditions will continue to improve, we are six months into our Change Program, and as Mike and I mentioned, we are satisfied with our initial progress. However, the next six months will be crucial for our execution, which is being driven by Kirsty Roth, Andrew Pearson, and our teams. Let's concentrate on executing this plan before looking at additional optimisms. Our aim is to fundamentally enhance the customer experience, and while we have significant work ahead, we are optimistic that success will lead to increased customer satisfaction and opportunities for compelling growth. Regarding the ongoing uncertainty tied to COVID and the Delta variant, we experienced significant impacts in 2020, especially in areas like Reuters Events, print operations, and transaction volumes. In 2021, we have observed a rebound in all those areas, leading us to be cautiously optimistic about continued improvement. However, discussions with colleagues in regions such as Brazil, India, and Indonesia indicate that there is still no sign of improvement there, so we are tempering our expectations. We will closely monitor the situation in the United States to see if conditions continue to improve and confidence grows or if there is a slowdown in that progress. At this point, we feel confident that our products and solutions will remain relevant and valuable for our customers across our key areas, particularly in a more flexible, hybrid working environment.

Operator, Operator

Your next question is from the line of Kevin McVeigh, Credit Suisse.

Kevin McVeigh, Analyst

Great. I actually wanted to start with just extending our sympathies for your loss, and congratulate you folks on the results. I want to talk a little bit about Change Program, specifically as it relates to kind of the cloud conversion and how we should think about that within the context of the retention, specifically within Legal, Steve, if we could. Because I think there’s a real big opportunity kind of mid or down market on the Legal side. So just how are we thinking about that in terms of retention around those initiatives? And are you starting to see the signs of that already, just given the strength you’re already seeing in Legal? Is that the strength of the clients relative to the last cycle? Is that product? Is that Change Program? Maybe just help us understand because obviously, really, really nice outcome on the Legal side.

Steve Hasker, CEO

As a reminder, regarding our cloud migration, we began the year with 20% of our revenues coming from the public cloud. We have now increased that to 33% and are on track to reach our goal of 90% or more by the end of 2023. I want to credit our technology and operations team for their hard work in achieving this progress. The effects of these changes are just starting to be felt. To address your point, Kevin, the strength of our Legal business is founded on several key factors: primarily Westlaw Edge, followed by Practical Law and HighQ. Our investments in these products are yielding positive results, and we plan to maintain our focus and funding for these key initiatives. Additionally, the legal market, especially in the United States, is quite dynamic. When speaking with law firm leaders, the main challenge they mention is the shortage of associates and the need to hire talent to meet client demands, such as scheduling meetings and calls. There is substantial activity across small, mid, and large firms. The impacts of the Change Program and enhancements in customer experience have not yet been fully realized in Legal; we are still in the early stages. This will require excellent execution on our part, and we remain cautiously optimistic that successful execution will lead to positive outcomes.

Mike Eastwood, CFO

Yes, I would like to add to that. In addition to the cloud conversion supporting our retention, I want to note that Legal’s overall retention is slightly over 90% year-to-date. The digital initiatives we are implementing, particularly in the areas led by David Wong and Karen Stroup, will also enhance our performance, especially in small law. As you may know, we tend to have lower retention rates in small law compared to the global law, which has a higher retention rate of 95% driven by the strength of Westlaw. Therefore, as Steve mentioned, with the combination of cloud conversion, digital initiatives, and omnichannel efforts, we are optimistic about improving our retention rates. I have mentioned in previous calls that we are forecasting an increase of 100 basis points for total TR, and I remain confident in that outlook over the planned time frame.

Kevin McVeigh, Analyst

Great. I have a quick follow-up. Will Woodbridge be participating in the buyback, or will it be in the open market? I remember you mentioned a 10b5, Mike, at one point. Any clarity you can provide regarding the buyback would be appreciated.

Mike Eastwood, CFO

Sure, Kevin. Certainly, Woodbridge will have the opportunity to participate, just like all shareholders. And Woodbridge has always been a great shareholder and a great supporter of ours. So they have the opportunity to participate, Kevin.

Operator, Operator

Your next question is from the line of Andrew Steinerman at JP Morgan.

Andrew Steinerman, Analyst

I heard the Westlaw Edge penetration numbers for the quarter and the year-end. I wasn’t sure if I heard the Westlaw Edge revenue or its contribution to organic revenue growth in Legal. In the past, that’s been around 100 basis points for Legal. How long do you think Westlaw Edge can continue to grow at this rate? Also, could you discuss the Westlaw Edge product roadmap? As you add more modules, will that generate additional revenue for current Westlaw Edge customers?

Mike Eastwood, CFO

Andrew, you asked some great questions. As of June 30, we have achieved 57% ACV penetration. We are confident that we'll reach between 60% and 65% by the end of the year, and this trend is expected to continue into 2022 before we reach our peak. In the latter half of 2022, I anticipate launching Westlaw Edge 2.0, which is the next version of Westlaw Edge. Andy Martens briefly mentioned it during the March Investor Day. We saw a 100 basis point increase in the second quarter, which aligns with our observations in previous quarters. We expect this trend to persist for several more quarters, and we believe Westlaw Edge 2.0 will help maintain that momentum. Therefore, we do not foresee any decline in Westlaw in the midterm. Steve and I recently visited Minneapolis with Andy Martens, David Wong, and Mike Dahn, and we are making good progress on Westlaw Edge 2.0.

Operator, Operator

Your next question is from the line of Toni Kaplan of Morgan Stanley.

Toni Kaplan, Analyst

Corporates was a little bit lighter than I was expecting. And I think there’s still a way to go to get to the 7% to 9% target that you mentioned. You mentioned that Corporates will accelerate in the back half of the year. So just maybe what’s going on in Corporates? And what are the main drivers that are going to help it accelerate and get up to the target level by ‘23?

Steve Hasker, CEO

Thank you, Toni, for your question. To provide some context, the Corporates segment is relatively new within Thomson Reuters. Sunil Pandita, who became the President of Corporates in December of last year, is essentially starting from the ground up. He has been working diligently on several initiatives. Firstly, he has put together a skilled team, combining experienced professionals from TR with talented newcomers from the software industry. Over the past six months, he and his team have focused on identifying major opportunities within Corporates, targeting general counsels, heads of technology, and heads of risk. We anticipate substantial growth in these areas, which is evident in our projections for the second half of the year and our outlook for the next few years. This growth includes indirect tax and our recent partnership with Oracle. Additionally, we are increasing the use of key Legal products like Westlaw and Practical Law in general counsel offices. Finally, we see significant potential in our risk, fraud, and compliance business, which has traditionally served government agencies but can now better meet the needs of risk and compliance leaders within corporations through solutions like CLEAR and TRSS. All these factors contribute to the accelerating growth rate reflected in our commentary.

Toni Kaplan, Analyst

Great. Also wanted to ask about what you’re seeing in terms of your own hiring. We’ve heard from some of the other info services companies that turnover is maybe a little bit higher right now because of the better labor market. So just in terms of what are you seeing in terms of voluntary turnover and ease of finding good people.

Steve Hasker, CEO

Yes, Toni. Over the last 18 months, we are proud of our ability to attract top-tier talent. Our goal is to build the best team in business information services, and we have started that process. Our latest team member is Sarah Wilkinson, our Chief Information Officer, who previously served as CEO of NHS Digital. She is one of many great new talents we have added to the experienced TR team. As I assess whether we are successfully attracting the right people externally, I believe the answer is yes. Additionally, I feel cautiously optimistic about our new talent development approach for existing TR employees, though further work is needed. We are noticing an increase in voluntary attrition across our organization. The labor market is competitive, and the virtual working environment has expanded the range of opportunities people, both at TR and in the industry, are willing to consider. We are staying alert to ensure attrition does not become a challenge for us. While it has risen, it remains manageable, and we are committed to implementing necessary measures to keep it that way.

Operator, Operator

Your next question is from the line of George Tong, Goldman Sachs.

George Tong, Analyst

You’re experiencing strong success with your Change Program regarding efficiency improvements and benefits to revenue. I would like to discuss the potential for long-term margins. You have reiterated the EBITDA margin target for 2023, but considering your progress with the change initiatives, where do you see overall corporate EBITDA margins trending in the future?

Mike Eastwood, CFO

Yes, George, we’re certainly remaining very confident in regards to the guidance that we provided for ‘22 and for ‘23. So for 2023, it’s 38% to 40%. We remain very confident on that. We’re not prepared today, George, to talk about ‘24 or ‘25 today. I would just say as we go into ‘24, we should certainly see continued sustainability, some potential increases given the operating leverage that we have in our business. As discussed before, once we hit that 3% organic growth, which we are, the operating leverage kicks in, given that about 60% to 65% of our costs are fixed in nature. So we’ll focus on ‘22, ‘23 guidance now, George.

George Tong, Analyst

Understood. Regarding the Corporates side, you mentioned various factors that could help accelerate growth towards your long-term targets, aiming for a 7% to 9% increase by 2023. How significant is cross-selling in achieving that goal, particularly in Legal and Tax & Accounting? How important is cross-selling as a driver?

Mike Eastwood, CFO

Yes. George, before I address the cross-sell question, I would just supplement Toni’s question previously that Steve addressed. One of the reasons we have optimism with our Q3, Q4 uptick in Corporates’ overall organic revenue is the underlying book of business that we’ve built in Q1, Q2. So the net sales performed really well in the first half of the year. In regards to cross-sell, George, we are at the early stage, the early innings right now in cross-sell. We are optimistic there, especially with Sunil Pandita, as Steve mentioned earlier, in the chair about 7 or 8 months now. So we still believe we have good optimism in regards to accelerating. It’s a relatively small portion now for total TR. About 15% of our gross sales are generated via cross-sell activity, comparable within Corporates. So we have significant opportunity over the time horizon to generate more cross-sell activity. And that’s something that Sunil is working with David Wong and Shawn Malhotra and product and engineering to ensure that as we enhance our products and build new products, that they will enhance our opportunities for further cross-sell.

Steve Hasker, CEO

Yes, George, I want to add that we are excited about the opportunities that will arise from the Oracle partnership. It is a valuable learning experience for us since we have not engaged in many partnerships in the past. We are cautiously optimistic that these insights will help us expand that relationship and explore others in different areas of our product offerings.

Mike Eastwood, CFO

And George, just one final point. Steve mentioned Sarah Wilkinson, Kirsty, Andrew, others working on the Change Program. A core component thereof is expanding our salesforce.com and in common instances there of Salesforce, that will certainly help. If you think about the infrastructure and underlying business systems, that just makes it easier for our go-to-market teams, led by Brian Peccarelli, to drive cross-sell.

Operator, Operator

Your next question is from the line of Tolecki Domina, TD Securities.

Vince Valentini, Analyst

I assume that’s for me. Can you guys hear me?

Steve Hasker, CEO

Yes, we can.

Mike Eastwood, CFO

We can hear you, yes.

Vince Valentini, Analyst

It’s Vince Valentini. So first off, congrats on the results in the share price today. I assume a new all-time high will help with that employee retention that you were talking about earlier. My question really is quite simple. There’s a ton of optimism in the results here and in your commentary so far to several of the questions, whether it’s Westlaw Edge traction, whether it’s the improvement in Corporates, I mean, across the board. Is there a reason you’re not increasing your 2023 targets yet? Is that just simply saying that’s still a ways off, and you want to be conservative? Or I have to assume there’s an upward bias to those targets now, unless there’s some unforeseen sort of macro negative event between now and then. Is that a fair conclusion?

Mike Eastwood, CFO

Yes, Vince, I would address it as follows. Our optimism is balanced with the reality that we have to execute like hell every day and we have to win every day. That’s our approach today, and that’s going to be our approach tomorrow. We’re not going to take anything for granted, and we have to earn it. So there are a lot of quarters between now and 2023. So we’re confident in our team, but we also are grounded in the reality that we have a lot of work to do with our Change Program, as Steve referenced earlier, in the rest of this year and into 2022. So what I would say, Vince, is we reaffirm we’re very confident today in 2023. And we’ll provide an update in February on ‘22 and ‘23. So we’re going to continue to work our Change Program. We’re going to work on accelerating the top line. We’re going to work on improving our customer experience. And we take care of our employees and we take care of our customers. I think our confidence level in 2023 will just continue to increase. That would be my viewpoint, Vince.

Operator, Operator

Your final question is from the line of Tim Casey, BMO Capital Markets.

Tim Casey, Analyst

Yes. Two for me. Can we just revisit the change in the buyback messaging? I mean, Mike, you’ve been pretty consistent that you wanted to retain a certain level of float and whatnot. Just if you could walk us through how your thinking has changed there. And what we investors should think about in terms of how much you plan to execute on the buyback program? And second one for you, Steve. One of the levers you haven’t talked about is pricing power. Can you just, from a high level, maybe walk us through your thinking on that in terms of how that factors in, in terms of your organic growth assumptions?

Mike Eastwood, CFO

Yes. Tim, let me focus on the first question first. I’m going to give you a two-part answer. First, historically, we’ve talked about 70% being an important threshold in regards with Woodbridge ownership. Prior to today’s announcement on the buyback, 66% ownership by Woodbridge, and we’ve talked about maintaining it at around 70%. Based on our recent analysis, a different way to look at it is the availability of public float, given that our market cap now exceeds $50 million. Working with our outside advisers, they feel like $10 million of public float is really a sufficient amount. So right now, we have $20 billion. So that gives us great confidence in being able to do the $1.2 billion today, Tim, and we can certainly consider more if the Board agrees over the time horizon, certainly balancing that with M&A. So I think it’s a combination, Tim, of that kind of 70% threshold that we’ve discussed in the past but also balancing that with the availability of public float, which exceeds $20 billion today. And our advisers believe that we are in a very good position to be able to do additional buybacks like today, Tim.

Steve Hasker, CEO

And then, Tim, the second part of your question with regard to pricing. As you know, we have a good record of getting price as appropriate, particularly as we add new features and functionality to our products. The Change Program is about transforming the customer experience. And we’re more focused on improving our retention, on taking opportunities where they exist around cross-sell, as Mike outlined, and growing the number of net new customers. We’re more focused on those levers than we are on price.

Frank Golden, Head of Investor Relations

Okay. Well, that will be our final question, and we’ll conclude our call. We’d like to thank you all for joining us. Happy to do any follow-ups that you may have. And we look forward to speaking with you over the course of the next couple of months and when we report Q3 in early November. Have a good day.

Operator, Operator

Thank you all, presenters, and thank you, everyone, for joining in. That concludes your call. Please disconnect your lines, and enjoy the rest of your day.