Thomson Reuters Corporation (TRI) Q1 2021 Earnings Report, Transcript and Summary

Good day and welcome everyone to the Thomson Reuters Quarter One 2021 Earnings Call. My name is Kan and I am your event operator. During the presentation, your lines will remain on listen-only. [Operator Instructions] I would like to advice all parties the conference will be recorded for replay purposes and I’d like to hand over to your host, Frank Golden, Head of Investor Relations.

Good morning, and thank you for joining us today for our first 2021 earnings call. I am joined today by our CEO, Steve Hasker; and our CFO, Mike Eastwood, each of whom will report our results and will take the 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 as we believe this provides the best basis to measure the underlying performance of the business. Today's presentation does contain forward-looking statements. 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.

Thank you, Frank, and thanks to all of you for joining us today. I am pleased to report our first quarter performance reflects a strong start to the year and we are encouraged by the momentum we are seeing build across the business. Our customers are more confident in both an improving economic environment and in the trajectory of their businesses. Positive prevailing tailwinds drove strong sales across the business, as customers brushed off the restraint and caution exhibited in 2020 and bought our solutions in preparation for an expected rebound through the year. However, despite the improving outlook, risks remain given that the global pandemic is still significantly impacting many parts of the world. Notwithstanding this we are encouraged by the first quarter’s results and that increasing confidence is reflected in our outlook for the second quarter and also an increase to the lower end of our full year revenue guidance. Now to the results. As I stated at our Investor Day, we operate in robust and growing, legal, tax and risk fraud and compliance markets and our first quarter results reflect the strength of those markets and our businesses. And within our core markets, we have advantaged positions in high-growth verticals, including the seven strategic growth initiatives we outlined at IR Day, which contributed to our strong first quarter results. This strong performance is reflected in 5% organic growth by our Bi 3 businesses, our best first quarter post the sale of Refinitiv. This performance was led by Legal’s 5% organic growth, the highest quarter since 2018. Strong sales across our businesses were driven by strong prevailing tailwinds and great performances across the board from our sales people. Law firms see growing demand with small law segment in particular increasingly positive. The large and mid-sized firms have done well throughout the past year and continue to do so. Tax & Accounting Professionals are also busy advising clients on a host of challenges, several of which are related to the U.S. federal stimulus programs. And governments across the U.S. and the world are now modernizing their systems and protocols in an effort to improve access to justice and reduced fraud motivated by what they've learned during the COVID-related lockdowns over the past year. We believe these strong tailwinds position us well for the balance of the year. The first quarter's reported revenues were up 4% with organic revenues up 3%. Adjusted EBITDA increased 16% to $558 million reflecting a margin of 35.3%. Excluding cost related to the Change Program, the adjusted EBITDA margin was 36%. This strong performance resulted in adjusted earnings per share of $0.58 compared to $0.48 per share in the prior year period. Turning to segments. As I mentioned, the Big 3 businesses achieved organic revenue growth of 5% for the quarter, a strong performance to start the year. We've seen good momentum in our seven strategic growth priorities with particularly strong sales performance from High Q, Confirmation and Practical Law. Legal built on last year’s organic growth 3% recording 5% organic revenue growth in Q1. Legal also had a strong sales quarter recording double-digit revenue sales growth – recurring sales growth. And it saw good growth across the businesses including Westlaw Edge, which continues to drive strong sales growth and ended the quarter at a 54% ACV penetration versus 52% at year end 2020. And to reiterate, we expect to achieve a penetration rate of between 60% and 65% by year end 2021. Second, Practical Law had a strong start to the year, growing 13% as we continue to invest behind this key growth initiative. And third, our government business which is managed within our Legal segment continues to see good momentum and grew 12% or 8% organically. Turning to the corporates business, organic revenues grew 4% despite a 2% reduction in revenue growth due to a loss of revenues impacted by the Affordable Care Act that was recorded in the prior year quarter but did not reoccur in 2021. And Tax & Accounting’s Q1 organic revenues grew 5% despite the extension of the U.S. tax filing deadline from April to May resulting in lower transactional revenues. Revenue growth was also negatively impacted due to the acceleration of UltraTax software from January 2021 to December 2020. Organic growth in Q1 would have been 8% normalized for the UltraTax state release timing. We are expecting Tax & Accounting’s revenue growth to be very strong in the second quarter, which Mike will discuss. Reuters News organic revenues grew 2% in the first quarter, a good performance and Global Print’s organic revenues declined 9% better than expected and helped by higher third-party revenues. You heard me say that it’s imperative that we elevate our value proposition to customers, enhance the customer experience and maximize our performance. To achieve success, we must execute on our four key focus areas and achieve the operational and financial goals and targets that we’ve set. It’s early days for our Change Program, but I am pleased with the progress we are making and happy to report that we are on track. And to further strengthen our bench, we continue to supplement our existing teams with seasoned experienced talent with new additions in product development, digital, technology, strategy and change management. This combined leadership team is executing well within a new operating company structure and is focused on the four key focus areas outlined in this slide. First, reimagining the customer experience by making it easier for our customers to do business with us. Second, optimizing and modernizing by simplifying our product portfolio and product development processes. Third, simplifying operations and leveraging technology by reducing complexity in our operations and technology organization and finishing the shift to cloud in 2023 and lastly, creating an inclusive culture of world-class talents. Over the course of the first quarter, I've shared with our employees that similar Change Program have been successfully implemented at many, many companies over the past decade. We are not first in line and that’s a positive from a learning standpoint as we continue to drive growth and improve efficiencies. In fact, there are numerous success stories we can draw from, including Refinitiv’s successful program as we implement our own Change Program and I am confident we will achieve similar success. Let me now turn it over to Mike, who will provide more detail on the first quarter results.

Thank you Steve and thanks to all of you 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 revenue performance of our Big 3 segments. Total and organic revenues at constant currency were both up 5% for the quarter. This marks the third consecutive quarter our Big 3 segments have grown 5%. Legal Professional’s revenues increased 5% and organic revenues were also up 5%. Recurring organic revenue growth of 4% was supplemented by 17% increase in transaction revenues related to our government and elite businesses. Westlaw Edge continues to drive over 100 basis points to Legal’s organic growth, while continuing to maintain a healthy premium. Our government business, which is reported within Legal and includes much of our existing risk, fraud and compliance offerings had a strong start to the year with total revenue growth of 12% and organic growth of 8%. In our Corporate segment, total and organic revenues increased 4% despite the loss of $3 million in revenue related to the Affordable Care Act which Steve mentioned earlier. Recurring and Transaction organic revenues were up 4% driven by our Legal and Tax Solutions. And finally, Tax & Accounting’s total revenues grew 5% with organic revenues also up 5% driven by audit product and Latin America businesses. As previously mentioned, we accelerated the release of some of the UltraTax state software from January to December to align with the traditional December release of our U.S. Federal software. Normalizing for this timing, organic revenues for Tax & Accounting were up 8% in Q1. Moving to Reuters News, total and organic revenues increased 2%, 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 declined 9% in the quarter. This performance was better than we had expected driven by higher third-party revenues with printing services. Despite this higher performance, we still forecast full year revenues to decline between 4% and 7%. On a consolidated basis, first quarter total and organic revenues each increased 3%. Similar to last quarter, we are providing color regarding our expectations for the second quarter. We believe second quarter revenue growth will be the high point for the year given the impact of COVID-19 on our results in the second quarter of last year. Starting with the total TR chart on the top left, we estimate second quarter total and organic revenues will grow between 5.5% and 6.5%. The Big 3 total and organic revenues are forecast to grow 6% to 7% in the second quarter. Growth will benefit from Tax & Accounting’s paid for return revenues that shifted from Q1 to Q2 due to the delay in the tax filing deadline. We forecast second quarter revenue growth between 10% and 15% for Tax & Accounting. In 2020, these revenues were shifted from the second quarter to the third quarter. Moving to Reuters News, we forecast second quarter total and organic revenues to grow between 2% and 3%. This increase is primarily related to Reuters Events. The events team is currently holding all events virtual. We continue to assess when we can resume in-person events based on the local health experts' advice and feedback from our customers. Finally, global print’s second quarter revenues are expected to grow between 1% and 3%, driven by the COVID-10 impact in the prior year and shipment delivery hold releases. Turning to our profitability performance in the first quarter. Adjusted EBITDA for the Big 3 segments was $523 million, up 21% from the prior year period and related margin was up 540 basis points. First, legal Professional’s adjusted EBITDA margin in the first quarter grew 510 basis to 41.8%, compared to the prior year period. Second, corporate adjusted EBITDA margin was up 620 basis points to 38.1%. And third, Tax & Accounting’s adjusted EBITDA margin increased 500 basis points and 43.7%. The strong EBITDA margin improvement from each of the three businesses was driven by higher revenue growth and a benefit from 2020 for our savings initiatives. Moving to Reuters News, adjusted EBITDA was $28 million, $9 million more than the prior year period driven by revenue growth, 2020 cost savings initiatives and timing. Global Print’s adjusted EBITDA was $57 million, with a margin of nearly 40%, a decline of about 60 basis points due to the decrease in revenues. So in aggregate, total company adjusted EBITDA was $558 million a 16% increase versus Q1, 2020 due to higher revenues, partially offset by Change Program costs which I will address in a moment. This slide provides more color on the various factors impacting our first quarter 2021 reported adjusted EBITDA margin. They exclude the impact of Change Program cost in order to provide you with an understanding of the underlying trajectory of the adjusted EBITDA margin. As you can see, the first quarter's adjusted EBITDA margin was 35.3%, which represents a 370 basis points improvement over Q1 2020. There were too many factors in 2021 that drove a significant increase over the prior year period. First, the permanent acceleration of UltraTax revenues in Q4 2020 had about a 30 basis point negative impact. And second, the savings from the cost savings initiatives in 2020 provided a benefit to the margin of 490 basis points. On an underlying basis, excluding Change Program cost in the first quarter, the adjusted EBITDA margin was 36%.While this performance is impressive, we continue to recommend you assess our adjusted EBITDA margin on an annual basis. We will continue to increase our investment in the Change Program throughout the year, which will depress margin. We have good visibility into the levers at our disposal to achieve our full year margin target of 30% to 31%. Now, let me turn to our earnings per share, and Change Program cost. Starting with earnings per share, adjusted EPS was $0.58 per share in the first quarter versus $0.48 per share in the prior year period. The increase was mainly driven by higher adjusted EBITDA, partially offset by an increase in depreciation and amortization, higher income taxes and interest expense. Currency had a $0.01 positive impact on adjusted EPS in the quarter. Let me now turn to our free cash flow performance for the quarter. Our reported free cash flow was $239 million versus $35 million in the prior year period, an improvement over $200 million. Consistent with previous quarters, this slide removes the distorting factors impacting our free cash flow. Working from the bottom of the page upwards, the cash outflows from the discontinued operations component of our free cash flow was $22 million more than the prior year period. This was primarily attributable to payments to the UK tax authority related to the operations of our former Refinitiv business. Also in the current quarter, we made $12 million of Change Program payments as compared to Refinitiv related separation cost of $63 million in the prior year period. So, if you adjust for these items, comparable free cash flow from continuing operations was $288 million, $175 million higher than prior year period, primarily due to higher EBITDA and favorable working capital movements. Next, I’d like to provide an update on the financial components of our Change Program. First, in the first quarter, we invested $20 million of the $300 million to $350 million estimated to be incurred in 2021. Second, we have achieved $19 million of annual runrate operating expense savings. As a reminder, we anticipate saving $600 million by 2023, while reinvesting $200 million back into the business for a net savings of $400 million. And third, as I previously shared, our first quarter adjusted EBITDA margin excluding Change Program costs was 36%, compared to our 2023 target of between 38% and 40%. Now, an update on our Change Program cost for the first 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 first quarter was lower than we expected at $20 million including $11 million of OpEx, plus $9 million of CapEx and was primarily timing-related. We expect Change Program spend to pick up in the second quarter and over the balance of the year. We now anticipate to have about $85 million to $110 million total spend in the first half and $215 million to $240 million in the second half. For the full year, we continue to expect to spend between $300 million and $350 million related to the Change Program. The spend will vary quarter-to-quarter, but we do not expect to change to the full year estimate at this time. 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. And finally, as I mentioned, we are providing revenue guidance for the second quarter and we are increasing the bottom end of our full year revenue guidance for total TR and the Big 3. We are also reaffirming the balance of our full year 2021 guidance based on the strong start to the year and our confidence in the trajectory of the business and markets. And we also reaffirm our 2022 and 2023 guidance. Let me now turn it back to Frank for questions.

Thanks, very much Mike and that concludes our formal remarks and we would now like to open the call for questions. So, operator, if we could have the first question please?

[Operator Instructions] Your first question is coming from the line of Kevin McVeigh of Credit Suisse. Please go ahead. Your line is in the call.

Great. Thanks so much. And congratulations on the results. I don’t know this would be for Steve or Mike, but I wonder if you could just compare and contrast a little bit the recovery you are seeing today versus the GSE, because my sense is you folks are better positioned coming out of COVID-19 and maybe the GSE, but maybe from the presentation the reason I am asking Mike, Steve is obviously we are – any thoughts on that one will be just helpful.

Happy to start with that, Kevin, I am sure Steve would want to supplement. I think the thing that we are seeing right now is just really great relentless performance from ourselves and account management teams I think replaced – Kevin if you look back over the last decade and I think that was really amplified in 2020. So I think the performance, net sales would be a key parameter that I would focus on Kevin in the first quarter. We were up over $20 million in the first quarter net sales versus prior year. And we see that momentum continuing into Q2. In regards to the print business Kevin, you see that continuing to chip away in regards to when customers get back to the office. So those will be some initial thoughts, Kevin, but really kudos to our sales and account management team and I think the relationships with our customers are stronger than ever. In regards to – one other additional point, structural changes that we had and be able to go back to 2008, 2009 is another factor, Kevin.

And just to add to that, I think, Kevin, parameters we are cautiously optimistic obviously, the vast majority of our business and our revenues are in the United States where we are starting to see sort of real signs of a return to confidence in activity, preparedness to invest amongst our customers indeed, and we are putting many of our solutions. So that’s – I think that’s the optimistic side. I think we are very cautious for obvious reasons is in places like Brazil and Argentina and India where they are in the peak of it and our business is in those areas has held well and performed well in the first quarter, but we are not naïve. It’s – they’ve got a tough three quarters ahead of them. So, there is lots and lots of work to do and lots of business continuity planning to get through in those places.

A quick follow-up. I was surprised, it seems like the small law firm sentiment perhaps is shaping up a little fast and then what thought. Any thoughts around that maybe seen or thoughts on retention as the rates to maybe – account?

Yes, I mean smaller as you remember was pretty – as a sector it was pretty hard hit when the pandemic started. All of the sort of work around personal injury and a lot of work around – and accidents and so forth just went away as people were treated to – stop going to these places at work and going on such work. So, I think we are seeing a pretty – notwithstanding I think that changed on the market there with correct job throughout 2020 in ensuring that that level of activity stayed at good levels. But we’ve seen a return to activity in confidence amongst those small offerings.

Kevin, I would just supplement, we attempted during 2020 to support as best as possible and I think that’s showing in 2021.

Okay. Thank you guys.

Thank you. Your next question is coming from Toni Kaplan of Morgan Stanley. Please go ahead. You are now live in the call.

Hi there. Hopefully that’s better I think. The first quarter EBITDA margins were really strong, up over 350 basis points. Can you just help us bridge to the 30% to 31% guidance for the year? Is it that T&E or other costs are coming back? Just help us with that that cost bridge.

Yes, sure. Toni, it’s a couple of things. The biggest factor, Toni would be the Change Program investments that we’ll make only $20 million in Q1 in total. A portion of that being – that will significantly accelerate as we go into Q2. Kirsty Roth at Investor Day has recently completed engagements with our partner to complete the migration of our datacenter to the cloud. Kirsty has also completed a contract with one of our partners in regards to the content modernization that we also talked about. So those are the two key initiatives. [Indiscernible] who leads our digital subs were making good progress there, Toni. So the biggest factor is the acceleration of our Change Program investments through the remainder of this year. Certainly in Q1 that we received some continued benefits from the discretionary cost like T&E. We certainly expect those to pick up as we go through the year. And we also have some additional investments in areas like indirect tax and practical law, Toni that will make to help accelerate sustain and accelerate growth in those areas. But Change Program is the biggest factor, Toni.

That’s great. And Steve, just given your new operating strategy, just maybe give us an update on how you are thinking about M&A? What you are looking for, in terms of assets that you’d be interested in acquiring? Thanks.

Yes. Thanks, Toni. So, we made a couple of small acquisitions in 2020. And we got a active pipeline of opportunities that we continue to sort of to possess and turnover and replenish. I’d sum it up by saying, that pipeline is focused in and around the big three. So, we don’t have plans to make any acquisitions beyond the big three at this point. The acquisitions are mostly, if not entirely so bolt-on and complementary to both the big three and the Change Program. So we are looking at, just to give you a sense for the kinds of areas we are looking at and it’s building on also a great start in risk, fraud and compliance with CLEAR and TRS and Ponder places where we canhelp our customers to automate within the big three activities. We are interested in supplementing some of our growth in places like indirect tax and legal software building on high queue and we are always on the lookout for SMB and international opportunities. So there is a sort of a sense for the kinds of things we are looking at. But as you know, valuations are full at the moment and in a way that’s healthy because it just means that we have to be very confident that we are an advantaged owner and that in many places those acquisitions can be helpful to more than one of our segments. So, when you add all that up, we are going to continue to be very rigorous and prudent as it pertains to our M&A activity. But we are hopeful in the back half of this year that we’ll have a candidate or two to bring forward. Next question please?

Thank you. We have your next question coming from David Chu of Bank of America. Please go ahead. Just one moment please.

Hello.

So, just to advice, we are taking your next question at the moment from Andrew Steiner of JPMorgan. Please go ahead.

Hi, it’s Andrew Simon. I don’t think I heard your expectation for organic revenue growth for each of the big three. I definitely heard a Tax & Accounting comment for second quarter. So that’s my first question. My second question is, I was intrigued by the Reuters announcement around introducing a paywall. I wanted to know if you feel like that there is going to be a revenue needle mover for news this year and maybe what the capture rate you think will be at the subscription price you are proposing.

Okay. Andrew, I’ll take the first in regards to organic growth rates for the big three. We do not break that down on a recurring basis Andrew, we stick to the big 3. Back on Investor Day we did provide some lifecycle trends for each of those big three, we’ll stick with that. I would say that we are quite optimistic and lead to them as we progress during the year. As Steve mentioned earlier, and I did, Legal had a really great Q1 and we see that continuing to build throughout the year.

And then, on the Reuters paywall, Andrew, couple thoughts, one is, we’ve not – as I think everyone in the news business has noticed, but the sort of consumer and – preparedness to pay for very high quality news has gone up. So that landscape has changed over the last couple of years. I think the Reuters team has done a wonderful job in sort of doing a hard path which is ensuring that our content is at a sufficient premium to justify the pricepoint and secondarily putting all the scenery in place to enable us to move to a paywall later this quarter. Let me just finish by saying, we have been very, very conservative as to what the financial implications of this will be. We want to launch the paywall. We want to learn from – uses and we’ll get those uptake numbers and review the pricing and then move from this. So, certainly, this year, there has been very limited financial expectations. I think we view it as a very promising initiative and one that we will move up from, but from a financial standpoint, really nothing to say.

Okay. Thank you.

Thank you. Your next is coming from David Chu of Bank of America. Please go ahead.

I think we are continuing to have some audio difficulties with David. Let’s move on.

No problem. Thank you. We have your next question from Vince Valentini. Please go ahead. You are now live in the call.

Yes. Thanks very much. If I come back to the EBITDA margin for this year question again from a slightly different angle. Given that you've set these sort of targets through 2023, can you fill us in on how management compensation is working, if there's big beats on EBITDA in 2021. Does that drive the bulk of management bonuses? Or is the targets for 2023 now more impactful to how you guys get paid? And a second question, sorry, if I can. Mike, given the proposed corporate tax changes, can you give us any update on your ability to sort of move intellectual property around the world and keep your tax rate low? Or should we be expecting directionally an increase with whatever gets approved by the U.S. government?

Sure, Vince. Let me start with the first one in regards to our long-term incentive plan. Just for everyone’s benefit, we have a three year long-term incentive plan for 2021, 2022, and 2023. It consists of two levers, 50% based on organic growth rate, 50% on free cash flow per share. So there is equal weighting events in regards to 2021, 2022, 2023 management to earn out just on the core baseline. We have to earn out each year events there. So that’s how the line comes into plan more so. The targets that we provided to you during Investor Day, we have to get those for the long-term incentive for all three years. In regards to the taxes, it’s something that we are watching on a daily basis. It’s difficult to quantify in today events what we commit to as any legislation passes, we’ll provide real-time updates on these calls. We’ll give you one directional measure, Vince, in case it helps. In the U.S., it’s a 21% or increased to 28%. The impact on our effective tax rate would be between 1% to 2% kind of directionally. The other piece that we are monitoring closely that you reference is potential global minimum tax. Our intellectual property we are watching closely there internally with our tax payment tax advisors. It’s too early to speculate on that one but we are watching all of those items. For 2021, we feel very confident in achieving the ETR that we’ve provided.

Thank you.

Thank you, Vince.

Thank you. Your next question is coming from the line of Drew McReynolds. Please go ahead. Your line is in the call.

Yes. Thanks. Good morning. Thanks for taking the questions. I guess, two for me. A clarification, maybe over to you, Mike, on the legal side, last quarter, you said Q1 would be a low point for legal. I think it was 3% to 4% and you did 5%. Just wondering if that’s still a low point for legal for the remainder of the year? And then, secondly, maybe over to you Steve, you talk about where your cost is with the overall business, but certainly strong out of the gate here in Q1 and your comp in Q2. Just wondering, are you being somewhat conservative with the full year guidance here or do you see certainly the tougher comp in the second half of this year kind of checking and just want to level set expectations here. Thank you.

Yes, Drew, I’ll start in regards to the legal question. The way you summarized it is correct. We do view Q1 organic as the lower point for the full year. We spend a lot of time with Paul Fisher and his full management team. We are very encouraged by the momentum coming out of Q1 both at the sales and revenue activity and as we look at the pipeline, Westlaw Edge continues to do really, really well. We are getting the 100 basis points lift there which we’ve have been their practical wall which Steve mentioned. The government business 10%, nearly 10% organic growth in Q1. Steve Ruble is driving that business. So Drew, very, very pleased with legal for Q1 and encouraged – equally encouraged as we look out with that said, you have to monitor the sales every day as we move forward but the recurring net sales from Q1 gives us encouragement there.

And Drew, with regard to your point about sort of strong out of the gate, we’ve been somewhat conservative. I think, unequivocally yes, we are being somewhat conservative. And then, few reasons for that, I mean, firstly, we are all learning as it pertains to this pandemic and I think we are optimistic, we are hopeful we are upbeat about where the United States is headed. But our headquarters is in Toronto, as you know and Canada has still got some progress to make. We don’t have significant exposure to the countries that are really struggling, but we have some exposure. I think things will get harder before they get better in places like Brazil and Argentina and India. In addition to that, our folks are sort of poised in the second half of the year to return to office, but we got to execute against that and checking out and our people team are very focused on it. But we got to get that done. A lot of that business, fourth quarter is an important quarter for us. And then, lastly, we are overlaying the Change Program. And we are very excited about the first quarter or so progress in the Change Program. But as you've seen from Mike’s comments on the investment intensity, that that ramps up through the rest of this year. So we are going to overlay a lot of change on the team here as well. So that – they are the reasons for our - sort of our caution and our conservative approach. But as I said, we are optimistic and we are pleased with how we started the year and where we are headed. But I think, it’s sort of a bit of conservative is healthy.

Understood. Thank you both.

Thank you. Your next question is coming from [Indiscernible] of Barclays. Please go ahead. you are now live in the call.

Can you guys hear me?

Yes.

Okay. So I guess, that’s not my name. But anyway, hey guys. I just had one question. One was, and that was around, just talking about the competitive environment, I was just curious with all the changes you are making, if you are seeing your competitors making – taking orders, they are reacting, just any thoughts there would be appreciated.

Yes, Manav, great question. So, okay, the thinking – we have a lot of respect for our competitors. But the folks have been around a long time and have completed in legal and tax and risk fraud compliance and we also watch carefully what’s some of the newer players are doing and some of the sort of pure digital and innovators are doing. I think the competitive intensity is the sign today as it was what when I started 13, 14 months ago. It’s not more and it’s certainly not less. And so, I don’t think we’ve seen a marked change in my time at the company. Mike can provide you obviously a much longer time horizon there. But we are – one of the reasons that we’ve sort of solid aggressive in pursuing the Change Program is we do wanted to create a much better customer experience and we want to lead our sectors in terms of the customer experience we provide and we are pretty confident that if we get that right, we are always going to be very diligent about competitive dynamics in our market. But if we get that right, we’ll be in good shape.

Alright. Thank you guys.

Thank you. Your next question is coming from Aravinda Galappatthige of Canaccord Genuity. Please go ahead. You are live in the call.

Good morning. Thanks for taking my question. Just going back to the – some of the outlook comments you made with respect to legal. I was wondering if you can develop with respect to international growth there. I know that previously you had talked about traction in the UK, obviously, practical that was part of that, as well as Canada. I was wondering if you can sort of expand a little bit on the international growth element there. And secondly, just as a follow-up with respect to the tax comments. Is there an update on the UK tax dispute? I know that, there is an additional component that we are waiting for a larger component. I think for $600 million that Mike had alluded to in a prior conference call. I was just looking for an update there. Thank you.

Sure, Aravinda. Let me touch on each of those. In regards to international, I'll kind of do more expansive that just legal. If you know outside of North America, we are about 20% of our revenue. We would certainly like to see that expand to maybe as much as 30% in the years to come. I think Lucinda and the team is doing a great job in regards to UK that you referenced there, certainly practical law is very, very important for us in the UK. But if you look at Latin America and other territories, I think we are continuing to do a good job there with Adrian Fognini leading our efforts in Latin America. So I think we’ll continue to be very surgical, Aravinda, in regards to identifying some potential acquisition targets that would help us expand our legal and really our full suite of products in very specific geographic areas. In regards to tax for UK, HMRC, very consistent with the last update that I provided. In Q1, we did made the initial of roughly $100 million that related back to a 2016 disposition of the intellectual property and finance business. We currently are forecasting that we may emphasize may, we may have to make the payment in Q3 related to the 2018 divestiture of the Refinitiv business. We are continuing to work through it and certainly we factor that into our forecast as a potential payment that we would have to make - potentially we have to make in Q3. Thank you very much. I think one final question, we can take one final question .

Thank you. Your final question is coming from George Tong of Goldman Sachs. Please go ahead. You are live in the call.

Hi. Thanks. Good morning. I just wanted to dive into the legal segment. You mentioned 1Q should be the low watermark growth should accelerate organically from the 5% you saw in the first quarter. Westlaw Edge, practical law, government, all tailwinds. Just wanted to perhaps if you elaborate on the growth drivers, I mean, if we go above 5% and we know it would be the strongest level of organic growth we’ve seen from the legal segment in some time. And perhaps fold in the increasing contributions you are expecting from the Change Program, and how that’s going to lift organic growth in legal to new recent highs?

Yes, good morning, George. Thanks for the question. So, look, a couple of things have driven I think a strong start to the year. First and foremost the work that Paul Fischer and his teams have done in their outreach to our customers throughout 2020 and into 2021. I think, I cannot say enough about the way in which they’ve wrapped around their arms customers and supported them throughout a very difficult period of time and as the – the sort of level of activity about legal customs picks up, so too does our business. So that’s the first thing. I think the second thing is, Andy Martin's took you through Westlaw engine. And we also profiled the progress with practical law. We have made, I think very solid – historically very solid product mix around those products and is a group we are very focused on making sure that we continue to out invest in our competition in those products to ensure that their value is distinctive, relative to any competitive offering. And so, that is from a product perspective, they’ve really driven performance. We acquired HighQ in the last couple of years. HighQ had a good growth quarter and we are excited about what HighQ could do and we are excited about the way in which the team in Egan and across the world have embraced HighQ and we are excited about the way the corporates team under Sunil Pandit have embraced HighQ. So, those are few of the building blocks. But what I would say is that, there has been a change in the legal in sort of the mindset of our legal customers and it started earlier in the pandemic and it’s the largest of the firms and it’s really started to flow down into the medium to the mid and small groups. And that is that, they are reviewing their real estate expenses and they are starting to look at increasing their investments in information and technology. And I think that provides a real opportunity for us if we get it right. And we are out of work to figure out what additional products and services and potentially what acquisitions we might make to serve that these early days, George. And so, I think, we are happy with where we are. But there is some real potential upside if get it right and we’ve got some work to do and some execution to undertake to get there. Anything to add to that, Mike?

That’s a good summary.

No that’s …

I’ll take the final…George I think just one more?

Yes, quick follow-up. At the Analyst Day, your medium-term target for the corporate segment was the highest among all your segments. And so, given the strength that we are seeing in legal, would you perhaps touch on corporate, what’s going to drive the growth in corporate to keep out of legal over the next two to three years?

Yes. The corporates business, a few thoughts on it, George, [Indiscernible] joined us in 2020. So we look forward for him joining us to some investor conferences coming up. If you think about the corporates business practical law that we have discussed quite a bit today, the direct tax, indirect tax we are very enthused about, global trade management full portfolio there. This is where our Investor Day, Erin Brown and Brian Peccarelli talked about our full suite of OneSource. So if you really focus on the OneSource suite of products, specifically the indirect tax, we are very excited about that. If you look over the time horizon, I think you’ll see a very significant increase in our corporate approach as we go through 2022, 2023 to achieve the ranges that we discussed with Investor Day.

That’s very helpful. Thank you.

Okay. Well that will conclude our first quarter earnings call. We appreciate you all joining us this morning and this afternoon wherever you may be. If you have any follow-up questions, feel free to reach out to me or to Megan. And we look forward to speaking with you at a number of upcoming conferences over the course of the next several weeks and we’ll also speak through again in early August. Have a good day.

Thanks, everyone.

Thank you.

Thank you. So just to advise everyone that concludes your conference call for today. You may now disconnect. Thanks for joining and have a very good day.