Scott Fletcher: Hi. Good morning. Mike, I appreciate you just mentioned that you’ll share some of the drivers at the Investor Day, but I’m wondering if you could — just looking at the 2025 and 2026 acceleration in organic growth, particularly in the Big 3, could you sort of give us an idea of which segments specifically are going to be driving that acceleration? Is it mostly Legal given that GenAI rollout is first there? Or any color there would be helpful.
Mike Eastwood: Sure, Scott. Thanks for the question. We see growth acceleration across all the Big 3 segments over the time horizon, ’25 to ’26. Certainly, to your point, within Legal with GenAI and the road map that we started there, Westlaw Precision with the CoCounsel Core, the as Practical Law AI and the Practical Law Course Finder certainly, Legal has a head start there on the GenAI road map. But just given the opportunities across the horizon, Scott, to achieve that 6.5% to 8% organic growth, we see acceleration across all three segments. And I think, Scott, just as a reminder, if you think about that acceleration to 6.5% to 8%, the product road map, the investments we made in ’23, the investments in ’24, but also the recent acquisitions in the last 13 months with SurePrep, Tax & Accounting, Casetext and Legal and then Pagero within Corporates with the invoicing and Indirect Tax, given that those acquisitions cross the Big 3 segments, that’s what gives us the additional confidence that we’ll see acceleration across the Big 3, Scott.
Scott Fletcher: Okay. Thanks. And then as a follow-up, if we are thinking about that in the Big 3, 8% to 9% organic growth in ’25 and ’26, is that something you see as sustainable at those levels? Or is that a function somewhat of the price increases rolling out over the contract lengths given you’ve got sort of 3-year terms that would take you into 2026?
Mike Eastwood: Certainly, as we get into that ’25, ’26 time horizon, the 8% to 9% for the Big 3 will be sustainable. Price increase is certainly a component of that, Scott. I think I shared in the November earnings call, on a weighted average basis, about $0.035 on the composite, which was up about 30 to 40 basis points versus calendar year ’22. The multiyear contracts that you mentioned certainly play a factor into the time of when we increase our prices, but roughly 3.5% for 2023, Scott, on the prices.
Steve Hasker: Just to — Scott, it’s Steve. Just to add to that, I think the confidence around the sustainability of that elevated growth comes from both our organic investments and inorganic. So on the organic front, what we are starting to see, and it is very early days, is an expanded role in serving the professionals that are in our customer bases. And we think that that’s going to make us an even more relevant and larger part of their working lives. And then on the inorganic, I made reference in my remarks to the portfolio shift to some higher-growth assets and businesses. So it’s really the combination of those two things that gives us confidence around the sustainability of those higher growth rates going forward.
Mike Eastwood: Scott, I might be anticipating questions from you or others. Just a reminder, within the GenAI revenue, I think Gary, Steve and I plan to provide additional metrics as we progress during ’24 on that. But the revenue will certainly lag the sales of GenAI, which we anticipate revenue from the GenAI beginning to pick up more in the second half ’24, and that goes into 2025, if helpful [ph].
Scott Fletcher: Okay, great. Thank you very much.
Operator: Thank you. We will go next to Drew McReynolds from RBC.
Drew McReynolds: Yes, thanks very much. Good morning. Can you hear me?
Mike Eastwood: Very well, Drew.
Drew McReynolds: Okay. Super. My question is just around the competitive landscape, specifically either new entrants or your peers that are also deploying GenAI. Just would love to get an update on kind of what your assessment of that would be just given the pace of change and everybody kind of launching their own GenAI versions of different products. And then maybe a follow-up to that. Steve, in the past, you’ve talked a little bit about the end markets that you serve and the transition or transformation that inevitably will be taking place at law firms and tax and accounting firms. What have you seen to date? And presumably not a lot. But if not, when do you think those end markets begin to accelerate their pace of transition? Thank you.
Steve Hasker: Yes. Thanks, Drew. Great questions. So with regard to the competitive landscape, I think we are seeing, I’m sure you’re seeing sort of the flurry of announcements of new entrants of some of our traditional competitors making moves. I can only really comment on the conversations that I have and my colleagues have with our customers, be they existing customers or new prospects. And the feedback we are getting on our both launches to date and our product road map is extremely positive and growing. And I think that’s based on a couple of different things, particularly for those customers who had a chance to really kick the tires on our offerings and test the accuracy and incremental value of our offerings relative to some of the competitors.
Our repositories of content are deeper and broader than anyone else in the industries that we serve, particularly in legal. And that is being recognized as a key value component in any GenAI-driven solution. Secondly, we enjoy, but don’t take for granted very deep and broad customer relationships, and they’re trust-based customer relationships. So in terms of doing it right and predicting client proprietary information and all the sort of data privacy rules that will inevitably come as GenAI evolves, there’s a level of trust in TR’s plans and exhibition — and execution, I should say. And then thirdly, talent. We’ve — as you know, we’ve put a lot of effort into making sure that we have the best product and engineering and labs teams. And we’re just starting to scratch the surface in terms of the results of that.
So those three things give us a lot of confidence coming out of 2023 into 2024. But I would also say it’s early days. I think this sort of GenAI-driven transformation will be a multiyear journey, and we’re certainly not going to rest on our laurels based on what we’ve been able to achieve in the early going. And that sort of, I think, leads to the second part of the question. The good news is, as we explore with our customers, the role of Thomson Reuters content-driven technology in their work lives, we just see that role expanding, as I said, in response to Scott’s question. And we see a world in which a customer in a year or two’s time, perhaps longer, perhaps shorter, says, well, that was Thomson Reuters, who I traditionally — my Chief Knowledge Officer or my librarian leaned on for many, many years to provide great content.
And now I’m really running my practice, I’m running my business, I’m running my department on their content-driven technology. We see a fairly clear line to that expanded role. But your point about adoption, we also see — as that role expands, we see a greater need for change management at the customer site. And some customers are expecting us to be very much front and center to that change management program, and others are keen to sort of navigate a lot of that themselves. I think it’s early days, Drew, in terms of that — their scoping out of that change management and figuring out what it looks like and what resources will be required over what period of time, but we’ll certainly be shoulder to shoulder with them as they figure that out.
Drew McReynolds: Very helpful. Thank you.
Operator: Thank you. We will go next to Kevin McVeigh from UBS.
Kevin McVeigh: It’s Kevin McVeigh from UBS. I just want to start and just — I typically don’t do this, but just congratulate the execution you folks have had because it’s been a major transformation in the business, and it’s really gone flawlessly. So I just — I wanted to call that out because I think it’s really important. I don’t know if this is for Steve or Mike, but when you think about those medium-term targets kind of going from 6% to 6.5% to 8%, is there any way to think about — build that up a little bit, how much of that is retention versus pricing? And then you’ve done a lot of high-growth acquisitions that are in the base now, maybe how that contributes. Because it feels like a first step to me as opposed to a ceiling, if you would. But maybe can we start there?
Steve Hasker: Yes. Can I just — I’ll just make a comment on — or reaction to Kevin, to your questions and then turn it over to Mike. So thanks for your points about execution, Kevin. We are proud but I hope not arrogant about what we’ve been able to — the work we’ve been able to get through. We were very deliberate back in — way back in 2020 in saying we’re going to go through this Change Program. And in doing so, we’ll make a two-part pivot: first, from portfolio operating; and the second from holding to — sorry, from holding company to portfolio — to operating company and then from content to content-driven technology. And we’re — we’ve achieved a lot in getting through that. Kudos to Kirsty Roth and Jason [indiscernible] and a legion of others who have really driven a lot of that hard work and executed along the way.
And as a group, I think we’ve learned a lot and we are getting stronger and stronger. As it pertains to some of the key metrics that we are very focused on, like Net Promoter Score and Net Recurring Revenue, the sort of broader set of customer success metrics, we are just getting started. I think there’s sort of an appropriate level of modesty as to how much progress we’ve made and how much upside there is for our Big 3 segments should we be able to accelerate and build more momentum. Over to you, Mike.
