Manav Patnaik: Got it. And then I apologize if I missed this, but just on the topic of GenAI, just trying to appreciate the feed off between the expenses or the investments versus the growth benefit, I guess, that you’re embedding in your ’25, ’26 guidance. I think you said you’d spend like $100 million a year on GenAI or something like that. Is that still the case? And is the right way to think about it that you’ve made some of the big investments, acquisitions this year. And so now any growth will just help you leverage to the bottom line, and hence your guidance?
Mike Eastwood: Yes. So you’re right, with regard to the $100 million investment in ’23. We plan to continue about that intensity. We will constantly sort of revisit whether that’s the right number and whether we’re getting adequate and exciting returns from that. A couple of things, though, and I don’t have the split. But it’s worth noting that, that pertains to a couple of different things. One is the development of a GenAI platform. So [indiscernible] and his team and Joe Herron [ph] have built a GenAI platform that serves, firstly, Westlaw Precision, our research memo, but also the other Legal products. And Can and will be extended into other parts of the business, including Reuters News. And so there’s a level of sort of common and shared capabilities.
It’s not discrete products. And then, of course, there are the investments required in developing and launching the specific applications like Westlaw AI research memory like Practical Law Course Finder and so forth, some of the things I mentioned. So there’s two of those things. And the investment in the platform side of things is probably a little heavier in the early going and then lightens up as we start to start to leverage that across more and more product launches.
Manav Patnaik: Thank you.
Operator: Thank you. We will go next to Maher Yaghi from Scotiabank.
Maher Yaghi: Great. Thank you for squeezing me in. I wanted to go back to one of the slides at the end of your presentation talking about your expected debt leverage over the medium-term. You’re focusing on 2.5. That’s like — to get there, it’s about $4 billion of additional acquisitions. So my question is when we think about return on invested capital for Thomson, how should we think about the movement on that metric as you undertake these kind of significant acquisitions over the medium term? And a follow-up question on organic growth for ’25, ’26. How much of the acceleration in organic growth is coming from adding on these companies that you have been buying recently, like Casetext and Pagero, versus your existing portfolio seeing acceleration in its revenue growth itself? Thank you.
Mike Eastwood: We’ve break those down, Maher, in regards to your questions there. I think you’re referring to Page 29 and of the presentation. And first, the net debt leverage 2.5 over the long run, those of you who have followed us for many years, we’ve consistently provided our value-creation model, which reflects that. We’re currently below 1x. To your point, Maher, we have significant flexibility, significant optionality. And to Steve’s point on his discussions today on M&A, given the opportunities that we see with the pipeline, we have a lot of flexibility. So not much more I can say there that we’re going to be very, very prudent in deploying our capital given that we are roughly at 1x today, and 2.5x is our internal target.
Our bank covenants provide up to 4.5x, a lot of flexibility. On ROIC, additional focus on that in recent years. Certainly, as we make acquisitions, might there be times where you have some ebb and flows given the impact of M&A on the ROIC. But I think over the long run, focusing on 2x [technical difficulty] we feel very comfortable on achieving recognizing that acquisitions can have some near-term impact on that. Your third question on organic growth for ’25, ’26, I will refer back to Kevin’s question earlier today. I think ’25, ’26 revenue growth acceleration, the 4 vectors I mentioned earlier: tension, pricing, the product road map and then the M&A. You mentioned the M&A specifically in your question. I stated in my prepared remarks about 50 basis points of contribution in calendar year ’24.
If you look at ’25, ’26, there will be additional contribution from the M&A.
Maher Yaghi: Thank you very much.
Operator: Thank you. We will go next to Doug Arthur from Huber Research.
Doug Arthur: Yes, Mike, can you hear me?
Mike Eastwood: Very well, Doug.
Doug Arthur: Yes, just quickly on your margin guidance specifically for 2024, I mean you — company has been notably conservative in their guidance that far out. What do you see as sort of the main puts and takes? I know you went through the investment emphasis. But where could you be conservative in that margin guide, I guess, is my question.
Mike Eastwood: Yes, the approximately 38% is our best lens, Doug, as of today. I’d just emphasize two points. One, as stated in the prepared remarks, the M&A that we’ve done recently will dilute our margin by about 120 basis points in calendar year ’24. The other point, Doug, I mentioned during the November earnings call, about 75 basis points is the operating leverage contribution for us. If you assume 6% organic growth, 4% increase in our fixed costs, which are 65% and then variable costs flow through, that yields about 75%. So given the M&A dilution of 120 basis points and we are reinvesting the operating leverage, that gets us to that approximately 38%. And if there’s any variation there too during the course of the year, Doug, we will keep you posted. But that’s our best transparent lens today given those two key items.
Doug Arthur: No, it makes sense. Interesting framework. Okay. Thank you very much.
Mike Eastwood: Thank you, Doug.
Gary Bisbee: Jennifer, I think we have time for one final question, please.
Operator: Thank you. We will go to Sami Kassab from BNP Paribas.
Sami Kassab: Yes, hello. Thank you. Can you hear me?
Steve Hasker: Yes, Sami.
Mike Eastwood: Hi, Sami.
Sami Kassab: Yes, thank you. good morning, gentlemen. We talked a lot about the GenAI contribution to the top line. But can you help us understand the cost efficiencies that this technology may help the company achieve in the next 2 or 3 years and perhaps highlight a few initiatives you have ongoing to deploy GenAI internally? Thank you, gentlemen.
Steve Hasker: Yes. It’s great question, Sami. Thank you. So Christi Roth [ph] and [indiscernible] are spearheading an effort to look end-to-end at our core operations and our functions to figure out where we can successfully apply generative AI tools. In some cases, with our Legal department under Norie Campbell’s leadership it will be the internal applications of our own tools, whereas within the engineering and content and editorial areas, it will be some of the off-the-shelf tools that we’re all starting to read about and understand. We are not here to quantify what the sort of financial impact of that will be today. But we are pretty excited about the ability to improve employee sentiment, improve the sort of underlying productivity of the various parts of our company and the team as a whole and ultimately see some interesting financial benefits.
But I think it’s too early, Sami, for us to put a stake in the ground. But as we all — under Mike’s leadership, we will be very focused on ensuring that any investments we make in applying those tools across the company, there’s an attractive return for our shareholders.
Sami Kassab: Thank you very much.
Mike Eastwood:
Steve Hasker: Thank you, Sami.
Gary Bisbee: Great. Thank you. Thank you, Jennifer. We will leave it there.
Operator: Thank you. That does conclude today’s conference. Thank you for your participation. You may now disconnect.
