Thomson Reuters Corporation (TRI) Earnings Call Transcript & Summary

Good morning, everybody. Thank you for being here. We'll continue the day here. Again, for those of you who don't know me, my name is Manav Patnaik., I'm Barclays' business and information services analyst. But we're very pleased to have our next session here with Thomson Reuters. And to my right, we have Steve Hasker, who is the CEO; Kirsty Roth, COO and CTO, and then Gary Bisbee, who's Head of Investor Relations. So thank you, all 3 of you for being here. Appreciate it.

Thanks for having us, Manav.

Steve, maybe I'll start with you. Just to set the stage a little bit. I guess, when -- still for a lot of folks, especially out here, when you hear Thomson, we still think of -- I shouldn't say we, but some of them still think of the legacy business that you've had, that you've cleaned away. So maybe just to set the stage, how do you describe Thomson Reuters today?

Yes. So 90% of our business is what we call content driven technology. So we're the leading provider of content-enabled software for the legal profession, the tax and accounting and audit profession and the sort of risk, fraud and compliance, particularly law enforcement and particularly in the U.S. And then 10% or a little bit less of the business is the Reuters News Agency, which remains the largest wholesaler of news in the world.

Got it. And the 3 main divisions, the Big 3 as you talk about it, maybe just give us a flavor of that in the mix there.

Yes. So the largest of them is Legal Professionals, so that serves law firms of all sizes, predominantly sort of throughout the common law markets, so the U.S., U.K., Australia, New Zealand, Hong Kong, Singapore, Canada and so forth. And then the Tax & Accounting Professionals business serves the tax accounting firm. So basically from sort of the eighth largest firm all the way down to sole practitioners, predominantly in the United States and Brazil. And the reason of that geographic footprint is those are 2 of the most complicated tax codes on the planet. And therefore, there's more demand for our content-driven technology in those markets. And then lastly, our Corporate business, the last of the Big 3. And so that's really in service of the General Counsel, the head of sort of tax and trade and the head of risk and compliance.

Got it. Kirsty, maybe I'll move to you. Just a little bit of background of yourself. Some of folks here, you'll be new to them. And then also I think the initial work you had done in terms of transforming Thomson Reuters into its current stage, if you could just give us a flavor of that as well.

Yes, sure. So nice to see everybody. I'm a technologist by background, but spend, if you kind of don't quite count TR, about half of my career in financial services, but really in the tech and sort of change side of the business and then about half in consulting, right? So that kind of gives you a sense. And I think joined TR very much seeing the opportunity, I think, in the content and the software, as Steve described it, but really thinking about how could we improve the customer service. We historically had quite low NPS, right? What could we do to really drive up the use of the software, get the customer service at a level that people want to use it and really sort of drive it into that next generation? So spent really the first 3 years of, I'm on my fifth year at TR, really driving through that program. And I have spending far more time, obviously, growth orientated and what we're doing, particularly with product and technology.

Got it. And maybe you can just expand on the latter part, the growth of the product, technology, the growth. Like what are some of your goals that you have there?

Yes. So I think we're experiencing a pretty exciting time with generative AI. And for those of us that are sort of the tech nerds, should let say, the generative AI works extremely well when you have rich content, right? So we are blessed, I would say, by what we have within our portfolio, the kind of models that have been put together by many of the big tech houses and the independents, like OpenAI, Anthropic, et cetera, work extremely well when you have large amounts of words, basically, right, like long context. And so that's playing extremely well for us in terms of the products that we've been updating. We've obviously acquired some along the way and then integrating them. So things like CoCounsel have been real winners for us, but really thinking about how do we then get those skills into all of our products, so that we're getting a richer and richer experience, as Steve described, either into the hands of attorneys, lawyers or into the hands of tax and audit professionals or even risk professionals. Setting a lot more time on really growth and the opportunities there with what we can do with the tech and the content that we have.

Got it. And Steve, several years ago when you were at this conference, Jenny, I had just about hit the tapes and there was a lot of debate on whether that's good or bad for the legal industry and, therefore, your business, where do we stand today? How do you see this...

I mean I think as Kirsty said, we're very excited about it because we do bring something very valuable and unique to this GenAI environment, and that is unique and proprietary content, and thousands of highly trained experts who can -- if we sort of repurposed to become prompt engineers in various forms. So as we sit and sort of look at the next few years of our business, we think there's 2 sort of big prevailing tailwinds. The first one is the increasing complexity associated with compliance. So any corporation or their adviser faces increasing legal complexity, increasing tax and audit complexity and increasing sort of fraud-related compliance complexity and adding more bodies to sort of to meet the needs of that complexity is not really viable. Investing in scalable content-driven technology is the best path forward. And so that's the first of the tailwinds. The second one, as Kirsty said, is generative AI, because what generative AI does is helps us extend the role we play in the success of our customers. So one example would be for a law firm, a product like Westlaw has for years been the leading litigation research database. So in other words, which cases are relevant for a particular matter. What AI enables us to do is translate that from a list of relevant cases into the first draft of the research memo that an associate can put in front of their partner or a partner can send to a client. It also enables us to -- instead of just being the tax calculation engine, it enables us to do the end-to-end tax return and then provide sort of advisory prompts for tax and accounting firm in service of their customers. It enables a lawyer to produce a first draft or a first brief or to take -- to get a sense for what the opposite side will argue and how a judge might respond to your arguments and the opposite side segment. So we're excited about that increased complexity and tariffs and changes -- constant changes to tax codes are our friends as a increased sort of legal complexity. And then GenAI enables us to play a larger role and help our clients, our customers automate their workflows on at large scale.

Got it. And just to put some numbers on the GenAI strategy, talk about the annual organic investment in AI broadly, I guess. And then also as a follow-up, you kind of -- you've made a few key acquisitions along the way. If you could just talk about those as well.

Yes. So 2 sort of separate but related things. We've spent about USD 2.2 billion, USD 2.3 billion over the last 24 months on GenAI acquisitions, so -- or at least sort of AI acquisitions. So that has included Casetext, which brought with the leading legal AI assistant called CoCounsel that we've invested heavily behind. It also included SurePrep and SafeSend, which either ends of the tax return process; Materia, which is an agentic AI assistant for auditors, tax and accounting professionals; and then Pagero, which is the leading e-invoicing solution and the indirect tax or the sales exit VAT space. And so each of those so far has -- had been highly productive for us. And we -- Kirsty has been able to integrate them pretty seamlessly into our tech stack into our environment. So that's the inorganic part. The organic investment part, we're spending about USD 200 million split pretty evenly between OpEx and CapEx, injecting GenAI into our flagship product. So developing new features and functionality through CoCounsel, integrating CoCounsel into Westlaw or Practical Law on the legal side, Checkpoint and ONESOURCE on the tax and the corporate tax side. And we're starting to see that translate into tangible increases in demand from our customers and a tick-up in our revenue growth.

That's clear. And Kirsty, sounds like you're very involved with the GenAI part as well. So maybe if you could give us a flavor on the $200 million. Like where does that get spent? Like what are some of the key signposts, I guess, to look for?

Yes. So I mean, as Steve said, it's actually spent quite evenly across if you think about legal and tax in the big, right, with slightly more -- having some started in legal, but tax catching up quite quickly. And really, like, CoCounsel as our kind of go-to-market view. So if you're an attorney or a tax professional and you want to be able to do all these things in one place, right? I also do all the buying for TR, I should say. I sort of understand the other side of that, you're only buying 15 different bits of software, right? You want ideally a platform for our users that will integrate very well. So we're looking at that and whereas traditionally, as Steve said, somebody might be using Westlaw for litigation, but they're using Practical Law for the sort of more junior associates to come up and understand how to kind of do things. It's all in one place. So you can just use the assistance, whether it's asking a question about the right way to do something or preparing you a draft or integrating with HighQ, which is our workflow solution, right? So really think of it as sort of your one-stop shop either for an attorney or on the tax side, the same thing. Like Steve talked about some of the integration which we've made, but right from preparing someone's tax through to actually wanting to really give them more advisory. And certainly, when I joined TR, we were talking a lot about getting more out of the tax filing business and much more into the advisory business. And this now really gives us an opportunity to do that because the software just works extremely well to be able to give those use cases life in a way that is very intuitive for our customers to use and quite easy to use. You don't need to be a tech expert. As Steve highlighted, we're using a lot of our editorial resources, we call it. So those are trained attorneys and tax professionals to actually help us drive the prompting. So in our experience so far, it's far easier to train an attorney or a tax professional to prompt than it is train an engineer to learn the tax or the legal content, right? And so we can get them more quickly that way around. And so that enables us to really have a kind of user's view as we go around like these products and how easy are they for someone to use, whether they are trying to just get your tax filing done or actually then ideally go where a lot of our customers want to go, which is at that next level. So I've not just got your filing done, and we've all sort of run out of energy. And given we all file taxes, I'm sure we all know how that feels. But you to that level of, "Okay. Well, now we filed your taxes. Here are some things we would suggest next that you might want to look at that would optimize your personal portfolio or your business portfolio, depending on whether you're talking about individual or corporate tax."

And importantly, for our CPA customers, that's a new revenue stream for them. So we're helping them grow their businesses by automating manual process they and or people on their teams have done. You free up their time and the GenAI also has the potential to provide them these advisory suggestions based on our content base and based on the history of tax returns of an entity or person. And so you're allowing your customers to grow their business, which is why there's real excitement as we innovate in the space.

Yes. And when you spend time of those customers, I mean, one of the things they get most -- the most challenge is really hard to find new CPAs. Like they're really struggling to hire enough people. Plus, you then got to train them. Then you've got to retain them, et cetera. And so being able to have the software do what traditionally might have been somebody in their sort of first to fifth year of learning for you really is an easy kind of win-win versus having to have real anxiety and kind of compete for this pretty rare talent now to get on your team.

Got it. So just to follow up on that, either Steve or Kirsty. So with Legal, clearly, you have that content advantage, and I think everyone -- most of the press on GenAI and the opportunities on the legal side or on the tax side, it's more on the software side of the opportunity. Or can you just help us appreciate the TR advantage there?

Well, it's -- look, it's both. I mean, in both cases, we bring to bear the unique and proprietary content that we've created over decades. So in Legal, that's Westlaw, that's Practical Law. And in Tax & Accounting, that's predominantly a product called Checkpoint. And we feed that into the workflow software. The moat in our Tax & Accounting business is the tax calculation engine because once the tax and accounting firm have adopted that software, it's very difficult to sort of rip it out, right, because you're effectively -- you're facing -- in the United States, as an example, you're facing a March, April tax filing deadline. And then before you know it, you're up to the September, October. And if you decide that you want to replace the software, it's a difficult thing to do in that short period of time. And so you really need a sort of incentive to do it and you need sufficient sort of change management capabilities to do it. So the sort of the longer tail of customers are reluctant to do it. So it has a very sort of solid background. What we have identified in this space, though, as Kirsty said, is a chronic lack of talent. So kids coming out of sort of accounting -- kids are not going through accounting and audit programs as they used to, and they're certainly not joining the profession. So as the number of returns goes up and the complexity of returns goes up, and the number of audits and the complexity of audits goes up, there just isn't the talent to fulfill that demand. And so the tax and accounting profession, whether it be here in the U.K. or in the U.S. or anywhere else, is desperate to get hold of a technology that can enable them to automate a large part of that tax return process in the first instance. And in the second instance is to, as Gary said, gear up for advisory services. So what we've done is we acquired SurePrep, which is document ingestion for the tax return process, and SafeSend, which is the e-filing capability, and we've created an end-to-end workflow, which we'll launch as we go through this year, which literally will be agentic and AI-driven and enable a tax and accounting professional to, almost at the press of a button, produce a first draft of the tax return, and that will be the first step. And the second step is that we'll then queue a series of advisory prompts that will enable that tax and accounting professional to do what they want to do, which is sit down with their clients and provide advice as to how they better manage their business or manage their individual financial situation. And so it both addresses a chronic talent shortage and also creates a growth vector for the tax and accounting profession and the audit profession.

Got it. I mean, GenAI has clearly been a big part of your story at least over the last several years. And I think you're one of the only companies that provides a breakout of GenAI contribution. So I don't know, Gary, maybe you want to just tell us the history of the ACV, the contribution, anything you can on the growth side.

Yes. So in the third quarter of last year, we launched a new metric that we say is the percentage of our for ACV, think-- for ACV, think our annualized recurring revenue. Recurring revenue is 82% of our revenue. So annualized recurring revenue, what percent of that is in products that are Gen AI-enabled. So have a meaningful GenAI portion of it. And it's 20% as of the first quarter that we reported last week, and it has risen from mid-teens to 20% over the couple of quarters that we provided that metric. And so the -- and we expect, as we continue to bring the capabilities into more products and grow the products that, that metric will likely continue to rise.

And some of the key products in that 20%?

Yes. So the biggest one is Westlaw, which is our biggest product. The -- Westlaw, we have 3 tiers of service, the top tier called Precision, which we've also said is in the mid-40s percent of all of Westlaw is upgraded to the top version. That top version has meaningful GenAI capability in it. And so that's the biggest. Practical Law is the next biggest, the dynamic package of that offering. Westlaw is about 1/4 of our revenue. We've said Practical Law is about $600 million. But then we also have the much smaller but rapidly growing GenAI tools like CoCounsel. CoCounsel Drafting. And earlier this year, we launched CoCounsel for tax, audit and accounting as another product that are GenAI enabled.

Got it. And Steve, maybe just to take a step back. Even before GenAI helped you accelerate some of your growth, I mean, you did -- you guys did a fabulous job transforming the company from what was low single-digit growth, low 30s margins. And now we're talking about high single-digit growth, approaching 40% margin. So even before GenAI, like, what was -- what were some of the key things that you had to change when you took over right at the start of COVID?

Yes. So it was sort of 5, 5.5 years ago that Kirsty and I set off on this journey with a number of our colleagues. And essentially, what we found after we joined Thomson Reuters was that customer after customer said a version of the following to us, which is, "Look, I love your content. It is -- when I buy Thomson Reuters content I know I'm getting the best, the most comprehensive, the deepest, the best curated, the best annotated content. You're the most easily searched." And in many cases, they loved our people. So they would literally say, "Let me tell you about Mary. She's fantastic. She's been serving me for decades, and she's just so committed to what we do. But, gee, the experience of dealing with you folks is difficult." So finding the right product, figuring out what price to pay, signing up, initializing it, authenticating it, getting on board and then heaven forbid when they get a bill, and then go to renew. And so they said, "Look, it's just -- it's not a good enough experience." So Kirsty went end-to-end. And basically, what would -- imagine what we called the change program. We basically reengineered the customer experience. And we've been able to drive our NPS from low 20s up into the mid-30s with, I think, some real upside to come. As you know, it's improving NPS is sort of -- it's 1 million different moves. There are very few singular moves you can make to do that. And I think we're starting to build some momentum there, which ought to play through to our retention and now in our NRR. But it really was reengineering the customer experience and increasingly having it be digital. So a marketing, sales, billing renewal motion that's digital. We also went and optimized our workforce. So we've got 27,000 people, and we sort of went through every single location and every layer and make sure that we have centers of excellence, that we've got the right people in the right places. And then last but not least, we were quite ruthless about investing behind our higher-growth products. I think our predecessors have been much nicer and much more sort of democratic in terms of sort of every part of the business and every product got a little bit of investment And what Mike Eastwood, our CFO, Manav, was just ruthless about saying, "Look, if the TAM is big enough and the opportunity is big enough, I'm going to invest heavily behind. And if it's not, I'm not going to." And that has yielded what Gary described last week. Do you want to talk about your famous slide from earnings last week, Gary? But we've been able to sort of drive that growth by being much more focused on where the opportunities are.

Yes. We've gone from what was 2% to 3% revenue growth for a long time for the assets we have to this year, we're guiding to 7% to 7.5%. And next year, we put out a financial framework for 7.5% to 8% organic revenue growth. And I think we illustrated some of that progress on the slide in our earnings last week where we just showed in 2019, if you looked at our revenue by product, 11% of our revenue is products growing double digits. In 2024, that had grown to 25% of our revenue with products growing double digits. And it's also worth noting, the portion of the revenue that's not growing double digits, it's growing faster today than it was in 2019. And so we've had -- I think that Steve cited several reasons that were the big ones. We've clearly done some portfolio optimization work, both M&A and a few targeted divestitures. The prioritizing and investing behind our best opportunities that Steve just mentioned was a key one, and we've invested heavily to the discussion around AI that we've been having. And I think those 3 factors have been the biggest drivers of the acceleration. And we've gotten a lot of questions on Steve's discussion of this in earnings. I think one of the key ones is how do you think about the duration of growth in -- within those products that are delivering that quarter of our revenue that's growing double digits. And I the simple answer is we feel pretty good about it. There's a lot of those products where we see runway to continue delivering double-digit growth. And there's a lot of places where we've got a detailed road map of future innovations that we believe will allow us to continue to price and grow the business.

And Gary, just to follow up on that. I asked you this last week, but the 20% ACV that's GenAI and the 25% of products is growing 10%, is there an overlap there? Or...

There is, but the biggest piece of the GenAI ACV is Westlaw. Westlaw's growth rate has doubled in the last 5 years, but it's not quite double digit. So to the point of the non-double digits accelerated a lot, that's Westlaw. But certainly, there's a lot of the products that are driving the GenAI growth are in that 25%, for sure. But there's a lot of stuff, not GenAI specifically, other technology in areas where we're growing double digits as well.

Got it. And Steve, you needed -- you have another public competitor, RELX, that also has a good legal business. They've also talked a lot about their GenAI; efforts, growing nicely them as well. Can you just help us distill the competitive dynamics? Do you guys eat -- swim in your own lane? What is the context behind both of you doing well here?

Yes. So I mean, I think what we're seeing -- what we've seen over the last couple of years is a pretty robust legal end market. If you sort of look at the profitability of law firms, if you look at the equity partner take-home compensation, these have been good years. And I think that's sort of provided something of a tailwind for both companies. We invested very heavily in, first, Westlaw Edge and then Westlaw Precision. We didn't see LexisNexis as RELX's legal franchise necessarily match that. But they did sort of use the moment where ChatGPT-4 passed the bar exam, and GenAI came along to sort of lift up their proposition, Lexis+ AI, and sort of get back into a direct comparison with Westlaw. One of the things that we've been determined to do is become the most innovative company in business information services. So as we think about RELX, as we think about Wolters Kluwer and a bunch of other companies that we have a lot of respect for, we want to make sure that our proven track record of putting new products, new features, new functionality in the hands of our customers supersedes any of our competitors. And I think we're starting to see the green shoots of that. And it's a fantastic time to be in the sort of legal tech, legal software space because GenAI is in the process of transforming the profession. It's very early days, but there are some exciting use cases coming from us and some of the competitors. And I think the beneficiary will be the profession, ultimately.

Got it. And to Gary's point, if Westlaw obviously has grown faster, but it's still not double digits, I mean, you would think that the law firm should be adopting this pretty quickly. But what are some of the qualitative barriers that you hear from your customers? And why it's not...

Yes. So I mean, sort of very roughly speaking, if you look at the percent at a law firm, or for that matter, a general counsel's office spend in -- on technology, it is meaningfully less than other professions. So whether it's the consulting profession, whether it's the financial services profession, this is sort of 1/3 to 1/4 of spend of the revenue on technology. So we think going forward that law firms, and they're starting to do this, partnerships have agreed, we're going to spend a little bit more in experiment with some of these GenAI products. And ultimately, we think we'll spend more on technology, less on real estate. And it may well be that they spend less on headcount, although that discussion and debate is very much sort of just beginning. But some of the barriers exist, of course, to sort of wide-scale adoption of GenAI products that can do 30 hours worth of work in 3 minutes is the per hour billing, which is less prevalent here in London, but it's still prevalent amongst the big U.S. firms. So that's one. The second one is you're talking about technology that can and will reshape the pyramid structure of a law firm in terms of the way talent sort of migrates up, becomes more and more senior, gets elected partner and so on and so forth. You're also talking about a very different apprenticeship model. If the first draft of a contract or a brief or an opinion is produced by CoCounsel, then what's the role of a first-year associate? And how does the firm sort of rethink the number of graduates they're bringing in, the types of skills they're looking for? Attorney-client privilege needs to be rethought, right? Data privacy and protection, which is something that we think will lead the industry on, but that needs to be rethought, the amount that they spend. And then last and maybe most important, what are the new lines of revenue, new lines of business that firms will generate, and we're starting to work with a series of our customers on all of those issues, including that last one, because, ultimately, these are profit-driven enterprises and the managing partners are highly incented to improve the economics for their partners and, in doing so, retain their rainmakers. And so you always got to think about -- when you look at the legal profession, you've always got to think about the mobility of talent and how the technology plays in and helps retain talent or creates greater mobility. And so those are some of the things that we're working through in terms of the change management within our customer base.

Got it. When I think of Thomson Reuters, I always think of like 4 key parts of the story, which is the accelerating growth we talked about that. The GenAI layer we talked about that. The other 2 is kind of your defensiveness and capital allocation. So maybe starting with the defensiveness point, maybe more current view, like with all the noise out there, have you seen any impact from your customers? Are they delaying decisions?

Not yet, not yet. I mean, we've seen sort of -- we've talked with you for a while, Manav, about sort of elongated sales cycles coming out of the sort of out of the pandemic into a higher interest rate environment. We saw a number of corporate CTOs sort of put us and other vendors through an extra procurement meeting, an extra hurdle. That really hasn't changed. And the sort of tariff volatility this year has probably just kept that situation as is. But if you think about the defensive nature of our business, so we have, to Gary's point, over 80% of our revenues are recurring. We have close to 600,000 customers. We're not -- and it's highly dispersed. So we don't have any sort of customer concentration. And we -- our products are not discretionary. So these are products that are sort of very much embedded into the customers' workflows. And maybe, most importantly, as we head into potentially a more difficult environment, almost every single one of our products drives efficiency and reduces the need to add headcount to cope with increased complexity. And so that positions us well in this environment. Now we've got a couple of parts of the business that are volatile, and it's -- they're much less material. But within Reuters, we have some digital advertising and events. We still have a small Print business that can move up and down with the economic cycle. And then we have some transaction revenues, much of which is sort of repeatable transaction revenues. But nevertheless, that can move as well. But it's that 80% sort of recurring revenue that puts us in good stead and makes us look sort of relatively better in a difficult environment.

Got it. And I know a lot has changed, but in past slides, you guys have shown kind of the resiliency of the growth. In that low single-digit range, you guys obviously starting at a higher level. So should we think that the resiliency could also be at a higher level?

What do you think, Gary?

I think that's fair. In the first quarter of 2020, and it's still on our IR website, at the time with the beginning of the pandemic, we had some slides looking out of the businesses we have today did in the financial crisis. And making the comparison as to why the business was more durable then, I think that, that has continued with the divestitures of Elite and FindLaw, with the larger mix of recurring revenue, we've got a significant base of multiyear contracts, particularly in legal. And obviously, our balance sheet, really, a fortress quality balance sheet. I think we're very well positioned. I think it is not unreasonable to think we'd be potentially somewhat more resilient than in the past. And the worse it gets, the better we do on a relative basis. I mean that. ..

On that -- Gary, on that capital capacity, maybe if people will notice, we've -- between now and the end of 2027, we've got about USD 10 billion in dry powder. As I said, we've spent a couple of billion dollars over the last few years on bolt-on acquisitions to serve our customers within the Big 3. We will continue to be very, very rigorous and keep the bar high. So we're not going to get deal fever. But we are sort of cautiously optimistic that this environment could bring into view some better priced assets. We thought the same actually coming out of the pandemic when the interest rate environment sort of turned and private equity funds sort of kept the price point higher for the best assets in the portfolio, perhaps that will persist, perhaps we'll see something a bit different. But we're certainly in a position, we think, to take advantage of what may come our way.

Correct, yes. I observed that in your script on the last call. So I was going to follow up on that. So maybe it's a good time just to remind us of what are the key geographies, verticals, even segments. Like where are some of these deals that we should be looking at?

Yes. So as I said, I mean, we're very much focused on the Big 3. I mean, going forward, we would love to heavy up in Indirect Tax. So this is the software that calculates VAT and sales and excise and so forth, global trade and tariff rates. We acquired Pagero a couple of years ago, which we believe is the -- is really the only e-invoicing solution that's truly global. So it's the largest corporations who operate in more than one jurisdiction need to meet e-invoicing mandates as they roll out, particularly in Europe, increasingly Southeast Asia and Latin America. Pagero is a natural and logical choice for them. But we're still sort of #4 in the indirect tax space. In that space, you've got Vertex, you've got Avalara, you've got Sovos, you've got us and then you've got a bunch of smaller players. We think it's a very, very valuable space, and we'd like to get a bit bigger and better than that. We also have $300 million odd revenues in the sort of risk and fraud area. So this is on the back of the CLEAR data set, which is the leading person's data set in the United States and also what we call TRSS, Thomson Reuters Special Services, which does sort of highly sensitive analytics, data-driven analytics work predominantly for law enforcement. And so if we could find our way to scale up in that space, we'd certainly go after it. We quite like -- within the sort of broad ESG landscape, we quite like supply chain and risk-related analytics in the supply chain. So if we could find something there, we'd be interested. 80% of our revenues are in North America today. And particularly as we sort of look at some potential downward pressure on the U.S. dollar, we'd love to heavy up on our international revenues. So particularly Brazil, where we've got a great starting point, Mexico. Where we're starting to see some growth in Southeast Asia. So if we could find the sort of right deals to do there, we'd certainly be interested.

And just on the international point of view, you talked a lot about it at the Investor Day as well. I mean, I think some of the challenges with our companies is the business models and the content is so good in the U.S., you can't find the same thing abroad. So is that the case? Or is it valuation?

No, it's not. It is, to some degree, the case. So if you look at the Dominio franchise in Brazil, which is the leading tax software for the sort of long tail of tax and accounting firms in that economy, that -- its growth has consistently been north of 20%. And that's driven by the complexity of the tax code. We think there's some really interesting extensions that we can add on to that, and we'll pursue those over the next couple of years. We would love to find similar extensions in Southeast Asia. In some cases, we already have the content. In other cases, we can acquire or build it. It's certainly a different starting position to your question other than we have -- we enjoy in the United States, but it shouldn't stop us from going after it.

Got it. And you've clearly been active with M&A. You said $2.3 billion, but $10 billion is a big number. Let's just say some of these big deals you mentioned don't come through, what do you do with the cash?

We've -- I think, under Mike's leadership, we've been very sort of disciplined about increasing our dividend 10% a year, about some buybacks where they make sense. So just to assure everyone, we certainly won't get deal fever is because we've got that dry powder. If we can't find the deals that are going to be -- that are going to create value for our shareholders versus just the exiting shareholders, then we'll return the capital to shareholders one way or another.

Got it.

But we're also -- I think it's worth saying, we're also willing to be patient for a bit. We're earning 4.5% on our cash, and we're seeking high return opportunities. And we think M&A is the highest return opportunities in front of us. But to Steve's point, we're not going to lower the bar. Buybacks are less attractive than they were 2 years ago largely because interest rates are a lot higher. And we think about it on the same type of an IRR NPV framework we do for M&A, large capital projects. And so I think it's likely we'll do a bit of buybacks. We've made a commitment to return 75% of our free cash flow a year over time to shareholders between the dividends and dividend growth and buybacks. But to the extent that buybacks get a lot more attractive at some point, certainly, we could obviously do a lot more based on the strength of the balance sheet.

Okay. Got it. In the last couple of minutes, I just wanted to end with some of your government contracts, exposure, a lot of noise, obviously, the DOGE website. There's a couple of your contracts listed up there. But then in the last earnings call, you actually talked about how your government growth accelerated. So just help us bridge the gap. Like are you losing stuff to those? Is -- just the dynamics, that would be helpful.

Yes. We've spent a bit of time on the DOGE website as of others. And certainly, we had a couple of contracts that sort of came into the field of view of that team. By and large, we haven't suffered any material sort of deterioration in our government business. And to your point, we did see a pretty healthy growth in the first quarter. And the reason for that is our products and services, whether it's Westlaw or it's TRSS or Clear are a must have, and the agency heads have sort of read, by and large, reached that conclusion. So we'll just keep serving those customers as best we can and remain sort of vigilant in this environment. I mean, there's definitely -- I think it's not only the United States. You're seeing a sort of more and more countries, more and more governments sort of look at ways in which they can better represent tax pays. And so the proposition for us is to make sure that we're part of the solution, not part of the problem, and that whether it's CoCounsel or whether it's Westlaw or any other product that we sell to government agency, it drives efficiency.

Got it. And maybe just quickly to end with that, Reuters News is a little bit more in the news on the government side. Just any thoughts there?

Yes. I mean, I think as everyone knows, Reuters News is governed by the trust principle. So it is straight down the middle. It doesn't lean left. It doesn't lean right. There is no opinion on narrative on Reuters News. It is just the facts. And there are places and times across the world where it's difficult and dangerous to represent the facts as we find them or as our journalists and editors find them. And that's certainly attracted some attention in different parts of the world. But we're very proud of the work the team is doing and the integrity they're showing in getting their stories out. So they'll keep doing that.

Got it. All right. Let's end it there. Thank you, guys, for your time.

Thanks, Manav.