Thomson Reuters - Earnings Call - Q3 2019
October 31, 2019
Transcript
Operator (participant)
Ladies and gentlemen, thank you for standing by and welcome to the third quarter earnings conference call. At this time, all participants are in listen-only mode. If you'd like to ask a question, you may do so by pressing star one. As a reminder, this conference is being recorded. I'd now like to turn the conference over to Senior Vice President of Investor Relations, Frank Golden. Please go ahead.
Frank Golden (SVP of Investor Relations)
Good morning and thank you for joining us today. Our CEO, Jim Smith, and our CFO, Stéphane Bello, will review the results for the third quarter and will update you on our outlook for the balance of the year and also for 2020. When we open the call for questions, we'd appreciate it if you'd limit yourselves to one question each to enable us to get to as many as possible. I'll also remind you that Refinitiv is not included in our adjusted earnings or in our adjusted earnings per share, and we do not control Refinitiv as we own 45% of the partnership.
Now, before we get started, there is one accounting item I will call out, and that is our financial statements for the fourth quarter of 2018 and the first and second quarters of 2019 have been revised to correct the non-material misstatement in each period related to our equity interest in Refinitiv. This misstatement had no impact on revenues, Adjusted EBITDA, adjusted earnings per share, or free cash flow for any period. We posted revised financial information on our website this morning and will provide revised financial statements in our regulatory filings. Now, throughout today's presentation, when we compare performance period on period, we discuss revenue growth rates before currency as we believe this provides the best basis to measure the underlying performance of the business. And today's presentation contains forward-looking statements.
Actual results may differ materially due to a number of risks and uncertainties discussed in reports and filings that we provide to regulatory agencies. You can access these documents on our website or by contacting our investor relations department. And with that, I'd like to now turn it over to Jim Smith.
Jim Smith (CEO)
Thank you, Frank, and thanks to all of you for joining us today. Our third quarter results reflect the progress we continue to make across the business. We posted our second consecutive quarter of 4% organic revenue growth and feel that we are well positioned to achieve our full year 2019 and 2020 guidance targets. The continued revenue momentum is attributable to several positive factors. First, the success of our new AI-powered Legal solutions, which continue to be very well received in the market. These are now viewed by many customers as a competitive differentiator, and we're helping to drive sales and revenue growth. Secondly, these new solutions are leading to higher retention rates, including historic high rates in our Legal segment exceeding 90% overall, with large law firms at 100% customer retention year to date.
Thirdly, our new customer-led approach to building open platforms is resonating in the market. We're also working with our customers to integrate not only a number of our previously disconnected products but also other tools and databases they need onto our underlying platform. The more we can integrate our offerings, the more tools and capabilities we can offer our customers. Growth is also supplemented by our recent acquisitions, HighQ and Confirmation, which closed during the third quarter, and also by Integration Point, which closed in Q4 2018. These acquisitions have come with world-class platforms and talent, and we've begun to roll these solutions out across our sales force. Earlier this month, our Reuters business completed the acquisition of FC Business Intelligence, a fast-growing company in the events marketing space. This acquisition will be rebranded as Reuters Events, leveraging the globally recognized Reuters brand with a leader in the space.
We expect this acquisition will be free cash flow accretive in 2020, just like the other acquisitions we have recently completed. Now, to the results for the quarter. Reported revenues and revenues at constant currencies were up 10%, which included the quarterly payment from Refinitiv to Reuters News. Currency did not impact revenue growth this quarter, and for the second consecutive quarter, organic revenues grew 4%, driven by recurring revenues, which were again up 5%, while transaction revenues declined. Adjusted EBITDA was $345 million, up 10%. On an underlying basis, the Adjusted EBITDA margin was about 30% for the quarter, down 90 basis points from the prior year due to the dilutive effect of both the Refinitiv News agreement and recent acquisitions.
Let me remind you here that the third quarter is typically our weakest quarter of the year for margins, and we expect the margin to be a bit better in the fourth quarter despite higher one-time costs, some timing of expenses, and dilution from the acquisitions we've made. These impacts are included in our guidance for this year and next, and finally, Adjusted EPS was up $0.15 to $0.27 per share versus $0.12 per share a year ago. Currency added $0.02 to EPS this quarter. Our Legal, Corporate, and Tax and Accounting segments, which comprise about 80% of our revenues, posted another solid quarter. Organic revenues for these segments were again up 5%. The reported recurring revenues for these three segments, which make up about 90% of their total revenues, grew 6% and were up 5% organically.
We continue to expect a solid performance for these three segments for the full year, and as you've seen from our recent acquisitions, this is where we've been targeting the bulk of our inorganic investment. Reuters News revenues were up more than 100%, including the quarterly payment from Refinitiv. Organic revenues were up 3%. This will be the last quarter that you will see Reuters News revenue growth rates distorted by the Refinitiv agreement. In the fourth quarter, we'll lap the first payment that was made in the fourth quarter of 2018, and Global Print continues to outperform our expectations, with organic revenues declining only 2%, thanks to U.S. Print revenues having achieved positive growth for the first time since 2011 due to better sales and higher retention.
As impressively, the Global Print team continues to operate more efficiently, which is reflected in an EBITDA margin exceeding 42% for the quarter. For the full year, we now forecast that Print revenues will decline between 4% and 5%. One final highlight: Peer Monitor recently reported that demand in the U.S. Legal industry in the third quarter rose by 2.4%, which represented the highest quarterly increase in demand since the fourth quarter of 2007. Needless to say, it's an encouraging data point and reflects a better overall environment for the U.S. Legal industry as we close out 2019 and look to next year. Now, before I turn it over to Stéphane, I think it's worthwhile to share with you how we're thinking about our value creation model as we look to 2020 and beyond. Our model is based on four key principles.
First, driving higher revenue growth is our number one priority. Second, we focus on delivering the highest possible level of growth in free cash flow and free cash flow per share. Third, we seek to carefully balance reinvestments in the business and returns of capital to shareholders. Finally, we aim to maintain a strong capital structure. Let me expand a bit on each of these four principles. We believe the company is positioned to achieve total revenue growth rate of 4%-7% over the business cycle. Most of our growth will be organic, with bolt-on acquisitions potentially adding 1%-2% annually to our overall growth rate. Looking at 2020, we expect the organic growth to be 4%-4.5%, and we expect the acquisitions we announced to date will add about an additional 100 basis points.
This should lead to total revenue growth of about 5%-5.5% next year, which could, of course, change depending upon additional bolt-on acquisitions we may consider over the course of the year. That level of revenue growth, combined with the operating leverage inherent in our business model, should drive higher free cash flow growth. And as stated before, we continue to expect free cash flow per share to reach $2.40 next year. Given our confidence in free cash flow growth going forward, we now intend to target between 50% and 60% of our free cash flow to fund our dividend. That's up from the 40%-50% range we previously targeted. This implies that our annual dividend should start increasing in line with free cash flow once we achieve that target level, which we expect to happen in the next 12-18 months.
Importantly, a higher dividend payout ratio would leave ample room to fund tactical acquisitions, which, as I explained, will bolster our overall revenue growth rate. Finally, let me stress that we remain committed to a very solid capital structure with a leverage target capped at 2.5 times net debt to EBITDA, and as we grow our EBITDA over time, we'll be able to gradually increase our debt capacity within that leverage target. As a reminder, our net debt to EBITDA ratio is currently well below our 2.5 times target, standing at 1.8 times as of September 30th. In summary, we believe that we're now very well positioned to deliver on the value creation model summarized on this slide through revenue growth, enhanced efficiencies, and capital returns for our shareholders.
To conclude, given our nine-month performance and our outlook for the balance of the year, we are reaffirming our guidance for 2019 and 2020. So with that, let me turn it over to Stéphane.
Stéphane Bello (CFO)
Thank you, Jim, and good morning or good afternoon to all of you joining us today. As we always do, let me start by reminding you that our results exclude the performance of Refinitiv. Also, I will talk to revenue growth before currency. On a constant currency basis, third quarter revenues were up 10%, and as you can see, currency had virtually no impact on revenue growth during the quarter. On an organic basis, revenues grew 4% in the third quarter, which excludes the impact of the Reuters News contract with Refinitiv, as well as the impact of our recent M&A activity. As a reminder, this is the final quarter the Reuters News contract will distort our organic results.
Turning to profitability, Adjusted EBITDA was $345 million in the third quarter, up 10% due to higher revenues and lower one-time costs in the quarter, and despite the dilutive impact of our recent acquisitions. We do expect the margin to be a bit higher in Q4 versus Q3, and importantly, we also still expect our full year EBITDA to end up within the guidance range we had provided earlier. Let me also remind you that Q4 should be the last quarter during which our results will be negatively impacted by these stranded and restructuring costs related to the Refinitiv transaction. Now, let me provide some additional color on the performance of our individual segments, starting with legal professionals. Legal revenues were up 2% during the quarter, with organic revenue up 3%.
Now, Legal's organic revenue growth rate was negatively affected by about 100 basis points due to a difficult prior year comparison when we had a one-time transactional sale in our Government business that did not reoccur. Therefore, the third quarter revenue growth performance for our Legal business should represent the trough for this year, and we would expect that Legal's organic revenue growth rate will rebound to approximately 4% in the fourth quarter. Now, for the third quarter, recurring revenues, which were 93% of the total, were up 4% organically, and transaction revenues were down 6% organically, primarily driven by a strong performance in the prior year period when transactional revenues were up 8% due to the one-time sales I just mentioned earlier.
From a profitability perspective, the EBITDA margin increased 280 basis points to 37.4% compared to the prior year period, and this was driven primarily by revenue growth and productivity savings. We continue to expect the full year EBITDA margin to be up from last year, driven by the factors mentioned earlier. Here's a more detailed look at Legal Professionals' revenue performance for the third quarter. Law firms, which include small, mid, and large law firms, represented about two-thirds of total revenues. Law firms grew 2%, just as they did in the second quarter. Government grew 5%, and earlier this week, we announced that this business was awarded a long-term contract by the U.S. Federal Government, which represented the largest contract ever signed by our Legal business.
Global segment revenues were flat in the quarter due to the divestitures of some of our transactional-based businesses in Canada, which had about a 500 basis points negative impact on that subsegment. Organic revenues for this global subsegment actually grew 4% during the quarter. We remain confident with regard to the trajectory of the legal segment as we close out 2019 and look to 2020, and here are a few reasons for our positive outlook. First, Westlaw Edge continues to yield a healthy premium, which has been consistent since its launch in July of 2018. We have now rolled out Westlaw Edge to a little more than 20% of our Westlaw revenue base, and therefore, we believe that we still have a fair bit of runway in 2020 and beyond.
Second, the launch of Westlaw Quick Check in July drove our two highest sales months during the quarter since the launch of Westlaw Edge in July 2018. Also, in the third quarter, our online legal research business, so Westlaw and Practical Law, posted their highest growth rate in about 10 years at 4%. Overall, the legal retention rate remains above 90%, and it is up about 100 basis points compared to last year. And finally, 35% of our small law firm renewals are now being done digitally, which represents some encouraging progress from an ease of doing business and customer retention perspective. Now, moving to our Corporates segment, Corporates' revenues were up 8% during the quarter, with organic revenue growth of 6%. The net impact of recent acquisitions we made in that segment largely explains the difference between the Corporates' total and organic growth rates.
Recurring revenues, which made up 86% of the total, were up 8% organically, and transaction revenues were down 3% organically. From a profitability perspective, the margin of 34.3% was down about 100 basis points over the prior year period, and that was primarily due to the dilutive impact of the recent acquisitions. We continue to expect Corporates' full year margin to be roughly in line with the prior year despite the dilutive impact of these acquisitions. Looking at Corporates' results by subsegment, large Corporates grew 8%, driven both by tax and Legal solutions and by our recent acquisitions. Organic growth in that subsegment was 6%. The medium-sized Corporates grew 5%, mainly driven by strong growth from Legal solutions, and global Corporates grew 13%, thanks to a solid performance from our Asia business. Moving to the Tax and Accounting Professionals segment, third quarter revenues grew 10%, and organic revenues grew 8%.
Conversely to what I just described for our legal segment, our Tax Professional business benefited somewhat from an easier prior year comparison during the third quarter. Recurring revenues, which were 84% of the total, were up 8% organically, driven by a strong performance in our Latin America business. Transaction revenues grew 7% organically, mainly driven by growth in our Government business and by an easier year-over-year comparison. The Adjusted EBITDA margin was slightly down over the prior year period at 21% due to the dilutive impact of the Confirmation acquisition, which was over 200 basis points during the quarter. And despite that acquisition, we still expect the EBITDA margin for the full year to be higher than the 2018 margin for that segment. Now, looking at the Tax and Accounting Professionals' revenue by subsegment, small, mid, and large accounting firms, which make up nearly 80% of revenues, grew 7%.
The global business segment grew 23%, primarily driven by our Latin America business. Our government segment, which is about 7% of revenues, grew 8%. In summary, our Tax Professionals' segment continues on a positive trajectory with improving retention, strong growth from the Confirmation acquisition during the quarter, and encouraging initial results, albeit still early, from Checkpoint Edge. Moving to Reuters News, the third quarter results include $84 million of revenues from Refinitiv, which explains the revenue growth rate once again exceeding 100% during the quarter. As mentioned earlier, Reuters' revenue growth rate should return to a more normalized level starting with next quarter. Organic revenues grew 3%, which was attributable to an annual price increase related to the Refinitiv contract, as well as growth in our agency business. EBITDA was $5 million.
As a benefit from currency, did offset the impact of higher one-time costs and investments, which we expect to continue in the fourth quarter. As a reminder, the revenues from Refinitiv essentially cover the cost of providing the new services, and therefore, this contract has a dilutive impact on our overall EBITDA margin. A final point, as Jim mentioned earlier, we recently closed the acquisition of FC Business Intelligence in the attractive B2B events marketing space, and we anticipate that 2020 revenues from that business will be about $40 million growing in the mid-teens. Lastly, global print revenues declined 2% over the prior year period, with organic revenues also down 2%, marking the best performance for that segment in a decade. As Jim mentioned, U.S. print revenues actually grew organically in the quarter, the first time U.S. Legal Print has grown since 2011.
This better-than-expected performance was attributable to both improved sales growth and steady retention. For the fourth quarter, we expect print to decline in the range of 5%-6%, which is primarily timing-related, and for the full year, we expect global print revenues to decline between 4% and 5%. Turning to profitability, the EBITDA margin for the quarter remained strong at 42%, and we expect the margin to be lower in the fourth quarter, but still finish the full year above 40%. And as we've been stating, throughout the course of the year, we are very encouraged by the print segment's ability to continue to drive innovation and to leverage scale from both revenue growth and cost efficiencies. Let me now turn to our earnings per share and free cash flow performance, and I will also update you on our expectations for Corporate costs for the remainder of the year.
So, starting with earnings per share, Adjusted EPS increased by $0.15 to $0.27 per share. The increase was driven by higher Adjusted EBITDA, fewer shares outstanding, and lower interest expense. The EPS increase was partially offset by higher depreciation due to the adoption of IFRS 16 and also higher one-time investments, which is in line with what we had projected in the guidance we provided earlier this year. Finally, currency had a $0.02 positive impact on EPS during the quarter. Turning to our free cash flow performance for the first nine months of the year, our reported free cash flow was negative $50 million, whereas we did generate nearly $1.3 billion in 2018. So, that represented a decline of a little over $1.3 billion.
Consistent with what we did in previous quarters, this slide will hopefully help you remove the distorting factors impacting our free cash flow performance during the first nine months of the year. Working from the bottom of the page and upwards, the Refinitiv-related component of our free cash flow was down almost $1 billion from the prior year period, and that was primarily due to Refinitiv no longer being included in our results. Also, in the first nine months of the year, we made a pension contribution and other payments totaling $542 million, primarily related to the Refinitiv transaction. So, if you adjust for these items, comparable free cash flow from continuing operations was $650 million, which was an improvement of $162 million over the prior year period, primarily driven by the stronger EBITDA performance before start-up and one-time costs, and also by lower interest expense.
Now, a quick update on Corporates costs for the fourth quarter. Let me start by saying that the 2019 annual estimate has not changed from what we showed in our original 2019 guidance. For the full year, we still expect to spend about $570 million. And just to be clear, that $570 million I just quoted is a cash spent number. It consists primarily of expenses ex-EBITDA, but it also includes about $75 million of capital expenditure spending. Looking at our spend during the third quarter, it was a bit lower than we had expected, at $125 million, and that included about $25 million of CapEx. And that was primarily timing-related. We now expect spending to accelerate in the fourth quarter, driving Corporates cash cost to a quarterly peak of about $165 million.
Finally, let me state again that we do not anticipate any material costs related to the Refinitiv deal to carry over in 2020. Therefore, there are no changes to our guidance for Corporates costs next year, which are expected to range between $140 and $150 million. Now, before we conclude today's call, I'd like to expand a bit on the value creation model which Jim discussed earlier. Over the last eight years, we've returned just under $24 billion to shareholders in the form of dividends and share buybacks. Ordinary dividends accounted for about a third of that total. The tender offer and return of capital transactions associated with the Refinitiv deal last year comprised an additional $10 billion. And finally, normal-course issuer bid share buybacks over the last eight years represent the remaining $6 billion.
Looking ahead at the next few years, we believe that we are well-positioned to continue to deliver very attractive returns of capital to our shareholders. As Jim explained earlier, the board has now set a dividend payout target of 50%-60% of our annual free cash flow. Once we achieve that target level, this will allow us to increase the annual dividend in line with the progression of our underlying free cash flow. We do expect to reduce our reliance on share buybacks going forward. In fact, our objective would be to buy back enough shares each year to offset the dilution associated with the dividend reinvestment plan and with our equity incentive plans, thereby maintaining our outstanding share count at around $500 million.
To that point, our board recently approved a new buyback program which will allow us to repurchase up to an additional $200 million worth of shares by the end of this year and up to an additional $200 million of shares in 2020. Finally, we hold a significant store of value with our equity stake in Refinitiv. In fact, assuming the London Stock Exchange transaction is completed as expected in the second half of 2020, that equity stake would be worth approximately $15 per share on a pre-tax basis based on the LSE Group's current stock price. Once we begin monetizing our equity interest following the expiration of the lock-up provision, we will decide how best to use the proceeds, which could lead to additional returns of capital to shareholders. Let me point out that Refinitiv's results for Q3 are included in the appendix of today's press release.
Finally, as stated earlier, we plan to balance returns to shareholders with our twofold objective of reinvesting appropriately in the business and maintaining a solid capital structure. In that regard, our current leverage of 1.8 times positions us very comfortably within our leverage target and gives us ample financial flexibility going forward. Now, one final point on free cash flow and flexibility. As you know, free cash flow is calculated after capital expenditures. It's what we have left for dividends, buybacks, and acquisitions after organically investing in the business. We believe that we can further drive free cash flow growth by reducing our capital expenditures as a percentage of revenues from about 9% this year to between 7.5% and 8% next year. And this reduction will not starve the business since this year's spend includes about 100 basis points related to one-time investments associated with the Refinitiv deal.
The remaining reduction is expected to be driven primarily by more efficient capital spending across the company, including platform consolidation, migration to the cloud, and reducing the number of products we build. We believe that a 7%-8% annual CapEx spending level is certainly adequate to maintain our premium positions and to continue to drive attractive organic revenue growth for the business going forward. With that, let me now turn it back over to Jim.
Jim Smith (CEO)
Thank you, Stéphane. So, in closing, we're excited about the opportunities we see ahead. Given the high level of recurring revenue we generate and the inherent operating leverage of our business model, we believe we can continue to progressively increase profitability and free cash flow. This should, in turn, allow us to fund both acquisitions and attractive returns of capital to our shareholders, all while maintaining a strong capital structure.
Before we get to your questions, I wanted to take a moment to address a story you may have seen in the media last week about our board hiring a search firm to help with succession planning. I want to assure you that this is part of our normal course succession planning for all executive roles and that I'm actively involved in the process. I turned 60 earlier this year, so that process has kicked into its next phase. The board will evaluate internal successors against a slate of possible candidates outside the firm. That's standard best practice for orderly succession, and our entire board is involved. It's been eight years since Stéphane and I took over a company in a very different place than where Thomson Reuters stands today.
We are proud of all that the team has accomplished in getting us to this place, but we know our jobs include ensuring an orderly transition of leadership to the next generation. Both us and our board are committed to ensuring continuity in both our business and capital strategies. As I told my TRI colleagues last week, I'm not planning on going anywhere soon. When the time comes to hand over the reins, they and you will hear it from me. But right now, I am focused on running the business, closing the year strongly, and delivering on our guidance targets for 2020. Let me now turn it back over to Frank for questions.
Frank Golden (SVP of Investor Relations)
Thanks very much, Jim and Stéphane. And that concludes our prepared remarks, and now we'd like to open the call for questions. So, if we could have the first question, please, operator.
Operator (participant)
Yes.
As a reminder, it's star one for questions. Our first question will come from Vince Valentini from TD Securities.
Vince Valentini (Analyst)
Thanks very much. Two questions. One, Westlaw Edge, maybe this is what you expected to occur, but it's a bit lower than I thought to be at only 20% of your customers have migrated to it. Given the power of it and some of the testimonials that your customers are saying they couldn't live without it, is this you really holding back the pace of migration? Could it be faster if you wanted it to? And where do you see 20% going over the next year? I mean, is there a bit of an acceleration to get it up to 50%, or is it stay at this slow, steady pace? The second question is just the free cash flow.
I did the math pretty quickly, Stéphane, but just want to make sure. I mean, if you use 50%-60% of $1 billion-$1.2 billion in free cash flow next year, it doesn't actually signal dividend growth. Is that a target you work into over time, and you may have to stay a bit above it temporarily? I assume you're not going to trim the dividend, but can you still grow the dividend even though you're not in that target range yet if that's how the math works out? Thanks.
Jim Smith (CEO)
Yes. You want to take a good Stéphane or do you?
Stéphane Bello (CFO)
I'll take the second question, and you take the first question. Perfect. So, Vince, your math is correct.
If you do the math and you try to reconcile between our current share count, the 240 target that we got out there, and the current number of shares that we have, you get closer to the higher end of the 50%-60% target. I think that just gets us pretty much at that higher end, so I think what we're indicating here is that once we start moving lower in that range, the intent of our board would be to start increasing dividends in line with your own Free Cash Flow, but we're only going to be at the very top of that range next year,
Jim Smith (CEO)
And Vince, to your first question, frankly, it's a very timely question, and it's a subject of a good debate inside the company right now.
The truth is, early on, as we introduced the product, we wanted to be very careful as we were testing how much, frankly, price premium we could get on that product as we rolled it out. You combine that with the fact that it's a pretty sophisticated tool, and it requires training in order to get the most out of it. So, we have a full pipeline that occupies our current capacity. And as we look to next year, look, we think it's going to have a lot of take-up. The question is the pace of take-up, and we'll decide when we put our plan together for next year exactly how we're going to set our capacity to roll it out to do the training and installations that we need to do.
There's a whole lot of runway with these new AI products, and I would expect the pace of adoption to pick up. We want to do it in such a way that we maintain the premium as well, Vince.
Operator (participant)
Our next call will come from Gary Bisbee from Merrill Lynch.
Gary Bisbee (Analyst)
Yeah. Thanks. Good morning. The commentary on buybacks versus dividends, I guess, could you give a little more color on the concept of slowing down buybacks? Is that really just more that you've had sort of an outsized amount of that in the last two years, given all the moving parts and Refinitiv? Or should we look at this as sort of a change to prioritizing dividends over buybacks over the long term?
Stéphane Bello (CFO)
Sure, Gary. Look, buybacks are going to continue to be an important lever that we use going forward.
But if you look also at our current ownership splits, we obviously have one very large shareholder in Woodbridge. And so, relying more heavily on buyback for us essentially gradually drives a decrease in our public float, which we want to avoid. So, that's why I think as we look at our capital strategy, we're saying, "Let's use buyback on a run-rate basis at a level as just mentioned just to avoid a dilution." As I also said, when we are faced with decisions about what do we do with large capital inflows we receive from eventually selling down our interest in Refinitiv, obviously, we'll look at buyback as one potential lever to use these proceeds.
Gary Bisbee (Analyst)
Great. Thanks. And if I could add one quick follow-up, just any update on the concept of using the strategies to use commercial levers to drive retention?
You mentioned that a bit, but the digital strategies, just sort of any update on how you're progressing with those? Thank you.
Stéphane Bello (CFO)
Yeah. No, look, as we said, I think in our remarks, right, if you look at the legal segment, in the small law segments, we now are doing 35% of our renewals entirely digitally, which is much easier for our customers and also, frankly, more cost-efficient for us. So, we are rolling that with the rollout of our digital solutions across the board. It's being progressive. I think that another element that's also helping to drive retention is the platform strategy that we're pursuing, right? We are increasingly selling a number of our products, not as standalone products, but very much as part of a platform, which really makes the whole solution more sticky. I don't know, Jim, if you got anything.
Jim Smith (CEO)
Yeah.
The only thing I would add to that: you agree with Stéphane completely, and I think the more we move to these digital solutions and digital transactions, the more exhaust we get to feed our analytics, and if I look over the course of this year, one of the biggest improvements we've made is in the quality of our analytics on our markets, on our customers, on the use of our products, and the ability to make our products more useful and to put together more valuable packages of products all comes from those analytics.
Gary Bisbee (Analyst)
Thank you.
Operator (participant)
Our next question will come from Manav Patnaik, Barclays. Please go ahead.
Manav Patnaik (Analyst)
Thank you. Good morning, guys. I was hoping you could just give us a little bit more color on the marketing events business that you just acquired and maybe why it seems so attractive now.
I guess the impression is events, late cycle, there's probably some risk there. So, just curious on how resilient this asset has been.
Jim Smith (CEO)
Well, look, the way we view that opportunity is as part of the strategy to add to revenue streams for our Reuters News business. And we have a great global brand there. And if we look at that business, well, look, it's not huge. I think we've talked about $40 million in revenue. I think we've talked about that publicly. But it's a $40 million revenue business, and I think it's—but it's growing nicely, and it's growing strongly. About 50% of the business is in the United States. Then the rest is in Europe and a very small footprint in Asia. We think with the Reuters rebranding, that Reuters Events and using our brand power around the world, we'll be able to keep that growth going.
And we think it's a great way to have a convening power for both people who would want to come to events around these specific topics. And by the way, many of those are customers for our other professional solutions as well. So, I think it has a broader impact than just on the Reuters News business.
Manav Patnaik (Analyst)
Got it. And if I could also squeeze in a quick one, just you've done a fair number of, well, I guess three decent deals already. Is the pipeline still active? As maybe you had alluded to before you made these.
Jim Smith (CEO)
Sure. The pipeline is still active, and we are still working the pipeline. I think, as we've said, we spent about half of the two, just over half of the $2 billion that we set aside.
If we can find the kinds of deals that we have found in the past 15 months, we'd love to spend the rest of that. I think the real interesting thing about that is that we've really kind of changed the criteria and narrowed the criteria that we have for acquisitions. And many of you will remember the day when we were doing 20-25 acquisitions a year. We are not going back to those days. And importantly, if you look at each of those acquisitions, there's kind of one chunky thing in each of our business units, the things that are easily integratable. But even more important than that, we're not buying individual businesses with the hope of improving those individual businesses.
What we're buying are our capabilities or platforms or technologies or skills that we think we need to serve our core customers that we're already serving and to serve them with things they're going to need down the road. So, the example of that I would give is if you look at the confirmations piece, that functionality that goes into our Cloud Audit Suite, it's right in the heart of what we sell to our audit customers in our tax accounting business, right? And if you look at HighQ, the most recent acquisition, that's a workflow platform to which we're going to integrate all of our workflow tools, the various discrete tools into a platform that will help connect our customers to their customers. So, we're looking at things that'll be right in the heart of the center of our strategy.
If we can find those and we can find them that make financial sense, and again, I will point out all four of those acquisitions we've made will be free cash flow positive in the first full year we go in them.
Manav Patnaik (Analyst)
Got it. Thanks, guys.
Operator (participant)
Thank you. Our next question will come from Andrew Steinerman, J.P. Morgan. Please go ahead.
Andrew Steinerman (Analyst)
Hi, it's Andrew. Jim, talk about the legal end market a little bit. Is it changing in any way that's making them more receptive to spend with Thomson Legal? So, I'm talking about legal headcount or internal budgets for technology and data. And then also, when you think about Thomson Legal as a vendor, do you feel like you're gaining share from competitors or expanding the market opportunity that you're addressing for customers?
Jim Smith (CEO)
Sure. I think the end market's stronger, Andrew.
I mean, not massively so, but that increase in demand that we've seen mirrors what I am hearing from customers. I would say the biggest change I've seen is the willingness to accept technology solutions and the eagerness really to embrace technology solutions over the last couple of years and particularly this year. We do a big thought event in the legal industry every year in May. This year, there's been a remarkable turn in the eagerness to consider platforms and workflow tools. I will just give you a data point. We had a pre-breakfast optional session to present our platform strategy at that conference. We thought maybe 35 or 40 folks would show up. It was standing room only. They were out in the hallway. I do think there's an increasing appetite to spend on technology that helps them operate more effectively and more efficiently.
So, I think, look, we're certainly holding our own in terms of market share against our traditional competitors. But I think where we're making even more gains is on the areas where we're working to become the kind of technology platform partner of choice in the space. And I think that's where the next kind of big battleground will play out over the next five years or so.
Andrew Steinerman (Analyst)
Thank you.
Operator (participant)
Thank you. Our next question will come from Aravinda Galappatthige with Canaccord Genuity. Canaccord?
Aravinda Galappatthige (Analyst)
Hi. Good morning. Thanks for taking my question. I wanted to just do a quick follow-up for Stéphane to begin with and then a bigger picture question. With respect to the Corporates cost, the $140 million-$150 million that you're projecting for 2020, I just wanted to clarify, is there even a small CapEx component in that, Stéphane?
And then my bigger picture question is with respect to operating leverage. Jim obviously gave us some helpful color around what the organic revenue growth trajectory would be like through the business cycle. How should we think about the operating leverage and, as a result, the EBITDA growth arising from that? I mean, I know that much of the heaviest spend around sort of building up your newer platforms like Westlaw Edge is behind you, but I suspect there's still some investment that goes in that would be on the OpEx line. But I just wanted to get a sense of how you should think about the operating leverage going forward. Thanks.
Stéphane Bello (CFO)
All right. No, let me take your first question. And thanks for asking it. I'm glad I can clarify it. The forecast we got for next year, the $140 million-$150 million, that's 100% EBITDA. That's only expenses.
This year, as I said in my remarks, right, the $570 million that we have been guiding towards since the beginning of the year, that includes about $75 million of CapEx. The rest of it is EBITDA. And if you wanted to break down that CapEx over time, I would say we had about $25 million in the first half, $25 million roughly in Q3, and we expect another $25 million approximately in Q4. And on the same. Let me try to take your other question. And I think where you're really going with the question is what's the margin prognosis for next year and what's the inherent operating leverage of the business? Look, as of now, reach that level of revenue growth rate where we're at, right, where we're really squarely in mid-single-digit territory, the operating leverage is pretty strong in the business. There's no question about that.
I would just draw your attention to a couple of things as you look at margins. The first one is that our news business does not have very high margins, and that's primarily related to that Refinitiv contract. We've got about $325 million worth of revenue coming from Refinitiv, which comes with virtually zero margin, so that has a very diluted impact on the overall margin. Actually, if you were to exclude Reuters News from our results, our margins would be about 200 basis points higher than what they are. The second point I would make is that if you look at our remaining four segments, Global Print, you would expect the margin Global Print to decline over time simply because it's a highly profitable business, and we don't expect that business to turn to positive revenue growth rate, so that piece will essentially be a drag on margin.
In the three other segments, I would expect pretty substantial operating leverage, actually. And so, overall, when you put all these factors together, we absolutely do see room for our margin to improve because of the operating leverage that we have in our three main businesses.
Aravinda Galappatthige (Analyst)
Great. Thank you, Stéphane.
Operator (participant)
Thank you. Our next question will come from Toni Kaplan from Morgan Stanley.
Toni Kaplan (Analyst)
Could you just give us an update on the shift to SaaS for your Legal solution? I guess what percentage are you up to with regard to technology versus content? And just in general, Jim, I know you mentioned in response to—
Jim Smith (CEO)
Toni, can I—Toni, just before you go to your second, just repeat the first one. We're having a little bit of a hard time hearing you.
Toni Kaplan (Analyst)
Sure.
I was hoping you could give an update on the shift to SaaS for your Legal solutions, just what percentage you're up to with regard to technology versus content, and just in general, what trends you're seeing with regard to disruption in legal technology? I know you mentioned a little bit with an earlier question, but that would be very helpful.
Jim Smith (CEO)
Sure. Look, so on the first question, not really talking about just SaaS, but software in total represented about 31% of revenues for legal in the third quarter, so 69% is still content, so it's still a pretty high weighting towards content solutions versus software solutions. Yeah, and I would just reiterate what I said before. I think the appetite for technology spend is going up.
And I think that's what you're seeing in a lot of our investment and what we're seeing certainly in our dialogue with our clients. So, I think that's, as I said earlier, where the game is moving, and I would expect that percentage to grow.
Operator (participant)
Thank you. Our next question will come from George Tong from Goldman Sachs. Please go ahead.
Ryan Drafke (Analyst)
Hi. You have Ryan on for George today. Thanks for taking my question. So, you'd previously discussed that you were intending to accelerate your organic growth through cross-selling and upselling solutions and that your customers, on average, were using less than two. Could you discuss progress with this and where you're seeing the most success? And then one other quick question.
I know you touched on the operating leverage a bit earlier, but do you have any aspirational margin targets or even a range for the individual segments that you're trying to achieve?
Jim Smith (CEO)
Sure. Let me take the first one, and I'll turn the segment over to Stéphane, right, as far as the cross-sell and upsell. I would say we're still in the very, very early days of cross-sell and upsell. And if you think about how this year has progressed and the third quarter, in the third quarter last year, we completed the Refinitiv deal, and we came into this year, sales force was all realigned, trying to come out of the gate really strongly, pushing cross-sell and upsell. Second quarter, we really started to hit our stride. And frankly, what we started learning was what was working best, right?
We were gearing up our analytics, and we are seeing clear opportunities for upsell, cross-sell, and we have a lot of folks in our sales forces who are very excited about those opportunities. What we've been working through in the third quarter is the notion that all products aren't created equal. And I mentioned earlier the better analytics that we have. We're using those analytics to find what the best opportunities are to kind of blend a solution together. We don't think about it quite so much anymore, I don't think about it so much anymore, as how do we cross-sell individual products, but how do we combine services or capabilities, and then how do we commercially price that? And I think that we have a lot of room for enormous uplift there, but we're early days.
And I just would share with you that I'm thinking of it more about kind of how do we craft propositions for the various market segments and looking more at the total uptake and the total amount of revenue we get from a particular customer, which is driven under the covers by cross-selling and upselling more products, but in probably a different way in the future. Stéphane?
Stéphane Bello (CFO)
And on your second question, we don't really have a specific aspirational margin target because, as Jim likes to say, right, and he described it very well in the value creation model that he spoke about earlier today, our main goal is to achieve the maximum possible rate of free cash flow per share growth. It's not really margin growth. It's how do we drive free cash flow and free cash flow per share. That's frankly what is driving our incentive plans.
That's what we think creates the most value for investors over time. And then we will decide how we use the flow through the operating leverage that the business generates now, whether it's to reinvest in the business organically to drive growth, which may put a little bit of pressure on margin or on this operating leverage, or whether we let it flow through the margins. But it's free cash flow per share we very much focus on.
Ryan Drafke (Analyst)
Great. Thanks.
Operator (participant)
Thank you. Our next question will come from Doug Arthur, Huber Research.
Doug Arthur (Analyst)
Yeah. Thanks. I'm not sure if there's a way to disaggregate this, but as you sort of look at your organic growth progress and your goal in 2020, is there a way to sort of box the impact of the new products? I mean, you have a lot of new product initiatives virtually across the board.
Is there a way to sort of quantify the impact that's having on organic and, I assume, impact to be greater in ensuing years?
Stéphane Bello (CFO)
No, that's a really tough question because, I mean, if you look at new product stuff, take Westlaw Edge, for instance, right? New product, of course. A lot of the growth we're getting from Edge is because the much higher functionality of the product, the much better substantive products enables us to sell it at a price premium. So, is that price or is that new product? So, it's really hard to break it down for us the way you just described, to be very honest.
Doug Arthur (Analyst)
Okay. All right. Thank you.
Operator (participant)
Thank you. Next question will come from Tim Casey, BMO.
Tim Casey (Analyst)
Yeah. Two for me.
One, Jim, just when you look at the macro trends out there in terms of global trade and the increasing complexity on that, you're now mostly a U.S. business, but you do have a number of multinational clients. Are you getting any bump from the complexity there, which is usually good for the business? And second, just on print, you've acknowledged you're surprised by how it's performed. When you peel it back, what's going on underneath there? And are we just delaying the pain, if you will, and are you expecting it to have a - the better year you've had this year, you give it back and have a worse year next year? Thanks.
Jim Smith (CEO)
Okay. I'll try both of those, and Stéphane can jump in to correct or augment my answer. What's the first question was?
Tim Casey (Analyst)
Did you get the impact from the complexity?
Jim Smith (CEO)
Oh, yeah. Yeah.
I think you're exactly right on the first one. I apologize. I was thinking of the second one. I think the increasing complexity is helping us around global trade. And that's why we bought the Integration Point business, because we thought we needed a global platform to serve those clients. I was just down a few weeks ago with the team at Integration Point and with some of their clients and their customers. And the opportunity for us to, if you look at the capabilities that we have between our current existing global trade businesses and with the team in Integration Point, I think it's absolutely unrivaled what we're going to be able to provide the customers.
And also, if you look at where we are and then you look about what we can add to the workflow tools that we're providing, I think it's a great opportunity for us. And so the short answer is that complexity in global trade is indeed driving opportunity for us, and I think it's going to be a significant growth factor going forward. In fact, we're having that team present to our board of directors next week in Dallas.
Stéphane Bello (CFO)
On the second question, I'd say the success we're seeing in print is partly attributable to all the factors we described in our remarks, right? A really great job for the team in leveraging their scale globally from all the practices that we had implemented in the U.S. and really use that to drive better growth in terms of less decline, but also better cost efficiencies.
There's also the backdrop of a good market environment, obviously, with legal demand being at the highest level we've seen in a number of years. That certainly helps. We don't expect, I mean, we're in the midst of our plan right now, but at this stage, we do not expect to have to give back anything that we've earned this year in print next year. We would actually expect, based on what we're seeing, a pretty similar type growth rate for print next year as we see this year. Again, that will be partly a function of the environment, but if it stays where it is today, we certainly would not expect that much change in terms of a big deterioration. Yeah.
Jim Smith (CEO)
And if I could just add to that, I would have to add that the team in Global Print is just doing a terrific job at kind of reimagining those customer relationships. I think, Tim, Elizabeth Beastrom's led a real turnaround in that organization to begin thinking about a group of clients that were our print-only customers and think of that as an entryway as a client and a customer. How can we build out a more holistic relationship with all those customers, of which print is only a part of that relationship? That's highly encouraging. Kudos to the team for continuing, particularly the guys in the plant who are continuing to find ways to take costs out and be more effective and more efficient. It's encouraging, and it is surprising.
But as Stéphane said, this is not something we think we're necessarily going to give back. I don't think we're going to change the overall trajectory per se, but I think we can stem it and continue to stem it. And I think that they've certainly proven that they can surprise us on the upside. The other thing I would call out in terms of print is this year is the first time we've pulled all of our global print under one management team. And I think we're seeing the benefits of doing that with best practices really being spread around the world.
Tim Casey (Analyst)
Thank you.
Operator (participant)
Thank you.
How about you?
Jim Smith (CEO)
Operator, we'll take one final question, please.
Operator (participant)
Okay. Now we'll come from Kevin McVeigh, Credit Suisse. Please go ahead.
Jim Smith (CEO)
Great. Thanks. Hey, thank you very much. Hey, if you said this, I apologize.
I guess, what gave you the confidence to boost the organic growth, the 50 basis points in 2019? And when should we expect that to flow through into 2020, Stéphane, or are we just being conservative at this point?
Stéphane Bello (CFO)
We really haven't changed anything to the guidance we gave last quarter, Kevin. Last quarter, we did increase our guidance for this year and for next year very slightly. So we just kept it at the same level as what we announced last quarter. Oh, okay. I thought it was the organic. Maybe I misread that. I apologize. And then, okay. So then just real quick. No, exactly. I think what Jim said is that if you—so for next year, we expect organic growth of like 4-4.5%, and we expect the acquisitions we've made to date to add about 100 basis points.
The total growth rate, as we see it now, is somewhere between 5%-5.5%. And as Jim said, it may change if we do more acquisitions, of course.
Kevin McVeigh (Analyst)
All right. That's helpful. That's helpful. And then as you kind of shift the legal, as that goes more towards software, I think you said 30% today, 70% content. How does that impact the margin over time? So as you kind of shift that, as it remixes more towards software, what's the margin impact on that? And any sense of how long that should take as you kind of shift again more towards software as opposed to the content?
Jim Smith (CEO)
If you look at the Legal business specifically, because the revenue base in our content business is so large, it has pretty attractive margins.
So obviously, software is a highly repeatable business, and it has very nice margins, but the content has pretty decent margins itself. So I don't think there's a major impact. They're both quite attractive businesses from a margin perspective.
Kevin McVeigh (Analyst)
Super. Thank you.
Jim Smith (CEO)
All right. That'll be our final question. We'd like to thank you all for joining us today, and we will speak to you again in February when we report Q4. Have a good day.