Thomson Reuters (TRI) Q1 2021 Earnings Call Transcript

Thomson Reuters (TRI -0.62%)
Q1 2021 Earnings Call
May 04, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome everyone to the Thomson Reuters' Quarter 1 2021 earnings call. My name is Karen and I'm your event operator. [Operator instructions] I'd like to advise all parties, the conference will be recorded for replay purposes. I'd now like to hand over to your host, Frank Golden, head of investor relations.

Frank Golden -- Head of Investor Relations

Good morning and thank you for joining us today for our first-quarter 2021 earnings call. I'm joined today by our CEO, Steve Hasker; and our CFO, Mike Eastwood, each of whom will report our results and we'll take your questions following our presentation. To enable us to get to as many questions as possible, we appreciate it if you would limit yourselves to one question each and one follow-up when we open the phone lines. Now, throughout today's presentation, when we compare the performance period on period, we discuss revenue growth rates before currency, as well as on an organic basis.

We believe this provides the best basis to measure the underlying performance of the business. Today's presentation does contain forward-looking statements. Actual results may differ materially due to a number of risks and uncertainties related to the COVID-19 pandemic and other risks discussed in reports and filings that we provided from time to time to regulatory agencies. You may access these documents on our website or by contacting our investor relations department.

Let me now turn it over to Steve Hasker.

Steve Hasker -- Chief Executive Officer

Thank you, Frank, and thanks to all of you for joining us today. I'm pleased to report our first-quarter performance reflects a strong start to the year and we're encouraged by the momentum we're seeing build across the business. Our customers are more confident in both an improving economic environment and in this trajectory of their businesses. Positive prevailing tailwinds drove strong sales across the business as customers brushed off the restraint and caution exhibited in 2020 and bought our solutions in preparation for an expected rebound through the year.

However, despite the improving outlook, risks remain given that the global pandemic is still significantly impacting many parts of the world. Notwithstanding this, we're encouraged by the first quarter's results, and that increasing confidence is reflected in our outlook for the second quarter and also in the increase to the lower end of our full-year revenue guidance. Now to the results. As I stated at our Investor Day, we operate in robust and growing legal, tax, and risk, fraud, and compliance markets.

And our first-quarter results reflect the strength of those markets and our businesses. And within our core markets, we have advantage positions in high growth verticals, including the seven strategic growth initiatives we outlined at IR Day which contributed to our strong first-quarter results. This strong performance is reflected in 5% organic growth by our Big 3 businesses, our best first quarter post the sale of Refinitiv. This performance was led by legal's 5% organic growth, the highest quarter since 2018.

Strong sales across our businesses were driven by strong prevailing tailwinds and great performances across the board from our salespeople. Law firms see growing demand with small law segment in particular increasingly positive. The large and mid-sized firms have done well throughout the past year and continue to do so. Tax and accounting professionals are also busy advising clients on a host of challenges, several of which are related to the U.S.

Federal stimulus programs. And governments across the U.S. and the world are now modernizing their systems and protocols in an effort to improve access to justice and reduce fraud, motivated by what they've learned during the COVID-related lockdowns over the past year. We believe these strong tailwinds position us well for the balance of the year.

The first quarter's reported revenues were up 4%, with organic revenues up 3%. Adjusted EBITDA increased 16% to $558 million, reflecting a margin of 35.3%. Excluding costs related to the change program, the adjusted EBITDA margin was thir -- 36%. This strong performance resulted in adjusted earnings per share of $0.58, compared to $0.48 per share in the prior-year period.

Turning to segments. As I mentioned, the Big 3 businesses achieved organic revenue growth of 5% for the quarter. A strong performance to start the year. We've seen good momentum in our seven strategic growth priorities, with particularly strong sales performance from HighQ, confirmation, and practical law.

Legal built on last year's organic growth 3%, recording 5% organic revenue growth in Q1. Legal also had a strong sales quarter, recording double-digit revenue sales growth -- recurring sales growth. And it's all good growth across the businesses, including Westlaw Edge, which continues to -- to drive strong sales growth and ended the quarter at a 54% ACV penetration versus 52% at year-end 2020. And to reiterate, we expect to achieve a penetration rate of between 60% and 65% by year-end 2021.

Second, practical law had a strong start to the year, growing 13% as we continue to invest behind this key growth initiative. And third, our government business, which is managed within our legal segment, continues to see good momentum and grew 12% or 8% organically. Turning to the corporates business. Organic revenues grew 4% despite a 2% reduction in revenue growth due to the loss of revenues impacted by the Affordable Care Act that was recorded in the prior-year quarter but did not reoccur in 2021.

And tax and accounting's Q1 organic revenues grew 5% despite the extension of the U.S. tax filing deadline from April to May, resulting in lower transactional revenues. Revenue growth was also negatively impacted due to the acceleration of UltraTax software from January 2021 to December 2020. Organic growth in Q1 would have been 8% normalized for the UltraTax state release timing.

We're expecting tax and accounting revenue growth to -- to be very strong in the second quarter, which Mike will discuss. Reuters News organic revenues grew 2% in the first quarter, a good performance. And global print's organic revenues declined 9%, better than expected and helped by higher third-party revenues. You've heard me say that it's imperative that we elevate our value proposition to customers, enhance the customer experience, and maximize our performance.

To achieve success, we must execute on our four key focus areas and achieve the operational and financial goals and targets that we've set. It's early days for our change program, but I'm pleased with the progress we're making and happy to report that we are on track. And to further strengthen our bench, we continue to supplement our existing teams with seasoned experienced talent, with new additions in product development, digital, technology, strategy, and change management. This combined leadership team is executing well within our new operating company structure and is focused on the four key focus areas outlined in this slide.

First, reimagining the customer experience by making it easier for our customers to do business with us. Second, optimizing and modernizing by simplifying our product portfolio and product development processes. Third, simplifying operations and leverage -- leveraging technology by reducing complexity in our operations and technology organization and finishing the shift to cloud in 2023. And lastly, creating an inclusive culture of world-class talent.

Over the course of the first quarter, I've shared with our employees that similar change programs have been successfully implemented at many, many companies over the past decade. We are not first in line, and that's a positive from a learning standpoint as we continue to drive growth and improve efficiencies. In fact, there are numerous success stories we can draw from, including Refinitv's successful program as we implement our own change program. And I'm confident we'll achieve similar success.

Let me now turn it over to Mike who will provide more detail on the first-quarter results.

Mike Eastwood -- Chief Financial Officer

Thank you, Steve, and thanks to all of you for joining us today. As a reminder, I will talk to revenue growth before currency and on an organic basis. Let me start by discussing the revenue performance of our Big 3 segments. Total and organic revenues at constant currency were both up 5% for the quarter.

This marks the third consecutive quarter our Big 3 segments have grown 5%. Legal professionals' revenues increased 5% and organic revenues were also up 5%. Recurring organic revenue growth of 4% was supplemented by 17% increase in transaction revenue related to our government and elite businesses. Westlaw Edge continues to drive over 100 basis points to legal's organic growth while continuing to maintain a healthy premium.

Our government business, which is reported within legal and includes much of our existing risk, fraud, and compliance offerings, had a strong start to the year with total revenue growth of 12% and organic growth of 8%. In our corporates segment, total and organic revenues increased 4% despite the loss of $3 million in revenue related to the Affordable Care Act, which Steve mentioned earlier. Recurring in transaction organic revenues were up 4%, driven by our legal and tax solutions. And finally, tax and accounting's total revenues grew 5%, with organic revenues also up 5%, driven by audit products and Latin American businesses.

As previously mentioned, we accelerated the release of some of the UltraTax state software from January to December to align with the traditional December release. This performance was slightly better than we had anticipated. And global print total and organic revenues declined 9% in the quarter. This performance was better than we had expected, driven by higher third-party revenues for printing services.

From tax and accounting's pay for returned revenues that shifted from Q1 to Q2 due to the delay in the tax filing deadline, we forecast second-quarter revenue growth between 10% and 15% for tax and accounting. In 2020, these revenues were shifted from the second quarter to the third quarter. Leading to Reuters News, we forecast second-quarter total and organic revenues to grow between 2% and 3%. This increase is primarily related to Reuters events.

The events team is currently holding all events virtual. We continue to assess when we can resume in-person events based on the local health experts' advice and feedback from our customers. Finally, global print's second-quarter revenues are expected to grow between 1% and 3%, driven by the COVID-19 impact in the prior year and shipment deliver basis points to 43.7%. The strong EBITDA margin improvement of each of the three businesses was driven by higher revenue growth and a benefit from 2020 cost savings initiatives.

Moving to Reuters News. Adjusted EBITDA was $558 million, a 16% increase versus Q1 2020, due to higher revenues, partially offset by change program costs which I will address in a moment. This slide provides more color on the various factors impacting our first-quarter 2021 reported adjusted EBITDA ratio and of UltraTax revenues to Q4 2020, had about a 30-basis-point negative impact. And second, the savings from the cost savings initiatives in 2020 provided a benefit to the margin of 490 basis points.

On an underlying basis, positive impact on adjusted EPS in the quarter. Let me now turn to our free cash flow performance for the quarter. Our reported free cash flow was $239 million versus $35 million in the prior-year period, an improvement of over $200 million. Consistent with previous quarters, this slide removes the distorting factors impacting our free cash flow.

Working from the bottom of the page upwards, the cash outflows from the discontinued operations component of our free cash flow was $22 million more than the prior-year period. This was primarily attributable to payments to the U.K. tax authority related to the operations of our former Refinitiv business. Also in the current quarter, we made $12 million in change program payments as compared to Refinitiv-related separation cost of $63 million in the prior-year period.

So if you adjust for these items, comparable free cash flow from continuing operations was $288 million, $175 million higher than the prior-year period, primarily due to higher EBITDA and favorable working capital movements. Next, I'd like to provide an update on the financial components of our change program. First, in the first quarter, we invested $20 million, with the $300 million to $350 million estimated to be incurred in 2021. Second, we have achieved $19 million of annual run-rate operating expense savings.

As a reminder, we anticipate saving $600 million by 2023 while reinvesting $200 million back into the business for a net savings of $400 million. And third, as I previously shared, our first-quarter adjusted EBITDA margin, excluding change program costs, was 36%, compared to our 2023 target of between 38% and 40%. Now, an update on our change program costs for the first quarter and the rest of 2021. Let me start by saying none of the annual estimates have changed from what we provided last quarter for the full year.

Spending for the first quarter was lower than we expected at $20 million, including $11 million of opex plus $9 million of capex, and was primarily timing-related. We expect change program spend to pick up in the second quarter and over the balance of the year. We now anticipate to have about $85 million to $110 million total spend in the first half and $215 million to $240 million in the second half. For the full year, we continue to expect to spend between $300 million and $350 million related to the change program.

The spend will vary quarter to quarter, but we do not expect a change to the full-year estimate at this time. And there is no change in the anticipated split of about 60% opex and 40% capex. We will continue to provide quarterly updates on our change program spend as we move through the year. And finally, as I mentioned, we are providing revenue guidance for the second quarter and we are increasing the bottom end of our full-year revenue guidance for total TR and the Big 3.

We are also reaffirming the balance of our full-year 2021 guidance based on the strong start to the year and our confidence in the trajectory of the business and markets. And we also reaffirm our 2022 and 2023 guidance. Let me now turn it back to Frank for questions.

Frank Golden -- Head of Investor Relations

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

Questions & Answers:

Operator

Thank you. [Operator instructions] Your first question is coming from the line of Kevin McVeigh of Credit Suisse. Please go ahead. You're live in the call.

Kevin McVeigh -- Credit Suisse -- Analyst

Great. Thanks so much and congratulations on the results. OK. I don't know if this would be for Steve or Mike, but I wonder, you know, if you could just compare and contrast a little bit the recovery you're seeing today versus the GFC.

Because my sense is you folks are better positioned coming out of COVID and maybe the GFC, but maybe some of the puts and takes. And the reason I mentioned, Mike and Steve, it's obviously more, you know, CEO [Inaudible], but any thoughts from either one of you is super helpful.

Mike Eastwood -- Chief Financial Officer

Yeah, happy to start with that, Kevin. I'm sure Steve would want to  supplement. I think the thing that we're seeing right now is just really great relentless performance from ourselves and account management teams. I think were [Inaudible], Kevin, if you look back over the last decade and I think that was really amplified in 2020.

So I think the performance net sales would be a key barometer that I would focus on, Kevin, in the first quarter. We were up over $20 million in the first-quarter net sales versus the prior year, and we see that momentum continuing into Q2. In regards to the print business, Kevin, we see that continuing to chip away in regards to when customers get back to the office. So those would be some of my initial thoughts, Kevin.

But, really, kudos to ourselves and account management team. And I think the relationships with our customers are stronger than ever. In regards to -- one other additional point, structural changes that we've had in legal, if you go back to 20 -- 2008 and 2009, is another factor, Kevin.

Steve Hasker -- Chief Executive Officer

And just to add to that. I think, Kevin, we're [Audio gap] sort of real signs of a return to confidence and activity preparedness to invest among our customers in their businesses, you know, is putting many of our solutions. So that's -- I think that's, you know, the optimistic side. I think where we're cautious, for obvious reasons, is in places like Brazil and Argentina or [Audio gap] Yeah, I mean, smaller law, as you remember, was pretty -- as a -- as a sector was pretty hard hit when the pandemic started.

All of this sort of workaround personal injury and a lot of what was workaround divorce and accidents and so forth just went away as people retreated to their -- to their homes, stopped going to their places of work, and so on and so forth. So I think we've seen a pretty -- no -- no explaining that I think that our teams under market there did a great job throughout 2020 in -- in ensuring that -- that our level of activity stayed -- stayed at -- at good levels. But we've seen a return to -- to activity and confidence among those small law firms.

Mike Eastwood -- Chief Financial Officer

Kevin, I would just supplement, we've attempted during 2020 to support our customers as much as possible. And I think that's showing in 2021.

Kevin McVeigh -- Credit Suisse -- Analyst

Thanks, guys. Thanks again.

Operator

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

[Technical difficulty] Just to advise, Toni, we may be having a --

Toni Kaplan -- Morgan Stanley -- Analyst

Hi, there. Hopefully that's better. I picked up the headset. The first-quarter EBITDA margins were really strong, up over 350 basis points.

Can you just help us bridge to the 30% to 31% guidance for the year? Is it that T&E or other costs are coming back? You know, just help us with that cost bridge.

Mike Eastwood -- Chief Financial Officer

Yeah, sure, Toni. A couple of things. The biggest factor, Toni, would be the -- the change program investments that we'll make. Only completed engagements with our partner to complete the migration of our Eagan data center to the cloud.

Kirsty has also completed a contract with one of our partners in regards to the content modernization that we also talked about. So those are our two of the key initiatives. Karen Stroup was [Audio gap]

Steve Hasker -- Chief Executive Officer

Yeah. Thanks, Toni. So, you know, we made a couple of small acquisitions in 2020 and we've got a -- an active pipeline of opportunities that we continue to sort of assess and turn over and replenish. I'd sum it up by saying, with that -- that pipeline is focused in and around the Big 3.

So we don't have plans to make any acquisitions beyond the Big 3 at this point. The acquisitions are mostly, if not entirely, sort of bolt on and complementary to both the Big 3 and the change program. So we're looking at, you know, just to give you a sense of the kinds of areas we're looking at, and it's  building on our own -- on our sort of a great start in risk, fraud, and compliance with CLEAR, and TRSS, and -- and Pondera. You know, places where we can help our customers automate with -- within the Big 3 activities.

Now, we're interested in supplementing some of our growth players in places like indirect tax and legal software, building on HighQ. And we're always on the lookout for SMB and international opportunities. So there -- there's a sort of a sense for the kinds of things we're looking at. But as you know, you know, valuations are full at the moment.

And in a way that's healthy because it just means that we have to -- we have to be very confident that we are in advantage doing up. And that in -- in many places, those acquisitions can be helpful to more than one of our segments. So, you know, when you -- when you add all that up, we're going to continue to be very rigorous and prudent as it pertains to our M&A activity. But we are hopeful in the back half of this year that we'll have, you know, a candidate or two to bring forward.

Frank Golden -- Head of Investor Relations

Karen, our next question, please.

Operator

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

Frank Golden -- Head of Investor Relations

Hello.

Operator

So just to advise, we're taking your next question at the moment from Andrew Steiner of J.P. Morgan. Please go ahead.

Andrew Steiner -- J.P. Morgan -- Analyst

Hi, it's Andrew Steiner. I don't think I heard your expectation for organic revenue growth for each of the big -- Big 3. I definitely heard a tax and accounting comment for second quarter. So that's my first question.

My second question is I was intrigued by the Reuters announcement around, you know, introducing a paywall. I wanted to know if you feel like this is going to be a revenue needle mover for news, you know, this year, and maybe what the capture rate you think will be at the subscription price you're proposing?

Mike Eastwood -- Chief Financial Officer

Yeah, Andrew, I'll take the first in regards to organic growth rates for the Big 3. We do not break that down on a recurring basis, Andrew. We stick to the Big 3. Back on Investor Day, we did provide some lifecycle trends for each of those for the Big 3.

We'll stick with that. I would say that we're quite optimistic in each of them as we progressed during the year. As Steve mentioned earlier and I did, legal had a really great Q1 and we see that continuing to build throughout the year.

Steve Hasker -- Chief Executive Officer

And then on the  Reuters paywall, Andrew, a couple of thoughts. One is, you know, we've noticed as I think everyone in the news business has noticed that the sort of consumer and prosumer preparedness to pay for very high-quality news has gone up. So that that landscape has changed over the last couple of years. I think the Reuters team has done a wonderful job in sort of doing the hard part, which is ensuring that our content is -- is of a sufficient premium to justify that price point.

And secondarily, putting all the machinery in place to enable us to move to a paywall later this quarter. But let me just finish by saying we're -- we're being very, very conservative as to what the financial implications of this will be. We want to launch the paywall. We want to learn from our audiences and look at those uptake numbers and review the pricing, and then move from there.

So certainly, this year, there's very limited financial expectation. I think we view it as a very promising initiative and one that -- that we'll learn a lot from. But from a financial standpoint, really nothing to say.

Andrew Steiner -- J.P. Morgan -- Analyst

OK, thank you.

Operator

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

Mike Eastwood -- Chief Financial Officer

I think we're continuing to have some audio difficulties with David.

Frank Golden -- Head of Investor Relations

Let's -- let's move on.

Operator

No problem. Thank you. We have your next question from Vince Valentini. Please go ahead.

You're now live in the call.

Vince Valentini -- TD Securities -- Analyst

Yeah, thanks very much. If I can come back to the -- the EBITDA margin for this year question again from a slightly different angle. Given that you've set these sort of targets through 2023, can you fill us in on how management compensation is working? If there's a big bridge on EBITDA in 2021, does that drive the bulk of management bonuses or -- or is targets for 2023 now more impactful too?

Mike Eastwood -- Chief Financial Officer

We have to earn out each year, Vince, there. So that's how the long-term incentive plan works. So the targets that we provided to you during Investor Day, we have to get those for the long-term incentive for -- for all three years. In regards to the taxes, it's something that we'll watch in 1% to 2% and at directionally.

The other piece that we're monitoring closely that you referenced is potential global minimum tax. Our intellectual property, we're watching closely there internally with our tax team and tax advisors. Too early to speculate on that one yet, Vince. But we're watching all of those -- all of those items.

For 2021, we feel very confident in achieving the ETR that we provided.

Vince Valentini -- TD Securities -- Analyst

Thank you.

Mike Eastwood -- Chief Financial Officer

Thank you, Vince.

Operator

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

Drew McReynolds -- RBC Capital Markets -- Analyst

Yeah, thanks. Good morning. Thanks for taking the questions. I guess two -- two for me.

On the legal side, last quarter, you said Q1 would -- would be a low point for -- for legal. I think it was 3% to 4%, and you did 5%. Just wondering if that's still a low point for legal for the remainder of the year? And then secondly, maybe over to you, Steve, you talked about where you're cautious with the overall business. But certainly, strong out of the gate here in Q1, an easier comp in Q2.

Just wondering, you know, are you -- are you being somewhat conservative with the full-year guidance here or, you know, do you see certainly the tougher comp in the second half of this year kind of kick in and just want to level-set expectations here? Thank you.

Mike Eastwood -- Chief Financial Officer

Hey, Drew, I'll start with regards to the legal question. The way you summarize it, it is correct. We do the Q1, our organic as the lowest point for the full year. We spent a lot of time with Paul Fisher and his full management team.

We're very encouraged by the momentum coming out of Q1, both with the sales and revenue activity and as we look at the pipeline. Westlaw Edge continues to do really, really well. We're getting the 100 basis points lift there which we tapped in. They are practical law, which -- which Steve mentioned.

The government business, 10% -- nearly 10% organic growth in Q1. Steve were at least driving that business. So, Drew, we're very, very pleased with legal for Q1 and encouraged -- equally encouraged as we lookout. With that said, we have to monitor the sales every day as we move forward.

But the recurring net sales from Q1, it gives us encouragement there.

Steve Hasker -- Chief Executive Officer

And, Drew, with regard to your -- your point about sort of strong out of the gate and you thought we're being somewhat conservative. I think, unequivocally, yes, we are being somewhat conservative. And there's a few reasons for that. I mean, firstly, we're all learning as it pertains to this pandemic.

And I think we're -- we're optimistic, we're hopeful, we're upbeat about where the United States is headed. But, you know, our headquarters is in -- is in Toronto as you know, and -- and Canada still got some -- some progress to make. We -- we don't have significant exposure to the countries that are really struggling. But we have some exposure.

And I think things will get harder before they get better in places like Brazil, and Argentina, and India. In addition to that, our folks are sort of poised in the second half of the year to return to office. But we've got to execute against that. And, you know, Mary Alice and our -- and our people team are very focused on it, but we're -- we're going to get that done.

You know, a lot of our business -- and fourth quarter is an important quarter for us. And -- and then lastly, we're overlaying the change program, and we're very excited about the first quarter or so progress in the change program. But as you've seen from Mike's comments on the investment intensity, that -- that ramps up through the rest of this year. So we're going to overlay a lot of change, well, on -- on the team here as well.

So that -- they are reasons for our -- our sort of caution and our conservative approach. But as I said, we are -- we are optimistic and we're pleased with -- with how we started the year and -- and where we're headed. But I think sort of a bit of conservatism is -- is healthy.

Drew McReynolds -- RBC Capital Markets -- Analyst

Understood. Thank you both.

Operator

Thank you. Your next question is coming from [Inaudible] of Barclays. Please go ahead. You're now live in the call.

Manav Patnaik -- Barclays -- Analyst

Can you guys hear me?

Steve Hasker -- Chief Executive Officer

Yes.

Manav Patnaik -- Barclays -- Analyst

OK. So I guess that is me. That's not my name. But anyway.

Hey, guys. I just got one question. One was -- and that was around just talking about the competitive environment. I was just curious, you know, a, you know, with all the changes you're making, if you're seeing, you know, your competitors make note -- take notice, if they're reacting? Just any thoughts there would be appreciated.

Steve Hasker -- Chief Executive Officer

Yeah, Manav, great question. So, OK. And so I think, you know, we -- we have a lot of respect for -- for our competitors, both -- both the folks who've been around a long time and have -- have competed in -- in legal, and tax, and risk, fraud, and compliance, and we also watch carefully what some of the -- what some of the newer players are doing and -- and some of the sort of pure digital and innovators are doing. I think the competitive intensity is -- is the same today as it was when I started 13, 14 months ago.

You know, it's not more and it's certainly not less. So, you know, I don't think we've seen a market change in my time at the company. Mike can -- can provide you obviously a much longer time horizon there. But we are -- you know, one -- one of the reasons that we've -- we're sort of so aggressive in pursuing the change program is we -- we do want to create a much better customer experience and we want to lead our sectors in terms of the customer experience we provide.

And we're pretty confident that if we get that right, you know, we're always going to be very diligent about -- about competitive dynamics in our markets. But if we get that right, we'll be in good shape.

Manav Patnaik -- Barclays -- Analyst

All right. Thank you, guys.

Operator

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

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Good morning. Thanks for taking my question. Just going back to the -- the -- some of the outlook comments you made with respect to legal. I was wondering if you can develop with respect to international growth there.

I was wondering if you can sort of expand a little bit on the international growth element there? And secondly, just as a follow up with respect to the tax comments. Is there an update on the U.K. tax dispute? I know that there is an additional component that we're waiting for a larger component. I think, of course, $600 million --

Mike Eastwood -- Chief Financial Officer

It's here about the [Inaudible]. In regards to tax for U.K. HMRC, very consistent with the last update that I provided in Q1. We did make the initial roughly $100 million that related back to the 2016 disposition of the intellectual property in science business.

We currently are forecasting that we may, emphasized may, we may have to make the payment in Q3 related to the 2018 divestiture other representative business. Works -- we're continuing to work through it, but certainly, we factored that into our forecast as a potential payment that we would have to make -- potentially have to make in Q3.

Frank Golden -- Head of Investor Relations

Karen, we'd like to take one final question -- one -- one final question, please.

Operator

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

George Tong -- Goldman Sachs -- Analyst

Hi, thanks. Good morning. I just wanted to dive into the legal segment. You mentioned 1Q should be the low watermark growth should accelerate organically from the 5% we saw in the first quarter.

Westlaw Edge, practical law, government, all tailwinds. Just wanted to perhaps have you elaborate on -- on the growth drivers. I mean, if we go above 5%, certainly, that would be the strongest level of organic growth we've seen from the legal segment in some time, and perhaps fold in the increasing contributions you're expecting from the change program and how that's going to lift organic growth in legal to -- to new recent highs?

Steve Hasker -- Chief Executive Officer

Yeah. Good morning, George. Thanks for the question. So look, a couple of things have -- have driven -- driven I think a strong start to the year.

First and foremost, the work that Paul Fisher and his teams have done in -- in their outreach to our customers throughout 2020 and into 2021. I think I cannot say enough about the way in which they have wrapped their arms around customers and supported them throughout a very difficult period of time. And as -- and as the sort of level of activity about legal customers picks up, so too does our -- our business. That's the first thing.

I think the second thing is, you know, Andy Martens took you through west -- Westlaw Edge and -- and we also profiled the -- the progress with practical law. We have made I think very solid -- historically, very solid product bits around those products. And as a -- and as a group, we're very focused on making sure that we continue to out invest our competition in those products to ensure that their value is -- is -- is distinctive relative to any competitive offer. So that's -- that is from a product perspective, you know, that really driven performance.

We acquired HighQ in the last couple of years. HighQ had a good first quarter and we're excited about what -- what HighQ could do and we're excited about the way in which the team in Eagan and across the world have embraced HighQ. And we're excited about the -- that way the corporates team under Sunil Pandita have embraced HighQ. So those are a few of the building blocks.

But what I would say is that, you know, there's -- there's been a -- if we get it right. We're hard at work to figure out what additional products and services and -- and potentially what acquisitions we might make to serve that. It's early days now, George. And so I think we're happy with where we are.

But there's some -- there's some real potential upside if we get it right, and -- and we -- we've got some -- some work to do. [Inaudible]

George Tong -- Goldman Sachs -- Analyst

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

Mike Eastwood -- Chief Financial Officer

Yeah, the corporates business a few thoughts on it, George. Sunil Pandita joined us in December of 2020. So we look forward for him joining us to -- in some investor conferences coming up. If you think about the corporates business practical law that we've discussed quite a bit today, the direct tax, indirect tax, we're very enthused about global trade management, full portfolio.

They are -- this is where at Investor Day, Erin Brown and Brian Peccarelli talked about our full suite of ONESOURCE. So if you really focus on the -- the ONESOURCE suite of products, specifically the indirect tax, we're very excited about that. If you look over the time horizon, I think you'll see a very significant increase in our corporates growth as we go through '22 '23 to achieve the ranges that we discussed with Investor Day.

George Tong -- Goldman Sachs -- Analyst

Very helpful, thank you.

Frank Golden -- Head of Investor Relations

OK. Well, that will conclude our first-quarter earnings call. We appreciate you all joining us this morning and this afternoon, wherever you may be. If you have any follow-up questions, feel free to reach out to me or to Megan, and we look forward to speaking with you at a number of upcoming conferences over the course of the next several weeks.

And we'll also speak to you again in early August. Have a good day.

Steve Hasker -- Chief Executive Officer

Thanks, everyone.

Mike Eastwood -- Chief Financial Officer

Thank you.

Operator

[Operator signoff]

Duration: 56 minutes

Call participants:

Frank Golden -- Head of Investor Relations

Steve Hasker -- Chief Executive Officer

Mike Eastwood -- Chief Financial Officer

Kevin McVeigh -- Credit Suisse -- Analyst

Toni Kaplan -- Morgan Stanley -- Analyst

Andrew Steiner -- J.P. Morgan -- Analyst

Vince Valentini -- TD Securities -- Analyst

Drew McReynolds -- RBC Capital Markets -- Analyst

Manav Patnaik -- Barclays -- Analyst

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

George Tong -- Goldman Sachs -- Analyst

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