April 29, 2015
Thomson Reuters Reports First-Quarter 2015 Results
NEW YORK — Thomson Reuters (TSX / NYSE: TRI) today reported results for the first quarter ended March 31, 2015. The company also re-affirmed its full-year 2015 outlook.
- Reported revenues were down 3% as the negative impact of foreign currency reduced revenues by 5%
- Revenues grew 2% before currency
- Organic revenues grew 1%
- Legal’s organic revenues increased 3%
- Financial & Risk’s organic revenues were unchanged
- Financial & Risk net sales were positive in all regions. Net sales were positive for the fourth consecutive quarter
- Adjusted EBITDA decreased 2% to $803 million
- The margin was 26.4% vs. 26.2% in the prior-year period
- Excluding the impact of currency, adjusted EBITDA grew 4% and the margin was 60 basis points higher than the prior-year period
- Underlying operating profit decreased 2% to $515 million
- The margin was 16.9%, unchanged from the prior-year period
- Excluding the impact of currency, underlying operating profit grew 6% and the margin was 60 basis points higher than the prior-year period
- Adjusted EPS was $0.44 vs. $0.46 in the prior-year period
- Foreign currency had a $0.06 negative impact on adjusted EPS
"2015 is off to a solid start as we continue building our sustainable platform for growth," said James C. Smith, president and chief executive officer of Thomson Reuters. "We are strengthening our core businesses, improving all aspects of our go-to-market capabilities and putting more resources behind high-growth opportunities."
Consolidated Financial Highlights
Three Months Ended March 31,
(Millions of U.S. dollars, except EPS and margins)
|IFRS FINANCIAL MEASURES||2015||2014||CHANGE|
|Diluted earnings per share (EPS)||$0.38||$0.34||12%|
|Cash flow from operations||$237||$113||110%|
|NON-IFRS FINANCIAL MEASURES1||2015||2014||CHANGE||CHANGE BEFORE CURRENCY|
|Revenues from ongoing businesses||$3,044||$3,129||-3%||2%|
|Adjusted EBITDA margin||26.4%||26.2%||20bp||60bp|
|Underlying operating profit||$515||$528||-2%||6%|
|Underlying operating profit margin||16.9%||16.9%||0bp||60bp|
|Adjusted earnings per share (EPS)||$0.44||$0.46||-4%||9%|
|Free cash flow||($65)||($135)||nm2|
1 These and other non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the tables appended to this news release. Additional information is provided in the explanatory footnotes to the appended tables.
2 nm - not meaningful
- Revenues from ongoing businesses increased 2% (before currency) from the prior-year period driven by the Legal, Tax & Accounting and Intellectual Property & Science businesses, which grew 5% in aggregate (4% organically).
- Adjusted EBITDA decreased 2% from the prior-year period and the margin increased 20 basis points to 26.4%. Excluding the impact of currency in the quarter, the 2015 margin was 60 basis points higher than the prior-year period.
- Underlying operating profit decreased 2% from the prior-year period with the margin of 16.9% unchanged from the prior-year period. Excluding the impact of currency, the 2015 margin was 60 basis points higher than the prior-year period.
- Adjusted EPS decreased $0.02 from the prior-year period primarily due to foreign currency having a $0.06 negative impact.
- Free cash flow was negative $65 million, a $70 million improvement compared to the prior-year period primarily due to lower severance payments. The first quarter is historically the company’s weakest of the year for free cash flow generation. For the full year, the company continues to expect free cash flow to range between $1.55 billion and $1.75 billion.
First-Quarter Business Segment Highlights
Unless otherwise noted, all revenue growth comparisons in this news release are before the impact of foreign currency (constant currency) as Thomson Reuters believes this provides the best basis to measure the performance of its business.
Financial & Risk
- Revenues were unchanged compared to the prior-year period and reflected a substantial improvement compared to a 3% organic decline in both the first quarter and the full-year 2014. This represented the segment’s best performance since the second quarter of 2012.
- Recurring revenues (75% of the segment’s revenues) decreased 1% (all organic) due to lower price realization resulting from the migration of some foreign exchange and buy-side customers to new products on Financial & Risk’s unified platform. Recurring revenues declined 2% (3% organically) in the first quarter of 2014.
- Transactions-related revenues (14% of the segment’s revenues) were up 3% due to increased foreign exchange volumes.
- Recoveries revenues (11% of the segment’s revenues) were flat for the quarter and are low-margin revenues. As some third-party clients move to “direct billing” with customers, Recoveries revenues are expected to decline over the balance of the year.
- By geography, revenues in Europe, Middle East and Africa (EMEA) were down 2%, revenues in the Americas were up 2% and revenues in Asia were down 1%.
- Net sales were positive overall and were positive in all regions. This marked the fourth consecutive quarter of positive net sales.
- EBITDA increased 1% primarily due to savings related to efficiency initiatives, which were partially offset by the impact of foreign currency.
- The margin was 25.8%, up 170 basis points from the prior-year period. Before the impact of currency from both periods and adjusted for the impact of the charges we took in the first quarter of 2014 ($12 million), EBITDA increased 9% and the margin was up 250 basis points at 27.3% compared to the prior-year period.
- Foreign currency had a 150 basis point negative impact on the margin.
- Operating profit was flat compared to the prior-year period with savings related to efficiency initiatives offset by the negative impact of foreign currency.
- The margin was 15.5%, up 100 basis points from the prior-year period.
- Foreign currency had a 190 basis point negative impact on the margin.
- Revenues increased 3% (all organic). Excluding US print, revenues grew 5% (all organic). This represented the segment’s best performance since the first quarter of 2011.
- Solutions businesses (45% of the segment’s revenues) grew 10% (9% organic), driven by strong growth from FindLaw, UK Practical Law and Serengeti. Solutions businesses represent all of Legal’s revenue excluding US print and US online legal information.
- US online legal information (41% of the segment’s revenues) grew slightly, representing its first quarter of positive growth since 2009.
- US print (14% of the segment’s revenues) declined 6%, as expected.
- EBITDA decreased 2% and the margin was 34.4% compared to 35.4% in the prior-year period. The margin was negatively impacted by investments and some timing-related costs.
- Operating profit decreased 1% with a margin of 26.3% compared to 26.8% in the prior-year period. The margin was impacted by the same factors noted above.
Tax & Accounting
- Revenues increased 10% (7% organic) driven primarily by the Corporate and Professional businesses. Recurring revenues were up 11% (7% organic).
- EBITDA increased 10% and the margin was 33.8% compared to 33.0% in the prior-year period. The EBITDA margin increase was primarily related to the flow through from strong revenue growth.
- Operating profit increased 17% and the margin was 26.3% compared to 24.1% in the prior-year period. The margin improvement was primarily related to flow through from strong revenue growth and lower depreciation and amortization expense.
- Small movements in the timing of revenues and expenses can impact margins in any given quarter for the Tax & Accounting business. Full-year margins are more reflective of the segment’s underlying performance.
Intellectual Property & Science
- Revenues were flat as subscription revenue (79% of the segment’s revenues) growth of 3% was offset by an 11% decline in transactions-related revenues as the first quarter of 2014 had certain large one-time sales to Government and Academic customers which did not repeat in the first quarter of 2015.
- EBITDA decreased 17% with a margin of 25.3% compared to 29.6% in the prior-year period. The EBITDA margin decline was due to a lower margin revenue mix and some non-recurring expenditures.
- Operating profit decreased 25% with a margin of 16.0% compared to 21.0% in the prior-year period. The operating profit margin decrease was due to the same items that impacted the EBITDA margin.
- Small movements in the timing of revenues and expenses can impact margins in any given quarter for the Intellectual Property & Science business. Full-year margins are more reflective of the segment’s underlying performance.
Corporate & Other (Including Reuters News)
- Reuters News revenues were $74 million, up 1% compared to the prior-year period.
- Corporate & Other costs were $75 million compared to $62 million in the prior-year period.
Business Outlook (Before Currency)
Thomson Reuters today re-affirmed its full-year business outlook for 2015 which was previously communicated in February 2015. The company’s 2015 Outlook assumes constant currency rates compared to 2014 and is based on the expected performance of the company’s existing businesses and does not factor in the impact of any acquisitions or divestitures that may occur during the year. In light of the increased volatility recently seen in the foreign currency markets, the company believes that currency is likely to have a higher-than-usual impact on its results in 2015.
The company continues to expect:
- Positive organic revenue growth;
- Adjusted EBITDA margin to range between 27.5% and 28.5%;
- Underlying operating profit margin to range between 18.5% and 19.5%; and
- Free cash flow to range between $1.550 billion and $1.750 billion in 2015.
The information in this section is forward-looking and should be read in conjunction with the section below entitled “Special Note Regarding Forward-Looking Statements, Material Assumptions and Material Risks.”
Dividend and Share Repurchases
In February 2015, Thomson Reuters board of directors approved a $0.02 per share annualized increase in the dividend to $1.34 per share. A quarterly dividend of $0.335 per share is payable on June 15, 2015 to common shareholders of record as of May 21, 2015.
In the first quarter of 2015, the company returned approximately $348 million to shareholders through the repurchase of approximately 8.8 million shares under its current $1.0 billion share buyback program announced in July 2014. Through March 31, 2015, the company has repurchased 18.4 million shares at a cost of approximately $713 million since it announced the buyback program.
Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world's most trusted news organization. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges (symbol: TRI). For more information, go to www.thomsonreuters.com.
NON-IFRS FINANCIAL MEASURES
Thomson Reuters prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).
This news release includes certain non-IFRS financial measures, such as revenues from ongoing businesses, adjusted EBITDA and the related margin, underlying operating profit and the related margin, free cash flow, adjusted EPS, and selected measures before the impact of foreign currency. Thomson Reuters uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS. Non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the appended tables.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL ASSUMPTIONS AND MATERIAL RISKS
Certain statements in this news release, including, but not limited to, statements in the "Business Outlook (Before Currency)" section and Mr. Smith’s comments, are forward-looking. As a result, forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. There is no assurance that the events described in any forward-looking statement will materialize. A business outlook is provided for the purpose of presenting information about current expectations for 2015. This information may not be appropriate for other purposes. You are cautioned not to place undue reliance on forward-looking statements which reflect expectations only as of the date of this news release. Except as may be required by applicable law, Thomson Reuters disclaims any obligation to update or revise any forward-looking statements.
The company's 2015 business outlook is based on various external and internal assumptions. Economic and market assumptions include, but are not limited to, GDP growth in the countries where Thomson Reuters operates. Internal financial and operational assumptions include, but are not limited to, continuing operational improvement in the Financial & Risk business and the successful execution of new sales initiatives, ongoing product release programs, globalization strategy and other growth and efficiency initiatives.
Some of the material risk factors that could cause actual results or events to differ materially from those expressed in or implied by forward-looking statements in this news release include, but are not limited to, changes in the general economy; actions of competitors; failure to develop new products, services, applications and functionalities to meet customers' needs, attract new customers or expand into new geographic markets and identify areas of higher growth; failures or disruptions of telecommunications, network systems or the Internet; fraudulent or unpermitted data access or other cyber-security or privacy breaches; increased accessibility to free or relatively inexpensive information sources; failure to maintain a high renewal rate for subscription-based services; dependency on third parties for data, information and other services; changes to law and regulations, including the impact of the Dodd-Frank legislation and similar financial services laws around the world; tax matters, including changes to tax laws, regulations and treaties; fluctuations in foreign currency exchange and interest rates; failure to adapt to recent organizational changes and effectively implement strategic initiatives; failure to recruit, motivate and retain high quality management and key employees; failure to meet the challenges involved in operating globally; failure to derive fully the anticipated benefits from existing or future acquisitions, joint ventures, investments or dispositions; failure to protect the brands and reputation of Thomson Reuters; impairment of goodwill and identifiable intangible assets; inadequate protection of intellectual property rights; threat of legal actions and claims; risk of antitrust/competition-related claims or investigations; downgrading of credit ratings and adverse conditions in the credit markets; the effect of factors outside of the control of Thomson Reuters on funding obligations in respect of pension and post-retirement benefit arrangements; and actions or potential actions that could be taken by the company’s principal shareholder, The Woodbridge Company Limited. These and other factors are discussed in materials that Thomson Reuters from time to time files with, or furnishes to, the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. Thomson Reuters annual and quarterly reports are also available in the “Investor Relations” section of www.thomsonreuters.com.
Thomson Reuters will webcast a discussion of its first-quarter 2015 results today beginning at 8:30 a.m. Eastern Time (ET). You can access the webcast by visiting the "Investor Relations" section of www.thomsonreuters.com. An archive of the webcast will be available following the presentation.
Senior Vice President, Corporate Affairs
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Frank J. Golden
Senior Vice President, Investor Relations
Tel: +1 646 223 5288