February 08, 2018

Thomson Reuters Reports Fourth-Quarter and Full-Year 2017 Results

TORONTO – Thomson Reuters (TSX/NYSE: TRI) today reported results for the fourth quarter and full year ended December 31, 2017. As already announced on January 30, 2018, the company achieved its full-year 2017 Outlook (as updated in August).  

“Our 2017 fourth-quarter and full-year results show continued progress in key areas,” said Jim Smith, president and chief executive officer of Thomson Reuters. “Moving forward, we remain extremely excited about the future prospects for F&R through our strategic partnership with Blackstone, and our renewed focus to accelerate growth in the core businesses of Thomson Reuters. Our ability to capitalize on opportunities at the intersection of regulation and commerce has never been stronger.”

Consolidated Financial Highlights - Three Months Ended December 31

(Millions of U.S. dollars, except for adjusted EBITDA margin and earnings per share (EPS))
(unaudited)

        2016 Excluding Q4 2016 Severance Charges(2)

IFRS Financial Measures(1)

 2017
2016
 Change 2016
Change
Change at Constant Currency
Revenues 
$2,944
$2,860
3%
     
Operating profit
$445
$294
51%
     
Diluted EPS
(includes discontinued operations (3))
$0.81
$3.03
-73%
     
Cash flow from operations
(includes discontinued operations (3))
$755
$998
-24%
     

Non-IFRS Financial Measures(1)

           
Revenues
$2,944
$2,860
3%
$2,860
3%
1%
Adjusted EBITDA
$874
$635
38%
$847
3%
1%
Adjusted EBITDA margin
29.7%
22.2%
750bp
29.6%
10bp
10bp
Adjusted EPS
$0.60
$0.31
94%
$0.60
0%
-5%
Free cash flow 
(includes discontinued operations (3))
$506
$755
-33%
$794
-36%
 

(1) In addition to results reported in accordance with International Financial Reporting Standards (IFRS), the company uses certain non-IFRS financial measures as supplemental indicators of its operating performance and financial position. 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.
(2) Results exclude the impact of $212 million of fourth-quarter 2016 charges from adjusted EBITDA and adjusted EPS. Free cash flow excludes 2016 cash payments of $39 million associated with these charges. Refer to the tables appended to this news release for a reconciliation of 2016 adjusted EBITDA , the related margin, adjusted EPS and free cash flow including and excluding the charges.
(3) Discontinued operations are comprised solely of our Intellectual Property & Science business (IP & Science), which was sold in October 2016. 
 

Revenues increased 3% due to higher recurring revenues and a positive impact from foreign currency. 

  • At constant currency, revenues increased 1%.

Operating profit increased 51%, primarily because the prior year included $212 million of severance charges.

  • Adjusted EBITDA increased 38% to $874 million and the margin increased 750 basis points to 29.7% from 22.2%.
    • Excluding the severance charges from the prior-year period, adjusted EBITDA increased 3% and the margin increased 10 basis points.

Diluted EPS, which includes discontinued operations, decreased 73% to $0.81, primarily because the prior-year period included a $2.0 billion gain on the sale of the IP & Science business. The current-year period reflected $304 million of tax benefits from the enactment of the US Tax Cuts and Jobs Act of 2017.

  • Adjusted EPS, which excludes the gain and tax benefit, among other items, was $0.60 compared to $0.31 per share in the prior-year period. 
    • Excluding the severance charges in the prior-year period, adjusted EPS was unchanged. Currency had a $0.03 favorable impact.

Cash flow from operations decreased 24%, as the prior-year period benefited from a $200 million tax benefit related to a $500 million pension contribution made in the first quarter of 2017.     

  • Free cash flow decreased 33% to $506 million reflecting the same factor.

Highlights by Business Unit – Three Months Ended December 31

(Millions of U.S. dollars, except for adjusted EBITDA margins)
(unaudited)

   

Three Months Ended December 31,

Change
Revenues
2017
2016
Total
Foreign  Currency
Constant Currency
Financial & Risk
$1,551
$1,508
3%
2%
1%
Legal 
881
864
2%
1%
1%
Tax & Accounting
443
416
6%
0%
6%
Corporate & Other (Reuters News)
75
77
-3%
2%
-5%
Eliminations
(6)
 (5)
     
Revenues
$2,944
$2,860 
3%
2%
1%
Adjusted EBITDA 
         
Financial & Risk $481
$289
66%
0%
66%
Legal 
314
296
6%
1%
5%
Tax & Accounting
156
131
19%
-1%
20%
Corporate & Other (includes Reuters News)
(77)
(81)
n/a n/a n/a
Adjusted EBITDA
$874
$635
38%
2%
36%
Adjusted EBITDA Margin 
         
Financial & Risk 31.0%
19.2%
1180bp
-30bp
1210bp
Legal  35.6%
34.3%
130bp
0bp
130bp
Tax & Accounting 35.2%
31.5%
370bp
-40bp
410bp
Corporate & Other (includes Reuters News) n/a n/a n/a n/a n/a
Adjusted EBITDA margin 29.7%
22.2%
750bp
-10bp
760bp

Excluding 2016 Severance Charges from Prior-Year Period Amounts and Margins
Adjusted EBITDA  
         
Financial & Risk
$481
$456
5%
2%
3%
Legal 
314
322
-2%
1%
-3%
Tax & Accounting
156
149
5%
0%
5%
Corporate & Other (includes Reuters News)
(77)
(80)
n/a n/a
n/a
Adjusted EBITDA
$874
$847
3%
2%
1%
Adjusted EBITDA margin
         
Financial & Risk
31.0%
30.2%
80bp
0bp
80bp
Legal 
35.6%
37.3%
-170bp
-20bp
-150bp
Tax & Accounting
35.2%
35.8%
-60bp
-40bp
-20bp
Corporate & Other (includes Reuters News)
n/a
n/a
n/a
n/a
n/a
Adjusted EBITDA margin
29.7%
29.6%
10bp
0bp
10bp

n/a – not applicable
 

Unless otherwise noted, all revenue growth comparisons by business unit in this news release are at constant currency (or exclude the impact of foreign currency) as Thomson Reuters believes this provides the best basis to measure their performance.

Financial & Risk

Revenues increased 1% to $1.6 billion.  Organic revenues were unchanged and acquisitions contributed 1%. 

  • Revenues by type:
    • Recurring revenues were unchanged (77% of total)
    • Transactions revenues grew 7% (16% of total)
      • Growth was due to increased revenue from Tradeweb and contributions from acquisitions, partially offset by the impact of lower foreign exchange trading revenues.
    • Recoveries revenues decreased 6% (7% of total) 
  • Revenues by geography:
    • Revenues were up 2% in the Americas, unchanged in Europe, Middle East and Africa (EMEA), and down 1% in Asia Pacific.

Adjusted EBITDA increased 66% to $481 million and the margin increased to 31.0% from 19.2%. The increase was primarily driven by the impact of severance charges incurred in the fourth quarter of 2016.

  • In constant currency and excluding the severance charges from the prior-year period, adjusted EBITDA was up 3% and the margin increased 80 basis points, driven by savings from the company’s simplification initiatives.

Net sales were positive in the quarter.

Legal

Revenues increased 1% to $881 million.

  • Recurring revenues grew 3% (75% of total)
  • US Print revenues declined 7% (14% of total)
  • Transactions revenues declined 1% (11% of total)

Adjusted EBITDA increased 6% to $314 million and the margin increased to 35.6% from 34.3% due to the impact of the severance charges incurred in the fourth quarter of 2016.

  • In constant currency and excluding the severance charges from the prior-year period, adjusted EBITDA declined 3% and the margin decreased by 150 basis points. 

Tax & Accounting

Revenues increased 6% to $443 million.

  • Recurring revenues grew 5% (88% of total)
  • Transactions revenues grew 11% (12% of total)

Adjusted EBITDA increased 19% to $156 million and the margin increased to 35.2% from 31.5%, primarily due to the impact of severance charges incurred in the fourth quarter of 2016.

  • In constant currency and excluding the severance charges from the prior-year period, adjusted EBITDA was up 5% and the margin decreased 20 basis points.

Corporate & Other (Including Reuters News)

Reuters News revenues were $75 million, down 5%.

Corporate & Other costs at the adjusted EBITDA level were $77 million compared to $81 million in the prior-year period. The reduction was driven by the company’s ongoing simplification initiatives, partly offset by investments relating to improving customer experience.

  • Including depreciation and amortization of software, Corporate & Other costs were $84 million compared to $92 million in the prior-year period. 

Consolidated Financial Highlights – Full-Year 2017

(Millions of U.S. dollars, except for adjusted EBITDA margin and EPS)
(unaudited)

        2016 Excluding Q4 2016 Severance Charges(2)
IFRS Financial Measures(1) 2017 2016 Change 2016 Change Change at Constant Currency
Revenues  $11,333 $11,166 1%
     
Operating profit $1,755 $1,390 26%      
Diluted EPS
(includes discontinued operations (3))
$1.94 $4.13 -53%      
Cash flow from operations
(includes discontinued operations (3))
$2,029 $2,984 -32%      
Non-IFRS Financial Measures(1)            
Revenues $11,333 $11,166
1% $11,166 1% 2%
Adjusted EBITDA $3,437 $2,954 16% $3,166 9% 8%
Adjusted EBITDA margin 30.3% 26.5% 380bp 28.4% 190bp 170bp
Adjusted EPS $2.51 $1.79 40% $2.07 21% 20%
Free cash flow
(includes discontinued operations (3))
$1,032 $2,022 -49% $2,061 -50%
 

(1) In addition to results reported in accordance with IFRS, the company uses certain non-IFRS financial measures as supplemental indicators of its operating performance and financial position. 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.
(2) Results exclude the impact of $212 million of fourth-quarter 2016 charges from adjusted EBITDA and adjusted EPS. Free cash flow excludes 2016 cash payments of $39 million associated with these charges. Refer to the tables appended to this news release for a reconciliation of 2016 adjusted EBITDA, the related margin, adjusted EPS and free cash flow including and excluding the charges.
(3) Discontinued operations are comprised solely of our Intellectual Property & Science business (IP & Science), which was sold in October 2016.
 

Revenues increased 1% due to higher recurring revenues, partly offset by a negative impact from foreign currency.

  • At constant currency, revenues increased 2%.

Operating profit increased 26%, primarily because the prior year included $212 million of severance charges. Higher revenues and lower operating expenses, reflecting the company’s ongoing simplification initiatives, also contributed, despite the unfavorable impact of fair value adjustments associated with foreign currency derivatives embedded in certain customer contracts.

Adjusted EBITDA increased 16% to $3.4 billion and the margin increased to 30.3% from 26.5%.

  • Excluding the severance charges from the prior year, adjusted EBITDA increased 9% and the margin increased 190 basis points.

Diluted EPS, which includes discontinued operations, decreased 53% to $1.94 primarily because the prior year included a $2.0 billion gain on the sale of the IP & Science business. The current-year period reflected $304 million of tax benefits from the enactment of the US Tax Cuts and Jobs Act of 2017.

  • Adjusted EPS, which excludes the gain and the tax benefits, among other items, was $2.51 compared to $1.79 per share in the prior year.
    • Excluding the charges from the prior year, adjusted EPS increased 21%, or $0.44 per share, driven by higher adjusted EBITDA. Currency had a $0.03 favorable impact. 

Cash flow from operations declined 32%, primarily due to a $500 million pension contribution in January 2017, $103 million of higher payments related to 2016 severance charges, the loss of cash flows from the IP & Science business, which was sold in October 2016 ($140 million year on year reduction), and higher tax payments. 

  • Free cash flow decreased 49% to $1.0 billion reflecting similar factors as noted above.

Highlights by Business Unit – Full-Year 2017

(Millions of U.S. dollars, except for adjusted EBITDA margins)
(unaudited)

   

Year Ended December 31,

Change
Revenues
2017
2016
Total
Foreign  Currency
Constant Currency
Financial & Risk
$6,112 $6,057 1%
0%
1%
Legal 
3,390 3,367 1%
0%
1%
Tax & Accounting
1,551 1,452 7%
1%
6%
Corporate & Other (Reuters News)
296 304 -3%
0%
-3%
Eliminations
(16)
 (14)
     
Revenues
$11,333 $11,166 
1%
-1%
2%
Adjusted EBITDA 
         
Financial & Risk $1,916 $1,629 18%
1%
17%
Legal 
1,279 1,232 4%
0%
4%
Tax & Accounting
495 414 20%
1%
19%
Corporate & Other (includes Reuters News)
(253) (321) n/a n/a n/a
Adjusted EBITDA
$3,437 $2,954 16%
0%
16%
Adjusted EBITDA Margin 
         
Financial & Risk 31.3% 26.9% 440bp 10bp 430bp
Legal  37.7% 36.6% 110bp 10bp 100bp
Tax & Accounting 31.9%
28.5% 340bp -10bp
350bp
Corporate & Other (includes Reuters News) n/a n/a n/a n/a n/a
Adjusted EBITDA margin 30.3%
26.5% 380bp 10bp 370bp

Excluding 2016 Severance Charges from Prior-Year Period Amounts and Margins 
Adjusted EBITDA  
         
Financial & Risk
$1,916 $1,796 7%
1%
6%
Legal 
1,279 1,258 2%
0%
2%
Tax & Accounting
495 432 15% 1%
14%
Corporate & Other (includes Reuters News)
(253) (320) n/a n/a
n/a
Adjusted EBITDA
$3,437 $3,166 9%
1%
8%
Adjusted EBITDA margin
         
Financial & Risk
31.3%
29.7% 160bp 20bp 140bp
Legal 
37.7% 37.4% 30bp 0bp 30bp
Tax & Accounting
31.9% 29.8% 210bp -10bp 220bp
Corporate & Other (includes Reuters News)
n/a
n/a
n/a
n/a
n/a
Adjusted EBITDA margin
30.3% 28.4% 190bp 20bp 170bp

n/a – not applicable
 

Financial & Risk

Revenues increased 1% to $6.1 billion.  Organic revenues were unchanged and acquisitions contributed 1%.

  • Revenues by type:
    • Recurring revenues grew 1% (77% of total)
    • Transactions revenues grew 6% (16% of total)
      • Growth was due to increased revenue from Tradeweb and contributions from acquisitions, partially offset by the impact of lower foreign exchange trading revenues.
    • Recoveries revenues decreased 6% (7% of total)
  • Revenues by geography:
    • Revenues were up 3% in the Americas, and were unchanged in EMEA and Asia Pacific. Excluding the impact of lower recoveries, all regions reported revenue growth.

Adjusted EBITDA increased 18% to $1.9 billion and the margin increased to 31.3% from 26.9% due to the impact of severance charges incurred in the fourth quarter of 2016, savings from the company’s simplification initiatives and higher revenues.

  • In constant currency and excluding the severance charges from the prior year, adjusted EBITDA was up 6% and the margin increased 140 basis points.

Net sales for the full year were positive.

Legal

Revenues increased 1% to $3.4 billion.

  • Recurring revenues grew 3% (76% of total)
  • US Print revenues declined 6% (13% of total)
  • Transactions revenues declined 6% (11% of total)

Adjusted EBITDA increased 4% to $1.3 billion and the margin increased to 37.7% from 36.6%. The increase was driven by the impact of severance charges incurred in the fourth quarter of 2016, higher revenues and savings from ongoing simplification initiatives.

  • In constant currency and excluding the severance charges from the prior year, adjusted EBITDA was up 2% and the margin increased 30 basis points. 

Tax & Accounting

Revenues increased 6% to $1.6 billion.

  • Recurring revenues grew 5% (85% of total)
  • Transactions revenues grew 18% (15% of total)

Adjusted EBITDA increased 20% to $495 million and the margin increased to 31.9% from 28.5%. The increase was driven by higher revenues, savings from the company’s simplification initiatives and the impact of severance charges incurred in the fourth quarter of 2016.

  • In constant currency and excluding the severance charges from the prior year, adjusted EBITDA was up 14% and the margin increased 220 basis points.

Corporate & Other (Including Reuters News)

Reuters News revenues were $296 million, down 3%.

Corporate & Other costs at the adjusted EBITDA level were $253 million compared to $321 million in the prior year. The reduction was driven by the company’s ongoing simplification initiatives, partly offset by investments relating to improving customer experience and costs related to real estate consolidation initiatives.

  • Including depreciation and amortization of software, Corporate & Other costs were $289 million compared to $381 million in the prior year.

Business Update: Proposed Financial & Risk Strategic Partnership with Blackstone

On January 30, 2018, Thomson Reuters announced that it signed a definitive agreement to enter into a strategic partnership with private equity funds managed by Blackstone related to the company's Financial & Risk business. As part of the transaction, Thomson Reuters has agreed to sell a 55% majority stake in Financial & Risk and will retain a 45% interest in the business. The transaction values the Financial & Risk business at approximately $20 billion. Thomson Reuters will receive approximately $17 billion in gross proceeds at closing (subject to purchase price adjustments). Thomson Reuters will maintain full ownership of its Legal, Tax & Accounting and the Reuters News businesses. The transaction is expected to close in the second half of the year and is subject to specified regulatory approvals and customary closing conditions.

Financial & Risk will be classified as a discontinued operation for 2018 reporting purposes.

Dividend

On January 30, 2018, Thomson Reuters announced that its board of directors approved maintaining its dividend at $1.38 per common share. A quarterly dividend of $0.345 per share is payable on March 15, 2018 to common shareholders of record as of February 22, 2018.

Note on 2018 Business Outlook

As announced on January 30, 2018, Thomson Reuters plans to provide a 2018 Business Outlook when it reports first-quarter results in early May as a result of the company's recently signed agreement to form a strategic partnership for Financial & Risk with Blackstone, and the related allocation of costs that will need to be made between Thomson Reuters and the proposed new partnership.

Thomson Reuters

Thomson Reuters is the world’s leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges (symbol: TRI). For more information, visit 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 adjusted EBITDA and the related margin (other than at the business unit or segment level), free cash flow, adjusted EPS, and selected measures excluding the impact of foreign currency and the impact of the fourth quarter 2016 severance charges. 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. The term “organic” refers to Thomson Reuters existing businesses before the impact of acquisitions.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL ASSUMPTIONS AND MATERIAL RISKS

Certain statements in this news release, including, but not limited to, Mr. Smith’s comments and statements regarding the proposed strategic partnership with Blackstone involving the Financial & Risk business, 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 a transaction involving all or part of the Financial & Risk business will be completed or that the events described in any other forward-looking statement will materialize. 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.

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 and retain existing ones, or expand into new geographic markets and identify areas of higher growth; fraudulent or unpermitted data access or other cyber-security or privacy breaches; failures or disruptions of telecommunications, data centers, network systems or the Internet; increased accessibility to free or relatively inexpensive information sources; failure to meet the challenges involved in operating globally; failure to maintain a high renewal rate for recurring, subscription-based services; dependency on third parties for data, information and other services; changes to law and regulations; tax matters, including changes to tax laws, regulations and treaties; fluctuations in foreign currency exchange and interest rates; failure to adapt to organizational changes and effectively implement strategic initiatives; failure to attract, motivate and retain high quality management and key employees; failure to protect the brands and reputation of Thomson Reuters; inadequate protection of intellectual property rights; threat of legal actions and claims; failure to derive fully the anticipated benefits from existing or future acquisitions, joint ventures, investments or dispositions; risk of antitrust/competition-related claims or investigations; impairment of goodwill and other identifiable intangible assets; 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.

As previously announced, the company will not webcast a discussion of its fourth-quarter and full-year 2017 results today because it pre-released expectations for its results and hosted a conference call on January 30, 2018 after it announced that the company had signed a definitive agreement to enter into a strategic partnership with Blackstone involving its Financial & Risk business. You can access an archive of the January 30, 2018 webcast by visiting the "Investor Relations" section of www.thomsonreuters.com
 

CONTACTS

MEDIA
David Crundwell
Senior Vice President, Corporate Affairs
+1 416 649 9904
david.crundwell@tr.com

INVESTORS
Frank J. Golden
Senior Vice President, Investor Relations
+1 646 223 5288
frank.golden@tr.com