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February 26, 2019

Thomson Reuters Reports Fourth-Quarter and Full-Year 2018 Results

TORONTO, February 26, 2019 – Thomson Reuters (TSX/NYSE: TRI) today reported results for the fourth quarter and full year ended December 31, 2018.

  • The company achieved its full-year 2018 Outlook and provided its future Outlook
  • The Thomson Reuters Board of Directors approved a $0.04 per share annualized increase in the dividend to $1.44 per common share. This represents the 26th consecutive year of dividend increases.

“It was encouraging to see our positive momentum continue through the fourth quarter,” said Jim Smith, president and CEO of Thomson Reuters. “With the solid close to an eventful year, we enter 2019 with a ‘new’ Thomson Reuters superbly positioned to build on the improved organic revenue growth rate we achieved in 2018. The financial services partnership with Blackstone is up and running smoothly, and our management team is now focused on accelerating the leading positions we hold in our core markets.”

Consolidated Financial Highlights - Three Months Ended December 31

On October 1, 2018, Thomson Reuters sold a 55% interest in the company's Financial & Risk (F&R) business, now known as Refinitiv. Except as otherwise noted, all amounts are from continuing operations and exclude the results of the company’s former F&R business.  Beginning October 1, 2018, the company’s IFRS earnings per share include its share of results from its 45% investment in Refinitiv, which is removed from the company’s non-IFRS calculation of adjusted EPS. Results also include new revenues in the Reuters News business from providing news and editorial content to Refinitiv since October 1, 2018. Finally, in the fourth quarter of 2018, the company began reporting in a new customer-focused structure with five customer segments. Prior-year results have been restated accordingly and can be found in the Investor Relations section of the company’s website.

Three Months Ended December 31,
(Millions of U.S. dollars, except for adjusted EBITDA margin and EPS)
(unaudited)


IFRS Financial Measures
(1)


 2018

2017

 
Change
Change at
Constant Currency

Revenues 
$1,519
$1,414
7%
 
Operating profit
$146
$254
-43%
 
Diluted earnings per share (EPS)
(includes discontinued operations)
$6.18
$0.81
663%
 
Cash flow from operations
(includes discontinued operations)
$(10)
$755
 n/m
 

Non-IFRS Financial Measures(1)

       
Revenues
$1,519
$1,414
7%
9%
Adjusted EBITDA
$285
$408
-30%
-33%
Adjusted EBITDA margin 18.8%
28.9%
-1010bp
-1120bp
Adjusted EPS
$0.20
$0.22
-9%
-18%
Free cash flow 
(includes discontinued operations)
$(167)
$506
n/m
 
(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.


Revenues increased 7% due to higher recurring revenues, which included new revenues in Reuters News from providing news and editorial content to Refinitiv since October 1, 2018.

  • At constant currency, revenues increased 9%.
  • Organic revenue growth was 3%, driven by a 5% increase in recurring revenues, which comprised 77% of total revenues. The 5% increase in recurring revenues was partially offset by a 5% decline in Global Print revenues (13% of total revenues) and a 3% decline in Transactions revenues (10% of total revenues).

Operating profit decreased 43% due to costs and investments to reposition Thomson Reuters following the separation of the F&R business from the company.

  • Adjusted EBITDA decreased 30% and the margin decreased to 18.8%, reflecting the same factors.

Diluted earnings per share (EPS) was $6.18 compared to $0.81 in the prior-year period, primarily due to a $3.4 billion gain on the sale of a 55% interest in the F&R business, which was reported within discontinued operations, as well as lower shares outstanding as a result of shares repurchased with some of the F&R transaction proceeds and a related share consolidation.

  • Adjusted EPS, which excludes discontinued operations among other items, was $0.20 compared to $0.22 in the prior-year period, primarily due to the same factors that affected Operating Profit, however these factors were mitigated by the impact of share repurchases and lower interest expense.

Cash flow from operations decreased primarily due to costs and investments to reposition Thomson Reuters following the separation of the F&R business from the company and the loss of three months of cash flows from the former F&R business in 2018 (compared to 2017 when the business was included for the full year).

  • Free cash flow decreased for the same reasons. 

Highlights by Customer Segment – Three Months Ended December 31

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

Three Months Ended
December 31,


Change


Revenues


2018


2017


Total

Foreign 
Currency

Constant
Currency

Legal Professionals
$599 $580 3%
-1%
4%
Corporates 315 301
5%
-2%
7%
Tax Professionals 248 239 4%
-4%
8%
Reuters News 155
75 107% -4%
111%
Global Print 203 219 -7% -3% -4%
Eliminations (1) -      
Revenues
$1,519 $1,414 
7%
-2%
9%
Adjusted EBITDA 
         
Legal Professionals  $221
$185
19% 2%
17%
Corporates 87
99 -12% 1%
-13%
Tax Professionals  118 97 22% 1%
21%
Reuters News 6
(2)
n/m n/m n/m
Global Print 88 94 -6% -1% -5%
Corporate costs (235) (65) n/a n/a n/a
Adjusted EBITDA
$285 $408 -30% 3%
-33%
Adjusted EBITDA Margin          
Legal Professionals  36.9%
31.9% 500bp 100bp 400bp
Corporates 27.6% 32.9% -530bp 80bp -610bp
Tax Professionals  47.6%
40.6%
700bp 170bp 530bp
Reuters News 3.9% -2.7% 660bp 330bp 330bp
Global Print 43.3% 42.9% 40bp 90bp -50bp
Corporate costs n/a n/a n/a n/a n/a
Adjusted EBITDA margin
18.8% 28.9% -1010bp 110bp -1120bp
n/a; not applicable
n/m; not meaningful

Unless otherwise noted, all revenue growth comparisons by customer segment 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.

Legal Professionals

Revenues increased 4% to $599 million.

  • Recurring revenues grew 4% (91% of total). 
  • Transactions revenues grew 4% (9% of total).

Adjusted EBITDA increased 19% to $221 million.

  • The margin increased from 31.9% to 36.9% primarily due to higher revenues and severance charges incurred in the prior-year period that did not reoccur.

Corporates

Revenues increased 7% to $315 million. The acquisition of Integration Point (a global trade management business) in the fourth quarter of 2018 contributed approximately 100 basis points to the growth rate.

  • Recurring revenues grew 11% (83% of total) driven by organic revenue growth of 10% and revenues from the acquisition of Integration Point.
  • Transactions revenues declined 10% (17% of total), due to lower revenues from Legal Managed Services and businesses in Latin America.

Adjusted EBITDA decreased 12% to $87 million.

  • The margin decreased from 32.9% to 27.6% due to costs required to stand up the new Corporates segment as well as the dilutive impact of the Integration Point acquisition.

Tax Professionals

Revenues increased 8% to $248 million.

  • Recurring revenues grew 9% (89% of total).
  • Transactions revenues declined 3% (11% of total).

Adjusted EBITDA grew 22% to $118 million.

  • The margin increased from 40.6% to 47.6% due to higher revenues as well as lower expenses in the Government business versus the prior-year period.

Reuters News

Revenues increased 111% to $155 million due to revenue from the 30-year agreement for Reuters News to supply news and editorial content to Refinitiv, which began in the fourth quarter of 2018. Organic revenues increased 1%.

Adjusted EBITDA was $6 million, an increase of $8 million from the prior-year period primarily due to the fact that the fourth quarter of 2017 included about $9 million of severance charges.

Global Print

Revenues decreased 4% to $203 million.

Adjusted EBITDA decreased 6% to $88 million.

  • The margin increased slightly from 42.9% to 43.3%.

Corporate Costs

Corporate costs at the adjusted EBITDA level were $235 million compared to $65 million in the prior-year period. As previously disclosed, the increase was due to costs and investments to reposition Thomson Reuters following the separation with F&R. These cash investments are expected to continue in 2019.

Consolidated Financial Highlights – Year Ended December 31

Year Ended December 31,  
(Millions of U.S. dollars, except for adjusted EBITDA margin and EPS)
(unaudited)

IFRS Financial Measures(1)


 2018

2017

 
Change
Change at 
Constant Currency

Revenues 
$5,501 $5,297 4%
 
Operating profit
$780 $1,034 -25%
 
Diluted EPS
(includes discontinued operations)
$5.91 $1.94 205%  
Cash flow from operations
(includes discontinued operations)
$2,062 $2,029  2%
 

Non-IFRS Financial Measures(1)

       
Revenues
$5,501 $5,297 4% 4%
Adjusted EBITDA
$1,365 $1,591 -14%
-15%
Adjusted EBITDA margin 24.8% 30.0% -520bp -560bp
Adjusted EPS
$0.75 $0.94 -20% -22%
Free cash flow 
(includes discontinued operations)
$1,107 $1,032 7%  
(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.


Revenues increased 4% due to higher recurring revenues, which included new revenues in Reuters News from providing news and editorial content to Refinitiv since October 1, 2018. Foreign currency had no impact on full-year revenue results.

  • Organic revenue growth was 2.5%, driven by 5% growth in recurring revenues, which comprised 75% of total revenues.

Operating profit decreased 25% due to costs and investments to reposition Thomson Reuters following the separation of the F&R business from the company.

  • Adjusted EBITDA decreased 14% and the margin decreased to 24.8%, reflecting the same factors.

Diluted EPS was $5.91 compared to $1.94 in the prior year period primarily due to a $3.4 billion gain on the sale of a 55% interest in the company's F&R business, which was reported within discontinued operations.

  • Adjusted EPS, which excludes discontinued operations among other items, was $0.75, compared to $0.94, primarily due to the same factors that affected operating profit.

Cash flow from operations increased 2% despite the loss of three months of cash flows from the company’s former F&R business in 2018, compared to 2017, when the business was included for the full year. This reflected that the prior year included a $500 million pension plan contribution.

  • Free cash flow increased 7% reflecting the same factors.

Highlights by Customer Segment – Year Ended December 31

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

Twelve Months Ended 
December 31,


Change


Revenues


2018


2017


Total

Foreign 
Currency

Constant
Currency

Legal Professionals
$2,373 $2,284 4%
0%
4%
Corporates 1,238 1,186 4%
-1%
5%
Tax Professionals 794 767 4%
-2%
6%
Reuters News 370 296 25% 1%
24%
Global Print 728 764 -5% -2% -3%
Eliminations (2) -      
Revenues
$5,501 $5,297 
4%
0%
4%
Adjusted EBITDA 
         
Legal Professionals  $816 $794 3% 1%
2%
Corporates 395 411 -4% 0%
-4%
Tax Professionals  273 252 8% -1%
9%
Reuters News 27 27 0% 19% -19%
Global Print 320 335 -4% 0% -4%
Corporate costs (466) (228) n/a n/a n/a
Adjusted EBITDA
$1,365 $1,591 -14% 1%
-15%
Adjusted EBITDA Margin          
Legal Professionals  34.4% 34.8% -40bp 20bp -60bp
Corporates 31.9% 34.7% -280bp 40bp -320bp
Tax Professionals  34.4% 32.9% 150bp 60bp 90bp
Reuters News 7.3% 9.1% -180bp 130bp -310bp
Global Print 44.0% 43.8% 20bp 50bp -30bp
Corporate costs n/a n/a n/a n/a n/a
Adjusted EBITDA margin
24.8% 30.0% -520bp 40bp -560bp
n/a: not applicable

Business Outlook for 2019 and 2020 (At Constant Currency)

Thomson Reuters today provided its Outlook for 2019 and 2020. The company’s Outlook for 2019 and 2020 assumes constant currency rates compared to 2018 and does not factor in the impact of acquisitions or divestitures that may occur.

 

2018
Actual
2019 Outlook 
Before Currency
2020 Outlook
Before Currency
Revenue Growth 4%(1) 7% - 8.5%(2) 3.5% - 4.5%
Adjusted EBITDA $1.4 billion 
($1.3 billion before currency)
$1.4 - $1.5 billion(3) 30.0% - 31.0%(3)
Corporate Costs $499 million ~$570 million $140 - $190 million
Free Cash Flow $1.1 billion $0 - $300 million  $1.0 - $1.2 billion
Capital Expenditures - % of Revenue ~10% ~9% 7.5% - 8.0%
Depreciation & Amortization of Computer Software $510 million $600 - $625 million(3) TBD
Interest Expense (P&L) $260 million $150 - $175 million TBD
Effective Tax Rate on Adjusted Earnings 15% 16% - 19% ~20%
(1) 2018 organic revenue growth was 2.5%.
(2) 2019 organic revenue growth is expected to be 3% - 3.5%.
(3) The impact of the new lease accounting standard (IFRS 16) is expected to increase both adjusted EBITDA and depreciation and amortization of computer software by an estimated $40 million in 2019 and $50 million in 2020 and is reflected in this Outlook. IFRS 16 has no impact on free cash flow.

Some of the forward-looking financial measures in the Outlook above are provided on a non-IFRS basis. See the section below entitled “Non-IFRS Financial Measures” for more information. The information in this section is forward-looking and should also be read in conjunction with the section below entitled “Special Note Regarding Forward-Looking Statements, Material Risks and Material Assumptions.”

Dividend and Share Repurchases

The Thomson Reuters Board of Directors approved a $0.04 per share annualized increase in the dividend to $1.44 per common share. A quarterly dividend of $0.36 per share is payable on March 20, 2019 to common shareholders of record as of March 8, 2019.

Today, the company also announced that it plans to repurchase up to an additional $250 million of its shares under its normal course issuer bid.

Financial & Risk Transaction Proceeds Update

On October 1, 2018, Thomson Reuters sold a 55% interest in its F&R business to private equity funds managed by Blackstone for approximately $17 billion in gross cash proceeds and retained a 45% interest in the business, which is now known as Refinitiv.

The company returned $10 billion of the F&R transaction proceeds to its shareholders as follows:

     Amount
Substantial issuer bid/tender offer $6.5 billion
Return of capital transaction $2.3 billion
Share repurchases under normal course issuer bid $1.2 billion

In October 2018, Thomson Reuters used approximately $4 billion of the proceeds to repay debt, enabling it to remain substantially below its target leverage ratio (net debt/adjusted EBITDA) of 2.5:1.

As previously disclosed, the company intends to utilize $2 billion of the proceeds to fund strategic, targeted acquisitions to bolster its positions in key growth segments of its Legal Professionals, Tax Professionals and Corporates businesses. In November 2018, the company acquired Integration Point, an international leader in global trade management operations.

The company is using approximately $1 billion of the proceeds for cash taxes, pension contributions, bond redemption costs, and other fees and expenses related to the transaction. This amount includes approximately $600 million to eliminate stranded costs as well as investments to reposition the company following the separation of the businesses. Approximately $270 million of this amount was incurred in 2018, with the balance expected to be incurred in 2019.

Thomson Reuters

Thomson Reuters (TSX/NYSE: TRI) is the world’s leading provider of news and information-based tools to professionals. Our worldwide network of journalists and specialist editors keep customers up to speed on global developments, with a particular focus on legal, regulatory and tax changes. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information on Thomson Reuters, visit tr.com and for the latest world news, reuters.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 segment level), free cash flow, adjusted EPS, and selected measures excluding 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. The term “organic” refers to Thomson Reuters’ existing businesses before the impact of acquisitions, dispositions, and IFRS 15. For purposes of the organic revenue calculation, the company’s 30-year news agreement with Refinitiv that was signed on October 1, 2018 is treated as an acquisition until October 1, 2019.

The company's business outlook contains various non-IFRS financial measures. The company believes that providing reconciliations of forward-looking non-IFRS financial measures in its business outlook would be potentially misleading and not practical due to the difficulty of projecting items that are not reflective of ongoing operations in any future period. The magnitude of these items may be significant. Consequently, for outlook purposes only, the company is unable to reconcile these non-IFRS measures to the most comparable IFRS measures because it cannot predict, with reasonable certainty, the 2019 or 2020 impact of changes in foreign exchange rates which impact (i) the translation of its results reported at average foreign currency rates for the year, and (ii) other finance income or expense related to intercompany financing arrangements. Additionally, the company cannot reasonably predict the occurrence or amount of other operating gains and losses, which generally arise from business transactions that it does not currently anticipate.

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

Certain statements in this news release, including, but not limited to, statements in the "Business Outlook for 2019 and 2020 (At Constant Currency)" section, Mr. Smith’s comments and the company’s anticipated uses of the remaining proceeds from the F&R transaction, are forward-looking. While the company believes that it has a reasonable basis for making forward-looking statements in this news release, they are not a guarantee of future performance or outcomes and there is no assurance that the events described in any forward-looking statement will materialize. Forward-looking statements are subject to a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from current expectations. Many of these risks, uncertainties and assumptions are beyond our company’s control and the effects of them can be difficult to predict.

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; downgrading of credit ratings and adverse conditions in the credit markets; failure to derive fully the anticipated benefits from the sale of the former F&R business and the Refinitiv strategic partnership with Blackstone; failure to efficiently complete the separation of Refinitiv from Thomson Reuters; failure to derive fully the anticipated benefits from existing or future acquisitions, joint ventures, investments or dispositions; the effect of factors outside of the control of Thomson Reuters on funding obligations in respect of pension and post-retirement benefit arrangements, risk of antitrust/competition-related claims or investigations; impairment of goodwill and other identifiable intangible assets; 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.

The company's 2019 and 2020 business outlook is based on information currently available to the company and is based on various external and internal assumptions made by the company in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the company believes are appropriate under the circumstances. Economic and market assumptions include, but are not limited to, GDP growth in the United States (approximately 80% of the company’s 2018 revenues) and secondarily, in other countries where Thomson Reuters operates; a continued increase in the demand and need for high quality information and tools that help automate or manage workflow solutions and drive productivity and efficiency; a continued need for trusted products and services that help customers navigate evolving and complex legal, tax, accounting, regulatory, geopolitical and commercial changes, developments and environments; and a continued increase in customers seeking software-as-a-service or other cloud-based offerings. Internal financial and operational assumptions include, but are not limited to, continued growth in the company’s recurring revenue base which offsets anticipated declines in its global print business; acquiring new customers by enhancing the company’s digital platforms and propositions and through other sales initiatives; improving customer retention through commercial simplification efforts and customer service improvements; the company’s ability to continue to combine information, technology and human expertise in offerings that meet evolving customer demands and needs; the company’s ability to reduce stranded costs related to the F&R transaction and the separation of the two businesses to less than $50 million in 2020; and the successful execution of a number of efficiency initiatives that are expected to generate cost savings, such as reducing headcount, office locations and the number of products offered by the company and the leveraging of fewer, shared technology platforms.

Our company has provided a business outlook for the purpose of presenting information about current expectations for 2019 and 2020. 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.

CONTACTS

MEDIA
David Crundwell 

Head of Communications
+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

Thomson Reuters will webcast a discussion of its fourth-quarter and full-year 2018 results and business outlook for 2019 and 2020 today beginning at 8:30 a.m. Eastern Standard Time (EST). You can access the webcast by visiting ir.thomsonreuters.com. An archive of the webcast will be available following the presentation.