Thomson Reuters Reports Third-Quarter 2022 Results

TORONTO, November 1, 2022 – Thomson Reuters (TSX/NYSE: TRI) today reported results for the third quarter ended September 30, 2022:

• Healthy revenue growth continued in the third quarter
  • Total company revenue up 3% / organic revenue up 6%
    • Organic revenue up 6% for the “Big 3” segments (Legal Professionals, Corporates and Tax & Accounting Professionals)
    • Third consecutive quarter of 7% recurring revenue growth
• Maintained full-year 2022 and 2023 guidance
• Westlaw Precision successfully launched on September 14
• Repurchased $855 million of company shares through October 28 under the $2 billion share buyback program announced on June 8, 2022

“I’m pleased to report good momentum continued in the third quarter, with revenue and margins modestly ahead of our expectations. Importantly, we also saw a positive early response to the September launch of Westlaw Precision, a major upgrade to our key Westlaw franchise. Given our year-to-date performance, we are maintaining our full-year 2022 outlook,” said Steve Hasker, President and CEO of Thomson Reuters. “While we acknowledge growing macroeconomic uncertainty, our underlying business is resilient, and we remain focused on investing for the long term.”

Consolidated Financial Highlights - Three Months Ended September 30

Revenues increased 3%, driven by growth across four of the company’s five business segments. Foreign currency had a 2% negative impact on revenues.

• Organic revenues increased 6%, driven by 7% growth in recurring revenues (82% of total revenues). Transactions revenues declined 3%, and Global Print revenues were nearly unchanged.      
• The company’s “Big 3” segments (Legal Professionals, Corporates and Tax & Accounting Professionals) reported organic revenue growth of 6% and collectively comprised 80% of total revenues.

Operating profit increased 41% driven by higher revenues and lower costs, which included cost benefits resulting from the Change Program, as well as gains on the sale of certain non-core businesses that were divested in the quarter.

• Adjusted EBITDA, which excludes gains on the sale of certain non-core businesses, increased 17% due to higher revenues and lower costs. The related margin increased to 34.0% from 30.0% in the prior-year period, of which foreign currency contributed 90bp. Investments in the Change Program negatively impacted the third quarter of 2022 adjusted EBITDA margin by 300bp.

Diluted EPS was $0.47 compared to diluted loss per share of $(0.49) in the prior-year period. While both periods included significant reductions in the value of the company’s investment in London Stock Exchange Group (LSEG), the current period benefited from gains on foreign exchange contracts related to a portion of the investment, which is denominated in British pound sterling.

• Adjusted EPS, which excludes the change in value of the company’s LSEG investment, related foreign exchange contracts and other adjustments, increased to $0.57 per share from $0.46 per share in the prior-year period as higher adjusted EBITDA more than offset higher income tax expense.

Net cash provided by operating activities decreased $3 million as unfavorable movements in working capital, which included higher payments associated with the Change Program, essentially offset the cash benefits from higher operating profit.

• Free cash flow, which included dividends from the Company’s LSEG investment, increased $3 million.

Highlights by Customer Segment - Three Months Ended September 30

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 5% (6% organic) to $701 million.

• Recurring revenues grew 6% (94% of total, all organic), driven by strong performances from Practical Law, Westlaw, HighQ and the Government business.
• Transactions revenues decreased 10% (6% of total, decreased 7% organic).

Adjusted EBITDA increased 13% to $324 million.

• The margin increased to 46.2% from 42.3%, driven by higher revenues and Change Program savings.
  

Corporates

Revenues increased 7% (all organic) to $373 million.

• Recurring revenues grew 9% (89% of total, all organic), driven by strong performances from Practical Law, CLEAR, Direct Tax and HighQ.
• Transactions revenues decreased 7% (11% of total, all organic), primarily driven by the lower number of software implementations.

Adjusted EBITDA increased 13% to $147 million.

• The margin increased to 39.2% from 36.7%, due to higher revenues and Change Program savings.

Tax & Accounting Professionals

Revenues increased 8% (9% organic) to $190 million.

• Recurring revenues grew 8% (83% of total, 9% organic), driven by strong growth from UltraTax and the segment’s Latin America business.
• Transactions revenues increased 12% (17% of total, all organic), driven by UltraTax and training revenues.

Adjusted EBITDA increased 17% to $59 million.

• The margin increased to 31.0% from 28.5%, driven by higher revenues, Change Program savings, and a benefit from a lower reserve for accounts receivable.

The Tax & Accounting Professionals segment is the company’s most seasonal business with approximately 60% of full-year revenues typically generated in the first and fourth quarters. As a result, the margin performance of this segment has been generally higher in the first and fourth quarters as costs are typically incurred in a more linear fashion throughout the year.

Reuters News

Revenues of $171 million increased 5% (all organic), primarily driven by the Agency business and by the company’s news agreement with the Refinitiv business of LSEG.

Adjusted EBITDA increased 37% to $33 million, due to higher revenues and currency benefits.

Global Print

Revenues were flat for the quarter, which was better than the decline the company expected due to improved retention and timing of new sales. The timing benefit is expected to normalize in the fourth quarter.

Adjusted EBITDA decreased 4% to $50 million.

• The margin decreased to 34.4% from 35.0% primarily due to foreign exchange.

Corporate Costs

Corporate costs at the adjusted EBITDA level were $78 million and included $47 million of Change Program costs. Corporate costs were $87 million in the prior-year period and included $53 million of Change Program costs. Additional information regarding the Change Program is provided below.

Consolidated Financial Highlights - Nine Months Ended September 30

Revenues increased 5%, driven by growth across four of the company’s five business segments. Foreign currency had a 1% negative impact on revenues.

• Organic revenues increased 6%, driven by 7% growth in recurring revenues (80% of total revenues) as well as 6% growth in transactions revenues. Global Print revenues decreased 1% organically.
• The company’s “Big 3” segments reported organic revenue growth of 7% and collectively comprised 81% of total revenues.

Operating profit increased 22% as higher revenues more than offset higher costs, which included investments associated with the company’s Change Program. 

• Adjusted EBITDA increased 12% reflecting the same factors that impacted operating profit. The related margin increased to 34.9% from 32.7% in the prior-year period, of which foreign currency contributed 70bp. Investments in the Change Program negatively impacted the adjusted EBITDA margin by 230bp in the nine-month period of 2022.

Diluted EPS was $2.30 per share compared to $11.80 per share in the prior-year period. The prior-year period included a gain of approximately $8.1 billion on the sale of Refinitiv to LSEG.

• Adjusted EPS, which excludes the gain on the sale of Refinitiv, as well as other adjustments, increased to $1.82 per share from $1.52 per share in the prior-year period, as higher adjusted EBITDA more than offset higher tax expense.

Net cash provided by operating activities decreased $137 million due to higher payments associated with the Change Program and higher annual incentive plan bonuses.

• Free cash flow decreased $187 million due to lower cash flows from operating activities and higher capital expenditures, primarily associated with the Change Program.

Highlights by Customer Segment - Nine Months Ended September 30

Change Program

In February 2021, the company announced a two-year Change Program to transition from a holding company to an operating company, and from a content provider to a content-driven technology company. The company is 22 months into the program, which is expected to be largely complete by the end of 2022. The program is projected to require an investment of approximately $600 million during that time of which $503 million has been invested as of September 30, 2022. The company continues to anticipate that Change Program spending will be approximately 60% operating expenses and 40% capital expenditures.

2022 and 2023 Outlook

The company is maintaining its outlook for 2022 and 2023, as reflected in the table below, which incorporates the forecasted impacts associated with the Change Program, assumes constant currency rates, and excludes the impact of any future acquisitions or dispositions. Thomson Reuters believes that this type of guidance provides useful insight into the anticipated performance of its businesses.

The company expects its fourth-quarter 2022 revenue growth and EBITDA margin to be approximately in-line with its full-year 2022 outlook target. For the full year, capital expenditures as a percentage of revenues are likely to be at the upper  end of the 7.5% - 8.0% guidance range, while the effective tax rate is expected to be at the lower end of the 19% - 21% outlook.

While we are maintaining our outlook for 2023, 2023 margins are trending towards the lower end of the current 39% - 40% range amid heightened inflation and select investments we are making to drive customer success and fund growth initiatives. Additionally, 2023 accrued capital expenditures as a percentage of revenues is trending towards the upper end of the current 6.0% - 6.5% range. Lastly, we expect that our 2023 effective tax rate will be approximately consistent with 2022.

We are maintaining our previously announced outlook on the basis of information and assumptions that we believe are reasonable. However, while the company’s third-quarter 2022 performance provides it with increasing confidence about its 2022 outlook, the global economy recently has experienced substantial disruption due to concerns regarding economic effects associated with the macroeconomic backdrop and ongoing geopolitical risks. Any worsening of the global economic or business environment could impact the company’s ability to achieve its outlook. The company intends to revisit its 2023 outlook in the first quarter of 2023 and provide an update in connection with its fourth-quarter and full-year 2022 earnings release.

Full-Year 2022 Outlook

(1) Non-IFRS financial measures. See the “Non-IFRS Financial Measures” section below as well as the tables and footnotes appended to this news release for more information.

Reported Full-Year 2021 and Full-Year 2022 – 2023 Outlook

(1) Non-IFRS financial measures. See the “Non-IFRS Financial Measures” section below as well as the tables and footnotes appended to this news release for more information.

The information in this section is forward-looking. Actual results, which will include the impact of currency and future acquisitions and dispositions completed during 2022 and 2023, may differ materially from the company’s outlook. The information in this section should also be read in conjunction with the section below entitled “Special Note Regarding Forward-Looking Statements, Material Risks and Material Assumptions.”

Share Repurchases – Update on $2.0 Billion Buyback Program

In June 2022, Thomson Reuters announced its plans to buy back up to $2.0 billion of its common shares.

From June 2022 through October 28, 2022, the company repurchased approximately 8.0 million of its common shares under the new buyback program, for a total spend of $855 million. As of October 28, 2022, Thomson Reuters had approximately 479.7 million common shares outstanding.

Dividends

In February 2022, the company announced a 10% or $0.16 per-share annualized increase in the dividend to $1.78 per common share, representing the 29^th consecutive year of dividend increases. A quarterly dividend of $0.445 per share is payable on December 15, 2022, to common shareholders of record as of November 17, 2022.

LSEG Ownership Interest

In January 2021, Thomson Reuters and private equity funds affiliated with Blackstone sold Refinitiv to LSEG in an all-share transaction. Thomson Reuters indirectly owns LSEG shares through an entity that it jointly owns with Blackstone’s consortium and a group of current LSEG and former Refinitiv senior management. 

As of October 28, 2022, Thomson Reuters indirectly owned approximately 72.0 million LSEG shares which had a market value of approximately $6.3 billion based on LSEG’s closing share price on that day. Through the same date, the company received $87 million of dividends from its LSEG investment, and $33 million related to share repurchases conducted by LSEG.

Thomson Reuters

Thomson Reuters is a leading provider of business information services. Our products include highly specialized information-enabled software and tools for legal, tax, accounting and compliance professionals combined with the world’s most global news service – Reuters. 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, which include ratios that incorporate one or more non-IFRS financial measures, such as adjusted EBITDA and the related margin (other than at the customer segment level), free cash flow, adjusted EPS and the effective tax rate on adjusted EPS, accrued capital expenditures expressed as a percentage of revenues, selected measures excluding the impact of foreign currency, changes in revenues computed on an organic basis as well as all financial measures for the “Big 3” segments. Thomson Reuters uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position as well as for internal planning purposes and the company’s business outlook. Additionally, Thomson Reuters uses non-IFRS measures as the basis for management incentive programs. 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 company's outlook contains various non-IFRS financial measures. The company believes that providing reconciliations of forward-looking non-IFRS financial measures in its 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 directly comparable IFRS measures because it cannot predict, with reasonable certainty, the 2022 and 2023 impacts 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 and foreign exchange contracts. Additionally, the company cannot reasonably predict (i) its share of post-tax earnings or losses in equity method investments, which is subject to changes in the stock price of LSEG or (ii) the occurrence or amount of other operating gains and losses that generally arise from business transactions that the company does not currently anticipate.

ROUNDING

Other than EPS, the company reports its results in millions of U.S. dollars, but computes percentage changes and margins using whole dollars to be more precise. As a result, percentages and margins calculated from reported amounts may differ from those presented, and growth components may not total due to rounding.

REVISION TO PRIOR-YEAR SEGMENT RESULTS

In the first quarter of 2022, the company made two changes to its segment reporting to reflect how it currently manages its businesses. The changes (i) reflect the transfer of certain revenues from its Corporates business to its Tax & Accounting Professionals business where they are better aligned; and (ii) record intercompany revenue in Reuters News for content-related services that it provides to Legal Professionals, Corporates and Tax & Accounting Professionals. Previously, these services had been reported as a transfer of expense from Reuters News to these businesses. These changes impact the financial results of the company’s segments, but do not change the company’s consolidated financial results. The table below summarizes the changes for the three and nine months ended September 30, 2021.

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

Certain statements in this news release, including, but not limited to, statements in Mr. Hasker’s comments, the "Change Program,” “2022 and 2023 Outlook" and “LSEG Ownership Interest” sections and the company’s expectations regarding share repurchases are forward-looking. The words “will”, “expect”, “believe”, “target”, “estimate”, “could”, “should”, “intend”, “predict”, “project” and similar expressions identify forward-looking statements. 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 any of the other 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 the 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, those discussed on pages 17-30 in the “Risk Factors” section of the company’s 2021 annual report. These and other risk 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 (SEC). Thomson Reuters annual and quarterly reports are also available in the “Investor Relations” section of tr.com.

The company's 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. Material assumptions and material risks may cause actual performance to differ from the company’s expectations underlying its business outlook. In particular, during the last quarter the global economy has experienced substantial disruption due to concerns regarding economic effects associated with the macroeconomic backdrop and ongoing geopolitical risks. The company’s business outlook assumes that uncertain macroeconomic and geopolitical conditions will continue to disrupt the economy and cause periods of volatility, however, these conditions may last substantially longer than expected and any worsening of the global economic or business environment could impact the company’s ability to achieve its outlook and affect its results and other expectations. For a discussion of material assumptions and material risks related to the company’s 2022 and 2023 outlook, please see pages 19-20 of the company’s second-quarter management’s discussion and analysis (MD&A) for the period ended June 30, 2022. Material assumptions and material risks related to the company’s outlook will also be included in the company’s third-quarter management’s discussion and analysis for the period ended September 30, 2022, which is expected to be filed shortly. The company’s quarterly MD&A and annual report are filed with, or furnished to, the Canadian securities regulatory authorities and the U.S. SEC and are also available in the “Investor Relations” section of tr.com.

The company has provided an outlook for the purpose of presenting information about current expectations for the periods presented. 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
Andrew Green
Senior Director, Corporate Affairs
+1 332 219 1511
andrew.green@tr.com

INVESTORS
Gary Bisbee
Head of Investor Relations
+1 646 540 3249
gary.bisbee@tr.com

Thomson Reuters will webcast a discussion of its third-quarter 2022 results and its business outlook today beginning at 9:00 a.m. Eastern Daylight Time (EDT). You can access the webcast by visiting ir.tr.com. An archive of the webcast will be available following the presentation.