Thomson Reuters Reports Fourth-Quarter and Full-Year 2023 Results

TORONTO, February 8, 2024 – Thomson Reuters (TSX/NYSE: TRI) today reported results for the fourth quarter and full year ended December 31, 2023:

• Good revenue momentum continued in the fourth quarter and full year
  • Full-year total company revenue up 3% / organic revenue up 6%
  • Fourth-quarter total company revenue up 3% / organic revenue up 7%
• Organic revenue up 8% for the “Big 3” segments (Legal Professionals, Corporates and Tax & Accounting Professionals)
• Met or exceeded full-year 2023 outlook for organic revenue, adjusted EBITDA margin and free cash flow
• Full-year 2024 outlook anticipates organic revenue growth of approximately 6% and an adjusted EBITDA margin of approximately 38%
• Financial framework for 2025-2026 anticipates 6.5%-8% organic revenue growth and rising adjusted EBITDA margins
• Increased annualized dividend per share by 10% (31^st consecutive annual increase)
• Anticipate current $1 billion share buyback program to conclude by end of the second quarter
• Acquired a majority ownership stake in e-invoicing leader Pagero in January 2024

“Last year was one of innovation and accomplishment across our business,” said Steve Hasker, President and CEO of Thomson Reuters. “We made significant progress delivering Generative AI-powered solutions, including the launch of AI-Assisted Research on Westlaw Precision, as well as expanded features and design enhancements across our product portfolio. We plan to maintain this momentum in 2024 through a robust product roadmap positioning us to meet our customers’ evolving needs at pace.”

Mr. Hasker added, “We remain focused on allocating capital to drive long-term shareholder value creation. In 2023, we returned significant capital to shareholders and executed a number of strategic acquisitions, resulting in a stronger and more strategically aligned portfolio with improved growth prospects.”

Consolidated Financial Highlights - Three Months Ended December 31

Revenues increased 3%, driven by growth in recurring and transactions revenues. Net divestitures had a 4% negative impact on revenues and foreign currency had no impact. 

• Organic revenues increased 7%, driven by 7% growth in recurring revenues (82% of total revenues) as well as 16% growth in transactions revenues. Global Print revenues decreased 4% organically. 
• The company’s “Big 3” segments reported organic revenue growth of 8% and collectively comprised 80% of total revenues.

Operating profit decreased 11% because the prior-year period included gains on the sale of several non-core businesses.

• Adjusted EBITDA, which excludes gains on sales of businesses as well as other adjustments, increased 12% due to higher revenues and lower costs. The related margin increased to 38.9% from 35.9% in the prior-year period. Lower costs reflected Change Program investments made in the prior-year period, which benefited the year-over-year change in adjusted EBITDA margin by 340bp. Foreign currency contributed 90bp to the increase in adjusted EBITDA margin.

Diluted EPS was $1.49 compared to $0.45 in the prior-year period primarily due to an increase in value of the company’s investment in London Stock Exchange Group (LSEG), net of changes in the value of related foreign exchange contracts, and lower income tax expense, which included a non-cash tax benefit. Diluted EPS also benefited from a reduction in weighted-average common shares outstanding due to share repurchases and the company’s June 2023 return of capital transaction.

• Adjusted EPS, which excludes the changes in value of the company’s LSEG investment and the related foreign exchange contracts, the non-cash tax benefit as well as other adjustments, increased to $0.98 per share from $0.75 per share in the prior-year period, primarily due to higher adjusted EBITDA. Adjusted EPS also benefited from a reduction in weighted-average common shares.

Net cash provided by operating activities increased $29 million as the cash benefits from higher revenues and lower costs more than offset higher tax payments.

• Free cash flow increased $87 million due to higher net cash provided by operating activities and other investing activities, which included proceeds from the sale of real estate. The prior-year period also included investments in the Change Program.

Highlights by Customer Segment – Three Months Ended December 31

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 decreased 1% to $700 million due to the negative impact from net divestitures. Organic revenues increased 7%.

• Recurring revenues increased 2% (96% of total, 7% organic). Organic growth was primarily driven by Westlaw, Practical Law, Casetext and the segment’s international businesses.
• Transactions revenues decreased 39% (4% of total, increased 2% organic).  

Adjusted EBITDA increased 1% to $298 million.

• The margin increased to 42.5% from 41.7% reflecting a 130 basis point benefit from foreign exchange.

Corporates

Revenues increased 5% to $402 million, including a negative impact from net divestitures. Organic revenues increased 7%.

• Recurring revenues increased 6% (89% of total, 7% organic) primarily driven by strong growth in Practical Law, Indirect Tax and our Latin America business.
• Transactions revenues increased 4% (11% of total, 7% organic), primarily driven by our Trust offering and Confirmation.

Adjusted EBITDA increased 3% to $138 million.

• The margin decreased to 34.5% from 35.7%, primarily driven by higher expenses.

Tax & Accounting Professionals

Revenues increased 9% to $344 million, including a negative impact from net divestitures. Organic revenues increased 10%.

• Recurring revenues increased 8% (89% of total, 10% organic). Organic growth was driven by Ultratax and the segment’s Latin America business.
• Transactions revenues increased 22% (11% of total, 14% organic) primarily due to Confirmation and SurePrep.

Adjusted EBITDA decreased 1% to $188 million.

• The margin decreased to 54.6% from 58.1%, as higher revenues were more than offset by higher expenses, driven largely by SurePrep seasonality and integration costs.

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 $220 million increased 10% (9% organic) driven primarily by Generative AI related content licensing revenue that was largely transactional in nature.
Adjusted EBITDA increased 56% to $61 million primarily due to higher revenues.

Global Print

Revenues decreased 5% (decreased 4% organic) to $154 million, in line with our expectations.

Adjusted EBITDA decreased 5% to $55 million.

• The margin increased to 36.4% from 36.1%, reflecting a 130 basis point benefit from foreign exchange.

Corporate Costs

Corporate costs at the adjusted EBITDA level were $33 million. Corporate costs were $84 million in the prior-year period and included $60 million of Change Program costs. 

Consolidated Financial Highlights – Year Ended December 31

Revenues increased 3%, driven by recurring and transactions revenues. Net divestitures had a 3% negative impact on revenues and foreign currency had no impact.

• Organic revenues increased 6%, driven by 6% growth in recurring revenues (80% of total revenues) as well as 10% growth in transactions revenues. Global Print revenues decreased 3% organically.
• The company’s “Big 3” segments reported organic revenue growth of 7% and collectively comprised 81% of total revenues.

Operating profit increased 27% due to higher revenues and lower costs, as well as higher gains from the sale of non-core businesses, including the sale of a majority stake in the company’s Elite business.  

• Adjusted EBITDA, which excludes the gains on sale of Elite and other businesses, as well as other adjustments, increased 15% due to higher revenues and lower costs. The related margin increased to 39.3% from 35.1% in the prior year. Lower costs reflected Change Program investments made in the prior year, which benefited the year-over-year change in adjusted EBITDA margin by 260bp. Foreign currency contributed 40bp to the change in margin.

Diluted EPS was $5.80 per share compared to $2.75 per share in the prior year, primarily due to higher operating profit and an increase in the value of the company’s investment in LSEG, net of changes in the value of related foreign exchange contracts. Diluted EPS also benefited from a reduction in weighted-average common shares outstanding due to share repurchases and the company’s June 2023 return of capital transaction.

• Adjusted EPS, which excludes the gains on sale of Elite and other businesses, changes in value of the company’s LSEG investment, as well as other adjustments, increased to $3.51 per share from $2.62 per share in the prior year, primarily due to higher adjusted EBITDA. Adjusted EPS also benefited from a reduction in weighted-average common shares.

Net cash provided by operating activities increased $426 million due to cash benefits from higher revenues and lower costs as well as favorable movements in working capital.

• Free cash flow increased $531 million primarily due to higher cash flows from operating activities. Free cash flow also benefited from lower capital expenditures and higher other investing activities, which included proceeds from the sale of real estate. The prior year included investments in the Change Program.

Highlights by Customer Segment - Year Ended December 31

2024 Outlook

The company’s outlook for 2024 in the table below assumes constant currency rates and incorporates the recent Pagero and World Business Media acquisitions but excludes the impact of any future acquisitions or dispositions that may occur during the remainder of the year. Thomson Reuters believes that this type of guidance provides useful insight into the anticipated performance of its businesses.

The company expects its first-quarter 2024 organic revenue growth to be approximately 8%, boosted by the expectation for additional AI licensing revenue at Reuters. The company also anticipates an adjusted EBITDA margin of approximately 40%, benefiting from normal seasonal strength and the Reuters licensing revenue, partially offset by M&A dilution and select growth investments.

The company continues to operate in an uncertain macroeconomic environment, reflecting ongoing geopolitical risk, uneven economic growth and an evolving interest rate and inflationary backdrop. Any worsening of the global economic or business environment could impact the company’s ability to achieve its outlook.

Reported Full-Year 2023 Results and Full-Year 2024 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.
(2)      Full-year 2023 interest expense excludes a $12 million benefit from the release of a tax reserve that is removed from adjusted earnings.

2025-2026 Financial Framework

For the 2025-2026 period, the company targets an organic revenue growth range of 6.5%-8%, driven by 8%-9% for the “Big 3” segments.  The company targets adjusted EBITDA margin expansion of approximately 75 basis points in 2025, followed by at least 50 basis points in 2026. It anticipates accrued capital expenditures as a percentage of revenues to be approximately 8%, and 2026 free cash flow to range from $2.0-$2.1 billion.

This financial framework assumes constant currency rates and incorporates the recent Pagero and World Business Media acquisitions but excludes the impact of any future acquisitions or dispositions that may occur during this time horizon.

The information in this section is forward-looking. Actual results, which will include the impact of currency and future acquisitions and dispositions completed during 2024, 2025 and 2026 may differ materially from the company’s 2024 outlook and 2025-2026 financial framework. 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.” The company’s 2024 outlook and 2025-2026 financial framework are also based on certain assumptions described in the cross-referenced section, which the company believes are reasonable in the circumstances, and is subject to a number of risks, including those specifically identified in the cross-referenced section and those facing the company generally.

Recent Acquisitions

In January 2024, the company announced a recommended public tender offer to acquire 100 per cent of the shares of Pagero Group AB  (Pagero) and subsequently acquired a majority interest in Pagero. As of February 2, 2024, the company’s ownership of Pagero was approximately 84.53%. Pagero is a global leader in e-invoicing and indirect tax solutions, which it delivers through its Smart Business Network. The Company links customers, suppliers, and institutions, allowing for the automated, compliant, and secure exchange of digital orders, invoices, and other business documents. Thomson Reuters’ majority ownership of Pagero will enhance the strategic partnership announced in February 2023, accelerating the companies’ joint vision for a connected suite of global indirect tax, reporting and e-invoicing capabilities.

In January 2024, the company also acquired World Business Media Limited, a cross-platform, subscription-based provider of editorial coverage for the global P&C and specialty (re)insurance industry. This acquisition is in line with Reuters strategic priority to provide must-have news and insight for new customer markets and professional verticals.

Dividends

The company announced today that its Board of Directors approved a 10% or $0.20 per share annualized increase in the dividend to $2.16 per common share, representing the 31^st consecutive year of dividend increases. A quarterly dividend of $0.54 per share is payable on March 8, 2024 to common shareholders of record as of February 21, 2024.

Share Repurchases – Update on $1.0 Billion Buyback Program

In November 2023, Thomson Reuters announced its plans to repurchase up to $1.0 billion of its common shares.

From November 2023 through January 31, 2024, the company repurchased approximately 3.3 million of its common shares under this buyback program, for a total spend of $457 million. As of January 31, 2024, Thomson Reuters had approximately 452.4 million common shares outstanding.

Subject to market conditions, the company anticipates completing the $1.0 billion program by the end of the second quarter of 2024.

LSEG Ownership Interest

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. During 2023, the company sold 56.0 million shares that it indirectly owned and received nearly $5.5 billion of gross proceeds.

As of January 31, 2024, Thomson Reuters indirectly owned approximately 15.2 million LSEG shares, which had a market value of approximately $1.7 billion based on LSEG’s closing share price on that day.

Thomson Reuters

Thomson Reuters (NYSE / TSX: TRI) informs the way forward by bringing together the trusted content and technology that people and organizations need to make the right decisions. The company serves professionals across legal, tax, accounting, compliance, government, and media. Its products combine highly specialized software and insights to empower professionals with the data, intelligence, and solutions needed to make informed decisions, and to help institutions in their pursuit of justice, truth and transparency. Reuters, part of Thomson Reuters, is a world leading provider of trusted journalism and news. For more information, visit tr.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 (other than at the customer segment level) and the related margin, free cash flow, adjusted earnings and the effective tax rate on adjusted earnings, 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.

As of September 30, 2023, Thomson Reuters amended its definition of adjusted earnings to exclude amortization from acquired computer software.  While the company has always excluded amortization from acquired identifiable intangible assets other than computer software from its definition of adjusted earnings, this change aligns its treatment of amortization for all acquired intangible assets. Prior period amounts were revised for comparability.

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 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.

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 “2024 Outlook” section, the “2025-2026 Financial Framework” section and the company’s expectations including the impact of its recent acquisition of a majority ownership in Pagero and its acquisition of World Business Media Limited and statements regarding the company’s anticipated completion of its buyback program in the second quarter of 2024, 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 19-33 in the “Risk Factors” section of the company’s 2022 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 and 2025-2026 financial framework 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, 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 and 2025-2026 financial framework 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. Material assumptions related to the company’s revenue outlook and 2025-2026 financial framework are that uncertain macroeconomic and geopolitical conditions will continue to disrupt the economy and cause periods of volatility; there will be 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 for cloud-based digital tools that drive productivity; Thomson Reuters will have a continued ability to deliver innovative products that meet evolving customer demands; the company will acquire new customers through expanded and improved digital platforms, simplification of the product portfolio and through other sales initiatives; and the company will improve customer retention through commercial simplification efforts and customer service improvements. Material assumptions related to the company’s adjusted EBITDA margin outlook and 2025-2026 financial framework are its ability to achieve revenue growth targets; the company’s business mix continues to shift to higher-growth product offerings; and integration expenses associated with recent acquisitions will reduce margins. Material assumptions related to the company’s free cash flow outlook and 2025-2026 financial framework are its ability to achieve its revenue and adjusted EBITDA margin targets; and accrued capital expenditures approximate the percentage of revenues as set forth in the company’s outlook. Material assumptions related to the company’s effective tax rate on adjusted earnings outlook are its ability to achieve its adjusted EBITDA target; the mix of taxing jurisdictions where the company recognized pre-tax profit or losses in 2023 does not significantly change; no unexpected changes in tax laws or treaties within the jurisdictions where the company operates;  significant gains that will prevent the imposition of certain minimum taxes; no significant charges or benefits from the finalization of prior tax years; depreciation and amortization of internally developed computer software as set forth in the company’s outlook; and interest expense as set forth in the company’s outlook.

Material risks related to the company’s revenue outlook and 2025-2026 financial framework are that ongoing geopolitical instability and uncertainty regarding interest rates and inflation, continue to impact the global economy. The severity and duration of any one, or a combination, of these conditions could impact the global economy and lead to lower demand for our products and services (beyond our assumption that these disruptions will cause periods of volatility); uncertainty in the legal regulatory regime relating to AI has made it difficult for the company to predict the risks associated with the use of AI in its businesses and products. Future legislation may make it harder for the company to conduct its business using AI, lead to regulatory fines or penalties, require it to change its product offerings or business practices or prevent or limit its use of AI; demand for the company’s products and services could be reduced by changes in customer buying patterns or in its inability to execute on key product design or customer support initiatives; competitive pricing actions and product innovation could impact the company’s revenues; and the company’s sales, commercial simplification and product initiatives may be insufficient to retain customers or generate new sales. Material risks related to the company’s adjusted EBITDA margin outlook and 2025-2026 financial framework are the same as the risks above related to the revenue outlook; higher than expected inflation may lead to greater than anticipated increase in labor costs, third-party supplier costs and costs of print materials; and acquisition and disposal activity may dilute the company’s adjusted EBITDA margin. Material risks related to the company’s free cash flow outlook are the same as the risks above related to the revenue and adjusted EBITDA margin outlook; a weaker macroeconomic environment could negatively impact working capital performance, including the ability of the company’s customers to pay; accrued capital expenditures may be higher than currently expected; and the timing and amount of tax payments to governments may differ from the company’s expectations. Material risks related to the company’s effective tax rate on adjusted earnings outlook and 2025-2026 financial framework are the same as the risks above related to adjusted EBITDA; a material change in the geographical mix of the company’s pre-tax profits and losses; a material change in current tax laws or treaties to which the company is subject, and did not expect; and depreciation and amortization of internally developed computer software as well as interest expense may be significantly higher or lower than expected.

The company has provided an outlook and 2025-2026 financial framework 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
Gehna Singh Kareckas
Senior Director, Corporate Affairs
+1 613 979 4272
gehna.singhkareckas@tr.com

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

Thomson Reuters will webcast a discussion of its fourth-quarter and full-year 2023 results and its 2024 business outlook and 2025-2026 financial framework 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 wil be available following the presentation.