Thomson Reuters Reports Second-Quarter 2023 Results

TORONTO, August 2, 2023 – Thomson Reuters (TSX/NYSE: TRI) today reported results for the second quarter ended June 30, 2023:

• Solid revenue momentum continued in the second quarter
  • Total company revenue up 2% / organic revenue up 5%
    • Organic revenue up 7% for the “Big 3” segments (Legal Professionals, Corporates and Tax & Accounting Professionals)
• Based on Q2 performance, maintained full-year 2023 outlook for organic revenue, adjusted EBITDA margin and free cash flow 
  • Interest expense, tax rate and accrued capital expenditures outlooks updated
• Completed $2 billion return of capital transaction; and reduced share count by 15.8 million shares in concurrent consolidation
• Sold 15.5 million shares of the London Stock Exchange Group (LSEG) in the second quarter, for gross proceeds of $1.6 billion
• Signed definitive agreement in June to acquire Casetext and completed Reuters acquisition of Imagen in July

“I am pleased with our performance in the second quarter as we continued to see good momentum across our portfolio despite an uncertain macro backdrop,” said Steve Hasker, president and CEO of Thomson Reuters. “Importantly, our confidence around the opportunity that generative AI brings to us and our customers continues to strengthen. We made good progress in executing our ‘build, partner, buy’ approach throughout the quarter, with organic AI builds progressing, our announcement of an intelligent drafting solution with Microsoft, and the announcement of our intention to acquire Casetext. Our capital capacity and liquidity will also remain a key asset as we look to continue innovating in our markets, strengthening our leading positions and generating shareholder value.”

Consolidated Financial Highlights - Three Months Ended June 30

Revenues increased 2%, driven by growth across four of the company’s five business segments. Net divestitures had a 3% negative impact on revenues and foreign currency had no impact.  

• Organic revenues increased 5%, driven by 6% growth in recurring revenues (80% of total revenues) as well as 6% growth in transactions revenues. Global Print revenues decreased 4% organically.
• The company’s “Big 3” segments reported organic revenue growth of 7% and collectively comprised 81% of total revenues.

Operating profit increased 111% primarily due to the gain on the sale of a majority stake in the company’s Elite business. Higher revenues and lower costs also contributed to operating profit growth.

• Adjusted EBITDA, which excludes the gain on sale of Elite, as well as other adjustments, increased 18% due to higher revenues and lower costs. The related margin increased to 40.1% from 34.7% 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 190bp, as well as the timing of expenses. Foreign currency contributed 10bp to the change.

Diluted EPS was $1.90 compared to a diluted loss per share of $0.24 in the prior-year period. The increase reflected higher operating profit and an increase in the value of the company’s investment in LSEG, while the prior-year period included a significant reduction in the value of the company’s investment in LSEG.

• Adjusted EPS, which excludes the gain on the sale of a majority stake in Elite, changes in value of the company’s LSEG investment, as well as other adjustments, increased to $0.84 per share from $0.60 per share in the prior-year period, primarily due to higher adjusted EBITDA.

Net cash provided by operating activities increased $262 million primarily due to the cash benefits from higher revenues and lower costs, lower tax payments, and favorable movements in working capital.

• Free cash flow increased $254 million primarily due to the same factors as net cash provided by operating activities.

Highlights by Customer Segment - Three Months Ended June 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 1% to $705 million, reflecting a significant negative impact from net divestitures. Organic revenues increased 6%.

• Recurring revenues grew 2% (95% of total, 5% organic). Organic growth was primarily driven by Westlaw, Practical Law, HighQ, and the segment’s international businesses.
• Transactions revenues declined 12% (5% of total, 12% organic growth). Organic growth was primarily due to the Government business and revenue timing at Findlaw.

Adjusted EBITDA increased 14% to $345 million.

• The margin increased to 48.9% from 43.4%, driven by higher revenues and the timing of expenses, with the latter expected to normalize in the second half of the year.

Corporates

Revenues increased 5% to $392 million, including a negative impact from net divestitures. Organic revenues increased 7%.

• Recurring revenues grew 5% (87% of total, 8% organic) primarily driven by strong growth in Practical Law, CLEAR and our Latin America business.
• Transactions revenues grew 2% (13% of total, decreased 1% organic).

Adjusted EBITDA increased 17% to $163 million.

• The margin increased to 41.6% from 37.4%, driven by higher revenues and the timing of expenses, with the latter expected to normalize in the second half of the year.

Tax & Accounting Professionals

Revenues increased 7% to $229 million, including a negative impact from net divestitures. Organic revenues increased 10%.

• Recurring revenues increased 1% (73% of total, 9% organic). Organic growth was driven by the segment’s Latin America business.
• Transactions revenues increased 27% (27% of total, 12% organic) primarily due to Confirmation and SurePrep.

Adjusted EBITDA increased 10% to $89 million.

• The margin increased to 38.5% from 37.4%, driven by higher revenues.

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 $194 million increased 2% (1% organic). The moderation in revenue growth was driven by a lower contractual price increase in 2023 compared to 2022 of our news agreement with the Data & Analytics business of LSEG, slower events growth and lower digital revenues.

Adjusted EBITDA increased 2% to $45 million, primarily due to currency benefits.

Global Print

Revenues decreased 5% (decreased 4% organic) to $133 million, which was in line with our expectations.

Adjusted EBITDA increased 5% to $53 million.

• The margin increased to 39.7% from 35.4%, driven largely by expense timing related to materials sourcing and labor. We expect this to normalize in Q3.
  

Corporate Costs

Corporate costs at the adjusted EBITDA level were $33 million. Corporate costs were $57 million in the prior-year period and included $30 million of Change Program costs.

Consolidated Financial Highlights - Six Months Ended June 30

Revenues increased 3%, driven by growth across four of the company’s five business segments. Net divestitures had a 2% negative impact on revenues and foreign currency had 1% negative impact.

• Organic revenues increased 6%, driven by 6% growth in recurring revenues (78% of total revenues) as well as 9% growth in transactions revenues. Global Print revenues decreased 2% organically.
• The company’s “Big 3” segments reported organic revenue growth of 7% and collectively comprised 81% of total revenues.

Operating profit increased 66% primarily due to the gain on the sale of a majority stake in the company’s Elite business. Higher revenues and lower costs also contributed to operating profit growth.

• Adjusted EBITDA, which excludes the gain on sale of Elite, as well as other adjustments, increased 15% due to higher revenues and lower costs. The related margin increased to 39.4% from 35.3% 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 190bp, as well as the timing of expenses. Foreign currency contributed 30bp to the year-over-year change.

Diluted EPS was $3.49 per share compared to $1.83 per share in the prior-year period primarily due to higher operating profit and an increase in the current period in the value of the company’s investment in LSEG.

• Adjusted EPS, which excludes the gain on the sale of a majority stake in the company’s Elite business, changes in value of the company’s LSEG investment, as well as other adjustments, increased to $1.67 per share from $1.26 per share in the prior-year period, primarily due to higher adjusted EBITDA.

Net cash provided by operating activities increased $254 million due to cash benefits from higher revenues and lower costs, lower tax payments, and favorable movements in working capital.

• Free cash flow increased $301 million due to higher cash flows from operating activities as well as lower capital expenditures. The prior-year period included investments in the Change Program.

Highlights by Customer Segment - Six Months Ended June 30

2023 Outlook

The company is maintaining its 2023 outlook except for updates to its tax rate, interest expense, and accrued capital expenditures as a percentage of revenues as follows:

• The outlook for the 2023 effective tax rate has been reduced to approximately 17% from the prior forecast of approximately 18%, reflecting a second quarter benefit from the settlement of a prior year tax audit.
• Interest expense is now expected to be approximately $190 million, which is the low end of the previously communicated range of $190 to $210 million, reflecting the accelerated pace of LSEG monetization and the benefit from higher interest rates on our cash balances.
• Lastly, the outlook for accrued capital expenditures as a percent of revenues has been increased to approximately 8%, from the prior forecast of approximately 7% plus $30 million non-recurring real estate spend. The updated outlook includes the previously forecasted real estate optimization spend and additional investments to accelerate Thomson Reuters AI focused growth strategies.

The table below sets forth the company’s updated outlook, which assumes constant currency rates and excludes the impact of any future acquisitions or dispositions that may occur during the year. Thomson Reuters believes that this type of guidance provides useful insight into the anticipated performance of its businesses.

The company expects its third-quarter 2023 organic revenue growth rate to be at the high end of the full year 5.5% - 6.0% range, and its adjusted EBITDA margin to be approximately 36%, reflecting typical margin seasonality, the normalization of cost timing that benefited Q2 margins, and also higher SurePrep integration expenses.

While the company’s performance during the first half of 2023 provides it with increasing confidence about its outlook, the macroeconomic backdrop remains uncertain with many signs that point to a weakening global economic environment, amid rising interest rates, high inflation, and ongoing geopolitical risks. Any worsening of the global economic or business environment could impact the company’s ability to achieve its outlook.

Reported Full-Year 2022 and Updated Full-Year 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.
(2) Real estate optimization spend in 2023 was incremental to the Accrued Capex as a percent of revenue outlook, as presented on February 9 and May 2 of 2023.

The information in this section is forward-looking. Actual results, which will include the impact of currency and future acquisitions and dispositions completed during 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.”
 
Thomson Reuters and TPG establish Elite as an Independent Legal Technology Company

In June 2023, TPG acquired a majority stake in Thomson Reuters’ Elite business, which provides financial and practice management solutions to the world’s leading law firms, helping customers automate and streamline critical finance and accounting workflows. The company received proceeds of $418 million and retained a 19.9% minority interest and board representation in the business, supporting Elite strategically going forward. TPG Capital, TPG’s U.S. and European late-stage private equity business, is now the majority shareholder of the standalone business.

London Stock Exchange Group plc (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 the second quarter of 2023, the company sold 15.5 million shares that it indirectly owned for $1.6 billion of gross proceeds. As of July 31, 2023, Thomson Reuters indirectly owned approximately 31.8 million LSEG shares, which had a market value of approximately $3.5 billion based on LSEG’s closing share price on that day.

Return of Capital and Share Consolidation

In June 2023, the company returned approximately $2.0 billion of gross proceeds related to the disposition of shares in LSEG to shareholders, and reduced its common shares outstanding by 15.8 million, in accordance with its previously announced plans. The return of capital transaction consisted of a cash distribution of $4.67 per common share and a share consolidation, or “reverse stock split”, which reduced the number of outstanding common shares at a ratio of 1 pre-consolidated share for 0.963957 post-consolidated shares, which was proportional to the cash distribution. 

Acquisitions

In June 2023, the company signed a definitive agreement to acquire Casetext for $650 million. Casetext uses artificial intelligence and machine learning, which enable legal professionals to work more efficiently. The company expects the acquisition to close by the end of 2023, subject to specified regulatory approvals and customary closing conditions.

In July 2023, the company acquired Imagen Ltd, a media asset management company, which will be part of the Reuters News segment.

Dividends

In February 2023, the company announced a 10% or $0.18 per share annualized increase in the dividend to $1.96 per common share, representing the 30th consecutive year of dividend increases. A quarterly dividend of $0.49 per share is payable on September 15, 2023 to common shareholders of record as of August 17, 2023.

As of July 31, 2023, Thomson Reuters had approximately 455.3 million common shares outstanding.

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 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 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 “2023 Outlook” and “Acquisitions” sections and the company’s expectations regarding Legal Professionals, Corporates and Global Print, 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 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 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 2023 outlook, please see page 20 of the company’s first-quarter management’s discussion and analysis (MD&A) for the period ended March 31, 2023. 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 updated 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, CFA
Head of Investor Relations
+1 646 540 3249
gary.bisbee@tr.com

Thomson Reuters will webcast a discussion of its second-quarter 2023 results and its 2023 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.