Thomson Reuters Reports Fourth-Quarter and Full-Year 2022 Results

TORONTO, February 9, 2023 – Thomson Reuters (TSX/NYSE: TRI) today reported results for the fourth quarter and full year ended December 31, 2022:          

• Broad revenue momentum continued for the fourth quarter and full year
  • Full-year total company revenue up 4% / organic revenue up 6%
  • Fourth-quarter total company revenue up 3% / organic revenue up 6%
    • Organic revenue up 7% for the “Big 3” segments (Legal Professionals, Corporates, and Tax & Accounting Professionals)
• Based on 2022 performance, maintained full-year 2023 organic revenue and adjusted EBITDA margin outlooks; select other 2023 metrics updated
• Completed Change Program, achieving $540 million run-rate operating expense savings by the end of 2022
• Increased annualized dividend per share by 10% (30^th consecutive annual increase)
• On track to conclude current $2 billion share buyback program by April
• Intend to execute return of capital of at least $2 billion with concurrent share consolidation in 2023 funded by London Stock Exchange Group (LSEG) proceeds
• Closed acquisition of SurePrep on January 3

“2022 was a year of significant progress at Thomson Reuters,” said Steve Hasker, President and CEO of Thomson Reuters. “Our product and innovation efforts were highlighted by the September launch of Westlaw Precision, which continues to see strong momentum. We also successfully completed our Change Program at year end, delivering to our financial results and driving significant progress across our company. The completion of the Change Program provides us with a strong foundation for sustainable growth into the future.”

Mr. Hasker added, “Looking ahead, we remain focused on allocating capital to drive sustainable long-term value creation. The acquisition of SurePrep brings leading AI-driven workflow automation capabilities and represents another strong platform for growth while helping our customers save time and costs. Importantly, we are on pace to complete our $2 billion share repurchase program by April, and we plan to execute a return of capital of at least $2 billion later this year, funded with LSEG sale proceeds.”

Consolidated Financial Highlights - Three Months Ended December 31

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

• Organic revenues increased 6%, driven by 7% growth in recurring revenues (82% of total revenues), as well as 5% 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 80% of total revenues.

Operating profit increased significantly due to lower costs, which included cost benefits resulting from the Change Program and lower performance bonus expense, as well as higher revenues and gains on the sale of certain non-core businesses.

• Adjusted EBITDA, which excludes gains on the sale of certain non-core businesses, as well as other adjustments, increased 40% due to lower costs and higher revenues. The related margin increased to 35.9% from 26.4% in the prior-year period, of which foreign currency contributed 30bp. Investments in the Change Program negatively impacted the fourth quarter of 2022 adjusted EBITDA margin by 340bp.

Diluted EPS was $0.59 compared to diluted loss per share of $(0.36) in the prior-year period due to higher operating profit and because the prior-year period included a decrease in value in the company’s investment in LSEG.

• Adjusted EPS, which excludes the change in value of the company’s LSEG investment, as well as other adjustments, increased to $0.73 per share from $0.43 per share in the prior-year period as higher adjusted EBITDA more than offset higher income tax expense.

Net cash provided by operating activities increased $279 million, reflecting the cash benefits from higher operating profit as well as favorable movements in working capital.

• Free cash flow increased $271 million due to higher cash flows from operating activities.

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 increased 4% (5% organic) to $704 million.

• Recurring revenues grew 5% (94% of total, 6% organic) primarily driven by Westlaw, Practical Law and HighQ.
• Transactions revenues decreased 11% (6% of total, decreased 8% organic), primarily related to lower professional services revenues in the ELITE business and slower release of US Federal funding, which affected revenues in the Government business.

Adjusted EBITDA increased 23% to $294 million.

• The margin increased to 41.7% from 34.5%, driven by higher revenues, Change Program savings and lower performance bonus expense.

Corporates

Revenues increased 7% (9% organic) to $379 million.

• Recurring revenues grew 10% (89% of total, 11% organic) primarily driven by Practical Law, CLEAR, Direct Tax and Global Trade Management.
• Transactions revenues decreased 8% (11% of total, decreased 5% organic), primarily related to weaker implementation revenues.

Adjusted EBITDA increased 45% to $135 million.

• The margin increased to 35.7% from 26.0%, driven by higher revenues, Change Program savings and lower performance bonus expense.

Tax & Accounting Professionals

Revenues increased 5% (8% organic) to $326 million.

• Recurring revenues grew 5% (90% of total, 8% organic) primarily driven by UltraTax and the segment’s Latin America business.
• Transactions revenues increased 6% (10% of total, 10% organic), primarily driven by UltraTax, Confirmation and the segment’s Latin America business.

Adjusted EBITDA increased 22% to $189 million.

• The margin increased to 58.1% from 50.0%, driven by higher revenues, Change Program savings and lower performance bonus expense.

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 $198 million increased 10% (all organic), primarily driven by the Reuters Events business and the company’s news agreement with the Data & Analytics business of LSEG.

Adjusted EBITDA increased 162% to $40 million, driven by Reuters Events revenue growth and currency benefits.

Global Print

Revenues decreased 2% (decreased 1% organic) to $162 million, which was better than expected driven by improved retention, better third-party print revenue and timing benefits, which are expected to normalize in the first quarter of 2023.

Adjusted EBITDA decreased 3% to $59 million.

• The margin increased to 36.1% from 35.9%.

Corporate Costs

Corporate costs at the adjusted EBITDA level were $84 million and included $60 million of Change Program costs. Corporate costs were $112 million in the prior-year period and included $78 million of Change Program costs.

Consolidated Financial Highlights – Year Ended December 31

Revenues increased 4%, 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 (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 80% of total revenues.

Operating profit increased 48% due to higher revenues, lower costs, which included cost benefits resulting from the Change Program as well as currency benefits, and gains on the sale of certain non-core businesses.

• Adjusted EBITDA, which excludes gains on the sale of non-core businesses, as well as other adjustments, increased 18% due to lower costs and higher revenues. The related margin increased to 35.1% from 31.0% in the prior-year period, of which foreign currency contributed 60bp. Investments in the Change Program negatively impacted the full year of 2022 adjusted EBITDA margin by 260bp.

Diluted EPS was $2.88 per share compared to $11.50 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 $2.56 per share from $1.95 per share in the prior-year period, as higher adjusted EBITDA more than offset higher income tax expense.

Net cash provided by operating activities increased $142 million as the cash benefits from higher operating profit more than offset higher payments associated with the Change Program and higher annual incentive plan bonuses.

• Free cash flow increased $84 million as higher cash flows from operating activities were partially offset by higher capital expenditures primarily associated with the Change Program.

Highlights by Customer Segment – Year Ended December 31

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 program was concluded in December 2022.

During the two-year period, the company invested nearly $600 million and has broadly delivered against the financial targets set out in 2021, with $540 million of run-rate savings achieved as of December 31, 2022. During the program, the company made significant progress in transforming itself into a more streamlined and scalable business and now has a strong foundation for sustainable future growth.

2023 Outlook

The company is maintaining its 2023 outlook for organic revenue growth and adjusted EBITDA margin but has updated select other performance measures. The company’s updated outlook for 2023 in the table below assumes constant currency rates and incorporates the recent SurePrep acquisition and fourth-quarter 2022 divestitures but 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 first-quarter 2023 organic revenue growth rate to be at the low end of the full year 5.5% - 6.0% range, and its adjusted EBITDA margin to be approximately 38%.

While the company’s full-year 2022 performance provides it with increasing confidence about its updated 2023 outlook, there are 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 is incremental to the Accrued Capex as a percent of revenue outlook.

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.”

Dividends

The company announced today that its Board of Directors approved a 10% or $0.18 per share annualized increase in the dividend to $1.96 per common share, representing the 30^th consecutive year of dividend increases. A quarterly dividend of $0.49 per share is payable on March 16, 2023 to common shareholders of record as of February 23, 2023.

Share Repurchases – Update on $2.0 Billion Buyback Program

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

From June 2022 through January 31, 2023, the company repurchased approximately 13.9 million of its common shares under this buyback program, for a total spend of $1.5 billion. As of January 31, 2023, Thomson Reuters had approximately 474.1 million common shares outstanding.

Subject to market conditions, the company anticipates completing the $2.0 billion program by early second-quarter 2023.

Intention to Execute Return of Capital of at least $2 Billion

Following the completion of the share repurchase program, the company intends in 2023 to initiate a return of capital of at least $2 billion, which will be combined with a share consolidation or reverse stock split (similar to the return of capital transaction that the company completed in 2018). This transaction will be funded through proceeds from LSEG share dispositions, and as such, the timing and amount of the transaction will depend on market conditions and other factors.

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.

On December 12, 2022, Thomson Reuters announced that it and certain investment funds affiliated with Blackstone had agreed to sell shares in LSEG that they co-own to Microsoft. On January 31, 2023, the company sold 10.5 million LSEG shares for gross proceeds of approximately $1.0 billion as part of this transaction.

As of January 31, 2022, Thomson Reuters indirectly owned approximately 61.5 million LSEG shares which had a market value of approximately $5.6 billion based on LSEG’s closing share price on that day. Approximately 31 million additional LSEG shares were released from the company’s lock-up agreement with LSEG on January 30, 2023 and are now able to be sold by the company.

Recent Developments

On January 3, Thomson Reuters completed the acquisition of SurePrep, a U.S.-based leader in 1040 tax automation software and services, for $500 million in cash. SurePrep’s products and solutions, including 1040SCAN, SPbinder and TaxCaddy, are used by over 23,000 tax professionals at CPA firms, wealth management firms and others. The acquisition supports Thomson Reuters’ strategy of pursuing both organic and inorganic growth opportunities as it promotes seamless, cloud-based workflows for professionals through innovative digital solutions and open, smart, and connected platforms.

SurePrep is now part of the company’s Tax and Accounting Professionals operations, with revenues in both Tax & Accounting Professionals and Corporates. 

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 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 months and year ended December 31, 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 and the "Change Program”, “2023 Outlook”, “Dividends”, “Share Repurchases – Update on $2.0 Billion Buyback Program”, “Intention to Execute Return of Capital of at least $2 Billion”, “LSEG Ownership Interest” sections, 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, 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 third-quarter management’s discussion and analysis (MD&A) for the period ended September 30, 2022. 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 fourth-quarter and full-year 2022 results and its 2023 business outlook today beginning at 8:30 a.m. Eastern Standard Time (EST). You can access the webcast by visiting ir.tr.com. An archive of the webcast will be available following the presentation.