Thomson Reuters Reports Second-Quarter 2024 Results

TORONTO, Aug. 1, 2024 /PRNewswire/ -- Thomson Reuters (TSX/NYSE: TRI) today reported results for the second quarter ended June 30, 2024:

• Good revenue momentum continued in the second quarter
  • Total company and organic revenues both up 6%
    • Organic revenues up 8% for the "Big 3" segments (Legal Professionals, Corporates and Tax & Accounting Professionals)
• Based on Q2 performance, raised full-year 2024 outlook for total and organic revenue growth to the high end of the prior ranges
• Completed monetization of interest in London Stock Exchange Group (LSEG) in the second quarter
• Completed $1.0 billion share buyback program
  • Repurchased $287 million of the company's common shares in the second quarter

"Good momentum continued across our portfolio in the second quarter, leading to a moderately raised revenue outlook," said Steve Hasker, President and CEO of Thomson Reuters. "Our 2024 investment plans remain on track as we execute against the ambitious product roadmap we detailed at our March investor day, exemplified by the July launches of CoCounsel Drafting and Checkpoint Edge with CoCounsel. We believe we are well positioned to help our customers navigate rising regulatory compliance, in addition to harnessing the potential of Generative AI".

Mr. Hasker added, "As we look ahead, we are committed to taking a balanced capital allocation approach, focusing on delivering sustained value creation through a long-term investment strategy".

Consolidated Financial Highlights - Three Months Ended June 30

Revenues increased 6%, driven by growth in recurring and transactions revenues. Foreign currency had no impact on revenue growth.

• Organic revenues increased 6%, driven by 8% growth in recurring revenues (82% of total revenues) and 5% growth in transactions revenues. Global Print revenues decreased 7% organically.
• The company's "Big 3" segments reported organic revenue growth of 8% and collectively comprised 82% of total revenues.

Operating profit decreased 50% primarily because the 2023 period included a $347 million gain on the sale of a majority stake in the company's Elite business.

• Adjusted EBITDA, which excludes the gain on sale of Elite, as well as other items, decreased 2% as higher revenues were more than offset by growth investments and the impact of acquisitions. The related margin decreased to 37.1% from 40.1% in the prior-year period. Foreign currency contributed 30 basis points to the year-over-year change in adjusted EBITDA margin.

Diluted EPS decreased to $1.86 compared to $1.90 in the prior-year period. The current period reflected lower operating profit and included a $468 million non-cash tax benefit related to tax legislation enacted in Canada. The prior-year period included a significant increase in the value of the company's investment in LSEG. In 2024, 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 gain on sale of Elite, the changes in value of the company's LSEG investment, the non-cash tax benefit, as well as other adjustments, decreased to $0.85 per share from $0.88 per share in the prior-year period, as lower adjusted EBITDA, higher internally developed software amortization and higher taxes more than offset a benefit from a reduction in weighted-average common shares.

Net cash provided by operating activities increased by $10 million in the second quarter, despite a reduced working capital benefit compared to the prior year.

• Free cash flow decreased $55 million as the increase in cash flow from operating activities was more than offset by higher capital expenditures and lower cash flows from other investing 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 constantcurrency (or exclude the impact of foreign currency) as Thomson Reuters believes this provides the best basis to measure their performance.

Legal Professionals

Revenues increased 3% to $727 million and included a negative impact from net divestitures. Organic revenue growth was 7%.

• Recurring revenues increased 5% (97% of total, 8% organic). Organic growth was primarily driven by Westlaw, Practical Law, CoCounsel and the segment's international businesses.
• Transactions revenues decreased 33% (3% of total, increased 3% organic).

Adjusted EBITDA decreased 5% to $327 million.

• The margin decreased to 45.0% from 48.9% primarily driven by higher investments and the Casetext acquisition.

Corporates

Revenues increased 13% to $442 million, including the acquisition impact of Pagero. Organic revenues increased 8%.

• Recurring revenues increased 13% (86% of total, 10% organic). Organic growth was primarily driven by Practical Law, Indirect Tax, Clear and Pagero.
• Transactions revenues increased 17% (14% of total, 1% organic) driven primarily by Pagero and the segment's international businesses.

Adjusted EBITDA was unchanged at $163 million.

• The margin decreased to 36.8% from 41.6%, driven by the Pagero acquisition and higher investments.

Tax & Accounting Professionals

Revenues increased 12% to $250 million. Organic revenues increased 10%.

• Recurring revenues increased 10% (72% of total, all organic). Organic growth was driven by the segment's Latin America business and audit products.
• Transactions revenues increased 16% (28% of total, 11% organic) primarily due to SurePrep and Confirmation.

Adjusted EBITDA increased 3% to $91 million.

• The margin decreased to 36.8% from 38.5%, primarily driven by higher investments.

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 $205 million increased 7% (4% organic) driven primarily by growth in the agency business and by a contractual price increase from our news agreement with the Data & Analytics business of LSEG.

Adjusted EBITDA increased 13% to $51 million driven by higher revenues.

Global Print

Revenues of $123 million decreased 7%, all organic, impacted in part by the migration of customers from a Global Print product to Westlaw.

Adjusted EBITDA decreased 18% to $43 million.

• The margin decreased to 35.2% from 39.7% due to lower revenues.

Corporate Costs

Corporate costs were $29 million, compared to $33 million in the prior-year period.

Consolidated Financial Highlights - Six Months Ended June 30

Revenues increased 7%, driven by growth in recurring and transactions revenues. Net divestitures had a 1% negative impact and foreign currency had no impact on revenue growth.

• Organic revenues increased 8%, driven by 8% growth in recurring revenues (78% of total revenues) and 15% growth in transactions revenues. Global Print revenues decreased 9% organically.
• The company's "Big 3" segments reported organic revenue growth of 9% and collectively comprised 82% of total revenues.

Operating profit decreased 27%, primarily because the 2023 period included a $347 million gain on the sale of a majority stake in the company's Elite business.

• Adjusted EBITDA, which excludes the gain on sale of Elite, as well as other items, increased 8% as higher revenues more than offset growth investments and the impact of acquisitions. The related margin increased to 40.0% from 39.4% in the prior-year period. Foreign currency contributed 20 basis points to the year-over-year change in adjusted EBITDA margin.

Diluted EPS decreased to $2.92 compared to $3.49 in the prior-year period. The current period reflected lower operating profit and included a $468 million non-cash tax benefit related to tax legislation enacted in Canada. The prior-year period included a significant increase in the value of the company's investment in LSEG. In 2024, 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 gain on sale of Elite, the changes in value of the company's LSEG investment, the non-cash tax benefit, as well as other adjustments, increased to $1.97 per share from $1.71 per share in the prior-year period, primarily due to higher adjusted EBITDA. In 2024, diluted EPS also benefited from a reduction in weighted-average common shares.

Net cash provided by operating activities increased by $175 million due to the cash benefits from higher revenues. The prior-year period also included $74 million of payments associated with the company's Change Program, which was completed at the end of 2022.

• Free cash flow increased $83 million as higher cash flows from operating activities more than offset higher capital expenditures and lower cash flows from other investing activities.

Highlights by Customer Segment - Six Months Ended June 30

2024 Outlook

The company raised its 2024 outlook for total and organic revenue growth to the high end of the ranges provided in its outlook on May 2, 2024 to reflect strong performance in the first half of the year. It also updated the component parts of its outlook for depreciation and amortization of computer software, and for interest expense.

The company's outlook for 2024 in the table below assumes constant currency rates and 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 third-quarter 2024 organic revenue growth to be approximately 6% and its adjusted EBITDA margin to be approximately 34%.

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, among other factors, could impact the company's ability to achieve its outlook.

Reported Full-Year 2023 Results and Full-Year 2024 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 2024 may differ materially from the company's 2024 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

In February 2024, the company announced a 10% or $0.20 per share annualized increase in the dividend to $2.16 per common share, representing the 31st consecutive year of dividend increases. A quarterly dividend of $0.54 per share is payable on September 10, 2024 to common shareholders of record as of August 15, 2024.

Share Repurchases – Completed $1.0 Billion Buyback Program

In November 2023, Thomson Reuters announced that it planned to repurchase up to $1.0 billion of its common shares. In the second quarter of 2024, the company completed this plan by repurchasing approximately 1.8 million of its common shares for $287 million.

As of July 30, 2024, Thomson Reuters had approximately 449.7 million common shares outstanding.

LSEG Ownership Interest

Thomson Reuters indirectly owned LSEG shares through an entity that it jointly owns with Blackstone's consortium. During the second quarter of 2024, the company sold its remaining 5.9 million shares that it indirectly owned and received $0.6 billion of gross proceeds.

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. Additionally, the company cannot reasonably predict 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, and the "2024 Outlook" section, 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 19-35 in the "Risk Factors" section of the company's 2023 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 2024 outlook see page 18 of the company's first-quarter management's discussion and analysis (MD&A) for the period ended March 31, 2024. The company's quarterly MD&A and annual report was 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 period 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

Thomson Reuters will webcast a discussion of its second-quarter 2024 results and its 2024 business outlook today beginning at 8:30 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.

Reconciliation of adjusted EBITDA margin(1)

To compute segment and consolidated adjusted EBITDA margin, we exclude fair value adjustments related to acquired deferred revenue from our IFRS revenues. The chart below reconciles IFRS revenues to revenues used in the calculation of adjusted EBITDA margin, which excludes fair value adjustments related to acquired deferred revenue.

Reconciliation of adjusted EBITDA margin(1)

Please refer to reconciliations for the most directly comparable IFRS financial measures.

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