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

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

Thomson Reuters logo. (PRNewsFoto/Thomson Reuters)
Thomson Reuters logo. (PRNewsFoto/Thomson Reuters)
  • Broad revenue momentum continued for the fourth quarter and full year

  • 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% (30th 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

Three Months Ended December 31,

(Millions of U.S. dollars, except for adjusted EBITDA margin and EPS)

(unaudited)

 

 

 

IFRS Financial Measures(1)

2022

2021

Change

Change at
Constant
Currency

Revenues

$1,765

$1,710

3 %


Operating profit

$631

$257

146 %


Diluted earnings (loss) per share (EPS)

$0.59

$(0.36)

n/m


Net cash provided by operating activities

$676

$397

70 %


Non-IFRS Financial Measures(1)





Revenues

$1,765

$1,710

3 %

5 %

Adjusted EBITDA

$633

$452

40 %

41 %

Adjusted EBITDA margin

35.9 %

26.4 %

950bp

920bp

Adjusted EPS

$0.73

$0.43

70 %

72 %

Free cash flow

$526

$255

106 %


 

(1)  In addition to results reported in accordance with International Financial Reporting Standards (IFRS), the company uses certain non-IFRS
      financial measures as supplemental indicators of its operating performance and financial position. See the "Non-IFRS Financial Measures"
      section and the tables appended to this news release for additional information on these and other non-IFRS financial measures, including
      how they are defined and reconciled to the most directly comparable IFRS measures.

n/m: not meaningful

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

(Millions of U.S. dollars, except for adjusted EBITDA margins)

(unaudited)

 



Three Months Ended







December 31, 


Change



2022

2021(2)


Total

Constant
Currency
(1) 

 

Organic(1)(3) 

Revenues








  Legal Professionals


$704

$689


2 %

4 %

5 %

  Corporates


379

358


6 %

7 %

9 %

  Tax & Accounting Professionals


326

312


5 %

5 %

8 %

"Big 3" Segments Combined(1)


1,409

1,359


4 %

5 %

7 %

   Reuters News


198

187


7 %

10 %

10 %

   Global Print


162

170


-4 %

-2 %

-1 %

   Eliminations/Rounding


(4)

(6)





Revenues


$1,765

$1,710


3 %

5 %

6 %









Adjusted EBITDA(1) 








  Legal Professionals


$294

$239


23 %

27 %


  Corporates


135

93


45 %

46 %


  Tax & Accounting Professionals


189

156


22 %

21 %


"Big 3" Segments Combined(1)


618

488


27 %

28 %


  Reuters News


40

15


162 %

125 %


  Global Print


59

61


-3 %

-1 %


  Corporate costs


(84)

(112)


n/a

n/a


Adjusted EBITDA


$633

$452


40 %

41 %










Adjusted EBITDA Margin(1) 








  Legal Professionals


41.7 %

34.5 %


720bp

740bp


  Corporates


35.7 %

26.0 %


970bp

940bp


  Tax & Accounting Professionals


58.1 %

50.0 %


810bp

740bp


"Big 3" Segments Combined(1)


43.9 %

35.8 %


810bp

780bp


  Reuters News


19.8 %

8.1 %


1170bp

840bp


  Global Print


36.1 %

35.9 %


20bp

20bp


Adjusted EBITDA margin


35.9 %

26.4 %


950bp

920bp










(1)  See the "Non-IFRS Financial Measures" section and the tables appended to this news release for additional information on these and
       other non-IFRS financial measures.

(2)  For comparative purposes, 2021 segment results have been revised to reflect the current period presentation. For additional
       information, see the "Revision to Prior-Year Segment Results" section of this news release.

(3)  Computed for revenue growth only.

n/a: not applicable

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

Year Ended December 31,

(Millions of U.S. dollars, except for adjusted EBITDA margin and EPS)

(unaudited) 

IFRS Financial Measures(1)

2022

2021

Change

Change at
Constant
Currency

Revenues

$6,627

$6,348

4 %


Operating profit

$1,834

$1,242

48 %


Diluted EPS

$2.88

$11.50

-75 %


Net cash provided by operating activities

$1,915

$1,773

8 %


Non-IFRS Financial Measures(1)





Revenues

$6,627

$6,348

4 %

6 %

Adjusted EBITDA

$2,329

$1,970

18 %

18 %

Adjusted EBITDA margin

35.1 %

31.0 %

410bp

350bp

Adjusted EPS

$2.56

$1.95

31 %

30 %

Free cash flow

$1,340

$1,256

7 %


 

(1)  In addition to results reported in accordance with IFRS, the company uses certain non-IFRS financial measures as supplemental
      indicators of its operating performance and financial position. See the "Non-IFRS Financial Measures" section and the tables appended
      to this news release for additional information on these and other non-IFRS financial measures, including how they are defined and
      reconciled to the most directly comparable IFRS measures.

 

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

(Millions of U.S. dollars, except for adjusted EBITDA margins)

(unaudited)

 



Year Ended







December 31,


Change



2022

2021(2)


Total

Constant
Currency
(1) 

 

Organic(1)(3) 

Revenues








  Legal Professionals


$2,803

$2,712


3 %

5 %

6 %

  Corporates


1,536

1,440


7 %

8 %

8 %

  Tax & Accounting Professionals


986

915


8 %

8 %

9 %

"Big 3" Segments Combined(1)


5,325

5,067


5 %

6 %

7 %

   Reuters News


733

694


6 %

9 %

9 %

   Global Print


592

609


-3 %

-1 %

-1 %

   Eliminations/Rounding


(23)

(22)





Revenues


$6,627

$6,348


4 %

6 %

6 %









Adjusted EBITDA(1) 








  Legal Professionals


$1,227

$1,091


13 %

14 %


  Corporates


578

496


17 %

16 %


  Tax & Accounting Professionals


451

379


19 %

18 %


"Big 3" Segments Combined(1)


2,256

1,966


15 %

16 %


  Reuters News


154

103


50 %

36 %


  Global Print


212

226


-6 %

-4 %


  Corporate costs


(293)

(325)


n/a

n/a


Adjusted EBITDA


$2,329

$1,970


18 %

18 %










Adjusted EBITDA Margin(1) 








  Legal Professionals


43.8 %

40.2 %


360bp

350bp


  Corporates


37.6 %

34.4 %


320bp

270bp


  Tax & Accounting Professionals


45.8 %

41.3 %


450bp

390bp


"Big 3" Segments Combined(1)


42.4 %

38.8 %


360bp

330bp


  Reuters News


21.0 %

14.8 %


620bp

380bp


  Global Print


35.7 %

37.1 %


-140bp

-130bp


Adjusted EBITDA margin


35.1 %

31.0 %


410bp

350bp










(1)  See the "Non-IFRS Financial Measures" section and the tables appended to this news release for additional information on these and
       other non-IFRS financial measures.

(2)  For comparative purposes, 2021 segment results have been revised to reflect the current period presentation. For additional
      information, see the "Revision to Prior-Year Segment Results" section of this news release.

(3)  Computed for revenue growth only.

n/a: not applicable
























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

Total Thomson Reuters

FY 2022

Reported

FY 2023

Outlook

11/1/22

FY 2023

Outlook

2/9/23

Total Revenue Growth

4 %

5.5% - 6.0%

4.5% - 5.0%

Organic Revenue Growth(1)

6 %

5.5% - 6.0%

5.5% - 6.0%

Adjusted EBITDA Margin(1)

35.1 %

39% - 40%

~ 39%

Corporate Costs

     Core Corporate Costs

     Change Program Opex

$293 million

$122 million

$171 million

$110 - $120 million

$110 - $120 million

n/a

$110 - $120 million

$110 - $120 million

n/a

Free Cash Flow(1)

$1.3 billion

$1.9 - $2.0 Billion

~$1.8 billion

Accrued Capex as % of Revenue(1)

     Real Estate Optimization Spend(2)

8.2%

n/a

6.0% - 6.5%

n/a

~ 7%

$30 million

Depreciation & Amortization of Computer Software

$625 million

$580 - $605 million

$595 - $625 million

Interest Expense (P&L)

$196 million

$190 - $210 million

$190 - $210 million

Effective Tax Rate on Adjusted Earnings(1)

17.6 %

n/a

~ 18%

"Big 3" Segments(1)

FY 2022

Reported

FY 2023

Outlook

11/1/22

FY 2023

Outlook

2/9/23

Total Revenue Growth  

5 %

6.5% - 7.0%

5.5% - 6.0%

Organic Revenue Growth

7 %

6.5% - 7.0%

6.5% - 7.0%

Adjusted EBITDA Margin

42.4 %

44% - 45%

~ 44%



(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 30th 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 pro...