0Q89 Thomson Reuters Corp

Thomson Reuters Reports Fourth-Quarter and Full-Year 2021 Results

TORONTO, Feb. 8, 2022 /PRNewswire/ -- Thomson Reuters (TSX/NYSE: TRI) today reported results for the fourth quarter and full year ended December 31, 2021:          

• Strong revenue and sales growth for the fourth quarter and full year
  • Full-year total company revenue up 6% / organic revenue up 5%
  • Fourth-quarter total company revenue up 6% / organic revenue up 6%
    • Organic revenue up 7% for the "Big 3" (Legal Professionals, Corporates, and Tax & Accounting Professionals)
• Global Legal, Tax, Risk, Fraud & Compliance markets continue to be robust, providing a tailwind
• Raised 2022/2023 guidance for organic revenue growth, adjusted EBITDA margin and free cash flow
• Change Program on track - $217 million run-rate operating expense savings at year-end
• Increased annualized dividend per share by 10% (29^th consecutive annual increase/largest increase since 2008)

"The momentum we saw in the first nine months of the year continued in the fourth quarter. Revenue and sales growth were again strong and exceeded our expectations, enabling us to finish the year on a solid footing. Our performance has increased momentum moving into 2022, helping to build confidence as we work to achieve our higher 2022 and 2023 targets," said Steve Hasker, President and CEO of Thomson Reuters.

Mr. Hasker added, "Our professional markets continue to grow helped by a significant global shift by customers to upgrade Legal, Tax and Risk, Fraud and Compliance products. Our products are proving well suited to enable them to effectively serve their clients. We are targeting investment in products that are driving faster growth and where we have strong positions in growing markets, and we continue to look to supplement organic growth with targeted acquisitions that can bolster our positions and where we are an advantaged owner. We look forward to continued progress in 2022 as we work to further strengthen our positions across our businesses."

Consolidated Financial Highlights - Three Months Ended December 31

Revenues increased 6%, before and after the impact of foreign currency, driven by growth across four of the company's five business segments.

• Organic revenues increased 6%, driven by 6% growth in recurring revenues (80% of total revenues), as well as 16% growth in transactions revenues. Global Print revenues declined 4%.
• The company's "Big 3" segments (Legal Professionals, Corporates and Tax & Accounting Professionals) reported organic revenue growth of 7% and collectively comprised 79% of total revenues.

Operating profit decreased 73%, primarily because the prior year included significant gains from the sale of an investment and an amendment to a pension plan. Additionally, higher revenues were more than offset by higher costs, primarily related to investments associated with the company's Change Program and higher performance bonus expense. Information regarding the Change Program is provided later in this news release.

Fourth-quarter costs also included a $25 million investment to better position the business for 2022, which was allocated to go-to-market and product development initiatives, and data and analytics tools to improve the customer experience.

• Adjusted EBITDA, which excludes the gains from the sale of the investment and the pension plan amendment among other items, declined 14% as higher revenues were more than offset by higher costs. The related margin decreased to 26.4% from 32.5% primarily due to higher costs, including those associated with the Change Program, which negatively impacted the margin by 470bp.

Diluted loss per share was $0.36 compared to diluted earnings per share of $1.13 in the prior-year period due to lower operating profit and a decrease in value of the company's LSEG investment, which is discussed in more detail in the "London Stock Exchange Group (LSEG) Ownership Interest" section of this news release.

• Adjusted EPS, which excludes the change in value of the company's LSEG investment, as well as other adjustments, decreased to $0.43 per share from $0.54 per share in the prior-year period primarily due to lower adjusted EBITDA. Adjusted EPS was $0.04 lower due to the $25 million of additional investment previously noted.

Net cash provided by operating activities decreased as higher revenues were more than offset by higher expenses, which included Change Program costs, and unfavorable movements in working capital.

• Free cash flow decreased $194 million due to lower cash flow 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 5% (6% organic) to $689 million.

• Recurring revenues grew 5% (93% of total, 6% organic), primarily due to strong performances from Practical Law, Elite, FindLaw and the Government business, as well as contributions from the company's Canadian, European and Latin American businesses.
• Transactions revenues grew 4% (7% of total, 6% organic), primarily related to the Elite, Government, and Asia and Emerging Markets businesses.

Adjusted EBITDA decreased 3% to $239 million.

• The margin decreased to 34.5% from 37.5%, primarily due to higher performance bonus expense.

Corporates

Revenues increased 7% (all organic) to $361 million.

• Recurring revenues grew 7% (87% of total, all organic) driven by Practical Law, Indirect Tax, CLEAR and Legal software, as well as the company's businesses in Latin America.
• Transactions revenues grew 4% (13% of total, all organic).

Adjusted EBITDA decreased 10% to $95 million.

• The margin decreased to 26.3% from 31.1%, primarily due to higher performance bonus expense.

Tax & Accounting Professionals

Revenues increased 9% (all organic) to $309 million.

• Recurring revenues grew 9% (89% of total, all organic), driven by strong growth from Audit Solutions, Tax Compliance and the company's Latin America businesses.
• Transactions revenues increased 10% (11% of total, all organic).

Adjusted EBITDA increased 6% to $154 million.

• The margin decreased to 49.8% from 51.1%, primarily due to higher 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 $182 million increased 12% (all organic), driven by growth in all businesses, including Reuters Events as it continues to recover from the negative impact from COVID-19 in 2020.

Adjusted EBITDA increased 139% to $15 million, primarily due to higher revenues.

Global Print

Revenues  decreased 4% to $170 million.

Adjusted EBITDA was unchanged from the prior-year period at $61 million.

• The margin increased to 35.9% from 34.6% due to year-over-year timing of expenses.

Corporate Costs

Corporate costs at the adjusted EBITDA level were $112 million and included $78 million of Change Program costs. Corporate costs were $37 million in the prior-year period. Additional information regarding the Change Program is provided below.

Consolidated Financial Highlights - Year Ended December 31

Revenues increased 6% driven by growth in recurring and transactions revenues and a 1% favorable impact from foreign currency.

• Organic revenues increased 5%, primarily due to 5% growth in recurring revenues (79% of total revenues), as well as 13% growth in transactions revenues. Global Print revenues declined.
  • Organic growth of 5% included an approximate 100bp benefit resulting from easier year-over-year comparisons due to the negative impact of COVID-19 on the business in 2020.
• The company's "Big 3" segments, which collectively comprised 80% of total revenues, reported organic revenue growth of 6%.

Operating profit declined 36%, primarily because the prior year included significant gains from the sale of an investment and from an amendment to a pension plan.

• Adjusted EBITDA, which excludes the gains from the sale of the investment and the pension plan amendment among other items, was unchanged on a year-over-year basis as higher revenues were offset by higher costs, which included investments associated with the company's Change Program and higher performance bonus expense. The related margin decreased to 31.0% from 33.0% in the prior year. Adjusted EBITDA margin was negatively impacted by 290bp due to Change Program costs.

Diluted EPS increased to $11.50 per share from $2.25 per share in the prior year due to the gain on the sale of Refinitiv to LSEG in January 2021.

• Adjusted EPS, which excludes the gain on the sale of Refinitiv and other adjustments, increased to $1.95 per share from $1.85 per share in the prior year, primarily due to lower depreciation and software amortization and lower income tax expense.

Net cash provided by operating activities increased as higher revenues more than offset higher tax payments and expenses, which included Change Program costs.

• Free cash flow decreased by $74 million as higher cash flows from operating activities were more than offset by a prior-year benefit from the proceeds associated with the sale of real estate.

Highlights by Customer Segment – Year Ended December 31

Thomson Reuters Change Program and Outlook

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 company is 12 months into the program, which is expected to be largely complete by the end of 2022. The program is projected to require an investment of approximately $600 million during that time of which $295 million was invested in 2021.

The company's updated outlook for 2022 and 2023 incorporates the forecasted impacts associated with the Change Program, assumes constant currency rates, and excludes the impact of any future acquisitions or dispositions that may occur during those periods. Thomson Reuters believes that this type of guidance provides useful insight into the performance of its businesses. The company expects its first-quarter 2022 revenue growth rate and adjusted EBITDA margin will be comparable to its full-year 2022 outlook targets.

While the company's full-year 2021 performance provides it with increasing confidence about its outlook, the global economy has recently experienced substantial disruption due to concerns regarding resurgences and new strains of COVID-19, measures intended to mitigate the pandemic's impact, and other events and macroeconomic factors. Any worsening of the global economic or business environment could impact the company's ability to achieve its outlook.

Reported Full-Year 2021 and Updated Full-Year 2022 – 2023 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 2022 and 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 and Share Repurchases

The company announced today that its Board of Directors approved a 10% or $0.16 per share annualized increase in the dividend to $1.78 per common share, representing the 29^th consecutive year of dividend increases. A quarterly dividend of $0.445 per share is payable on March 15, 2022 to common shareholders of record as of February 24, 2022.

In the fourth quarter of 2021, the company completed a previously announced plan to buy back up to $1.2 billion of its common shares. This buyback program was in addition to the $200 million repurchase program that was completed earlier in 2021. As of February 7, 2022, Thomson Reuters had approximately 486.2 million common shares outstanding.

In 2021, Thomson Reuters returned a total of $2.2 billion of cash to shareholders through dividends and share repurchases.

London Stock Exchange Group (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. 

As of February 7, 2022, Thomson Reuters indirectly owned approximately 72.4 million LSEG shares which had a market value of approximately $7.0 billion based on LSEG's closing share price on that day. The company received $51 million of dividends from its LSEG investment in June 2021 and an additional $24 million in October 2021.

In March 2021, as permitted under a lock-up exception, Thomson Reuters sold approximately 10.1 million LSEG shares for pre-tax net proceeds of $994 million. Over the course of 2021, Thomson Reuters paid $223 million of tax on the sale of these shares and used the after-tax proceeds to pay $627 million of tax that became payable when the Refinitiv sale closed. In 2021, the company paid $850 million of taxes related to these transactions.

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, 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". 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 2022 and 2023 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 (i) its share of post-tax earnings (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 and the "Thomson Reuters Change Program and 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 16-30 in the "Risk Factors" section of the company's 2020 annual report. A "Risk Factors" section will also be included in the company's 2021 annual report, which the company plans to file in March. 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. For a discussion of material assumptions and material risks related to the company's 2022 and 2023 updated outlook, please see pages 22-23 of the company's third-quarter management's discussion and analysis (MD&A) for the period ended September 30, 2021. In addition to those material assumptions and material risks, material assumptions related to the company's updated 2022 and 2023 outlook include the following updates: (i) the company's revenue outlook now assumes that there will be improved global economic conditions throughout 2022 and 2023, despite periods of volatility due to disruption caused by COVID-19, measures intended to mitigate the pandemic's impact, and other events and macroeconomic factors; (ii) the company's adjusted EBITDA margin outlook assumes Change Program operating expenditures between $160 million and $200 million in 2022; (iii) the company's free cash flow outlook now assumes accrued capital expenditures between 7.5% and 8% of revenues in 2022 and between 6% and 6.5% of revenues in 2023; and (iv) the company's effective tax rate on adjusted earnings outlook now assumes (a) the mix of taxing jurisdictions where the company recognized pre-tax profit or losses in 2021 does not significantly change; (b) there will be minimal changes in tax laws and treaties within the jurisdictions where the company operates; (c) the imposition of minimum taxes in various jurisdictions; (d) no significant benefits from the finalization of prior tax years; (e) depreciation and amortization of computer software between $620 million and $645 million in 2022; and (f) interest expense between $190 million and $210 million in 2022. Material assumptions and material risks related to the company's outlook will also be included in the company's 2021 annual report, which the company plans to file in March. 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

Thomson Reuters will webcast a discussion of its fourth-quarter and full-year 2021 results and its two-year business outlook today beginning at 9:00 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.

Please refer to reconciliations for most directly comparable IFRS measures.