REG-Thomson Reuters: 1st Quarter Results
04/05/2021 11:35
Thomson Reuters Reports First-Quarter 2021 Results
TORONTO, May 4, 2021 /PRNewswire/ -- Thomson Reuters (TSX/NYSE: TRI) today
reported results for the first quarter ended March 31, 2021, updated its
revenue outlook for the full year and provided an outlook for the second
quarter 2021.
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"Our first-quarter performance reflects a strong start to the year, and we are
encouraged by the momentum we see building. Our customers are more confident
in an improving economic environment and those positive prevailing tailwinds
were reflected in strong sales across our businesses. Despite the improving
outlook, risks remain as the pandemic is still significantly impacting many
parts of the world. However, we are encouraged by the first quarter's results
and our increasing confidence is reflected in our new outlook for the second
quarter and the increase to the low end of our revenue outlook for the full
year," said Steve Hasker, president and CEO of Thomson Reuters.
Consolidated Financial Highlights - Three Months Ended March 31
Three Months Ended March 31, (Millions of U.S. dollars, except for adjusted EBITDA margin and EPS) (unaudited)
IFRS Financial Measures ((1)) 2021 2020 Change Change at
Constant
Currency
Revenues $1,580 $1,520 4%
Operating profit $387 $290 34%
Diluted earnings per share (EPS) $10.13 $0.39 n/m
Cash flow from operations $380 $176 115%
Non-IFRS Financial Measures ((1))
Revenues $1,580 $1,520 4% 3%
Adjusted EBITDA $558 $480 16% 15%
Adjusted EBITDA margin 35.3% 31.6% 370bp 360bp
Adjusted EPS $0.58 $0.48 21% 19%
Free cash flow $239 $35 570%
(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. These and other non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the tables appended to this news release. n/m: not meaningful
Revenues increased 4% due to growth in recurring revenues and a 1% favorable
impact from foreign currency.
* Organic revenues increased 3%, driven by 3% growth in recurring revenues,
which comprised 77% of total revenues.
* The company's "Big 3" segments (Legal Professionals, Corporates and Tax &
Accounting Professionals), which collectively comprised 81% of total revenues,
reported organic revenue growth of 5%.
Operating profit increased 34% due to higher revenues and a favorable impact
from the revaluation of warrants that the company held in Refinitiv until they
were exercised in connection with the closing of the sale to London Stock
Exchange Group (LSEG) on January 29, 2021.
* Adjusted EBITDA, which excludes the impact of the warrant revaluation, among
other items, increased 16% due to higher revenues and lower costs, which
reflected the impact from cost-reduction initiatives in 2020. The related
margin increased to 35.3% from 31.6% in the prior-year period.
Diluted EPS increased to $10.13 per share from $0.39 per share in the
prior-year period due to the gain on the sale of the company's investment in
Refinitiv to LSEG.
* Adjusted EPS, which excludes the gain from the sale of the company's
investment in Refinitiv, as well as other adjustments, increased to $0.58 per
share from $0.48 per share in the prior-year period, primarily due to higher
adjusted EBITDA.
Cash flow from operations increased due to favorable movements in working
capital (including lower bonus payments which were due to the impact of
COVID-19 in 2020), higher revenues and cash savings from 2020 cost-reduction
initiatives.
* Free cash flow increased due to the same factors as cash flow from
operations.
Highlights by Customer Segment - Three Months Ended March 31
(Millions of U.S. dollars, except for adjusted EBITDA margins) (unaudited)
Three Months Ended
March 31, Change
2021 2020 Total Constant Organic ((1))
Currency
Revenues
Legal Professionals $668 $626 7% 5% 5%
Corporates 384 367 5% 4% 4%
Tax & Accounting Professionals 225 218 3% 5% 5%
"Big 3" Segments Combined 1,277 1,211 5% 5% 5%
Reuters News 160 155 3% 2% 2%
Global Print 143 155 -7% -9% -9%
Eliminations/Rounding - (1)
Revenues $1,580 $1,520 4% 3% 3%
Adjusted EBITDA
Legal Professionals $279 $230 21% 18%
Corporates 146 117 25% 25%
Tax & Accounting Professionals 98 84 17% 17%
"Big 3" Segments Combined 523 431 21% 20%
Reuters News 28 19 45% 65%
Global Print 57 63 -9% -11%
Corporate costs (50) (33) n/a n/a
Adjusted EBITDA $558 $480 16% 15%
Adjusted EBITDA Margin
Legal Professionals 41.8% 36.7% 510bp 460bp
Corporates 38.1% 31.9% 620bp 630bp
Tax & Accounting Professionals 43.7% 38.7% 500bp 470bp
"Big 3" Segments Combined 41.0% 35.6% 540bp 510bp
Reuters News 17.6% 12.6% 500bp 750bp
Global Print 39.9% 40.5% -60bp -80bp
Corporate costs n/a n/a n/a n/a
Adjusted EBITDA margin 35.3% 31.6% 370bp 360bp
n/a: not applicable (1) Computed for revenue growth only.
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% (all organic) to $668 million.
* Recurring revenues grew 4% (93% of total, all organic), primarily due to
strong performances from Practical Law, Westlaw Edge and the Government
business.
* Transactions revenues grew 17% (7% of total, all organic), primarily due to
the Elite and Government businesses.
Adjusted EBITDA increased 21% to $279 million.
* The margin increased to 41.8% from 36.7%, primarily due to higher revenues
and benefits from 2020 cost-savings initiatives.
Corporates
Revenues increased 4% (all organic) to $384 million, despite a 2% reduction
in revenue growth due to a loss of revenues related to the impact of the U.S.
federal Affordable Care Act that was recorded in the prior-year period.
* Recurring revenues grew 4% (77% of total, all organic).
* Transactions revenues grew 4% (23% of total, all organic), primarily related
to increasing demand for solutions provided by the Confirmation business,
which provides audit confirmation services.
Adjusted EBITDA increased 25% to $146 million.
* The margin increased to 38.1% from 31.9%, primarily due to higher revenues
and benefits from 2020 cost-savings initiatives.
Tax & Accounting Professionals
Revenues increased 5% (all organic) to $225 million, reflecting strong
transactions revenue growth of 7%, despite the extension of the U.S. tax
filing deadline to May from April that resulted in lower transactional tax
filing revenues in the first quarter. Additionally, revenue growth was
negatively impacted due to the acceleration of the release of some UltraTax
U.S. state tax software from January 2021 to December 2020 to align with the
traditional December release of the segment's U.S. Federal tax software. If
the UltraTax software had been released in January 2021, organic revenue
growth for the segment would have been 8%.
* Recurring revenues grew 4% (71% of total, all organic).
* Transactions revenues grew 7% (29% of total, all organic), primarily due to
audit products.
Adjusted EBITDA increased 17% to $98 million.
* The margin increased to 43.7% from 38.7%, primarily due to higher revenues
and benefits from 2020 cost-savings initiatives.
* 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 $160 million increased 2%, all organic, primarily due to the
segment's professional business.
* Reuters Events is currently holding all events virtually. Reuters Events
continue to assess when in-person events can resume based on local health
guidelines and feedback from customers.
Adjusted EBITDA increased 45% to $28 million, primarily due to revenue growth
and benefits from 2020 cost-savings initiatives.
Global Print
Revenues decreased 9% to $143 million, a better than expected performance,
driven by higher third-party revenues for printing services.
* Global Print's full-year 2021 revenues are forecast to decline between 4%
and 7%.
* Global Print's second-quarter revenues are forecast to increase between 1%
and 3%, as the prior-year period was negatively impacted by delayed shipments
at the beginning of the COVID-19 pandemic.
Adjusted EBITDA decreased 9% to $57 million.
* The margin decreased from 40.5% to 39.9% due to the decline in revenues.
Corporate Costs
Corporate costs at the adjusted EBITDA level were $50 million, including $11
million of Change Program costs, compared to $33 million of Corporate costs in
the prior-year period. Additional information on the Change Program is
provided below.
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 program is expected to
take 24 months (2021-2022) to largely complete and is projected to require an
investment of between $500 million and $600 million during the course of that
time. In 2023, the company is forecast to:
* Achieve organic revenue growth of 5% - 6%, including additional annual
revenues of $100 million;
* Achieve an Adjusted EBITDA margin of 38% - 40%;
* Achieve free cash flow of $1.8 billion - $2.0 billion;
* Achieve annual operating expense savings of $600 million, of which $200
million is expected to be reinvested in growth initiatives; and
* Reduce capital expenditures as a percentage of revenue to between 6.0% and
6.5%.
The company's outlook for 2021, 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.
While the company's first-quarter 2021 performance provides it with increasing
confidence about its outlook, the global economy continues to experience
substantial disruption due to concerns regarding the spread of COVID-19, as
well as from the measures intended to mitigate its impact. Any worsening of
the global economic or business environment could impact the company's ability
to achieve its outlook.
Today, the company updated its revenue outlook for 2021 and reaffirmed its
outlook for 2022 and 2023. The full updated outlook is appended to this news
release.
Second-Quarter 2021 Outlook
The company provided a new outlook today for the second quarter of 2021:
* Total company revenues and total organic revenues are expected to increase
between 5.5% and 6.5%. Second-quarter revenue growth is forecast to be the
high point for the year given the impact of COVID-19 in the second quarter of
2020.
* "Big 3" total revenue growth and organic revenue growth is forecast to range
between 6.0% and 7.0%.
* Tax & Accounting Professionals revenues are expected to increase between 10%
and 15%.
* Reuters News revenues are expected to increase between 2.0% and 3.0%.
* Global Print revenues are expected to increase between 1.0% and 3.0%.
Second-Quarter and Update to Full-Year 2021 Revenue Outlook
Total Thomson Reuters Q2 2021 Outlook Original FY 2021 Outlook (February 23, 2021) FY 2021 Outlook Update
Total Revenue Growth 5.5% - 6.5% 3.0% - 4.0% 3.5% - 4.0%
Organic Revenue Growth 5.5% - 6.5% 3.0% - 4.0% 3.5% - 4.0%
Adjusted EBITDA Margin - 30% - 31% Unchanged
Corporate Costs Core Corporate Costs Change Program Operating Expenses - $305 - $340 million $130 - $140 million $175 - $200 million Unchanged
Free Cash Flow - $1.0 - $1.1 billion Unchanged
Capital Expenditures - % of Revenue Change Program Capital Expenditures - 9.0% - 9.5% $125 - $150 million Unchanged
Depreciation & Amortization of Computer Software - $650 - $675 million Unchanged
Interest Expense (P&L) - $190 - $210 million Unchanged
Effective Tax Rate on Adjusted Earnings - 16% - 18% Unchanged
Big 3 Q2 2021 Outlook Original FY 2021 Outlook (February 23, 2021) FY 2021 Outlook Update
Total Revenue Growth 6.0% - 7.0% 4.5% - 5.5% 5.0% - 5.5%
Organic Revenue Growth 6.0% - 7.0% 4.5% - 5.5% 5.0% - 5.5%
Adjusted EBITDA Margin 38% - 39% Unchanged
The information in this section is forward-looking. Actual results, which
include the impact of currency and future acquisitions and dispositions
completed during 2021, 2022 and 2023, may differ materially from the company's
outlook. Some of the forward-looking financial measures in the outlook above
are provided on a non-IFRS basis. See the section below entitled "Non-IFRS
Financial Measures" for more information. 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
In February 2021, the company announced its Board of Directors approved a
$0.10 per share annualized increase in the dividend to $1.62 per common share,
representing the 28(th) consecutive year of dividend increases. A quarterly
dividend of $0.405 per share is payable on June 15, 2021 to common
shareholders of record as of May 20, 2021.
The company also announced in February 2021 that it completed the repurchase
of $200 million of its common shares under its normal course issuer bid
(NCIB), which began in January 2021. Thomson Reuters does not currently intend
to repurchase additional shares in 2021. Thomson Reuters has set a target to
maintain approximately 500 million common shares outstanding by using share
repurchases to offset dilution associated with its dividend reinvestment and
equity incentive plans. As of May 3, 2021, Thomson Reuters had approximately
496 million common shares outstanding.
Sale of Refinitiv to London Stock Exchange Group (LSEG)
On January 29, 2021, Thomson Reuters and private equity funds affiliated with
Blackstone closed the sale of Refinitiv to LSEG in an all-share
transaction. Thomson Reuters now indirectly owns LSEG shares through an
entity that it jointly owns with Blackstone's consortium and a group of
current and former Refinitiv senior management. On March 19, 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 will pay approximately $225 million of tax on the
sale of these shares and will use the after-tax proceeds to pay the
approximately $640 million of taxes that became payable when the Refinitiv
sale closed. As of May 3, 2021, Thomson Reuters indirectly
owned approximately 72.4 million LSEG shares which had a market value of
approximately $7.4 billion based on LSEG's closing share price on that
day.
Subject to certain exceptions, Thomson Reuters and Blackstone's
consortium have otherwise agreed to be subject to a lock-up for their LSEG
shares until January 29, 2023. In each of the three and four years following
the closing (starting on January 30, 2023 and January 30, 2024, respectively),
Thomson Reuters and Blackstone's consortium will become entitled to sell in
aggregate one-third of the LSEG shares issued to them. The lock-up arrangement
will terminate on January 29, 2025. The ability of current and former
members?of Refinitiv senior management to sell shares held by them is also
subject to certain restrictions.
Reuters News' 30-year agreement to supply news and editorial content to
Refinitiv/LSEG continues under the same terms and conditions and is scheduled
to run to 2048.
Thomson Reuters financial results for the first quarter included a gain on the
sale of Refinitiv to LSEG of $8.1 billion within "Share of post-tax earnings
(losses) of equity investments". The proceeds from Thomson Reuters March 2021
sale of LSEG shares were distributed to Thomson Reuters as a dividend that
reduced the value of the investment. The proceeds from the sale of the LSEG
shares were presented in "Net cash provided by investing activities" within
the consolidated statement of cash flow. Thomson Reuters removed these amounts
from its non-IFRS calculation of adjusted EPS and free cash flow. The company
accounts for its indirect investment in LSEG at fair value, based on the share
price of LSEG, within "Share of post-tax earnings (losses) in equity method
investments" within the consolidated income statement.
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
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and for the latest world news, reuters.com
(https://c212.net/c/link/?t=0&l=en&o=3150251-1&h=2858962651&u=http%3A%2F%2Fwww.reuters.com%2F&a=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, such as
adjusted EBITDA and the related margin (other than at the customer segment
level), net debt to adjusted EBITDA leverage ratio, free cash flow, adjusted
EPS, selected measures excluding the impact of foreign currency, and changes
in revenues computed on an organic basis. Thomson Reuters uses these non-IFRS
financial measures as supplemental indicators of its operating performance and
financial position. 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 comparable IFRS measures because
it cannot predict, with reasonable certainty, the 2021, 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) our
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, the "Thomson Reuters Change Program and
Outlook" section, and the company's expectations regarding Reuters Events,
Global Print and share repurchases, 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, including those related to the
COVID-19 pandemic, 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. In particular, the full extent of the impact of the COVID-19 pandemic
on the company's business, operations and financial results will depend on
numerous evolving factors that it may not be able to accurately 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, uncertainty,
downturns and changes in the markets that the company serves, the ongoing
impact of the COVID-19 pandemic on the company's business and risks that the
pandemic could have a longer duration or a more significant impact on Thomson
Reuters than the company currently expects; fraudulent or unpermitted data
access or other cyber-security or privacy breaches; failures or disruptions of
data centers, network systems, telecommunications, or the Internet; failure to
keep pace with technological developments to provide new products, services,
applications and functionalities to meet customers' needs, attract new
customers and retain existing ones, or expand into new geographic markets and
identify areas of higher growth; inadequate protection of intellectual
property rights; actions of competitors; failure to adapt to organizational
changes and effectively implement strategic initiatives; failure to attract,
motivate and retain high quality, talented and diverse management and key
employees; failure to derive fully the anticipated benefits from existing or
future acquisitions, joint ventures, investments or dispositions; failure to
meet the challenges involved in operating globally; failure to maintain a high
renewal rate for recurring, subscription-based services; dependency on third
parties for data, information and other services; failure to protect the
brands and reputation of Thomson Reuters; impairment of goodwill and other
identifiable intangible assets; changes to law and regulations related to
privacy, data security, data protection and other areas; tax matters,
including changes to tax laws, regulations and treaties; threat of legal
actions and claims; risk of antitrust/competition-related claims or
investigations; fluctuations in foreign currency exchange and interest rates;
downgrading of credit ratings and adverse conditions in the credit markets;
the effect of factors outside of the control of Thomson Reuters on funding
obligations in respect of pension and post-retirement benefit arrangements;
actions or potential actions that could be taken by the company's principal
shareholder, The Woodbridge Company Limited; and the ability of Thomson
Reuters Founders Share Company to affect the company's governance and
management. Many of the foregoing risks are, and could be, exacerbated by
the COVID-19 pandemic and any worsening of the global business and economic
environment as a result. 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. Thomson Reuters annual and quarterly reports are also
available in the "Investor Relations" section of tr.com
(https://c212.net/c/link/?t=0&l=en&o=3150251-1&h=3070395043&u=https%3A%2F%2Fwww.thomsonreuters.com%2Fen.html&a=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 (including those related
to the COVID-19 pandemic), 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, which reflects the global economic crisis
caused by the COVID-19 pandemic. Material assumptions related to the company's
revenue outlook are that there will be improved global economic conditions
throughout 2021 to 2023, despite periods of volatility due to disruption
caused by COVID-19 and the measures intended to mitigate its impact; there
will be a continued need for trusted products and services that help customers
navigate evolving and complex legal, tax, accounting, regulatory, geopolitical
and commercial changes, developments and environments, and for cloud-based
digital tools that drive productivity; Thomson Reuters will have a continued
ability to deliver innovative products that meet evolving customer demands;
the company will acquire new customers through expanded and improved digital
platforms, simplification of the product portfolio and through other sales
initiatives; and the company will improve customer retention through
commercial simplification efforts and customer service improvements. Material
assumptions related to the company's adjusted EBITDA margin outlook are its
ability to achieve revenue growth targets; the company's business mix
continues to shift to higher-growth product offerings; Change Program expenses
are $500 million to $600 million during the course of 2021 and 2022; and
Change Program investments will drive higher adjusted EBITDA margin through
higher revenues and efficiencies by 2023. Material assumptions related to
the company's free cash flow outlook are its ability to achieve its revenue
and adjusted EBITDA margin targets; and capital expenditures are between the
percentages of revenues in 2021, 2022 and 2023 as set forth in the company's
outlook. Material assumptions related to the company's effective tax rate on
adjusted earnings outlook are its ability to achieve its adjusted EBITDA
target; the mix of taxing jurisdictions where the company recognized pre-tax
profit or losses in 2020 does not significantly change; no unexpected changes
in tax laws or treaties within the jurisdictions where the company operates;
depreciation and amortization of computer software for 2021 as set forth in
the company's outlook; and interest expense for 2021 as set forth in the
company's outlook.
Material risks related to the company's revenue outlook are that business
disruptions associated with the COVID-19 pandemic, including government
enforced quarantines and stay-at-home orders, may continue longer than the
company expects or may be interrupted by future outbreaks and resurgences of
the virus, delaying the anticipated recovery of the global economy; global
economic uncertainty due to the COVID-19 pandemic as well as related
regulatory reform and changes in the political environment may lead to limited
business opportunities for the company's customers, creating significant cost
pressures for them and potentially constraining the number of professionals
employed, which could lead to lower demand for Thomson Reuters products and
services; demand for the company's products and services could be reduced by
changes in customer buying patterns or in its inability to execute on key
product design or customer support initiatives; competitive pricing actions
and product innovation could impact the company's revenues; and the company's
sales, commercial simplification and product design initiatives may be
insufficient to retain customers or generate new sales. Material risks related
to the company's adjusted EBITDA margin outlook are the same as the risks
above related to the revenue outlook; the costs to execute the Change Program
may be higher than current expectations or the expected benefits by 2023 may
be lower than current expectations; and acquisition and disposal activity may
dilute the company's adjusted EBITDA margin. Material risks related to the
company's free cash flow outlook are the same as the risks above related to
the revenue and adjusted EBITDA margin outlook; a weaker macroeconomic
environment could negatively impact working capital performance, including the
ability of customers to pay the company; capital expenditures may be higher
than currently expected; and the timing and amount of tax payments to
governments may differ from the company's expectations. Material risks
related to the company's effective tax rate on adjusted earnings outlook are
the same as the risks above related to adjusted EBITDA; a material change in
the geographical mix of the company's pre-tax profits and losses; a material
change in current tax laws or treaties to which the company is subject, and
did not expect; and depreciation and amortization of computer software as well
as interest expense may be significantly higher or lower than expected.
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, including those
related to the COVID-19 pandemic.
CONTACTS
MEDIA Melissa Cassar Head of Commercial Communications & Corporate Affairs +1 437 388 3619 melissa.cassar@tr.com INVESTORS Frank J. Golden Head of Investor Relations +1 332 219 1111 frank.golden@tr.com
Thomson Reuters will webcast a discussion of its first-quarter 2021 results
and its business outlook today beginning at 8:30 a.m. Eastern Daylight Time
(EDT). You can access the webcast by visiting ir.tr.com
(https://c212.net/c/link/?t=0&l=en&o=3150251-1&h=1053393038&u=https%3A%2F%2Fir.thomsonreuters.com%2F&a=ir.tr.com).
An archive of the webcast will be available following the presentation.
Thomson Reuters Corporation
2021 - 2023 Outlook
Total Thomson Reuters 2021 Outlook (Updated) 2022 Outlook 2023 Outlook
Total Revenue Growth 3.5% - 4.0% 4.0% - 5.0% 5.0% - 6.0%
Organic Revenue Growth 3.5% - 4.0% 4.0% - 5.0% 5.0% - 6.0%
Adjusted EBITDA Margin 30% - 31% 34% - 35% 38% – 40%
Corporate Costs Core Corporate Costs Change Program Operating Expenses $305 - $340 million $130 - $140 million $175 - $200 million $245 - $280 million $120 - $130 million $125 - $150 million $110 - $120 million $110 - $120 million $0
Free Cash Flow $1.0 - $1.1 billion $1.2 - $1.3 billion $1.8 - $2.0 billion
Capital Expenditures - % of Revenue Change Program Capital Expenditures 9.0% - 9.5% $125 - $150 million 7.5% - 8.0% $75 - $100 million 6.0% - 6.5% $0
Depreciation & Amortization of Computer Software $650 - $675 million $620 - $645 million $580 - $605 million
Interest Expense (P&L) $190 - $210 million $190 - $210 million $190 - $210 million
Effective Tax Rate on Adjusted Earnings 16% - 18% n/a n/a
Big 3 2021 Outlook (Updated) 2022 Outlook 2023 Outlook
Total Revenue Growth 5.0% - 5.5% 5.5% - 6.5% 6.0% - 7.0%
Organic Revenue Growth 5.0% - 5.5% 5.5% - 6.5% 6.0% - 7.0%
Adjusted EBITDA Margin 38% - 39% 41% - 42% 43% - 45%
The information in this section is forward-looking. Actual results, which
include the impact of currency and future acquisitions and dispositions
completed during 2021, 2022 and 2023, may differ materially from the company's
outlook. Some of the forward-looking financial measures in the outlook above
are provided on a non-IFRS basis. See the section above entitled "Non-IFRS
Financial Measures" for more information. The information in this section
should also be read in conjunction with the section above entitled "Special
Note Regarding Forward-Looking Statements, Material Risks and Material
Assumptions."
Thomson Reuters Corporation
Consolidated Income Statement
(millions of U.S. dollars, except per share data)
(unaudited)
Three Months Ended
March 31,
2021 2020
CONTINUING OPERATIONS
Revenues $1,580 $1,520
Operating expenses (1,018) (1,017)
Depreciation (46) (40)
Amortization of computer software (115) (111)
Amortization of other identifiable intangible assets (31) (30)
Other operating gains (losses), net 17 (32)
Operating profit 387 290
Finance costs, net:
Net interest expense (51) (45)
Other finance (costs) income (6) 47
Income before tax and equity method investments 330 292
Share of post-tax earnings (losses) in equity method investments 6,297 (54)
Tax expense (1,594) (47)
Earnings from continuing operations 5,033 191
Earnings from discontinued operations, net of tax 3 2
Net earnings $5,036 $193
Earnings attributable to common shareholders $5,036 $193
Earnings per share:
Basic earnings per share:
From continuing operations $10.15 $0.38
From discontinued operations - 0.01
Basic earnings per share $10.15 $0.39
Diluted earnings per share:
From continuing operations $10.13 $0.38
From discontinued operations - 0.01
Diluted earnings per share $10.13 $0.39
Basic weighted-average common shares 495,939,970 496,205,027
Diluted weighted-average common shares 496,938,318 498,145,078
Thomson Reuters Corporation
Consolidated Statement of Financial Position
(millions of U.S. dollars)
(unaudited)
March 31, December 31,
2021 2020
Assets
Cash and cash equivalents $2,584 $1,787
Trade and other receivables 1,049 1,151
Other financial assets 77 612
Prepaid expenses and other current assets 448 425
Current assets 4,158 3,975
Property and equipment, net 500 545
Computer software, net 815 830
Other identifiable intangible assets, net 3,397 3,427
Goodwill 5,977 5,976
Equity method investments 6,870 1,136
Other non-current assets 884 788
Deferred tax 1,179 1,204
Total assets $23,780 $17,881
Liabilities and equity
Liabilities
Payables, accruals and provisions $1,059 $1,159
Current tax liabilities 1,130 251
Deferred revenue 832 866
Other financial liabilities 157 376
Current liabilities 3,178 2,652
Long-term indebtedness 3,788 3,772
Provisions and other non-current liabilities 954 1,083
Deferred tax 1,043 394
Total liabilities 8,963 7,901
Equity
Capital 5,465 5,458
Retained earnings 10,119 5,211
Accumulated other comprehensive loss (767) (689)
Total equity 14,817 9,980
Total liabilities and equity $23,780 $17,881
Thomson Reuters Corporation
Consolidated Statement of Cash Flow
(millions of U.S. dollars)
(unaudited)
Three Months Ended
March 31,
2021 2020
Cash provided by (used in):
Operating activities
Earnings from continuing operations $5,033 $191
Adjustments for:
Depreciation 46 40
Amortization of computer software 115 111
Amortization of other identifiable intangible assets 31 30
Share of post-tax (earnings) losses in equity method investments (6,297) 54
Deferred tax 674 (3)
Other 30 11
Changes in working capital and other items 785 (243)
Operating cash flows from continuing operations 417 191
Operating cash flows from discontinued operations (37) (15)
Net cash provided by operating activities 380 176
Investing activities
Acquisitions, net of cash acquired (3) (124)
Proceeds (payments) from disposals of businesses and investments 5 (3)
Dividend from sale of LSEG shares 994 -
Capital expenditures (120) (142)
Proceeds from disposals of property and equipment - 19
Other investing activities 1 1
Taxes paid on sale of Refinitiv and LSEG shares (6) -
Investing cash flows from continuing operations 871 (249)
Investing cash flows from discontinued operations (42) -
Net cash provided by (used in) investing activities 829 (249)
Financing activities
Proceeds from debt - 1,020
Repayments of debt - (645)
Net borrowings under short-term loan facilities - 118
Payments of lease principal (21) (18)
Repurchases of common shares (200) (200)
Dividends paid on preference shares (1) (1)
Dividends paid on common shares (194) (182)
Other financing activities 5 (12)
Net cash (used in) provided by financing activities (411) 80
Increase in cash and bank overdrafts 798 7
Translation adjustments (1) (10)
Cash and bank overdrafts at beginning of period 1,787 825
Cash and bank overdrafts at end of period $2,584 $822
Cash and bank overdrafts at end of period comprised of:
Cash and cash equivalents $2,584 $823
Bank overdrafts - (1)
$2,584 $822
Thomson Reuters Corporation
Reconciliation of Earnings from Continuing Operations to Adjusted EBITDA ((1))
(millions of U.S. dollars, except for margins)
(unaudited)
Three Months Ended
March 31,
2021 2020
Earnings from continuing operations $5,033 $191
Adjustments to remove:
Tax expense 1,594 47
Other finance costs (income) 6 (47)
Net interest expense 51 45
Amortization of other identifiable intangible assets 31 30
Amortization of computer software 115 111
Depreciation 46 40
EBITDA $6,876 $417
Adjustments to remove:
Share of post-tax (earnings) losses in equity method investments (6,297) 54
Other operating (gains) losses, net (17) 32
Fair value adjustments (4) (23)
Adjusted EBITDA ((1)) $558 $480
Adjusted EBITDA margin ((1)) 35.3% 31.6%
Thomson Reuters Corporation
Reconciliation of Net Earnings to Adjusted Earnings ((2))
Reconciliation of Total Change in Adjusted EPS to Change in Constant Currency ((4))
(millions of U.S. dollars, except for share and per share data)
(unaudited)
Three Months Ended
March 31,
2021 2020 Change
Net earnings $5,036 $193
Adjustments to remove:
Fair value adjustments (4) (23)
Amortization of other identifiable intangible assets 31 30
Other operating (gains) losses, net (17) 32
Other finance costs (income) 6 (47)
Share of post-tax (earnings) losses in equity method investments (6,297) 54
Tax on above items 1,535 (31)
Tax items impacting comparability 1 30
Earnings from discontinued operations, net of tax (3) (2)
Interim period effective tax rate normalization ((3)) 1 4
Dividends declared on preference shares (1) (1)
Adjusted earnings ((2)) $288 $239
Adjusted EPS ((2)) $0.58 $0.48 21%
Foreign currency ((4)) 2%
Constant currency ((4)) 19%
Diluted weighted-average common shares (millions) 496.9 498.1
Refer to page 19 for footnotes.
Thomson Reuters Corporation
Reconciliation of Net Cash Provided By Operating Activities to Free Cash Flow ((5))
(millions of U.S. dollars)
(unaudited)
Three Months Ended
Ma
rc
h
31
,
2021 2020
Net cash provided by operating activities $380 $176
Capital expenditures (120) (142)
Proceeds from disposals of property and equipment - 19
Other investing activities 1 1
Payments of lease principal (21) (18)
Dividends paid on preference shares (1) (1)
Free cash flow $239 $35
Thomson Reuters Corporation
Reconciliation of Net Debt and Leverage Ratio of Net Debt to Adjusted EBITDA ((7))
(millions of U.S. dollars)
(unaudited)
March 31,
2021
Long-term indebtedness $3,788
Total debt 3,788
Swaps (110)
Total debt after swaps 3,678
Remove fair value adjustments for hedges (5)
Total debt after currency arrangements 3,673
Remove transaction costs, premiums or discounts included in the carrying value of debt 37
Add: lease liabilities (current and non-current) 280
Less: cash and cash equivalents (2,584)
Net debt ((7)) $1,406
Adjusted EBITDA ((1)*) $2,053
Net Debt / Adjusted EBITDA ((7)*) 0.7
* Our target leverage ratio of 2.5:1 is a non-IFRS measure. For purposes of this calculation, adjusted EBITDA is computed on a rolling twelve-month basis and includes adjusted EBITDA of $558 million, $525 million, $491 million and $479 million for the three months ended March 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively. Refer to the tables appended to this news release, the company's 2020 annual report and the company's interim reports for the three months ended September
30, 2020 and June 30, 2020, for additional information regarding the calculation of adjusted EBITDA in each of these periods.
Refer to page 19 for footnotes.
Thomson Reuters Corporation
Reconciliation of Changes in Revenues to Changes in Revenues on a Constant Currency ( (4))and Organic Basis ((6))
(millions of U.S. dollars)
(unaudited)
Three Months Ended
March 31, Change
2021 2020 Total Foreign SUBTOTAL Constant Acquisitions/ Organic ((6))
Currency Currency ((4)) (Divestitures)
Total Revenues
Legal Professionals $668 $626 7% 1% 5% 1% 5%
Corporates 384 367 5% 0% 4% 0% 4%
Tax & Accounting Professionals 225 218 3% -1% 5% 0% 5%
"Big 3" Segments Combined 1,277 1,211 5% 1% 5% 0% 5%
Reuters News 160 155 3% 2% 2% 0% 2%
Global Print 143 155 -7% 1% -9% 0% -9%
Eliminations/Rounding - (1)
Revenues $1,580 $1,520 4% 1% 3% 0% 3%
Recurring Revenues
Legal Professionals $621 $587 6% 1% 4% 1% 4%
Corporates 295 281 5% 0% 4% 0% 4%
Tax & Accounting Professionals 160 158 2% -2% 4% 0% 4%
"Big 3" Segments Combined 1,076 1,026 5% 1% 4% 0% 4%
Reuters News 144 142 2% 2% 0% 0% 0%
Total Recurring Revenues $1,220 $1,168 5% 1% 4% 0% 3%
Transactions Revenues
Legal Professionals $47 $39 20% 3% 17% 0% 17%
Corporates 89 86 4% 0% 4% 0% 4%
Tax & Accounting Professionals 65 60 7% 1% 7% 0% 7%
"Big 3" Segments Combined 201 185 8% 1% 8% 0% 8%
Reuters News 16 13 23% 1% 22% 0% 22%
Total Transactions Revenues $217 $198 9% 1% 9% 0% 9%
Growth percentages are computed using whole dollars. As a result, percentages calculated from reported amounts may differ from those presented, and growth components may not total due to rounding.
Refer to page 19 for footnotes.
Thomson Reuters Corporation
Reconciliation of Changes in Adjusted EBITDA to Changes on a Constant Currency Basis ((4))
(millions of U.S. dollars)
(unaudited)
Three Months Ended
March 31, Change
2021 2020 Total Foreign Currency Constant Currency ((4))
Adjusted EBITDA
Legal Professionals $279 $230 21% 3% 18%
Corporates 146 117 25% 0% 25%
Tax & Accounting Professionals 98 84 17% -1% 17%
"Big 3" Segments Combined 523 431 21% 2% 20%
Reuters News 28 19 45% -20% 65%
Global Print 57 63 -9% 2% -11%
Corporate costs (50) (33) n/a n/a n/a
Adjusted EBITDA $558 $480 16% 1% 15%
Adjusted EBITDA Margin
Legal Professionals 41.8% 36.7% 510bp 50bp 460bp
Corporates 38.1% 31.9% 620bp -10bp 630bp
Tax & Accounting Professionals 43.7% 38.7% 500bp 30bp 470bp
"Big 3" Segments Combined 41.0% 35.6% 540bp 30bp 510bp
Reuters News 17.6% 12.6% 500bp -250bp 750bp
Global Print 39.9% 40.5% -60bp 20bp -80bp
Corporate costs n/a n/a n/a n/a n/a
Adjusted EBITDA margin 35.3% 31.6% 370bp 10bp 360bp
n/a: not applicable
Growth percentages and margins are computed using whole dollars. As a result, percentages and margins calculated from reported amounts may differ from those presented, and growth components may not total due to rounding.
Refer to page 19 for footnotes.
Footnotes
(1) Thomson Reuters defines adjusted EBITDA for its business segments as earnings or losses from continuing operations before tax expense or benefit, net interest expense, other finance costs or income, depreciation, amortization of software and other
identifiable intangible assets, Thomson Reuters share of post-tax earnings or losses in equity method investments, other operating gains and losses, certain asset impairment charges, fair value adjustments and corporate related items. Consolidated adjusted
EBITDA is comprised of adjusted EBITDA for its business segments and corporate costs. Adjusted EBITDA margin is adjusted EBITDA expressed as a percentage of revenues. Thomson Reuters uses adjusted EBITDA because it provides a consistent basis to evaluate
operating profitability and performance trends by excluding items that the company does not consider to be controllable activities for this purpose. Adjusted EBITDA also represents a measure commonly reported and widely used by investors as a valuation
metric. Additionally, this measure is used by Thomson Reuters and investors to assess a company's ability to incur and service debt.
(2) Thomson Reuters defines adjusted earnings as net earnings or loss including dividends declared on preference shares but excluding the post-tax impacts of fair value adjustments, amortization of other identifiable intangible assets, other operating gains
and losses, certain asset impairment charges, other finance costs or income, Thomson Reuters share of post-tax earnings or losses in equity method investments, discontinued operations and other items affecting comparability. Thomson Reuters calculates the
post-tax amount of each item excluded from adjusted earnings based on the specific tax rules and tax rates associated with the nature and jurisdiction of each item. Adjusted EPS is calculated from adjusted earnings using diluted weighted-average shares and
does not represent actual earnings or loss per share attributable to shareholders. Thomson Reuters uses adjusted earnings and adjusted EPS as they provide a more comparable basis to analyze earnings and they are also measures commonly used by shareholders
to measure the company's performance.
(3) Adjustment to reflect income taxes based on estimated full-year effective tax rate. Earnings or losses for interim periods under IFRS reflect income taxes based on the estimated effective tax rates of each of the jurisdictions in which Thomson Reuters
operates. The non-IFRS adjustment reallocates estimated full-year income taxes between interim periods, but has no effect on full-year income taxes.
(4) The changes in revenues, adjusted EBITDA and the related margins, and adjusted earnings per share before currency (at constant currency or excluding the effects of currency) are determined by converting the current and prior-year period's local currency
equivalent using the same exchange rates.
(5) Free cash flow is net cash provided by operating activities, proceeds from disposals of property and equipment, and other investing activities less capital expenditures, payments of lease principal and dividends paid on the company's preference shares.
Thomson Reuters uses free cash flow as it helps assess the company's ability, over the long term, to create value for its shareholders as it represents cash available to repay debt, pay common dividends and fund share repurchases and new acquisitions.
(6) Represents changes in revenues of our existing businesses at constant currency. The metric excludes the distortive impacts of acquisitions and dispositions from not owning the business in both comparable periods. Thomson Reuters uses organic growth because
it provides further insight into the performance of its existing businesses by excluding distortive impacts and serves as a better measure of the company's ability to grow its business over the long term.
(7) Net debt is total indebtedness (excluding the associated unamortized transaction costs and premiums or discounts) plus the currency related fair value of associated hedging instruments, and lease liabilities less cash and cash equivalents. For purposes of
calculating the leverage ratio, net debt is divided by adjusted EBITDA for the previous twelve-month period ending with the current fiscal quarter.
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