Mr. Steve Hasker reports

THOMSON REUTERS REPORTS FIRST-QUARTER 2023 RESULTS

Thomson Reuters Corp. has released its results for the first quarter ended March 31, 2023:

• Broad revenue momentum continued in the first quarter:
  • Total company revenue up 4 per cent/ organic revenue up 6 per cent;
• Organic revenue up 7 per cent for the big 3 segments (legal professionals, corporates, and tax and accounting professionals);
• Based on Q1 performance, maintained full-year 2023 organic revenue and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin outlook:
  • Total revenue growth outlook updated for the company and the big 3 segments to incorporate the pending sale of a majority stake in Elite;
• Completed $2-billion share buyback program; $718-million repurchased during first quarter;
• Sold 24.5 million shares of LSEG in the first quarter, for gross proceeds of $2.3-billion;
• Launched approximately $2.2-billion return of capital transaction, expected to be completed in June.

"Solid momentum continued across our business in the first quarter, with revenue and margins meeting or slightly exceeding our expectations," said Steve Hasker, president and chief executive officer of Thomson Reuters. "While we acknowledge elevated macroeconomic uncertainty, our underlying business is resilient and we are largely maintaining our 2023 outlook. We are also excited about recent developments in AI [artificial intelligence], which we believe will provide plentiful opportunities to better serve our customers as we continue to invest in their future."

Mr. Hasker added: "We also remain focused on allocating capital to drive sustainable long-term value creation. To this end, we completed our $2-billion share repurchase program in March and are planning to execute a $2.2-billion return of capital transaction in June, funded with LSEG sale proceeds."

Revenues increased 4 per cent, driven by growth in the company's big 3 segments. Foreign currency and net divestitures each had a 1-per-cent negative impact on revenues:

• Organic revenues increased 6 per cent, driven by 6-per-cent growth in recurring revenues (76 per cent of total revenues), as well as 11-per-cent growth in transactions revenues. Global Print revenues were essentially unchanged on an organic basis.
• The company's big 3 segments reported organic revenue growth of 7 per cent and collectively comprised 82 per cent of total revenues.

Operating profit increased 23 per cent primarily due to higher revenues. Slightly lower costs reflected currency benefits:

• Adjusted EBITDA increased 13 per cent due to the same factors that impacted operating profit. The related margin increased to 38.8 per cent from 35.8 per cent in the prior-year period, of which foreign currency contributed 70 basis points.

Diluted EPS (earnings per share) was $1.59 per share compared with $2.06 per share in the prior-year period, as the prior-year period included a significantly higher increase in the value of the company's investment in London Stock Exchange Group (LSEG):

• Adjusted EPS, which excludes the change in value of the company's LSEG investment, as well as other adjustments, increased to 82 cents per share from 66 cents per share in the prior-year period, primarily due to higher adjusted EBITDA.

Net cash provided by operating activities decreased $8-million as the cash benefits from higher operating profit were more than offset by higher tax payments and unfavourable movements in working capital:

• Free cash flow increased $47-million primarily due to lower capital expenditures, which more than offset the decrease in cash flows from operating activities. Capital expenditures in the prior-year period included investments in the change program.

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 per cent (5 per cent organic) to $714-million:

• Recurring revenues grew 4 per cent (94 per cent of total, 6 per cent organic) primarily driven by Westlaw, Practical Law, HighQ and the segment's international businesses.
• Transactions revenues decreased 5 per cent (6 per cent of total, decreased 1 per cent organic) primarily due to lower professional services revenues in the Elite business.

Adjusted EBITDA increased 4 per cent to $318-million:

• The margin increased to 44.6 per cent from 43.7 per cent, driven by foreign currency, higher revenues and change program savings.

Corporates

Revenues increased 7 per cent (8 per cent organic) to $435-million:

• Recurring revenues grew 5 per cent (76 per cent of total, 7 per cent organic) primarily driven by Practical Law, Clear and the segment's Latin America business.
• Transactions revenues grew 14 per cent (24 per cent of total, 11 per cent organic) primarily driven by Confirmation, SurePrep and Trust.

Adjusted EBITDA decreased 2 per cent to $154-million:

• The margin decreased to 35.1 per cent from 38.1 per cent, driven in part by unfavourable timing of expenses.

Tax and accounting professionals

Revenues increased 13 per cent (11 per cent organic) to $282-million:

• Recurring revenues decreased 2 per cent (62 per cent of total) due to the impact of divestitures and a small non-recurring reserve:
  • Organic recurring revenues increased 6 per cent driven by the segment's Latin America business.
• Transactions revenues increased 51 per cent (38 per cent of total, 19 per cent organic) primarily due to Confirmation and SurePrep.

SurePrep contributed 2.6 per cent to total segment organic growth in the quarter. As a reminder, SurePrep is highly seasonal, generating approximately half of its annual revenues in the first quarter.

Adjusted EBITDA increased 22 per cent to $149-million:

• The margin increased to 51.4 per cent from 48.3 per cent, driven by higher revenues, change program savings and the addition of SurePrep.

The tax and accounting professionals segment is the company's most seasonal business with approximately 60 per cent 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 $175-million increased 1 per cent (all organic). The expected moderation in revenue growth was driven by a lower contractual price increase in 2023 compared with 2022 of its news agreement with the Data & Analytics business of LSEG, a lighter seasonal events calendar and lower digital revenues.

Adjusted EBITDA decreased 21 per cent to $29-million, primarily due to select investments and the impact of lower revenue growth.

Global print

Revenues decreased 1 per cent (0 per cent organic) to $138-million, which was better than expected driven by improved retention, better third party print revenues, strong international performance and timing benefits, which are expected to normalize in the remainder of 2023.

Adjusted EBITDA decreased 4 per cent to $50- million:

• The margin decreased to 36.5 per cent from 37.0 per cent.

Corporate costs

Corporate costs at the adjusted EBITDA level were $23-million. Corporate costs were $74-million in the prior-year period and included $34-million of change program costs.

2023 outlook

The company is maintaining its outlook for 2023, announced on Feb. 9, 2023, except for total revenue growth which is being adjusted to incorporate the pending sale of a majority stake in Elite. This transaction is expected to close in the second quarter. An attached table sets forth the company's outlook, which assumes constant currency rates and, except for the pending Elite transaction, 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 second quarter 2023 organic revenue growth rate to be at the low end of the full year 5.5-per-cent to 6-per-cent range and its adjusted EBITDA margin to be approximately 38 per cent.

While the company's first quarter 2023 performance provides it with increasing confidence about its outlook, the macroeconomic backdrop remains uncertain with many signs that point to a weakening global economic environment, amid rising interest rates, high inflation and continuing geopolitical risks. Any worsening of the global economic or business environment could impact the company's ability to achieve its outlook.

Thomson Reuters and TPG to establish Elite as an independent legal technology company

In April, TPG and the company announced the signing of a definitive agreement for TPG to acquire a majority stake in Thomson Reuters' Elite business, which provides financial and practice management solutions to the world's leading law firms, helping customers automate and streamline critical finance and accounting workflows. The proposed transaction values the business at approximately $500-million. Upon closing of the transaction, the company expects to receive proceeds of approximately $400-million while retaining a 19.9-per-cent minority interest and board representation in the business, supporting Elite strategically going forward. TPG Capital, TPG's United States and European late-stage private equity business, will become the majority shareholder of the stand-alone business.

London Stock Exchange Group ownership interest

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. During the first quarter of 2023, the company sold 24.5 million shares that it indirectly owned for $2.3-billion of gross proceeds. As of April 30, 2023, Thomson Reuters indirectly owned approximately 47.4 million LSEG shares which had a market value of approximately $5-billion based on LSEG's closing share price on that day.

Return of capital and share consolidation

On April 4, 2023, the company announced it had finalized its planned uses of its approximate $2.3-billion of gross proceeds related to disposition of shares in LSEG. As the company had previously disclosed in February, 2023, it plans to use the gross proceeds to provide returns to shareholders. In connection therewith, approximately $2.2-billion will be returned to shareholders through a return of capital transaction consisting of a cash distribution of $4.67 per common share and a share consolidation, or reverse stock split, which will reduce the number of outstanding common shares on a basis that is proportional to the cash distribution. This transaction is subject to shareholder approval at the company's annual and special meeting of shareholders on June 14, 2023. Woodbridge, its principal shareholder, has indicated that it plans to vote in favour of the transaction. Provided the company receives shareholder and court approval, it expects to complete the proposed transaction by the end of June, 2023. Any finances retained by the company from the proceeds and as a result of eligible opt-out shareholders opting out of the return of capital transaction will be used to pursue organic and inorganic opportunities in key growth segments, as well as other general corporate purposes.

Dividends, temporary suspension of the dividend reinvestment plan (DRIP) and share repurchases

In February, 2023, the company announced a 10-per-cent, or 18-cent-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 49 cents per share is payable on June 15, 2023,to common shareholders of record as of May 18, 2023.

Due to administrative complexities associated with the timing of the proposed return of capital transaction, Thomson Reuters will temporarily suspend its DRIP for any dividend payable in advance of completion of the return of capital transaction, which it currently expects to apply to only the quarterly dividend payable on June 15, 2023. This means that even if shareholders previously elected to reinvest their cash dividends in additional Thomson Reuters shares, any such dividend will not be reinvested but will be paid in cash. Thomson Reuters plans to resume the DRIP in connection with future dividends after completion of the return of capital transaction. This temporary suspension of the DRIP will not have an impact on shareholders who currently receive their dividends in cash.

The company completed its $2-billion normal course share repurchase program in the first quarter of 2023.

As of April 30, 2023, Thomson Reuters had approximately 471.0 million common shares outstanding.

About Thomson Reuters Corp.

Thomson Reuters 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 the world's leading provider of trusted journalism and news.

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