Mr. Steve Hasker reports

THOMSON REUTERS REPORTS THIRD-QUARTER 2023 RESULTS

Thomson Reuters Corp. has released results for the third quarter ended Sept. 30, 2023.

Highlights:

• Solid revenue momentum continued in the third quarter:
  • Total company revenue up 1 per cent; organic revenue up 6 per cent:
    • Organic revenue up 7 per cent for the big three segments (legal professionals, corporates, and tax and accounting professionals);
• Maintained full-year 2023 outlook for organic revenue, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin and free cash flow:
  • Depreciation and amortization and interest expense outlook updated;
• Sold 15 million shares of the London Stock Exchange Group (LSEG) in the third quarter for gross proceeds of $1.5-billion;
• Announcement of new $1-billion share repurchase program.

"Solid momentum across our business continued in the third quarter, despite an uncertain macro environment," said Steve Hasker, president and chief executive officer of Thomson Reuters. "Importantly, our confidence around the generative AI [artificial intelligence] opportunity continues to strengthen. We made good progress against our build/partner/buy approach in the quarter, advancing our product roadmaps, pursuing strategic partnerships and completing our acquisition of Casetext. Customers view this progress as a clear sign of our intent and ability to lead in generative AI, and we are excited to continue unlocking its full potential for their benefit."

Revenues increased 1 per cent, driven by growth in recurring revenues. Net divestitures had a 5 per cent negative impact on revenues and foreign currency had no impact.

• Organic revenues increased 6 per cent, driven by 7 per cent growth in recurring revenues (83 per cent of total revenues) as well as 9 per cent growth in transactions revenues. Global Print revenues decreased 4 per cent organically.
• The company's "Big 3" segments reported organic revenue growth of 7 per cent and collectively comprised 80 per cent of total revenues.

Operating profit increased 11 per cent driven by higher revenues and lower costs.

• Adjusted EBITDA, increased 18 per cent due to higher revenues and lower costs. The related margin increased to 39.6 per cent from 34.0 per cent in the prior-year period. Lower costs reflected Change Program investments made in the prior-year period, which benefited the year-over-year change in adjusted EBITDA margin by 290bp, as well as the timing of expenses, which are largely expected to normalize in the fourth quarter. Foreign currency contributed 10bp to the change.

Diluted EPS was $0.80 compared to $0.47 in the prior-year period primarily due to higher operating profit and lower income tax expense. While both periods included reductions in the value of the company's investment in LSEG, net of gains on related foreign exchange contracts, the three-month period ended September 30, 2023, benefited from a lower net reduction in the value of the investment.

• Adjusted EPS, which excludes the changes in value of the company's LSEG investment and the related foreign exchange contracts, as well as other adjustments, increased to $0.82 per share from $0.58 per share in the prior-year period, primarily due to higher adjusted EBITDA. Adjusted EPS also benefited from a reduction in weighted-average common shares outstanding due to share repurchases and our June 2023 return of capital transaction.

Net cash provided by operating activities increased $143-million primarily due to the cash benefits from higher revenues and lower costs, as well as lower tax payments, and favorable movements in working capital.

• Free cash flow increased $143-million due to the same factors as net cash provided by operating activities. The prior-year period included investments in the Change Program.

Highlights by Customer Segment - Three Months Ended September 30

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 decreased 2 per cent to $688-million due to the negative impact from net divestitures. Organic revenues increased 6 per cent.

• Recurring revenues were essentially unchanged (96 per cent of total, 6 per cent organic growth). Organic growth was primarily driven by Westlaw, Practical Law, HighQ, and the Elite divestiture.
• Transactions revenues declined 37 per cent (4 per cent of total, 12 per cent organic growth). Organic growth was primarily due to the Government business.

Adjusted EBITDA increased 4 per cent to $338-million.

• The margin increased to 49.1 per cent from 46.2 per cent as lower expenses more than offset lower revenues.

Corporates

Revenues increased 4 per cent to $391-million, including a negative impact from net divestitures. Organic revenues increased 7 per cent.

• Recurring revenues grew 5 per cent (89 per cent of total, 8 per cent organic) primarily driven by strong growth in Practical Law, HighQ, CLEAR and our Latin America business.
• Transactions revenues decreased 4 per cent (11 per cent of total, decreased 2 per cent organic).

Adjusted EBITDA increased 12 per cent to $164-million.

• The margin increased to 41.9 per cent from 39.2 per cent, primarily driven by higher revenues.

Tax & Accounting Professionals

Revenues increased 8 per cent to $203-million, including a negative impact from net divestitures. Organic revenues increased 12 per cent.

Recurring revenues increased 2 per cent (79 per cent of total, 9 per cent organic). Organic growth was driven by the segment's Latin America business.

Transactions revenues increased 39 per cent (21 per cent of total, 20 per cent organic) primarily due to Confirmation and SurePrep.

Adjusted EBITDA increased 8 per cent to $64-million.

The margin increased to 31.2 per cent from 31.0 per cent, driven by higher revenues and the timing of expenses.

The Tax & 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 $180-million increased 5 per cent (3 per cent organic) driven by a contractual price increase from our news agreement with the Data & Analytics business of LSEG, and growth in our transactional events and digital advertising revenues.

Adjusted EBITDA increased 10 per cent to $37-million, primarily due to higher revenues.

Global Print

Revenues decreased 5 per cent (decreased 4 per cent organic) to $137-million, in line with our expectations.

Adjusted EBITDA increased 9 per cent to $55-million.

• The margin increased to 39.6 per cent from 34.4 per cent, driven by lower expenses due to timing related to editorial and other labor costs. We expect the timing to largely normalize in Q4.

Corporate Costs

Corporate costs at the adjusted EBITDA level were $26-million. Corporate costs were $78-million in the prior-year period and included $47-million of Change Program costs.

Revenues increased 2 per cent, driven by recurring and transactions revenues. Net divestitures had a 3 per cent negative impact on revenues and foreign currency had 1 per cent negative impact.

• Organic revenues increased 6 per cent, driven by 6 per cent growth in recurring revenues (80 per cent of total revenues) as well as 9 per cent growth in transactions revenues. Global Print revenues decreased 3 per cent organically.
• The company's "Big 3" segments reported organic revenue growth of 7 per cent and collectively comprised 81 per cent of total revenues.

Operating profit increased 47 per cent primarily due to the gain on the sale of a majority stake in the company's Elite business. Higher revenues and lower costs also contributed to operating profit growth.

• Adjusted EBITDA, which excludes the gain on sale of Elite, as well as other adjustments, increased 16 per cent due to higher revenues and lower costs. The related margin increased to 39.5 per cent from 34.9 per cent in the prior-year period. Lower costs reflected Change Program investments made in the prior-year period, which benefited the year-over-year change in adjusted EBITDA margin by 220bp. Foreign currency contributed 30bp to the year-over-year change in the adjusted EBITDA margin.

Diluted EPS was $4.31 per share compared to $2.30 per share in the prior-year period, primarily due to higher operating profit and an increase in the value of the company's investment in LSEG, net of changes in the value of related foreign exchange contracts.

• Adjusted EPS, which excludes the gain on the sale of a majority stake in the company's Elite business, changes in value of the company's LSEG investment, as well as other adjustments, increased to $2.53 per share from $1.87 per share in the prior-year period, primarily due to higher adjusted EBITDA. Adjusted EPS also benefited from a reduction in weighted-average common shares outstanding due to share repurchases and our June 2023 return of capital transaction.

Net cash provided by operating activities increased $397-million due to cash benefits from higher revenues and lower costs, lower tax payments, and favorable movements in working capital.

• Free cash flow increased $444-million due to higher cash flows from operating activities as well as lower capital expenditures. The prior-year period included investments in the Change Program.

2023 Outlook

The company is maintaining its 2023 outlook except for updates to depreciation and amortization, and interest expense as follows:

In the third quarter of 2023, we amended our definition of adjusted earnings to exclude amortization from acquired computer software. As part of this transition, our guidance includes new details about the components of amortization expense. Refer to the non-IFRS financial measures section and the tables appended to this news release for additional information.

• Depreciation and amortization has been updated to incorporate the recent acquisitions and to narrow the range with one quarter left in the year. Depreciation and amortization is also broken down into two line items to support the new non-IFRS adjusted earnings presentation. Amortization of acquired software, which is now excluded from our non-IFRS adjusted earnings, rises due to recent acquisition activity. Our full-year adjusted depreciation and amortization guidance for the full year is now $625-million to $635-million, with $555-million to $560-million related to internally developed software and $70-million to $75-million for amortization of acquired software.
• Interest expense is expected to be $170-million to $180-million, which is lower than our previous guidance of $190-million. We continue to benefit from our accelerated pace of LSEG monetization and higher interest rates on our cash balances.

The table below sets forth the company's updated outlook, which assumes constant currency rates and 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 fourth-quarter 2023 organic revenue growth to be within the full-year 5.5 per cent - 6.0 per cent range and its adjusted EBITDA margin to be approximately 37 per cent, reflecting growth investments, productivity initiatives and dilution from recent acquisitions.

While the company's performance during the nine months of 2023 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 ongoing geopolitical risks. Any worsening of the global economic or business environment could impact the company's ability to achieve its outlook.

Acquisitions

In August 2023, the company acquired Casetext for $650-million. Casetext uses artificial intelligence and machine learning, which enable legal professionals to work more efficiently.

In July 2023, the company acquired Imagen Ltd, a media asset management company, which will be part of the Reuters News segment.

Today, the company acquired full ownership of the Westlaw Japan business, previously a joint venture with Shinnippon-Hoki Publishing Co., Ltd. Westlaw Japan is now part of Thomson Reuters Japan.

Dividends

In February 2023, the company announced a 10 per cent 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 December 15, 2023 to common shareholders of record as of November 16, 2023.

As of the close of business on October 30, 2023, Thomson Reuters had 455,491,082 common shares outstanding.

Normal Course Issuer Bid and $1.0 Billion Share Repurchase Program

Thomson Reuters also announced today that it has received approval from the Toronto Stock Exchange (TSX) for the renewal of its normal course issuer bid (NCIB). The company also announced that it plans to repurchase up to $1.0 billion of its shares under the new NCIB.

Under the new NCIB, up to 10-million common shares (which represents approximately 2.19 per cent of the company's issued and outstanding common shares as of October 30, 2023) may be repurchased between November 3, 2023 and November 2, 2024.

Under the renewed NCIB, shares may be repurchased in open market transactions on the TSX, the New York Stock Exchange (NYSE) and/or other exchanges and alternative trading systems, if eligible, or by such other means as may be permitted by the TSX and/or NYSE or under applicable law, including private agreement purchases or share purchase program agreement purchases if Thomson Reuters receives, if applicable, an issuer bid exemption order in the future from applicable securities regulatory authorities in Canada for such purchases. The price that Thomson Reuters will pay for common shares in open market transactions will be the market price at the time of purchase or such other price as may be permitted by the TSX. Any private agreement purchases made under an exemption order, if applicable, may be at a discount to the prevailing market price. In accordance with TSX rules, any daily repurchases (other than pursuant to a block purchase exception) on the TSX under the renewed NCIB are limited to a maximum of 81,240 shares, which represents 25 per cent of the average daily trading volume on the TSX of 324,961 for the six months ended September 30, 2023 (net of repurchases made by the company during that time period). Any shares that are repurchased are cancelled.

From time to time when Thomson Reuters does not possess material nonpublic information about itself or its securities, it may enter into a pre-defined plan with its broker to allow for the repurchase of shares at times when Thomson Reuters ordinarily would not be active in the market due to its own internal trading blackout periods, insider trading rules or otherwise. Any such plans entered into with Thomson Reuters' broker will be adopted in accordance with applicable Canadian securities laws and the requirements of Rule 10b5-1 under the U.S. Securities Exchange Act of 1934, as amended.

Thomson Reuters has historically maintained a disciplined capital strategy that balances growth, long-term financial leverage, credit ratings and returns to shareholders through dividends and share repurchases. The NCIB provides the company with a flexible way to provide returns to shareholders who choose to participate by selling their shares.

Decisions regarding any future repurchases will depend on certain factors, such as market conditions, share price and other opportunities to invest capital for growth. Thomson Reuters may elect to suspend or discontinue share repurchases at any time, in accordance with applicable laws.

For its NCIB that began on June 13, 2022 and expired on June 12, 2023, Thomson Reuters previously received approval from the TSX to repurchase up to 24-million common shares. Of this amount, Thomson Reuters repurchased 17,851,024 common shares for a total cost of approximately $2 billion, representing an average price of $112.04 per share. Thomson Reuters repurchased the common shares through the facilities of the TSX, the NYSE and other alternative trading systems through its broker.

LSEG 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 third quarter of 2023, the company sold 15.0 million shares that it indirectly owned for $1.5 billion of gross proceeds.

As of October 30, 2023, Thomson Reuters indirectly owned approximately 16.9 million LSEG shares, which had a market value of approximately $1.7 billion based on LSEG's closing share price on that day. In connection with the September 2023 LSEG share sale, the company entered into call options to sell approximately 3.5 million LSEG shares with maturity dates in 2023 and 2024 in the event that the LSEG share price exceeds specified levels.

Thomson Reuters

Thomson Reuters (NYSE / TSX: TRI) informs the way forward by bringing together the trusted content and technology that people and organizations need to make the right decisions. The company serves professionals across legal, tax, accounting, compliance, government, and media. Its products combine highly specialized software and insights to empower professionals with the data, intelligence, and solutions needed to make informed decisions, and to help institutions in their pursuit of justice, truth and transparency. Reuters, part of Thomson Reuters, is a world leading provider of trusted journalism and news. For more information, visit tr.com.

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.

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