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Thomson Reuters Corp (2)
Symbol TRI
Shares Issued 495,555,587
Close 2021-05-04 C$ 119.08
Recent Sedar Documents

Thomson Reuters earns $5,036M (U.S.) in Q1

2021-05-04 06:57 ET - News Release

Mr. Steve Hasker reports

THOMSON REUTERS REPORTS FIRST-QUARTER 2021 RESULTS

Thomson Reuters Corp. has released 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. All currency figures are in U.S. dollars.

"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 chief financial officer of Thomson Reuters.

 CONSOLIDATED FINANCIAL HIGHLIGHTS -- THREE MONTHS ENDED MARCH 31
(in millions of dollars, except for adjusted EBITDA margin and EPS)
   
                                         Three months ended March 31 
IFRS financial measures                           2021          2020

Revenues                                        $1,580        $1,520
Operating profit                                  $387          $290
Diluted earnings per share (EPS)                $10.13         $0.39
Cash flow from operations                         $380          $176
Non-IFRS financial measures     
Revenues                                        $1,580        $1,520
Adjusted EBITDA                                   $558          $480
Adjusted EBITDA margin                           35.3%         31.6%
Adjusted EPS                                     $0.58         $0.48
Free cash flow                                    $239           $35

Revenues increased 4 per cent due to growth in recurring revenues and a 1-per-cent favourable impact from foreign currency:

  • Organic revenues increased 3 per cent, driven by 3-per-cent growth in recurring revenues, which comprised 77 per cent of total revenues.
  • The company's big three segments (legal professionals, corporates, and tax and accounting professionals), which collectively comprised 81 per cent of total revenues, reported organic revenue growth of 5 per cent.

Operating profit increased 34 per cent due to higher revenues and a favourable 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 Jan. 29, 2021:

  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which excludes the impact of the warrant revaluation, among other items, increased 16 per cent due to higher revenues and lower costs, which reflected the impact from cost-reduction initiatives in 2020. The related margin increased to 35.3 per cent from 31.6 per cent in the prior-year period.

Diluted EPS (earnings per share) increased to $10.13 per share from 39 cents 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 58 cents per share from 48 cents per share in the prior-year period, primarily due to higher adjusted EBITDA.

Cash flow from operations increased due to favourable 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
        (in millions of dollars, except for adjusted EBITDA margins) 
   
                                                    Three months ended March 31
                                                    2021                   2020
Revenues
Legal professionals                                 $668                   $626
Corporates                                           384                    367
Tax and accounting professionals                     225                    218
Big three segments combined                        1,277                  1,211
Reuters News                                         160                    155
Global print                                         143                    155
Eliminations/rounding (loss)                           -                     (1)
Revenues                                          $1,580                 $1,520
Adjusted EBITDA
Legal professionals                                 $279                   $230
Corporates                                           146                    117
Tax and accounting professionals                      98                     84
Big three segments combined                          523                    431
Reuters News                                          28                     19
Global print                                          57                     63
Corporate (costs)                                    (50)                   (33)
Adjusted EBITDA                                     $558                   $480
Adjusted EBITDA margin
Legal professionals                                41.8%                  36.7%
Corporates                                         38.1%                  31.9%
Tax and accounting professionals                   43.7%                  38.7%
Big three segments combined                        41.0%                  35.6%
Reuters News                                       17.6%                  12.6%
Global print                                       39.9%                  40.5%
Corporate costs                                      n/a                    n/a
Adjusted EBITDA margin                             35.3%                  31.6%
                                                                                    

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 customer segment performance.

Legal professionals

Revenues increased 5 per cent (all organic) to $668-million:

  • Recurring revenues grew 4 per cent (93 per cent of total, all organic), primarily due to strong performances from Practical Law, Westlaw Edge and the government business.
  • Transactions revenues grew 17 per cent (7 per cent of total, all organic), primarily due to the elite and government businesses.

Adjusted EBITDA increased 21 per cent to $279-million:

  • The margin increased to 41.8 per cent from 36.7 per cent, primarily due to higher revenues and benefits from 2020 cost-saving initiatives.

Corporates

Revenues increased 4 per cent (all organic) to $384-million, despite a 2-per-cent 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 per cent (77 per cent of total, all organic).
  • Transaction revenues grew 4 per cent (23 per cent 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 per cent to $146-million:

  • The margin increased to 38.1 per cent from 31.9 per cent, primarily due to higher revenues and benefits from 2020 cost-saving initiatives.

Tax and accounting professionals

Revenues increased 5 per cent (all organic) to $225-million, reflecting strong transaction revenue growth of 7 per cent, 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 per cent:

  • Recurring revenues grew 4 per cent (71 per cent of total, all organic).
  • Transaction revenues grew 7 per cent (29 per cent of total, all organic), primarily due to audit products.

Adjusted EBITDA increased 17 per cent to $98-million:

  • The margin increased to 43.7 per cent from 38.7 per cent, primarily due to higher revenues and benefits from 2020 cost-saving initiatives.
  • 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 $160-million increased 2 per cent, all organic, primarily due to the segment's professional business:

  • Reuters Events is currently holding all events virtually. Reuters Events continues to assess when in-person events can resume based on local health guidelines and feedback from customers.

Adjusted EBITDA increased 45 per cent to $28-million, primarily due to revenue growth and benefits from 2020 cost-saving initiatives.

Global print

Revenues decreased 9 per cent 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 per cent and 7 per cent.
  • Global print's second quarter revenues are forecast to increase between 1 per cent and 3 per cent, as the prior-year period was negatively impacted by delayed shipments at the beginning of the COVID-19 pandemic.

Adjusted EBITDA decreased 9 per cent to $57-million:

  • The margin decreased from 40.5 per cent to 39.9 per cent 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 with $33-million of corporate costs in the prior-year period. Additional information on the change program is provided below.

Thomson Reuters's 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 to 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 per cent to 6 per cent, including additional annual revenues of $100-million;
  • Achieve an adjusted EBITDA margin of 38 per cent to 40 per cent;
  • Achieve free cash flow of $1.8-billion to $2.0-billion;
  • Achieve annual operating expense savings of $600-million, of which $200-million is expected to be reinvested in growth initiatives;
  • Reduce capital expenditures as a percentage of revenue to between 6.0 per cent and 6.5 per cent.

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.

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 per cent and 6.5 per cent. 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 three total revenue growth and organic revenue growth are forecast to range between 6.0 per cent and 7.0 per cent.
  • Tax and accounting professionals revenues are expected to increase between 10 per cent and 15 per cent.
  • Reuters News revenues are expected to increase between 2.0 per cent and 3.0 per cent.
  • Global print revenues are expected to increase between 1.0 per cent and 3.0 per cent.

               SECOND QUARTER AND UPDATE TO FULL-YEAR 2021 REVENUE OUTLOOK

                                               Q2 2021              Original          FY 2021
Total Thomson Reuters                          outlook       FY 2021 outlook          outlook
                                                             (Feb. 23, 2021)           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
                                                               $305-million-
Corporate costs                                                 $340-million
                                                               $130-million-
Core corporate costs                                            $140-million
                                                               $175-million-
Change program operating expenses                    -          $200-million        unchanged
                                                               $1.0-billion-
Free cash flow                                       -          $1.1-billion        unchanged
Capital expenditures -- per
cent of revenue                                                    9.0%-9.5%
                                                               $125-million-
Change program capital expenditures                  -          $150-million        unchanged
Depreciation and amortization of                               $650-million-
computer software                                    -          $675-million        unchanged
                                                               $190-million-
Interest expense (P&L)                               -          $210-million        unchanged
Effective tax rate on adjusted earnings              -               16%-18%        unchanged

                                               Q2 2021              Original          FY 2021
Big three                                      outlook       FY 2021 outlook          outlook
                                                             (Feb. 23, 2021)           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

Dividends and share repurchases

In February, 2021, the company announced its board of directors approved a 10-cent-per-share annualized increase in the dividend to $1.62 per common share, representing the 28th consecutive year of dividend increases. A quarterly dividend of 40.5 cents 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 Jan. 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 pretax 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 Jan. 29, 2023. In each of the three and four years following the closing (starting on Jan. 30, 2023, and Jan. 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 Jan. 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's financial results for the first quarter included a gain on the sale of Refinitiv to LSEG of $8.1-billion within share of posttax earnings (losses) of equity investments. The proceeds from Thomson Reuters'd 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 (international financial reporting standards) 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 posttax earnings (losses) in equity method investments within the consolidated income statement.

About Thomson Reuters Corp.

Thomson Reuters is a leading provider of business information services. Its 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.

                             
                          CONSOLIDATED INCOME STATEMENT                             
                   (millions of dollars, except per-share data)                   
                  
                                                               Three months ended
                                                                         March 31       
                                                              2021           2020
Continuing operations
Revenues                                                    $1,580         $1,520
Operating (expenses)                                        (1,018)        (1,017)
Depreciation (loss)                                            (46)           (40)
Amortization (loss) of computer software                      (115)          (111)
Amortization (loss) 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 posttax 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

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