TORONTO, May 5, 2020 /PRNewswire/ -- Thomson Reuters
(TSX/NYSE: TRI) today reported results for the first quarter ended
March 31, 2020 and updated its
full-year 2020 Outlook to reflect its currently estimated impact of
the COVID-19 pandemic.
"Given the challenges we are all facing from the COVID-19
pandemic, our main priority remains the health and safety of all of
our employees. I want to thank them for how they have stepped up to
support our customers around the globe as they help businesses,
communities and economies do what they can to move forward," said
Steve Hasker, president and CEO of
Thomson Reuters. "We entered the year with an encouragingly strong
start and delivered a good first quarter as our Legal, Corporates
and Tax & Accounting segments - 80% of total revenues – grew 4%
organically. As we generate most of our revenues from selling
information and software solutions electronically and on a
subscription basis, our businesses have historically been resilient
over time, but they are not immune to the recent downturn in the
global economy. We are confident that our 'must-have' products and
solutions, deep and long-term customer relationships, and strong
balance sheet and liquidity position will enable us to emerge on
the other side even stronger."
This news release discusses the evolving impact of the COVID-19
pandemic on Thomson Reuters business, financial condition and
results of operations as well as Thomson Reuters response to the
pandemic.
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)
|
2020
|
2019(2)
|
Change
|
Change at
Constant
Currency
|
Revenues
|
$1,520
|
$1,487
|
2%
|
|
Operating
profit
|
$290
|
$274
|
6%
|
|
Diluted earnings per
share (EPS)
|
$0.39
|
$0.20
|
95%
|
|
Cash flow from
operations
|
$176
|
$(30)
|
n/m
|
|
Non-IFRS Financial
Measures (1)
|
|
|
|
|
Revenues
|
$1,520
|
$1,487
|
2%
|
3%
|
Adjusted
EBITDA
|
$480
|
$397
|
21%
|
22%
|
Adjusted EBITDA
margin
|
31.6%
|
26.7%
|
490bp
|
480bp
|
Adjusted
EPS
|
$0.48
|
$0.36
|
33%
|
36%
|
Free cash
flow
|
$35
|
$(177)
|
n/m
|
|
|
|
|
|
|
n/m: not
meaningful
|
|
|
|
|
|
|
|
|
|
(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.
(2) 2019
results have been revised to correct for certain immaterial
misstatements. For additional information, see the "Revision of
Prior-Period Financial Statements" section of this news
release.
|
|
|
|
|
|
|
|
Revenues increased 2% due to growth in recurring revenues
but also from higher transactions revenues, which were driven by
acquisitions. Foreign currency had a $14
million (approximately 1%) negative impact.
- Organic revenue growth was 2%, driven by 4% 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
approximately 80% of first-quarter revenues, reported organic
revenue growth of 4%.
Operating profit increased as higher revenues and lower
costs more than offset a negative impact from the revaluation of
warrants that the company holds in Refinitiv relating to the
proposed sale of Refinitiv to London Stock Exchange Group plc
(LSEG). Lower costs reflected the completion of the program, in
2019, to reposition the company following the separation from
Financial & Risk (F&R).
- Adjusted EBITDA, which excludes the impact of the
warrant revaluation among other items, increased 21%, reflecting
the completion of the F&R separation program, which required
significant costs and investments in the prior-year period. The
related margin increased to 31.6% compared to 26.7% in the
prior-year period.
Diluted EPS increased to $0.39 compared to $0.20 per share in the prior-year period as
higher operating profit, lower losses from the company's 45% equity
interest in Refinitiv, and currency benefits from the revaluation
of certain intercompany funding arrangements more than offset
higher tax expense.
- Adjusted EPS, which excludes the company's equity
interest in Refinitiv, the currency revaluation benefits as well as
other adjustments, increased to $0.48
from $0.36 in the prior-year period,
primarily due to higher adjusted EBITDA.
Cash flow from operations increased, primarily due to a
$167 million pension plan
contribution in the prior-year period.
- Free cash flow increased for the same reason.
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
|
|
|
|
2020
|
2019
(1)
|
|
Total
|
Constant
Currency
|
Organic
(2)
|
Revenues
|
|
|
|
|
|
|
|
Legal
Professionals
|
|
$626
|
$600
|
|
4%
|
5%
|
4%
|
Corporates
|
|
367
|
346
|
|
6%
|
7%
|
5%
|
Tax &
Accounting Professionals
|
|
218
|
222
|
|
-2%
|
0%
|
0%
|
"Big 3" Segments
Combined
|
|
1,211
|
1,168
|
|
4%
|
5%
|
4%
|
Reuters
News
|
|
155
|
155
|
|
0%
|
0%
|
-4%
|
Global
Print
|
|
155
|
165
|
|
-6%
|
-5%
|
-5%
|
Eliminations/Rounding
|
|
(1)
|
(1)
|
|
|
|
|
Revenues
|
|
$1,520
|
$1,487
|
|
2%
|
3%
|
2%
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
Legal
Professionals
|
|
$230
|
$229
|
|
0%
|
1%
|
|
Corporates
|
|
117
|
111
|
|
5%
|
5%
|
|
Tax &
Accounting Professionals
|
|
84
|
92
|
|
-8%
|
-6%
|
|
"Big 3" Segments
Combined
|
|
431
|
432
|
|
0%
|
1%
|
|
Reuters
News
|
|
19
|
23
|
|
-14%
|
-27%
|
|
Global
Print
|
|
63
|
74
|
|
-15%
|
-15%
|
|
Corporate
costs
|
|
(33)
|
(132)
|
|
n/a
|
n/a
|
|
Adjusted
EBITDA
|
|
$480
|
$397
|
|
21%
|
22%
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Margin
|
|
|
|
|
|
|
|
Legal
Professionals
|
|
36.7%
|
38.1%
|
|
-140bp
|
-130bp
|
|
Corporates
|
|
31.9%
|
32.1%
|
|
-20bp
|
-60bp
|
|
Tax &
Accounting Professionals
|
|
38.7%
|
41.4%
|
|
-270bp
|
-290bp
|
|
"Big 3" Segments
Combined
|
|
35.6%
|
37.0%
|
|
-140bp
|
-140bp
|
|
Reuters
News
|
|
12.6%
|
14.6%
|
|
-200bp
|
-400bp
|
|
Global
Print
|
|
40.5%
|
44.7%
|
|
-420bp
|
-450bp
|
|
Corporate
costs
|
|
n/a
|
n/a
|
|
n/a
|
n/a
|
|
Adjusted EBITDA
margin
|
|
31.6%
|
26.7%
|
|
490bp
|
480bp
|
|
|
|
|
|
|
|
|
|
|
n/a: not
applicable
(1) For
comparative purposes, 2019 segment results have been adjusted to
reflect the current period presentation. For additional
information, see the "Adjustments to Prior-Period Segment Results"
section of this news release.
(2) Computed for
revenue growth only.
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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% (4% organic) to $626 million.
- Recurring revenues grew 6% (94% of total), driven by organic
revenue growth of 5% and strong growth from HighQ, which was
acquired in July 2019.
- Transactions revenues declined 11% (6% of total) due to the
sale of several small businesses in 2019 and declined 5%
organically.
Adjusted EBITDA of $230
million was flat.
- The margin decreased to 36.7% from 38.1%, primarily due to the
dilutive impact of the HighQ acquisition and timing of
expenses.
Corporates
Revenues increased 7% (5% organic) to $367 million, primarily due to strong recurring
revenue growth. Growth of 7% also reflected the acquisitions of
Confirmation (July 2019) and HighQ
(July 2019), which more than offset a
loss of revenues following the sale of the Pangea3/Legal Managed
Services business (May 2019).
- Recurring revenues grew 8% (77% of total), driven by organic
revenue growth of 7% and revenues from the acquisition of
HighQ.
- Transactions revenues grew 4% (23% of total), as revenues from
the acquisition of Confirmation more than offset the loss of
revenues following the sale of the Pangea3/Legal Managed Services
business. Transactions revenues declined 2% organically.
Adjusted EBITDA increased 5% to $117 million.
- The margin decreased from 32.1% to 31.9% reflecting slightly
higher expenses.
Tax & Accounting Professionals
Revenues of $218
million were unchanged (organic also unchanged) as expected,
due to the permanent acceleration of some UltraTax U.S. state tax
software releases from January 2020
to December 2019 to more closely
align with the traditional December release of U.S. federal tax
software. If the UltraTax software had been released in
January 2020, revenue growth for the
segment in the first quarter of 2020 would have been 6%.
- Recurring revenues declined 7% (72% of total), driven by an
organic revenue decline of 1%, due to the acceleration of UltraTax
software releases and by the loss of revenues from the sale of the
segment's Government business in November
2019.
- Transactions revenues grew 26% (28% of total), primarily due to
revenues contributed by Confirmation. Transactions revenues grew 3%
organically.
Adjusted EBITDA declined 8% to $84 million.
- The margin decreased from 41.4% to 38.7% due to the UltraTax
revenue timing.
- The Tax & Accounting Professionals segment is the company's
most seasonal business with nearly 60% of full-year revenues
typically generated in the first and fourth quarters. Because of
this, the margin performance in this segment historically has been
generally higher in the first and fourth quarters as costs
historically have been incurred in a more linear fashion throughout
the year.
Reuters News
Revenues of $155
million were flat and organic revenues decreased
4% due to COVID-19 related cancellations of events in the Reuters
Events business (formerly FC Business Intelligence), which was
acquired in October 2019.
- Nearly all of Reuters Events in-person conferences have been
postponed through August 2020, which
is expected to result in lost revenues of approximately
$25 million in the second quarter, or
about 50% of Reuters Events expected full-year revenues. The
Reuters Events business could forgo an additional $15 million of revenues in the fourth quarter of
2020 if it is unable to resume in-person conferences.
- Reuters News full-year 2020 revenues are expected to decline
between 4% and 6%.
Adjusted EBITDA was $19
million, down $4 million from
the prior-year period mainly due to costs associated with the
cancellation of Reuters Events and higher investments.
Global Print
Revenues decreased 5% to $155
million.
In the second quarter of 2020, the company expects Global
Print's revenues to decline by about $35
million, reflecting about a 15% to 25% decline in the
segment's organic revenues. While the company's manufacturing plant
in Minnesota remains open, as it
has been classified as an "essential business", the company is
experiencing significant customer requests to delay shipments.
These requests reflect that customers are not in their business
locations to accept the shipments due to government mandated
business shutdowns in the U.S. and many other countries. As these
materials have historically been viewed as critical content by law
firms and government agencies, the company currently expects most
of these shipments will eventually take place. As such, the company
believes that most of the second-quarter revenue loss will be
recouped in the third and fourth quarters if the economy gradually
re-opens and stabilizes. Full-year revenues for Global Print are
expected to decline between 7%-11%.
Adjusted EBITDA decreased 15% to $63
million.
- The margin decreased from 44.7% to 40.5% due to the decline in
revenues.
Corporate Costs
Corporate costs at the adjusted EBITDA level were
$33 million compared to $132 million in the prior-year period. The
decline reflects the completion of the company's program in 2019 to
reposition Thomson Reuters following the separation of F&R,
which required significant costs and investments.
Updated Business Outlook for 2020
Thomson Reuters today updated its full-year outlook for 2020.
The company originally communicated a 2020 full-year business
outlook in February 2020. Since the
middle of March, the global economy has
experienced unprecedented disruption due to the COVID-19
pandemic. Given the uncertainty about the duration and impact
of the crisis, it is still too early to predict how and when world
markets may recover.
Thomson Reuters has updated its outlook based on its current
view, and the company expects to provide another update with the
release of its second-quarter results. In addition, the company
provided a new full-year 2020 outlook for its "Big 3" segments
(Legal Professionals, Corporates and Tax & Accounting
Professionals) for total revenue growth, organic revenue growth and
adjusted EBITDA margin.
The updated outlook assumes diminished economic activity through
the second quarter followed by a gradual recovery through the
second half of 2020. The updated outlook also assumes the financial
and operational health of the company's customer base in both the
U.S. and global economies will gradually improve, which the company
believes will coincide with the easing of lockdowns and other
restrictions.
The company utilized three scenarios to update its
outlook. The three scenarios assume the gradual economic
improvement will begin in July 2020,
October 2020 and January 2021.
The company's updated outlook was derived by taking the mid-point
of the July 2020 and October 2020 scenarios.
The updated outlook also assumes that the company will be able
to mitigate the impact of anticipated lower 2020 revenues through
its $100 million cost reduction
program. While the company believes it will still generate strong
free cash flow, it has lowered its free cash flow forecast to
approximately $1.0 billion for the
full-year 2020. The lower free cash flow guidance assumes lower
revenues and temporary delays in collecting payments from some
customers, but the company believes this cash will be collected as
the economy improves.
The company's updated outlook for 2020 continues to assume
constant currency rates and excludes the impact of any future
acquisitions or dispositions that may occur in 2020. Thomson
Reuters believes that this type of guidance provides useful insight
into the performance of its businesses.
Second-Quarter 2020 Outlook (New)
Total company revenues for the second quarter of 2020 are
expected to decline between 1% and 2% and organic revenues are
expected to decline between 2% and 3%, primarily due to
cancellations of events in the Reuters News business and delays in
shipping of certain Global Print materials.
The company's "Big 3" segments (Legal Professionals, Corporates
and Tax & Accounting Professionals) collectively are expected
to achieve revenue growth between 2.5% and 3.5% and organic revenue
growth between 2% and 3% in the second quarter of 2020.
Full-Year 2020 Outlook
Total Thomson
Reuters
|
Original 2020
Outlook
(Communicated
on
February 25, 2020)
|
Updated
2020
Outlook
|
|
Before currency
and excluding the impact of future
acquisitions/dispositions
|
Total Revenue
Growth
|
4.5% -
5.5%
|
1.0% -
2.0%
|
Organic Revenue
Growth
|
4.0% -
4.5%
|
0% - 1.0%
|
Adjusted EBITDA
Margin
|
31.5% –
32.0%
|
31.0% –
32.0%
|
Corporate
Costs
|
$140 - $150
million
|
Unchanged
|
Free Cash
Flow
|
$1.2+
billion
|
~$1.0
billion
|
Capital Expenditures
- % of Revenue
|
7.5% -
8.0%
|
Unchanged
|
Depreciation &
Amortization of Computer Software
|
$625 - $650
million
|
Unchanged
|
Interest Expense
(P&L)
|
$175 - $200
million
|
$190 - $215
million
|
Effective Tax Rate on
Adjusted Earnings
|
Approx. 17% -
19%
|
Unchanged
|
"Big 3" – Legal
Professionals, Corporates and Tax
& Accounting Professionals
|
2020
Outlook
|
|
Before currency
and excluding the impact of future
acquisitions/dispositions
|
Total Revenue
Growth
|
3.0% -
4.0%
|
Organic Revenue
Growth
|
3.0% -
4.0%
|
Adjusted EBITDA
Margin
|
36.0% -
37.0%
|
The information in this section is
forward-looking. Actual results, which include the
impact of currency and acquisitions and dispositions completed
during 2020, 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."
Thomson Reuters Response to COVID-19: Supporting Employees,
Customers and Communities
- Thomson Reuters main priority has been the health and safety of
its employees and the company's actions have been driven by local
health authority directions and government mandates and guidelines.
The company is currently operating its business with approximately
98% of its employees working remotely from their homes. In parts of
Asia, the company is beginning a
gradual phased return to work in the office. Staff returning to
Thomson Reuters offices and essential employees around the world
who are not working from home, such as Reuters News journalists and
those running the company's print facilities, follow social
distancing and cleaning protocols. The company has also expanded
its health and welfare programs to help employees during the crisis
and has transitioned recruiting, onboarding and training of new
employees to a virtual experience. Thomson Reuters created a
dedicated site for its employees on the company intranet to serve
as a focal point for COVID-19 related information, including
updated company policies and Q&As, in multiple languages.
Technology utilized across the company has allowed Thomson Reuters
employees to continue to collaborate with customers and among
themselves regardless of where they are in the world, with
relatively little disruption.
- Thomson Reuters has approximately 500,000 customers that are
largely comprised of legal and tax professionals in corporations
and professional services firms. The U.S. Federal Government is
Thomson Reuters largest customer and comprised approximately 2% of
its 2019 revenues. As the company's customers can access most
Thomson Reuters products and services remotely and through the
Internet, the company has been able to help legal and tax
professionals remain productive during the period that they work
from home. Levels of product usage by customers remains high and
the company remains focused on supporting customers who are also
working in new operating environments by maintaining timely
responsiveness in call centers and continuing to implement products
into their infrastructures remotely. Thomson Reuters believes that
COVID-19 may result in more lawyers and accountants accelerating
their transformation to more technology-driven models on which the
company's products are built, given the changes that they are
experiencing in working remotely.
- Thomson Reuters relies on a global network of suppliers,
including third party service providers for telecommunications, as
well as other services that the company has outsourced, such as
certain accounting services, human resources administrative
functions, facilities management and IT services. Most of Thomson
Reuters' suppliers have also been impacted by the COVID-19 pandemic
and many of them are also working from home. Thomson Reuters has
not experienced any significant COVID-19 related supplier
disruptions or issues as of the date of this news release.
- The company believes that its Reuters News journalists are
delivering outstanding global reporting on COVID-19. In direct
response to COVID-19, Thomson Reuters legal and tax editorial staff
launched a COVID-19 resource center to support customers with free
resources regarding emerging regulatory guidance. Additionally,
Thomson Reuters court case management team is working to establish
virtual court hearings in selected locations to enable court
operations that otherwise would have ceased to continue. Thomson
Reuters Government business leveraged its investigative analytic
skills to help the U.S. government prevent distribution of
counterfeit COVID-19 testing kits and other unlicensed medical
equipment.
Liquidity and Capital Resources; Dividend and Share
Repurchases
Thomson Reuters principal sources of liquidity continue to be
cash on hand, cash provided by its operations, its $1.8 billion syndicated credit facility and its
$1.8 billion commercial paper
program. As set forth in the company's updated full-year 2020
outlook, Thomson Reuters expects to generate approximately
$1.0 billion of free cash flow this
year. As of March 31, 2020, Thomson
Reuters had $823 million of cash on
hand. As the economic crisis began to emerge, the company borrowed
$1.0 billion under its credit
facility in the first quarter of 2020 primarily to repay commercial
paper, but also as a precautionary measure given the economic
uncertainty caused by the COVID-19 pandemic. Amounts borrowed
under the credit facility are not due until 2024 although the
company may consider replacing some of these borrowings with
longer term debt in the near term. As of March 31, 2020, the company had $120 million of outstanding commercial
paper.
Thomson Reuters does not have debt securities maturing until
2023. Its net debt to adjusted EBITDA leverage ratio as of
March 31, 2020 was approximately
2.1x, which is lower than the company's target of 2.5x. As
calculated under its credit facility covenant, the company's net
debt to adjusted EBITDA leverage ratio was 1.9:1, well below the
allowed maximum of 4.5x.
The company does not anticipate any changes to its plans to pay
the annualized dividend. In February
2020, the company announced that its Board of Directors
approved a $0.08 per share annualized
increase in the dividend to $1.52 per
common share (representing the 27th consecutive year of
dividend increases). A quarterly dividend of $0.38 per share is payable on June 15, 2020 to common shareholders of record as
of May 21, 2020.
In October 2019, the company
announced that it planned to repurchase up to an additional
$200 million of its common shares
under its normal course issuer bid in 2020. These repurchases were
completed in February 2020 and the
company does not anticipate repurchasing more of its shares in the
near term.
The company believes that its existing sources of liquidity,
cash on hand, cash generated from operations and funds available
from its credit and commercial paper facilities, will be sufficient
to fund its projected cash requirements for the next 12 months.
Refinitiv Ownership Interest and Proposed Sale to
LSEG
On October 1, 2018, the company
sold a 55% interest in its F&R business to private equity funds
affiliated with Blackstone. Thomson Reuters retained a 45% interest
in the business, which is now known as Refinitiv. Thomson Reuters
includes its share of post-tax losses from its 45% interest in
Refinitiv, an equity method investment, in its net earnings,
however, it removes these amounts from its non-IFRS
calculation of adjusted EPS. Refinitiv achieved run-rate savings of
$538 million as of March 31, 2020. Refinitiv believes it is on track
to achieve its full annual cost savings run-rate target of
$650 million by the end of 2020.
Additional information regarding Refinitiv's financial results is
provided in the appendix to this news release.
On August 1, 2019, Thomson Reuters
and private equity funds affiliated with Blackstone agreed to
sell Refinitiv to LSEG in an all share transaction for a total
enterprise value of approximately $27
billion (as of the announcement date). The proposed
transaction is subject to regulatory clearances and other customary
closing conditions and is expected to close in the second half of
2020. Upon the closing of this transaction, Thomson Reuters is
projected to indirectly own approximately 82.5 million LSEG shares,
which would have a market value of approximately $7.6 billion based on LSEG's closing
share price on May 4, 2020.
Thomson Reuters
Thomson Reuters is a leading provider of business information
services. Our products include highly specialized
information-enabled software and tools for legal, tax, accounting
and compliance professionals combined with the world's most global
news service – Reuters. For more information on Thomson Reuters,
visit tr.com and for the latest world news,
reuters.com.
NON-IFRS FINANCIAL MEASURES
Thomson Reuters prepares its financial statements in
accordance with International Financial Reporting Standards (IFRS),
as issued by the International Accounting Standards Board
(IASB).
This news release includes certain non-IFRS financial
measures, 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
2020 impact 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 the occurrence or amount of other
operating gains and losses, which include fair value adjustments
relating to the warrants the company holds in Refinitiv as well as
gains or 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.
ADJUSTMENTS TO PRIOR-PERIOD SEGMENT RESULTS
The company adjusted its prior-period segment amounts to
reflect the current presentation. In the first quarter of 2020, in
connection with the completion of its program to reposition its
businesses after the separation from Refinitiv, the company
re-assessed its methodology for allocating costs to its business
segments and adjusted its allocations. For comparative purposes,
the prior period of 2019 was adjusted to reflect the current
methodology, with the effect of increasing adjusted EBITDA for
Reuters News by $7 million and
decreasing adjusted EBITDA for the Corporates segment by the same
amount. The other customer segments reflected minor adjustments to
adjusted EBITDA. Additionally, the 2019 segment amounts were
adjusted to reflect the transfer of $6
million of revenues from the Corporates segment to the Legal
Professionals segment, where they are better aligned. These changes
impacted the 2019 financial results of the segments, but did not
change consolidated 2019 financial results.
REVISION OF PRIOR-PERIOD FINANCIAL STATEMENTS
Since October 1, 2018, the
company has included its share of post-tax losses from its 45%
interest in Refinitiv, an equity method investment, in its net
earnings. As initially disclosed by the company on October 31, 2019, a misstatement was identified
in the third quarter of 2019 that understated the company's share
of Refinitiv's post-tax losses since the fourth quarter of
2018. The misstatement related to an accounting principle
difference for preferred stock issued by Refinitiv to the
Blackstone consortium between U.S. GAAP, the basis on which
Refinitiv prepares its financial statements, and IFRS, the basis on
which Thomson Reuters prepares its financial statements. The
misstatement, which does not impact revenue, operating
profit, segment measures, adjusted EBITDA, adjusted EPS, cash
flow from operations or free cash flow, was
immaterial to the company's previously issued financial
statements. As the correction of the cumulative misstatement
in the third quarter of 2019 would have been material to net
earnings in the quarter, the company revised its previously issued
financial statements. In conjunction with correcting this
misstatement, the company corrected other unrelated misstatements
in the applicable prior periods which were also not material to the
company's previously issued financial statements.
The company revised its previously issued financial
statements for the nine months ended September 30, 2018, the year ended December 31, 2018, the three months ended
March 31, 2019 and the six months
ended June 30, 2019.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL
RISKS AND MATERIAL ASSUMPTIONS
Certain statements in this news release, including, but not
limited to, statements in the "Updated Business Outlook for 2020"
section, statements regarding the potential or expected impact of
the COVID-19 pandemic on Thomson Reuters, its customers and the
general economy, Mr. Hasker's comments, the company's expectations
regarding dividends, share repurchases and its liquidity and
capital resources, the number of LSEG shares that Thomson Reuters
is projected to indirectly own upon closing of the proposed sale of
Refinitiv, the company's current expectations regarding the timing
for closing of the proposed LSEG/Refinitiv transaction, and
Refinitiv's belief regarding achieving its full annual cost savings
run-rate target by the end of 2020, 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 the proposed
LSEG/Refinitiv transaction will be completed or 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, 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; changes in the general economy
(including the impact of the pandemic on the U.S. and global
economies); actions of competitors; 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 develop 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; changes to
law and regulations; failure to adapt to organizational changes and
effectively implement strategic initiatives; failure to attract,
motivate and retain high quality 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; inadequate protection of
intellectual property rights; tax matters, including changes to tax
laws, regulations and treaties; fluctuations in foreign currency
exchange and interest rates; failure to protect the brands and
reputation of Thomson Reuters; threat of legal actions and claims;
downgrading of credit ratings and adverse conditions in the credit
markets; failure to efficiently complete the separation of
Refinitiv from Thomson Reuters; failure to complete the proposed
LSEG/Refinitiv transaction; the effect of factors outside of the
control of Thomson Reuters on funding obligations in respect of
pension and post-retirement benefit arrangements; risk of
antitrust/competition-related claims or investigations; actions or
potential actions that could be taken by the company's principal
shareholder, The Woodbridge Company Limited; impairment of goodwill
and other identifiable intangible assets; 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 www.thomsonreuters.com.
The company's updated 2020 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 updated 2020 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 diminished economic activity through
the second quarter followed by a gradual recovery through the
second half of 2020; the financial and operational health of
the company's customer base in both the U.S. and global
economies will gradually improve, which the company believes will
coincide with the easing of lockdowns and other
restrictions; the company will incur limited cancellations
of subscription contracts during the economic crisis, as its
products and services will remain critical for legal and tax
professionals; during the extended work from home period, Thomson
Reuters' customers will continue to access the company's products
remotely and will value high quality information and tools that
drive productivity and efficiency; the company will maintain its
ability to acquire some new customers during the economic crisis,
as it enhances its digital platforms and propositions or through
other sales initiatives; Reuters News will experience a significant
reduction in demand in its Reuters Events business due to the
cancellation of in-person events, as well as lower demand in its
consumer and news agency business; Thomson Reuters' workforce will
continue to be effective in a remote working environment for an
extended period, including the ability to implement new products
and service and support existing products for the company's
customers; the company's Global Print facility will continue to
remain open and its Reuters News journalists will continue to be
able to report on global events; customer requested shipment delays
of print materials will be temporary and will peak in the second
quarter and most delayed shipments will resume in the third and
fourth quarters of 2020; related to customer use of
Tax & Accounting Professionals' products, the original
April 15, 2020 filing deadline for
U.S. federal income tax returns is not further extended beyond
July 15, 2020 and the segment's
estimated tax product usage for the second quarter compared to the
third quarter does not materially vary from expectations; a
limited number of Thomson Reuters' smaller customers will be unable
to pay the company or will seek financial accommodations or
alternative payment terms due to their financial condition; and
customers will continue to seek software-as-a-service or other
cloud-based offerings. 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; continued investment in
growth markets, customer service, product development and digital
capabilities; and the company will be able to mitigate a
significant portion of the impact of lost revenues on adjusted
EBITDA margin through its cost savings programs, including reduced
spending on consulting and advisory services, travel and
entertainment, certain development initiatives and other
discretionary spend. Material assumptions related to the company's
free cash flow outlook are its ability to achieve its revenue and
adjusted EBITDA margin targets; capital expenditures are expected
to be approximately between 7.5% to 8.0% of revenues in 2020; a
limited number of Thomson Reuters' smaller customers will be unable
to pay the company or will seek financial accommodations or
alternative payment terms due to their financial condition; and
deferrals of payments from customers will be limited, and the
company's access to credit facilities will be sufficient to bridge
any gap. 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 2019 does not significantly change; no unexpected changes in tax
laws or treaties within the jurisdictions where the company
operates; the completion of the proposed sale of Refinitiv to LSEG
or the sale of another significant, but non-strategic, equity
investment at a significant gain in the second half of 2020;
depreciation and amortization of computer software between
$625 million and $650 million; and interest expense between
$190 million and $215 million.
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 secondary outbreaks 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;
competitive pricing actions and product innovation could impact the
company's revenues; the company's sales, commercial simplification
and product initiatives may be insufficient to retain customers or
generate new sales; factors that the company cannot anticipate may
reduce the effectiveness of its employees working remotely,
including the inability to execute on key product or customer
support initiatives or to perform implementation services remotely;
factors that the company cannot anticipate may require it to
suspend or cease operations at its Global Print facility or may
limit the ability of Reuters News journalists to report on certain
global events; a decline in Global Print revenues may be larger
than the company anticipates if customers do not resume shipments
because they are not able to return to their business locations or
for other reasons; and the expected seasonality of the
company's second-quarter revenues and profit, in particular Tax
& Accounting Professionals' results, could be further adversely
impacted if the filing deadline for U.S. federal income tax returns
is further extended beyond July 15,
2020 or if more tax product usage, which historically
peaks around U.S. filing deadlines, occurs in the third quarter
than expected. 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 of required investments
exceed expectations or actual returns are below expectations;
acquisition and disposal activity may dilute the company's adjusted
EBITDA margin; and the company's cost savings programs may be
insufficient to offset lost revenues. 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; capital
expenditures may be higher than currently expected resulting in
higher cash outflows; the timing and amount of tax payments to
governments may differ from the company's expectations; a
significant deterioration in the macroeconomic environment could
negatively impact the ability of Thomson Reuters' customers to pay
the company leading to reduced free cash flow and the tightening of
credit markets could limit the company's ability to bridge gaps in
payments leading to unexpected operational impacts on its
business. 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; the tax rates and calculations that apply to the
company's taxable income could be impacted if the transactions
described in the material assumptions for the effective tax rate on
adjusted earnings outlook do not occur; 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 2020. 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
David
Crundwell
Head of Corporate
Affairs
+44 7909 898
605
david.crundwell@tr.com
|
INVESTORS
Frank J.
Golden
Head of Investor
Relations
+1 646 223
5288
frank.golden@tr.com
|
Thomson Reuters will webcast a discussion of its
first-quarter 2020 results and updated business outlook for 2020
today beginning at 8:30 a.m. Eastern
Daylight Time (EDT). You can access the webcast by
visiting ir.thomsonreuters.com. An archive of the webcast will be
available following the presentation.
Thomson Reuters
Corporation
Consolidated
Income Statement
(millions of U.S.
dollars, except per share data)
(unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2020
|
2019
|
CONTINUING
OPERATIONS
|
|
|
Revenues
|
$1,520
|
$1,487
|
Operating
expenses
|
(1,017)
|
(1,091)
|
Depreciation
|
(40)
|
(34)
|
Amortization of
computer software
|
(111)
|
(105)
|
Amortization of other
identifiable intangible assets
|
(30)
|
(27)
|
Other operating
(losses) gains, net
|
(32)
|
44
|
Operating
profit
|
290
|
274
|
Finance costs,
net:
|
|
|
Net interest
expense
|
(45)
|
(35)
|
Other finance income
(costs)
|
47
|
(11)
|
Income before tax and
equity method investments
|
292
|
228
|
Share of post-tax
losses in equity method investments
|
(54)
|
(113)
|
Tax
expense
|
(47)
|
(1)
|
Earnings from
continuing operations
|
191
|
114
|
Earnings (loss) from
discontinued operations, net of tax
|
2
|
(10)
|
Net
earnings
|
$193
|
$104
|
Earnings attributable
to common shareholders
|
$193
|
$104
|
|
|
|
Earnings (loss)
per share:
|
|
|
Basic earnings (loss)
per share:
|
|
|
From
continuing operations
|
$0.38
|
$0.23
|
From
discontinued operations
|
0.01
|
(0.02)
|
Basic earnings per
share
|
$0.39
|
$0.21
|
|
|
|
Diluted earnings
(loss) per share:
|
|
|
From
continuing operations
|
$0.38
|
$0.22
|
From
discontinued operations
|
0.01
|
(0.02)
|
Diluted earnings per
share
|
$0.39
|
$0.20
|
|
|
|
Basic
weighted-average common shares
|
496,205,027
|
501,888,688
|
Diluted
weighted-average common shares
|
498,145,078
|
503,649,290
|
Thomson Reuters
Corporation
Consolidated
Statement of Financial Position
(millions of U.S.
dollars)
(unaudited)
|
|
|
March 31,
|
|
December
31,
|
2020
|
|
2019
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$823
|
|
$825
|
Trade and other
receivables
|
1,120
|
|
1,167
|
Other financial
assets
|
441
|
|
533
|
Prepaid expenses and
other current assets
|
558
|
|
546
|
Current
assets
|
2,942
|
|
3,071
|
|
|
|
|
Property and
equipment, net
|
591
|
|
615
|
Computer software,
net
|
901
|
|
900
|
Other identifiable
intangible assets, net
|
3,476
|
|
3,518
|
Goodwill
|
5,823
|
|
5,853
|
Equity method
investments
|
1,387
|
|
1,551
|
Other non-current
assets
|
639
|
|
611
|
Deferred
tax
|
1,157
|
|
1,176
|
Total
assets
|
$16,916
|
|
$17,295
|
|
|
|
|
Liabilities and
equity
|
|
|
|
Liabilities
|
|
|
|
Current
indebtedness
|
$1,121
|
|
$579
|
Payables, accruals
and provisions
|
1,143
|
|
1,373
|
Deferred
revenue
|
780
|
|
833
|
Other financial
liabilities
|
131
|
|
434
|
Current
liabilities
|
3,175
|
|
3,219
|
|
|
|
|
Long-term
indebtedness
|
2,676
|
|
2,676
|
Provisions and other
non-current liabilities
|
1,317
|
|
1,264
|
Deferred
tax
|
512
|
|
576
|
Total
liabilities
|
7,680
|
|
7,735
|
|
|
|
|
Equity
|
|
|
|
Capital
|
5,385
|
|
5,377
|
Retained
earnings
|
4,934
|
|
4,965
|
Accumulated other
comprehensive loss
|
(1,083)
|
|
(782)
|
Total
equity
|
9,236
|
|
9,560
|
Total liabilities
and equity
|
$16,916
|
|
$17,295
|
Thomson Reuters
Corporation
Consolidated
Statement of Cash Flow
(millions of U.S.
dollars)
(unaudited)
|
|
|
Three Months
Ended
March 31,
|
|
2020
|
2019
|
Cash provided by
(used in):
|
|
|
Operating
activities
|
|
|
Earnings from
continuing operations
|
$191
|
$114
|
Adjustments
for:
|
|
|
Depreciation
|
40
|
34
|
Amortization of
computer software
|
111
|
105
|
Amortization of other
identifiable intangible assets
|
30
|
27
|
Net losses (gains) on
disposals of businesses and investments
|
3
|
(24)
|
Deferred
tax
|
(3)
|
(68)
|
Other
|
62
|
144
|
Pension
contribution
|
-
|
(167)
|
Changes in working
capital and other items
|
(243)
|
(138)
|
Operating cash flows
from continuing operations
|
191
|
27
|
Operating cash flows
from discontinued operations
|
(15)
|
(57)
|
Net cash provided by
(used in) operating activities
|
176
|
(30)
|
|
|
|
Investing
activities
|
|
|
Acquisitions, net of
cash acquired
|
(124)
|
(4)
|
(Payments) proceeds
from disposals of businesses and investments
|
(3)
|
34
|
Capital
expenditures
|
(142)
|
(138)
|
Proceeds from
disposals of property and equipment
|
19
|
-
|
Other investing
activities
|
1
|
3
|
Investing cash flows
from continuing operations
|
(249)
|
(105)
|
Investing cash flows
from discontinued operations
|
-
|
29
|
Net cash used in
investing activities
|
(249)
|
(76)
|
|
|
|
Financing
activities
|
|
|
Proceeds from
debt
|
1,020
|
-
|
Repayments of
debt
|
(645)
|
-
|
Net borrowings under
short-term loan facilities
|
118
|
-
|
Payments of lease
principal
|
(18)
|
(11)
|
Repurchases of common
shares
|
(200)
|
(190)
|
Dividends paid on
preference shares
|
(1)
|
(1)
|
Dividends paid on
common shares
|
(182)
|
(174)
|
Other financing
activities
|
(12)
|
35
|
Net cash provided by
(used in) financing activities
|
80
|
(341)
|
Increase (decrease)
in cash and bank overdrafts
|
7
|
(447)
|
Translation
adjustments
|
(10)
|
2
|
Cash and bank
overdrafts at beginning of period
|
825
|
2,703
|
Cash and bank
overdrafts at end of period
|
$822
|
$2,258
|
Cash and bank
overdrafts at end of period comprised of:
|
|
|
Cash and cash
equivalents
|
$823
|
$2,258
|
Bank
overdrafts
|
(1)
|
-
|
|
$822
|
$2,258
|
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,
|
|
|
2020
|
2019
|
|
Earnings from
continuing operations
|
$191
|
$114
|
|
Adjustments to
remove:
|
|
|
|
Tax expense
|
47
|
1
|
|
Other finance (income)
costs
|
(47)
|
11
|
|
Net interest
expense
|
45
|
35
|
|
Amortization of other
identifiable intangible assets
|
30
|
27
|
|
Amortization of
computer software
|
111
|
105
|
|
Depreciation
|
40
|
34
|
|
EBITDA
|
$417
|
$327
|
|
Adjustments to
remove:
|
|
|
|
Share of post-tax
losses in equity method investments
|
54
|
113
|
|
Other operating losses
(gains), net
|
32
|
(44)
|
|
Fair value
adjustments
|
(23)
|
1
|
|
Adjusted
EBITDA
|
$480
|
$397
|
|
Adjusted EBITDA
margin(1)
|
31.6%
|
26.7%
|
|
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,
|
|
|
2020
|
2019
|
Change
|
Net
earnings
|
$193
|
$104
|
|
Adjustments to
remove:
|
|
|
|
Fair value
adjustments
|
(23)
|
1
|
|
Amortization of other
identifiable intangible assets
|
30
|
27
|
|
Other operating losses
(gains), net
|
32
|
(44)
|
|
Other finance (income)
costs
|
(47)
|
11
|
|
Share of post-tax
losses in equity method investments
|
54
|
113
|
|
Tax on above
items
|
(31)
|
(29)
|
|
Tax items impacting
comparability
|
30
|
(11)
|
|
(Earnings) loss from
discontinued operations, net of tax
|
(2)
|
10
|
|
Interim period
effective tax rate normalization(3)
|
4
|
-
|
|
Dividends declared on
preference shares
|
(1)
|
(1)
|
|
Adjusted
earnings(2)
|
$239
|
$181
|
|
Adjusted
EPS(2)
|
$0.48
|
$0.36
|
33%
|
Foreign
currency(4)
|
|
|
-3%
|
Constant
currency(4)
|
|
|
36%
|
|
|
|
|
Diluted
weighted-average common shares (millions)
|
498.1
|
503.6
|
|
|
Refer to page 19 for
footnotes.
|
Thomson Reuters
Corporation
|
Reconciliation of
Net Cash Provided By (Used In) Operating Activities to Free Cash
Flow(5)
|
(millions of U.S.
dollars)
|
(unaudited)
|
|
|
Three Months
Ended
|
March
31,
|
|
2020
|
2019
|
Net cash provided
by (used in) operating activities
|
$176
|
$(30)
|
Capital
expenditures
|
(142)
|
(138)
|
Proceeds from
disposals of property and equipment
|
19
|
-
|
Other investing
activities
|
1
|
3
|
Payments of lease
principal
|
(18)
|
(11)
|
Dividends paid on
preference shares
|
(1)
|
(1)
|
Free cash
flow
|
$35
|
$(177)
|
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,
2020
|
Current
indebtedness
|
|
$1,121
|
Long-term
indebtedness
|
|
2,676
|
Total
debt
|
|
3,797
|
Remove transaction
costs and discounts included in the carrying value of
debt
|
|
35
|
Add: lease
liabilities
|
|
321
|
Less: cash and cash
equivalents
|
|
(823)
|
Net
debt
|
|
$3,330
|
|
|
|
Adjusted
EBITDA*
|
|
$1,576
|
|
|
|
Net Debt /
Adjusted EBITDA*
|
|
2.1x
|
|
|
|
|
* 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 $480 million, $396 million,
$345 million and $355 million for the three months ended March 31,
2020, December 31, 2019, September 30, 2019 and June 30, 2019,
respectively. Refer to the tables appended to this news release and
Appendix C of the company's 2019 annual management's discussions
and analysis, which is contained in the company's 2019 annual
report, 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 (Total, Recurring and Transactions) 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
|
|
|
2020
|
2019*
|
|
Total
|
Foreign
Currency
|
SUBTOTAL Constant
Currency
|
Acquisitions/
(Divestitures)
|
Organic
|
Total
Revenues
|
|
|
|
|
|
|
|
|
|
Legal
Professionals
|
|
$626
|
$600
|
|
4%
|
-1%
|
5%
|
1%
|
4%
|
Corporates
|
|
367
|
346
|
|
6%
|
-1%
|
7%
|
2%
|
5%
|
Tax &
Accounting Professionals
|
|
218
|
222
|
|
-2%
|
-2%
|
0%
|
1%
|
0%
|
"Big 3" Segments
Combined
|
|
1,211
|
1,168
|
|
4%
|
-1%
|
5%
|
1%
|
4%
|
Reuters
News
|
|
155
|
155
|
|
0%
|
0%
|
0%
|
4%
|
-4%
|
Global
Print
|
|
155
|
165
|
|
-6%
|
-1%
|
-5%
|
0%
|
-5%
|
Eliminations/Rounding
|
|
(1)
|
(1)
|
|
|
|
|
|
|
Revenues
|
|
$1,520
|
$1,487
|
|
2%
|
-1%
|
3%
|
1%
|
2%
|
|
|
|
|
|
|
|
|
|
|
Recurring
Revenues
|
|
|
|
|
|
|
|
|
|
Legal
Professionals
|
|
$587
|
$556
|
|
6%
|
-1%
|
6%
|
1%
|
5%
|
Corporates
|
|
281
|
263
|
|
7%
|
-1%
|
8%
|
1%
|
7%
|
Tax &
Accounting Professionals
|
|
158
|
173
|
|
-9%
|
-2%
|
-7%
|
-5%
|
-1%
|
"Big 3" Segments
Combined
|
|
1,026
|
992
|
|
3%
|
-1%
|
4%
|
0%
|
4%
|
Reuters
News
|
|
142
|
143
|
|
-1%
|
-1%
|
-1%
|
0%
|
-1%
|
Total Recurring
Revenues
|
|
$1,168
|
$1,135
|
|
3%
|
-1%
|
4%
|
0%
|
4%
|
|
|
|
|
|
|
|
|
|
|
Transactions
Revenues
|
|
|
|
|
|
|
|
|
|
Legal
Professionals
|
|
$39
|
$44
|
|
-12%
|
-1%
|
-11%
|
-6%
|
-5%
|
Corporates
|
|
86
|
83
|
|
3%
|
-1%
|
4%
|
6%
|
-2%
|
Tax &
Accounting Professionals
|
|
60
|
49
|
|
24%
|
-1%
|
26%
|
22%
|
3%
|
"Big 3" Segments
Combined
|
|
185
|
176
|
|
5%
|
-1%
|
6%
|
7%
|
-1%
|
Reuters
News
|
|
13
|
12
|
|
9%
|
5%
|
4%
|
36%
|
-32%
|
Total Transactions
Revenues
|
|
$198
|
$188
|
|
5%
|
-1%
|
6%
|
10%
|
-4%
|
|
|
|
|
|
|
|
|
|
|
* For comparative
purposes, 2019 segment results have been adjusted to reflect the
current period presentation. For additional information, see the
"Adjustments to Prior-Period Segment Results" section of this news
release.
|
|
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
|
|
|
2020
|
2019*
|
|
Total
|
Foreign
Currency
|
Constant
Currency
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
Legal
Professionals
|
|
$230
|
$229
|
|
0%
|
-1%
|
1%
|
Corporates
|
|
117
|
111
|
|
5%
|
0%
|
5%
|
Tax &
Accounting Professionals
|
|
84
|
92
|
|
-8%
|
-2%
|
-6%
|
"Big 3" Segments
Combined
|
|
431
|
432
|
|
0%
|
-1%
|
1%
|
Reuters
News
|
|
19
|
23
|
|
-14%
|
12%
|
-27%
|
Global
Print
|
|
63
|
74
|
|
-15%
|
0%
|
-15%
|
Corporate
costs
|
|
(33)
|
(132)
|
|
n/a
|
n/a
|
n/a
|
Adjusted
EBITDA
|
|
$480
|
$397
|
|
21%
|
-1%
|
22%
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Margin
|
|
|
|
|
|
|
|
Legal
Professionals
|
|
36.7%
|
38.1%
|
|
-140bp
|
-10bp
|
-130bp
|
Corporates
|
|
31.9%
|
32.1%
|
|
-20bp
|
40bp
|
-60bp
|
Tax &
Accounting Professionals
|
|
38.7%
|
41.4%
|
|
-270bp
|
20bp
|
-290bp
|
"Big 3" Segments
Combined
|
|
35.6%
|
37.0%
|
|
-140bp
|
0bp
|
-140bp
|
Reuters
News
|
|
12.6%
|
14.6%
|
|
-200bp
|
200bp
|
-400bp
|
Global
Print
|
|
40.5%
|
44.7%
|
|
-420bp
|
30bp
|
-450bp
|
Corporate
costs
|
|
n/a
|
n/a
|
|
n/a
|
n/a
|
n/a
|
Adjusted EBITDA
margin
|
|
31.6%
|
26.7%
|
|
490bp
|
10bp
|
480bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a: not
applicable
|
|
* For comparative
purposes, 2019 segment results have been adjusted to reflect the
current period presentation. For additional information, see the
"Adjustments to Prior-Period Segment Results" section of this news
release.
|
|
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, dividends paid on the
company's preference shares, and dividends paid to non-controlling
interests. 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 (including the associated fair value of hedging
instruments, but excluding the associated unamortized transaction
costs and premiums or discounts and the interest-related fair value
component of 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.
|
APPENDIX – INFORMATION ABOUT REFINITIV
Thomson Reuters owns a 45% interest in Refinitiv, which was
formerly its wholly owned F&R business. 55% of Refinitiv is
owned by private equity funds affiliated with Blackstone. Thomson
Reuters IFRS results include the company's 45% share of Refinitiv's
results reported in a single line item on the company's
consolidated income statement titled
"Share of post-tax losses in equity method
investments."
Thomson Reuters non-IFRS measures, including
adjusted earnings, exclude its
share of post-tax results in Refinitiv and
other equity method investments.
The table below sets forth selected financial information for
100% of Refinitiv for the three months ended March 31, 2020 and 2019 on both an IFRS and
non-IFRS basis. Refinitiv reports on a US GAAP basis and provides a
reconciliation to IFRS in accordance with Thomson Reuters
accounting policies. A reconciliation from these IFRS measures to
the related non-IFRS measures is also included in this
appendix.
(millions of U.S.
dollars, except for margins)
|
|
|
Change
|
(unaudited)
Three months ended
March 31,
|
2020
|
2019
|
Total
|
Before
Currency
&
Excluding
Businesses
Disposed
|
IFRS
Measures
|
|
|
|
|
Revenues
|
$1,633
|
$1,567
|
4%
|
5%
|
|
|
|
|
|
Net loss
|
$(93)
|
$(243)
|
|
|
Cash flow from
operations
|
$(54)
|
$(200)
|
|
|
Capital expenditures,
less proceeds from disposals
|
$186
|
$131
|
|
|
Debt at March 31,
2020 and March 31, 2019
|
$13,698
|
$13,895
|
|
|
|
|
|
|
|
Non-IFRS
Measures
|
|
|
|
|
Adjusted
EBITDA
|
$620
|
$557
|
|
|
Adjusted EBITDA
margin
|
38.0%
|
35.5%
|
|
|
Free cash
flow
|
$(245)
|
$(341)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following reconciliations of IFRS measures to non-IFRS
measures are based on Refinitiv's definition of non-GAAP measures,
which is not the same as the definitions used by Thomson
Reuters.
Refinitiv
|
Reconciliation of
Net Loss to Adjusted EBITDA
|
(millions of U.S.
dollars, except for margins)
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
March
31,
|
|
2020
|
2019
|
Net
loss
|
$(93)
|
$(243)
|
Adjustments to
remove:
|
|
|
Tax benefit
|
-
|
(22)
|
Finance
costs
|
166
|
235
|
Depreciation and
amortization
|
471
|
463
|
EBITDA
|
$544
|
$433
|
Adjustments to
remove:
|
|
|
Share of post-tax
earnings in equity method investments
|
(1)
|
-
|
Other operating
(gains) losses
|
(54)
|
1
|
Fair value
adjustments
|
6
|
22
|
Share-based
compensation
|
13
|
4
|
Transformation-related
costs
|
112
|
97
|
Adjusted
EBITDA
|
$620
|
$557
|
Adjusted EBITDA
margin
|
38.0%
|
35.5%
|
Refinitiv
|
Reconciliation of
Net Cash Used In Operating Activities to Free Cash
Flow
|
(millions of U.S.
dollars)
|
(unaudited)
|
|
|
Three Months
Ended
|
March
31,
|
|
2020
|
2019
|
Net cash used in
operating activities
|
$(54)
|
$(200)
|
Capital expenditures,
less proceeds from disposals
|
(186)
|
(131)
|
Other investing
activities
|
1
|
(1)
|
Dividends paid to
non-controlling interests
|
(6)
|
(9)
|
Free cash
flow
|
$(245)
|
$(341)
|
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