Thomson Reuters
Reports Fourth-Quarter and Full-Year 2018 Results
TORONTO, Feb. 26, 2019 /PRNewswire/ -- Thomson
Reuters (TSX/NYSE: TRI) today reported results for the fourth
quarter and full year ended December 31,
2018.
-
The company achieved its full-year 2018 Outlook and provided its
future Outlook
-
The Thomson Reuters Board of Directors approved a $0.04 per share annualized increase in the
dividend to $1.44 per common share.
This represents the 26th consecutive year of dividend
increases.
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"It was encouraging to see our positive momentum continue
through the fourth quarter," said Jim
Smith, president and CEO of Thomson Reuters. "With the solid
close to an eventful year, we enter 2019 with a 'new' Thomson
Reuters superbly positioned to build on the improved organic
revenue growth rate we achieved in 2018. The financial services
partnership with Blackstone is up and running smoothly, and our
management team is now focused on accelerating the leading
positions we hold in our core markets."
Consolidated Financial Highlights - Three Months Ended
December 31
On October 1, 2018, Thomson
Reuters sold a 55% interest in the company's Financial & Risk
(F&R) business, now known as Refinitiv. Except as otherwise
noted, all amounts are from continuing operations and exclude the
results of the company's former F&R business. Beginning
October 1, 2018, the company's IFRS
earnings per share include its share of results from its 45%
investment in Refinitiv, which is removed from the company's
non-IFRS calculation of adjusted EPS. Results also include new
revenues in the Reuters News business from providing news and
editorial content to Refinitiv since October
1, 2018. Finally, in the fourth quarter of 2018, the company
began reporting in a new customer-focused structure with five
customer segments. Prior-year results have been restated
accordingly and can be found in the Investor Relations section of
the company's website.
Three Months Ended
December 31,
(Millions of U.S. dollars, except for adjusted EBITDA margin and
EPS)
(unaudited) |
|
|
IFRS Financial Measures (1) |
2018 |
2017 |
Change |
Change at
Constant
Currency |
Revenues |
$1,519 |
$1,414 |
7% |
|
Operating profit |
$146 |
$254 |
-43% |
|
Diluted earnings per share (EPS) (includes
discontinued operations) |
$6.18 |
$0.81 |
663% |
|
Cash flow from operations (includes discontinued
operations) |
$(10) |
$755 |
n/m |
|
Non-IFRS Financial Measures
(1) |
|
|
|
|
Revenues |
$1,519 |
$1,414 |
7% |
9% |
Adjusted EBITDA |
$285 |
$408 |
-30% |
-33% |
Adjusted EBITDA margin |
18.8% |
28.9% |
-1010bp |
-1120bp |
Adjusted EPS |
$0.20 |
$0.22 |
-9% |
-18% |
Free cash flow (includes discontinued
operations) |
$(167) |
$506 |
n/m |
|
|
(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. |
Revenues increased 7% due to higher recurring revenues,
which included new revenues in Reuters News from providing news and
editorial content to Refinitiv since October
1, 2018.
-
At constant currency, revenues increased 9%.
-
Organic revenue growth was 3%, driven by a 5% increase in
recurring revenues, which comprised 77% of total revenues. The 5%
increase in recurring revenues was partially offset by a 5% decline
in Global Print revenues (13% of total revenues) and a 3% decline
in Transactions revenues (10% of total revenues).
Operating profit decreased 43% due to costs and
investments to reposition Thomson Reuters following the separation
of the F&R business from the company.
-
Adjusted EBITDA decreased 30% and the margin decreased to
18.8%, reflecting the same factors.
Diluted earnings per share (EPS) was $6.18 compared to $0.81 in the prior-year period, primarily due to
a $3.4 billion gain on the sale of a
55% interest in the F&R business, which was reported within
discontinued operations, as well as lower shares outstanding as a
result of shares repurchased with some of the F&R transaction
proceeds and a related share consolidation.
-
Adjusted EPS, which excludes discontinued operations
among other items, was $0.20 compared
to $0.22 in the prior-year period,
primarily due to the same factors that affected Operating Profit,
however these factors were mitigated by the impact of share
repurchases and lower interest expense.
Cash flow from operations decreased primarily due to
costs and investments to reposition Thomson Reuters following the
separation of the F&R business from the company and the loss of
three months of cash flows from the former F&R business in 2018
(compared to 2017 when the business was included for the full
year).
-
Free cash flow decreased for the same reasons.
Highlights by
Customer Segment – Three Months Ended December 31 |
|
(Millions of U.S.
dollars, except for adjusted EBITDA margins)
(unaudited) |
|
|
Three Months Ended |
|
|
|
|
|
|
December
31, |
|
Change |
|
|
2018 |
2017 |
|
Total |
Foreign
Currency |
Constant
Currency |
Revenues |
|
|
|
|
|
|
|
Legal Professionals |
|
$599 |
$580 |
|
3% |
-1% |
4% |
Corporates |
|
315 |
301 |
|
5% |
-2% |
7% |
Tax Professionals |
|
248 |
239 |
|
4% |
-4% |
8% |
Reuters News |
|
155 |
75 |
|
107% |
-4% |
111% |
Global Print |
|
203 |
219 |
|
-7% |
-3% |
-4% |
Eliminations |
|
(1) |
- |
|
|
|
|
Revenues |
|
$1,519 |
$1,414 |
|
7% |
-2% |
9% |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
Legal Professionals |
|
$221 |
$185 |
|
19% |
2% |
17% |
Corporates |
|
87 |
99 |
|
-12% |
1% |
-13% |
Tax Professionals |
|
118 |
97 |
|
22% |
1% |
21% |
Reuters News |
|
6 |
(2) |
|
n/m |
n/m |
n/m |
Global Print |
|
88 |
94 |
|
-6% |
-1% |
-5% |
Corporate costs |
|
(235) |
(65) |
|
n/a |
n/a |
n/a |
Adjusted EBITDA |
|
$285 |
$408 |
|
-30% |
3% |
-33% |
|
|
|
|
|
|
|
|
Adjusted EBITDA
Margin |
|
|
|
|
|
|
|
Legal Professionals |
|
36.9% |
31.9% |
|
500bp |
100bp |
400bp |
Corporates |
|
27.6% |
32.9% |
|
-530bp |
80bp |
-610bp |
Tax Professionals |
|
47.6% |
40.6% |
|
700bp |
170bp |
530bp |
Reuters News |
|
3.9% |
-2.7% |
|
660bp |
330bp |
330bp |
Global Print |
|
43.3% |
42.9% |
|
40bp |
90bp |
-50bp |
Corporate costs |
|
n/a |
n/a |
|
n/a |
n/a |
n/a |
Adjusted EBITDA margin |
|
18.8% |
28.9% |
|
-1010bp |
110bp |
-1120bp |
|
|
|
|
|
|
|
|
n/a; not applicable
n/m; not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unless otherwise noted, all revenue
growth comparisons by customer segment in this news release are at
constant currency (or exclude the impact of foreign
currency) as Thomson Reuters believes this provides the best basis
to measure their performance.
Legal Professionals
Revenues increased 4% to $599
million.
-
Recurring revenues grew 4% (91% of total).
-
Transactions revenues grew 4% (9% of total).
Adjusted EBITDA increased 19% to $221 million.
-
The margin increased from 31.9% to 36.9% primarily due to higher
revenues and severance charges incurred in the prior-year period
that did not reoccur.
Corporates
Revenues increased 7% to $315
million. The acquisition of Integration Point (a global
trade management business) in the fourth quarter of 2018
contributed approximately 100 basis points to the growth rate.
-
Recurring revenues grew 11% (83% of total) driven by organic
revenue growth of 10% and revenues from the acquisition of
Integration Point.
-
Transactions revenues declined 10% (17% of total), due to lower
revenues from Legal Managed Services and businesses in Latin America.
Adjusted EBITDA decreased 12% to $87 million.
-
The margin decreased from 32.9% to 27.6% due to costs required
to stand up the new Corporates segment as well as the dilutive
impact of the Integration Point acquisition.
Tax Professionals
Revenues increased 8% to
$248 million.
-
Recurring revenues grew 9% (89% of total).
-
Transactions revenues declined 3% (11% of total).
Adjusted EBITDA grew 22% to $118 million.
-
The margin increased from 40.6% to 47.6% due to higher revenues
as well as lower expenses in the Government business versus the
prior-year period.
Reuters News
Revenues increased 111% to $155
million due to revenue from the 30-year agreement for
Reuters News to supply news and editorial content to Refinitiv,
which began in the fourth quarter of 2018. Organic revenues
increased 1%.
Adjusted EBITDA was $6
million, an increase of $8
million from the prior-year period primarily due to the fact
that the fourth quarter of 2017 included about $9 million of severance charges.
Global Print
Revenues decreased 4% to
$203 million.
Adjusted EBITDA decreased 6% to
$88 million.
-
The margin increased slightly from 42.9% to 43.3%.
Corporate Costs
Corporate costs at the adjusted EBITDA level were
$235 million compared to $65 million in the prior-year period. As
previously disclosed, the increase was due to costs and investments
to reposition Thomson Reuters following the separation with
F&R. These cash investments are expected to continue in
2019.
Consolidated
Financial Highlights – Year Ended December 31 |
|
Year Ended December
31,
(Millions of U.S. dollars, except for adjusted EBITDA margin and
EPS)
(unaudited) |
IFRS Financial Measures(1) |
2018 |
2017 |
Change |
Change at
Constant
Currency |
Revenues |
$5,501 |
$5,297 |
4% |
|
Operating profit |
$780 |
$1,034 |
-25% |
|
Diluted EPS (includes discontinued
operations) |
$5.91 |
$1.94 |
205% |
|
Cash flow from operations (includes discontinued
operations) |
$2,062 |
$2,029 |
2% |
|
Non-IFRS Financial
Measures(1) |
|
|
|
|
Revenues |
$5,501 |
$5,297 |
4% |
4% |
Adjusted EBITDA |
$1,365 |
$1,591 |
-14% |
-15% |
Adjusted EBITDA margin |
24.8% |
30.0% |
-520bp |
-560bp |
Adjusted EPS |
$0.75 |
$0.94 |
-20% |
-22% |
Free cash flow (includes discontinued
operations) |
$1,107 |
$1,032 |
7% |
|
|
(1) In addition to results
reported in accordance with 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. |
Revenues increased 4% due to higher recurring revenues,
which included new revenues in Reuters News from providing news and
editorial content to Refinitiv since October
1, 2018. Foreign currency had no impact on full-year revenue
results.
-
Organic revenue growth was 2.5%, driven by 5% growth in
recurring revenues, which comprised 75% of total revenues.
Operating profit decreased 25% due to costs and
investments to reposition Thomson Reuters following the separation
of the F&R business from the company.
-
Adjusted EBITDA decreased 14% and the margin decreased to 24.8%,
reflecting the same factors.
Diluted EPS was $5.91
compared to $1.94 in the prior year
period primarily due to a $3.4
billion gain on the sale of a 55% interest in the company's
F&R business, which was reported within discontinued
operations.
-
Adjusted EPS, which excludes discontinued operations among other
items, was $0.75, compared to
$0.94, primarily due to the same
factors that affected operating profit.
Cash flow from operations increased 2% despite the
loss of three months of cash flows from the company's former
F&R business in 2018, compared to 2017, when the business was
included for the full year. This reflected that the prior year
included a $500 million pension plan
contribution.
-
Free cash flow increased 7% reflecting the same
factors.
Highlights by
Customer Segment – Year Ended December 31 |
|
(Millions of U.S.
dollars, except for adjusted EBITDA margins)
(unaudited) |
|
|
Twelve Months Ended |
|
|
|
|
|
|
|
December
31, |
|
Change |
|
|
2018 |
2017 |
|
Total |
Foreign
Currency |
Constant
Currency |
Revenues |
|
|
|
|
|
|
|
Legal Professionals |
|
$2,373 |
$2,284 |
|
4% |
0% |
4% |
Corporates |
|
1,238 |
1,186 |
|
4% |
-1% |
5% |
Tax Professionals |
|
794 |
767 |
|
4% |
-2% |
6% |
Reuters News |
|
370 |
296 |
|
25% |
1% |
24% |
Global Print |
|
728 |
764 |
|
-5% |
-2% |
-3% |
Eliminations |
|
(2) |
- |
|
|
|
|
Revenues |
|
$5,501 |
$5,297 |
|
4% |
0% |
4% |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
Legal Professionals |
|
$816 |
$794 |
|
3% |
1% |
2% |
Corporates |
|
395 |
411 |
|
-4% |
0% |
-4% |
Tax Professionals |
|
273 |
252 |
|
8% |
-1% |
9% |
Reuters News |
|
27 |
27 |
|
0% |
19% |
-19% |
Global Print |
|
320 |
335 |
|
-4% |
0% |
-4% |
Corporate costs |
|
(466) |
(228) |
|
n/a |
n/a |
n/a |
Adjusted EBITDA |
|
$1,365 |
$1,591 |
|
-14% |
1% |
-15% |
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin |
|
|
|
|
|
|
|
Legal Professionals |
|
34.4% |
34.8% |
|
-40bp |
20bp |
-60bp |
Corporates |
|
31.9% |
34.7% |
|
-280bp |
40bp |
-320bp |
Tax Professionals |
|
34.4% |
32.9% |
|
150bp |
60bp |
90bp |
Reuters News |
|
7.3% |
9.1% |
|
-180bp |
130bp |
-310bp |
Global Print |
|
44.0% |
43.8% |
|
20bp |
50bp |
-30bp |
Corporate costs |
|
n/a |
n/a |
|
n/a |
n/a |
n/a |
Adjusted EBITDA margin |
|
24.8% |
30.0% |
|
-520bp |
40bp |
-560bp |
|
|
|
|
|
|
|
|
n/a:
not applicable |
|
|
|
|
|
|
|
|
|
|
Business Outlook for 2019 and 2020 (At
Constant Currency)
Thomson Reuters today provided its Outlook for 2019 and 2020.
The company's Outlook for 2019 and 2020 assumes constant currency
rates compared to 2018 and does not factor in the impact of
acquisitions or divestitures that may occur.
|
2018
Actual |
2019 Outlook
Before Currency |
2020 Outlook
Before Currency |
Revenue Growth |
4%(1) |
7% - 8.5%(2) |
3.5% - 4.5% |
Adjusted EBITDA |
$1.4 billion
($1.3 billion before currency) |
$1.4 - $1.5
billion(3) |
30.0% - 31.0%(3) |
Corporate Costs |
$499 million |
~$570 million |
$140 - $190 million |
Free Cash Flow |
$1.1 billion |
$0 - $300 million |
$1.0 - $1.2 billion |
Capital Expenditures - % of Revenue |
~10% |
~9% |
7.5% - 8.0% |
Depreciation & Amortization of
Computer Software |
$510 million |
$600 - $625
million(3) |
TBD |
Interest Expense (P&L) |
$260 million |
$150 - $175 million |
TBD |
Effective Tax Rate on Adjusted
Earnings |
15% |
16% - 19% |
~20% |
|
|
(1) |
2018 organic revenue growth was
2.5%. |
(2) |
2019 organic revenue growth is
expected to be 3% - 3.5%. |
(3) |
The impact of the new lease
accounting standard (IFRS 16) is expected to increase both adjusted
EBITDA and depreciation and amortization of computer software by an
estimated $40 million in 2019 and $50 million in 2020 and is
reflected in this Outlook. IFRS 16 has no impact on free cash
flow. |
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 is forward-looking and
should also be read in conjunction with the section below entitled
"Special Note Regarding Forward-Looking Statements, Material Risks
and Material Assumptions."
Dividend and Share Repurchases
The Thomson Reuters Board of Directors approved a $0.04 per share annualized increase in the
dividend to $1.44 per common share. A
quarterly dividend of $0.36 per share
is payable on March 20, 2019 to
common shareholders of record as of March 8,
2019.
Today, the company also announced that it plans to repurchase up
to an additional $250 million of its
shares under its normal course issuer bid.
Financial & Risk Transaction
Proceeds Update
On October 1, 2018, Thomson
Reuters sold a 55% interest in its F&R business to private
equity funds managed by Blackstone for approximately $17 billion in gross cash proceeds and retained a
45% interest in the business, which is now known as Refinitiv.
The company returned $10 billion
of the F&R transaction proceeds to its shareholders as
follows:
|
Amount |
Substantial issuer bid/tender offer |
$6.5 billion |
Return of capital transaction |
$2.3 billion |
Share repurchases under normal course issuer
bid |
$1.2 billion |
In October 2018, Thomson Reuters
used approximately $4 billion of the
proceeds to repay debt, enabling it to remain substantially below
its target leverage ratio (net debt/adjusted EBITDA) of 2.5:1.
As previously disclosed, the company intends to utilize
$2 billion of the proceeds to
fund strategic, targeted acquisitions to bolster its positions
in key growth segments of its Legal Professionals, Tax
Professionals and Corporates businesses. In November 2018, the company acquired Integration
Point, an international leader in global trade management
operations.
The company is using approximately $1 billion of the proceeds for cash taxes,
pension contributions, bond redemption costs, and other fees and
expenses related to the transaction. This amount includes
approximately $600 million to
eliminate stranded costs as well as investments to reposition the
company following the separation of the businesses. Approximately
$270 million of this amount was
incurred in 2018, with the balance expected to be incurred in
2019.
Thomson Reuters
Thomson Reuters (TSX/NYSE: TRI) is the world's leading provider
of news and information-based tools to professionals. Our worldwide
network of journalists and specialist editors keep customers up to
speed on global developments, with a particular focus on legal,
regulatory and tax changes. Thomson Reuters shares are listed on
the Toronto and New York Stock
Exchanges. 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 business segment level), free
cash flow, adjusted EPS, and selected measures excluding the impact
of foreign currency. 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 term "organic"
refers to Thomson Reuters' existing businesses before the impact of
acquisitions, dispositions, and IFRS 15. For purposes of the
organic revenue calculation, the company's 30-year news agreement
with Refinitiv that was signed on October 1,
2018 is treated as an acquisition until October 1, 2019.
The company's business outlook
contains various non-IFRS financial measures. The company believes
that providing reconciliations of forward-looking non-IFRS
financial measures in its business 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
2019 or 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 generally
arise from business transactions that it does not currently
anticipate.
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 "Business
Outlook for 2019 and 2020 (At Constant Currency)" section, Mr.
Smith's comments and the company's anticipated uses of the
remaining proceeds from the F&R transaction, are
forward-looking. 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 events described in any
forward-looking statement will materialize. Forward-looking
statements 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 our company's control and
the effects of them can be difficult to 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, changes in the general economy; actions of
competitors; 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; fraudulent
or unpermitted data access or other cyber-security or privacy
breaches; failures or disruptions of telecommunications, data
centers, network systems or the Internet; increased accessibility
to free or relatively inexpensive information sources; 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; changes to law and regulations; tax matters,
including changes to tax laws, regulations and treaties;
fluctuations in foreign currency exchange and interest rates;
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
protect the brands and reputation of Thomson Reuters; inadequate
protection of intellectual property rights; threat of legal actions
and claims; downgrading of credit ratings and adverse conditions in
the credit markets; failure to derive fully the anticipated
benefits from the sale of the former F&R business and the
Refinitiv strategic partnership with Blackstone; failure to
efficiently complete the separation of Refinitiv from Thomson
Reuters; failure to derive fully the anticipated benefits from
existing or future acquisitions, joint ventures, investments or
dispositions; 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; impairment
of goodwill and other identifiable intangible assets; and actions
or potential actions that could be taken by the company's principal
shareholder, The Woodbridge Company Limited. These and other
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 2019 and 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, as
well as other factors that the company believes are appropriate
under the circumstances. Economic and market assumptions include,
but are not limited to, GDP growth in the
United States (approximately 80% of the company's 2018
revenues) and secondarily, in other countries where Thomson
Reuters operates; a continued increase in the demand and need for
high quality information and tools that help automate or manage
workflow solutions and drive productivity and efficiency; a
continued need for trusted products and services that help
customers navigate evolving and complex legal, tax, accounting,
regulatory, geopolitical and commercial changes, developments and
environments; and a continued increase in customers seeking
software-as-a-service or other cloud-based offerings. Internal
financial and operational assumptions include, but are not limited
to, continued growth in the company's recurring revenue base which
offsets anticipated declines in its global print business;
acquiring new customers by enhancing the company's digital
platforms and propositions and through other sales initiatives;
improving customer retention through commercial simplification
efforts and customer service improvements; the company's ability to
continue to combine information, technology and human expertise in
offerings that meet evolving customer demands and needs; the
company's ability to reduce stranded costs related to the F&R
transaction and the separation of the two businesses to less than
$50 million in 2020; and the
successful execution of a number of efficiency initiatives that are
expected to generate cost savings, such as reducing headcount,
office locations and the number of products offered by the company
and the leveraging of fewer, shared technology platforms.
Our company has provided a business
outlook for the purpose of presenting information about current
expectations for 2019 and 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.
CONTACTS |
|
MEDIA |
INVESTORS |
David Crundwell |
Frank J. Golden |
Head of Communications |
Senior Vice President, Investor Relations |
+1 416 649 9904 |
+1 646 223 5288 |
david.crundwell@tr.com |
frank.golden@tr.com |
Thomson Reuters will webcast a
discussion of its fourth-quarter and full-year 2018 results and
business outlook for 2019 and 2020 today beginning at 8:30 a.m. Eastern Standard Time (EST). 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 |
|
Twelve Months
Ended |
|
December
31, |
|
December
31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
CONTINUING OPERATIONS |
|
|
|
|
|
|
|
Revenues |
$1,519 |
|
$1,414 |
|
$5,501 |
|
$5,297 |
Operating expenses |
(1,230) |
|
(1,008) |
|
(4,131) |
|
(3,706) |
Depreciation |
(27) |
|
(28) |
|
(110) |
|
(113) |
Amortization of computer software |
(106) |
|
(92) |
|
(400) |
|
(357) |
Amortization of other identifiable intangible
assets |
(26) |
|
(32) |
|
(109) |
|
(135) |
Other operating gains, net |
16 |
|
- |
|
29 |
|
48 |
Operating profit |
146 |
|
254 |
|
780 |
|
1,034 |
Finance costs, net: |
|
|
|
|
|
|
|
Net interest expense |
(19) |
|
(87) |
|
(260) |
|
(357) |
Other finance income
(costs) |
3 |
|
(25) |
|
13 |
|
(170) |
Income before tax and equity method
investments |
130 |
|
142 |
|
533 |
|
507 |
Share of post-tax losses in equity method
investments |
(217) |
|
- |
|
(212) |
|
(4) |
Tax benefit (expense) |
11 |
|
160 |
|
(141) |
|
134 |
(Loss) earnings from continuing
operations |
(76) |
|
302 |
|
180 |
|
637 |
Earnings from discontinued operations, net of
tax |
3,478 |
|
289 |
|
3,859 |
|
822 |
Net earnings |
$3,402 |
|
$591 |
|
$4,039 |
|
$1,459 |
|
|
|
|
|
|
|
|
Earnings attributable to: |
|
|
|
|
|
|
|
Common shareholders |
3,402 |
|
576 |
|
3,949 |
|
1,395 |
Non-controlling interests |
- |
|
15 |
|
90 |
|
64 |
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
Basic and diluted (loss) earnings per share: |
|
|
|
|
|
|
|
From continuing operations |
$(0.14) |
|
$0.42 |
|
$0.27 |
|
$0.88 |
From discontinued operations |
6.32 |
|
0.39 |
|
5.64 |
|
1.06 |
Basic and diluted earnings per share |
$6.18 |
|
$0.81 |
|
$5.91 |
|
$1.94 |
|
|
|
|
|
|
|
|
Basic weighted-average common shares |
550,091,316 |
|
711,543,112 |
|
667,586,385 |
|
718,769,705 |
Diluted weighted-average common shares |
550,091,316 |
|
713,001,123 |
|
668,210,717 |
|
720,193,505 |
Thomson Reuters
Corporation |
Consolidated
Statement of Financial Position |
(millions of U.S.
dollars) |
(unaudited) |
|
|
December 31, |
|
December 31, |
2018 |
|
2017 |
Assets |
|
|
|
Cash and cash equivalents |
$2,706 |
|
$874 |
Trade and other receivables |
1,313 |
|
1,457 |
Other financial assets |
76 |
|
98 |
Prepaid expenses and other current assets |
434 |
|
548 |
Current assets |
4,529 |
|
2,977 |
|
|
|
|
Computer hardware and other property, net |
473 |
|
921 |
Computer software, net |
908 |
|
1,458 |
Other identifiable intangible assets, net |
3,324 |
|
5,315 |
Goodwill |
5,076 |
|
15,042 |
Equity method investments |
2,207 |
|
167 |
Other financial assets |
53 |
|
83 |
Other non-current assets |
446 |
|
438 |
Deferred tax |
31 |
|
79 |
Total assets |
$17,047 |
|
$26,480 |
|
|
|
|
Liabilities and equity |
|
|
|
Liabilities |
|
|
|
Current indebtedness |
$3 |
|
$1,644 |
Payables, accruals and provisions |
1,569 |
|
2,086 |
Deferred revenue |
795 |
|
937 |
Other financial liabilities |
95 |
|
129 |
Current liabilities |
2,462 |
|
4,796 |
|
|
|
|
Long-term indebtedness |
3,213 |
|
5,382 |
Provisions and other non-current liabilities |
1,268 |
|
1,740 |
Other financial liabilities |
79 |
|
279 |
Deferred tax |
799 |
|
708 |
Total liabilities |
7,821 |
|
12,905 |
|
|
|
|
Equity |
|
|
|
Capital |
5,348 |
|
9,549 |
Retained earnings |
4,755 |
|
7,201 |
Accumulated other comprehensive loss |
(877) |
|
(3,673) |
Total shareholders' equity |
9,226 |
|
13,077 |
Non-controlling interests |
- |
|
498 |
Total equity |
9,226 |
|
13,575 |
Total liabilities and equity |
$17,047 |
|
$26,480 |
Thomson Reuters
Corporation |
Consolidated
Statement of Cash Flow |
(millions of U.S.
dollars) |
(unaudited) |
|
|
Three Months
Ended
December 31, |
|
Twelve Months
Ended
December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Cash provided by (used in): |
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
(Loss) earnings from continuing operations |
$(76) |
|
$302 |
|
$180 |
|
$637 |
Adjustments for: |
|
|
|
|
|
|
|
Depreciation |
27 |
|
28 |
|
110 |
|
113 |
Amortization of computer software |
106 |
|
92 |
|
400 |
|
357 |
Amortization of other identifiable intangible
assets |
26 |
|
32 |
|
109 |
|
135 |
Net gains on disposals of businesses and
investments |
- |
|
(1) |
|
- |
|
(36) |
Deferred tax |
(224) |
|
(180) |
|
(167) |
|
(286) |
Other |
276 |
|
87 |
|
394 |
|
361 |
Pension contribution |
- |
|
- |
|
- |
|
(500) |
Changes in working capital and other
items |
(71) |
|
(123) |
|
(134) |
|
(151) |
Operating cash flows from continuing
operations |
64 |
|
237 |
|
892 |
|
630 |
Operating cash flows from discontinued
operations |
(74) |
|
518 |
|
1,170 |
|
1,399 |
Net cash (used in) provided by operating
activities |
(10) |
|
755 |
|
2,062 |
|
2,029 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
Acquisitions, net of cash acquired |
(418) |
|
(1) |
|
(478) |
|
(2) |
Proceeds from disposals of businesses and
investments |
- |
|
- |
|
6 |
|
50 |
Capital expenditures |
(156) |
|
(127) |
|
(576) |
|
(519) |
Proceeds from disposals of property and
equipment |
- |
|
- |
|
27 |
|
- |
Other investing activities |
(1) |
|
2 |
|
18 |
|
18 |
Investing cash flows from continuing
operations |
(575) |
|
(126) |
|
(1,003) |
|
(453) |
Investing cash flows from discontinued
operations |
16,088 |
|
(108) |
|
15,732 |
|
(594) |
Net cash provided by (used in) investing
activities |
15,513 |
|
(234) |
|
14,729 |
|
(1,047) |
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
Proceeds from debt |
- |
|
- |
|
1,370 |
|
- |
Repayments of debt |
(2,349) |
|
(1,012) |
|
(3,719) |
|
(2,112) |
Payments for substantial issuer bid/tender offer
on common shares |
(6,485) |
|
- |
|
(6,485) |
|
- |
Payments of return of capital on common
shares |
(2,303) |
|
- |
|
(2,303) |
|
- |
Net (repayments) borrowings under short-term loan
facilities |
(1,739) |
|
936 |
|
(1,661) |
|
1,641 |
Repurchases of common shares |
(686) |
|
(192) |
|
(1,174) |
|
(1,000) |
Dividends paid on preference shares |
(1) |
|
- |
|
(3) |
|
(2) |
Dividends paid on common shares |
(193) |
|
(236) |
|
(900) |
|
(956) |
Other financing activities |
(11) |
|
(25) |
|
(1) |
|
5 |
Financing cash flows from continuing
operations |
(13,767) |
|
(529) |
|
(14,876) |
|
(2,424) |
Financing cash flows from discontinued
operations |
- |
|
(16) |
|
(60) |
|
(66) |
Net cash used in financing activities |
(13,767) |
|
(545) |
|
(14,936) |
|
(2,490) |
Increase (decrease) in cash and bank
overdrafts |
1,736 |
|
(24) |
|
1,855 |
|
(1,508) |
Translation adjustments |
1 |
|
- |
|
(20) |
|
9 |
Cash and bank overdrafts at beginning of
period |
966 |
|
892 |
|
868 |
|
2,367 |
Cash and bank overdrafts at end of period |
$2,703 |
|
$868 |
|
$2,703 |
|
$868 |
|
|
|
|
|
|
|
|
Cash and bank overdrafts at end of period
comprised of: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$2,706 |
|
$874 |
|
$2,706 |
|
$874 |
Bank overdrafts |
(3) |
|
(6) |
|
(3) |
|
(6) |
|
$2,703 |
|
$868 |
|
$2,703 |
|
$868 |
.
Thomson Reuters
Corporation |
Reconciliation of
(Loss) Earnings from Continuing Operations to Adjusted EBITDA
(1) |
(millions of U.S.
dollars, except for margins) |
(unaudited) |
|
|
Three Months
Ended |
|
Twelve Months
Ended |
December
31, |
|
December
31, |
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing
operations |
$(76) |
|
$302 |
|
n/m |
|
$180 |
|
$637 |
|
-72% |
Adjustments to remove: |
|
|
|
|
|
|
|
|
|
|
|
Tax (benefit) expense |
(11) |
|
(160) |
|
|
|
141 |
|
(134) |
|
|
Other finance (income) costs |
(3) |
|
25 |
|
|
|
(13) |
|
170 |
|
|
Net interest expense |
19 |
|
87 |
|
|
|
260 |
|
357 |
|
|
Amortization of other identifiable intangible
assets |
26 |
|
32 |
|
|
|
109 |
|
135 |
|
|
Amortization of computer software |
106 |
|
92 |
|
|
|
400 |
|
357 |
|
|
Depreciation |
27 |
|
28 |
|
|
|
110 |
|
113 |
|
|
EBITDA |
$88 |
|
$406 |
|
|
|
$1,187 |
|
$1,635 |
|
|
Adjustments to remove: |
|
|
|
|
|
|
|
|
|
|
|
Share of post-tax losses in equity
method
investments |
217 |
|
- |
|
|
|
212 |
|
4 |
|
|
Other operating gains, net |
(16) |
|
- |
|
|
|
(29) |
|
(48) |
|
|
Fair value adjustments |
(4) |
|
2 |
|
|
|
(5) |
|
- |
|
|
Adjusted EBITDA |
$285 |
|
$408 |
|
-30% |
|
$1,365 |
|
$1,591 |
|
-14% |
Adjusted EBITDA margin(1) |
18.8% |
|
28.9% |
|
-1010bp |
|
24.8% |
|
30.0% |
|
-520bp |
|
n/m – not meaningful |
Thomson Reuters
Corporation |
Reconciliation of
Net Earnings to Adjusted Earnings(2) |
(millions of U.S.
dollars, except for share and per share data) |
(unaudited) |
|
|
Three
Months Ended
December 31, |
|
Twelve
Months Ended
December 31, |
|
|
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
Net earnings |
$3,402 |
|
$591 |
|
476% |
|
$4,039 |
|
$1,459 |
|
177% |
Adjustments to remove: |
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments |
(4) |
|
2 |
|
|
|
(5) |
|
- |
|
|
Amortization of other identifiable intangible
assets |
26 |
|
32 |
|
|
|
109 |
|
135 |
|
|
Other operating gains, net |
(16) |
|
- |
|
|
|
(29) |
|
(48) |
|
|
Other finance (income) costs |
(3) |
|
25 |
|
|
|
(13) |
|
170 |
|
|
Share of post-tax losses in equity method
investments |
217 |
|
- |
|
|
|
212 |
|
4 |
|
|
Tax on above items |
(56) |
|
(5) |
|
|
|
(74) |
|
(17) |
|
|
Tax items impacting comparability |
26 |
|
(205) |
|
|
|
126 |
|
(204) |
|
|
Earnings from discontinued operations, net of
tax |
(3,478) |
|
(289) |
|
|
|
(3,859) |
|
(822) |
|
|
Interim period effective tax rate
normalization(3) |
- |
|
8 |
|
|
|
- |
|
- |
|
|
Dividends declared on preference shares |
(1) |
|
- |
|
|
|
(3) |
|
(2) |
|
|
Adjusted earnings |
$113 |
|
$159 |
|
-29% |
|
$503 |
|
$675 |
|
-25% |
Adjusted EPS |
$0.20 |
|
$0.22 |
|
-9% |
|
$0.75 |
|
$0.94 |
|
-20% |
Foreign currency(4) |
|
|
|
|
9% |
|
|
|
|
|
2% |
Constant currency(4) |
|
|
|
|
-18% |
|
|
|
|
|
-22% |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average common shares
(millions) |
551.3 |
|
713.0 |
|
|
|
668.2 |
|
720.2 |
|
|
|
Refer to page 15 for footnotes. |
Thomson Reuters
Corporation |
Reconciliation of
Net Cash (Used in) Provided by Operating Activities to Free Cash
Flow(5) |
(millions of U.S.
dollars) |
(unaudited) |
|
|
Three Months
Ended |
|
Twelve Months
Ended |
December
31, |
|
December
31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net cash (used in) provided by operating
activities |
$(10) |
|
$755 |
|
$2,062 |
|
$2,029 |
Capital expenditures |
(156) |
|
(127) |
|
(576) |
|
(519) |
Proceeds from disposals of property and
equipment |
- |
|
- |
|
27 |
|
- |
Other investing activities |
(1) |
|
2 |
|
18 |
|
18 |
Other investing activities from discontinued
operations |
1 |
|
(108) |
|
(361) |
|
(428) |
Financing activities from discontinued
operations |
- |
|
(16) |
|
(60) |
|
(66) |
Dividends paid on preference shares |
(1) |
|
- |
|
(3) |
|
(2) |
Free cash flow |
$(167) |
|
$506 |
|
$1,107 |
|
$1,032 |
|
|
|
|
|
|
|
|
|
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) |
Adjusted earnings and adjusted EPS include
dividends declared on preference shares but exclude 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 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. |
|
|
|
Because Thomson Reuters reported a net loss for
continuing operations under IFRS for the three months ended
December 31, 2018, the weighted-average number of common shares
used for basic and diluted loss per share is the same for all
per-share calculations in the period, as the effect of stock
options and other equity incentive awards would reduce the loss per
share, and therefore be anti-dilutive. Since the company's non-IFRS
measure "adjusted earnings" is a profit, potential common shares
are included, as they lower adjusted EPS and are therefore
dilutive. |
|
|
|
The following table reconciles IFRS and non-IFRS
common share information: |
|
(weighted-average common shares) |
Three Months Ended
December 31, 2018 |
|
|
IFRS: Basic and Diluted |
550,091,316 |
Effect of stock options and other equity incentive
awards |
1,217,214 |
Non-IFRS Diluted |
551,308,530 |
|
(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 (includes free cash flow from
continuing and discontinued operations) is net cash provided by
(used in) operating activities, proceeds from disposals of property
and equipment, and other investing activities less capital
expenditures, dividends paid on the company's preference shares,
and dividends paid to non-controlling interests from discontinued
operations. 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. |
APPENDIX – INFORMATION ABOUT
REFINITIV
As of October 1, 2018, 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 managed by Blackstone. Beginning with the fourth
quarter of 2018, Thomson Reuters' IFRS results include the
company's 45% share of Refinitiv's results reported in a single
line item on the company's 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.
Because Refinitiv has only been in existence since October 1, 2018, there are no financial
statements for the business for the full year ended December 31, 2018.
The table below sets forth selected financial information for
100% of Refinitiv for the fourth quarter of 2018, on both an IFRS
and non-IFRS basis, as well as a reconciliation between the two
bases, as provided to Thomson Reuters from Refinitiv for inclusion
in this news release. The information for the fourth quarter of
2017 that was previously reported for the F&R business by
Thomson Reuters is not fully comparable to Refinitiv's current
basis of presentation, as Refinitiv must apply accounting rules
related to the purchase of the business and because Refinitiv
defines its non-IFRS measures differently than Thomson Reuters. To
provide a reasonable basis to assess revenue trends for the
business, Thomson Reuters has noted the 2017 revenues, as
previously reported by the company on a discontinued operations
basis prior to the change in ownership, and provided a supplemental
change before currency and purchase accounting adjustments.
The following
information, which has been provided by Refinitiv, is unaudited
and is reflected in millions of U.S. dollars, except for
adjusted EBITDA margin |
|
|
|
Q4 |
|
Refinitiv
Actuals
2018 |
As
Reported
by
Thomson
Reuters
2017 |
Change |
Change
before
currency
& purchase
accounting
adjustments |
IFRS Measures |
|
|
|
|
Revenues |
$1,550 |
$1,532 |
1% |
3% |
|
|
|
|
|
Net loss |
$(477) |
|
|
|
Cash flow from operations |
$299 |
|
|
|
Capital expenditures |
$70 |
|
|
|
Debt at 12/31/2018 |
$12,989 |
|
|
|
Preferred equity at 12/31/2018 |
$963 |
|
|
|
|
|
|
|
|
Non-IFRS Measures |
|
|
|
|
Adjusted EBITDA |
$486 |
|
|
|
Adjusted EBITDA
margin |
31.4% |
|
|
|
Free cash flow |
$210 |
|
|
|
|
|
|
|
|
The following
reconciliation of IFRS measures to non-IFRS measures was provided
by Refinitiv. The definitions of non-IFRS measures used by
Refinitiv are not the same as those of Thomson Reuters. |
|
Refinitiv |
Reconciliation of
Net Loss to Adjusted EBITDA |
(millions of U.S.
dollars, except for margins) |
(unaudited) |
|
|
Three Months
Ended |
December 31, |
|
2018 |
Net loss |
$(477) |
Adjustments to remove: |
|
Tax benefit |
(58) |
Finance costs |
201 |
Depreciation and amortization |
472 |
EBITDA |
$138 |
Adjustments to remove: |
|
Other operating losses |
23 |
Fair value adjustments |
(7) |
Transformation- related costs |
332 |
Adjusted EBITDA |
$486 |
Adjusted EBITDA margin |
31.4% |
|
|
Refinitiv |
Reconciliation of
Net Cash Provided by Operating Activities to Free Cash
Flow |
(millions of U.S.
dollars) |
(unaudited) |
|
|
Three Months Ended |
December 31, |
|
2018 |
Net cash provided by operating
activities |
$299 |
Capital expenditures |
(70) |
Dividends paid to non-controlling interests
|
(19) |
Free cash flow |
$210 |