Thomson Reuters Reports Second-Quarter 2023 Results

TORONTO, Aug. 2, 2023 /PRNewswire/ -- Thomson Reuters (TSX/NYSE: TRI) today reported results for the second quarter ended June 30, 2023:

• Solid revenue momentum continued in the second quarter
  • Total company revenue up 2% / organic revenue up 5%
    • Organic revenue up 7% for the "Big 3" segments (Legal Professionals, Corporates and Tax & Accounting Professionals)
• Based on Q2 performance, maintained full-year 2023 outlook for organic revenue, adjusted EBITDA margin and free cash flow
  • Interest expense, tax rate and accrued capital expenditures outlooks updated
• Completed $2 billion return of capital transaction; and reduced share count by 15.8 million shares in concurrent consolidation
• Sold 15.5 million shares of the London Stock Exchange Group (LSEG) in the second quarter, for gross proceeds of $1.6 billion
• Signed definitive agreement in June to acquire Casetext and completed Reuters acquisition of Imagen in July

"I am pleased with our performance in the second quarter as we continued to see good momentum across our portfolio despite an uncertain macro backdrop," said Steve Hasker, president and CEO of Thomson Reuters. "Importantly, our confidence around the opportunity that generative AI brings to us and our customers continues to strengthen. We made good progress in executing our 'build, partner, buy' approach throughout the quarter, with organic AI builds progressing, our announcement of an intelligent drafting solution with Microsoft, and the announcement of our intention to acquire Casetext. Our capital capacity and liquidity will also remain a key asset as we look to continue innovating in our markets, strengthening our leading positions and generating shareholder value."

Consolidated Financial Highlights - Three Months Ended June 30

Revenues increased 2%, driven by growth across four of the company's five business segments. Net divestitures had a 3% negative impact on revenues and foreign currency had no impact.

• Organic revenues increased 5%, driven by 6% growth in recurring revenues (80% of total revenues) as well as 6% growth in transactions revenues. Global Print revenues decreased 4% organically.
• The company's "Big 3" segments reported organic revenue growth of 7% and collectively comprised 81% of total revenues.

Operating profit increased 111% primarily due to the gain on the sale of a majority stake in the company's Elite business. Higher revenues and lower costs also contributed to operating profit growth.

• Adjusted EBITDA, which excludes the gain on sale of Elite, as well as other adjustments, increased 18% due to higher revenues and lower costs. The related margin increased to 40.1% from 34.7% in the prior-year period. Lower costs reflected Change Program investments made in the prior-year period, which benefited the year-over-year change in adjusted EBITDA margin by 190bp, as well as the timing of expenses. Foreign currency contributed 10bp to the change.

Diluted EPS was $1.90 compared to a diluted loss per share of $0.24 in the prior-year period. The increase reflected higher operating profit and an increase in the value of the company's investment in LSEG, while the prior-year period included a significant reduction in the value of the company's investment in LSEG.

• Adjusted EPS, which excludes the gain on the sale of a majority stake in Elite, changes in value of the company's LSEG investment, as well as other adjustments, increased to $0.84 per share from $0.60 per share in the prior-year period, primarily due to higher adjusted EBITDA.

Net cash provided by operating activities increased $262 million primarily due to the cash benefits from higher revenues and lower costs, lower tax payments, and favorable movements in working capital.

• Free cash flow increased $254 million primarily due to the same factors as net cash provided by operating activities.

Highlights by Customer Segment - Three Months Ended June 30

Unless otherwise noted, all revenue growth comparisons by customer segment in this news release are at constant currency (or exclude the impact of foreign currency) as Thomson Reuters believes this provides the best basis to measure their performance.

Legal Professionals

Revenues increased 1% to $705 million, reflecting a significant negative impact from net divestitures. Organic revenues increased 6%.

• Recurring revenues grew 2% (95% of total, 5% organic). Organic growth was primarily driven by Westlaw, Practical Law, HighQ, and the segment's international businesses.
• Transactions revenues declined 12% (5% of total, 12% organic growth). Organic growth was primarily due to the Government business and revenue timing at Findlaw.

Adjusted EBITDA increased 14% to $345 million.

• The margin increased to 48.9% from 43.4%, driven by higher revenues and the timing of expenses, with the latter expected to normalize in the second half of the year.

Corporates

Revenues increased 5% to $392 million, including a negative impact from net divestitures. Organic revenues increased 7%.

• Recurring revenues grew 5% (87% of total, 8% organic) primarily driven by strong growth in Practical Law, CLEAR and our Latin America business.
• Transactions revenues grew 2% (13% of total, decreased 1% organic).

Adjusted EBITDA increased 17% to $163 million.

• The margin increased to 41.6% from 37.4%, driven by higher revenues and the timing of expenses, with the latter expected to normalize in the second half of the year.

Tax & Accounting Professionals

Revenues increased 7% to $229 million, including a negative impact from net divestitures. Organic revenues increased 10%.

• Recurring revenues increased 1% (73% of total, 9% organic). Organic growth was driven by the segment's Latin America business.
• Transactions revenues increased 27% (27% of total, 12% organic) primarily due to Confirmation and SurePrep.

Adjusted EBITDA increased 10% to $89 million.

• The margin increased to 38.5% from 37.4%, driven by higher revenues.

The Tax & Accounting Professionals segment is the company's most seasonal business with approximately 60% of full-year revenues typically generated in the first and fourth quarters. As a result, the margin performance of this segment has been generally higher in the first and fourth quarters as costs are typically incurred in a more linear fashion throughout the year.

Reuters News

Revenues of $194 million increased 2% (1% organic). The moderation in revenue growth was driven by a lower contractual price increase in 2023 compared to 2022 of our news agreement with the Data & Analytics business of LSEG, slower events growth and lower digital revenues.

Adjusted EBITDA increased 2% to $45 million, primarily due to currency benefits.

Global Print

Revenues decreased 5% (decreased 4% organic) to $133 million, which was in line with our expectations.

Adjusted EBITDA increased 5% to $53 million.

• The margin increased to 39.7% from 35.4%, driven largely by expense timing related to materials sourcing and labor. We expect this to normalize in Q3.

Corporate Costs

Corporate costs at the adjusted EBITDA level were $33 million. Corporate costs were $57 million in the prior-year period and included $30 million of Change Program costs.

Consolidated Financial Highlights - Six Months Ended June 30

Revenues increased 3%, driven by growth across four of the company's five business segments. Net divestitures had a 2% negative impact on revenues and foreign currency had 1% negative impact.

• Organic revenues increased 6%, driven by 6% growth in recurring revenues (78% of total revenues) as well as 9% growth in transactions revenues. Global Print revenues decreased 2% organically.
• The company's "Big 3" segments reported organic revenue growth of 7% and collectively comprised 81% of total revenues.

Operating profit increased 66% primarily due to the gain on the sale of a majority stake in the company's Elite business. Higher revenues and lower costs also contributed to operating profit growth.

• Adjusted EBITDA, which excludes the gain on sale of Elite, as well as other adjustments, increased 15% due to higher revenues and lower costs. The related margin increased to 39.4% from 35.3% in the prior-year period. Lower costs reflected Change Program investments made in the prior-year period, which benefited the year-over-year change in adjusted EBITDA margin by 190bp, as well as the timing of expenses. Foreign currency contributed 30bp to the year-over-year change.

Diluted EPS was $3.49 per share compared to $1.83 per share in the prior-year period primarily due to higher operating profit and an increase in the current period in the value of the company's investment in LSEG.

• Adjusted EPS, which excludes the gain on the sale of a majority stake in the company's Elite business, changes in value of the company's LSEG investment, as well as other adjustments, increased to $1.67 per share from $1.26 per share in the prior-year period, primarily due to higher adjusted EBITDA.

Net cash provided by operating activities increased $254 million due to cash benefits from higher revenues and lower costs, lower tax payments, and favorable movements in working capital.

• Free cash flow increased $301 million due to higher cash flows from operating activities as well as lower capital expenditures. The prior-year period included investments in the Change Program.

Highlights by Customer Segment - Six Months Ended June 30