Thomson Reuters
Reports Third-Quarter 2020 Results
IFRS revenues and organic revenues up
2%
"Big 3" revenues up 4%; organic
revenues up 5%
Operating profit up 21%; adjusted
EBITDA up 42%
Raising full-year outlook for
adjusted EBITDA margin and free cash flow
TORONTO, Nov. 3, 2020 /PRNewswire/ -- Thomson Reuters
(TSX/NYSE: TRI) today reported results for the third quarter ended
September 30, 2020.
"I'm very pleased to report our markets and businesses continue
to prove resilient in the face of a challenging broader
macro-environment. Our third-quarter results were above our
expectations across the group from the top line to the bottom line.
Our customers are adapting to a new cadence in this environment,
and we continue to adapt to support them in their evolving ways of
working," said Steve Hasker,
President and CEO of Thomson Reuters.
"We exceeded each of the revenue guidance metrics previously
provided on a consolidated basis and for our Big 3 segments - Legal
Professionals, Corporates and Tax & Accounting Professionals.
Based on our performance for the first nine months of the year, I'm
confident we will continue to effectively manage through this
challenging environment and build on this performance in 2021."
"And, our organization is now approaching an exciting crossroads
as we begin the transition from a holding company to an operating
company. I view the direction we are headed in as a logical
progression for our organization as we seek to continually
strengthen our businesses, elevate our value proposition, enhance
the customer experience and maximize our performance, which I
believe will present substantive opportunities to further fuel our
growth and realize efficiencies."
Consolidated Financial Highlights -
Three Months Ended September 30
Three Months Ended
September 30,
(Millions of U.S. dollars, except for adjusted EBITDA margin and
EPS)
(unaudited) |
|
| IFRS Financial Measures(1) |
2020 |
2019 |
Change |
Change at
Constant
Currency |
| Revenues |
$1,443 |
$1,413 |
2% |
|
| Operating profit |
$318 |
$262 |
21% |
|
| Diluted earnings (loss) per share (EPS) |
$0.48 |
$(0.09) |
n/m |
|
| Cash flow from operations |
$581 |
$264 |
117% |
|
Non-IFRS Financial Measures(1) |
|
|
|
|
| Revenues |
$1,443 |
$1,413 |
2% |
3% |
| Adjusted EBITDA |
$491 |
$345 |
42% |
45% |
| Adjusted EBITDA margin |
34.0% |
24.4% |
960bp |
1000bp |
| Adjusted EPS |
$0.39 |
$0.27 |
44% |
48% |
| Free cash flow |
$541 |
$126 |
330% |
|
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. |
Revenues increased 2% as growth in both recurring and
transactions revenues was partly offset by a decline in Global
Print revenues and a negative impact from foreign currency that
reduced revenues by $6 million
(approximately 1%).
- As expected, organic revenues increased 2%, driven by 4% growth
in both recurring revenues, which comprised 80% of total revenues,
and transactions revenues.
- The company's "Big 3" segments (Legal Professionals, Corporates
and Tax & Accounting Professionals), which collectively
comprised 79% of total revenues, reported organic revenue growth of
5%.
Operating profit increased primarily due to lower costs
and higher revenues. Lower costs reflected the completion of the
repositioning of the company in 2019 following the separation from
the Financial & Risk (F&R) business and lower expenses from
the company's COVID-19-related efforts to mitigate 2020 annual
costs by $100 million. Lower
costs were partly offset by higher depreciation and amortization
and a lower benefit 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), which is
discussed later in this news release.
- Adjusted EBITDA, which excludes the impact of the
warrant revaluation among other items, increased 42%,
primarily reflecting lower costs and higher revenues. The related
margin increased to 34.0% from 24.4% in the prior-year
period.
Diluted EPS was $0.48
per share compared to a loss of $0.09
per share in the prior-year period, primarily due to higher
operating profit, lower losses from the company's 45% equity
interest in Refinitiv and the recognition of non-cash tax
benefits.
- Adjusted EPS, which excludes the company's 45% equity
interest in Refinitiv as well as other adjustments, increased to
$0.39 per share from $0.27 per share in the prior-year period,
primarily due to higher adjusted EBITDA.
Cash flow from operations increased to $581 million from $264
million due to significantly higher costs and investments in
the prior-year period to reposition the company following the
separation of F&R, savings from the company's COVID-19-related
cost mitigation efforts and lower tax payments.
- Free cash flow increased primarily due to higher
cash flows from operations.
Highlights by Customer Segment - Three
Months Ended September 30
(Millions of U.S.
dollars, except for adjusted EBITDA margins)
(unaudited) |
|
|
|
Three Months
Ended |
|
|
|
|
September
30, |
|
Change |
|
|
2020 |
2019(1) |
|
Total |
Constant
Currency |
Organic(2) |
| Revenues |
|
|
|
|
|
|
|
| Legal Professionals |
|
$636 |
$607 |
|
5% |
4% |
3% |
| Corporates |
|
333 |
319 |
|
5% |
5% |
5% |
| Tax & Accounting Professionals |
|
165 |
165 |
|
0% |
3% |
10% |
| "Big 3" Segments Combined |
|
1,134 |
1,091 |
|
4% |
5% |
5% |
| Reuters News |
|
154 |
155 |
|
0% |
-1% |
-2% |
| Global Print |
|
154 |
168 |
|
-8% |
-7% |
-7% |
| Eliminations/Rounding |
|
1 |
(1) |
|
|
|
|
| Revenues |
|
$1,443 |
$1,413 |
|
2% |
3% |
2% |
|
|
|
|
|
|
|
|
| Adjusted EBITDA |
|
|
|
|
|
|
|
| Legal Professionals |
|
$272 |
$222 |
|
22% |
21% |
|
| Corporates |
|
120 |
105 |
|
14% |
14% |
|
| Tax & Accounting Professionals |
|
47 |
33 |
|
42% |
47% |
|
| "Big 3" Segments Combined |
|
439 |
360 |
|
22% |
21% |
|
| Reuters News |
|
23 |
16 |
|
53% |
65% |
|
| Global Print |
|
64 |
71 |
|
-10% |
-11% |
|
| Corporate costs |
|
(35) |
(102) |
|
n/a |
n/a |
|
| Adjusted EBITDA |
|
$491 |
$345 |
|
42% |
45% |
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA Margin |
|
|
|
|
|
|
|
| Legal Professionals |
|
42.8% |
36.7% |
|
610bp |
580bp |
|
| Corporates |
|
36.0% |
33.0% |
|
300bp |
280bp |
|
| Tax & Accounting Professionals |
|
28.5% |
20.1% |
|
840bp |
850bp |
|
| "Big 3" Segments Combined |
|
38.7% |
33.1% |
|
560bp |
540bp |
|
| Reuters News |
|
15.2% |
10.0% |
|
520bp |
610bp |
|
| Global Print |
|
41.1% |
42.3% |
|
-120bp |
-170bp |
|
| Corporate costs |
|
n/a |
n/a |
|
n/a |
n/a |
|
| Adjusted EBITDA margin |
|
34.0% |
24.4% |
|
960bp |
1000bp |
|
|
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. |
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% (3% organic) to $636 million.
- Recurring revenues grew 5% (93% of total), driven by organic
revenue growth of 4% with strong performance from Practical Law,
Westlaw Edge, the segment's businesses in Europe and Canada, its Government business as well as
contributions from HighQ and Pondera, which were acquired in
July 2019 and March 2020, respectively.
- Transactions revenues declined 2% (7% of total) due to a timing
delay in the FindLaw business. Transactions revenues declined 4%
organically.
Adjusted EBITDA increased 22% to $272 million.
- The margin increased to 42.8% from 36.7%, primarily due to
higher revenues and lower expenses from the company's
COVID-19-related cost mitigation efforts.
Corporates
Revenues increased 5% (all organic) to $333 million, primarily due to strong recurring
revenue growth of 6%.
- Recurring revenues grew 6% (86% of total), all organic.
- Transactions revenues grew 2% (14% of total) due to
acquisitions.
Adjusted EBITDA increased 14% to $120 million.
- The margin increased to 36.0% from 33.0%, primarily due to
higher revenues.
Tax & Accounting Professionals
Revenues of $165
million increased 3% (10% organic), primarily due to strong
transactions revenue growth. Revenues benefited by 3.8% from the
shift from the second quarter to the third quarter of
Pay-Per-Return tax filings (transactions revenues) related to the
extension of the U.S. federal tax filing deadline to July 15 from April
15. Revenue growth was negatively impacted by the loss of
revenues from the Aumentum government business, which was sold in
November 2019.
- Recurring revenues declined 1% (81% of total), driven by the
loss of revenues from the sale of the Aumentum government business.
Organic recurring revenues grew 6%.
- Transactions revenues grew 25% (19% of total), driven by
organic revenue growth of 31%, primarily due to the Pay-Per-Return
tax filings in the quarter.
Adjusted EBITDA grew 42% to $47 million.
- The margin increased to 28.5% from 20.1%, primarily due to
lower expenses from the company's COVID-19-related cost mitigation
efforts and the sale of the lower margin Aumentum business.
- 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 are
typically incurred in a more linear fashion throughout the
year.
Reuters News
Revenues of $154
million decreased 1% and organic revenues decreased 2%
primarily due to a decline in the Agency business.
- All of Reuters Events' in-person conferences have been
postponed through the end of 2020, though many events have been
held virtually this year. The business is assessing if and when
in-person conferences can resume in 2021. As a result, the business
is preparing a hybrid events strategy that can accommodate both
physical and virtual options.
- The company now expects full-year 2020 revenues to decline
between 2% and 4%, better than the prior estimate of declining
between 4% and 6%.
Adjusted EBITDA was $23
million, up $7 million from
the prior-year period, primarily due to the COVID-19-related cost
mitigation efforts.
Global Print
Revenues decreased 7% to $154 million, as expected, partially due to the
continuing delay in shipments of content. We continue to expect
full-year revenues for Global Print to decline between 7% and
11%.
Adjusted EBITDA decreased 10% to
$64 million.
- The margin decreased from 42.3% to 41.1% due to the decline in
revenues.
Corporate Costs
Corporate costs at the adjusted EBITDA level were
$35 million compared to $102 million in the prior-year period. The
decline primarily reflected the completion of the repositioning of
the company in 2019 following the separation of F&R, which
required significant costs and investments.
Consolidated Financial Highlights –
Nine Months Ended September 30
Nine Months Ended
September 30,
(Millions of U.S. dollars, except for adjusted EBITDA margin and
EPS)
(unaudited) |
| IFRS Financial Measures(1) |
2020 |
2019 |
Change |
Change at
Constant
Currency |
| Revenues |
$4,368 |
$4,323 |
1% |
|
| Operating profit |
$973 |
$983 |
-1% |
|
| Diluted EPS |
$1.12 |
$0.47 |
138% |
|
| Cash flow from operations |
$1,179 |
$347 |
238% |
|
Non-IFRS Financial Measures(1) |
|
|
|
|
| Revenues |
$4,368 |
$4,323 |
1% |
2% |
| Adjusted EBITDA |
$1,450 |
$1,097 |
32% |
33% |
| Adjusted EBITDA margin |
33.2% |
25.4% |
780bp |
770bp |
| Adjusted EPS |
$1.31 |
$0.92 |
42% |
43% |
| Free cash flow |
$881 |
$(50) |
n/m |
|
n/m: not meaningful
(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 1% as growth in recurring revenues, as
well as acquisition-related growth in transactions revenues, was
partly offset by a decline in Global Print revenues and a negative
impact from foreign currency that reduced revenues by $41 million (approximately 1%).
- Organic revenues increased 1%, driven by 4% growth in recurring
revenues, which comprised 79% of total revenues.
- The company's "Big 3" segments, which also collectively
comprised approximately 79% of total revenues, reported organic
revenue growth of 3%.
Operating profit declined as the prior-year period
included a significantly higher benefit from the revaluation of
warrants that the company holds in Refinitiv.
- Adjusted EBITDA, which excludes the impact of the
warrant revaluation among other items, increased 32% primarily
due to lower costs and higher revenues. Lower costs reflected the
completion of the repositioning of the company in 2019 following
the separation from F&R, which required significant costs and
investments in the prior-year period, and lower expenses from
the company's COVID-19-related cost mitigation efforts. The related
margin increased to 33.2% from 25.4% in the prior-year
period.
Diluted EPS increased to $1.12 per share compared to $0.47 per share in the prior-year period due to
lower losses from the company's 45% equity interest in Refinitiv
and the recognition of non-cash tax benefits in the current
period.
- Adjusted EPS, which excludes the company's equity
interest in Refinitiv and other adjustments, increased to
$1.31 per share from $0.92 per share in the prior-year period,
primarily due to higher adjusted EBITDA.
Cash flow from operations increased primarily because the
prior-year period included a $167
million pension contribution as well as significantly higher
costs and investments to reposition Thomson Reuters following the
separation from F&R. Cash flow also benefited from savings
related to the company's COVID-19-related cost mitigation efforts
and lower income tax payments.
- Free cash flow increased primarily due to higher
cash flows from operations.
Highlights by Customer Segment – Nine
Months Ended September 30
(Millions of U.S.
dollars, except for adjusted EBITDA margins)
(unaudited) |
|
|
Nine Months
Ended |
|
|
|
|
|
|
September
30, |
|
Change |
|
|
2020 |
2019(1) |
|
Total |
Constant Currency |
Organic(2) |
| Revenues |
|
|
|
|
|
|
|
| Legal Professionals |
|
$1,882 |
$1,812 |
|
4% |
4% |
3% |
| Corporates |
|
1,029 |
980 |
|
5% |
6% |
5% |
| Tax & Accounting Professionals |
|
551 |
569 |
|
-3% |
0% |
3% |
| "Big 3" Segments Combined |
|
3,462 |
3,361 |
|
3% |
4% |
3% |
| Reuters News |
|
464 |
466 |
|
0% |
0% |
-6% |
| Global Print |
|
443 |
497 |
|
-11% |
-10% |
-10% |
| Eliminations/Rounding |
|
(1) |
(1) |
|
|
|
|
| Revenues |
|
$4,368 |
$4,323 |
|
1% |
2% |
1% |
|
|
|
|
|
|
|
|
| Adjusted EBITDA |
|
|
|
|
|
|
|
| Legal Professionals |
|
$756 |
$680 |
|
11% |
11% |
|
| Corporates |
|
355 |
314 |
|
13% |
13% |
|
| Tax & Accounting Professionals |
|
185 |
184 |
|
1% |
3% |
|
| "Big 3" Segments Combined |
|
1,296 |
1,178 |
|
10% |
10% |
|
| Reuters News |
|
67 |
58 |
|
16% |
7% |
|
| Global Print |
|
181 |
217 |
|
-17% |
-17% |
|
| Corporate costs |
|
(94) |
(356) |
|
n/a |
n/a |
|
| Adjusted EBITDA |
|
$1,450 |
$1,097 |
|
32% |
33% |
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA Margin |
|
|
|
|
|
|
|
| Legal Professionals |
|
40.2% |
37.6% |
|
260bp |
250bp |
|
| Corporates |
|
34.5% |
32.0% |
|
250bp |
210bp |
|
| Tax & Accounting Professionals |
|
33.6% |
32.3% |
|
130bp |
110bp |
|
| "Big 3" Segments Combined |
|
37.4% |
35.1% |
|
230bp |
220bp |
|
| Reuters News |
|
14.5% |
12.4% |
|
210bp |
90bp |
|
| Global Print |
|
40.7% |
43.7% |
|
-300bp |
-330bp |
|
| Corporate costs |
|
n/a |
n/a |
|
n/a |
n/a |
|
| Adjusted EBITDA margin |
|
33.2% |
25.4% |
|
780bp |
770bp |
|
|
|
|
|
|
|
|
|
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. |
Business Outlook for 2020
Thomson Reuters today increased its full-year 2020 outlook for
adjusted EBITDA margin, free cash flow, capital expenditures as a
percentage of revenue, and depreciation and amortization of
computer software. The company reaffirmed all other outlook metrics
for full-year 2020 that it had previously provided on August 5, 2020.
While the company's third-quarter performance provides it with
increasing confidence about its full-year outlook, the global
economy continues to experience substantial disruption due to
concerns regarding the spread of COVID-19, as well as
from the measures intended to mitigate its impact. Any worsening of
the global and business economic environment could impact the
company's ability to achieve its outlook.
The company's 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.
Full-Year 2020
Outlook
|
Total Thomson Reuters
2020 Outlook |
Big 3
2020 Outlook |
|
Before currency
and excluding the impact of future
acquisitions/dispositions |
| Total Revenue Growth |
1.0% - 2.0% |
3.0% - 4.0% |
| Organic Revenue Growth |
0% - 1.0% |
3.0% - 4.0% |
| Adjusted EBITDA Margin (Increased from 31.0% -
32.0%) |
Approx. 32.0% |
37.0% – 38.0%
(Up from 36.0% - 37.0%) |
| Corporate Costs |
$140 - $150 million |
|
| Free Cash Flow (Increased from $1.0 - $1.1
billion) |
Approx. $1.1 billion |
|
| Capital Expenditures - % of Revenue (Increased
from 7.5% - 8.0%) |
8.0% - 8.5% |
|
Depreciation & Amortization of
Computer Software
(Increased from $625 - $650 million) |
$650 - $675 million |
|
| Interest Expense (P&L) |
$190 - $215 million |
|
| Effective Tax Rate on Adjusted Earnings |
Approx. 17% - 19% |
|
The information in
this section is forward-looking. Actual results, which include the
impact of currency and future 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."
COVID-19 Update
Thomson Reuters has not experienced any significant disruptions
to its business and continues to be fully operational. Most
employees continue to work remotely from their homes, enabled by
technology that allows them to collaborate with customers and each
other. Essential employees who cannot work from home, such as
Reuters News journalists and those working in the company's Global
Print facilities, follow various health and safety standards. While
the company cancelled or postponed nearly all in-person
conferences, primarily in its Reuters Events business, many of
these events were replaced with virtual meetings. The company
continues to act based on guidance from global health
organizations, relevant governments and evolving best
practices.
The company has approximately 500,000 customers that are largely
comprised of legal and tax professionals in corporations and
professional service firms, many of whom are also working remotely.
The company's products enable its customers to remain productive
while they work remotely because they can access most Thomson
Reuters products and services through the Internet.
The company continues to believe it is well positioned to
weather the economic crisis because its business is supported by a
solid financial foundation with access to liquidity resources that
it believes are adequate to support it through a gradual
recovery. 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. From time to time, the company also
issues debt securities under a prospectus. As set forth in its
full-year 2020 outlook, the company expects to generate
approximately $1.1 billion of free
cash flow this year. As of September 30,
2020, Thomson Reuters had $1.2
billion of cash on hand and none of its debt securities are
scheduled to mature until 2023.
Dividends and Share Repurchases
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 December 15, 2020 to common shareholders of
record as of November 19, 2020.
In the first quarter of 2020, the company completed the
repurchase of $200 million of its
shares. The company did not repurchase any of its shares in the
second or third quarters of 2020 and does not anticipate
repurchasing more of its shares for the remainder of the year.
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 $613 million as of September 30, 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 first quarter of
2021. 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 $8.8 billion based on LSEG's closing share price
on November 2, 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
In the first quarter of 2020, the
company re-assessed its methodology for allocating costs to its
business segments and adjusted its allocations in connection with
the completion of the repositioning of its businesses in 2019 after
the separation of F&R. The company adjusted its prior-period
segment amounts to reflect the current presentation. The 2019
segment amounts were also adjusted to reflect the transfer of
certain revenues among the segments to where they are better
aligned. These changes impacted the 2019 financial results of the
segments but did not change the consolidated 2019 financial
results. The table below summarizes the changes:
|
Three Months
Ended |
|
Nine Months
Ended |
|
September 30,
2019 |
|
September 30,
2019 |
| (millions of U.S. dollars) |
As Reported |
Adjustments |
As Revised |
|
As Reported |
Adjustments |
As Revised |
| Revenues |
|
|
|
|
|
|
|
| Legal Professionals |
$605 |
$2 |
$607 |
|
$1,802 |
$10 |
$1,812 |
| Corporates |
320 |
(1) |
319 |
|
990 |
(10) |
980 |
| Tax & Accounting Professionals |
166 |
(1) |
165 |
|
570 |
(1) |
569 |
| Eliminations/Rounding |
(1) |
- |
(1) |
|
(2) |
1 |
(1) |
| Total revenues |
$1,413 |
- |
$1,413 |
|
$4,323 |
- |
$4,323 |
| Adjusted EBITDA |
|
|
|
|
|
|
|
| Legal Professionals |
$227 |
$(5) |
$222 |
|
$686 |
$(6) |
$680 |
| Corporates |
110 |
(5) |
105 |
|
330 |
(16) |
314 |
| Tax & Accounting Professionals |
35 |
(2) |
33 |
|
188 |
(4) |
184 |
| Reuters News |
5 |
11 |
16 |
|
31 |
27 |
58 |
| Global Print |
71 |
- |
71 |
|
218 |
(1) |
217 |
| Corporate costs/Rounding |
(103) |
1 |
(102) |
|
(356) |
- |
(356) |
| Total adjusted EBITDA |
$345 |
- |
$345 |
|
$1,097 |
- |
$1,097 |
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 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 Reuters News, Global Print, 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 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 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
economic conditions will gradually recover, despite periods of
volatility due to disruption caused by COVID-19 and the measures
intended to mitigate its impact; the financial and operational
health of the company's customer base in both the U.S. and global
economies will gradually improve 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, with the ability to implement new products and
services 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; Print revenues will decline at a greater
rate than expected prior to COVID-19; a limited number of Thomson
Reuters 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 sustain approximately $100 million
of cost savings that it has achieved through September 30, 2020 to mitigate the impact of lost
revenues on adjusted EBITDA. 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 8.0% to 8.5% of revenues
in 2020; a limited number of Thomson Reuters 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
sale of a significant, but non-strategic, equity investment at a
significant gain by the end of 2020; depreciation and amortization
of computer software between $650
million and $675 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 future outbreaks and resurgences 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; and 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. 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; and
acquisition and disposal activity may dilute the company's adjusted
EBITDA margin. 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 transaction described in the material assumptions
for the effective tax rate on adjusted earnings outlook does 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
Alex Thompson
Chief Communications Officer
+1 647 281 6806
alex.thompson@tr.com |
INVESTORS
Frank J. Golden
Head of Investor Relations
+1 332 219 1111
frank.golden@tr.com |
Thomson Reuters will webcast a
discussion of its third-quarter 2020 results and business outlook
for 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 |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
2020 |
2019 |
|
2020 |
2019 |
| CONTINUING OPERATIONS |
|
|
|
|
|
| Revenues |
$1,443 |
$1,413 |
|
$4,368 |
$4,323 |
| Operating expenses |
(955) |
(1,059) |
|
(2,901) |
(3,220) |
| Depreciation |
(61) |
(38) |
|
(144) |
(110) |
| Amortization of computer software |
(133) |
(117) |
|
(362) |
(326) |
| Amortization of other identifiable intangible
assets |
(32) |
(28) |
|
(92) |
(80) |
| Other operating gains, net |
56 |
91 |
|
104 |
396 |
| Operating profit |
318 |
262 |
|
973 |
983 |
| Finance costs, net: |
|
|
|
|
|
| Net interest expense |
(49) |
(40) |
|
(146) |
(112) |
| Other finance income
(costs) |
2 |
(3) |
|
36 |
(32) |
| Income before tax and equity method
investments |
271 |
219 |
|
863 |
839 |
| Share of post-tax losses in equity method
investments |
(178) |
(304) |
|
(385) |
(555) |
| Tax benefit (expense) |
147 |
13 |
|
84 |
(35) |
| Earnings (loss) from continuing
operations |
240 |
(72) |
|
562 |
249 |
| Earnings (loss) from discontinued operations, net
of tax |
1 |
28 |
|
(2) |
(9) |
| Net earnings (loss) |
$241 |
$(44) |
|
$560 |
$240 |
| Earnings (loss) attributable to common
shareholders |
$241 |
$(44) |
|
$560 |
$240 |
|
|
|
|
|
|
| Earnings (loss) per share: |
|
|
|
|
|
| Basic earnings (loss) per share: |
|
|
|
|
|
| From continuing operations |
$0.48 |
$(0.14) |
|
$1.13 |
$0.49 |
| From discontinued operations |
- |
0.05 |
|
(0.01) |
(0.02) |
| Basic earnings (loss) per share |
$0.48 |
$(0.09) |
|
$1.12 |
$0.47 |
|
|
|
|
|
|
| Diluted earnings (loss) per share: |
|
|
|
|
|
| From continuing operations |
$0.48 |
$(0.14) |
|
$1.12 |
$0.49 |
| From discontinued operations |
- |
0.05 |
|
- |
(0.02) |
| Diluted earnings (loss) per share |
$0.48 |
$(0.09) |
|
$1.12 |
$0.47 |
|
|
|
|
|
|
| Basic weighted-average common shares |
497,090,942 |
501,240,480 |
|
496,544,202 |
501,415,930 |
| Diluted weighted-average common shares |
498,433,719 |
501,240,480 |
|
497,828,059 |
503,161,382 |
Thomson Reuters
Corporation
Consolidated Statement of Financial Position
(millions of U.S. dollars)
(unaudited) |
|
|
September 30, |
|
December 31, |
|
2020 |
|
2019 |
| Assets |
|
|
|
| Cash and cash equivalents |
$1,152 |
|
$825 |
| Trade and other receivables |
1,045 |
|
1,167 |
| Other financial assets |
550 |
|
533 |
| Prepaid expenses and other current assets |
412 |
|
546 |
| Current assets |
3,159 |
|
3,071 |
|
|
|
|
| Property and equipment, net |
551 |
|
615 |
| Computer software, net |
868 |
|
900 |
| Other identifiable intangible assets, net |
3,436 |
|
3,518 |
| Goodwill |
5,901 |
|
5,853 |
| Equity method investments |
1,206 |
|
1,551 |
| Other non-current assets |
708 |
|
611 |
| Deferred tax |
1,209 |
|
1,176 |
| Total assets |
$17,038 |
|
$17,295 |
|
|
|
|
| Liabilities and equity |
|
|
|
| Liabilities |
|
|
|
| Current indebtedness |
- |
|
$579 |
| Payables, accruals and provisions |
$1,141 |
|
1,373 |
| Deferred revenue |
810 |
|
833 |
| Other financial liabilities |
146 |
|
434 |
| Current liabilities |
2,097 |
|
3,219 |
|
|
|
|
| Long-term indebtedness |
3,720 |
|
2,676 |
| Provisions and other non-current liabilities |
1,232 |
|
1,264 |
| Deferred tax |
429 |
|
576 |
| Total liabilities |
7,478 |
|
7,735 |
|
|
|
|
| Equity |
|
|
|
| Capital |
5,454 |
|
5,377 |
| Retained earnings |
4,987 |
|
4,965 |
| Accumulated other comprehensive loss |
(881) |
|
(782) |
| Total equity |
9,560 |
|
9,560 |
| Total liabilities and equity |
$17,038 |
|
$17,295 |
Thomson Reuters
Corporation
Consolidated Statement of Cash Flow
(millions of U.S. dollars)
(unaudited) |
|
|
Three Months
Ended
September 30, |
|
Nine Months
Ended
September 30, |
|
2020 |
2019 |
|
2020 |
2019 |
| Cash provided by (used in): |
|
|
|
|
|
| Operating activities |
|
|
|
|
|
| Earnings (loss) from continuing operations |
$240 |
$(72) |
|
$562 |
$249 |
| Adjustments for: |
|
|
|
|
|
| Depreciation |
61 |
38 |
|
144 |
110 |
| Amortization of computer software |
133 |
117 |
|
362 |
326 |
| Amortization of other identifiable intangible
assets |
32 |
28 |
|
92 |
80 |
| Net losses (gains) on disposals of businesses and
investments |
- |
1 |
|
1 |
(20) |
| Deferred tax |
(153) |
(65) |
|
(190) |
(145) |
| Other |
168 |
243 |
|
368 |
320 |
| Pension contribution |
- |
- |
|
- |
(167) |
| Changes in working capital and other
items |
103 |
10 |
|
(147) |
(248) |
| Operating cash flows from continuing
operations |
584 |
300 |
|
1,192 |
505 |
| Operating cash flows from discontinued
operations |
(3) |
(36) |
|
(13) |
(158) |
| Net cash provided by operating activities |
581 |
264 |
|
1,179 |
347 |
|
|
|
|
|
|
| Investing activities |
|
|
|
|
|
| Acquisitions, net of cash acquired |
(43) |
(816) |
|
(165) |
(821) |
Proceeds from disposals of businesses
and investments, net of
taxes paid |
- |
5 |
|
1 |
62 |
| Capital expenditures |
(117) |
(125) |
|
(404) |
(365) |
| Proceeds (payments) from disposals of property and
equipment |
98 |
(2) |
|
162 |
- |
| Other investing activities |
- |
1 |
|
2 |
5 |
| Investing cash flows from continuing
operations |
(62) |
(937) |
|
(404) |
(1,119) |
| Investing cash flows from discontinued
operations |
- |
- |
|
- |
29 |
| Net cash used in investing activities |
(62) |
(937) |
|
(404) |
(1,090) |
|
|
|
|
|
|
| Financing activities |
|
|
|
|
|
| Proceeds from debt |
- |
- |
|
2,019 |
- |
| Repayments of debt |
- |
- |
|
(1,645) |
- |
| Net repayments under short-term loan
facilities |
(120) |
- |
|
(2) |
- |
| Payments of lease principal |
(20) |
(12) |
|
(56) |
(35) |
| Repurchases of common shares |
- |
(98) |
|
(200) |
(288) |
| Dividends paid on preference shares |
(1) |
- |
|
(2) |
(2) |
| Dividends paid on common shares |
(183) |
(175) |
|
(547) |
(524) |
| Other financing activities |
6 |
1 |
|
(10) |
38 |
| Net cash used in financing activities |
(318) |
(284) |
|
(443) |
(811) |
| Increase (decrease) in cash and bank
overdrafts |
201 |
(957) |
|
332 |
(1,554) |
| Translation adjustments |
5 |
(4) |
|
(5) |
(2) |
| Cash and bank overdrafts at beginning of
period |
946 |
2,108 |
|
825 |
2,703 |
| Cash and bank overdrafts at end of period |
$1,152 |
$1,147 |
|
$1,152 |
$1,147 |
| Cash and bank overdrafts at end of period
comprised of: |
|
|
|
|
|
| Cash and cash equivalents |
$1,152 |
$1,147 |
|
$1,152 |
$1,147 |
| Thomson Reuters
Corporation |
| Reconciliation of
Earnings (Loss) from Continuing Operations to Adjusted
EBITDA(1) |
| (millions of U.S.
dollars, except for margins) |
| (unaudited) |
|
|
Three Months
Ended |
|
|
Nine Months
Ended |
| September
30, |
|
|
September
30, |
|
2020 |
2019 |
|
|
2020 |
2019 |
|
|
|
|
|
|
|
| Earnings (loss) from continuing
operations |
$240 |
$(72) |
|
|
$562 |
$249 |
| Adjustments to remove: |
|
|
|
|
|
|
| Tax (benefit) expense |
(147) |
(13) |
|
|
(84) |
35 |
| Other finance (income) costs |
(2) |
3 |
|
|
(36) |
32 |
| Net interest expense |
49 |
40 |
|
|
146 |
112 |
| Amortization of other identifiable intangible
assets |
32 |
28 |
|
|
92 |
80 |
| Amortization of computer software |
133 |
117 |
|
|
362 |
326 |
| Depreciation |
61 |
38 |
|
|
144 |
110 |
| EBITDA |
$366 |
$141 |
|
|
$1,186 |
$944 |
| Adjustments to remove: |
|
|
|
|
|
|
Share of post-tax losses in equity
method
investments |
178 |
304 |
|
|
385 |
555 |
| Other operating gains, net |
(56) |
(91) |
|
|
(104) |
(396) |
| Fair value adjustments |
3 |
(9) |
|
|
(17) |
(6) |
| Adjusted EBITDA |
$491 |
$345 |
|
|
$1,450 |
$1,097 |
| Adjusted EBITDA margin(1) |
34.0% |
24.4% |
|
|
33.2% |
25.4% |
| Thomson Reuters
Corporation |
| Reconciliation of
Net Earnings (Loss) 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 |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
2020 |
2019 |
Change |
|
2020 |
2019 |
Change |
| Net earnings (loss) |
$241 |
$(44) |
|
|
$560 |
$240 |
|
| Adjustments to remove: |
|
|
|
|
|
|
|
| Fair value adjustments |
3 |
(9) |
|
|
(17) |
(6) |
|
| Amortization of other identifiable intangible
assets |
32 |
28 |
|
|
92 |
80 |
|
| Other operating gains, net |
(56) |
(91) |
|
|
(104) |
(396) |
|
| Other finance (income) costs |
(2) |
3 |
|
|
(36) |
32 |
|
| Share of post-tax losses in equity method
investments |
178 |
304 |
|
|
385 |
555 |
|
| Tax on above items |
(41) |
(58) |
|
|
(100) |
(57) |
|
| Tax items impacting comparability |
(146) |
22 |
|
|
(107) |
7 |
|
| (Earnings) loss from discontinued operations, net
of tax |
(1) |
(28) |
|
|
2 |
9 |
|
| Interim period effective tax rate
normalization(3) |
(15) |
7 |
|
|
(21) |
(1) |
|
| Dividends declared on preference shares |
(1) |
- |
|
|
(2) |
(2) |
|
| Adjusted earnings (2) |
$192 |
$134 |
|
|
$652 |
$461 |
|
| Adjusted EPS (2) |
$0.39 |
$0.27 |
44% |
|
$1.31 |
$0.92 |
42% |
| Foreign currency(4) |
|
|
-4% |
|
|
|
-1% |
| Constant currency(4) |
|
|
48% |
|
|
|
43% |
|
|
|
|
|
|
|
|
| Diluted weighted-average common shares
(millions) |
498.4 |
503.3 |
|
|
497.8 |
503.2 |
|
|
| Refer to page 23 for footnotes. |
| Thomson Reuters
Corporation |
| Reconciliation of
Net Cash Provided by Operating Activities to Free Cash
Flow(5) |
| (millions of U.S.
dollars) |
| (unaudited) |
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
2020 |
2019 |
|
2020 |
2019 |
| Net cash provided by operating
activities |
$581 |
$264 |
|
$1,179 |
$347 |
| Capital expenditures |
(117) |
(125) |
|
(404) |
(365) |
| Proceeds (payments) from disposals of property and
equipment |
98 |
(2) |
|
162 |
- |
| Other investing activities |
- |
1 |
|
2 |
5 |
| Payments of lease principal |
(20) |
(12) |
|
(56) |
(35) |
| Dividends paid on preference shares |
(1) |
- |
|
(2) |
(2) |
| Free cash flow |
$541 |
$126 |
|
$881 |
$(50) |
| Thomson Reuters
Corporation |
| Reconciliation of
Net Debt and Leverage Ratio of Net Debt to Adjusted
EBITDA(7) |
| (millions of U.S.
dollars) |
| (unaudited) |
|
|
|
September 30,
2020 |
| Long-term indebtedness |
|
$3,720 |
| Total debt |
|
3,720 |
| Swaps |
|
(43) |
| Total debt after swaps |
|
3,677 |
| Remove fair value adjustments for hedges |
|
(6) |
| Total debt after currency arrangements |
|
3,671 |
| Remove transaction costs and discounts included in
the carrying value of debt |
|
39 |
| Add: lease liabilities (current and
non-current) |
|
319 |
| Less: cash and cash equivalents |
|
(1,152) |
| Net debt |
|
$2,877 |
|
|
|
| Adjusted EBITDA* |
|
$1,846 |
| Net Debt / Adjusted EBITDA* |
|
1.6:1 |
|
| * The company's 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 $491 million, $479 million, $480
million and $396 million for the three months ended September 30,
2020, June 30, 2020, March 31, 2020 and December 31, 2019,
respectively. Refer to the tables appended to this news release,
Appendix B of the company's management's discussion and analysis
contained in its March 31, 2020 and June 30, 2020 interim reports
and Appendix C of the company's 2019 annual management's discussion
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 23 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 |
|
|
|
|
September
30, |
|
Change |
|
|
2020 |
2019* |
|
Total |
Foreign
Currency |
SUBTOTAL
Constant
Currency |
Acquisitions/
(Divestitures) |
Organic |
| Total Revenues |
|
|
|
|
|
|
|
|
|
| Legal Professionals |
|
$636 |
$607 |
|
5% |
0% |
4% |
1% |
3% |
| Corporates |
|
333 |
319 |
|
5% |
-1% |
5% |
1% |
5% |
| Tax & Accounting Professionals |
|
165 |
165 |
|
0% |
-4% |
3% |
-7% |
10% |
| "Big 3" Segments Combined |
|
1,134 |
1,091 |
|
4% |
-1% |
5% |
0% |
5% |
| Reuters News |
|
154 |
155 |
|
0% |
1% |
-1% |
1% |
-2% |
| Global Print |
|
154 |
168 |
|
-8% |
0% |
-7% |
0% |
-7% |
| Eliminations/Rounding |
|
1 |
(1) |
|
|
|
|
|
|
| Revenues |
|
$1,443 |
$1,413 |
|
2% |
0% |
3% |
0% |
2% |
|
|
|
|
|
|
|
|
|
|
| Recurring Revenues |
|
|
|
|
|
|
|
|
|
| Legal Professionals |
|
$592 |
$562 |
|
5% |
0% |
5% |
1% |
4% |
| Corporates |
|
287 |
273 |
|
5% |
-1% |
6% |
0% |
6% |
| Tax & Accounting Professionals |
|
133 |
140 |
|
-5% |
-4% |
-1% |
-7% |
6% |
| "Big 3" Segments Combined |
|
1,012 |
975 |
|
4% |
-1% |
4% |
0% |
5% |
| Reuters News |
|
141 |
143 |
|
-1% |
1% |
-2% |
0% |
-2% |
| Total Recurring Revenues |
|
$1,153 |
$1,118 |
|
3% |
0% |
4% |
0% |
4% |
|
|
|
|
|
|
|
|
|
|
| Transactions Revenues |
|
|
|
|
|
|
|
|
|
| Legal Professionals |
|
$44 |
$45 |
|
-2% |
0% |
-2% |
2% |
-4% |
| Corporates |
|
46 |
46 |
|
1% |
-1% |
2% |
3% |
-1% |
| Tax & Accounting Professionals |
|
32 |
25 |
|
23% |
-2% |
25% |
-6% |
31% |
| "Big 3" Segments Combined |
|
122 |
116 |
|
5% |
0% |
5% |
1% |
4% |
| Reuters News |
|
13 |
12 |
|
7% |
-10% |
17% |
17% |
0% |
| Total Transactions Revenues |
|
$135 |
$128 |
|
5% |
-1% |
6% |
2% |
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 23 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) |
|
|
Nine Months
Ended |
|
|
|
|
|
|
|
|
September
30, |
|
Change |
|
|
2020 |
2019* |
|
Total |
Foreign
Currency |
SUBTOTAL
Constant
Currency |
Acquisitions/
(Divestitures) |
Organic |
| Total Revenues |
|
|
|
|
|
|
|
|
|
| Legal Professionals |
|
$1,882 |
$1,812 |
|
4% |
0% |
4% |
1% |
3% |
| Corporates |
|
1,029 |
980 |
|
5% |
-1% |
6% |
1% |
5% |
| Tax & Accounting Professionals |
|
551 |
569 |
|
-3% |
-3% |
0% |
-3% |
3% |
| "Big 3" Segments Combined |
|
3,462 |
3,361 |
|
3% |
-1% |
4% |
1% |
3% |
| Reuters News |
|
464 |
466 |
|
0% |
0% |
0% |
6% |
-6% |
| Global Print |
|
443 |
497 |
|
-11% |
-1% |
-10% |
0% |
-10% |
| Eliminations/Rounding |
|
(1) |
(1) |
|
|
|
|
|
|
| Revenues |
|
$4,368 |
$4,323 |
|
1% |
-1% |
2% |
1% |
1% |
|
|
|
|
|
|
|
|
|
|
| Recurring Revenues |
|
|
|
|
|
|
|
|
|
| Legal Professionals |
|
$1,759 |
$1,675 |
|
5% |
0% |
5% |
1% |
4% |
| Corporates |
|
850 |
803 |
|
6% |
-1% |
7% |
1% |
6% |
| Tax & Accounting Professionals |
|
427 |
460 |
|
-7% |
-4% |
-4% |
-6% |
3% |
| "Big 3" Segments Combined |
|
3,036 |
2,938 |
|
3% |
-1% |
4% |
0% |
4% |
| Reuters News |
|
424 |
430 |
|
-1% |
0% |
-1% |
0% |
-1% |
| Total Recurring Revenues |
|
$3,460 |
$3,368 |
|
3% |
-1% |
4% |
0% |
4% |
|
|
|
|
|
|
|
|
|
|
| Transactions Revenues |
|
|
|
|
|
|
|
|
|
| Legal Professionals |
|
$123 |
$137 |
|
-11% |
0% |
-10% |
0% |
-10% |
| Corporates |
|
179 |
177 |
|
1% |
-1% |
2% |
4% |
-2% |
| Tax & Accounting Professionals |
|
124 |
109 |
|
14% |
-2% |
15% |
12% |
3% |
| "Big 3" Segments Combined |
|
426 |
423 |
|
0% |
-1% |
1% |
4% |
-3% |
| Reuters News |
|
40 |
36 |
|
12% |
-4% |
15% |
52% |
-36% |
| Total Transactions Revenues |
|
$466 |
$459 |
|
1% |
-1% |
2% |
9% |
-7% |
|
| * 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 23 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 |
|
|
|
|
September
30, |
|
Change |
|
|
2020 |
2019* |
|
Total |
Foreign
Currency |
Constant
Currency |
| Adjusted EBITDA |
|
|
|
|
|
|
|
| Legal Professionals |
|
$272 |
$222 |
|
22% |
1% |
21% |
| Corporates |
|
120 |
105 |
|
14% |
0% |
14% |
| Tax & Accounting Professionals |
|
47 |
33 |
|
42% |
-5% |
47% |
| "Big 3" Segments Combined |
|
439 |
360 |
|
22% |
0% |
21% |
| Reuters News |
|
23 |
16 |
|
53% |
-12% |
65% |
| Global Print |
|
64 |
71 |
|
-10% |
1% |
-11% |
| Corporate costs |
|
(35) |
(102) |
|
n/a |
n/a |
n/a |
| Adjusted EBITDA |
|
$491 |
$345 |
|
42% |
-3% |
45% |
|
|
|
|
|
|
|
|
| Adjusted EBITDA Margin |
|
|
|
|
|
|
|
| Legal Professionals |
|
42.8% |
36.7% |
|
610bp |
30bp |
580bp |
| Corporates |
|
36.0% |
33.0% |
|
300bp |
20bp |
280bp |
| Tax & Accounting Professionals |
|
28.5% |
20.1% |
|
840bp |
-10bp |
850bp |
| "Big 3" Segments Combined |
|
38.7% |
33.1% |
|
560bp |
20bp |
540bp |
| Reuters News |
|
15.2% |
10.0% |
|
520bp |
-90bp |
610bp |
| Global Print |
|
41.1% |
42.3% |
|
-120bp |
50bp |
-170bp |
| Corporate costs |
|
n/a |
n/a |
|
n/a |
n/a |
n/a |
| Adjusted EBITDA margin |
|
34.0% |
24.4% |
|
960bp |
-40bp |
1000bp |
|
| 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 23 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) |
|
|
|
Nine Months
Ended |
|
|
|
|
September
30, |
|
Change |
|
|
2020 |
2019* |
|
Total |
Foreign
Currency |
Constant
Currency |
| Adjusted EBITDA |
|
|
|
|
|
|
|
| Legal Professionals |
|
$756 |
$680 |
|
11% |
0% |
11% |
| Corporates |
|
355 |
314 |
|
13% |
0% |
13% |
| Tax & Accounting Professionals |
|
185 |
184 |
|
1% |
-3% |
3% |
| "Big 3" Segments Combined |
|
1,296 |
1,178 |
|
10% |
0% |
10% |
| Reuters News |
|
67 |
58 |
|
16% |
10% |
7% |
| Global Print |
|
181 |
217 |
|
-17% |
0% |
-17% |
| Corporate costs |
|
(94) |
(356) |
|
n/a |
n/a |
n/a |
| Adjusted EBITDA |
|
$1,450 |
$1,097 |
|
32% |
-1% |
33% |
|
|
|
|
|
|
|
|
| Adjusted EBITDA Margin |
|
|
|
|
|
|
|
| Legal Professionals |
|
40.2% |
37.6% |
|
260bp |
10bp |
250bp |
| Corporates |
|
34.5% |
32.0% |
|
250bp |
40bp |
210bp |
| Tax & Accounting Professionals |
|
33.6% |
32.3% |
|
130bp |
20bp |
110bp |
| "Big 3" Segments Combined |
|
37.4% |
35.1% |
|
230bp |
10bp |
220bp |
| Reuters News |
|
14.5% |
12.4% |
|
210bp |
120bp |
90bp |
| Global Print |
|
40.7% |
43.7% |
|
-300bp |
30bp |
-330bp |
| Corporate costs |
|
n/a |
n/a |
|
n/a |
n/a |
n/a |
| Adjusted EBITDA margin |
|
33.2% |
25.4% |
|
780bp |
10bp |
770bp |
|
| 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 23 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. |
|
|
|
Because Thomson Reuters reported a net loss for
continuing operations under IFRS for the three months ended
September 30, 2019, 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
September 30, 2019 |
|
|
|
|
| IFRS: Basic and Diluted |
501,240,480 |
|
| Effect of stock options and other equity incentive
awards |
2,043,370 |
|
| Non-IFRS Diluted |
503,283,850 |
|
| (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 and nine months ended September 30, 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 the IFRS measures to the
related non-IFRS measures is also included in this appendix.
Refinitiv
Financial Data
(millions of U.S. dollars, except for margins)
(unaudited) |
|
|
|
Three Months
Ended
September 30, |
|
Nine Months
Ended
September 30, |
|
|
|
Change |
|
|
Change |
|
2020 |
2019 |
Total |
Before
Currency &
Excluding
Businesses
Disposed |
|
2020 |
2019 |
Total |
Before
Currency &
Excluding
Businesses
Disposed |
| IFRS Measures |
|
|
|
|
|
|
|
|
|
| Revenues |
$1,615 |
$1,557 |
4% |
2% |
|
$4,836 |
$4,674 |
3% |
3% |
|
|
|
|
|
|
|
|
|
|
| Net loss |
$(389) |
$(656) |
|
|
|
$(808) |
$(1,201) |
|
|
| Cash flow from operations |
$584 |
$404 |
|
|
|
$933 |
$477 |
|
|
Capital expenditures, less
proceeds from disposals |
$132 |
$182 |
|
|
|
$475 |
$419 |
|
|
Debt at September 30, 2020
and September 30, 2019 |
|
|
|
|
|
$14,308 |
$13,907 |
|
|
|
|
|
|
|
|
|
|
|
|
| Non-IFRS Measures |
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA |
$643 |
$543 |
|
|
|
$1,874 |
$1,655 |
|
|
| Adjusted EBITDA margin |
39.8% |
34.9% |
|
|
|
38.8% |
35.4% |
|
|
| Free cash flow |
$443 |
$211 |
|
|
|
$436 |
$(41) |
|
|
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 |
|
|
Nine Months
Ended |
|
September
30, |
|
|
September
30, |
|
2020 |
2019 |
|
|
2020 |
2019 |
| Net loss |
$(389) |
$(656) |
|
|
$(808) |
$(1,201) |
| Adjustments to remove: |
|
|
|
|
|
|
| Tax expense (benefit) |
31 |
38 |
|
|
39 |
(22) |
| Finance costs |
267 |
570 |
|
|
710 |
1,074 |
| Depreciation and amortization |
517 |
486 |
|
|
1,474 |
1,431 |
| EBITDA |
$426 |
$438 |
|
|
$1,415 |
$1,282 |
| Adjustments to remove: |
|
|
|
|
|
|
| Share of post-tax losses (earnings) in equity
method investments |
2 |
- |
|
|
- |
(1) |
| Other operating losses (gains) |
63 |
(21) |
|
|
54 |
(20) |
| Fair value adjustments |
9 |
7 |
|
|
30 |
45 |
| Share-based compensation |
5 |
35 |
|
|
26 |
42 |
| Transformation-related costs |
138 |
84 |
|
|
349 |
307 |
| Adjusted EBITDA |
$643 |
$543 |
|
|
$1,874 |
$1,655 |
| Adjusted EBITDA margin |
39.8% |
34.9% |
|
|
38.8% |
35.4% |
Refinitiv
Reconciliation of Net Cash Provided By Operating Activities to
Free Cash Flow
(millions of U.S. dollars)
(unaudited) |
|
|
Three Months
Ended |
|
|
Nine Months
Ended |
|
September
30, |
|
|
September
30, |
|
2020 |
2019 |
|
|
2020 |
2019 |
| Net cash provided by operating
activities |
$584 |
$404 |
|
|
$933 |
$477 |
| Capital expenditures, less proceeds from
disposals |
(132) |
(182) |
|
|
(475) |
(419) |
| Other investing activities |
- |
1 |
|
|
1 |
1 |
| Dividends paid to non-controlling interests
|
(9) |
(12) |
|
|
(23) |
(100) |
| Free cash flow |
$443 |
$211 |
|
|
$436 |
$(41) |