Thomson Reuters Reports Second-Quarter 2022 Results

TORONTO, August 4, 2022 - Thomson Reuters (TSX/NYSE: TRI) today reported results for the second quarter ended June 30, 2022:

• Strong revenue and sales growth continued in the second quarter
  • Total company revenue up 5% / organic revenue up 7%
    • Organic revenue up 7% for the "Big 3" segments (Legal Professionals, Corporates and Tax & Accounting Professionals)
• Raised full-year 2022 revenue guidance
  • Total company revenue forecast increased to approximately 6.0% from approximately 5.5%
  • "Big 3" segments revenue forecast increased to approximately 7.0% from approximately 6.5%
  • No other changes to full-year 2022 outlook, reaffirmed full-year 2023 outlook
• Change Program on track - $369 million run-rate operating expense savings through June 30
• Repurchased $394 million of company shares through July 31 under the $2 billion share buyback program announced on June 8, 2022

"The momentum that has been building in our businesses continued in the second quarter, with revenues again ahead of our expectations. Leading indicators remain healthy, and we have a resilient, highly recurring business serving growing industries. This positioning and a strong first half give us confidence we are on the right path to achieve our 2022 and 2023 targets," said Steve Hasker, President and CEO of Thomson Reuters.

Mr. Hasker added, "Our businesses are benefitting from what we believe are multi-year tailwinds driven by a step change in the complexity of compliance in our legal, tax, and risk-related markets. Against this backdrop, we remain focused on investing in our businesses and effectively allocating capital as we work to translate our current momentum into sustainable long-term value creation."

Consolidated Financial Highlights - Three Months Ended June 30

Three Months Ended June 30, (Millions of U.S. dollars, except for adjusted EBITDA margin and EPS) (unaudited)
IFRS Financial Measures(1)	2022	2021	Change	Change at Constant Currency
Revenues	$1,614	$1,532	5%
Operating profit	$391	$316	24%
Diluted (loss) earnings per share (EPS)	$(0.24)	$2.15	n/m
Net cash provided by operating activities	$433	$462	-6%
Non-IFRS Financial Measures(1)
Revenues	$1,614	$1,532	5%	7%
Adjusted EBITDA	$561	$502	12%	11%
Adjusted EBITDA margin	34.7%	32.7%	200bp	110bp
Adjusted EPS	$0.60	$0.48	25%	23%
Free cash flow	$342	$379	-10%
(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. See the "Non-IFRS Financial Measures" section and the tables appended to this news release for additional information on these and other non-IFRS financial measures, including how they are defined and reconciled to the most directly comparable IFRS measures. n/m: not meaningful

Revenues increased 5%, driven by growth across four of the company's five business segments. Foreign currency had a 2% negative impact on revenues.

• Organic revenues increased 7%, driven by 7% growth in recurring revenues (80% of total revenues) as well as 13% growth in transactions revenues. Global Print revenues decreased 1% organically.
  • Transactions revenue growth was driven by Reuters News and Corporates. Reuters Events was a key contributor as it benefited from both timing shifts and the return to in-person events.
• The company's "Big 3" segments (Legal Professionals, Corporates and Tax & Accounting Professionals) reported organic revenue growth of 7% and collectively comprised 80% of total revenues.

Operating profit increased 24% as higher revenues more than offset higher costs, which included investments associated with the Change Progrm.

• Adjusted EBITDA increased 12% due to the same factors as operating profit. The related margin increased to 34.7% from 32.7% in the prior-year period, of which foreign currency contributed 90bp. Investments in the Change Program negatively impacted the second quarter of 2022 adjusted EBITDA margin by 190bp.

Diluted (loss) per share of $(0.24) included a significant reduction in the value of the company's investment in London Stock Exchange Group (LSEG). Diluted earnings per share of $2.15 in the prior-year period included a significant increase in the value of the company's investment in LSEG.

• Adjusted EPS, which excludes the change in value of the company's LSEG investment, and other adjustments, increased to $0.60 per share from $0.48 per share in the prior-year period, primarily due to higher adjusted EBITDA.

Net cash provided by operating activities decreased $29 million as higher payments associated with the Change Program as well as higher tax payments more than offset the cash benefits from higher operating profit.

• Free cash flow decreased $37 million due to lower cash flows from operating activities and higher capital expenditures primarily associated with the Change Program.

Highlights by Customer Segment - Three Months Ended June 30

(Millions of U.S. dollars, except for adjusted EBITDA margins) (unaudited)
	Three Months Ended June 30,		Change
	2022	2021(2)	Total	Constant Currency(1)	Organic(1)(3)
Revenues
Legal Professionals	$700	$673	4%	6%	6%
Corporates	373	346	8%	9%	9%
Tax & Accounting Professionals	217	199	9%	10%	9%
"Big 3" Segments Combined(1)	1,290	1,218	6%	7%	7%
Reuters News	188	173	9%	12%	12%
Global Print	142	147	-3%	-1%	-1%
Eliminations/Rounding	(6)	(6)
Revenues	$1,614	$1,532	5%	7%	7%
Adjusted EBITDA(1)
Legal Professionals	$304	$285	7%	8%
Corporates	139	128	9%	8%
Tax & Accounting Professionals	81	74	12%	11%
"Big 3" Segments Combined(1)	524	487	8%	8%
Reuters News	44	35	26%	19%
Global Print	50	56	-9%	-8%
Corporate costs	(57)	(76)	n/a	n/a
Adjusted EBITDA	$561	$502	12%	11%
Adjusted EBITDA Margin(1)
Legal Professionals	43.4%	42.3%	110bp	80bp
Corporates	37.4%	37.0%	40bp	-20bp
Tax & Accounting Professionals	37.4%	36.5%	90bp	30bp
"Big 3" Segments Combined(1)	40.7%	39.9%	80bp	40bp
Reuters News	23.3%	20.2%	310bp	110bp
Global Print	35.4%	37.9%	-250bp	-250bp
Adjusted EBITDA margin	34.7%	32.7%	200bp	110bp
(1) See the "Non-IFRS Financial Measures" section and the tables appended to this news release for additional information on these and other non-IFRS financial measures. (2) For comparative purposes, 2021 segment results have been revised to reflect the current period presentation. For additional information, see the "Revision to Prior-Year Segment Results" section of this news release. (3) Computed for revenue growth only. n/a: not applicable

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 6% (all organic) to $700 million.

• Recurring revenues grew 6% (94% of total, 7% organic), primarily due to strong performances from Westlaw, Practical Law, FindLaw and the Government business.
• Transactions revenues decreased 3% (6% of total, decreased 1% organic).

Adjusted EBITDA increased 7% to $304 million.

• The margin increased to 43.4% from 42.3%, primarily due to higher revenues and Change Program savings.

Corporates

Revenues increased 9% (all organic) to $373 million. Revenues benefited from transactional revenue strength that we do not expect to recur at the same level in the second half of this year as the second-quarter performance was seasonal in nature.

• Recurring revenues grew 9% (86% of total, all organic), driven by CLEAR, Practical Law and Indirect Tax.
• Transactions revenues grew 8% (14% of total, all organic), driven by Trust, Confirmation as well as the company's businesses in Latin America and Asia & Emerging Markets.

Adjusted EBITDA increased 9% to $139 million.

• The margin increased to 37.4% from 37.0%, as higher revenues more than offset higher expenses.

Tax & Accounting Professionals

Revenues increased 10% (9% organic) to $217 million.

• Recurring revenues grew 11% (77% of total, all organic), driven by strong growth from Ultra Tax, audit products and the segment's Latin America business.
• Transactions revenues increased 5% (23% of total, all organic), primarily driven by Confirmation.

Adjusted EBITDA increased 12% to $81 million.

• The margin increased to 37.4% from 36.5%, primarily due to higher revenues and Change Program savings.

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 $188 million increased 12% (all organic), primarily driven by the Professional business and the flow-through of the annual increase in the company's news agreement with the Refinitiv business of LSEG. The Professional business benefited from timing shifts in Reuters Events as more events were hosted in the second quarter of this year rather than the second half, which is a return to the pre-COVID cadence. The Reuters Events business also benefited from a return to in-person events from primarily virtual events last year.

Adjusted EBITDA increased 26% to $44 million, primarily due to higher revenues.

Global Print

Revenues decreased 1% (all organic), which was better than the decline the company expected due to higher third-party revenues for printing services and the timing of new sales.

Adjusted EBITDA decreased 9% to $50 million.

• The margin decreased to 35.4% from 37.9% due to the decrease in revenues and the dilutive effect of third-party print revenue.

Corporate Costs

Corporate costs at the adjusted EBITDA level were $57 million and included $30 million of Change Program costs. Corporate costs were $76 million in the prior-year period and included $41 million of Change Program costs. Additional information regarding the Change Program is provided below.

Consolidated Financial Highlights - Six Months Ended June 30

Six Months Ended June 30, (Millions of U.S. dollars, except for adjusted EBITDA margin and EPS) (unaudited)
IFRS Financial Measures(1)	2022	2021	Change	Change at Constant Currency
Revenues	$3,288	$3,112	6%
Operating profit	$805	$703	15%
Diluted EPS	$1.83	$12.28	n/m
Net cash provided by operating activities	$708	$842	-16%
Non-IFRS Financial Measures(1)
Revenues	$3,288	$3,112	6%	7%
Adjusted EBITDA	$1,161	$1,060	10%	9%
Adjusted EBITDA margin	35.3%	34.1%	120bp	70bp
Adjusted EPS	$1.26	$1.06	19%	17%
Free cash flow	$428	$618	-31%
(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. See the "Non-IFRS Financial Measures" section and the tables appended to this news release for additional information on these and other non-IFRS financial measures, including how they are defined and reconciled to the most directly comparable IFRS measures. n/m: not meaningful

Revenues increased 6%, driven by growth across four of the company's five business segments. Foreign currency had a 1% negative impact on revenues.

• Organic revenues increased 7%, driven by 7% growth in recurring revenues (79% of total revenues) as well as 10% growth in transactions revenues. Global Print revenues decreased 1% organically.
  • Transactions revenue growth was driven by Reuters News, Corporates and Tax & Accounting Professionals. Reuters Events was a key contributor as it benefited from both timing shifts and the return to in-person events.
• The company's "Big 3" segments reported organic revenue growth of 7% and collectively comprised 81% of total revenues.

Operating profit increased 15% as higher revenues more than offset higher costs, which included investments associated with the company's Change Program.

• Adjusted EBITDA increased 10% reflecting the same factors that impacted operating profit. The related margin increased to 35.3% from 34.1% in the prior-year period, of which foreign currency contributed 50bp. Investments associated with the Change Program negatively impacted the adjusted EBITDA margin by 190bp in the six months of 2022.

Diluted EPS was $1.83 per share compared to $12.28 per share in the prior-year period. The prior-year period included a gain of approximately $8.1 billion on the sale of Refinitiv to LSEG.

• Adjusted EPS, which excludes the gain on the sale of Refinitiv, as well as other adjustments, increased to $1.26 per share from $1.06 per share in the prior-year period, primarily due to higher adjusted EBITDA.

Net cash provided by operating activities decreased $134 million due to higher payments associated with the Change Program, higher tax payments and higher annual incentive plan bonuses.

• Free cash flow decreased $190 million due to lower cash flows from operating activities and higher capital expenditures, primarily associated with the Change Program.

Highlights by Customer Segment - Six Months Ended June 30

(Millions of U.S. dollars, except for adjusted EBITDA margins) (unaudited)
	Six Months Ended June 30,		Change
	2022	2021(2)	Total	Constant Currency(1)	Organic(1)(3)
Revenues
Legal Professionals	$1,398	$1,341	4%	5%	6%
Corporates	784	728	8%	9%	8%
Tax & Accounting Professionals	470	426	10%	10%	10%
"Big 3" Segments Combined(1)	2,652	2,495	6%	7%	7%
Reuters News	364	338	8%	11%	11%
Global Print	284	290	-2%	-1%	-1%
Eliminations/Rounding	(12)	(11)
Revenues	$3,288	$3,112	6%	7%	7%
Adjusted EBITDA(1)
Legal Professionals	$609	$564	8%	9%
Corporates	296	273	8%	8%
Tax & Accounting Professionals	203	173	18%	17%
"Big 3" Segments Combined(1)	1,108	1,010	10%	10%
Reuters News	81	63	28%	21%
Global Print	103	113	-9%	-8%
Corporate costs	(131)	(126)	n/a	n/a
Adjusted EBITDA	$1,161	$1,060	10%	9%
Adjusted EBITDA Margin(1)
Legal Professionals	43.6%	42.1%	150bp	140bp
Corporates	37.8%	37.5%	30bp	-20bp
Tax & Accounting Professionals	43.2%	40.4%	280bp	240bp
"Big 3" Segments Combined(1)	41.8%	40.5%	130bp	110bp
Reuters News	22.2%	18.7%	350bp	180bp
Global Print	36.2%	38.9%	-270bp	-270bp
Adjusted EBITDA margin	35.3%	34.1%	120bp	70bp
(1) See the "Non-IFRS Financial Measures" section and the tables appended to this news release for additional information on these and other non-IFRS financial measures. (2) For comparative purposes, 2021 segment results have been revised to reflect the current period presentation. For additional information, see the "Revision to Prior-Year Segment Results" section of this news release. (3) Computed for revenue growth only. n/a: not applicable

Change Program

In February 2021, the company announced a two-year Change Program to transition from a holding company to an operating company, and from a content provider to a content-driven technology company. The company is 18 months into the program, which is expected to be largely complete by the end of 2022. The program is projected to require an investment of approximately $600 million during that time of which $424 million has been invested as of June 30, 2022. The company continues to anticipate that Change Program spending will be approximately 60% operating expenses and 40% capital expenditures. 

2022 and 2023 Outlook

The company's updated outlook for 2022 and reaffirmed outlook for 2023 (which is reflected in the table below) incorporates the forecasted impacts associated with the Change Program, assumes constant currency rates, and excludes the impact of any future acquisitions or dispositions that may occur during those periods. Thomson Reuters believes that this type of guidance provides useful insight into the performance of its businesses.

The company expects its third-quarter 2022 revenue growth to be approximately 50bp to 100bp below its full-year 2022 outlook target. The company also expects its fourth-quarter 2022 revenue growth to be higher than the third-quarter 2022 revenue growth. The company expects full-year 2022 recurring revenue growth to be 7%.

The company's third-quarter 2022 adjusted EBITDA margin is expected to be approximately 300bp below its second-quarter 2022 adjusted EBITDA margin. The fourth-quarter 2022 is expected to have the highest quarterly adjusted EBITDA margin of the year.

While the company's second-quarter 2022 performance provides it with increasing confidence about its outlook, the global economy recently has experienced substantial disruption due to concerns regarding economic effects associated with the macroeconomic backdrop and ongoing geopolitical risks. Any worsening of the global economic or business environment could impact the company's ability to achieve its outlook.

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