Thomson Reuters Reports Third-Quarter 2018 Results

Thomson Reuters Reports Third-Quarter 2018 Results

PR Newswire

TORONTO, Nov. 6, 2018

TORONTO, Nov. 6, 2018 /PRNewswire/ -- Thomson Reuters (TSX/NYSE: TRI) today reported results for the third quarter ended September 30, 2018. The company also reaffirmed and updated part of its Outlook for 2018 as previously provided in May 2018.

"Our third-quarter results continued to build on a solid first half," said Jim Smith, president and chief executive officer of Thomson Reuters.  "Accelerating sales momentum and strong recurring revenue growth delivered our best top-line performance in more than two years.  Achieving 3% organic growth is particularly encouraging and we view this as a base to build upon.  Our year-to-date performance strengthens our confidence that we are on track to deliver a solid year and an even better 2019."

Consolidated Financial Highlights - Three Months Ended September 30

Unless otherwise noted, all results are from continuing operations and exclude the results of the company's former Financial & Risk business unit (F&R), which is now known as Refinitiv. On October 1, 2018, the company closed the sale of a 55% interest in F&R to private equity funds managed by Blackstone. For 2018 reporting purposes, F&R was classified as a discontinued operation for the third quarter and first nine months of the year, Reuters News is a reportable segment and prior-year results have been restated accordingly.

Three Months Ended September 30,  

(Millions of U.S. dollars, except for adjusted EBITDA margin and EPS)

(unaudited)

 

 

IFRS Financial Measures(1)

2018

2017

Change

Change at 
Constant
Currency

Revenues

$1,292

$1,272

2%


Operating profit

$162

$288

-44%


Diluted earnings per share (EPS) (includes discontinued operations)

$0.37

$0.46

-20%


Cash flow from operations (includes discontinued operations)

$850

$808

5%


Non-IFRS Financial Measures(1)





Revenues

$1,292

$1,272

2%

3%

Adjusted EBITDA

$302

$388

-22%

-21%

Adjusted EBITDA margin

23.4%

30.5%

-710bp

-710bp

Adjusted EPS

$0.11

$0.27

-59%

-59%

Free cash flow (includes discontinued operations)

$599

$531

13%


 

(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% due to higher recurring revenues. Foreign currency had a negative 1% impact on revenue growth.  

Operating profit decreased 44% due to investments to reposition Thomson Reuters in anticipation of separating F&R from the company, higher depreciation and compensation-related expenses within the business segments. The prior-year period also benefited from the sale of a portion of an investment.

Diluted earnings per share (EPS) decreased 20% as lower operating profit and higher income tax expense from continuing operations more than offset higher net earnings from discontinued operations, which increased primarily because F&R assets held for sale are not depreciated.   

Cash flow from operations increased $42 million, primarily due to favorable working capital movements within discontinued operations.

Highlights by Business Unit – Three Months Ended September 30

(Millions of U.S. dollars, except for adjusted EBITDA margins)

(unaudited)

 



Three Months Ended







September 30,


Change



2018

2017


Total

Foreign 
Currency

Constant
Currency

Revenues








Legal(1)


$883

$860


3%

-1%

4%

Tax & Accounting


341

341


0%

-3%

3%

Reuters News


71

73


-3%

1%

-4%

Eliminations


(3)

(2)





Revenues


$1,292

$1,272


2%

-1%

3%









Adjusted EBITDA 








Legal(1)


$327

$345


-5%

 

0%

-5%

Tax & Accounting


93

95


-2%

0%

-2%

Reuters News


6

7


-14%

3%

-17%

Corporate


(124)

(59)


n/a

n/a

n/a

Adjusted EBITDA


$302

$388


-22%

-1%

-21%









Adjusted EBITDA Margin 








Legal(1)


37.0%

40.1%


-310bp

20bp

-330bp

Tax & Accounting


27.3%

27.9%


-60bp

80bp

-140bp

Reuters News


8.5%

9.6%


-110bp

0bp

-110bp

Corporate


n/a

n/a


n/a

n/a

n/a

Adjusted EBITDA margin


23.4%

30.5%


-710bp

0bp

-710bp









n/a:    not applicable

(1)       Includes certain portions of the F&R Risk business (Regulatory Intelligence and Compliance Learning) that 
           were retained by the Thomson Reuters Legal segment in connection with the sale of 55% of the F&R business. 
           These businesses generated approximately $69 million of annual revenues in 2017.

















Unless otherwise noted, all revenue growth comparisons by business unit 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

Revenues increased 4% to $883 million (organic revenue growth was 3%).

Adjusted EBITDA decreased 5% to $327 million.

Tax & Accounting

Revenues increased 3% to $341 million and reflected a negative impact from the adoption of a new accounting standard, IFRS 15. Excluding the impact of IFRS 15, revenues increased 4% organically. For the full year, IFRS 15 is expected to have a nominal impact on revenue growth. Currency had a 300 basis point negative impact on reported revenue growth.

Adjusted EBITDA decreased 2% to $93 million.

Reuters News

Revenues declined 4% to $71 million due to lower recurring revenues.

The 30-year agreement for Reuters News to supply news and editorial content to the new Refinitiv partnership for a minimum of $325 million per year took effect at the October 1, 2018 closing of the F&R transaction. Reuters News revenues will begin to reflect Refinitiv payments in the fourth quarter.

Adjusted EBITDA was $6 million, down $1 million from the prior-year period.

Corporate

Corporate costs at the adjusted EBITDA level were $124 million compared to $59 million in the prior-year period. As previously disclosed, this was due to higher costs, which included investments to reposition Thomson Reuters following the separation of the F&R business and formation of the new Refinitiv partnership. These cash investments are expected to be incurred in 2018 and 2019.

Financial & Risk – Discontinued Operation

(Millions of U.S. dollars, except for adjusted EBITDA margin)

(unaudited)

 

Financial & Risk (Discontinued Operation)(1)


Three Months Ended







September 30,


Change



2018

2017


Total

Foreign
Currency

Constant
Currency(2)

Revenues


$1,541

$1,525


1%

-1%

2%

Adjusted EBITDA


$482

$461


5%

-1%

6%

Adjusted EBITDA margin


31.3%

30.2%


110bp

10bp

100bp

Cash flow from operations


$583

$413


41%



Free cash flow (non-IFRS measure)(2)


$442

$296


49%



Capital expenditures


$116

$96


21%




(1)       Excludes certain portions of the F&R Risk business (Regulatory Intelligence and Compliance Learning) that 
           were retained by the Thomson Reuters Legal segment in connection with the sale of 55% of the F&R business. These 
           businesses generated approximately $69 million of annual revenues in 2017.  

(2)       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 2% to $1.5 billion.

Adjusted EBITDA increased 5% to $482 million.

Cash flow from operations increased 41% due to favorable working capital movements.

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)

2018

2017

Change

Change at 
Constant
Currency

Revenues

$3,982

$3,883

3%


Operating profit

$634

$780

-19%


Diluted EPS (includes discontinued operations)

$0.77

$1.13

-32%


Cash flow from operations (includes discontinued operations)

$2,072

$1,274

63%


Non-IFRS Financial Measures(1)





Revenues

$3,982

$3,883

3%

3%

Adjusted EBITDA

$1,080

$1,183

-9%

-9%

Adjusted EBITDA margin

27.1%

30.5%

-340bp

-330bp

Adjusted EPS

$0.55

$0.71

-23%

-23%

Free cash flow (includes discontinued operations)

$1,274

$526

142%


 

(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 3% due to higher recurring revenues, with no impact from foreign currency.

Operating profit decreased 19% due to higher costs, which included investments to reposition Thomson Reuters in anticipation of separating the F&R business from the company, higher depreciation and additional expenses within the business segments.  The prior-year period also benefited from the sale of a portion of an investment.

Diluted EPS decreased 32% due to lower operating profit and higher income tax expense from continuing operations, as well as lower net earnings from discontinued operations, which included an $850 million deferred tax charge (most of which was recorded in the first quarter of 2018) associated with the sale of a 55% interest in the F&R business. The tax charge was required to be recorded when the business was first considered held for sale, rather than when the sale was completed.

Cash flow from operations increased $798 million primarily because the prior-year period included a $500 million pension contribution, as well as favorable movements in working capital within discontinued operations.

Highlights by Business Unit – Nine Months Ended September 30

(Millions of U.S. dollars, except for adjusted EBITDA margins)

(unaudited)

 



Nine Months Ended







September 30,


Change



2018

2017


Total

Foreign 
Currency

Constant
Currency

Revenues








Legal(1)


$2,637

$2,559


3%

0%

3%

Tax & Accounting


1,137

1,108


3%

-1%

4%

Reuters News


215

221


-3%

2%

-5%

Eliminations


(7)

(5)





Revenues


$3,982

$3,883


3%

0%

3%









Adjusted EBITDA 








Legal(1) 


$967

$984


-2%

0%

-2%

Tax & Accounting


331

339


-2%

-1%

-1%

Reuters News


22

29


-24%

5%

-29%

Corporate


(240)

(169)


n/a

n/a

n/a

Adjusted EBITDA


$1,080

$1,183


-9%

0%

-9%









Adjusted EBITDA Margin 








Legal(1)


36.7%

38.5%


-180bp

0bp

-180bp

Tax & Accounting


29.1%

30.6%


-150bp

10bp

-160bp

Reuters News


10.2%

13.1%


-290bp

20bp

-310bp

Corporate


n/a

n/a


n/a

n/a

n/a

Adjusted EBITDA margin


27.1%

30.5%


-340bp

-10bp

-330bp









n/a:     not applicable

(1)       Includes certain portions of the Risk business (Regulatory Intelligence and Compliance Learning) that were retained 
           by the Legal segment in connection with the sale of 55% of the F&R business. These businesses generated 
           approximately $69 million of annual revenues in 2017.

Financial & Risk – Discontinued Operation

(Millions of U.S. dollars, except for adjusted EBITDA margin)

(unaudited)

 

Financial & Risk (Discontinued Operation)(1)


Nine Months Ended







September 30,


Change



2018

2017


Total

Foreign 
Currency

Constant
Currency(2)

Revenues


$4,677

$4,511


4%

2%

2%

Adjusted EBITDA


$1,480

$1,380


7%

1%

6%

Adjusted EBITDA margin


31.6%

30.6%


100bp

-20bp

120bp

Cash flow from operations


$1,244

$935


33%



Free cash flow (non-IFRS measure)(2)


$822

$565


45%



Capital expenditures


$362

$318


14%




(1)       Excludes certain portions of the F&R Risk business (Regulatory Intelligence and Compliance Learning) that 
           were retained by Thomson Reuters Legal segment in connection with the sale of 55% of the F&R business. 
           These businesses generated approximately $69 million of annual revenues in 2017.  

(2)       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.

















New Organizational Structure

In July 2018, the company began transitioning from a product-centric structure to a customer-centric structure. Thomson Reuters is organizing its Legal and Tax & Accounting business units into three customer segments: Legal Professionals, Tax Professionals and Corporates. Global print will be reported as a separate segment, reflecting the way that the company manages the business. Reuters News will continue to be reported as a segment.

This new structure is intended to move decision making closer to the customer and allow the company to serve customers better with its full suite of offerings.  The company plans to begin reporting under the new organizational structure with its fourth-quarter 2018 results.

Business Outlook 2018 (At Constant Currency)

Thomson Reuters today reaffirmed its Outlook for 2018 as previously provided on May 11, 2018 except for an update to its full-year 2018 adjusted EBITDA and estimated effective tax rate (see below).

The company's 2018 Outlook assumes constant currency rates compared to 2017 and does not factor in the impact of acquisitions or divestitures that may occur, except for the F&R transaction, which closed on October 1, 2018. F&R was considered a discontinued operation for the first three quarters of 2018 and is excluded from the company's 2018 Outlook.

For the full-year 2018, the company currently expects:

The information in this section is forward-looking and should be read in conjunction with the section below entitled "Special Note Regarding Forward-Looking Statements, Material Assumptions and Material Risks."

Dividend

In October 2018, Thomson Reuters announced a $0.02 per share annualized increase in the dividend to $1.40 per common share. A quarterly dividend of $0.35 per share is payable on December 17, 2018 to common shareholders of record as of November 15, 2018. Thomson Reuters has increased its common share dividend for 25 consecutive years.

Financial & Risk Transaction Proceeds Update

On October 1, 2018, Thomson Reuters closed the sale of a 55% interest in the company's F&R business to private equity funds managed by Blackstone. An affiliate of Canada Pension Plan Investment Board and an affiliate of GIC invested alongside Blackstone. The F&R business is now known as Refinitiv. Thomson Reuters received approximately $17 billion in gross cash proceeds at the closing and retained a 45% interest in the business. Beginning with its results for the fourth quarter of 2018, Thomson Reuters IFRS results will include the company's 45% share of Refinitiv's results reported in a single line item on the company's income statement titled "Share of post-tax earnings in equity method investments". Thomson Reuters' non-IFRS measures, including adjusted earnings, will exclude its share of post-tax earnings in equity method investments.

The company is in the process of returning $10 billion of the F&R transaction proceeds to its shareholders.

Thomson Reuters used approximately $4 billion of the F&R transaction cash proceeds to repay debt, enabling it to remain substantially below its target leverage ratio (net debt/adjusted EBITDA) of 2.5:1.

As previously disclosed, the company intends to utilize $2 billion of the proceeds to fund strategic, targeted acquisitions to bolster its positions in key growth segments of its Legal Professionals, Tax Professionals and Corporates businesses. The company expects to use the remaining $1 billion to cover cash taxes, pension contributions, bond redemption costs, and other fees and outflows related to the transaction. These funds include $500 million to $600 million of spend that the company views as necessary to eliminate stranded costs as well as investments to reposition the company following the separation of the businesses.

Return of Capital Transaction

A special meeting of Thomson Reuters shareholders will be held on Monday, November 19, 2018. Shareholders will be asked to approve the distribution of $4.45 in cash per common share (approximately $2.5 billion) to holders of common shares and a consolidation of outstanding common shares (or "reverse stock split") on a basis that is proportional to the cash distribution. The transaction is expected to be tax-free for Canadian tax purposes. Certain shareholders who are taxable in a jurisdiction outside of Canada will be able to opt out of the transaction. For shareholders who are subject to income tax outside of Canada, opting out of the transaction may be preferable to participating in the transaction. As such, the company strongly recommends that non-Canadian resident shareholders consult with their tax or other professional advisor about the opt-out right for the transaction prior to November 14, 2018. Full details of the proposed transaction are described in the company's management proxy circular and other related materials dated October 23, 2018 and can be found on the Thomson Reuters Investor Relations website.

Thomson Reuters

Thomson Reuters (TSX/NYSE: TRI) is the world's leading provider of news and information-based tools to professionals. Our worldwide network of journalists and specialist editors keep customers up to speed on global developments, with a particular focus on legal, regulatory and tax changes. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information on Thomson Reuters, visit tr.com and for the latest world news, reuters.com.

NON-IFRS FINANCIAL MEASURES

Thomson Reuters prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

This news release includes certain non-IFRS financial measures, such as adjusted EBITDA and the related margin (other than at the business unit or segment level), free cash flow, adjusted EPS, and selected measures excluding the impact of foreign currency. Thomson Reuters uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS. Non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the appended tables. The term "organic" refers to Thomson Reuters' existing businesses before the impact of acquisitions, dispositions and IFRS 15.

The company's business outlook contains various non-IFRS financial measures. 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 2018 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 foreign exchange contracts and intercompany financing arrangements. Additionally, the company cannot reasonably predict the occurrence or amount of other operating gains and losses, which generally arise from business transactions that it does not anticipate.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL ASSUMPTIONS AND MATERIAL RISKS

Certain statements in this news release, including, but not limited to, statements in the "Business Outlook 2018 (At Constant Currency)" section, Mr. Smith's comments, statements regarding the company's anticipated uses of proceeds from the F&R transaction, Legal's and Tax & Accounting's expected full-year adjusted EBITDA margin, and the expected timing for the return of capital transaction, are forward-looking. As a result, forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. There is no assurance that the return of capital transaction will be completed or that the events described in any other forward-looking statement will materialize. A business outlook is provided for the purpose of presenting information about current expectations for 2018. 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.

The company's 2018 business outlook is based on various external and internal assumptions. Economic and market assumptions include, but are not limited to, GDP growth in most of the countries where Thomson Reuters operates, a continued increase in demand for high quality information and workflow solutions and a continued need for trusted products and services that help customers navigate changing geopolitical, economic and regulatory environments. Internal financial and operational assumptions include, but are not limited to, the successful execution of sales initiatives, ongoing product release programs, our globalization strategy and other growth and efficiency initiatives.

Some of the material risk factors that could cause actual results or events to differ materially from those expressed in or implied by forward-looking statements in this news release include, but are not limited to, changes in the general economy; actions of competitors; failure to develop new products, services, applications and functionalities to meet customers' needs, attract new customers and retain existing ones, or expand into new geographic markets and identify areas of higher growth; fraudulent or unpermitted data access or other cyber-security or privacy breaches; failures or disruptions of telecommunications, data centers, network systems or the Internet; increased accessibility to free or relatively inexpensive information sources; failure to meet the challenges involved in operating globally; failure to maintain a high renewal rate for recurring, subscription-based services; dependency on third parties for data, information and other services; changes to law and regulations; tax matters, including changes to tax laws, regulations and treaties; fluctuations in foreign currency exchange and interest rates; failure to adapt to organizational changes and effectively implement strategic initiatives; failure to attract, motivate and retain high quality management and key employees; failure to protect the brands and reputation of Thomson Reuters; inadequate protection of intellectual property rights; threat of legal actions and claims; downgrading of credit ratings and adverse conditions in the credit markets; failure to derive fully the anticipated benefits from existing or future acquisitions, joint ventures, investments or dispositions; the effect of factors outside of the control of Thomson Reuters on funding obligations in respect of pension and post-retirement benefit arrangements, risk of antitrust/competition-related claims or investigations; impairment of goodwill and other identifiable intangible assets; actions or potential actions that could be taken by the company's principal shareholder, The Woodbridge Company Limited; difficulties separating F&R from the company; and failure to realize the benefits of the Refinitiv partnership. These and other factors are discussed in materials that Thomson Reuters from time to time files with, or furnishes to, the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. Thomson Reuters annual and quarterly reports are also available in the "Investor Relations" section of www.thomsonreuters.com.

CONTACTS

MEDIA

David Crundwell

Head of Communications

+1 416 649 9904

david.crundwell@tr.com

INVESTORS

Frank J. Golden

Senior Vice President, Investor Relations

+1 646 223 5288

frank.golden@tr.com

Thomson Reuters will webcast a discussion of its third-quarter 2018 results 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,


2018

2017


2018

2017

CONTINUING OPERATIONS






Revenues

$1,292

$1,272


$3,982

$3,883

Operating expenses

(985)

(888)


(2,901)

(2,698)

Depreciation

(24)

(23)


(83)

(85)

Amortization of computer software

(96)

(76)


(294)

(265)

Amortization of other identifiable intangible assets

(26)

(33)


(83)

(103)

Other operating gains, net

1

36


13

48

Operating profit

162

288


634

780

Finance costs, net:






     Net interest expense

(82)

(89)


(241)

(270)

     Other finance (costs) income

(11)

(57)


10

(145)

Income before tax and equity method investments

69

142


403

365

Share of post-tax earnings (losses) in equity method

   investments

1

1


5

(4)

Tax expense

(128)

-


(152)

(26)

(Loss) earnings from continuing operations

(58)

143


256

335

Earnings from discontinued operations, net of tax

349

205


381

533

Net earnings

$291

$348


$637

$868







Earnings attributable to:






Common shareholders

261

330


547

819

Non-controlling interests

30

18


90

49







Earnings per share:






Basic and diluted earnings (loss) per share:






   From continuing operations

$(0.08)

$0.20


$0.36

$0.46

   From discontinued operations

0.45

0.26


0.41

0.67

Basic and diluted earnings per share

$0.37

$0.46


$0.77

$1.13







Basic weighted-average common shares

701,212,419

715,532,769


707,181,793

721,205,041

Diluted weighted-average common shares

701,212,419

716,900,125


708,074,979

722,527,597

 

 

Thomson Reuters Corporation

Consolidated Statement of Financial Position

(millions of U.S. dollars)

(unaudited)



September 30,  


December 31,

2018


2017

Assets




Cash and cash equivalents

$507


$874

Trade and other receivables

871


1,457

Other financial assets

42


98

Prepaid expenses and other current assets

419


548

   Current assets excluding assets held for sale

1,839


2,977

Assets held for sale

14,605


-

Current assets

16,444


2,977





Computer hardware and other property, net

459


921

Computer software, net

890


1,458

Other identifiable intangible assets, net

3,276


5,315

Goodwill

5,009


15,042

Other financial assets

37


83

Other non-current assets

572


605

Deferred tax

62


79

Total assets

$26,749


$26,480





Liabilities and equity




Liabilities




Current indebtedness

$2,127


$1,644

Payables, accruals and provisions

1,291


2,086

Deferred revenue

718


937

Other financial liabilities

791


129

   Current liabilities excluding liabilities associated with assets held for sale

4,927


4,796

Liabilities associated with assets held for sale

1,779


-

Current liabilities

6,706


4,796





Long-term indebtedness

4,955


5,382

Provisions and other non-current liabilities

1,060


1,740

Other financial liabilities

54


279

Deferred tax

1,424


708

Total liabilities

14,199


12,905





Equity




Capital

9,311


9,549

Retained earnings

6,618


7,201

Accumulated other comprehensive loss

(3,906)


(3,673)

Total shareholders' equity

12,023


13,077

Non-controlling interests

527


498

Total equity

12,550


13,575

Total liabilities and equity

$26,749


$26,480

 

 

Thomson Reuters Corporation

Consolidated Statement of Cash Flow

(millions of U.S. dollars)

(unaudited)



Three Months Ended

September 30,


Nine Months Ended

September 30,


2018

2017


2018

2017

Cash provided by (used in):






Operating activities






(Loss) earnings from continuing operations

$(58)

$143


$256

$335

Adjustments for:






Depreciation

24

23


83

85

Amortization of computer software

96

76


294

265

Amortization of other identifiable intangible assets

26

33


83

103

Net gains on disposals of businesses and investments

-

(35)


-

(35)

Deferred tax

82

(94)


57

(106)

Other

60

63


118

274

Pension contribution

-

-


-

(500)

Changes in working capital and other items 

37

191


(63)

(28)

Operating cash flows from continuing operations

267

400


828

393

Operating cash flows from discontinued operations

583

408


1,244

881

Net cash provided by operating activities

850

808


2,072

1,274







Investing activities






Acquisitions, net of cash acquired

(32)

(1)


(60)

(1)

Proceeds from disposals of businesses and investments

6

40


6

50

Capital expenditures 

(110)

(160)


(420)

(392)

Proceeds from disposals of property and equipment

-

-


27

-

Other investing activities

1

1


19

16

Investing cash flows from continuing operations

(135)

(120)


(428)

(327)

Investing cash flows from discontinued operations

(110)

(98)


(356)

(486)

Net cash used in investing activities

(245)

(218)


(784)

(813)







Financing activities






Proceeds from debt

-

-


1,370

-

Repayments of debt

(500)

(550)


(1,370)

(1,100)

Net borrowings under short-term loan facilities

17

555


78

705

Repurchases of common shares

(129)

(230)


(488)

(808)

Dividends paid on preference shares

(1)

(1)


(2)

(2)

Dividends paid on common shares

(232)

(237)


(707)

(720)

Other financing activities

9

14


10

30

Financing cash flows from continuing operations

(836)

(449)


(1,109)

(1,895)

Financing cash flows from discontinued operations

(25)

(19)


(60)

(50)

Net cash used in financing activities

(861)

(468)


(1,169)

(1,945)

(Decrease) increase in cash and bank overdrafts

(256)

122


119

(1,484)

Translation adjustments

(9)

4


(21)

9

Cash and bank overdrafts at beginning of period

1,231

766


868

2,367

Cash and bank overdrafts at end of period

$966

$892


$966

$892







Cash and bank overdrafts at end of period comprised of:






Cash and cash equivalents

$507

$898


$507

$898

Cash and cash equivalents in assets held for sale

461

-


461

-

Bank overdrafts

(2)

(6)


(2)

(6)


$966

$892


$966

$892

 


 

Thomson Reuters Corporation


Reconciliation of (Loss) Earnings from Continuing Operations to Adjusted EBITDA(1)


(millions of U.S. dollars, except for margins)


(unaudited)





Three Months Ended



Nine Months Ended



September 30,



September 30,




2018

2017

Change


2018

2017

Change









(Loss) earnings from continuing operations

$(58)

$143

n/m


$256

$335

-24%

Adjustments to remove:








Tax expense

128

-



152

26


Other finance costs (income)

11

57



(10)

145


Net interest expense

82

89



241

270


Amortization of other identifiable intangible assets

26

33



83

103


Amortization of computer software

96

76



294

265


Depreciation

24

23



83

85


EBITDA

$309

$421



$1,099

$1,229


Adjustments to remove:








Share of post-tax (earnings) losses in equity 
     method investments

(1)

(1)



(5)

4


Other operating gains, net

(1)

(36)



(13)

(48)


Fair value adjustments

(5)

4



(1)

(2)


Adjusted EBITDA

$302

$388

-22%


$1,080

$1,183

-9%

Adjusted EBITDA margin(1)

23.4%

30.5%

-710bp


27.1%

30.5%

-340bp



























n/m – not meaningful













 

 

Thomson Reuters Corporation

Reconciliation of Net Earnings to Adjusted Earnings(2)

(millions of U.S. dollars, except for share and per share data)

(unaudited)



Three Months Ended

September 30,


Nine Months Ended

September 30,




2018

2017

Change


2018

2017

Change

Net earnings

$291

$348

-16%


$637

$868

-27%

Adjustments to remove:








Fair value adjustments

(5)

4



(1)

(2)


Amortization of other identifiable intangible assets

26

33



83

103


Other operating gains, net

(1)

(36)



(13)

(48)


Other finance costs (income)

11

57



(10)

145


Share of post-tax (earnings) losses in equity method 
     investments

(1)

(1)



(5)

4


Tax on above items

(7)

8



(18)

(12)


Tax items impacting comparability

112

(5)



100

1


Earnings from discontinued operations, net of tax

(349)

(205)



(381)

(533)


Interim period effective tax rate normalization(3)

(2)

(6)



-

(8)


Dividends declared on preference shares

(1)

(1)



(2)

(2)


Adjusted earnings

$74

$196

-62%


$390

$516

-24%

Adjusted EPS

$0.11

$0.27

-59%


$0.55

$0.71

-23%

Foreign currency(4)



0%




0%

Constant currency(4)



-59%




-23%









Diluted weighted-average common shares (millions)

702.3

716.9



708.1

722.5



 

 

Thomson Reuters Corporation


Reconciliation of Earnings from Discontinued Operations to Financial & Risk Adjusted EBITDA(1)


(millions of U.S. dollars, except for margins)


(unaudited)





Three Months Ended



Nine Months Ended


September 30,



September 30,



2018

2017

Change


2018

2017

Change









Earnings from discontinued operations

$349

$205

70%


$381

$533

-29%

Adjustments to remove:








Tax expense (benefit)

135

(22)



1,021

(34)


Other finance costs

3

1



3

31


Net interest expense (income)

1

(5)



7

2


Amortization of other identifiable intangible assets

1

82



29

251


Amortization of computer software

-

95



30

254


Depreciation

3

50



17

137


EBITDA

$492

$406



$1,488

$1,174


Adjustments to remove:








Share of post-tax earnings in equity method 
     investments

-

(1)



-

(1)


Other operating losses, net

1

6



61

35


Fair value adjustments

(16)

49



(81)

173


IP & Science discontinued operations

5

1



12

(1)


Financial & Risk discontinued operations adjusted

   EBITDA

$482

$461

5%


$1,480

$1,380

7%

Adjusted EBITDA margin(1)

31.3%

30.2%

110bp


31.6%

30.6%

100bp














 

 

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,


2018

2017


2018

2017

Net cash provided by operating activities

$850

$808


$2,072

$1,274

Capital expenditures

(110)

(160)


(420)

(392)

Proceeds from disposals of property and equipment

-

-


27

-

Capital expenditures from discontinued operations

(116)

(96)


(362)

(318)

Other investing activities

1

1


19

16

Other investing activities from discontinued operations

-

(2)


-

(2)

Dividends paid on preference shares

(1)

(1)


(2)

(2)

Dividends paid to non-controlling interests from discontinued operations

(25)

(19)


(60)

(50)

Free cash flow

$599

$531


$1,274

$526









 

 


Thomson Reuters Corporation


Reconciliation of Operating Cash Flows from Discontinued Operations to Financial & Risk Free Cash Flow(5)


(millions of U.S. dollars)


(unaudited)






Three Months Ended


Nine Months Ended

September 30,


September 30,


2018

2017


2018

2017

Operating cash flows from discontinued operations

$583

$408


$1,244

$881

Remove: Operating cash flows - IP & Science discontinued operations

-

5


-

54

Capital expenditures from discontinued operations

(116)

(96)


(362)

(318)

Other investing activities from discontinued operations

-

(2)


-

(2)

Dividends paid to non-controlling interests from discontinued operations

(25)

(19)


(60)

(50)

Free cash flow - Financial & Risk discontinued operations

$442

$296


$822

$565

 

Footnotes

(1)

Thomson Reuters defines adjusted EBITDA for its business units as earnings from continuing operations, or for F&R as earnings from discontinued 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) 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 units and Corporate. Adjusted EBITDA margin is adjusted EBITDA expressed as a percentage of revenues. Thomson Reuters uses adjusted EBITDA because it provides a consistent basis to evaluate operating profitability and performance trends by excluding items that the company does not consider to be controllable activities for this purpose. Adjusted EBITDA also represents a measure commonly reported and widely used by investors as a valuation metric. Additionally, this measure is used by Thomson Reuters and investors to assess a company's ability to incur and service debt.

(2)

Adjusted earnings and adjusted EPS include dividends declared on preference shares but exclude the post-tax impacts of fair value adjustments, amortization of other identifiable intangible assets, other operating gains and losses, certain asset impairment charges, other finance costs or income, Thomson Reuters share of post-tax (earnings) losses in equity method investments, discontinued operations and other items affecting comparability. Thomson Reuters calculates the post-tax amount of each item excluded from adjusted earnings based on the specific tax rules and tax rates associated with the nature and jurisdiction of each item. Adjusted EPS is calculated using diluted weighted-average shares and does not represent actual earnings or loss per share attributable to shareholders. Thomson Reuters uses adjusted earnings and adjusted EPS as they provide a more comparable basis to analyze earnings and they are also measures commonly used by shareholders to measure the company's performance.




Because Thomson Reuters reported a net loss under IFRS for the three months ended September 30, 2018, the weighted-average number of common shares used for basic and diluted loss per share is the same, 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, 2018



IFRS: Basic and Diluted

701,212,419

Effect of stock options and other equity incentive awards

1,132,041

Non-IFRS Diluted

702,344,460

(3)

Adjustment to reflect income taxes based on estimated full-year effective tax rate. Earnings or losses for interim periods under IFRS reflect income taxes based on the estimated effective tax rates of each of the jurisdictions in which Thomson Reuters operates. The non-IFRS adjustment reallocates estimated full-year income taxes between interim periods, but has no effect on full-year income taxes.

(4)

The changes in revenues, adjusted EBITDA and the related margins, and adjusted earnings per share before currency (at constant currency or excluding the effects of currency) are determined by converting the current and prior-year period's local currency equivalent using the same exchange rates.

(5)

Free cash flow (includes free cash flow from continuing and discontinued operations) is net cash provided by (used in) operating activities, proceeds from disposals of property and equipment, and other investing activities less capital expenditures, dividends paid on the company's preference shares, and dividends paid to non-controlling interests from discontinued operations. Thomson Reuters uses free cash flow as it helps assess the company's ability, over the long term, to create value for its shareholders as it represents cash available to repay debt, pay common dividends and fund share repurchases and new acquisitions.

 

 

Supplemental

Thomson Reuters Corporation

Depreciation and Amortization of Computer Software by Business Segment

(millions of U.S. dollars)

(unaudited)



Three Months Ended


Nine Months Ended

September 30,


September 30,


2018

2017


2018

2017

Legal

$67

$63


$195

$190

Tax & Accounting

36

31


110

95

Reuters News

4

4


12

13

Corporate

13

1


60

52

Total depreciation and amortization of computer software

$120

$99


$377

$350

 

 

Appendix A




The following supplemental information provides revised 2017 business segment information excluding the Financial & Risk (F&R) business, which was classified as a discontinued operation for the first nine months of 2018. The information provided illustrates the company's business on a continuing operations basis.

 


Revised Business Segment Information


(Excluding the F&R Segment)


(millions of U.S. dollars except for per share amounts)


(unaudited)





Year Ended




Year Ended


December 31,
2017

Adjustments

December 31,
2017


Previously
Reported

Remove F&R
Segment
Results

Add Back
Retained
Businesses(3)

Other
Adjustments(4)

Revised
Excluding F&R

Revenues







Financial & Risk

$6,112

(6,112)

-

-

-


Legal

3,390

-

69

-

$3,459


Tax & Accounting

1,551

-

-

-

1,551


Reuters News(1)

296

-

-

-

296


Eliminations

(16)

7

-

-

(9)


Revenues from continuing operations

$11,333

(6,105)

69

-

$5,297









Adjusted EBITDA(2)







Financial & Risk

$1,916

(1,916)

-

-

-


Legal

1,279

-

28

-

$1,307


Tax & Accounting

495

-

-

-

495


Reuters News(1)

27

-

-

-

27


Corporate

(280)

-

-

42

(238)


Adjusted EBITDA

$3,437

(1,916)

28

42

$1,591









Adjusted earnings(2)







Adjusted EBITDA

$3,437

(1,916)

28

42

$1,591


Depreciation and amortization of computer software

(995)

581

(10)

(46)

(470)


Adjustments:







   Interest

(362)

-

-

5

(357)


   Tax

(205)

121

(2)

(1)

(87)


   Non-controlling interests

(64)

-

-

64

-


   Dividends declared on preference shares

(2)

-

-

-

(2)


Adjusted earnings

$1,809

(1,214)

16

64

$675









Adjusted EPS(2)

$2.51

(1.68)

0.02

0.09

$0.94














(1)

Effective January 1, 2018, Reuters News became a reportable segment.



(2)

Refer to the explanatory footnotes earlier in this news release for definitions of our non-IFRS measures. Refer to the company's 2017 Annual Report for a reconciliation of this non-IFRS financial measure to the most directly comparable IFRS measure.



(3)

Represents the Regulatory Intelligence and Compliance Learning businesses that was retained by the company's Legal segment following the closing of the F&R transaction.



(4)

Other adjustments include the following:


·    Adjusted EBITDA contains costs primarily for real estate optimization that relate to properties transferred with the F&R business.


·    Depreciation and amortization of computer software relates to assets that were not transferred with the F&R business.


·    Non-controlling interests relates to third party shareholdings in Tradeweb that were transferred with the F&R business.

 

 

 

Appendix A


The following supplemental information provides revised 2017 business segment information excluding the F&R business, which was classified as a discontinued operation for the first nine months of 2018. The information provided illustrates the company's business on a continuing operations basis.


Revised Business Segment Information


(Excluding the F&R Segment)


(millions of U.S. dollars except for per share amounts and margins)


(unaudited)





2017


First  
Quarter

Second
Quarter

Third 
Quarter

Fourth
Quarter

Full Year

Revenues







Legal

$841

$858

$860

$900

$3,459

Tax & Accounting

417

350

341

443

1,551

Reuters News

74

74

73

75

296

Eliminations

(1)

(2)

(2)

(4)

(9)

Revenues from continuing operations

$1,331

$1,280

$1,272

$1,414

$5,297








Adjusted EBITDA(1)







Legal

$314

$325

$345

$323

$1,307

Tax & Accounting

141

103

95

156

495

Reuters News

13

9

7

(2)

27

Corporate

(53)

(57)

(59)

(69)

(238)

Adjusted EBITDA

$415

$380

$388

$408

$1,591








Adjusted earnings(1)







Adjusted EBITDA

$415

$380

$388

$408

$1,591

Depreciation and amortization of computer software

(124)

(127)

(99)

(120)

(470)

Adjustments:







   Interest

(92)

(89)

(89)

(87)

(357)

   Tax

(18)

(24)

(3)

(42)

(87)

   Dividends declared on preference shares

(1)

-

(1)

-

(2)

Adjusted earnings

$180

$140

$196

$159

$675

Adjusted EPS(1)

$0.25

$0.19

$0.27

$0.22

$0.94








Adjusted EBITDA margin(1)







Legal

37.3%

37.9%

40.1%

35.9%

37.8%

Tax & Accounting

33.8%

29.4%

27.9%

35.2%

31.9%

Reuters News

17.6%

12.2%

9.6%

n/m

9.1%

Corporate

n/a

n/a

n/a

n/a

n/a

Adjusted EBITDA margin

31.2%

29.7%

30.5%

28.9%

30.0%

n/m – not meaningful







n/a – not applicable
















(1)      Refer to the explanatory footnotes earlier in this news release for definitions of our non-IFRS measures.

 

 

Voltar noticias em Inglês