Thomson Reuters (TSX/NYSE: TRI) reported results for the fourth quarter and full year ended December 31, 2017. As already announced on January 30, 2018, the company achieved its full-year 2017 Outlook (as updated in August).  

“Our 2017 fourth-quarter and full-year results show continued progress in key areas,” said Jim Smith, president and chief executive officer of Thomson Reuters. “Moving forward, we remain extremely excited about the future prospects for F&R through our strategic partnership with Blackstone, and our renewed focus to accelerate growth in the core businesses of Thomson Reuters. Our ability to capitalize on opportunities at the intersection of regulation and commerce has never been stronger.”

Revenues $2,944 $2,860 3% $2,860 3% 1%
Adjusted EBITDA $874 $635 38% $847 3% 1%
Adjusted EBITDA margin 29.7% 22.2% 750bp 29.6% 10bp 10bp
Adjusted EPS $0.60 $0.31 94% $0.60 0% -5%
Free cash flow
(includes discontinued operations (3))
$506 $755 -33% $794 -36%

Segment Results:

Financial & Risk:  Revenues increased 1% to $1.6 billion.  Organic revenues were unchanged and acquisitions contributed 1%.

  • Revenues by type:
    • Recurring revenues were unchanged (77% of total)
    • Transactions revenues grew 7% (16% of total)
      • Growth was due to increased revenue from Tradeweb and contributions from acquisitions, partially offset by the impact of lower foreign exchange trading revenues.
    • Recoveries revenues decreased 6% (7% of total) 
  • Revenues by geography:
    • Revenues were up 2% in the Americas, unchanged in Europe, Middle East and Africa (EMEA), and down 1% in Asia Pacific.

Legal:  Revenues increased 1% to $881 million.

  • Recurring revenues grew 3% (75% of total)
  • US Print revenues declined 7% (14% of total)
  • Transactions revenues declined 1% (11% of total)

Tax & Accounting:  Revenues increased 6% to $443 million.

  • Recurring revenues grew 5% (88% of total)
  • Transactions revenues grew 11% (12% of total)

Corporate & Other (Including Reuters News):  Reuters News revenues were $75 million, down 5%.

Highlights by Business Unit – Full-Year 2017

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

Year Ended December 31, Change
Revenues 2017 2016 Total Foreign  Currency Constant Currency
Financial & Risk $6,112 $6,057 1% 0% 1%
Legal 3,390 3,367 1% 0% 1%
Tax & Accounting 1,551 1,452 7% 1% 6%
Corporate & Other (Reuters News) 296 304 -3% 0% -3%
Eliminations (16)  (14)
Revenues $11,333 $11,166  1% -1% 2%
Adjusted EBITDA
Financial & Risk $1,916 $1,629 18% 1% 17%
Legal 1,279 1,232 4% 0% 4%
Tax & Accounting 495 414 20% 1% 19%
Corporate & Other (includes Reuters News) (253) (321) n/a n/a n/a
Adjusted EBITDA $3,437 $2,954 16% 0% 16%
Adjusted EBITDA Margin
Financial & Risk 31.3% 26.9% 440bp 10bp 430bp
Legal 37.7% 36.6% 110bp 10bp 100bp
Tax & Accounting 31.9% 28.5% 340bp -10bp 350bp
Corporate & Other (includes Reuters News) n/a n/a n/a n/a n/a
Adjusted EBITDA margin 30.3% 26.5% 380bp 10bp 370bp

Excluding 2016 Severance Charges from Prior-Year Period Amounts and Margins 
Adjusted EBITDA 
Financial & Risk $1,916 $1,796 7% 1% 6%
Legal 1,279 1,258 2% 0% 2%
Tax & Accounting 495 432 15% 1% 14%
Corporate & Other (includes Reuters News) (253) (320) n/a n/a n/a
Adjusted EBITDA $3,437 $3,166 9% 1% 8%
Adjusted EBITDA margin
Financial & Risk 31.3% 29.7% 160bp 20bp 140bp
Legal 37.7% 37.4% 30bp 0bp 30bp
Tax & Accounting 31.9% 29.8% 210bp -10bp 220bp
Corporate & Other (includes Reuters News) n/a n/a n/a n/a n/a
Adjusted EBITDA margin 30.3% 28.4% 190bp 20bp 170bp

n/a – not applicable

Financial & Risk

Revenues increased 1% to $6.1 billion.  Organic revenues were unchanged and acquisitions contributed 1%.

  • Revenues by type:
    • Recurring revenues grew 1% (77% of total)
    • Transactions revenues grew 6% (16% of total)
      • Growth was due to increased revenue from Tradeweb and contributions from acquisitions, partially offset by the impact of lower foreign exchange trading revenues.
    • Recoveries revenues decreased 6% (7% of total)
  • Revenues by geography:
    • Revenues were up 3% in the Americas, and were unchanged in EMEA and Asia Pacific. Excluding the impact of lower recoveries, all regions reported revenue growth.

Adjusted EBITDA increased 18% to $1.9 billion and the margin increased to 31.3% from 26.9% due to the impact of severance charges incurred in the fourth quarter of 2016, savings from the company’s simplification initiatives and higher revenues.

  • In constant currency and excluding the severance charges from the prior year, adjusted EBITDA was up 6% and the margin increased 140 basis points.

Net sales for the full year were positive.

Legal

Revenues increased 1% to $3.4 billion.

  • Recurring revenues grew 3% (76% of total)
  • US Print revenues declined 6% (13% of total)
  • Transactions revenues declined 6% (11% of total)

Adjusted EBITDA increased 4% to $1.3 billion and the margin increased to 37.7% from 36.6%. The increase was driven by the impact of severance charges incurred in the fourth quarter of 2016, higher revenues and savings from ongoing simplification initiatives.

  • In constant currency and excluding the severance charges from the prior year, adjusted EBITDA was up 2% and the margin increased 30 basis points.

Tax & Accounting

Revenues increased 6% to $1.6 billion.

  • Recurring revenues grew 5% (85% of total)
  • Transactions revenues grew 18% (15% of total)

Adjusted EBITDA increased 20% to $495 million and the margin increased to 31.9% from 28.5%. The increase was driven by higher revenues, savings from the company’s simplification initiatives and the impact of severance charges incurred in the fourth quarter of 2016.

  • In constant currency and excluding the severance charges from the prior year, adjusted EBITDA was up 14% and the margin increased 220 basis points.

Corporate & Other (Including Reuters News)

Reuters News revenues were $296 million, down 3%.

Corporate & Other costs at the adjusted EBITDA level were $253 million compared to $321 million in the prior year. The reduction was driven by the company’s ongoing simplification initiatives, partly offset by investments relating to improving customer experience and costs related to real estate consolidation initiatives.

  • Including depreciation and amortization of software, Corporate & Other costs were $289 million compared to $381 million in the prior year.

Business Update: Proposed Financial & Risk Strategic Partnership with Blackstone

On January 30, 2018, Thomson Reuters announced that it signed a definitive agreement to enter into a strategic partnership with private equity funds managed by Blackstone related to the company’s Financial & Risk business. As part of the transaction, Thomson Reuters has agreed to sell a 55% majority stake in Financial & Risk and will retain a 45% interest in the business. The transaction values the Financial & Risk business at approximately $20 billion. Thomson Reuters will receive approximately $17 billion in gross proceeds at closing (subject to purchase price adjustments).

Thomson Reuters will maintain full ownership of its Legal, Tax & Accounting and the Reuters News businesses. The transaction is expected to close in the second half of the year and is subject to specified regulatory approvals and customary closing conditions.

Financial & Risk will be classified as a discontinued operation for 2018 reporting purposes.

Source: Thomson Reuters Press Release