Thomson Reuters Corporation · TSX:TRI
Thomson Reuters — Q4 2019 Earnings Presentation
35 slides from Thomson Reuters's earnings presentation, Feb 25, 2020
Slide 1: 2019 Fourth-Quarter & Full-Year Results
REUTERS / Vasily Fedosenko REUTERS REUTERS / Mike / Marcos Blake Brindicci Leonhard Foeger THOMSON REUTERS 2019 FOURTH-QUARTER & FULL-YEAR RESULTS February 25, 2020
Slide 2: Agenda
Agenda Welcome / Introduction Frank Golden Fourth-Quarter & Full-Year 2019 Results & 2020 Outlook Jim Smith Financial Review Stephane Bello & Mike Eastwood Conclusion Jim Smith Q&A 2
Slide 3: Special Note Regarding Forward-Looking Statements
Special Note Special Note Regarding Forward-Looking Statements, Material Risks and Material Assumptions This presentation consists of these slides and the associated remarks and comments, which are related and intended to be presented and understood together. Certain statements in this presentation
Slide 4: Fourth-Quarter & Full-Year 2019 Highlights & 2020 Outlook
THOMSON REUTERS Fourth-Quarter & Full-Year 2019 Highlights & 2020 Outlook JIM SMITH PRESIDENT & CEO 4
Slide 5: Fourth-Quarter 2019 Consolidated Results
Fourth-Quarter 2019 Consolidated Results IFRS Financial Measures ($ millions) 2019 2018 Change Revenues $1,583 $1,527 Up 4% Operating profit $216 $135 Up 60% Diluted earnings per share (EPS)(1) $2.64 $6.13 -57% Cash flow from operations(1) $355 $(10) n/m Change at Constant Organic Non-IFRS Financial
Slide 6: Fourth-Quarter 2019 Revenue Growth by Segment
Fourth-Quarter 2019 Revenue Growth by Segment Reported Revenues up 4% to $1.6 billion Organic revenues up 4% Organic recurring revenues up 6% Tax Corporates Reuters News Global Print Professionals Legal Tax & Accounting Corporates Reuters News Global Print Professionals Professionals $0.6B $0.3B $0.
Slide 7: A Successful Repositioning … Momentum is Building
A Successful Repositioning … Momentum is Building 2017 / 2018 2019 2020 2021+ • Well-positioned • Clean Reporting year • Launched New TR in • Business Information Professional Information ✓ No additional stranded or customer segmentation Services (BIS) company Situation business 1x costs expected re
Slide 8: Full-Year 2019 Results vs 2019 Outlook
Full-Year 2019 Results vs 2019 Outlook Achieved Each Full-Year 2019 Guidance Target 2019 Outlook 2019 Results 2019 Before Currency Before Currency Reported Revenue Growth 7% - 8.5% 8.5% 7.4% 3.5% - 4.0% Organic 3.7% Organic 3.7% Organic Adjusted EBITDA $1.45 - $1.5 billion $1.48 billion $1.49 billio
Slide 9: 2020 Outlook
2020 Outlook 2019 2020 Outlook(1) Reported Before Currency Total Revenue Growth 7.4%(2) 4.5% - 5.5% Organic Revenue Growth 3.7% 4.0% - 4.5% Adjusted EBITDA Margin 25.3% 31.5% - 32.0% (1) Before currency and excluding the impact of future acquisitions/disposals (2) Includes first full-year contractua
Slide 10: Positioned for Higher Growth & Profitability
Positioned for Higher Growth & Profitability 10
Slide 11: Evolution of Key Financial Metrics since 2012
Evolution of Key Financial Metrics since 2012 2012 2020 Variance Total Revenue Growth - 4.0% 4.5% - 5.5% * +950 bps Organic Revenue Growth 0.2% 4.0% - 4.5% * +400 bps Adjusted EBITDA Margin 26.6% 31.5% - 32.0% * +500 bps Return on Invested Capital 6.7% > 10.0% +330 bps Market Capitalization $22.1B *
Slide 12: The New Thomson Reuters: A Return to Our Value Creation Model
The New Thomson Reuters A Return to Our Value Creation Model Revenue Growth FCF Growth Prioritizing capital toward FCF = Lifeblood of future highest growth opportunities success & growth Organic: 3%-5% 4%-7% 6%-10% Acquisitions: 1%-2% Revenue Growth FCF growth $2.40+ 4.5% - 5.5% FCF/Share ~2.5x ~ 50
Slide 13: 2020 Dividend Increase of $0.08 Per Share to $1.52
2020 Dividend Increase of $0.08 Per Share to $1.52 27 Consecutive Years of Annual Dividend Increases Annualized Dividend per Common Share $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201
Slide 14: 2020 Key Priorities
2020 Key Priorities 1. Grow organic revenue at a sustainable mid-single digit level 2. Deploy remaining ~$800 million reinvestment fund • Targeting acquisitions that strengthen our value proposition, advance our platform strategy and extend to highly adjacent market segments 3. Build on our strength
Slide 15: Financial Review
FINANCIAL REVIEW STEPHANE BELLO CHIEF FINANCIAL OFFICER 15
Slide 16: Q4 & FY 2019 Revenues - Legal, Corporates, Tax & Accounting
Fourth-Quarter & Full-Year 2019 Revenues - Legal, Corporates, Tax & Accounting ($ millions) Fourth Quarter Full Year Constant Constant Revenues 2019 2018 Total Currency Organic 2019 2018 Total Currency Organic Legal Professionals 617 600 +3% +4% + 4% 2,419 2,373 +2% +3% +4% Corporates 331 315 +5% +5
Slide 17: Full-Year 2019 Organic Revenue Growth Details
Full-Year 2019 Organic Revenue Growth Details Recurring Recurring Revenue 10% up 85 bps organically 8% 8% Total Company Organic Revenue 7% up 120 bps 5% Total 5% 4% 3% 8% 6% 6% 5% Legal Corporates Tax Total TR 4% 4% 4% % of Total 92% 83% 83% 78% 2% Transactions Revenue Transactions up 120 bps 4% org
Slide 18: Q4 & FY 2019 Consolidated Revenues
Fourth-Quarter & Full-Year 2019 Consolidated Revenues ($ millions) Fourth Quarter Full Year Constant Constant Revenues 2019 2018 Total Currency Organic 2019 2018 Total Currency Organic Reuters News 164 155 +5% +5% -1% 630 370 +70% +72% +2% Global Print 196 206 -5% -4% -4% 693 728 -5% -3% -3% Elimina
Slide 19: Q4 & FY 2019 Adjusted EBITDA - Legal, Corporates, Tax & Accounting
Fourth-Quarter & Full-Year 2019 Adjusted EBITDA - Legal, Corporates, Tax & Accounting ($ millions) Fourth Quarter Full Year Constant Constant Adjusted EBITDA 2019 2018 Total Currency 2019 2018 Total Currency Legal Professionals 215 221 -3% -2% 901 816 +10% +10% Margin 34.9% 36.8% 37.2% 34.4% Corpora
Slide 20: Q4 & FY 2019 Consolidated Adjusted EBITDA
Fourth-Quarter & Full-Year 2019 Consolidated Adjusted EBITDA ($ millions) Fourth Quarter Full Year Constant Constant Adjusted EBITDA 2019 2018 Total Currency 2019 2018 Total Currency Reuters News 4 6 -23% -86% 35 27 +32% -6% Margin 2.4% 3.3% 5.6% 7.2% Global Print 77 87 -12% -13% 295 320 -8% -7% Mar
Slide 21: Full-Year 2019 Adjusted EBITDA Margin Performance
Full-Year 2019 Adjusted EBITDA Margin Performance +80 bps Expansion on Underlying Underlying Underlying Adj. EBITDA Adj. EBITDA Adj. EBITDA YOY 31.5% 30.7% 0.6% -1.2% 1.0% 1x Costs -0.4% 0.7% 4.6% 1x Costs 4.3% Integration Point HighQ Confirmation FCBI Acritas Stranded Costs Stranded Costs & Divesti
Slide 22: Adjusted Earnings Per Share, Free Cash Flow, Corporate Costs, Capital Structure
ADJUSTED EARNINGS PER SHARE FREE CASH FLOW CORPORATE COSTS CAPITAL STRUCTURE 22
Slide 23: Adjusted Earnings Per Share (EPS)
Adjusted Earnings Per Share (EPS) ($ millions except per share amounts & share count) Fourth Quarter Full Year % % 2019 Change 2019 Change Change Change Adjusted EBITDA $396 $122 $1,493 $128 Depreciation & Amortization ($167) ($34) ($603) ($93) Interest Expense ($51) ($32) ($163) $97 Income Tax $8 $
Slide 24: Consolidated Free Cash Flow
Consolidated Free Cash Flow ($ millions) Fourth Quarter Full Year 2019 2018 Change 2019 2018 Change Comparable Free Cash Flow (Continuing Operations) $419 $197 $222 $1,069 $685 $384 Other Items (Q1-19 pension contribution & F&R separation costs) $204 $291 $87 $746 $327 ($419) Free Cash Flow (Continu
Slide 25: Corporate Costs
Corporate Costs $564M $499M $340M $272M (3) $87M $100M ~$140M - $150M $140M $124M (1) (2) 2018 2019 2020E One-Time Costs Stranded Costs Core Corporate Costs (1) Includes $33 million of Capital Expenditures (2) Includes $70 million of Capital Expenditures (3) All operating expense/excludes Capital Ex
Slide 26: Year-End 2019 Capital Structure
Year-End 2019 Capital Structure 1) Debt Outstanding = $3.4 billion 2) Cash on Balance Sheet = $0.8 billion 3) Leverage Ratio 1.9x (net of cash on balance sheet) • Conservative debt portfolio profile ‒ Average maturity ~10 years 4.3% 4.6% ~10 Yrs ‒ Redeemed ~$640 million of debt maturing 2021 in Jan.
Slide 27: Proposed Sale of Refinitiv to London Stock Exchange Group
Proposed Sale of Refinitiv to London Stock Exchange Group • TRI expected ownership interest in LSEG upon transaction closing = ~82.5M shares ̶ Value = ~$8.9B / ~$17.70 value within TRI stock price [based on LSEG 2/24/20 closing price] ̶ Transaction expected to close in the second half of 2020 • LSEG
Slide 28: 2020 Outlook
2020 Outlook 28
Slide 29: Organic Revenue Growth Rate & Adjusted EBITDA Margin
Organic Revenue Growth Rate & Adjusted EBITDA Margin Organic Revenue Growth Rate Adjusted EBITDA Margin No Additional Stranded or 1x Costs Expected in 2020 Improving Trajectory Expected to Continue Related to Refinitiv Transaction 4.5% - 5.5% 4.0% - 4.5% 3.7% 3.7% 2.5% 31.5% - 32.0% 27.4% 26.3% 24.8
Slide 30: Targeting to Return to Record Free Cash Flow per Share in 2020
Targeting to Return to Record Free Cash Flow per Share in 2020 • 2020 forecast FCF per share of $2.40+ would represent record high • Increase in 2020 Free Cash Flow is driven primarily by improvements in underlying adjusted EBITDA and capital efficiency $2.40+ Record high $2.43 $2.32 of $2.43 achiev
Slide 31: Delivering on our Expectations (IR Day – Dec. 2018)
Delivering on our Expectations (IR Day – Dec. 2018) Five Customer-Focused Segments -- “Big 3” grew 5% organically in 2019 FY 2019 - 78% of revenues grew 5% organically Tax Corporates Global Print Reuters News Professionals Legal Tax & Accounting Corporates Global Print Reuters News Professionals Pro
Slide 32: Drivers of Variance Between FCF and Adjusted Earnings in 2020
Drivers of Variance Between FCF and Adjusted Earnings in 2020 2020 FCF expected to exceed Adjusted Earnings due to Taxes, Non-Cash Charges & Capital vs. D&A $ Millions Factors • Reduction in Capital Intensity has immediate Capital vs. impact on FCF (vs. Depreciation run-off) ~ $150M - $175M D&A • IF
Slide 33: 2020 Outlook
2020 Outlook 2019 2020 Outlook(1) Reported Before Currency Total Revenue Growth 7.4% 4.5% - 5.5% Organic Revenue Growth 3.7% 4.0% - 4.5% Adjusted EBITDA Margin 25.3% 31.5% - 32.0% Corporate Costs $564 million(2) $140 - $150 million Core Corporate costs $124 million Stranded costs $100 million One-Ti
Slide 34: Conclusion
Conclusion • CEO/CFO announcement is the culmination of the implementation of a deliberate succession plan • Beginning of the next chapter for the company • Thomson Reuters on firmest footing in many years • Foundation has been laid for continued success 34 Sensitivity: Confidential
Slide 35: Q&A
Q&A 35