Thomson Reuters(TRI) - 2025 Q1 - Quarterly Report

Executive Summary Company Overview Thomson Reuters provides trusted content and technology to professionals in legal, tax, audit, accounting, compliance, government, and media sectors. The company's business model is centered on selling information and software solutions, primarily through recurring subscriptions. These solutions integrate deep domain knowledge with technology to enhance customer productivity, leading to strong customer retention and a capital-efficient, cash-generative business - The company serves professionals across legal, tax, audit, accounting, compliance, government, and media[8] - The majority of revenues are derived from recurring subscriptions for information and software solutions that blend domain knowledge with technology, resulting in strong customer retention[9] Reportable Segments The company is organized into five reportable segments: Legal Professionals, Corporates, Tax & Accounting Professionals, Reuters News, and Global Print. The first three are collectively referred to as the "Big 3" segments and represent the core of the business - The five reportable segments are Legal Professionals, Corporates, Tax & Accounting Professionals, Reuters News, and Global Print[11][12][13] - The Legal Professionals, Corporates, and Tax & Accounting Professionals segments are collectively known as the "Big 3" segments[17] Financial Highlights In Q1 2025, Thomson Reuters reported a 1% increase in total revenues, achieving 6% organic growth driven by a 9% rise in recurring revenues. The "Big 3" segments saw 9% organic revenue growth. Adjusted EBITDA margin slightly decreased to 42.3%. The company acquired SafeSend for approximately $600 million, sold FindLaw, and announced a 10% dividend increase. The full-year 2025 outlook has been reaffirmed Q1 2025 Financial Highlights | Metric | Value/Change | | :--- | :--- | | Total Revenue Growth | 1% | | Organic Revenue Growth | 6% | | Recurring Revenue Organic Growth | 9% | | "Big 3" Segments Organic Revenue Growth | 9% | | Adjusted EBITDA Margin | 42.3% (-40 bp YoY) | | "Big 3" Adjusted EBITDA Margin | 47.3% (+150 bp YoY) | - Acquired cPaperless, LLC (SafeSend) for approximately $600 million in January 2025, which was offset by the loss of revenues from the sale of FindLaw in December 2024[19][23] - Announced a 10% annualized dividend increase to $2.38 per common share in February 2025[25] - The full-year 2025 outlook, originally communicated in February 2025, was reaffirmed[22] Results of Operations Consolidated Results For Q1 2025, consolidated revenues increased by 1% to $1.9 billion, with organic growth at 6%. Operating profit rose 1% to $563 million. However, diluted EPS fell 9% to $0.96, primarily due to higher tax expense and unfavorable currency impacts in other finance income compared to the prior year. Adjusted EPS increased 1% to $1.12 Consolidated Financial Results (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | IFRS Measures | | | | | Revenues | $1,900M | $1,885M | 1% | | Operating profit | $563M | $557M | 1% | | Diluted EPS | $0.96 | $1.06 | (9%) | | Non-IFRS Measures | | | | | Organic revenue growth | 6% | n/a | n/a | | Adjusted EBITDA | $809M | $806M | - | | Adjusted EBITDA margin | 42.3% | 42.7% | (40) bp | | Adjusted EPS | $1.12 | $1.11 | 1% | Revenue by Type (Q1 2025 vs Q1 2024) | Revenue Type | Q1 2025 | Q1 2024 | Total Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Recurring | $1,451M | $1,426M | 2% | 9% | | Transactions | $333M | $335M | (1%) | 1% | | Global Print | $116M | $124M | (6%) | (5%) | | Total | $1,900M | $1,885M | 1% | 6% | - Net earnings and diluted EPS decreased primarily due to higher tax expense and because the prior-year period included currency benefits reflected in other finance income[49] Segment Results In Q1 2025, the "Big 3" segments collectively achieved 9% organic revenue growth. Legal Professionals grew 8% organically despite a total revenue decline from the FindLaw divestiture. Corporates and Tax & Accounting Professionals showed strong organic growth of 9% and 11% respectively. Reuters News revenue declined 7% organically due to a tough comparison with prior-year AI content licensing deals. Global Print revenue continued its decline, down 5% organically Legal Professionals Total revenue for the Legal Professionals segment decreased 4% to $693 million due to the FindLaw divestiture. However, organic revenue grew 8%, driven by strong performance in Westlaw, CoCounsel, and Practical Law. Segment adjusted EBITDA margin improved by 100 basis points to 48.4% Legal Professionals Q1 2025 Performance | Metric | Q1 2025 | Q1 2024 | Total Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $693M | $721M | (4%) | 8% | | Segment adjusted EBITDA | $336M | $342M | (2%) | n/a | | Segment adjusted EBITDA margin | 48.4% | 47.4% | +100 bp | n/a | Corporates The Corporates segment revenue grew 7% to $541 million, with strong organic growth of 9%. This was driven by an 11% increase in recurring revenues from products like Indirect and Direct Tax, and Practical Law. Segment adjusted EBITDA margin expanded by 160 basis points to 39.4%, aided by operating leverage and favorable currency effects Corporates Q1 2025 Performance | Metric | Q1 2025 | Q1 2024 | Total Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $541M | $507M | 7% | 9% | | Segment adjusted EBITDA | $213M | $193M | 10% | n/a | | Segment adjusted EBITDA margin | 39.4% | 37.8% | +160 bp | n/a | Tax & Accounting Professionals This segment's revenue increased 10% to $360 million, with organic growth of 11%, boosted by the SafeSend acquisition and strong performance in transactions revenues. Segment adjusted EBITDA margin rose 170 basis points to 56.7%, reflecting operating leverage. The segment's performance is highly seasonal, with revenues concentrated in Q1 and Q4 Tax & Accounting Professionals Q1 2025 Performance | Metric | Q1 2025 | Q1 2024 | Total Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $360M | $328M | 10% | 11% | | Segment adjusted EBITDA | $210M | $181M | 17% | n/a | | Segment adjusted EBITDA margin | 56.7% | 55.0% | +170 bp | n/a | - The segment is highly seasonal, with about 60% of annual revenues typically generated in the first and fourth quarters[59] Reuters News Reuters News revenue declined 7% to $196 million on an organic basis. This was primarily due to the absence of large, transactional generative AI-related content licensing revenue that was present in Q1 2024. Segment adjusted EBITDA margin contracted significantly by 830 basis points to 20.0% due to the lower revenues Reuters News Q1 2025 Performance | Metric | Q1 2025 | Q1 2024 | Total Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $196M | $210M | (7%) | (7%) | | Segment adjusted EBITDA | $39M | $60M | (34%) | n/a | | Segment adjusted EBITDA margin | 20.0% | 28.3% | (830) bp | n/a | - Revenue decrease was primarily due to generative AI-related content licensing revenue included in the prior-year period that was largely transactional[60] Global Print Global Print revenue decreased 6% to $116 million, or 5% organically, driven by lower shipment volumes and customer migration to digital products like Westlaw. The segment's adjusted EBITDA margin saw a slight decline of 40 basis points to 37.8% Global Print Q1 2025 Performance | Metric | Q1 2025 | Q1 2024 | Total Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $116M | $124M | (6%) | (5%) | | Segment adjusted EBITDA | $44M | $47M | (7%) | n/a | | Segment adjusted EBITDA margin | 37.8% | 38.2% | (40) bp | n/a | Liquidity and Capital Resources Capital Strategy and Financial Position The company maintains a disciplined capital strategy focused on growth, leverage management, and shareholder returns. As of March 31, 2025, cash and cash equivalents were $1.4 billion. The net debt to adjusted EBITDA leverage ratio was 0.6:1, well below the target of 2.5:1. The company expects its liquidity to be sufficient for the next 12 months and plans to repay C$1.4 billion in notes due May 2025 with cash on hand - Capital strategy targets include a maximum leverage ratio of 2.5x net debt to adjusted EBITDA, a dividend payout of 50-60% of free cash flow, and returning at least 75% of annual free cash flow to shareholders[69] Financial Position as of March 31, 2025 | Metric | Value | | :--- | :--- | | Cash and cash equivalents | $1.4 billion | | Net debt | $1.75 billion | | Net debt to adjusted EBITDA ratio | 0.6:1 | | Credit facility covenant max ratio | 4.5:1 | - In March 2025, the company completed a debt exchange offer to optimize its capital structure, with TR Finance LLC issuing new notes guaranteed by the parent and certain subsidiaries[79] Cash Flow For Q1 2025, net cash from operating activities was $445 million, a slight increase from the prior year. Investing activities used $756 million, primarily for the $606 million SafeSend acquisition. Financing activities used $288 million, mainly for dividend payments. Free cash flow was stable at $277 million Summary of Cash Flow (Q1 2025 vs Q1 2024) | (millions of U.S. dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | 445 | 432 | | Net cash (used in) provided by investing activities | (756) | 631 | | Net cash used in financing activities | (288) | (470) | | Free cash flow (Non-IFRS) | 277 | 271 | - Investing cash outflow in Q1 2025 was driven by the $606 million acquisition of SafeSend[73] - Financing cash outflow in Q1 2025 included $259 million in dividend payments. The prior year period included $352 million of share repurchases[75][77][85] Contingencies The company is involved in various legal proceedings and tax audits in the ordinary course of business, but management does not expect them to have a material adverse impact. A notable issue is an ongoing dispute with the U.K. tax authority (HMRC) regarding the Diverted Profits Tax (DPT), for which the company has paid $430 million under assessment but expects to recover substantially all of it. The company also has guarantee obligations related to the 3 Times Square office building redevelopment - The company is contesting notices of assessment from the U.K.'s HMRC under the Diverted Profits Tax (DPT) regime, having paid $430 million, but expects to receive refunds for substantially all amounts paid[95][96] - The company guarantees 50% of a $415 million term loan facility for the 3 Times Square office building redevelopment, which is expected to be refinanced in June 2025[97] Outlook 2025 Outlook Thomson Reuters reaffirmed its full-year 2025 outlook. The company projects total revenue growth of 3.0-3.5% (impacted by divestitures) and organic revenue growth of 7.0-7.5%. The adjusted EBITDA margin is expected to be approximately 39%, with free cash flow around $1.9 billion. For Q2 2025, organic revenue growth is anticipated to be approximately 7% with an adjusted EBITDA margin of about 36% Full-Year 2025 Outlook | Metric | 2024 Actual | 2025 Outlook | | :--- | :--- | :--- | | Total Revenue growth | 7% | 3.0 - 3.5% | | Organic revenue growth | 7% | 7.0 - 7.5% | | Adjusted EBITDA margin | 38.2% | ~ 39% | | Free cash flow | $1.8 billion | ~ $1.9 billion | | "Big 3" Organic revenue growth | 9% | ~ 9% | - For the second quarter of 2025, the company expects an organic revenue growth rate of approximately 7% and an adjusted EBITDA margin of approximately 36%[103] Material Assumptions and Risks The 2025 outlook is based on assumptions of continued demand for trusted products and the ability to deliver innovative solutions amidst an uncertain macroeconomic environment. Key risks include the potential for lower demand due to economic worsening, regulatory changes related to AI, competitive pressures, and higher-than-expected inflation impacting costs - Material assumptions for revenue include continued need for trusted products to navigate complex environments and the ability to innovate and retain customers[105] - Material risks include ongoing geopolitical and macroeconomic uncertainty impacting demand, potential AI-related regulatory changes, competitive actions, and higher-than-expected inflation[105] Other Disclosures Related Party Transactions As of April 30, 2025, the principal shareholder, Woodbridge, beneficially owned approximately 70% of the company's common shares. The only new significant related party transaction in Q1 2025 was a $5 million cash contribution to 3XSQ Associates pursuant to a capital call - Woodbridge, the principal shareholder, owned approximately 70% of common shares as of April 30, 2025[107] - In Q1 2025, the company contributed $5 million in cash to 3XSQ Associates, a joint venture, as part of a capital call[108] Critical Accounting Estimates and Judgments There have been no significant changes to the company's critical accounting estimates and judgments since the 2024 annual report. However, management notes that the uncertain macroeconomic environment could cause these estimates to become more variable and subject to material changes in the future - No significant changes have been made to critical accounting estimates and judgments since the 2024 annual management's discussion and analysis[111] Additional Information Management concluded that disclosure controls and procedures were effective as of the end of Q1 2025. There were no material changes to internal control over financial reporting during the quarter. As of April 30, 2025, the company had 450,478,428 common shares outstanding - Disclosure controls and procedures were deemed effective at the end of the reporting period[113] - No material changes occurred in internal control over financial reporting during Q1 2025[115] Appendix Non-IFRS Financial Measures This section defines the non-IFRS financial measures used throughout the report, such as Adjusted EBITDA, Adjusted EPS, Free Cash Flow, and Organic Revenue Growth. The company believes these measures provide useful supplemental insight into its operating performance, financial position, and are used for internal planning and incentive programs - The company uses non-IFRS measures as supplemental indicators of operating performance and for internal planning, believing they provide more insight into performance[5][123] Reconciliations of Non-IFRS Financial Measures This appendix provides detailed reconciliations of non-IFRS financial measures to their most directly comparable IFRS measures. This includes reconciliations for Adjusted EBITDA, Adjusted EPS, Free Cash Flow, Net Debt, and organic revenue growth, ensuring transparency in how these supplemental metrics are derived from the IFRS financial statements Reconciliation of Earnings from Continuing Operations to Adjusted EBITDA (Q1 2025) | (millions of U.S. dollars) | Q1 2025 | | :--- | :--- | | Earnings from continuing operations | 425 | | Tax expense | 92 | | Other finance costs (income) | 10 | | Net interest expense | 30 | | Amortization & Depreciation | 226 | | EBITDA | 783 | | Other adjustments | 26 | | Adjusted EBITDA | 809 | Reconciliation of Net Earnings to Adjusted Earnings (Q1 2025) | (millions of U.S. dollars) | Q1 2025 | | :--- | :--- | | Net earnings | 434 | | Adjustments (Amortization, other op losses, etc.) | 94 | | Tax on above items | (24) | | Other adjustments (tax items, discontinued ops, etc.) | (1) | | Dividends declared on preference shares | (1) | | Adjusted earnings | 506 |