Thomson Reuters Corp. TRI-T reported resilient financial results to finish 2022 and kept its earnings outlook for the current year mostly unchanged in spite of mounting economic pressures from inflation and interest rates.
The news and information company’s fourth-quarter revenue increased 3 per cent to US$1.77-billion, up 6 per cent from a year ago, excluding the drag caused by foreign currency fluctuations and the sale of assets.
The recurring revenues from subscription products that are the core of Thomson Reuters’ business, and its strongest insulation against forces battering the global economy, increased 7 per cent year over year.
In 2023, Thomson Reuters is entering a new phase. The company has just wrapped up a two-year transformation plan to upgrade its technology and services and improve customer service. With an upfront investment of US$600-million, Thomson Reuters said it has streamlined its services and stripped out costs that will save the company US$540-million annually.
The company’s leadership expects that the work done under that plan should help it weather any turbulence in the coming quarters as many of its clients feel the pressure of an economic downturn.
“We’re very happy we’ve done that because it’s been an intensive fitness program that equips us for whatever comes in 2023 and beyond,” said chief executive Steve Hasker, in an interview.
The company is shifting more of its focus to speeding up revenue growth – it is likely to start outlining an “acceleration plan” later this year, Mr. Hasker said – and to deploying a large store of capital that will soon become available.
Thomson Reuters owns a US$5.6-billion stake in the London Stock Exchange Group, stemming from a 2018 deal that spun off its financial and risk division into a new company, Refinitiv, that was later acquired by LSEG. Starting in March, Thomson Reuters plans to sell that stake in tranches as lock-up provisions expire.
When the proceeds are combined with cash the company generates, Thomson Reuters expects to have about US$11-billion of capital to deploy by 2025. It plans to complete a US$2-billion share buyback program by April, and then return at least US$2-billion more to shareholders later this year with proceeds from the sale of LSEG shares.
“Having a disciplined capital allocation process will be a real focus for us this year,” Mr. Hasker said.
The large influx of capital has sparked interest in the company’s plans for acquisitions. It recently completed a US$500-million cash deal to buy SurePrep, a U.S.-based tax automation software provider. But Mr. Hasker stressed that the company is not looking for large or transformational deals, but hunting for complementary transactions that can bolster its core business lines serving legal, corporate and tax professionals.
A tougher economic environment has made valuations for acquisition targets more favourable for Thomson Reuters, but is also affecting some clients. In some cases, it is taking longer for Thomson Reuters to close renewals with clients, but so far “what we don’t see is them falling out of the pipeline,” Mr. Hasker said.
With increasing cost-cutting and layoffs in the technology and financial services sectors, however, “we’re holding our breath that that doesn’t become contagious and it doesn’t become a broad-based recession,” he said.
In the fourth quarter, Thomson Reuters earned profit of US$282-million or 59 US cents a share, compared with a loss of US$175-million or 36 US cents a year earlier. The fourth quarter last year included a decrease in the value of the company’s investment in the London Stock Exchange Group.
On an adjusted basis, Thomson Reuters said it earned 73 US cents per share. On average, analysts expected adjusted earnings of 64 US cents, according to Refinitiv.
The company increased its dividend 10 per cent or 18 US cents to US$1.96 a share on an annualized basis.
Woodbridge Co. Ltd., the Thomson family holding company and controlling shareholder of Thomson Reuters, also owns The Globe and Mail.
Looking ahead, Thomson Reuters maintained its target for revenue growth excluding the impact of divestitures at 5.5 per cent to 6 per cent for 2023. But it modestly lowered its estimate for free cash flow to about US$1.8-billion, from a previous range of US$1.9-billion to US$2-billion.
“Notwithstanding the economic backdrop, it’s steady as she goes,” Mr. Hasker said.