Thomson Reuters Corp. TRI-T reported higher fourth-quarter revenue and raised its dividend but missed analysts’ profit estimates as the company boosted temporary spending on key initiatives.
The Toronto-based news and information provider’s revenue increased by 6 per cent to US$1.7-billion in the fourth quarter, driven by strong increases in recurring revenue from subscription-based products. The company also nudged its revenue targets for 2022 and 2023 higher, predicting increases of 5 per cent this year and 5.5 per cent to 6 per cent next year.
But operating expenses rose faster, increasing by 14 per cent in the quarter to $1.3-billion. The company has been investing in a two-year “Change Program” to build more sophisticated software services and improve its customer experience, and decided to spend an extra US$25-million to bolster its sales and marketing resources, as well as its product engineering and data analytics teams.
“This is discretionary spending,” Steve Hasker, chief executive officer of Thomson Reuters, said in an interview on Tuesday. “It is very much as a result of seeing momentum, and seeing opportunities to accelerate that momentum.”
Bonus pay for employees also surged after the company beat its key performance targets in 2021, including for revenue growth, according to chief financial officer Mike Eastwood. At the same time, Thomson Reuters has cut costs elsewhere, stripping out US$217-million in continuing annual costs in 2021, and the company expects to reach its target to reduce yearly expenses by US$600-million by 2023.
On Tuesday, Thomson Reuters raised its dividend by 16 US cents, or 10 per cent on an annualized basis, to US$1.78 a share. And it completed a previously announced US$1.2-billion share repurchase plan in the fourth quarter, though Mr. Eastwood said further buybacks are not anticipated in 2022.
Total revenue for 2021 was up 6 per cent, to US$6.35-billion.
Woodbridge Co. Ltd., the Thomson family holding company and controlling shareholder of Thomson Reuters, also owns The Globe and Mail.
Looking ahead, “we see a pretty robust operating environment” for the company’s three largest business units, which cater to legal, corporate, and tax and accounting professionals, Mr. Hasker said. “Many of our customers are growing at record rates or close to record rates.”
He said those same customers could face “some turbulence through 2022″ from high inflation and expected increases to interest rates, which could also continue to push costs higher for Thomson Reuters. But those same factors could help temper the high valuations currently carried by some potential acquisition targets for Thomson Reuters, making deals more attractive.
Mr. Hasker told analysts any potential deals are likely to “be more additive or incremental in nature than transformative” on a Tuesday conference call.
In the fourth quarter, Thomson Reuters reported a loss of US$175-million, or 36 US cents a share, compared with a profit of US$562-million, or US$1.13 a share, in the same quarter a year earlier. But the loss was driven by a decrease in the value of the company’s US$7-billion stake in the London Stock Exchange Group, rather than core business performance. Operating profit was weaker because the company recorded large gains from selling an investment and amending a pension plan a year earlier.
After adjusting to exclude certain items, Thomson Reuters said it earned 43 US cents a share, while analysts expected adjusted earnings of 46 US cents, according to Refinitiv. The additional US$25-million in expenses reduced adjusted earnings per share by 4 US cents.
Revenue from legal clients increased 5 per cent to US$689-million, while corporate customers revenue rose 7 per cent to US$361-million. The tax and accounting division’s revenues increased faster, by 9 per cent to US$309-million. In each case, recurring revenues from subscriptions increased at an equivalent rate.
In Tuesday trading, the company’s share price fell 1.6 per cent to close at $131.07 on the Toronto Stock Exchange.
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