Source: Thomson Reuters
Thomson Reuters (TSX / NYSE: TRI), the world's leading source of intelligent information for businesses and professionals, today reported results for the first quarter ended March 31, 2012.
The company reported revenues from ongoing businesses of $3.2 billion, a 4% increase before currency. Adjusted EBITDA increased 15% with the corresponding margin up 260 basis points to 25.9%. Underlying operating profit increased 2% with a corresponding margin of 17.1% versus 17.4% in the prior-year period.
Adjusted earnings per share (EPS) were $0.44 compared to $0.37 in the first quarter of 2011.
"The first-quarter performance was consistent with our full-year expectations," said James C. Smith, chief executive officer of Thomson Reuters. "The Legal, Tax & Accounting and IP & Science businesses each performed well. Our Financial & Risk business continues to make progress in a very difficult environment. We are executing against a more focused strategy. In all, we are on track and affirm our full-year outlook."
"Last week, we announced an agreement to sell our Healthcare business for $1.25 billion. The transaction will enable us to redeploy capital to a number of alternatives, including accelerating development of our core businesses, as well as those in fast-growing geographies around the world."
Revenues from ongoing businesses were $3.2 billion, a 4% increase before currency.
Adjusted EBITDA increased 15%, and the corresponding margin was 25.9% versus 23.3% in the prior-year period primarily due to the elimination of integration expenses and flow-through from higher revenues.
Underlying operating profit increased 2% and the corresponding margin was 17.1% versus 17.4% in the prior-year period as higher revenues were offset by higher depreciation and amortization from new product launches.
Adjusted EPS was $0.44 compared to $0.37 in the prior-year period. The increase was largely attributable to the elimination of integration expenses and higher underlying operating profit.
First-Quarter Business Segment Highlights
Unless otherwise noted, all revenue growth comparisons in this news release are before the impact of foreign currency as Tis news release are before the impact of foreign currency as Thomson Reuters believes this provides the best basis to measure the performance of its business. Effective January 1, 2012, Thomson Reuters is organized as four reportable segments: Financial & Risk, Legal, Tax & Accounting and Intellectual Property & Science. Results for the first quarter of 2011 have been reclassified to reflect the current reportable segments.
Financial & Risk
Revenues increased 1%. Good growth in Marketplaces and Governance, Risk & Compliance was offset by declines in revenues from the Trading (Exchange Traded Instruments and Fixed Income) and Investors (Investment Management) business units.
Recurring subscription-related revenues grew 1%. Transactions-related revenues increased 4%. Recoveries revenues increased 2% and Outright revenues rose 9%.
By geography, revenues in Europe, Middle East and Africa (EMEA) rose 2%, revenues in the Americas were up 1% while revenues in Asia were flat.
EBITDA was $459 million, down 1%, with a related margin of 25.3%. Excluding currency, EBITDA increased 1% and the related margin was unchanged from the prior-year period.
Operating profit was $302 million, down 8%, with a related margin of 16.7%. Excluding currency, operating profit decreased 4% and the related margin decreased 100 basis points due to higher depreciation and amortization related to new product investments.
Eikon desktops now total over 16,000, up 30% from the fourth quarter of 2011.
Revenues decreased 2% with growth in Commodities & Energy and Foreign Exchange offset by desktop cancellations in Exchange Traded Instruments and Fixed Income.
Recoveries revenues increased 2%.
Revenues declined 3%. A 16% increase in Enterprise Content revenues was offset by a decline in Investment Management (down 10%) due to prior-year cancellations and weakness in Europe. Wealth Management declined 3%.
Investment Management net sales, though negative in the first quarter, improved from the fourth quarter of 2011.
Corporates revenues increased 1% and Investment Banking revenues were flat.
Revenues increased 10% (4% organic) driven by acquisitions and Tradeweb, which was up 11% on an organic basis.
Foreign exchange-related revenues rose slightly, impacted by lower volumes compared to the prior-year period.
Governance, Risk & Compliance
Revenues grew 122% (16% organic) to $51 million driven by acquisitions, new sales and strong demand for risk and compliance solutions.
Thomson Reuters Accelus Compliance Manager was launched in March 2012 with strong interest from customers.
Revenues increased 3%. US Law Firm Solutions grew 2% driven by a 12% increase in Business of Law revenues (FindLaw and Elite) with research-related revenues flat. Corporate, Government and Academic revenues rose 4%. Global businesses grew 7% with good growth in Latin America.
EBITDA increased 5% and the associated margin increased 60 basis points to 34.7%.
Operating profit increased 5% and the associated margin was 25.7% compared to 25.2% in the prior-year period.
WestlawNext has been sold to approximately 65% of Westlaw's revenue base.
Tax & Accounting
Revenues increased 31% (9% organic) driven by acquisitions and strong growth across the business.
EBITDA increased 50% and the corresponding margin increased 410 basis points to 31.0%.
Operating profit increased 58% and the corresponding margin increased 380 basis points to 21.9% due to strong revenue flow-through and efficiency initiatives, partly offset by the dilutive effect of acquisitions.
Tax & Accounting is a seasonal business with a significant percentage of its operating profit traditionally generated in the fourth quarter. Small movements in the timing of expenses can impact margins in any given quarter for the Tax & Accounting business. Full-year margins are more reflective of the segment's underlying performance.
Intellectual Property & Science
Revenues were up 4% driven by growth in the IP Solutions and Scientific & Scholarly Research businesses, partly offset by a 1% decline in Life Sciences revenues due to timing of renewals and a difficult comparable in the first quarter of 2011.
EBITDA increased 9% with the corresponding margin increasing 160 basis points to 34.4%.
Operating profit increased 6% with the corresponding margin increasing 40 basis points to 26.3%.
Small movements in the timing of expenses can impact margins in any given quarter for the Intellectual Property & Science business. Full-year margins are more reflective of the segment's underlying performance.
Corporate & Other (Including Media)
Media revenues totaled $82 million, unchanged from the prior-year period. Corporate and Other costs totaled $80 million compared to $76 million in the prior-year period.
On April 23, 2012, Thomson Reuters announced it had entered into a definitive agreement to sell its Healthcare business to an affiliate of Veritas Capital for $1.25 billion. The sale is not subject to any financing condition but is subject to regulatory approval and customary closing conditions, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act. The sale is expected to close in the next few months.
The Healthcare business provides data, analytics and performance benchmarking solutions and services to hospitals, health systems, employers, health plans, government agencies and healthcare professionals.
Business Outlook (Before Currency)
Thomson Reuters today reaffirmed its business outlook for 2012 that was previously communicated in February.
Thomson Reuters expects its revenues to grow low-single digits in 2012.
Thomson Reuters expects its adjusted EBITDA margin to range between 27% and 28% in 2012.
The company forecasts its underlying operating profit margin to range between 18% and 19% in 2012 due to higher depreciation and amortization expense.
Thomson Reuters expects reported free cash flow to grow 5% to 10% and free cash flow from ongoing operations to grow 15% to 20% in 2012.
The information in this section is forward-looking and should be read in conjunction with the section below entitled "Special Note Regarding Forward-Looking Statements, Material Assumptions and Material Risks."
Dividend and Share Repurchases
As previously announced, Thomson Reuters increased its 2012 annual dividend by $0.04 per share to $1.28 per share. A quarterly dividend of $0.32 per share is payable on June 15, 2012 to shareholders of record as of May 24, 2012.
As of May 1, 2012, the company has repurchased 11.6 million shares for an aggregate purchase price of approximately $350 million pursuant to its Normal Course Issuer Bid (NCIB). The current NCIB program authorizes the company to purchase up to 15 million shares.