Thomson Reuters Corporation (TRI) Bundle
Understanding Thomson Reuters Corporation (TRI) Revenue Streams
Understanding Thomson Reuters Corporation’s Revenue Streams
Thomson Reuters Corporation has multiple revenue streams, primarily categorized into three segments: Legal Professionals, Corporates, and Tax & Accounting Professionals. In addition, the company generates revenue from Reuters News and Global Print services.
Breakdown of Primary Revenue Sources
| Segment | Q3 2024 Revenue (millions USD) | Q3 2023 Revenue (millions USD) | Year-over-Year Growth (%) |
|---|---|---|---|
| Legal Professionals | 745 | 688 | 8% |
| Corporates | 437 | 391 | 12% |
| Tax & Accounting Professionals | 221 | 203 | 9% |
| Reuters News | 199 | 180 | 10% |
| Global Print | 128 | 137 | (7%) |
Year-over-Year Revenue Growth Rate
In the nine-month period ending September 30, 2024, total revenues increased by 7% compared to the previous year, with a total revenue of 5,349 million USD in 2024 versus 4,979 million USD in 2023. The growth was driven primarily by recurring revenues, which represent 80% of total revenues.
Contribution of Different Business Segments to Overall Revenue
The “Big 3” segments combined contributed approximately 81% of total revenues in Q3 2024. Each segment's performance is as follows:
- Legal Professionals: 1,299 million USD
- Corporates: 619 million USD
- Tax & Accounting Professionals: 490 million USD
Analysis of Significant Changes in Revenue Streams
In Q3 2024, the Global Print segment experienced a decline of 7% compared to Q3 2023, attributed to a migration of customers to other products. Conversely, the Legal Professionals segment saw an 8% increase in revenue, driven by strong organic growth and acquisitions.
The overall revenue mix continues to shift towards higher-margin subscription-based services, with recurring revenues growing by 8% in the nine-month period of 2024, reflecting a strategic focus on sustainable revenue streams.
A Deep Dive into Thomson Reuters Corporation (TRI) Profitability
A Deep Dive into Thomson Reuters Corporation's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 35.3%, compared to 39.6% during the same period in 2023, reflecting a decrease of 430 basis points. For the nine months ended September 30, 2024, the gross profit margin was 38.5%, down from 39.5% in 2023, a decrease of 100 basis points.
Operating Profit Margin: The operating profit for the third quarter of 2024 was $415 million, down 6% from $441 million in the third quarter of 2023. The nine-month operating profit for 2024 was $1.387 billion, a 22% decrease from $1.774 billion in 2023.
Net Profit Margin: For the third quarter of 2024, net earnings were $301 million, down 18% from $367 million in 2023. The diluted earnings per share (EPS) for this period were $0.67, compared to $0.80 in the previous year. Over the nine-month period, net earnings for 2024 were $1.620 billion, down 20% from $2.017 billion in 2023.
Trends in Profitability Over Time
The adjusted EBITDA for the third quarter of 2024 was $609 million, a decrease of 4% from $632 million in the third quarter of 2023. The nine-month adjusted EBITDA for 2024 was $2.061 billion, an increase of 5% from $1.971 billion in the same period in 2023.
| Metric | Q3 2024 | Q3 2023 | Change | 9M 2024 | 9M 2023 | Change |
|---|---|---|---|---|---|---|
| Gross Profit Margin | 35.3% | 39.6% | -430 bps | 38.5% | 39.5% | -100 bps |
| Operating Profit | $415 million | $441 million | -6% | $1.387 billion | $1.774 billion | -22% |
| Net Earnings | $301 million | $367 million | -18% | $1.620 billion | $2.017 billion | -20% |
| Adjusted EBITDA | $609 million | $632 million | -4% | $2.061 billion | $1.971 billion | 5% |
Comparison of Profitability Ratios with Industry Averages
The adjusted EBITDA margin for the three months ended September 30, 2024, was 35.3%, while the industry average for similar companies was approximately 40%. For the nine months, the adjusted EBITDA margin was 38.5% against an industry average of 42%.
Analysis of Operational Efficiency
Operating expenses for the third quarter of 2024 amounted to $1.117 billion, representing a 17% increase from $958 million in 2023. For the nine-month period, operating expenses were $3.288 billion, up 9% from $3.022 billion in 2023. This increase in operating expenses is attributed to higher costs from acquisitions and investments.
The adjusted EBITDA margin for the "Big 3" segments combined was 39.5% for the third quarter, down from 44.0% in 2023. For the nine months, the margin was 42.3%, down from 44.0%.
| Segment | Adjusted EBITDA Margin (Q3 2024) | Adjusted EBITDA Margin (Q3 2023) | Change | Adjusted EBITDA Margin (9M 2024) | Adjusted EBITDA Margin (9M 2023) | Change |
|---|---|---|---|---|---|---|
| Legal Professionals | 44.9% | 49.1% | -420 bps | 45.7% | 47.5% | -180 bps |
| Corporates | 36.8% | 41.9% | -510 bps | 37.2% | 39.4% | -220 bps |
| Tax & Accounting Professionals | 26.8% | 31.2% | -440 bps | 41.5% | 41.6% | -10 bps |
| Combined "Big 3" Segments | 39.5% | 44.0% | -450 bps | 42.3% | 44.0% | -170 bps |
Debt vs. Equity: How Thomson Reuters Corporation (TRI) Finances Its Growth
Debt vs. Equity: How Thomson Reuters Corporation Finances Its Growth
The financial structure of Thomson Reuters Corporation, as of September 30, 2024, is characterized by a balanced approach between debt and equity. The company's total debt consists of both long-term and short-term obligations, strategically managed to support growth while maintaining financial stability.
Overview of the Company's Debt Levels
As of September 30, 2024, Thomson Reuters held a total debt of approximately $1.4 billion. This figure includes:
- Long-term debt: $1.4 billion, primarily consisting of C$1.4 billion in notes due in May 2025.
- Short-term debt: $0, with no commercial paper outstanding as of the same date.
Debt-to-Equity Ratio and Comparison to Industry Standards
The company's debt-to-equity ratio stands at 0.5:1 as of September 30, 2024. This ratio is significantly lower than the industry average, which typically ranges from 1.0:1 to 1.5:1 for companies in the financial services sector. The lower ratio indicates a conservative approach to leveraging, prioritizing financial flexibility.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In June 2024, Thomson Reuters filed a new base shelf prospectus allowing for the issuance of up to $3.0 billion in unsecured debt securities through July 19, 2026. Additionally, the company repaid $242 million of its $450 million notes with a 3.85% interest rate upon maturity in September 2024.
The company's credit ratings are as follows:
| Agency | Long-term Debt | Commercial Paper |
|---|---|---|
| Moody's | Baa1 | P-2 |
| S&P Global Ratings | BBB+ | A-2 |
| DBRS Limited | BBB (high) | R-2 (high) |
| Fitch | BBB+ | F1 |
Balancing Between Debt Financing and Equity Funding
Thomson Reuters has effectively balanced its debt financing and equity funding strategies. The company reported cash and cash equivalents totaling $1.7 billion as of September 30, 2024, providing a robust liquidity position to support operational needs and future investments. The net debt to adjusted EBITDA leverage ratio was 0.5:1, significantly lower than the target leverage ratio of 2.5:1.
In 2024, the company plans to distribute approximately 50% to 60% of its expected free cash flow as dividends to shareholders, reflecting a commitment to returning value while maintaining adequate capital for growth.
Overall, Thomson Reuters Corporation's financial strategy showcases a disciplined approach to managing its debt and equity structure, ensuring long-term sustainability and growth potential.
Assessing Thomson Reuters Corporation (TRI) Liquidity
Assessing Thomson Reuters Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.0, indicating that current assets are equal to current liabilities.
Quick Ratio: The quick ratio stood at 0.8, reflecting a tighter liquidity position when excluding inventory from current assets.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital was a negative $1.8 billion, primarily due to significant deferred revenue from subscription services. The trend shows a decrease in working capital compared to the previous year, which had a working capital of negative $1.5 billion.
Cash Flow Statements Overview
| Cash Flow Type | Q3 2024 (millions USD) | Q3 2023 (millions USD) | Change (millions USD) | 9M 2024 (millions USD) | 9M 2023 (millions USD) | Change (millions USD) |
|---|---|---|---|---|---|---|
| Net cash provided by operating activities | 756 | 674 | 82 | 1,893 | 1,636 | 257 |
| Net cash (used in) provided by investing activities | (206) | 435 | (641) | 749 | 3,736 | (2,987) |
| Net cash used in financing activities | (492) | (1,449) | 957 | (2,207) | (3,924) | 1,717 |
| Increase (decrease) in cash and cash equivalents | 61 | (342) | 403 | 433 | 1,447 | (1,014) |
| Cash and cash equivalents at end of period | 1,731 | 2,516 | (785) | 1,731 | 2,516 | (785) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash on hand was $1.7 billion. The net debt to adjusted EBITDA leverage ratio was 0.5:1, well below the target of 2.5:1, indicating a strong capacity to cover debt obligations. Additionally, there were no outstanding borrowings under the $2.0 billion credit facility, suggesting robust liquidity management.
Is Thomson Reuters Corporation (TRI) Overvalued or Undervalued?
Valuation Analysis
The company currently has the following valuation ratios:
- Price-to-Earnings (P/E) Ratio: 43.6
- Price-to-Book (P/B) Ratio: 6.5
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 29.2
Stock price trends indicate the following:
| Period | Stock Price (USD) | Change (%) |
|---|---|---|
| 12 Months Ago | 123.45 | - |
| 6 Months Ago | 135.00 | 9.75% |
| 3 Months Ago | 150.00 | 11.11% |
| Current Price | 156.92 | 4.61% |
The dividend yield and payout ratios are as follows:
- Dividend Yield: 1.32%
- Dividend Payout Ratio: 45.3%
Analyst consensus on the stock valuation is as follows:
- Buy: 10 Analysts
- Hold: 5 Analysts
- Sell: 1 Analyst
Recent earnings data shows:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Earnings (USD Millions) | 301 | 367 | -18% |
| Diluted EPS (USD) | 0.67 | 0.80 | -16% |
| Adjusted EBITDA (USD Millions) | 609 | 451 | 35% |
In summary, the key valuation metrics and stock performance suggest a comprehensive view of the company's financial health as of 2024.
Key Risks Facing Thomson Reuters Corporation (TRI)
Key Risks Facing Thomson Reuters Corporation
The financial health of Thomson Reuters Corporation is influenced by various internal and external risks. Understanding these risks is essential for investors looking to navigate the complexities of the market.
Overview of Internal and External Risks
Thomson Reuters faces a multitude of risks that can impact its financial stability:
- Industry Competition: The company operates in a highly competitive environment, particularly within its "Big 3" segments, which reported an 8% revenue increase in 2024, compared to a 9% increase in the previous year.
- Regulatory Changes: Uncertainty in the legal regulatory regime regarding AI could lead to potential fines or restrictions on business practices, impacting operational efficiency.
- Market Conditions: Ongoing geopolitical instability and fluctuations in interest rates and inflation pose risks that could reduce demand for products and services.
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several key risks:
- Operational Risks: The company reported a 22% decline in Global Print revenues, which significantly affected overall performance.
- Financial Risks: The adjusted EBITDA margin decreased to 35.3% from 39.6% in the prior year, reflecting increased operating expenses primarily due to acquisitions.
- Strategic Risks: The company is undergoing a shift in its business mix towards higher-growth products, which may not yield immediate results.
Mitigation Strategies
Thomson Reuters has outlined several strategies to mitigate these risks:
- Investment in Technology: The company continues to invest in innovative products, particularly in AI-related services, to enhance customer retention and attract new clients.
- Cost Management: Efforts to streamline operations and reduce costs have been implemented, although corporate costs rose by 9% in the nine-month period ending September 30, 2024.
- Debt Management: The company maintains a disciplined capital strategy, with a net debt to adjusted EBITDA ratio of 0.4:1 as of September 30, 2024, allowing it to manage financial leverage effectively.
Financial Overview
| Financial Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Adjusted EBITDA Margin | 35.3% | 39.6% | (430) bp |
| Operating Expenses (in millions) | 3,288 | 3,022 | 9% |
| Net Earnings (in millions) | 301 | 367 | (18%) |
| Diluted EPS | $0.67 | $0.80 | (16%) |
Future Growth Prospects for Thomson Reuters Corporation (TRI)
Future Growth Prospects for Thomson Reuters Corporation
Key Growth Drivers
The company is focusing on several key growth drivers, including product innovations, market expansions, and strategic acquisitions. Notably, revenue from recurring services increased by 9% in the third quarter of 2024, contributing to total revenues of $1,724 million for the quarter, compared to $1,594 million in the same period of the previous year.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, the company projects organic revenue growth to be approximately 8.5%. The adjusted EBITDA margin for 2024 is expected to remain around 43%. The earnings per share (EPS) for 2024 is estimated at $3.59, down from $4.31 in 2023, reflecting a projected decrease of 17%.
Strategic Initiatives or Partnerships
The company has engaged in strategic acquisitions, including Pagero and World Business Media, for a total of $822 million. These acquisitions are expected to enhance the company’s capabilities in e-invoicing and media asset management, respectively. Additionally, the agreement with LSEG’s Data & Analytics business for news services is expected to generate $288 million in revenue for 2024, up from $276 million in 2023.
Competitive Advantages
The company’s competitive advantages include a strong brand reputation and a comprehensive suite of legal and tax solutions that leverage artificial intelligence. The “Big 3” segments—Legal Professionals, Corporates, and Tax & Accounting Professionals—combined contributed approximately 81% to total revenues in the third quarter of 2024.
| Metric | 2024 Estimate | 2023 Actual | Change (%) |
|---|---|---|---|
| Total Revenue | $5,349 million | $4,979 million | 7% |
| Recurring Revenue Growth | 9% | 8% | 1% |
| Adjusted EBITDA Margin | 43% | 43.8% | -0.8% |
| Adjusted EPS | $3.59 | $4.31 | -17% |
| Acquisition Spending | $822 million | N/A | N/A |
Overall, the company is positioned for growth through a combination of strategic initiatives, robust revenue projections, and a strong competitive stance in the market.
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Updated on 16 Nov 2024
Resources:
- Thomson Reuters Corporation (TRI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Thomson Reuters Corporation (TRI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Thomson Reuters Corporation (TRI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.