Thomson Reuters steadies after a year of big deals

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Thomson Reuters Corp. is showing signs of steadier revenue growth after a year in which the news and information provider bought and sold a number of businesses.

Third-quarter revenue rose 10 per cent from a year earlier to US$1.41-billion. That represents a 4-per-cent revenue bump when excluding an annual payment of US$325-million Thomson Reuters receives for Reuters News content through a deal that spun out its financial and risk division as a separate company, called Refinitiv, last year.

Recurring revenues from subscription-based products, which make up nearly 80 per cent of all Thomson Reuters revenue, increased 5 per cent in the quarter, rising in each of the company’s key businesses. The improved results are driven in large part by new products that command a higher price, such as the legal research platform Westlaw Edge, which launched last year. The company also reported lower-than-expected corporate costs of US$103-million, but expects spending to pick up again in the fourth quarter in line with previous estimates.

“It was really encouraging to see the continued progress in the business," chief executive officer Jim Smith said in an interview.

For the three months that ended Sep. 30, Thomson Reuters lost US$44-million or 9 cents per share, compared with a profit of US$302-million or 39 cents per share a year earlier. That loss is largely attributable to Thomson Reuters’s share of losses from its 45-per-cent stake in Refinitiv, which lost US$656-million in the quarter as it undergoes a restructuring.

Adjusted to exclude certain items, Thomson Reuters said it earned 27 US cents per share, ahead of analysts’ expectation of 19 US cents a share, according to data from Refinitiv.

Woodbridge Co. Ltd., the Thomson family holding company and controlling shareholder of Thomson Reuters, also owns The Globe and Mail.

Revenue from Thomson Reuters’s legal division, which is its largest, rose 2 per cent to US$605-million. That was a slower rate of growth when compared to a strong quarter a year earlier. But Mr. Smith said he expects the division will gather speed, as “we have a little bit of wind at our back in terms of demand in the legal sector right now, which is as good as it’s been for a long time.”

Revenue from the corporates division improved 7 per cent to US$320-million, while tax and accounting revenue climbed 11 per cent higher to $166-million.

After Thomson Reuters spun off Refinitiv, the company set aside US$2-billion for acquisitions to bolster its remaining businesses, which focus on legal, corporate and tax professionals. To date, the company has spent slightly more than half of that sum on four modest-sized deals. Those included buying Confirmation, an audit software provider, and HighIQ, a cloud-based platform for legal workflow. Thomson Reuters also bought FC Business Intelligence, a specialist in business events, which will be rebranded as Reuters Events.

“Those are the types of acquisitions that we are still looking at in our pipeline," Mr. Smith said. “If we could find four more things like the four we’ve acquired in the last couple of years, then that’s what we’d be going for.”

But he also noted that “we have plenty of room on our balance sheet as well should we find something that’s chunkier and larger."

Mr. Smith said he expects no short-term impact from Refinitiv’s pending sale for US$14.5-billion to the London Stock Exchange, expected to close next year. But Thomson Reuters plans to sell down its stake in the combined business as lockup provisions expire over the coming years. As it does, “we would decide with each event what it made the most sense to do with the cash,” Mr. Smith said.

Mr. Smith also addressed a news report that Thomson Reuters has hired a search firm to look for potential successors as CEO, which he said was “normal course" succession planning after he turned 60. “I’m surprised it was news,” he said. “I think it’s just a matter of good governance.”

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