Third-quarter and nine-month results on track with Financial & Risk net sales positive year-to-date and for all regions in the quarter, while Legal returned to positive organic revenue growth

NEW YORK – Thomson Reuters (TSX / NYSE: TRI) today reported results for the third quarter ended September 30, 2014.

• Revenues from ongoing businesses grew 1% before currency to $3.1 billion
• Adjusted EBITDA and underlying operating profit were both down 3%
• Adjusted EBITDA margin 26.5%, down 100 basis points; excluding charges was 27.0%
• Underlying operating profit margin 17.1%, down 70 basis points; excluding charges was 17.6%
• Adjusted earnings per share were $0.45 versus $0.48 in the prior-year period
• 28.4 million shares repurchased since October 2013 returning $1.0 billion to shareholders
• 2014 Outlook affirmed

"I am pleased to report yet another quarter of results in line with expectations, building on our first-half momentum," said James C. Smith, chief executive officer of Thomson Reuters. "It is particularly encouraging to see sales trends continue to improve in both our financial and legal businesses alongside consistent strong performance from our other units. We are delivering on our overarching objective: building a platform for higher, more sustainable and more profitable future growth."

Consolidated Financial Highlights – Third Quarter

Three Months Ended September 30,

(Millions of U.S. dollars, except EPS and margins)

The increase in operating profit was primarily due to favorable fair value adjustments largely associated with foreign currency embedded derivatives in certain customer contracts. The decline in diluted EPS resulted from higher costs associated with foreign currency fluctuations and income tax expense, which more than offset the increase in operating profit.

⁽¹⁾ These and other non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the tables appended to this news release. Additional information is provided in the explanatory footnotes to the appended tables.

• Revenues from ongoing businesses were $3.1 billion, a 1% increase before currency, reflecting 4% combined growth from the company’s Legal, Tax & Accounting and Intellectual Property & Science businesses, which was offset by a 2% decline in Financial & Risk.
• Adjusted EBITDA decreased 3%, and the corresponding margin was 26.5% versus 27.5% in the prior-year period, primarily due to higher operating costs and charges.
• Excluding charges from both periods, the margin was 27.0%, down 80 basis points from the prior-year period.
• Excluding charges from both periods and the negative impact of foreign currency the margin was 27.3%, down 10 basis points from the prior-year period.
• Underlying operating profit decreased 3%, and the corresponding margin was 17.1% versus 17.8% in the prior-year period. The decrease was primarily due to the same factors that impacted adjusted EBITDA.
• Excluding charges from both periods, the margin was 17.6%, down 60 basis points from the prior-year period.
• Excluding charges for both periods and the negative impact of foreign currency, the margin was 18.0%, up 20 basis points from the prior-year period.
• Adjusted EPS was $0.45 compared to $0.48 in the prior-year period, down 6%.

Third-Quarter Business Segment Highlights
Unless otherwise noted, all revenue growth comparisons in this 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.

Financial & Risk

• Revenues were down 2% (down 3% organic) due to the impact of negative net sales over the prior 12 months and a 5% organic decline in transactions-related revenues.
• Recurring subscription-related revenues decreased 3% due to the impact of negative aggregate net sales over the prior 12 months.
• Transactions-related revenues increased 3% (down 5% organic) due to lower trading volumes in fixed income markets. Recoveries revenues increased 1%.
• By geography, revenues in Europe, Middle East and Africa (EMEA) were down 4%, and revenues in the Americas and Asia were flat.
• Net sales were positive for the quarter and were positive for all regions – the Americas, Europe and Asia.
• EBITDA decreased 6% due to $18 million in charges and the impact of foreign currency. The margin was 25.1% versus 26.4% in the prior-year period.
• Excluding charges from both periods, the margin was 26.2%, down 50 basis points from the prior-year period.
• Excluding charges from both periods and the negative impact of foreign currency, the margin was 27.1%, up 100 basis points from the prior-year period.
• Operating profit decreased 8% due to the same items that impacted EBITDA. The margin was 15.5% compared to 16.8% in the prior-year period.
• Excluding charges from both periods, the margin was 16.6%, down 50 basis points from the prior-year period.
• Excluding charges from both periods and the negative impact of foreign currency the margin was 17.5%, up 100 basis points from the prior-year period.

Legal

• Revenues increased 1%. Excluding US print, revenues grew 3% (all organic).
• Solutions businesses (47% of Legal revenues) grew 7% (6% organic), driven by strong growth from Elite, Practical Law and Pangea3. Solutions businesses represent all of Legal’s revenue excluding US print and US online legal information.
• US online legal information (38% of Legal revenues) declined 1%.
• US print (15% of Legal revenues) declined 8%.
• EBITDA increased 1%. The margin was 37.9% compared to 38.0% in the prior-year period.
• Operating profit increased 2% with a margin of 29.7% versus 29.4% in the prior-year period.

Tax & Accounting

• Revenues increased 13% (9% organic) with good growth across each segment led by the Corporate business.
• EBITDA increased 9% and the margin was 23.9% compared to 24.4% in the prior-year period. The EBITDA margin decline was primarily related to reinvestment in the business.
• Operating profit increased 26% and the margin was 14.3% compared to 12.6% in the prior-year period due to lower depreciation and amortization expense.
• Small movements in the timing of revenues and 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 increased 3% driven by recurring revenue growth of 5% (79% of revenues) partially offset by a 4% decline in transactions-related revenues (21% of revenues).
• EBITDA decreased 5% with a corresponding margin of 30.6% compared to 33.3% in the prior-year period. The EBITDA margin decline was primarily due to the dilutive impact of prior-year acquisitions and reinvestments in the business.
• Operating profit decreased 11% with a corresponding margin of 21.8% compared to 25.4% in the prior-year period. The operating profit margin decline was a result of the same items that impacted the EBITDA margin.
• Small movements in the timing of revenues and 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 Reuters News)

Reuters News revenues for the third quarter of 2014 were $79 million, down 3% from the prior-year period. Corporate & Other costs for the third quarter of 2014 were $73 million, compared to $70 million in the prior-year period.

Consolidated Financial Highlights – Nine Months

Nine Months Ended September 30,

(Millions of U.S. dollars, except EPS and margins)

Results for the first nine months of 2013 were impacted by the following significant items: operating profit benefited from a $136 million gain realized on the sale of Financial & Risk’s Corporate Services business; and the company also recorded a $396 million tax charge associated with the consolidation of its technology and content assets. No similar items impacted results in the first nine months of 2014.

⁽¹⁾ These and other non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the tables appended to this news release. Additional information is provided in the explanatory footnotes to the appended tables.

• Revenues from ongoing businesses were $9.4 billion, a 1% increase before currency.
• Adjusted EBITDA increased 2% and the corresponding margin was 26.8% versus 26.5% in the prior-year period. The increase was primarily due to lower charges compared to the prior-year period. Charges for the nine-month period were $58 million versus $97 million in the prior-year period. Foreign exchange had a negligible impact on the margin for the year-to-date period.
• Excluding charges from both periods, adjusted EBITDA increased 1% and the related margin was 27.4% versus 27.6% in the prior-year period.
• Underlying operating profit increased 4% and the corresponding margin was 17.4% versus 17.0% in the prior-year period. The increase was primarily due to the same factor that impacted adjusted EBITDA.
• Excluding charges from both periods, underlying operating profit increased 1% and the related margin was 18.1%, unchanged from the prior-year period.
• Adjusted EPS was $1.41 compared to $1.34 in the prior-year period.
• Free cash flow was $875 million versus $976 million in the prior-year period. The decrease was primarily due to a $75 million reduction in free cash flow from disposals compared to the prior-year period and higher severance costs. For the full year, the company continues to expect to achieve free cash flow between $1.3 billion and $1.5 billion.

Business Outlook (Before Currency)

Thomson Reuters today reaffirmed its full-year business outlook for 2014 which was previously communicated in February 2014. The company continues to expect:

• revenues to be comparable to 2013;
• adjusted EBITDA margin to range between 26% and 27%;
• underlying operating profit margin to range between 17.0% and 18.0%; and
• free cash flow to range between $1.3 billion and $1.5 billion in 2014.

The company's 2014 outlook includes the impact of $120 million of previously announced charges expected to be incurred this year. The estimated aggregate amount of these charges is $395 million, $275 million of which was incurred in 2013. The free cash flow outlook for 2014 reflects the estimated cash impact of the charges incurred in 2013 and 2014 as well as the impact of the loss of free cash flow from disposals (approximately $375 million in aggregate).

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 in February 2014, Thomson Reuters board of directors approved a $0.02 per share annualized increase in the dividend to $1.32 per share. A quarterly dividend of $0.33 per share is payable on December 15, 2014 to common shareholders of record as of November 20, 2014.

In the third quarter of 2014, the company returned approximately $109 million to shareholders through the repurchase of approximately 2.9 million shares, of which 1.8 million were repurchased under its new $1.0 billion share buyback program announced in July 2014. The company has repurchased 28.4 million shares at a cost of $1.03 billion since it announced its first $1.0 billion share buyback program in October 2013.

Thomson Reuters

Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world's most trusted news organization. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges (symbol: TRI). For more information, go to www.thomsonreuters.com.

NON-IFRS FINANCIAL MEASURES

Thomson Reuters prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

This news release includes certain non-IFRS financial measures. Thomson Reuters uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS. Non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the appended tables.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL ASSUMPTIONS AND MATERIAL RISKS

Certain statements in this news release, including, but not limited to, statements in the "Business Outlook (Before Currency)" section and Mr. Smith’s comments, are forward-looking. Forward-looking statements also include expectations regarding the 2014 charges. As a result, forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. There is no assurance that the events described in any forward-looking statement will materialize. A business outlook is provided for the purpose of presenting information about current expectations for 2014. This information may not be appropriate for other purposes. You are cautioned not to place undue reliance on forward-looking statements which reflect expectations only as of the date of this news release. Except as may be required by applicable law, Thomson Reuters disclaims any obligation to update or revise any forward-looking statements.

The company's 2014 business outlook is based on various external and internal assumptions. Economic and market assumptions include, but are not limited to, GDP growth in the countries where Thomson Reuters operates. Internal financial and operational assumptions include, but are not limited to, continuing operational improvement in the Financial & Risk business and the successful execution of new sales initiatives, ongoing product release programs, globalization strategy and other growth and efficiency initiatives.

Some of the material risk factors that could cause actual results or events to differ materially from those expressed in or implied by forward-looking statements in this news release include, but are not limited to, changes in the general economy; actions of competitors; failure to develop new products, services, applications and functionalities to meet customers' needs, attract new customers or expand into new geographic markets and identify areas of higher growth; increased accessibility to free or relatively inexpensive information sources; failures or disruptions of network systems or the Internet; failure to maintain a high renewal rate for subscription-based services; dependency on third parties for data, information and other services; changes to law and regulations, including the impact of the Dodd-Frank legislation and similar financial services laws around the world; failure to adapt to recent organizational changes and effectively implement strategic initiatives; failure to recruit, motivate and retain high quality management and key employees; failure to meet the challenges involved in operating globally; failure to derive fully the anticipated benefits from existing or future acquisitions, joint ventures, investments or dispositions; failure to protect the brands and reputation of Thomson Reuters; impairment of goodwill and identifiable intangible assets; inadequate protection of intellectual property rights; threat of legal actions and claims; risk of antitrust/competition-related claims or investigations; downgrading of credit ratings and adverse conditions in the credit markets; fluctuations in foreign currency exchange and interest rates; the effect of factors outside of the control of Thomson Reuters on funding obligations in respect of pension and post-retirement benefit arrangements; and actions or potential actions that could be taken by the company’s principal shareholder, The Woodbridge Company Limited. These and other factors are discussed in materials that Thomson Reuters from time to time files with, or furnishes to, the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. Thomson Reuters annual and quarterly reports are also available in the "Investor Relations" section of http://thomsonreuters.com.

Thomson Reuters will webcast a discussion of its third-quarter 2014 results today beginning at 8:30 a.m. Eastern Daylight Time (EDT). You can access the webcast by visiting the "Investor Relations" section of http://thomsonreuters.com. An archive of the webcast will be available following the presentation.

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