DBRS Morningstar Confirms Thomson Reuters Corporation’s Ratings With Stable Trends

DBRS Limited (DBRS Morningstar) confirmed Thomson Reuters Corporation’s (Thomson Reuters or the Company) Issuer Rating, Unsecured Medium-Term Notes rating, and Unsecured Debentures rating at BBB (high). DBRS Morningstar also confirmed the Company’s Commercial Paper rating at R-2 (high) and its Preferred Shares rating at Pfd-3 (high). All trends remain Stable. The rating confirmations reflect consistent operating performance at strong levels across key segments while keeping the core financial profile intact. The Stable trends reflect the Company’s expectation of solid organic growth, while allocating such capital to maintain its current leverage target. While credit metrics have strengthened over the last year and the Company is expected to be in an enviable cash generating position through our forecast horizon, DBRS Morningstar notes the challenges of lapping strong operating results and that credit slack is expected to be absorbed through capital allocation decisions.

Through 2021 and Q1 2022, Thomson Reuters’ earning profile remained steady at levels strongly supportive of the current rating category, based on the Company's solid market share and market conditions in its Big 3 segments. EBITDA was approximately flat year over year following an exceptionally strong 2020 that reset the earnings baseline for the Company. Thomson Reuters’ financial profile remained steady and supportive of the rating as the core free cash flow (FCF) profile remained intact and financial leverage remained relatively stable.

DBRS Morningstar expects Thomson Reuters to achieve healthy earnings growth over the near to medium term on the back of mid-single-digit revenue growth driven primarily by organic growth as a result of strong industry growth trends, including the increasing demand for data, and the opportunity for product innovation and integration. DBRS Morningstar also anticipates significant margin expansion from the completion of the multi-year Change Program in 2022, improving operating leverage and the passing on of input cost increases to customers.

In terms of its financial profile, Thomson Reuters' FCF should continue to strengthen as a result of improving earnings, however, DBRS Morningstar believes the Company will use its financial flexibility for investment in growth and/or increasing returns to shareholders such that it drives leverage towards the Company's long term net leverage target of 2.50 times. DBRS Morningstar expects capital intensity to decline to a range of 6.0% to 6.5% after the incremental spending on the Change Program is completed in 2022. DBRS Morningstar expects Thomson Reuters to allocate FCF primarily toward opportunistic acquisition activity and enhanced returns to shareholders such that gross debt-to-adjusted EBITDA remains below the target through 2022 and 2023.

Although DBRS Morningstar views the current rating as soundly stable, should the Company experience a significant deterioration in its operating income and/or financial leverage that is meaningfully above the stated net leverage target for an extended period, a negative rating action could result. Conversely, if the Company were to experience stronger than expected organic earnings growth while formally reducing its long-term leverage target, a positive rating action may occur.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/ Social/ Governance (ESG) factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Publishing Industry (March 14, 2022; https://www.dbrsmorningstar.com/research/393670), DBRS Morningstar Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (March 1, 2022; https://www.dbrsmorningstar.com/research/393065), and DBRS Morningstar Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (October 21, 2022; https://www.dbrsmorningstar.com/research/386355), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (May 17, 2022; https://www.dbrsmorningstar.com/research/396929).

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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