DBRS Morningstar Confirms Thomson Reuters Corporation at BBB (high), Stable

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 strong performance across the Company's main operating segments, while maintaining stable credit metrics and strong liquidity. The Stable trends reflect the expectation that Thomson Reuters will experience solid organic earnings growth, while allocating capital in a manner that allows the Company to at least maintain its current leverage target.

Thomson Reuters earnings profile experienced solid earnings growth through 2022 and Q1 2023, based on strong performance across the Big 3 segments (i.e., Legal Professionals, Corporates, and Tax & Accounting Professionals), which saw positive top-line growth and meaningful adjusted EBITDA margin improvement, benefitting from the completion of the Company's multiyear Change Program. As such, adjusted EBITDA increased substantially year over year (YOY) in 2022, and continued to grow in Q1 2023. Thomson Reuters financial profile remained stable at a level that is supportive of the current rating category through 2022 and Q1 2023, as the positive impact of earnings growth offset the increase in debt during the year.

Looking ahead, DBRS Morningstar anticipates Thomson Reuters to experience solid earnings growth driven by strong organic performance in the Big 3 segments. DBRS Morningstar expects revenues to grow in the low to mid-single digits in 2023 as a result of organic growth in the Company's core segments, partially offset by the sale of the ELITE business, and continue growing in the mid-single digits over the medium term. Meanwhile, EBITDA margins are expected to improve meaningfully once again in 2023, after experiencing significant growth in 2022, on the back of further margin expansion attributable to the completion of the Change Program, and rolling off of stranded costs. In terms of financial profile, Thomson Reuters is expected to further strengthen within the current rating category on the back of earnings growth and conservative capital management. DBRS Morningstar anticipates the Company will continue to return capital to shareholders in the near term, primarily funded by the sale of London Stock Exchange Group (LSEG) shares.

While DBRS Morningstar views the current ratings as soundly placed within the current rating category, should the Company experience stronger-than-anticipated organic earnings growth on a sustainable basis, while formally reducing its long-term leverage target, a positive rating action may occur. Conversely, if the Company were to 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.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance 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 (May 17, 2022) https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmentalsocial-and-governance-risk-factors-in-credit-ratings.

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

DBRS Morningstar applied the following principal methodology:
-- Global Methodology for Rating Companies in the Publishing Industry (March 14, 2023)
https://www.dbrsmorningstar.com/research/410795/global-methodology-for-rating-companies-in-the-publishing-industry

The following methodologies have also been applied:
-- DBRS Morningstar Global Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (February 24, 2023)
https://www.dbrsmorningstar.com/research/410196/dbrs-morningstar-global-criteria-commercial-paper-liquidity-support-for-nonbank-issuers
-- DBRS Morningstar Global Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (October 20, 2022)
https://www.dbrsmorningstar.com/research/404248/dbrs-morningstar-global-criteria-preferred-share-and-hybrid-security-criteria-for-corporate-issuers

The credit rating methodologies used in the analysis of this transaction can be found at:: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

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.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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