Thomson Reuters Reports Second-Quarter 2017 Results

Transcription

1 TORONTO, August 1, 2017 Thmsn Reuters (TSX/NYSE: TRI) tday reprted results fr the secnd quarter ended Based n its first-half results, the cmpany raised its full-year 2017 utlk fr several metrics, as reflected n page 5. It is encuraging t see the cntinued imprvement in underlying perating perfrmance, said Jim Smith, president and chief executive fficer f Thmsn Reuters. Based n the slid start t the year, we are increasing full-year EPS guidance. Our executin fcus is paying ff, and we believe effrts t imprve custmer experience will keep the trend lines mving in the right directin. Cnslidated Financial Highlights June 30 (Millins f U.S. dllars, except fr adjusted EBITDA margin and earnings per share (EPS) IFRS Financial Measures (1) Change Revenues $2,782 $2,769 0% Operating prfit $399 $401 0% Diluted EPS (includes discntinued peratins) $0.27 $ % Cash flw frm peratins (includes discntinued peratins) $834 $770 8% Change at Cnstant Currency Nn-IFRS Financial Measures (1) Revenues $2,782 $2,769 0% 2% Adjusted EBITDA $838 $757 11% 11% Adjusted EBITDA margin 30.1% 27.3% 280bp 230bp Adjusted EPS $0.60 $ % 28% Free cash flw (includes discntinued peratins) $580 $525 10% Revenues were slightly higher cmpared t the prir-year perid as higher recurring revenues and cntributins frm acquisitins were mstly ffset by the impact f freign currency. At cnstant currency, revenues increased 2%. Operating prfit was essentially unchanged as slightly higher revenues and lwer expenses, which reflected savings frm the cmpany s simplificatin initiatives, were ffset by the unfavrable impact f fair value adjustments assciated with freign currency derivatives embedded in certain custmer cntracts. Adjusted EBITDA increased 11% t $838 millin and the margin increased 280 basis pints t 30.1% frm 27.3% primarily due t higher revenues and simplificatin initiatives which resulted in lwer expenses. Diluted EPS, which includes discntinued peratins, decreased 40% t $0.27 due t the same factrs that impacted perating prfit, as well as nn-cash freign currency fluctuatins n intercmpany lans and the lss f earnings frm IP & Science fllwing its sale in the furth quarter f Adjusted EPS was $0.60, an increase f 28%, r $0.13 per share, primarily due t higher adjusted EBITDA. Cash flw frm peratins increased 8%, despite the lss f cash flw frm IP & Science fllwing its sale, due t higher perating prfit befre the impact f nn-cash items, such as fair value adjustments. Free cash flw increased 10% t $580 millin, primarily reflecting strnger adjusted EBITDA perfrmance, partly ffset by the lss f cash flw frm IP & Science fllwing its sale. The cmpany repurchased 6.7 millin shares during the secnd quarter at a cst f $294 millin and repurchased 13.5 millin shares during the first six mnths f the year at a cst f $578 millin under its $1.0 billin share buyback prgram. (1) In additin t results reprted in accrdance with Internatinal Financial Reprting Standards (IFRS), the cmpany uses certain nn-ifrs financial measures as supplemental indicatrs f its perating perfrmance and financial psitin. These and ther nn-ifrs financial measures are defined and recnciled t the mst directly cmparable IFRS measures in the tables appended t this news release.

2 Page 2 f 11 Highlights by Business Unit June 30 (Millins f U.S. dllars, except fr adjusted EBITDA margins) Change Ttal Freign Currency Cnstant Currency Revenues Financial & Risk $1,517 $1,524 0% -2% 2% Legal % -1% 1% Tax & Accunting % 0% 8% Crprate & Other (Reuters News) % -1% -5% Eliminatins (1) (4) Revenues $2,782 $2,769 0% -2% 2% Adjusted EBITDA Financial & Risk $477 $443 8% 0% 8% Legal % -1% 4% Tax & Accunting % 2% 24% Crprate & Other (includes Reuters News) (62) (78) n/a n/a n/a Adjusted EBITDA $838 $757 11% 0% 11% Adjusted EBITDA Margin Financial & Risk 31.4% 29.1% 230bp 50bp 180bp Legal 38.0% 36.6% 140bp 30bp 110bp Tax & Accunting 29.4% 25.3% 410bp 20bp 390bp Crprate & Other (includes Reuters News) n/a n/a n/a n/a n/a Adjusted EBITDA margin 30.1% 27.3% 280bp 50bp 230bp n/a nt applicable Unless therwise nted, all revenue grwth cmparisns by business unit in this news release are at cnstant currency (r exclude the impact f freign currency) as Thmsn Reuters believes this prvides the best basis t measure their perfrmance. Financial & Risk Revenues increased 2% t $1.5 billin. Organic revenues grew 1% and acquisitins cntributed 1%. Revenues by type: Recurring revenues grew 1% (77% f ttal) The increase was primarily due t an annual price increase and psitive net sales. Transactins revenues grew 8% (15% f ttal) Grwth was due t increased revenue frm Tradeweb and the BETA brkerage prcessing business, as well as cntributins frm acquisitins. These increases were partially ffset by the impact f lwer freign exchange trading revenues. Recveries revenues decreased 5% (8% f ttal). The cmpany des nt expect recveries t have a significant impact n Financial & Risk's revenue grwth in the secnd half f the year. Revenues by gegraphy: Revenues were up 3% in the Americas, up 1% in Eurpe, Middle East and Africa (EMEA) and were up slightly in Asia Pacific, despite the impact f lwer recveries revenues in each regin. Adjusted EBITDA increased 8% t $477 millin. The margin increased t 31.4% frm 29.1%. In cnstant currency, the margin increased 180 basis pints primarily due t savings frm the cmpany s simplificatin initiatives, including the 2016 severance charges, and higher revenues. Net sales were psitive in the quarter.

3 Page 3 f 11 Legal Revenues increased 1% t $842 millin. Recurring revenues grew 4% (76% f ttal) US Print revenues declined 8% (14% f ttal) Transactins revenues declined 8% (10% f ttal) Adjusted EBITDA increased 3% t $320 millin. The margin increased t 38.0% frm 36.6%. In cnstant currency, the margin increased 110 basis pints due t higher revenues, savings related t the furth-quarter 2016 severance charges and nging simplificatin initiatives. Tax & Accunting Revenues increased 8% t $350 millin primarily due t higher recurring revenues and imprved transactins revenues. Revenue grwth als benefited frm a favrable year-ver-year cmparisn, as the Gvernment business reprted lwer revenues in the prir-year perid due t delays n certain cntracts. Recurring revenues grew 4% (84% f ttal) Transactins revenues grew 36% (16% f ttal) Adjusted EBITDA increased 26% t $103 millin. The margin increased t 29.4% frm 25.3%. In cnstant currency, the margin increased 390 basis pints due t higher revenues and savings related t the furth-quarter 2016 severance charges. Crprate & Other (Including Reuters News) Reuters News revenues were $74 millin, dwn 5%. Crprate & Other csts at the adjusted EBITDA level were $62 millin cmpared t $78 millin in the prir-year perid. The reductin was driven by savings generated by the cmpany s simplificatin initiatives and the eliminatin f certain csts fllwing the sale f IP & Science. Including depreciatin and amrtizatin f sftware, Crprate & Other csts were $74 millin cmpared t $94 millin in the prir-year perid. On this basis, the cmpany expects full-year Crprate & Other csts t be apprximately $280 millin. Cnslidated Financial Highlights - June 30 (Millins f U.S. dllars, except fr adjusted EBITDA margin and EPS) IFRS Financial Measures Change Revenues $5,597 $5,562 1% Operating prfit $843 $711 19% Diluted EPS (includes discntinued peratins) $0.67 $ % Cash flw frm peratins (includes discntinued peratins) $466 $1,228-62% Change At Cnstant Currency Nn-IFRS Financial Measures Revenues $5,597 $5,562 1% 2% Adjusted EBITDA $1,714 $1,505 14% 14% Adjusted EBITDA margin 30.6% 27.1% 350bp 310bp Adjusted EPS $1.23 $ % 32% Free cash flw (includes discntinued peratins) ($5) $748 n/m n/m nt meaningful

4 Page 4 f 11 Revenues increased 1% as higher recurring revenues and cntributins frm acquisitins were partly ffset by the impact f freign currency and a decline in Financial & Risk s recveries revenues. At cnstant currency, revenues increased 2%. Operating prfit increased 19% as higher revenues and lwer expenses were partly ffset by unfavrable fair value adjustments assciated with freign currency derivatives embedded in certain custmer cntracts. Lwer expenses reflected cntinued simplificatin initiatives. Adjusted EBITDA increased 14% t $1.7 billin and the margin increased t 30.6% frm 27.1%, primarily reflecting higher revenues and the psitive impact f the cmpany s simplificatin initiatives. Diluted EPS, which includes discntinued peratins, decreased 15% t $0.67 as higher perating prfit was mre than ffset by nn-cash freign currency fluctuatins n intercmpany lans and the lss f earnings frm IP & Science fllwing its sale. Adjusted EPS was $1.23, an increase f 32%, r $0.30 per share, primarily due t higher adjusted EBITDA. Cash flw frm peratins declined 62% primarily due t a $500 millin pensin plan cntributin, $116 millin f payments related t 2016 severance charges, and the lss f cash flw frm IP & Science fllwing its sale ($243 millin year-n-year variance). Free cash flw was negative $5 millin reflecting similar factrs as nted abve. Free cash flw fr the full year is expected t be between $0.9 billin and $1.2 billin, as reflected in the cmpany's utlk. Highlights by Business Unit June 30 (Millins f U.S. dllars, except fr adjusted EBITDA margins) Change Freign Currency Cnstant Currency Ttal Revenues Financial & Risk $3,019 $3,033 0% -1% 1% Legal 1,666 1,668 0% -1% 1% Tax & Accunting % 1% 7% Crprate & Other (Reuters News) % -2% -2% Eliminatins (3) (6) Revenues $5,597 $5,562 1% -1% 2% Adjusted EBITDA Financial & Risk $940 $880 7% 0% 7% Legal % -1% 4% Tax & Accunting % 0% 24% Crprate & Other (includes Reuters News) (97) (179) n/a n/a n/a Adjusted EBITDA $1,714 $1,505 14% 0% 14% Adjusted EBITDA Margin Financial & Risk 31.1% 29.0% 210bp 40bp 170bp Legal 37.6% 36.5% 110bp 0bp 110bp Tax & Accunting 31.8% 27.5% 430bp -10bp 440bp Crprate & Other (includes Reuters News) n/a n/a n/a n/a n/a Adjusted EBITDA margin 30.6% 27.1% 350bp 40bp 310bp n/a nt applicable

5 Page 5 f 11 Dividend In February 2017, the Thmsn Reuters bard f directrs apprved a $0.02 per share annualized increase in the dividend t $1.38 per cmmn share. A quarterly dividend f $0.345 per share is payable n September 15, 2017 t cmmn sharehlders f recrd as f August 17, Business Outlk 2017 (At Cnstant Currency) Based n the results f the first half f the year, the cmpany raised its full-year utlk fr adjusted EBITDA margin and adjusted EPS. The cmpany reaffirmed its full-year utlk fr revenue grwth and free cash flw. Fr the full-year 2017, the cmpany currently expects: Lw single-digit revenue grwth Adjusted EBITDA margin t range between 29.3% % - up frm previus guidance f 28.8% % Free cash flw t range between $0.9 billin and $1.2 billin, which reflects cash payments in 2017 relating t the furth-quarter 2016 charges, the $500 millin pensin plan cntributin made in the first quarter f 2017 and the lss f free cash flw frm the sale f the IP & Science business Adjusted EPS target f $ $2.45 up frm previus guidance f $2.35 The cmpany s 2017 utlk des nt factr in the impact f acquisitins r divestitures that may ccur during the year. The infrmatin in this sectin is frward-lking and shuld be read in cnjunctin with the sectin belw entitled Special Nte Regarding Frward-Lking Statements, Material Assumptins and Material Risks. Thmsn Reuters Thmsn Reuters is the wrld s leading surce f news and infrmatin fr prfessinal markets. Our custmers rely n us t deliver the intelligence, technlgy and expertise they need t find trusted answers. The business has perated in mre than 100 cuntries fr mre than 100 years. Thmsn Reuters shares are listed n the Trnt and New Yrk Stck Exchanges (symbl: TRI). Fr mre infrmatin, visit NON-IFRS FINANCIAL MEASURES Thmsn Reuters prepares its financial statements in accrdance with Internatinal Financial Reprting Standards (IFRS), as issued by the Internatinal Accunting Standards Bard (IASB). This news release includes certain nn-ifrs financial measures, such as adjusted EBITDA and the related margin (ther than at the business unit r segment level), free cash flw, adjusted EPS, and selected measures excluding the impact f freign currency. Thmsn Reuters uses these nn-ifrs financial measures as supplemental indicatrs f its perating perfrmance and financial psitin. These measures d nt have any standardized meanings prescribed by IFRS and therefre are unlikely t be cmparable t the calculatin f similar measures used by ther cmpanies, and shuld nt be viewed as alternatives t measures f financial perfrmance calculated in accrdance with IFRS. Nn-IFRS financial measures are defined and recnciled t the mst directly cmparable IFRS measures in the appended tables. The term rganic refers t Thmsn Reuters existing businesses befre the impact f acquisitins. The cmpany's business utlk cntains varius nn-ifrs financial measures. Fr utlk purpses nly, the cmpany is unable t recncile these nn-ifrs measures t the mst cmparable IFRS measures because it cannt predict, with reasnable certainty, the 2017 impact f changes in freign exchange rates which impact (i) the translatin f its results reprted at average freign currency rates fr the year, (ii) fair value adjustments assciated with freign currency derivatives embedded in certain custmer cntracts, and (iii) ther finance incme r expense related t freign exchange cntracts and intercmpany financing arrangements. Additinally, the cmpany cannt reasnably predict the ccurrence r amunt f ther perating gains and lsses, which generally arise frm business transactins that it des nt anticipate.

6 Page 6 f 11 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL ASSUMPTIONS AND MATERIAL RISKS Certain statements in this news release, including, but nt limited t, statements in the "Business Outlk 2017 (At Cnstant Currency)" sectin, Mr. Smith s cmments and statements regarding recveries revenues and crprate csts, are frwardlking. As a result, frward-lking statements are subject t a number f risks and uncertainties that culd cause actual results r events t differ materially frm current expectatins. There is n assurance that the events described in any frwardlking statement will materialize. A business utlk is prvided fr the purpse f presenting infrmatin abut current expectatins fr This infrmatin may nt be apprpriate fr ther purpses. Yu are cautined nt t place undue reliance n frward-lking statements which reflect expectatins nly as f the date f this news release. Except as may be required by applicable law, Thmsn Reuters disclaims any bligatin t update r revise any frward-lking statements. The cmpany's 2017 business utlk is based n varius external and internal assumptins. Ecnmic and market assumptins include, but are nt limited t, GDP grwth in mst f the cuntries where Thmsn Reuters perates, a cntinued increase in demand fr high quality infrmatin and wrkflw slutins and a cntinued need fr trusted prducts and services that help custmers navigate changing geplitical, ecnmic and regulatry envirnments. Internal financial and peratinal assumptins include, but are nt limited t, the successful executin f sales initiatives, nging prduct release prgrams, ur glbalizatin strategy and ther grwth and efficiency initiatives. Sme f the material risk factrs that culd cause actual results r events t differ materially frm thse expressed in r implied by frward-lking statements in this news release include, but are nt limited t, changes in the general ecnmy; actins f cmpetitrs; failure t develp new prducts, services, applicatins and functinalities t meet custmers' needs, attract new custmers and retain existing nes, r expand int new gegraphic markets and identify areas f higher grwth; fraudulent r unpermitted data access r ther cyber-security r privacy breaches; failures r disruptins f telecmmunicatins, data centers, netwrk systems r the Internet; increased accessibility t free r relatively inexpensive infrmatin surces; failure t meet the challenges invlved in perating glbally; failure t maintain a high renewal rate fr recurring, subscriptin-based services; dependency n third parties fr data, infrmatin and ther services; changes t law and regulatins; tax matters, including changes t tax laws, regulatins and treaties; fluctuatins in freign currency exchange and interest rates; failure t adapt t rganizatinal changes and effectively implement strategic initiatives; failure t attract, mtivate and retain high quality management and key emplyees; failure t prtect the brands and reputatin f Thmsn Reuters; inadequate prtectin f intellectual prperty rights; threat f legal actins and claims; failure t derive fully the anticipated benefits frm existing r future acquisitins, jint ventures, investments r dispsitins; risk f antitrust/cmpetitin-related claims r investigatins; impairment f gdwill and ther identifiable intangible assets; dwngrading f credit ratings and adverse cnditins in the credit markets; the effect f factrs utside f the cntrl f Thmsn Reuters n funding bligatins in respect f pensin and pst-retirement benefit arrangements; and actins r ptential actins that culd be taken by the cmpany s principal sharehlder, The Wdbridge Cmpany Limited. These and ther factrs are discussed in materials that Thmsn Reuters frm time t time files with, r furnishes t, the Canadian securities regulatry authrities and the U.S. Securities and Exchange Cmmissin. Thmsn Reuters annual and quarterly reprts are als available in the Investr Relatins sectin f CONTACTS MEDIA David Crundwell Senir Vice President, Crprate Affairs david.crundwell@tr.cm INVESTORS Frank J. Glden Senir Vice President, Investr Relatins frank.glden@tr.cm Thmsn Reuters will webcast a discussin f its secnd-quarter 2017 results tday beginning at 8:30 a.m. Eastern Daylight Time (EDT). Yu can access the webcast by visiting the "Investr Relatins" sectin f An archive f the webcast will be available fllwing the presentatin.

7 Page 7 f 11 Cnslidated Incme Statement (millins f U.S. dllars, except per share data) CONTINUING OPERATIONS Revenues $2,782 $2,769 $5,597 $5,562 Operating expenses (1,997) (1,991) (4,001) (4,100) Depreciatin (77) (80) (149) (161) Amrtizatin f cmputer sftware (168) (172) (348) (341) Amrtizatin f ther identifiable intangible assets (120) (132) (239) (260) Other perating (lsses) gains, net (21) 7 (17) 11 Operating prfit Finance csts, net: Net interest expense (95) (103) (188) (196) Other finance (csts) incme (91) 9 (118) (25) Incme befre tax and equity methd investments Share f pst-tax lsses in equity methd investments (7) (1) (5) - Tax (expense) benefit (5) (2) (14) 24 Earnings frm cntinuing peratins Earnings frm discntinued peratins, net f tax Net earnings $206 $350 $520 $622 Earnings attributable t: Cmmn sharehlders Nn-cntrlling interests Earnings per share: Basic and diluted earnings per share: Frm cntinuing peratins $0.26 $0.39 $0.67 $0.65 Frm discntinued peratins Basic and diluted earnings per share $0.27 $0.45 $0.67 $0.79 Basic weighted-average cmmn shares 721,009, ,598, ,088, ,163,267 Diluted weighted-average cmmn shares 722,504, ,350, ,409, ,795,444

8 Page 8 f 11 Cnslidated Statement f Financial Psitin (millins f U.S. dllars) December 31, Assets Cash and cash equivalents $771 $2,368 Trade and ther receivables 1,545 1,392 Other financial assets Prepaid expenses and ther current assets Current assets 3,137 4,634 Cmputer hardware and ther prperty, net Cmputer sftware, net 1,404 1,394 Other identifiable intangible assets, net 5,539 5,655 Gdwill 14,856 14,485 Other financial assets Other nn-current assets Deferred tax Ttal assets $26,517 $27,852 Liabilities and equity Liabilities Current indebtedness $718 $1,111 Payables, accruals and prvisins 2,027 2,448 Deferred revenue 1, Other financial liabilities Current liabilities 3,963 4,562 Lng-term indebtedness 6,326 6,278 Prvisins and ther nn-current liabilities 1,687 2,258 Other financial liabilities Deferred tax 1,093 1,158 Ttal liabilities 13,384 14,596 Equity Capital 9,571 9,589 Retained earnings 6,990 7,477 Accumulated ther cmprehensive lss (3,922) (4,293) Ttal sharehlders equity 12,639 12,773 Nn-cntrlling interests Ttal equity 13,133 13,256 Ttal liabilities and equity $26,517 $27,852

9 Page 9 f 11 Cnslidated Statement f Cash Flw (millins f U.S. dllars) Cash prvided by (used in): Operating activities Earnings frm cntinuing peratins $201 $304 $518 $514 Adjustments fr: Depreciatin Amrtizatin f cmputer sftware Amrtizatin f ther identifiable intangible assets Net gains n dispsals f businesses and investments - (1) - (2) Deferred tax (52) (26) (73) (84) Other Pensin cntributins - - (500) - Changes in wrking capital and ther items 54 (10) (603) (381) Operating cash flws frm cntinuing peratins ,034 Operating cash flws frm discntinued peratins (8) 72 (49) 194 Net cash prvided by perating activities ,228 Investing activities Acquisitins, net f cash acquired (5) (65) (183) (111) (Payments fr) prceeds frm dispsals f businesses and investments - (1) 10 1 Capital expenditures, less prceeds frm dispsals (241) (212) (454) (445) Other investing activities Investing cash flws frm cntinuing peratins (237) (277) (612) (535) Investing cash flws frm discntinued peratins 17 (14) 17 (25) Net cash used in investing activities (220) (291) (595) (560) Financing activities Prceeds frm debt Repayments f debt - (500) (550) (503) Net (repayments) brrwings under shrt-term lan facilities (105) (138) Repurchases f cmmn shares (294) (258) (578) (690) Dividends paid n preference shares - - (1) (1) Dividends paid n cmmn shares (241) (248) (483) (497) Dividends paid t nn-cntrlling interests (22) (20) (31) (29) Other financing activities Net cash used in financing activities (651) (657) (1,477) (905) Decrease in cash and bank verdrafts (37) (178) (1,606) (237) Translatin adjustments 3 (5) 5 (1) Cash and bank verdrafts at beginning f perid , Cash and bank verdrafts at end f perid $766 $684 $766 $684 Cash and bank verdrafts at end f perid cmprised f: Cash and cash equivalents $771 $686 $771 $686 Bank verdrafts (5) (2) (5) (2) $766 $684 $766 $684

10 Page 10 f 11 Recnciliatin f Earnings frm Cntinuing Operatins t Adjusted EBITDA (1) (millins f U.S. dllars, except fr margins) Change Change Earnings frm cntinuing peratins $201 $304-34% $518 $514 1% Adjustments t remve: Tax expense (benefit) (24) Other finance csts (incme) 91 (9) Net interest expense Amrtizatin f ther identifiable intangible assets Amrtizatin f cmputer sftware Depreciatin EBITDA $757 $784 $1,574 $1,473 Adjustments t remve: Share f pst-tax lsses in equity methd investments Other perating lsses (gains), net 21 (7) 17 (11) Fair value adjustments 53 (21) Adjusted EBITDA $838 $757 11% $1,714 $1,505 14% Adjusted EBITDA margin (1) 30.1% 27.3% 280bp 30.6% 27.1% 350bp Recnciliatin f Earnings Attributable t Cmmn Sharehlders t Adjusted Earnings (2) (millins f U.S. dllars, except fr share and per share data) Change Change Earnings attributable t cmmn sharehlders $192 $337-43% $489 $599-18% Adjustments t remve: Fair value adjustments 53 (21) Amrtizatin f ther identifiable intangible assets Other perating lsses (gains), net 21 (7) 17 (11) Other finance csts (incme) 91 (9) Share f pst-tax lsses in equity methd investments Tax n abve items (42) (35) (89) (92) Tax items impacting cmparability Earnings frm discntinued peratins, net f tax (5) (46) (2) (108) Interim perid effective tax rate nrmalizatin (3) (3) (8) (2) (13) Dividends declared n preference shares - - (1) (1) Adjusted earnings $436 $357 22% $894 $708 26% Adjusted EPS $0.60 $ % $1.23 $ % Freign currency (4) 0% 0% Cnstant currency (4) 28% 32% Diluted weighted-average cmmn shares (millins) Refer t page 11 fr ftntes.

11 Page 11 f 11 Recnciliatin f Net Cash Prvided by Operating Activities t Free Cash Flw (5) (millins f U.S. dllars) Net cash prvided by perating activities $834 $770 $466 $1,228 Capital expenditures, less prceeds frm dispsals (241) (212) (454) (445) Capital expenditures frm discntinued peratins - (14) - (25) Other investing activities Dividends paid n preference shares - - (1) (1) Dividends paid t nn-cntrlling interests (22) (20) (31) (29) Free cash flw $580 $525 $(5) $748 Ftntes (1) Thmsn Reuters defines adjusted EBITDA as earnings frm cntinuing peratins befre tax expense r benefit, net interest expense, ther finance csts r incme, depreciatin, amrtizatin f sftware and ther identifiable intangible assets, Thmsn Reuters share f pst-tax (earnings) lsses in equity methd investments, ther perating gains and lsses, certain asset impairment charges, fair value adjustments and crprate related items. Adjusted EBITDA margin is adjusted EBITDA expressed as a percentage f revenues. Thmsn Reuters uses adjusted EBITDA because it prvides a cnsistent basis t evaluate perating prfitability and perfrmance trends by excluding items that the Cmpany des nt cnsider t be cntrllable activities fr this purpse. Adjusted EBITDA als represents a measure cmmnly reprted and widely used by investrs as a valuatin metric. Additinally, this measure is used by Thmsn Reuters and investrs t assess a cmpany s ability t incur and service debt. (2) Adjusted earnings and adjusted EPS include dividends declared n preference shares but exclude the pst-tax impacts f fair value adjustments, amrtizatin f ther identifiable intangible assets, ther perating gains and lsses, certain asset impairment charges, ther finance csts r incme, Thmsn Reuters share f pst-tax (earnings) lsses in equity methd investments, discntinued peratins and ther items affecting cmparability. Thmsn Reuters calculates the pst-tax amunt f each item excluded frm adjusted earnings based n the specific tax rules and tax rates assciated with the nature and jurisdictin f each item. Adjusted EPS is calculated using diluted weighted-average shares and des nt represent actual earnings r lss per share attributable t sharehlders. Thmsn Reuters uses adjusted earnings and adjusted EPS as they prvide a mre cmparable basis t analyze earnings and they are als measures cmmnly used by sharehlders t measure the cmpany's perfrmance. (3) Adjustment t reflect incme taxes based n estimated full-year effective tax rate. Earnings r lsses fr interim perids under IFRS reflect incme taxes based n the estimated effective tax rates f each f the jurisdictins in which Thmsn Reuters perates. The nn-ifrs adjustment reallcates estimated full-year incme taxes between interim perids, but has n effect n full-year incme taxes. (4) The changes in revenues, adjusted EBITDA and the related margins, and adjusted earnings per share befre currency (at cnstant currency r excluding the effects f currency) are determined by cnverting the current and prir-year perid s lcal currency equivalent using the same exchange rates. (5) Free cash flw (includes free cash flw frm cntinuing and discntinued peratins) is net cash prvided by (used in) perating activities, and ther investing activities less capital expenditures, dividends paid n the cmpany s preference shares, and dividends paid t nn-cntrlling interests. Thmsn Reuters uses free cash flw as it helps assess the cmpany's ability, ver the lng term, t create value fr its sharehlders as it represents cash available t repay debt, pay cmmn dividends and fund share repurchases and new acquisitins. Depreciatin and Amrtizatin f Cmputer Sftware by Business Segment (millins f U.S. dllars) Supplemental Financial & Risk $140 $146 $287 $288 Legal Tax & Accunting Crprate & Other (includes Reuters News) Ttal depreciatin and amrtizatin f cmputer sftware $245 $252 $497 $502