UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

THOMSON REUTERS CORPORATION

(Translation of registrant’s name into English)

333 Bay Street, Suite 300

Toronto, Ontario M5H 2R2, Canada

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☐            Form 40-F  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

The information contained in Exhibit 99.1 and Exhibit 99.2 of this Form 6-K is incorporated by reference into, or as additional exhibits to, as applicable, the registrant’s outstanding registration statements.

Thomson Reuters Corporation is voluntarily furnishing certifications by its Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 99.3-99.6 of this Form 6-K. 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 6, 2021

EXHIBIT INDEX

EXHIBIT 99.1

Management’s Discussion and Analysis

This management’s discussion and analysis is designed to provide you with a narrative explanation through the eyes of our management of how we performed, as well as information about our financial condition and future prospects. As this management’s discussion and analysis is intended to supplement and complement our financial statements, we recommend that you read this in conjunction with our consolidated interim financial statements for the three months ended March 31, 2021, our 2020 annual consolidated financial statements and our 2020 annual management’s discussion and analysis. This management’s discussion and analysis contains forward-looking statements, which are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. Forward-looking statements include, but are not limited to, our quarterly and three-year outlook, including forecasted impacts associated with our Change Program, and our expectations related to general economic conditions (including the impact of the COVID-19 pandemic on the U.S. and global economies) and market trends and their anticipated effects on our business segments. For additional information related to forward-looking statements, material assumptions and material risks associated with them, please see the “Outlook,” and “Additional Information—Cautionary Note Concerning Factors That May Affect Future Results” sections of this management’s discussion and analysis. This management’s discussion and analysis is dated as of May 3, 2021.

We have organized our management’s discussion and analysis in the following key sections:

Unless otherwise indicated or the context otherwise requires, references in this discussion to “we,” “our,” “us”, the “Company” and “Thomson Reuters” are to Thomson Reuters Corporation and our subsidiaries.

Basis of presentation

We prepare our consolidated financial statements in U.S. dollars and in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

Other than EPS, we report our results in millions of U.S. dollars, but we compute percentage changes and margins using whole dollars to be more precise. As a result, percentages and margins calculated from reported amounts may differ from those presented, and growth components may not total due to rounding.

Use of non-IFRS financial measures

In this management’s discussion and analysis, we discuss our results on both an IFRS and non-IFRS basis. We use non-IFRS measures as supplemental indicators of our operating performance and financial position as well as for internal planning purposes and our business outlook. We believe non-IFRS financial measures provide more insight into our performance. Non-IFRS measures do not have 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.

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Our non-IFRS financial measures include:

We also report changes in our revenues, operating expenses, adjusted EBITDA and the related margin, and adjusted EPS before the impact of foreign currency or at “constant currency”. These measures remove the impacts from changes in foreign currency exchange rates to provide better comparability of our business trends from period to period. To provide greater insight into the revenue growth of our existing businesses on a constant currency basis, we report organic revenue growth (as defined in the glossary below and in Appendix A).

See Appendix A of this management’s discussion and analysis for a description of our non-IFRS financial measures, including an explanation of why we believe they are useful measures of our performance, including our ability to generate cash flow. Refer to the “Liquidity and Capital Resources” section of this management’s discussion and analysis and Appendix B for reconciliations of our non-IFRS financial measures to the most directly comparable IFRS measures.

Glossary of key terms

We use the following terms in this management’s discussion and analysis.

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Executive Summary

Our company

Thomson Reuters is a leading provider of business information services. Our products include highly specialized information-enabled software and tools for legal, tax, accounting and compliance professionals combined with the world’s most global news service — Reuters.

We derive most of our revenues from selling information and software solutions, primarily electronically and on a recurring subscription basis. Our solutions blend deep domain knowledge with software and automation tools. We believe our workflow solutions make our customers more productive, by streamlining how they operate, enabling them to focus on higher value activities. Many of our customers use our solutions as part of their workflows, which has led to strong customer retention. We believe that our customers trust us because of our history and dependability and our deep understanding of their businesses and industries, and they rely on our services for navigating a rapidly changing and increasingly complex digital world. Over the years, our business model has proven to be capital efficient and cash flow generative, and it has enabled us to maintain leading and scalable positions in our chosen market segments.

We are organized in five reportable segments supported by a corporate center:

Our corporate center centrally manages commercial and technology operations, including those around our sales capabilities, digital customer experience and product and content development. Our corporate center also centrally manages functions such as finance, legal and human resources. Costs associated with our Change Program are reported within our corporate center.

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Key Financial Highlights

Our first quarter performance reflected a strong start to the year. Our customers are becoming more confident in an improving economic environment, resulting in strong sales across our businesses. We are encouraged by the momentum we see building, but despite the improving outlook, risks remain as the global pandemic is still significantly impacting many parts of the world.

In February 2021, we announced our Change Program to transition from a holding company to an operating company, and from a content provider to a content-driven technology company. The program is currently on track. In the first quarter, we supplemented our existing teams with experienced talent to strengthen skill sets across product development, digital, technology, strategy and change management and we began to make investments to achieve our Change Program objectives.

Our first-quarter performance met or exceeded our first quarter business outlook communicated in February 2021. In May 2021, we announced our outlook for the second quarter and an increase to the low end of our revenue outlook for the full year of 2021, which reflects our increasing confidence in our business performance. We also reaffirmed all other measures in our three-year outlook. Refer to the “Outlook” section of this management’s discussion and analysis for additional information.

Consolidated results

Supplemental financial results – “Big 3” Segments—Legal Professionals, Corporates and Tax & Accounting Professionals Combined

Revenues increased 4% in total and 3% on both a constant currency and organic basis. The increase in organic revenues was driven by 3% growth in recurring revenues (77% of total revenues).

Revenues for our “Big 3” segments (81% of total revenues) increased 5% in total, in constant currency and on an organic basis. The increase in organic revenues was driven by 4% growth in recurring revenues (84% of “Big 3” revenues) and 8% growth in transactions revenues.

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Operating profit increased 34%, primarily due to higher revenues and a favorable impact from the revaluation of warrants that we held in Refinitiv until they were exercised in connection with the closing of the sale to LSEG on January 29, 2021. Adjusted EBITDA and the related margin, which excludes the impact of the warrant revaluation among other items, increased due to higher revenues and lower costs, which reflected the impact from our 2020 cost-reduction initiatives.

Diluted EPS increased to $10.13 per share compared to $0.39 per share in the prior-year period due to the gain on sale of our investment in Refinitiv to LSEG. Adjusted EPS, which excludes the gain from the sale of our investment in Refinitiv, as well as other adjustments, increased to $0.58 per share from $0.48 per share in the prior-year period due to higher adjusted EBITDA, which more than offset higher depreciation and amortization of computer software, as well as higher interest and tax expense.

Cash flow from operations increased primarily because of favorable movements in working capital, which included lower bonus payments in 2021 due to the impact of COVID-19 in 2020. Higher revenues and lower costs from 2020 cost-reduction initiatives also contributed. Free cash flow increased for the same reasons.

Below is a comparison of our actual revenue performance for the first quarter of 2021 to the related quarterly outlook.

The total Thomson Reuters revenue growth outlook included an anticipated decline in Global Print revenues of between 13% and 15% before currency and on an organic basis. In the first quarter, Global Print outperformed the outlook as revenues declined 9% on both bases.    

Change Program Update

Our outlook incorporates significant investments for our Change Program in 2021 and 2022. These investments are intended to drive growth and efficiency by transitioning our company from a holding company into an operating company, and from a content provider into a content-driven technology company.

The objectives of our Change Program are to:

In the first quarter of 2021, we supplemented our existing teams with experienced talent to strengthen skill sets across product development, digital, technology, strategy and change management and we began to make investments to achieve our objectives. We spent $20 million ($11 million of operating expenses and $9 million of capital expenditures) on technology and market-related initiatives. We achieved $19 million of annualized run-rate savings toward our overall savings targets.

Sale of Refinitiv to LSEG

On January 29, 2021, our company and Blackstone’s consortium closed the sale of Refinitiv to LSEG in an all share transaction. As a result, we indirectly own LSEG shares through our direct investment in YPL, an entity jointly owned by our company, Blackstone’s consortium and certain current and former members of Refinitiv senior management. As of March 31, 2021, YPL held a combination of LSEG ordinary shares and LSEG limited-voting ordinary shares (with the shares carrying in aggregate an approximate 30% economic interest and a 22% voting interest in LSEG). At the same date, we owned 42.74% of YPL and indirectly owned approximately 72.4 million LSEG shares. As of May 3, 2021, these shares had a market value of approximately $7.4 billion based on LSEG’s closing share price on that day.

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Subject to certain exceptions, Thomson Reuters and Blackstone’s consortium have otherwise agreed to be subject to a lock-up for their LSEG shares through January 29, 2023. In each of years three and four following closing (starting on January 30, 2023 and January 30, 2024, respectively), Thomson Reuters and Blackstone’s consortium will become entitled to sell in aggregate one-third of the LSEG shares that were issued. The lock-up arrangement will terminate on January 29, 2025. The ability of current and former members of Refinitiv senior management to sell shares held by them is also subject to certain restrictions.

YPL is entitled to nominate three non-executive LSEG directors for as long as it holds at least 25% of LSEG shares, two LSEG directors for as long as it holds at least 17.5% but less than 25% of LSEG shares and one LSEG director for as long as it holds at least 10% but less than 17.5% of LSEG shares. For so long as YPL is entitled to nominate three directors, one nominee will be a Thomson Reuters representative. Once YPL is released from the lock-up agreement described above, any disposals of LSEG shares will be subject to orderly marketing restrictions. A standstill restriction also applies to YPL under which it (and the underlying investors) have agreed not to, among other matters, acquire further LSEG shares, or make a takeover offer for LSEG for designated time periods. YPL has also committed to vote its LSEG shares in line with the LSEG Board’s recommendation.

Reuters News’ 30-year agreement to supply news and editorial content to Refinitiv continues under the same terms and conditions after the closing and is scheduled to run to 2048.

Thomson Reuters accounts for its indirect investment in LSEG at fair value, based on the share price of LSEG, within “Share of post-tax earnings (losses) in equity method investments” in the consolidated income statement. The investment is subject to equity accounting because the LSEG shares are held through YPL, over which Thomson Reuters has significant influence. As YPL owns only the financial investment in LSEG shares, which the parties intend to sell over time, and is not involved in operating LSEG or the Refinitiv business, the investment in LSEG shares held by YPL is accounted for at fair value. LSEG dividends distributed to Thomson Reuters from YPL will reduce the investment and will be included in “Other investing activities” in the consolidated statement of cash flow.

Gain on sale of Refinitiv to LSEG and subsequent sale of LSEG shares

Thomson Reuters recognized a gain of approximately $8.1 billion related to the January sale of Refinitiv to LSEG within “Share of post-tax earnings (losses) in equity method investments” in the consolidated income statement. As of the January 29, 2021 closing date, Thomson Reuters indirectly owned approximately 82.5 million LSEG shares, which included 4.5 million shares from the exercise of warrants Thomson Reuters previously held in Refinitiv. The transaction was predominantly tax deferred for Thomson Reuters except for approximately $640 million that is payable in 2021. On March 19, 2021, as permitted under a lock-up exception, Thomson Reuters instructed YPL to sell approximately 10.1 million LSEG shares for pre-tax net proceeds of $994 million. Over the course of 2021, Thomson Reuters will pay approximately $225 million of tax on the sale of these shares and will use the remaining after-tax proceeds to pay the approximately $640 million of taxes on the LSEG transaction. The proceeds from the sale of the shares by YPL were distributed to Thomson Reuters as a dividend that reduced the value of the investment. The proceeds were presented in “Net cash provided by investing activities” within the consolidated statement of cash flow.

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Results of Operations

Our revenues and operating profit on a consolidated basis do not tend to be significantly impacted by seasonality as we record a large portion of our revenues ratably over the contract term and our costs are generally incurred evenly throughout the year. However, our revenues from quarter to consecutive quarter can be impacted by the release of certain tax products, which tend to be concentrated in the fourth quarter and, to a lesser extent, in the first quarter of the year. The seasonality of our operating profit may be further impacted in 2021 by the timing of significant Change Program costs we expect to incur to transform ourselves from a holding company to an operating company and into a content-driven technology company. The seasonality of our revenues and operating expenses were impacted by COVID-19 in 2020.

Consolidated results

Revenues

Revenues increased 4% in total and 3% on both a constant currency and organic basis. The increase in organic revenues was driven by 3% growth in recurring revenues (77% of total revenues). While growth in transactions revenues was mostly offset by a 9% decline in Global Print revenues, the performance of Global Print was better than expected.

Revenues for our “Big 3” segments (81% of total revenues) increased 5% in total, in constant currency and on an organic basis. The increase in organic revenues was driven by 4% growth in recurring revenues (84% of “Big 3” revenues) and 8% growth in transactions revenues.

Foreign currency favorably impacted revenue growth due to the weakening of the U.S. dollar against most major currencies, including the British pound sterling, Euro and Australian dollar, which more than offset the strengthening of the U.S. dollar against the Brazilian real and Argentine peso, compared to the prior-year period.

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Operating profit, adjusted EBITDA and adjusted EBITDA less capital expenditures

Operating profit increased 34%, primarily due to higher revenues and a favorable impact from the revaluation of warrants that we held in Refinitiv prior to its sale to LSEG on January 29, 2021.

Adjusted EBITDA and the related margin, which excludes the impact of the warrant revaluation among other items, increased due to higher revenues and lower costs, which reflected the impact from our 2020 cost-reduction initiatives. We incurred $11 million of operating expenses associated with our Change Program in the first quarter of 2021.

Adjusted EBITDA less capital expenditures and the related margin increased due to higher adjusted EBITDA and lower capital expenditures. Capital expenditures in the first quarter of 2021 included $9 million associated with our Change Program.

Operating expenses

Operating expenses, excluding fair value adjustments, decreased 2% in both total and constant currency, reflecting our cost reduction initiatives in 2020. In the first quarter of 2021, operating expenses included $11 million related to our Change Program for technology and market-related initiatives. We also achieved $19 million of savings on an annualized run-rate basis toward our overall Change Program savings targets.

Depreciation and amortization

Other operating gains (losses), net

In the first quarter of 2021, other operating gains, net, included a benefit from the revaluation of warrants that we held in Refinitiv prior to its sale to LSEG on January 29, 2021. In the first quarter of 2020, other operating losses, net, included a loss from the revaluation of warrants that we held in Refinitiv, which more than offset gains associated with the sale of certain real estate properties and a distribution from an investment.

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Net interest expense

The increase in net interest expense reflected C$1.4 billion (approximately US$1 billion) of five-year notes issued in May 2020, as well as lower interest income.

Other finance costs (income)

Other finance costs (income) primarily included gains or losses from fluctuations of foreign currency exchange rates on certain intercompany funding arrangements. The first quarter of 2020 also included gains related to changes in foreign exchange contracts.

Share of post-tax earnings (losses) in equity method investments

In the first quarter of 2021, our share of post-tax earnings in equity method investments was primarily comprised of an $8,075 million gain from the sale of Refinitiv to LSEG on January 29, 2021, partially offset by $1,612 million of losses from the decline in the value of our indirect investment in LSEG subsequent to the sale date and $168 million of post-tax losses related to the Refinitiv operations prior to the sale.

Tax expense

The increase in tax expense was driven by our earnings in equity method investments, primarily from the gain on sale of our former investment in Refinitiv to LSEG. Additionally, tax expense in each period reflected the mix of taxing jurisdictions in which pre-tax profits and losses were recognized. Because the geographical mix of pre-tax profits and losses in interim periods may be different from that for the full year, tax expense or benefit in interim periods is not necessarily indicative of tax expense for the full year.

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The comparability of our tax expense was impacted by various transactions and accounting adjustments during each period. The following table sets forth certain components within income tax expense that impact comparability from period to period, including tax expense associated with items that are removed from adjusted earnings:

Because the items described above impact the comparability of our tax expense or benefit for each period, we remove them from our calculation of adjusted earnings, along with the pre-tax items to which they relate. The computation of our adjusted tax expense is set forth below:

Results of Discontinued Operations

Earnings from discontinued operations, net of tax, includes the following:

Earnings from discontinued operations, net of tax, included residual income and expenses related to our former F&R business.

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Net earnings and diluted EPS

Net earnings and diluted EPS increased due to the gain on sale of our investment in Refinitiv to LSEG.

Adjusted earnings and adjusted EPS

Adjusted earnings and the related per share amount increased as higher adjusted EBITDA more than offset higher depreciation and amortization of computer software, as well as higher interest and tax expense.

Segment results

The following is a discussion of our five reportable segments and our Corporate costs for the three months ended March 31, 2021. We assess revenue growth for each segment, as well as the businesses within each segment, in constant currency and on an organic basis. See Appendix A of this management’s discussion and analysis for additional information.

Legal Professionals

Revenues increased in total and on both a constant currency and organic basis. The increase in organic revenues was due to growth in recurring revenues (93% of the Legal Professionals segment) and transactions revenues (7% of the Legal Professionals segment). Revenues from law firms, which includes revenues from large global law firms and represent just over two-thirds of the segment’s revenues, increased 4%, and the segment’s Global business, representing smaller law firms outside the U.S., increased 5%. U.S. government revenues grew 8%.

The increase in recurring revenues on an organic basis reflected strong growth from Westlaw Edge and Practical Law. Transactions revenues also increased and included higher revenues from Elite. The Government business contributed to both recurring and transactions revenue growth.

Segment adjusted EBITDA and the related margin increased primarily due to higher revenues and lower expenses from cost savings initiatives in 2020. Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 50bp.

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Corporates

Revenues increased in total and on both a constant currency and organic basis. The increase in organic revenues was due to growth in recurring revenues (77% of the Corporates segment) as well as in transactions revenues (23% of the Corporates segment), which was driven by the segment’s Confirmation business, which provides audit confirmation services. Recurring revenues increased 4% despite a 2% reduction in revenue growth due to a loss of revenues related to the impact of the U.S. federal Affordable Care Act that were recorded in the prior-year period but did not reoccur in the first quarter of 2021.

Segment adjusted EBITDA and the related margin increased primarily due to higher revenues and lower expenses due to cost savings initiatives in 2020. Foreign currency negatively impacted the year-over-year change in segment adjusted EBITDA margin by 10bp.

Tax & Accounting Professionals

Revenues increased in total and on both a constant currency and organic basis. The increase in organic revenues was driven by growth in both recurring revenues (71% of the Tax & Accounting Professionals segment), as well as in transactions revenues (29% of the Tax & Accounting Professionals segment) despite the extension of the U.S. tax filing deadline to May 2021 from April 2021 that resulted in lower transactional Pay-Per-Return tax filing revenues in the first quarter of 2021.

Organic revenues grew 5% and included a negative impact from the acceleration of the release date of some of our UltraTax U.S. state tax software from January 2021 to December 2020 to align with the traditional December release of our U.S. federal tax software. If the UltraTax state tax software had been released in January 2021, organic revenue growth for the segment would have been 8% in the first quarter of 2021.

We expect Tax & Accounting Professional’s revenues to grow between 10% and 15% in the second quarter of 2021 reflecting the shift of Pay-Per-Return revenues from the first quarter to the second quarter of 2021 due to the delay in the U.S. tax filing deadline. In 2020, Pay-Per-Return revenues shifted from the second quarter to the third quarter when the U.S. tax filing deadline was extended to July 15.

Segment adjusted EBITDA and the related margin increased primarily due to higher revenues and lower expenses due to cost savings initiatives in 2020. Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 30bp.

Tax & Accounting Professionals is a more seasonal business relative to our other businesses, with a higher percentage of its segment adjusted EBITDA historically generated in the fourth quarter and to a slightly lesser extent, the first quarter, due to the release of certain tax products. Small movements in the timing of revenues and expenses can impact quarterly margins.

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Reuters News

Revenues increased in total and on both a constant currency and organic basis. The increase in organic revenues was driven by growth in transactions revenues from the segment’s Professional business, which includes Reuters Events. Recurring revenues were essentially unchanged on an organic basis.

The segment’s revenue performance was slightly better than the first quarter outlook provided in February 2021. For the second quarter, we expect Reuters News revenues on a constant currency and organic basis to grow between 2% and 3%, primarily due to the Reuters Events business. Reuters Events is currently holding all of its events virtually. However, it continues to assess when it can resume in-person events based on the advice of local health guidelines and customer feedback. Full-year total revenues are expected to increase between 1% and 3%.

Reuters News and the Refinitiv business of LSEG have an agreement pursuant to which Reuters News supplies news and editorial content to Refinitiv through October 1, 2048. In the first quarter of 2021, Reuters News recorded revenues of $85 million under this agreement.

Segment adjusted EBITDA and the related margin increased primarily due to higher revenues, cost savings initiatives from 2020 and timing of expenses. Foreign currency negatively impacted the year-over-year change in segment adjusted EBITDA margin by 250bp.

Global Print

Revenues decreased in total, in constant currency, and on an organic basis. However, the revenue performance was better than expected compared to the first quarter outlook provided in February 2021 driven by higher third-party revenues for printing services. Global Print revenues are expected to increase between 1% and 3% in the second quarter as the prior-year period was negatively impacted by delayed shipments at the beginning of the COVID-19 pandemic. Full-year total revenues are expected to decline between 4% and 7%.

Segment adjusted EBITDA and the related margin decreased due to lower revenues. Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 20bp.

Corporate costs

Corporate costs increased primarily due to $11 million of costs associated with the Change Program. Although our Change Program costs were lower than expected in the first quarter of 2021, we continue to expect to spend between $175 million and $200 million in 2021.    

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Liquidity and Capital Resources

We have historically maintained a disciplined capital strategy that balances growth, long-term financial leverage, credit ratings and returns to shareholders. We are focused on having the investment capacity to drive revenue growth, both organically and through acquisitions, while also maintaining our long-term financial leverage and credit ratings and continuing to provide returns to shareholders. Our principal sources of liquidity are cash on hand, cash provided by our operations, our commercial paper program and credit facility. From time to time, we also issue debt securities. Our principal uses of cash are for debt repayments, debt servicing costs, dividend payments, capital expenditures, share repurchases and acquisitions.

To date, we have not experienced any significant adverse impacts to our liquidity from the economic crisis caused by COVID-19. We continue to believe that we can weather the periods of volatility that are likely to occur as a result of the ongoing crisis, as our capital strategy approach has provided us with a strong capital structure and liquidity position. At March 31, 2021, we had $2.6 billion of cash on hand, of which we are using approximately $860 million to pay taxes on the sale of Refinitiv to LSEG, and on the subsequent sale of some of the LSEG shares that we received when the transaction closed.

We expect that the operating leverage of our business will increase our free cash flow if we increase revenues as contemplated by our outlook. We target a maximum leverage ratio of 2.5x net debt to adjusted EBITDA and have set a target to pay out 50% to 60% of our expected free cash flow as dividends to our shareholders. We completed a modest share repurchase program during the first quarter of 2021 to offset the dilution associated with our dividend reinvestment and equity incentive plans, and we plan to maintain our outstanding shares at about 500 million. In the future, we expect that proceeds from sales of LSEG shares after the expiration of the applicable contractual lock-up provisions, as discussed in the “Executive Summary — Sale of Refinitiv to LSEG” section of this management’s discussion and analysis, will provide us with further options for investment and returns to shareholders.

Our net debt to adjusted EBITDA leverage ratio as of March 31, 2021 was approximately 0.7:1, which is lower than our target of 2.5:1. As calculated under our credit facility covenant, our net debt to adjusted EBITDA leverage ratio at March 31, 2021 was 0.5:1, which is well below the maximum leverage ratio allowed under the credit facility of 4.5:1. None of our debt securities are scheduled to mature until 2023.

We believe that our existing sources of liquidity will be sufficient to fund our projected cash requirements for the next 12 months.

The information above and in this section is forward-looking and should be read in conjunction with the section entitled “Additional Information—Cautionary Note Concerning Factors That May Affect Future Results”.

Cash flow

Summary of consolidated statement of cash flow

Operating activities. Net cash provided by operating activities increased primarily due to favorable movements in working capital, primarily due to lower bonus payments, which reflected the impact of COVID-19 in 2020, and because the prior-year period included costs and investments to reposition our company following the separation of our former F&R business. In the first quarter of 2021, cash flow from operations also benefited from higher revenues and lower costs due to COVID-19 related cost-reduction initiatives in 2020.

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Investing activities. In the first quarter of 2021, net cash provided by investing activities included a $994 million dividend from YPL in connection with the sale of LSEG shares, which was partly offset by $120 million of capital expenditures. Net cash used in investing activities in the first quarter of 2020 included $142 million of capital expenditures and $124 million to acquire Pondera Solutions, a provider of technology and advanced analytics to combat fraud, waste and abuse in healthcare and large government programs.

Financing activities. In the first quarter of 2021, net cash used in financing activities was primarily comprised of returns to our common shareholders through dividends and share repurchases. Net cash provided by financing activities in the first quarter of 2020 included $493 million of proceeds from net borrowings of debt, which was partly offset by returns to common shareholders. Refer to the “Commercial paper program”, “Credit facility”, “Long-term debt” and “Share repurchases” subsections below for additional information regarding our debt activity and share repurchases.

Cash and bank overdrafts. The increase in cash and cash and bank overdrafts was primarily due to the $994 million dividend from YPL in connection with the sale of LSEG shares and $367 million in after-tax net proceeds from the sale of an investment in December 2020.

Free cash flow. Free cash flow increased primarily due to higher cash flows from operating activities.

Additional information about our debt, dividends and share repurchases is as follows:

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Financial position

Our total assets were $23.8 billion at March 31, 2021, compared to $17.9 billion at December 31, 2020. The increase was due to our equity investments, which was driven by the sale of Refinitiv to LSEG in January 2021.

At March 31, 2021, the carrying amounts of our total current assets exceeded total current liabilities by $1.0 billion, primarily because of an unusually high cash balance. Over the course of 2021, we expect to use approximately $860 million of this cash to pay taxes on the gain from the sale of our investment in Refinitiv to LSEG and on the subsequent sale of some of our LSEG shares that we received in the transaction. From time to time, our current liabilities may exceed our current assets because current liabilities include a significant amount of deferred revenue, which arises from the sale of subscription-based products and services that many customers pay for in advance. The cash received from these advance payments is used to currently fund the operating, investing and financing activities of our business. However, for accounting purposes, these advance payments must be deferred and recognized over the term of the subscription. As such, we typically reflect a negative working capital position in our consolidated statement of financial position. In the ordinary course of business, deferred revenue does not represent a cash obligation, but rather an obligation to perform services or deliver products, and therefore when we are in that situation, we do not believe it is indicative of a liquidity issue, but rather an outcome of the required accounting for our business model.

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Net debt and leverage ratio of net debt to adjusted EBITDA

At March 31, 2021, our total debt position (after swaps) was $3.7 billion. The maturity dates for our term debt are well balanced with no significant concentration in any one year. At March 31, 2021, the average maturity of our term debt was approximately nine years at an average interest rate (after swaps) of slightly over 4%, all of which is fixed. Our leverage ratio of net debt to adjusted EBITDA was below our target ratio of 2.5:1. The decrease in our net debt is primarily due to the increase in our cash and cash equivalents (refer to the “Cash Flow” section of this management’s discussion and analysis for additional information).

Off-balance sheet arrangements, commitments and contractual obligations

For a summary of our other off-balance sheet arrangements, commitments and contractual obligations please see our 2020 annual management’s discussion and analysis. There were no material changes to these arrangements, commitments and contractual obligations during the three months ended March 31, 2021.

Contingencies

Lawsuits and legal claims

We are engaged in various legal proceedings, claims, audits and investigations that have arisen in the ordinary course of business. These matters include, but are not limited to, employment matters, commercial matters, defamation claims and intellectual property infringement claims. The outcome of all of the matters against us is subject to future resolution, including the uncertainties of litigation. Based on information currently known to us and after consultation with outside legal counsel, management believes that the ultimate resolution of any such matters, individually or in the aggregate, will not have a material adverse impact on our financial condition taken as a whole.

Uncertain tax positions

We are subject to taxation in numerous jurisdictions and we are routinely under audit by many different taxing authorities in the ordinary course of business. There are many transactions and calculations during the course of business for which the ultimate tax determination is uncertain, as taxing authorities may challenge some of our positions and propose adjustments or changes to our tax filings.

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As a result, we maintain provisions for uncertain tax positions that we believe appropriately reflect our risk. These provisions are made using our best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. When appropriate, we perform an expected value calculation to determine our provisions. We review the adequacy of these provisions at the end of each reporting period and adjust them based on changing facts and circumstances. Due to the uncertainty associated with tax audits, it is possible that at some future date, liabilities resulting from such audits or related litigation could vary significantly from our provisions. However, based on currently enacted legislation, information currently known to us and after consultation with outside tax advisors, management believes that the ultimate resolution of any such matters, individually or in the aggregate, will not have a material adverse impact on our financial condition taken as a whole.

In February 2018, the U.K. tax authority, HM Revenue & Customs (HMRC), issued notices of assessment under the Diverted Profits Tax (DPT) regime for the 2015 taxation year of certain of our current and former U.K. affiliates. We paid $31 million in tax, as required under the notices. As management does not believe that these U.K. affiliates fall within the scope of the Diverted Profits Tax regime, we appealed these assessments in July 2019 to obtain a refund. In February 2021, HMRC issued DPT notices for the 2016 taxation year aggregating $87 million, which we paid in March 2021, as required under the notices. In addition, based on recent discussions with HMRC, management believes it is reasonably possible that HMRC may issue similar notices in the next 6 to 12 months for one or more other taxation years, largely related to businesses that we have sold and that are subject to indemnity arrangements. If that occurs, we will be required to pay additional taxes to HMRC, including those attributable to the indemnity counterparty, shortly thereafter. If we are required to make any additional tax payments, which could be as much as $600 million to $700 million, we intend to vigorously defend our position by contesting the assessments through all available administrative and judicial remedies. The large majority of the anticipated amounts in dispute relates to our F&R business, in which we sold a majority interest in 2018. Any payment made by us would not be a reflection of our view on the merits of the case. Because management believes that our position is supported by the weight of law, we do not believe that the resolution of this matter will have a material adverse effect on our financial condition taken as a whole. As a result, we would expect to record substantially all of any potential future payments as non-current receivables from HMRC and the indemnity counterparty on our financial statements since we would expect to receive refunds of substantially all of any amounts paid pursuant to these notices of assessment. We expect that our existing sources of liquidity will be sufficient to fund any required payments.

For additional information, please see the “Risk Factors” section of our 2020 annual report, which contains further information on risks related to legal and tax matters.

Outlook

The information in this section is forward-looking and should be read in conjunction with the section entitled “Additional Information—Cautionary Note Concerning Factors That May Affect Future Results”.

Our first-quarter performance met or exceeded our first quarter business outlook communicated in February 2021. In May 2021, we announced our outlook for the second quarter and an increase to the low end of our revenue outlook for the full year of 2021 to reflect our increasing confidence in our business performance. We also reaffirmed all other measures in our three-year outlook.

In February 2021, the Company announced a two-year Change Program to transition from a holding company to an operating company, and from a content provider to a content-driven technology company. Our outlook incorporates the forecasted impacts associated with the Change Program, which is expected to take 24 months (2021 – 2022) to largely complete and is projected to require an investment of between $500 million and $600 million during the course of that time. By 2023, we believe the financial benefits that will result from these initiatives include:

Our outlook also assumes constant currency rates relative to 2020 and does not factor in the impact of any acquisitions or divestitures that may occur in future periods. We believe this type of guidance provides useful insight into the performance of our business. Some of the financial measures in the Outlook below are provided on a non-IFRS basis. Refer to Appendices A and B of this management’s discussion and analysis for additional information and reconciliations of our non-IFRS financial measures to the most directly comparable IFRS financial measures.

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The following table provides the updates to our 2021 revenue growth outlook. All other measures in our 2021 outlook are unchanged.