Morningstar DBRS Confirms Thomson Reuters Corporation's Credit Ratings at BBB (high), Stable Trends

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating of Thomson Reuters Corporation (Thomson Reuters or the Company) and the credit ratings on the Company's Unsecured Medium-Term Notes and Unsecured Debentures at BBB (high). Morningstar DBRS also confirmed the Company's Commercial Paper rating at R-2 (high) and its Preferred Shares rating at Pfd-3 (high). In addition, Morningstar DBRS confirmed the credit ratings on TR Finance LLC's Unsecured Medium-Term Notes and Unsecured Debentures at BBB (high) and the credit rating on its Commercial Paper at R-2 (high). The trends on all credit ratings are Stable.

KEY CREDIT RATING CONSIDERATIONS
The credit rating confirmations reflect Thomson Reuters' strong execution and operating performance as well as the Company's low leverage and solid financial profile through Q1 2025. The Stable trends reflect Morningstar DBRS' view that the Company will continue to drive strong earnings growth, both organically and through acquisitions, despite an uncertain economic environment, given the importance and integrated nature of the Company's products as they relate to its customers' operations. Furthermore, Morningstar DBRS believes that Thomson Reuters has ample capacity to invest in growth through acquisitions and product development while maintaining its current leverage target.

CREDIT RATING DRIVERS
While Morningstar DBRS 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 net 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 rise meaningfully above the Company's stated net leverage target of 2.5 times (x) for an extended period, a negative rating action could result.

EARNINGS OUTLOOK
Morningstar DBRS forecasts Thomson Reuters' revenue to increase in the mid-single-digit range toward $7.5 billion in 2025 and continue to grow to more than $8.0 billion in 2026. Morningstar DBRS anticipates revenue growth to be primarily driven by strong organic growth in the Company's Big Three segments (i.e., Legal Professionals, Corporates, and Tax and Accounting Professionals), supported by product developments and enhancements including further integration of artificial intelligence (AI) within the Tax and Accounting segment through the expansion of CoCounsel. Revenue growth is expected to further benefit from contributions from acquisitions made in 2024 and Q1 2025, including Pagero and SafeSend, as well as continued acquisition activity over the near to medium term. Revenue growth is expected to be partially offset by the strategic divestiture of FindLaw in 2024 and the continued structural decline in the Global Print segment. Morningstar DBRS forecasts Thomson Reuters' EBITDA margins to improve modestly in 2025 because of improving operating leverage following the integration of acquisitions made since the beginning of 2024, partially offset by integration costs related to Safesend and the absence of some higher-margin generative AI transactions in 2024. Consequently, Morningstar DBRS forecasts EBITDA to grow toward $2.9 billion in 2025 and $3.1 billion in 2026 compared with $2.8 billion in 2024.

FINANCIAL OUTLOOK
In terms of financial profile, Morningstar DBRS expects Thomson Reuters credit metrics to remain strong for the current rating category as a result of earnings growth and capacity for debt-funded investment given the Company's currently low leverage. Morningstar DBRS forecasts cash flow from operations before changes in working capital to continue to track operating income, increasing to more than $2.3 billion in 2025 and toward $2.5 billion in 2026 from slightly less than $2.3 billion in 2024. Morningstar DBRS expects capital expenditures to remain relatively flat in the range of $600 million to $650 million in 2025 and 2026 compared with $607 million in 2024, and for spending to be primarily allocated toward investment in product development and enhancements with a continued focus on AI. Morningstar DBRS believes Thomson Reuters will allocate free cash flow toward opportunistic acquisition activity and returns to shareholders while maintaining debt-to-EBITDA in the target range on a sustainable basis through 2025 and 2026.

CREDIT RATING RATIONALE
-- Comprehensive Business Risk Assessment (CBRA): Thomson Reuters' CBRA of BBB/BBBH is supported by the Company's well-entrenched market positions, customer and product diversification, and strong free cash flow generation. The CBRA also takes into consideration the intense competition within the industries in which the Company operates, the need for constant client-focused product innovation, and the risks associated with dispositions and growth through acquisitions.

-- Comprehensive Financial Risk Assessment (CFRA): Thomson Reuters' CFRA of AA/AAL reflects its currently strong credit metrics (i.e., debt-to-EBITDA of approximately 1.0x).

-- Intrinsic Assessment (IA): The IA is based on Thomson Reuters' CBRA and CFRA, taking into consideration peer comparisons, among other factors. Morningstar DBRS places the IA in the lower end of the IA range taking into consideration Thomson Reuters' maximum net leverage target of 2.5x, and Morningstar DBRS' view that the current credit ratings provide Thomson Reuters the latitude to invest in acquisitions and product development such that leverage increases toward its stated target.

-- Additional Considerations: None

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Further details on the Issuer's Intrinsic Assessment can be found at https://dbrs.morningstar.com/research/457477.

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

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Companies in Services Industries (February 3, 2025)
https://dbrs.morningstar.com/research/447184

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186) which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:

Morningstar DBRS Global Corporate Criteria (February 3, 2025) https://dbrs.morningstar.com/research/447186

Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196

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

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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