TTAI Holding RELX Uses Free Cash Flow to Acquire 9 Companies, Buy Back Shares

RELX Plc, a global provider of information-based analytics and decision tools and a holding in the FCF International Quality ETF (TTAI), reported that free cash flow of nearly £2 billion ($2.5 billion) for 2022, up 18% from the previous year. The company’s CFO Nick Luff said that RELX spent that free cash flow on acquisitions, dividends, and share buybacks.

During the year, RELX completed nine acquisitions, totaling £443 million. The most notable of these acquisitions include BehavioSec, a behavioral biometrics firm; Flyreel, a self-inspection app for home insurance; and Interfolio, an academic faculty management software and higher education technology company.

Total dividend payments in the year were £983 million, and RELX resumed its share buyback program in 2022, deploying £500 million.

RELX CEO Erik Engstrom said in a statement that the company “intend[s] to deploy a total of £800 million on share buybacks in 2023.”

See more: “Seek Free Cash Flow Amid Banking Failures

Free cash flow is the sum of net cash provided by operating activities and net cash flow used in investing activities. This measure is useful when evaluating cash available for financing activities, including shareholder distributions, after investment in the business. It is also a far better way to measure long-term profitability than GAAP earnings, according to investment manager FCF Advisors.

“At FCF Advisors we offer a unique way to gauge quality investment,” said Vince (Qijun) Chen, director of research and portfolio manager at FCF Advisors. “We measure profitability with free cash flow instead of earnings, which is subject to manager discretion.”

FCF Advisors specializes in free cash flow investment strategies, primarily through its Free Cash Flow Quality Model (FCFQM), a multi-factor model featuring a combination of quality measures informed by the firm’s research.

TTAI aims to outperform the MSCI All Country World Index excluding the U.S. through an active investment process. A quant model is used to rank stocks based on proprietary measures of free cash flow. Roughly 140 of the highest-ranked stocks are selected and then weighted on a modified market-cap basis.

The fund’s portfolio is also rated with an ESG score, excluding companies with low ESG ratings. Firms with an extreme rise in share count and increase in leverage are also excluded.

“Over the last several quarters, the market has been demanding profitability, and we’ve been measuring profitability through free cash flow,” said Bob Shea, CIO of FCF Advisors. “Free cash flow has never been more important.”

TTAI carries an expense ratio of 0.59%.

For more news, information, and analysis, visit the Free Cash Flow Channel.