Thomson Reuters Corp (TRI)

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Thomson Reuters Corporation (TRI)

Q3 2009 Earnings Call

November 5, 2009 at 8:30 AM ET


Frank Golden – Senior Vice President, Investor Relations

Thomas H. Glocer - Chief Executive Officer

Robert D. Daleo - Chief Financial Officer


Paul Steep – Scotia Capital

Vince Valentini - TD Newcrest

Patrick Wellington - Morgan Stanley

Drew McReynolds - RBC Capital Markets

Thomas Singlehurst - Citigroup

Randal Rudniski – Credit Suisse

Mark O'Donnell – J.P. Morgan

Mark Braley – Deutsche Bank Securities



Welcome to the Thomson Reuters third quarter 2009 earnings call. (Operator Instructions). As a reminder, today’s call is being recorded.

I’d now like to turn the conference over to our host, Vice President, Investor Relations, Frank Golden. Please go ahead sir.

Frank J. Golden

Good morning and thank you for joining us. We’ll begin today with Thomson Reuters’ CEO Tom Glocer, who will be followed by our CFO Bob Daleo. Following Tom and Bob’s presentations, we will open the call for questions.

Before we begin, I am pleased to point out that for the first time since Reuters’ acquisition, we’re reporting actual growth rates for the quarter, not pro forma results, something I am sure will please you as much as it has our accounting group.

Today’s presentation contains forward-looking statements. Actual results may differ materially due to a number of risks and uncertainties discussed in reports and filings that we provide to the regulatory agencies. You can access these documents on our website or by contacting our Investor Relations department.

It is now my pleasure to introduce the Chief Executive Officer of Thomson Reuters, Tom Glocer.

Thomas H. Glocer

Thank you, Frank, and thank you for joining us this morning. I plan to cover two topics today. First, I’ll discuss our results for the quarter and second, I’ll provide an update on current trading.

Three-quarters of the way through the year we continue to perform well in what remains a challenging environment. Our tax and accounting and healthcare and science businesses continue to perform well, and the recurring subscription parts of our legal and market’s divisions held up well. Across the business, sequential quarterly net sales have improved, though they are still negative in markets. Now, although we believe that we’re past the bottom in terms of real economic activity, our reported year-over-year growth figures have gone negative, but we expect this dip to be shallow and limited to the next few quarters, and this is the direct result of the mathematics of the subscription model which I discussed on last quarter’s call and at our recent Investor Day in Toronto.

Let’s now look at the results for the third quarter keeping in mind that when we compare our performance period-on-period, we look at revenue growth rates before currency as we believe this provides the best spaces to measure the underlying performance of the business.

I am never pleased with performance when the numbers are preceded by a minus sign, but compared to our peers and the industry as a whole; I believe that Thomson Reuters performed well in the third quarter. Total revenues declined 2% with the professional division up 2% and the markets division down 4%. Market’s recurring subscription revenues excluding recoveries were down less than 1% and legal’s recurring subscription revenues grew 6%, and together these categories represent over 60% of total company revenues. The more resilient professional division performed well given the challenging economic environment and tough year-ago comps when revenues exceeded 10% that period.

Our professional products remain in demand as evidenced by growth of 8% in each of tax and accounting and healthcare and science, and good growth in legal subscription revenues. Market’s revenues were down 4% for the quarter, again, against the tough third quarter ’08 comps when they were up 5%, and I’ll come back to this in a moment.

On a consolidated basis, the whole company underlying profit was up 3% and the margin was up 140 basis points despite the decline in the top line growth, and this was driven by integration related savings, strong cost controls across the company, and the benefit of currency. The integration and legacy efficiency programs continue to go very well having achieved run rate savings of $975 million for the first nine months of the year, and we continue to expect run rate savings of at least $1 billion by year end 2009. Adjusted earnings per share for the quarter were $0.43 per share compared to $0.47, and this decline was due to higher integration costs which were planned for this period, and I should note here that we don’t adjust out integration costs from the EPS line. If we had, if we gave you EPS less integration costs, EPS for the quarter would have been $0.57; so $0.14 higher than the $0.43 reported. So, despite the flow-through into revenues of the weaker year-to-date net sales, we are again reaffirming our 2009 outlook.

Now, over to the professional division. The resiliency and diversity of our professional businesses was again on display in the third quarter with strong performances from each of tax and accounting and healthcare and science driving divisional growth. While revenues declined overall in legal, subscription revenues were up 6% and our international legal units and fine law and the legal education business all performed well, and these helped to offset in part continuing weakness in print, ancillary, enterprise software, consulting services, and trademarks. So, these are no doubt challenging times for the legal group, but we believe that we’re continuing to take share and outperform the market.

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