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Thomson Reuters (TRI)

Q4 2009 Earnings Call

February 24, 2010 8:30 am ET


Thomas Glocer – CEO

Robert Daleo – CFO

Frank Golden – SVP IR


Drew McReynolds - RBC Capital Markets

Phillip Huang – UBS Securities

William Bird – Bank of America

Vince Valentini - TD Newcrest

Thomas Singlehurst – Citigroup

Brian Karimzad – Goldman Sachs

Paul Steep – Scotia Capital

Paul Sullivan – Barclays Capital

Mark Braley – Deutsche Bank

Tim Casey – BMO Capital Markets

Colin Tennant – Nomura

Randal Rudniski – Credit Suisse



Welcome to the Thomson Reuters full year and fourth quarter 2009 earnings conference call. (Operator Instructions) We’ll now like to turn the call over to our host, Senior Vice President of Investor Relations, Mr. Frank Golden. Please go ahead.

Frank Golden

Hello and thank you for joining us today as we review our fourth quarter and full year 2009 results and provide our outlook for 2010. We’ll begin today with Thomson Reuters’ CEO Thomas Glocer. Thomas will be followed by our CFO, Robert Daleo, who will discuss the fourth quarter results.

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 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, Thomas Glocer.

Thomas Glocer

Thank you Frank, and thank you all for joining us. I plan to cover four topics today. First I’ll discuss our full year results. Second I’ll provide you with selected 2009 highlights. Third, I’ll discuss our market position as we enter 2010, including an update on the progress that we’ve made against my three key priorities. And lastly I’ll discuss our 2010 outlook and where I believe we can take this business over the next few years.

Now despite global markets sliding deeper into recession in 2009, Thomson Reuters recorded a solid performance thanks to our proven business model. For the full year we held revenues essentially flat, not a mean accomplishment given the challenging environment. As I stated last quarter and is even more clear today, we’re past the bottom in terms of real economic activity, what our sales teams experience every day.

Even though we’re likely to report negative year on year results for the first half of 2010. Now as I begin my discussion of 2009’s results keep in mind that when we compare performance period on period we look at revenue growth before currency as we believe this provides the best basis to measure the underlying performance of the business.

I’m pleased with the company’s full performance that hopefully you can see on the slide now if you’re watching on the screen. We were nimble, reallocating resources to higher growth opportunities and geographies, investing in new products, and continuing to make great progress with our integration program.

These steps enabled us to hold revenues, grow margins and adjusted EPS, and drive free cash flow. From a net sales standpoint we hit bottom in the second quarter with Q4 positive on a consolidated basis. For the full year total revenue was essentially unchanged against tough prior year comps when revenues were up 8%.

The professional division was up 3% and the market division was down 2%, what we believe is good performance compared to our peers and the industry as a whole. In the professional division growth was driven by the tax and accounting and healthcare and science businesses, up a combined 8%.

And the tax and accounting segment surpassed revenues of $1 billion for the first time, indicative of the expansion of its product suite and market share gains. The markets division performance was resilient given the challenging market and tough prior year comps when revenues rose 6%. Moreover the markets recurring subscription revenues which comprise about 75% of its total revenues grew 1% in the year. Really a remarkable achievement given the environment.

Good operating performance, integration related savings and the benefits of currency led to a 40 basis point increase in underlying operating profit margin and we again delivered excellent free cash flow, over $2 billion on a underlying basis.

Importantly we made significant progress with our integration program and have raised our savings target to $1.2 billion, nearly two and a half times greater than our original target. Lastly adjusted earnings per share this year was $1.85, up 2% from a year ago and that was after a $0.03 negative impact from higher integration related expenses.

It was a bit less than two years ago when we completed the acquisition of Reuters and since that time we’ve been able to accelerate and expand the level of integration savings while also staying focused on revenues, margins, and two critical product launches, WestLawNext and Utah. Outlined on this slide are some of the accomplishments worth highlighting in 2009 and I won’t read them all to you, but let me just point out a few.

Our tax and accounting business had another tremendous year in 2009 with revenues up nearly 10%, already the market leader in the US, this business will look to take that success internationally in 2010 with the launch of its global tax workstation. Further to that point you can see our increasing focus on global expansion as 16 of our 31 acquisitions in 2009 were made outside the US.

We built new and innovative products by utilizing components from across the company such as the incorporation of Reuters news into professional products. And on the financial side of the house, we’re in very good shape. We simplified our capital structure by unifying the DLC, ended the year with over $1 billion in cash on hand, and refinanced over $1 billion of debt at attractive rates extending our average maturities to over six years.

Let’s now take a look at our market position as we enter 2010, first given the improving sales figures off their Q2 lows, I’m confident that 2010 will be the bottom of the reporting cycle. Our fourth quarter total company net sales were positive, the best of the year, and given the subscription nature of our business model this will begin to flow through to revenues later in 2010.

We’re also well positioned as the global economy continues to strengthen. We’ve solidified our leadership positions, having invested through the cycle and this is beginning to show in our results. Q4 2009 was WestLaw’s best sales quarter in two years and that’s before the exciting launch of WestLawNext earlier this month.

December was Checkpoint’s best sales month in its history and January was the first positive net sales month for Markets in a year and was the best month for FX volumes since October, 2008. Our business model is powerful and resilient and we’re sticking to what we do best, operating in non-discretionary markets, and looking for opportunities that fit that description across markets, customers, and geographies.

The Great Recession of 2008 2009 was trying for most companies and a death experience for some. I feel good about how we’ve come through it and are sticking with and continuing to invest behind a strong business model. Selling electronic information and services to professionals, primarily on a subscription basis that is highly capital efficient and cash flow generative is a model that we like.

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