Thomson Reuters Corp (TRI)

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Thomson Reuters (TRI)

Q1 2011 Earnings Call

April 28, 2011 8:30 am ET

Executives

Frank Golden - Senior Vice President of Investor Relations

Thomas Glocer - Chief Executive Officer and Director

Robert Daleo - Chief Financial Officer and Executive Vice President

Analysts

Paul Steep - Scotia Capital Inc.

Jonathan Helliwell - Berenberg Bank

Patrick Wellington - Morgan Stanley

Phillip Huang - UBS Investment Bank

David Lewis - JP Morgan Chase & Co

Tim Casey - BMO Capital Markets Canada

Vince Valentini - TD Newcrest Capital Inc.

Brian Karimzad - Goldman Sachs Group Inc.

Drew McReynolds - RBC Capital Markets, LLC

Presentation

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Thomson Reuters First Quarter 2011 Earnings Conference Call. [Operator Instructions] And also as a reminder, this teleconference is being recorded. And at this time, I will turn the conference call over to your host, Senior Vice President, Investor Relations, Mr. Frank Golden. Please go ahead, sir.

Frank Golden

Good morning, and thank you for joining as we report our first quarter 2011 results. We'll begin today with Thomson Reuters' CEO, Tom Glocer, who will be followed by our CFO, Bob Daleo. Now following Tom and Bob's presentations, we'll open the call for questions, and I'd ask that you please limit yourselves to one question each.

Throughout today's presentation, keep in mind that when we compare performance period on period, we look at revenue growth rates before currency, as we believe this provides the best basis to measure the underlying performance of the business. In today's earnings release, we announced that we have signed an agreement for the sale of our BAR/BRI Legal Education business, which is expected to close late this quarter. And earlier this month, we closed on the sale of our Scandinavian Legal and Tax & Accounting business. We also announced today our intention to sell our Enterprise Risk and PORTIA businesses in the Markets division. These dispositions are expected to close in the second half of this year. Today's presentation and discussion excludes the results of these 4 disposals. Now on our website, you'll find the results for the first quarter, including these businesses for purposes of comparability. Lastly, also on our website, we provide 2 years of financials excluding the results of these disposals.

Now 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's now my pleasure to introduce the Chief Executive Officer of Thomson Reuters, Tom Glocer.

Thomas Glocer

Thank you, Frank. And thank you, all, for joining us this morning. I plan to cover 3 topics today. First, I'll discuss our first quarter 2011 results. Second, I'll comment on a few major developments in the quarter. And third, I'll provide an update on our 2011 outlook before turning it over to Bob.

But before I begin, I'd be remiss if I didn't acknowledge that it's just over 3 years since the acquisition of Reuters. And over that period, we've integrated the company, rolled out innovative product platforms, built to #39 global brand, safely navigated the financial crisis and return to growth.

We've accomplished a lot, but there's much more to do. The investments that we've made in our new product platforms position us to compete successfully and achieve results from scale. And we're finding new ways to leverage and combine assets across our businesses to meet evolving customer needs and to further consolidate platforms. It's gratifying to me to see the fruits of this progress just beginning to be borne out in our financial results that I'll share with you now.

I'm pleased with the first quarter's results for both the Professional and Markets division. The positive momentum we experienced in the fourth quarter carried into the first quarter as revenues increased 5%, the strongest quarter since Q4 2008, and a significant improvement compared to a 2% decline in the first quarter of 2010. The Professional division's revenues were up 8% and the Markets division's revenues grew 2%, which would've been 3% excluding recoveries. And Bob will provide you with more detail in a moment on this.

As I mentioned last quarter, the current economic environment for us is one of rising business optimism, although that optimism and the opportunities for growth are unevenly distributed across the globe. Conditions in the financial and legal services markets continue to improve, the environment in legal has certainly picked up with overall demand for services increasing, and small law firms, corporations, government and academic institutions opening the spigot a bit more. However, large law firms are still cautious in their buying patterns, and I'd certainly be worried if we didn't have a great platform like WestlawNext. And over in the Markets division, we are seeing good uptake of our new Eikon and Elektron platforms, but the overall environment in financial services is still far from robust.

For the quarter, our underlying operating margin was 17.2%, dampened by $39 million in one-time charges to fund efficiency measures. Excluding these charges, the margin was 18.4% versus 18% flat in the prior year period. And importantly, these one-time charges highlight that even as our integration process winds down, we continue to find and execute against efficiency opportunities to streamline our operations and to improve margins long-term. And I'll discuss this in more detail on the next slide.

Adjusted earnings per share in the quarter were $0.39 compared to $0.36 in Q1 2010. And included in this, one-time charges had a $0.03 impact on earnings. Lastly, we're affirming our full year 2011 outlook, given the first quarter results and the favorable trends in the business.

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