Ladies and gentlemen, thank you for standing by. Welcome to Thomson Reuters first-quarter 2009 Earnings Call. (Operator Instructions) As a reminder, this call is being recorded. I would now like to turn the conference over to our host, Mr. Frank Golden, Senior Vice President of Investor Relations. Please go ahead.

Good morning and thank you for joining us. We will begin today with our CEO, Tom Glocer, who will be followed by Bob Daleo, our CFO. Following their presentations, we will open the call for questions. I would ask that you please limit yourself to one question each. 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 my pleasure to now introduce the Chief Executive Officer of Thomson Reuters, Tom Glocer.

Thank you, Frank, and thank you to all of you for joining us. I plan to cover two topics today. First, I'll discuss our results for the quarter; and second, I will provide an update on current market conditions. I'm pleased to report that we are off to a good start for the year. Despite the continuing decline in the global economy and deep disruption in financial markets, our businesses continue to grow, gain share, and further solidify their competitive position. We serve a wide variety of customers with a single, tested business model. It is the same in our Markets Division as in our Professional Division. We provide must have content and services to professionals on a recurring subscription basis, creating a business that is highly cash flow generative, and enabling us to maintain leading and scalable positions in our chosen markets. Now, we have certainly been affected by the economic downturn as our rate of growth has slowed compared to last year. However, we are growing, and believe this will continue in 2009, even though we see few signs of any near-term recovery, other than a bit of a lighter feeling in market sentiment out there. Let's look at our results for the first quarter. Keeping in mind that when we compare performance year-on-year, we look at revenue growth rates before currency, as we believe this provides the best basis to measure the performance of our business. I'm pleased with the operating performance of the company for the first quarter, as total revenue rose 3%, with the Professional Division up 5% and the Markets Division still positive. The resilient Professional Division performed well given a more challenging economic landscape, and a tough year-ago comps, when revenue increased 8% organically. Our Professional products are still in demand, as evidenced…

Thank you Tom, and good morning and good afternoon everyone. Today, I will discuss the results for the first quarter, briefly provide an update on our integration initiatives, and provide some detail on our recent debt offering and our current capital structure. While growth rates in the first quarter certainly slowed relative to last year, they continue to be positive despite the headwinds brought on by a slowing worldwide economy. In the first quarter, 87% of our businesses recorded positive organic revenue growth, with 21% having grown 7% or more. These growth engines are more than offsetting declines in areas most directly impacted by the economic environment, such as equities and investment banking. As Tom mentioned, geographic diversity, market diversity, and product diversity are all helping to sustain our growth, and give us confidence that we will achieve our 2009 objectives. We continue to push forward and make progress with our integration and legacy savings programs, and are confident we will achieve our targeted savings of $1.4 billion. Now let's turn to the results for the first quarter. During the quarter, the strengthening US dollar relative to last year had a negative impact on our reported revenue growth. However, the strengthening dollar had a favorable impact on margins, given that we have a large component of our cost base in sterling, against which the dollar saw significant appreciation. Throughout today's presentation, I will speak to revenue before currency, for the reasons Tom previously mentioned. Reported revenues are highlighted on each of the slides. Consolidated revenues for the first quarter were $3.1 billion, up 3%, 2% of which was organic and 1% came from acquisitions. Underlying operating profit was up 2%; and the corresponding margin increased 100 basis points, primarily due to the benefit of currency, but also with integration related…

Operator, we would like to take the first question, please.

(Operator Instructions) We have a question from the line of Mark Braley with Deutsche Bank.

I just want to clarify on net new sales. You said net new sales were down in the Markets business. Do you mean they were positive or negative? The second question is also on Markets; there is still good growth in Asia in particular. I'm wondering is that the impact effectively of the growth you were getting in the first half of last year. Can you give us a feel for whether the Asian business sequentially is still growing, because anecdotally, a lot of the headcount reduction in the bulge bracket have actually been in precisely that area in the last two or three months.

First quarter net new sales were into negative territory Mark, so they are below zero, just as we expected. In terms of Asia, the 5% growth overall that Markets had, we continue to see balance and resiliency in Asia. So, the growth rate has come down year-on-year versus what different markets were growing at, but we think Asia can remain positive through the year. There are healthy pockets as well as more stagnant ones, so it's really the picture across the world; more of a balance of different trends, but still positive.

We have a question from the line of Drew McReynolds, RBC Capital Markets.

Thanks very much and good morning. I have one question with two parts to it, just on the Legal business. I just want to get your comments on, I guess, a trend that some are seeing out there with respect to legal firms moving from having both Westlaw and LexisNexis, and consolidating that into one vendor. Then just as a separate Legal question, I not sure you've done this before, what percentage of Legal revenues are ancillary?

Yes. I'll give Bob time to see if we can give you a number on the ancillary. You know, there are certainly firms that rely on only one. We think where they do we tend to come out ahead on that. However, by and large, all the middle to larger size firms have both. It's really more a function of which system is the sort of go-to center of desk, and which one is kept for more specialized or backup. We think generally if you look at our Westlaw trend, which is the most closely correlated, let's say, to the electronic research function which was up 6% in the quarter, despite, as Bob mentioned, other Legal components and the more volatile ones weakening. So we think we are holding up quite well. That is a good growth percentage at this stage of the market and I think would compare favorably to any competitor. The question on the ancillary?

It's only about 1% to 2% of the overall revenues for Legal, but when even that 1% or 2% is declining, where it cumulatively over this 12 month cycle it declined 25%, it has a big impact on relative growth rates. Like I said, in the quarter, it declined 15%, but it is a relatively small part of the overall business.

We have a question from the line of Paul Gooden with RBS.

A question on new product launches. Could you size for us the extra investment you are putting into new launches this year? Just give us a sense of, do you see that investment level as a permanent level of investment or do you see the levels of investment coming down over coming years?

Let me tackle that for you, Paul. Here is the way I would think about what we are spending in terms on products investment. If you look at the level of our capital expenditures, which we said are 8% or 9% of total revenues, the vast majority of that is product development. In that, in this particular year, we had carved out and said we had a couple hundred million dollars that related to integration or the integration product launches related to our new common platform in Legal, in Markets, as well as some additional spending in Legal to launch some improved interfaces for West. In addition to that, I would say that a significant portion of the expense that we're incurring in the integration, which is $500 million, a significant portion of that is also driving, I would say, growth in efficiency. A portion of that as well is was also product development. So in broad terms, it would be easy for me to say that expanding our new product development this year is probably somewhere between $500 million to $700 million.

Just thinking in terms the process of doing these new flagship launches that you are planning for end of this year, beginning of next year, I just wondered, is all of that in nonrecurring or is it kind of like a permanent level of investment?

I think in terms of our common platform, the last time we did something like this in the financial space was Thomson ONE, which was 10 years ago. I expect that a significant portion of the investment that we are making in common platform will be long-lived, because that will represent the core of how we deliver, and how we manage our data and deliver our products. To give you an example of that on the Legal side. On the Legal side, we invested a couple of hundred million dollars in building the Novus platform. It replaced the Westlaw platform which was built sometime in the mid-80s. So these core investments, the nature of them are really, I wouldn't say nothing in business is one time, but they certainly are long-lived. The biggest cost that we will have going forward after we make these are really routine maintenance. So I think that I would classify them as almost one time.

We have a question from the line of Paul Steep, Scotia capital.

I guess we will throw this to Bob or maybe to Tom. When we think about the synergies and the pacing you are doing right now, maybe just talk about the major activities that have pulled it forward a little bit, at least ahead of our expectations, and what the opportunity is to maybe move forward on that. The sort of second half of that would be, on the product side relating to common platform, just any updates on your launch timing and thoughts there around the BETA. Thanks.

Bob and I will split this. I'll start with the second part. No real update on common platform, sometimes called Project Utah. It's end of the year launch. As I have said, I think at least the last couple of quarters' calls; you really shouldn't expect any material revenues until 2010 given the rollout cycle at our major customers. However, the product looks great, and we're all very excited about it. In terms of amounts, I'll turn over to Bob. But in the integration in general, just the shape of it, we did a ton of work in the first year. 12,000 office moves, structures, roadmaps, service centers, a ton of work. SAP platform rolled across the firm. We're now into sort of the second and third waves, which are by their very nature longer. So, things like consolidating data centers, migrating clients off of platforms, which doesn't mean to say that we can't continue to sort of outpace targets. That is sort of what we live for around here. I don't think you should expect that you're going to see the progression of $500 million savings when we announced the deal; $750 million when we closed last year; $1 billion in February. I wouldn't continue that trend.

I agree entirely with what Tom has said. One way to think about this Paul is that, in these first phases, as we have upped the opportunity, I would say the increase in the opportunity has come from understanding of what I will call our Phase 1, as Tom has (inaudible) the low-hanging fruit, and the very rapid integration, which is why you've seen not only an increase in the target but an acceleration of those savings. The next part of Phase 1 is core to the real efficiency of the business going forward from a platform perspective. So, therefore we're going to be deliberate in how we approach these, and measured in how we roll them out. So, therefore, those would be more timed. Having said that, we would love to up it again, and we'll certainly look for opportunities to accelerate where we can, but not at the expense of the ultimate success of the business.

We have a question from the line of Sami Kassab, Exane BNP Paribas.

Good morning, gentlemen. One question on the Legal Division. Given that you expect print and CD revenues to decline in the remainder of the year, at least given the seasonality of the print revenues, do you expect some organic revenue growth this year in the Legal Division or do you think that it will be difficult to get to that number?

I don't think your line was breaking up but I think I got the gist of the point, which was, do we have a forecast specifically for organic growth in Legal for rest of the year, taking into account the weakness we've mentioned in print? The answer is, we internally do. I really don't want to go into any more depth than the guidance which we are affirming generally, and from which you can gather certainly my view that Legal will be positive for the year, but I don't want to break down sort of business by business, organic versus not et cetera.

In the Enterprise Division within Thomson Reuters Markets, were the renewals of the contracts in line with your expectations or as one of your competitors mentioned, somewhat below their own expectations?

Here I think it's important to remember that we use the word Enterprise and Markets often to mean two things. Somewhat related but important to be clear on. The Enterprise Division is the part of Markets that sells the heavy duty data feeds, the infrastructure and the risk management systems. We also perhaps unhelpfully use the term Enterprise agreements or have in the past to refer to a sort of comprehensive contract that we will enter into with our biggest clients that serve sort of 'soup to nuts' the need of the firm, which includes many of the Enterprise Division offerings, but also includes I/B/E/S, First Call, Datastream, Buy-side components, transaction systems, et cetera. So, I'll answer it both ways. Within Enterprise, the best sign of that is the 9% increase for that unit. That reflects healthy demand for the products and good renewal rates as well. With respect to the e-use of Enterprise agreements, we have seen actually a very good trend even at some of our very largest accounts, ones that have been in the news, let's say, for stress testing renewal. That doesn't mean that overall we are not seeing weakness here and there in Markets, but I've been pleased with that trend.

We have a question from the line of Peter Appert, Piper Jaffray.

Tom or Bob, can you give us any color on sort of how the pace of business progressed through the quarter in terms of whether you saw any acceleration or deceleration in terms of year-to-year revenue growth rates, likewise on the pace of renewal activity?

I think at this point, it is just a little bit too granular. I typically look at average monthly activity over a quarter, or better, over six months. There is a sawtooth movement. Things move around. Obviously, over the last several weeks I think it's fair to say that sentiment is certainly improving in the equity markets. We steer the Company on a longer-term basis. Right? We have set prudent cost budgets. We are not dependent on an early recovery. If it comes, great. That might mean some over-performance. However, what we are really doing is focusing on the big investments and ringfencing those, and being tight on cost, so that if this is an L-shaped rather than a V or U-shaped recession, we are well placed, safety first, and building the things we know will drive value over the longer term.

I interpret that as no meaningful improvement or deterioration in business as the quarter progressed?

Yes. I'm now thinking about the month-to-month data I've seen. I don't see a trend either way in that; and I'm not sure I would expect to yet.

We have a question from the line of Colin Tennant, Nomura.

My question was just on visibility. You've reiterated your expectation of positive revenue for the Group for the year. I just wondered, maybe speaking across the divisions, where you have the greatest visibility at this point in the year.

I stressed that we weren't clairvoyant. There is no guarantee in life, certainly not in the markets that we are operating in. About the transaction volumes, I think this time we've gone out of our way to explain the extent to which they can either increase Markets' revenues overall or pull them down, as they did in the first quarter. So obviously, nobody tries to predict what, let's say, fourth-quarter transaction volumes will look like. We look at our longer-term trends. We look at sales activity, and putting all of that together, we are comfortable that the firm as a whole should grow. However, as I mentioned to Peter, we are not trying to do a one week or one month mark-to-market. That feels right to us. It is our best forward visibility, but this is a very difficult environment to be making any forward predictions, and we are doing our best to give you as much transparency as we have.

We have a question from the line of Vince Valentini with TD Newcrest.

The question is on the margins within the Markets Division. You noted they were up year-over-year, but I think you would agree with me that the bulk of the merger synergies are buried in that Division. So, if you back those out, even though you had a slight increase in revenues, you would have seen underlying margins drop. I am ballparking sort of 300 basis points. So two questions slinging out of that that may help explain it. The foreign exchange obviously had a very big impact on the revenues. It was about 7.5% impact. So can you talk about how much impact FX would have had on EBITDA or on margins? Then secondly, the Transaction revenues, can you give us any color on what margins are like for those types of revenues? Are they significantly higher or lower than your average within the Markets division? Thanks.

I will answer that second question first, because it does have an impact. Transaction revenues have very high margins to them, because if you just think about them, they are over a platform and the incremental service costs are very low. So a decline transaction revenues has a significant impact, In terms of the foreign exchange, foreign exchange was a significant portion of the improvement, probably 80% of it in total. It didn't have an impact on the absolute dollar amount, but the margin itself because of the impact of revenues. I think the way to think about this Vince is that, if we didn't have an integration program going, we would have been attacking other costs to try to drive our cost base down in that business, and across all of our businesses, because of the toughening environment. What we said from the very beginning was that, it's a little bit unfair to pull out what we are saving in integration, because that is how we are driving to make the business more efficient, and that is the major program that we have. Certainly there are other things that we are doing in Markets across all of our businesses to cut our costs with travel and discretionary expenditures and so on, but short of that, you would have to do a major restructuring to cover that kind of a profit decline from the revenue impact of those. So, I think it's important you think of it as integral and not separate from it. Also, think about it this way. As I said in the presentation, that these are permanent costs we are removing. We are making the business permanently more efficient, so on the upside of this we will get the operating leverage out of these investments and get the margin improvement that we expect to get. Right now, this integration program is elegantly serving us to protect our bottom line and maintain our cash growth in a challenging market.

We have a question from the line of Patrick Wellington with Morgan Stanley.

Let's try an old one. Tom, just looking at Markets growth, would you agree that we have seen a bit more redundancy activity in Q1, so we might expect a more negative Q2 organic revenue number? Then as comps ease in the second half and maybe the redundancies level off, that life will get better in the second half of the year. Is that roughly how we should look at the shape of the business?

This is an old saw for us. You know, it's gotten to the point in Markets because of the really broad base of different markets that we address, that there always was certainly a relationship of headcount to organic revenue growth. However, that's broken down quite significantly, so I can't actually anymore tie the two together. One obviously because the non-headcount related revenues are now a majority of the revenues of Markets. Even when I look at what was the performance of standalone Reuters in the years leading up to the acquisition by Thomson, terminal quarter for old Reuters was 10% organic growth, but the prior three years saw terminal numbers, therefore headcount numbers come down. So that link is less and less germane. That is one reason why Bob and I really look at terminal numbers. There is certainly a systemic relationship between cost cutting activities at firms, partly reflected in their reduction in heads, and the overall environment for amount spent on outside parties like us, but the only last trend I would mention, and it certainly had been true over time at Morgan Stanley as well, is that, sometimes when heads go, let's say out of large IT departments, firms are asking themselves increasingly the question, should we use our own internal resources to do things that arguably the Thomson Reuters and Bloombergs' of the world can do at greater scale? Or rather, should we save our own IT folks to do the really proprietary close-in things? There are a couple of examples I can think of it over the last six months where we have benefited, where there is a headcount reduction, it's coming out of the IT operations at the firm, and they've decided in effect to outsource, to rely on us to do things they did before. So for a variety of those reasons, I'll agree with you that headcount is still germane to the question; but there is enough noise and swings and roundabouts that I can't draw a linear relationship. Sorry, my math skills aren't better.

Next question comes from the line of Jeffrey Fan, UBS Securities.

I want to ask about just the overall trends on your organic revenue growth. When you look at 2008, I think through quarter-to-quarter, we saw 100 basis points or maybe 200 basis points decline. In fact, in Q4 it was flat to Q3. Now this quarter, we saw about 300 basis points of sequential deceleration from Q4 to Q1, yet you guys are still reaffirming that the organic revenue growth for the year is going to be positive. So, it certainly does imply that you expect the deceleration to be less as you go through the year. Maybe, Tom or Bob, can you guys just touch on areas where you feel a lot of confidence that the deceleration would be less or even see some revenue acceleration through the year? I think one area you talked about was Tax & Accounting. You said that is going to accelerate, but are there other areas that you think will go through improvements in the year? Thanks.

Just to point out the math here as you look at it. When you look at the comparative of quarter-to-quarter, you are talking about the prior year. You have to remember that that prior year first quarter was the high watermark for 2008 with overall 8% organic growth rate. So, the fact that we were able to grow over the highest quarter is certainly indicative of an underlying strength in the business. If you looked at, say Q4 to Q1, you would see recurring revenues in both our two big businesses, meaning Markets and Legal, meaning Westlaw, were growing at virtually the same rates. If you look more broadly at what happened in the quarter relative to a quarter a year ago, it was primarily in what I would call transactional, ancillary, and business-related revenue. So for example, in the Legal business, the biggest decline didn't occur in the core Legal revenue. It occurred in ancillary revenues. It occurred in BAR/BRI revenues. It occurred in what we call the business of law revenues, which are much more sensitive to short-term cycle. So, my view is, you can't simply rely on that math, although I understand that it's certainly compelling to look at it that way. You have to really get below it. I will turn it over to Tom to talk about the trends.

I was just going to give a little data to make Bob's point. So let's look at Markets, which is an area obviously of focus. In Q4, if we want to look at sequential quarters to get a sense for the slope of the curve. In Q4 we had 4% growth, and that reads on first quarter 0.4%, which would suggest a fairly steep drop, but if you actually go one layer under the cover, which is as Bob suggests the way we look at it, in Q4, the actual recurring subscription number in Markets was 2.7% growth. The additional 1.3% was pretty much driven by transactions, which were up well over 20% year-on-year. In the first quarter, the 0.4% we've just reported, actually the recurring subscriptions are 2% and transactions down 12%; pull you down to 0.4%. So, if I now try and plot a sequential quarter-on-quarter curve, it is 2.7%, reads on 2%, and a shallower slope. Ditto in Legal in the example Bob just gave. So, don't take any of this to mean that ancillary revenue or consulting revenue in Legal isn't important to us. It is. Or that we don't care about transactions in Markets. We very much do, and it's very strategic. It's just that we are pleased that the large engine, which in both cases is this recurring subscription model we keep on going on about, that has shown a shallower trend in the recession, and therefore gives us confidence, and some of the visibility. Going back to Colin's question and Peter's question about how do we still feel positive for the year? No guarantees.

Just maybe one quick follow-up. Recently there was an article quoting Bloomberg about them growing in growing in Q4, hiring people et cetera. So maybe, they are implying that they are growing market share. So, maybe I will give you guys a chance to respond if you will.

It's a great company, and customers deserve a choice. I think the number I recall out of it least the article I saw in the FT was, Peter Grauer mentioned that they had seen a 2.5% decrease in terminal numbers, which back to Patrick's comment, terminal numbers in Bloomberg very much are revenues given their model. That would imply if that were an annual rate of something like close to a 10% decline, steeper than at least what we are seeing in the business. It's difficult to sort of shadowbox with market share data via press articles. They are a great company. They do well. They deserve lots of credit, and Bob and I, the whole company's focused on making Thomson Reuters the absolute best in Markets and Legal and in all of our other businesses.

We have a question from the line of Giasone Salati, Execution.

I have two questions please. The first one on Legal. I think I've heard you saying that the ancillary revenues are the first ones to decline when the cycle goes down. Q1 was basically the first bad quarter, and we will have to go through maybe 18 months of further slowdown in Legal? The second one is on margins. If revenues, including acquisitions were not to be positive for 2009, do you think you would still push the business to maintain the similar margins to 2008? Or you would continue investing in new products and development for the long-term?

I'm going to do Bob a favor by answering the 2010 margin question. On my way to work today, among other things, my Financial Times told me that giving guidance is dead. I think we do a pretty good job, more than I see a lot of others doing, giving you what we have for the current year. Obviously, it is so related to the issue of revenue that we are just not going to give a 2010 revenue number at the end of the first quarter of 2009. As to your first question, Giasone, about ancillary, I wouldn't make that conclusion. The ancillary revenue does come off when trends are down and does come back up, but most of the data that I've seen in the legal market suggests that litigation is now picking up, folks expect 2010 to be a significantly better year in Legal. So, I wouldn't imagine that we are at the beginning of a deep thaw in the Legal business.

I would add that, looking at the market, the legal market in the United States, and what happened in the first quarter was rather unique. In the first quarter, particularly in large law, there was a significant reaction to ultimately the performance of 2008, where they were not nearly as profitable as they had expected and took significant actions in that quarter to right-size themselves. Part of that resulted in kind of a freezing of the legal market in terms of expenditures and how they reacted, and we saw a precipitous decline. As I mentioned earlier, we had seen ancillary declining all year last year throughout each quarter, but it wasn't of a significant nature to warrant any commentary. We saw this precipitous decline in this quarter in reaction to that current environment, just as we saw in a number of other aspects of our business of law revenues. Subsequently, we've seen a bit of a thawing in that, in the legal marketplace early in April and now coming into May. There haven't been any major announcements of layoffs by law firms of any note really in the second quarter. So I think it's more related to that than anything else.

Come back to the second question. In terms of margins, I'm not really after guidance. I'm trying to understand what is your strategic view? If revenues were to decline faster than you expected two months ago than you may expect now, would you defend margins? Would you cut further costs or would you prefer to keep investing for the long run?

We would continue the strategy we have. Those things that we think really make a difference in a down period, and by implication that means, in terms of relative market share and competitive position we continue to invest in, and those things which are more at the discretionary end, there are always investments that you would make in a stronger market and make a lot of sense, but you could phase, those we would look at again. We are solving for a sort of mid to longer term, what makes this an exceptional company with good, profitable growth. Therefore, we're not going to jeopardize those core investments. If you told me that for 20 years the world would be in a negative tailspin, and no one would buy anything, we would think about it. If you tell me that it could be an 18 month rather than a 12 month, and therefore an L-shaped recovery, we think we have the right strategy for that.

Operator, we would like to take one final question, please.

We have a question from the line of Randal Rudniski with Credit Suisse.

I think it is a question for Bob. Bob, when you were discussing free cash flow generation in the quarter, you kind of threw out there that the Markets' legacy business had a use of cash of $100 million in the quarter. I just wanted to confirm that is what you said. Then also, I wanted to get context behind that statement. Are you really trying to say that as you unwind those businesses there is $100 million of upside to free cash on a quarterly basis?

No, Randy. That wasn't the intent of my comment. First of all, if you looked at the legacy Reuters' business, historically that business, just the nature of its cycle, would actually consume cash in the first quarter, and that has been in the neighborhood historically of about $100 million. I meant that that was embedded in that comparative looking at 2008, which didn't have the Reuters' business in it. No, we are not looking at unwinding those businesses, although I would say that the overall Markets Division actually did contribute some cash, a little bit. They weren't a consumer of cash, but in comparison to the prior year when we didn't have Reuters, it certainly is a fair observation. So, it is again just a point of comparative, that's all.

Okay. Thanks very much. That concludes our call. We would like to thank you all for joining us this morning.