Thomson Reuters Corporation (TRI) Q1 2010 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Thomson Reuters Full Year and First Quarter 2010 Earnings Call [Operator Instructions] I would now like to turn the conference over to our host, Frank Golden, Senior Vice President Investor Relations.

Thank you. Good morning, and thank you for joining us today. We will begin today with Thomson Reuters' CEO Tom Glocer who will be followed by our CFO, Bob Daleo. Following Tom's and Bob's presentations, we'll open the call for questions. I ask that you please limit yourselves to one question each so that we can get to as many questions as possible. Let me point out, prior to our presentation, that we made a revenue reclassification between our business segments and the markets division this quarter. We moved communications and professional publishing-related revenues. The net results in 2009 was an increase of $87 million to our Sales & Trading unit with the related reductions to the other segments. On our website, you'll find an updated set of figures for 2008 and 2009 reflecting this change. 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 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.

Thanks, Frank, and thank you all for joining us today. I plan to cover three topics. First, I'll discuss our Q1 results. Second I'll provide you with selected highlights for the quarter. And third, I'll discuss our market position and our expectations for the balance of the year given the positive momentum building in our fourth and our first quarters. Now as I discuss our first quarter 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 first quarter results, which were in line, actually a little bit ahead of our expectations. As I stated last quarter, and is even more clearer today given these results, we're past the bottom in terms of real economic activity although we're likely to report negative year-on-year results for the first half of 2010 given the subscription nature of our business model. First quarter revenues were down 2% as the impact from last year's negative net sales took hold. From a net sales standpoint, we hit bottom in Q2 of last year, and trends have continued to improve since then with both Q4 and Q1 of this year positive on a consolidated basis. Even the hard-hit markets division recorded positive net sales in two of the three months this quarter although still a bit negative for the quarter as a whole on an average monthly basis. The professional division revenues rose 1%, which we believe to be a good performance compared to our peers and the industry as a whole. Professional division growth was driven by the Tax & Accounting and Healthcare & Science businesses, up 7% combined. Legal was down 3% overall but subscription revenues, which comprise 70% of its total revenues, were up 3%, reflecting what we believe were share gains. The Markets division 4% period-on-period decline was due to last year's negative net sales, which will continue to impact our second quarter. However, as I mentioned, net sales trends have improved each quarter since the second quarter of last year, a very encouraging sign for us. Underlying operating profit margin declined 120 basis points as expected due to revenue declines and ongoing investments in the businesses, including the new product launches this year which I highlighted on our Q4 call. We continue to make good progress with our integration program, with run-rate savings of $1.2 billion by quarter end, and we remain confident that we'll achieve our total savings program's target of $1.6 billion by year-end 2011. And adjusted earnings per share for the quarter was $0.36 compared to $0.40 in the prior period due to lower underlying operating profit and higher integration related expenses. Lastly, we are affirming our full year 2010 outlook given the first quarter results and the favorable trends in the business. Now speaking of trends in the business, let me share a few specifics. Q1 marked the second consecutive quarter of positive consolidated net sales. Customers are still cautious when it comes to spending, but things are definitely picking up. Financial services firms have hired in three of the last four months, and the increase in returns across global stock markets over the past year has led to a substantial increase in assets under management. During this period, we've continued to solidify our leadership position across our businesses. The launch in February of the innovative WestlawNext service has only served to strengthen our competitive position with its clean modern interface and powerful new search functionality. It truly makes legal professionals significantly more efficient by giving them the confidence that they've cast the broadest possible search net while quickly returning only the most relevant authorities. With over 2,300 WestLawNext customers so far at an attractive increase in contract value, we're well ahead of our initial expectations and the feedback has been extremely positive. Another exciting new product launch in 2010 will be the Tax & Accounting unit's major release of its ONESOURCE platform, the first true global tax workstation. A first of its kind approach to global tax compliance for multinational corporations. This new product will address a large and growing global market where we see an opportunity to expand our business using globally scalable product platforms. While legacy print revenues continue to dampen growth in Professional, 80% of Professional's total revenues grew 5% or more, a clear indicator to us that we're taking share. On the market side, there are encouraging trends in the quarter. Average sales were positive in two of the three months, and Q1 transaction revenues were the highest since Q2 of last year. In addition, we launched Elektron, the next-generation data distribution platform in our Enterprise unit. Elektron will enable financial firms to trade faster using superior realtime data and connect to more markets across a global, resilient and secure cloud-based network. And later this year, we'll launch our new desktop product Eikon, formally known as Project Utah. This new platform will integrate content and trading technologies from across the business and provide a common platform to achieve scalable and profitable growth. So 2010 is a year of significant investment and delivery, but we're off to a good start with more to come. So in conclusion, let me just reiterate that I'm pleased with the start to the year. We're firing on all cylinders, and I've never been more excited about these and other opportunities. More importantly, our sales teams are fired up emotionally and loaded up with new product to sell into improving markets. This is an important year of investment for us, which I'm confident will enhance our competitive position and drive further revenue growth, margin improvement and free cash flow growth in 2011 and beyond. And with that, let me now turn it over to Bob Daleo.

Thank you, Tom, and good morning, everyone. Today, I will discuss the results of the first quarter and briefly provide an update on our integration initiatives and going to end with some detail on our recent debt restructuring and our current capital structure. And as Tom mentioned, we certainly are pleased with our performance in the first quarter. We're tracking to our expectations with few surprises and results thus far are consistent with the full year guidance we presented in February. While our revenue growth rates in the first quarter certainly slowed relative to last year, underlying trends remain encouraging across our markets. Law firm layoffs have subsided and financial services firms have begun hiring again. And our geographic diversity, our market diversity and our product diversity have all combined to soften the impact of the headwinds we have been dealing with. As Tom mentioned, our net sales trends continue to show improvement particularly in the Markets division where they were the most suppressed in 2009. Accordingly, we believe our reported results have bottomed down, which is supported by the sequential revenue growth Markets recorded in the first quarter. Given these trends, we believe we're well positioned to return to growth in the second half of this year. Lastly, we continue to make progress with our integration and legacy savings programs and are confident we will achieve our targeted savings of $1.6 billion by the end of next year. Now let's turn to the first quarter. Let me remind you that I will speak to revenue growth before currency for the reasons Tom mentioned. Reported revenues are highlighted on each slide. Foreign exchange had a favorable impact on our revenues in the first quarter versus the prior period and had about a 50 basis point benefit to our consolidated margins. Consolidated revenues in the first quarter were $3.1 billion. They were down 2% versus the prior year with 1% benefit from acquisitions. Underlying operating profit fell 6% and the margin decreased primarily due to the flow-through on lower revenues, product mix and the previously announced investments in new product launches. These factors more than offset integration savings, tight cost controls and the number of efficient initiatives across the businesses. Now I'd like to discuss the operating performance for the businesses starting with the Professional division, and the division recorded revenues of $1.3 billion, up 1% against the prior-year comp, growth of 5%. Organic revenues declined 1% and acquisitions contributed 2%. Let me remind you that Q1 is historically a small quarter for the division with about 23% of the year's revenues and 20% of its annual operating profit generated in the quarter. Operating profit declined 8% as anticipated, and the corresponding margin fell 240 basis points to 22.3%. Benefits from several ongoing efficiency initiatives and cost controls across the division were not enough to offset the negative impact of lower revenue growth, revenue mix and continued investments in the business. It's worth noting that we continue to implement efficiency initiatives across Professional division including shifting resources to lower-cost locations. Let me repeat what I said the last quarter to help set the context for the division's margin performance this year. I said for 2010 that we expect the Professionals margin to decline compared to 2009 and particularly in the first and second quarters of the year. Since these quarters are traditionally smaller, we're likely to see nominal revenue growth due to product mix and flow-through from the weaker sales of 2009. While the division will also experience a front-ended investment spending. We expect both margins and revenues to ramp up in the second half of the year. We expect margins to further rebound in 2011 as top line growth improves and the level of investments begin to taper off. Now turning to our perspective on the revenue mix and the dynamics for the Professional division were very similar to what we talked about in previous quarters. The Healthcare & Science and Tax & Accounting and Legal Subscription businesses continue to generate solid growth, and by implication, take market share. In fact, on a combined basis, these businesses grew 5% while representing 80% of the division's total revenues. However, this impressive growth was offset by a 70% decline in Legal print revenues and an 8% decline on Legal's non-subscription businesses. While the decline in print and non-subscription revenues are having a negative impact on reported results, we believe the first half of this year will be the bottom of the cycle. Print revenues in both the first and second quarters of last year did benefit from some favorable revenue timing and may well which they will not have to grow over in the second half of this year, which will provide for some easier comparisons. Therefore, given the trends we are seeing across Professional businesses, we expect to see a pick up in the business revenue growth rates in the third and fourth quarters. Similarly, we expect easier comparables and a stabilizing market to lead the better performance in non-subscription products for the remainder of the year. Now let's talk about the segments within the Professional division starting with Legal, where revenues declined 3% and that was all organic. As mentioned, our subscription revenues grew 3% in the quarter led by 15% growth in FindLaw. Our U.S. Westlaw subscriptions grew 1% while our International businesses declined 1%. Non-subscription revenues declined 8% primarily driven by Westlaw ancillary revenues which were down 19%. Perhaps very importantly, our Trademarks business, which historically is a leading indicator of economic activity, returned to growth in the quarter. By customer type, large law firms and government customers experienced the largest declines while corporates and small law firms were slightly negative. Operating profit, as anticipated, declined 13% and the margin was 25.5%. This margin was negatively impacted by lower revenues particularly from high-margin print and non-subscription products and currency. These dynamics were more than offset by several efficiency initiatives implemented throughout the business. Tax & Accounting revenues grew 6%, 2% was organic and 4% was acquisitions. And effective January 1 this year, Tax & Accounting reorganized around two major segments. The first is Workflow & Service Solutions (sic) [Workflow & Software Solutions], which consists of our tax products and services such as ONESOURCE. The second is Business Compliance & Knowledge Solutions, which includes our Research Compliance and Print businesses such as Checkpoint. Now both of these are not defaults they're for ease. I will refer to these businesses as Workflow Solutions and Business Compliance Solutions. Workflow Solutions represents 2/3 of Tax & Accounting revenues in the first quarter, and it grew 10% led by good growth in income tax products, including InSource and our creative solution suite of products. And the Global Tax segment, which is represented by businesses like Digita in the U.K. Business Compliance Solutions declined slightly as a 6% growth in Checkpoint was not enough to offset a 12% decline in print. Now print represents about 9% of Tax & Accounting's revenues, but obviously is a larger part of this segment's revenue base. We expect growth to improve as the year progresses. Operating profit decreased 15% for the quarter and the corresponding margin declined to 13.4%. These anticipated declines are largely due to the dilutive impact of 2009 acquisitions. Now I will remind you again that Tax & Accounting is historically a seasonal business with almost 50% of its operating profit generated in the fourth quarter of each year. Healthcare and Science revenues grew 9%, 6% organic with 3% from acquisitions. Performance was solid across the business and was led by our Scientific & Scholarly Research business which was up 13% in the quarter, benefiting from acquisitions and strong outright sales. Our Payer business also continued excellent performance growing 10% on good sales into the federal government channel. Operating profit increased 42%, and the margin rose sharply to 21.2%. Margin gains were attributable to revenue flow-through, continued focus on expense management and a one-time technology cost that were in the prior period that are not repeated. The Markets division, revenues declined 4% in the quarter to $1.8 billion impacted by the negative net sales we've talked about from the prior year. While the year-to-year decline is fairly consistent with the fourth quarter of last year, on a sequential basis, the first quarter performance improved versus the fourth quarter of last year. And I will discuss it a bit further in a moment. Also, as we stated when we announced the Reuters acquisition, there would be some disynergies and that is occurring as we continue to integrate the two businesses. For example, we're migrating customers' new products as we sunset products such as ILX, Stock Bound [ph], PDM, GlobalTopic, ReutersPlus, Trader and the FX. Migrating customers' platforms is resulting in some lost revenue, but is the right thing to do for the long-term and will ultimately contribute to improved margins. By revenue type, recurring subscription revenues declined 3%, transactions were down 2%, and recoveries and outright both declined double digits. By geography, Asia revenues were flat while EMEA and the Americas declined 4% and 7% respectively. Operating profit was $323 million, down 4% from last year. The margin decline as expected to 17.5% primarily attributable to decline in revenues. Now let me review the performance of Markets divisions per segment. Sales & Trading revenues declined 7% due to double-digit declines in recoveries revenues and the impact of desktop reductions particularly in fixed income and Exchange Traded Instruments. We did see growth from our Commodities & Energy segment, which rose 4% on the heels of a good market. And although treasury revenues were down 3% due to fewer desktops, FX transaction revenues grew 4% on the backs of improving volume. Investment & Advisory revenues declined 4%, 5% was organic and we had a positive impact of 1% from acquisitions. The Investment Banking business grew 6%, benefiting from improving market condition and strong sales of ThomsonONE.com as well as there were such certain timing effects in the quarter. The Corporate segment grew 6% primarily due to the acquisition of Reuters. Investment management revenues declined 9% in the first quarter as weak first half 2009 net sales flow through to reported results. Now revenues were stable in this first quarter versus the fourth quarter of last year. Wealth Management revenues declined in the quarter due to fewer desktops resulting from bank mergers and the sunsetting of several products including ReutersPlus and ILX. Enterprise revenues grew 3% in the quarter, 2% organic and 1% from acquisitions. And this is against a very challenging comp a year ago where the revenues grew 11%. Recurring revenues for the year were up a solid 5% but overall growth was dampened a bit by the declining outright and transaction revenues. Enterprise Information, which represent 60% of the business, grew 4% from continued strong demand for pricing and transparency data, somewhat offset by this decline in outright revenues. Information Management Systems, which represent 15% of the revenues, grew about 14% and Risk Management revenues were flat in the quarter. And we do expect the Enterprise growth to improve as the year progresses. And finally, Media's revenue declined 5%. The Agency business was down 6% as it continues to be impacted by tight customer budgets and media consolidation. A smaller consumer segment did return to growth in the quarter. Now turning to this slide, during the past few quarters, we have been reviewing the performance of Markets business by revenue type since it's a good way to depict trends in the business. This quarter, we thought it would be helpful to show sequential revenue growth, meaning Q1 2010 growth over Q4 2009. That will show quarter-over-quarter result rates since this year is a bit more realtime in terms of our performance indicator. Note that we've excluded outright revenues since they are truly seasonal with over 40% of annual revenues recorded in the fourth quarter, and they represent only 3% of Markets' total revenues last year. There are several things worthy of pointing out. First, the current transactions and recoveries revenue each show sequential improvement in the last two quarters with Q1 showing growth. I'll note that Q1 did benefit from a price increase relative to Q4. However, the yield is less than 2%, meaning the increase did not change the underlying pattern outlined in the graph. Second, transactions were the first to turn red, and were the first to turn green, which is not surprising given that there is no lag effect on transaction revenues. Third, the third quarter of 2009 appears to have been the bottom of the sequential decline trough, which is what one would expect given that Q2 was the slowest net sales quarter. To be clear, each of these revenue categories did decline on a reported-revenue basis versus the prior-year period. But this usually gives us confidence that we're trending in the right direction. Now let me turn to the adjusted earnings per share, and earnings attributable to common shares in the quarter was $127 million. Now to arrive at adjusted earnings, we made the following adjustments. First, we removed the $63 million of expense listed as other finance expense, which in 2010 refers to the expense associated with our recent bond redemption. Second, we moved the amortization of intangible assets, which is a non-cash expense. And third, we normalized for an anticipated full year tax rate, which we have estimated to be between 20% and 24% for the full year. This resulted an $18 million reduction to adjusted earnings in the quarter. The net result is $304 million of adjusted earnings or $0.36 per diluted share, which is a decline of $0.04 versus a year ago. Let me point out that we did benefit slightly from timing in the quarter, given that we are running a bit behind on planned integration spend, and we have favorable on core corporate cost versus last year. We expect these trends to reverse themselves as we move throughout the year. Now just as a point of information, integrated related cost represented $0.10 per share in this quarter versus $0.09 in the previous year. Turning to free cash flow. As you know, the first quarter is always the weaker free cash flow quarter for Thomson Reuters, and this year was no exception. Underlying free cash flow for the quarter was $107 million. This represents a $35 million decline versus the prior period primarily due to higher tax payments. For the full year, we again expect to generate strong levels of free cash flow. Now let's turn to a brief update on our integration and synergy programs. As Tom mentioned, we continue to make progress on our synergy projects and have currently achieved a run rate savings of $1.2 billion. The incremental $125 million in savings in the quarter was attributable to content consolidation and organization realignment in the Markets division and the leveraging of the Thomson Reuters global footprint by the professional division. We remain on track to achieve our savings target of $1.6 billion by the end of next year. In the quarter, we incurred $97 million of integration-related expense, and these costs pertain to severance, cost consulting fees and technology cost. Before I conclude, let me spend a moment updating you on our recently completed bond redemption and subsequent debt offering. Our current net debt outstanding is $6.7 billion. In March, we announced the combined tender offer redemption of $700 million of debt due in 2012. We simultaneously issued a $500 million 30-year bond to fund the majority of the redemption. Now there were three benefits resulting from the transaction. We reduced our gross debt by $200 million by utilizing cash on hand. We extended our average maturity to approximately eight years, and we reduced our average interest rate to below 6%. We were again proactive. And since September of 2009, we have replaced $1.3 billion in near-term maturities with $1 billion of longer-term debt at attractive rates. Our capital structure and balance sheet remains strong, and our net debt to EBITDA ratio is approximately 2x. In summary, we are pleased with the first quarter performance including the trends in the business and we are tracking to our expectations. We have a good understanding of our business and our markets, particularly given our leading position in the markets we serve. And for the past year, our expectation have proven to be recently accurate despite some unprecedented period of uncertainty. And we have began to realize the benefits of our investment initiatives including net sales, including a strong start to WestlawNext. That is why we believe that we are positioned to return to growth in the second half of this year. The key investments we have been making position us well for sustained growth in revenue and margins in 2011 and beyond. With that in mind, as Tom mentioned, we are reaffirming our 2010 full year outlook. Now let me turn it over to Frank for questions.

Thanks very much, Bob. And operator, we'd now like to open up the call for questions, please.

[Operator Instructions] Our first question comes from the line of Phillip Huang with UBS.

First, just a clarification, I think you mentioned at the beginning of the call that, I think that accounting change moved to $87 million to Sales & Trading revenues this quarter. I just wanted to know how did that impact the reported organic growth?

It did not because we would have adjusted the prior-year.

My question is, I know we've seen a turnaround in that since mid-last year, but for the first time since the economic downturn, we're seeing an improvement in the year-over-year organic revenue trend from Markets. Can you maybe give us a sense of how sustainable this is in light of disynergies from sunsetting legacy products? Was there any sort of timing-related items that helped the quarter? Or do you think that in the hindsight, the minus 6% organic revenue growth in Q4 was the bottom, and we can expect more than moderate declines and eventually back to organic growth from this point on?

It's Tom. I'd certainly agree with the trend as you've described it. So recalling always the lag mathematically between the economic activity which shows itself in our net sales and then the year-on-year, period-on-period performance, we think we bottomed in Markets in terms of actual economic activity in Q2 of last year. And therefore, in terms of reported results, the bottom sort of straddles Q4, Q1 of this year. And you will continue to see that climb out and headed towards revenue growth in the second half of the year.

And our next question will go to line of Vince Valentini with TD Newcrest.

We see this morning that private equity firms have purchased IDC. Now that that's official and we know that you didn't buy it, can you walk us through your thought process. Did you take a look at this asset or you're just being more disciplined these days of not wanting to make any acquisitions while you finish off your integration programs? And then also, maybe, if you have any thoughts about the new owners [ph](46:13) there if it will change things and Enterprise space and an impact your competitive environment in any way?

Vince, Bob would scold me if I let you get by with saying that we are now more disciplined. I think he'd tell you, we've have always been disciplined. Obviously, it's very directly in one of our markets, in particular, in the Enterprise information part of our Enterprise unit in Markets. I think as Bob has just gone through, the Enterprise information unit is about 60% of the revenues of the overall Enterprise unit. So call it around $750 million of revenues. That's been growing very well for us. Actually, we compete head-to-head with IDC there. We don't see any particular change in the competitive landscape. The buyers are very sophisticated. We know both Silver Lake and Worbert [ph](47:18) well, and have worked with them before on different things. So we take it really as an endorsement. A quick back of the envelope valuation I did on the way to work this morning suggests that it's about 5% of Thomson Reuters revenues, that is the comparable revenues in Enterprise information. But as the multiple paid, it would correspond to about 10% of our market cap. So it's a really nice read across. We think our business is growing faster. So it doesn't affect us competitively and is a nice reconfirmation of why we've been investing in that unit.

And our next question will go to the line Paul Steep of Scotia Capital.

Tom, actually, why don't we talk about Elektron, since that sort of feeds to what you just talked about. Maybe you could talk twofold to it. One on monetization opportunity in terms of is it more transitioning existing clients and then upside on new clients? And than secondly, the cost synergies sort of baked into the overall program from deploying Elektron?

Well, what's exciting to me is that no part of our business moves as quickly as the low latency computer-to-computer Enterprise part. It's the sort of very sharp point of the knife in terms of deployment of technology. It's where we have wonderful assets arrayed. There are competitors and there's constant innovation going on. So what Elektron really amounts to is a rethinking and replatforming of that machine-to-machine infrastructure part of the business. And not only does it allow for very low latency, therefore, very high speed communications into our market data platforms and execution venues, it allows clients an incredible range of choice. They can take a direct feed from us right at their premises, if that's how they prefer it. They can co-locate their algorithms in our hosting facilities, essentially in a financial services cloud. They can get the same data with the same data models and symbology as they use front office in their desktops in all of their applications. So I can't necessarily tie it to any particular increment that you'll be able to identify in our revenues, other than it's a great sign that we continue to invest to support our leadership position in that infrastructure business, number one. Number two, on the cost side, it will have benefits to it because it's a very scalable architecture. And above all, what it represents is a sort of sophisticated segmentation in where do we deliver the expensive to deliver fast data. So rather than shooting it all over the world, it goes only to those markets where folks are really trading that way. And it allows us to, in essence, manage the other data flows for both our and for our customers benefit, so it's really positive.

And our next question will go to the line of Paul Sullivan of Barclays Capital.

A quick question on Legal. Just in relationship to the 2,300 accounts that you were talking about in relation to WestlawNext. Can you try and sort of just size that for us in terms of penetration of your existing customer base either by a sort of number or by revenue and quantify the pricing uplift that you're seeing on average? And where do you think that incremental money is coming from? Are you seeing it cannibalize some of the Print business as we go through this year? And are there any signs of you, now starting to more materially displace some of your competitors?

This is Bob. The 2,300 represents about 3% of Legal's overall customer base. And why it varies depending upon the segment, the average uplift so far has been about 10%, and we haven't seen that come from print. Substantially, most of the customers that we have to date are from small to mid-sized law firms and the corporates where print is not a significant part of that marketplace, so we haven't seen a displacement. And we have seen a reasonable outcome from competition or I look at that in another way, there are customers who are new to us. That, if I remember correctly, about 40% of those new customers were not customers of Thomson Reuters Legal before. So it's been very, very successful. And we really, are tracking ahead of our own expectations both in terms of the price realization, market acceptance and the amount of customers who we've converted . But we have a long way to go. We'd like to convert 100% of our customer base to get the full benefit of this. And so our expectations are realistic and that will take a couple of years to do that.

We will go to the line of William Bird with Bank of America.

I was wondering if you could just discuss how quickly will your 8% deferred revenue growth on the balance sheet convert to actual revenue growth? And could you also just discuss how net sales developed within the quarter?

Actually, Bill, that's an interesting question. We'd really don't look at that particular one and so I'd have to study it. I think that there are probably other factors involved in that 8% growth and show a growth in sales, because I can tell you, certainly, I don't think that we've had an 8% growth in that business over that period. So from my perspective, I don't see that happening. It's hard for me to react it out. Certainly, take a look at it offline, but I don't understand -- I really can't respond to that other than saying, perhaps, part of that is influenced of certain by acquisitions that we make, which on a year-to-year comparison, would increase that. And that would actually factor out from an organic perspective. When we talk about growth year-to-year, we're referring to organic growth. So I really can't understand that and I'll certainly, will go and take a look at it and will post the answer to that to the website.

And we'll go to the line of Brian Karimzad of Goldman Sachs.

On the WestlawNext, just out of curiosity, what color do you have on the reception to the fill-in on the large law side? I know that's going to be a bit slower because of the duration of the contracts there. But any color you can provide on the reception and how does that will bake in on pricing?

It's Tom. They've been very welcoming and very receptive because pretty much any lawyer who looks at it, who, like me, who's ever had to do this sort of work, gets it quickly and intuitively, how much more efficient it can make you. Salesforce is being the lovable animals we know them to be, will go for the simpler sales first. So that's one reason you see a lot of the solo and small practitioners. But we think we will be able to sell-in, penetrate the large law firms. We have a large event for them coming up next week, in fact. What I can't predict is whether the pricing trends that Bob has described around the 10% uplift, will be the same once we get through the entire customer base or move one direction or another. But we certainly deliver a lot more value with the product.

And we'll go to the line of Drew McReynolds of RBC.

Question for you Tom, just bigger picture, when you look at all the things happening in the world on the sovereign credit issues and regulatory developments in the U.S., just a little bit of a crystal ball. But just curious to know net, how you ultimately think it impacts your business, whether that's across Professional or Markets?

I can give you the short term and I'll try and venture further out. So short-term, the instability in Greece in particular, and spreading to other sovereigns has certainly increased the volumes we're seeing in our FX business, and that trend is continuing in the second quarter. And it's also driving a significant sort of need for pricing information, news, and plays into a real strength that Thomson Reuters has or Thomson Reuters Markets has, which is the global coverage, the ability to report seamlessly from bureaus in Athens, London and emerging market's desks. That's been a very nice factor. Going out a little bit further, obviously, the potential in Europe could be severe. We've been reporting on what it would take for Greece to pull out of the euro, which is unprecedented and there is no mechanism for. It could drive very significant continued volatility in currency rates, all of which, I think are positive trends. But ultimately, we care about the health of the economies we operate in. Like everyone else, we'd be affected by a true crisis brought on by domino and solvency. Closer to home, in the U.S., we're following very carefully the financial reform legislation, and I should say we are in other markets as well. To date, and again, I'd caution it's a very moving target, that is headed in the direction which is I would say, neutral to positive for us in terms of market structure, in terms of transparency, mechanisms and pricing that will be mandated in the solution. And in particular, the out turn, where does the swaps market go. But it's further out than that, I wouldn't hazard a guess.

And we have a question from Colin Tennant with Nomura.

Just looking at the new launches that you mentioned, three big platforms are going out this year. I wonder if you could quantify the specific costs around the actual launch activity which may fall away next year or would it be replaced with ongoing sales and marketing around those products?

Colin, this is Bob, and I'll respond. We've tried to provide some guidance on that in a broad way by identifying about 100 basis points of margin, that we thought we would margin erosion in 2010, as a consequence of these launches rolling out. And that is a combination of two things. There is certainly, some one-time cost that occur as a result of a launch, the marketing and expense promotion things, such as what we've done with WestlawNext and what we're doing with Eikon. But then there is -- I'd say majority of the costs so, are really more run rate cost. Things like amortization of capitalized cost to develop products. And also, they are then -- the development staff then moves to maintenance, and so those costs become run rate. And so what has to happen for a number of these products is that the revenue growth has to catch up with that, so where they become a contribution. So I would say that majority of the costs are run rate. That 100 basis points probably, fairly captures what those investments are. And with that, we do expect to that we will see margin expansion, as we said, in 2011 and beyond as a consequence of these platform launches.

And our next question comes from the line of Patrick Wellington with Morgan Stanley.

A question about the market sales improvement. Tom, you said I think at the fourth quarter, that you chose to flank the positive number in January because it's a natural focus on when you cross that zero line. You seem to have crossed the zero line back in the other direction at some point in the quarter. Do you want to tell us what that tells us about this market upturn? Are we solid in this market upturn or is that just an aberration? And then secondly, just relating back to that last question, we had some cost presumably, for the launch WestlawNext in Q1. Bob, do you want to give us a better idea of when the Utah Eikon costs will fall incrementally by quarter and maybe, also on the global tax workstation, which quarters is that first impact felt?

I'll answer that question first and then I'll let Tom handle the first one. We have repeatedly said that Eikon will launch in the second half of the year, so that's when that will happen. One source, we have incurred some of those costs in because some of it was expensed in the first half of this year, but more will occur in the second half.

Patrick, I forgot how good you were with the slide rule against Markets' quarter-on-quarter sales. The facts are pretty straightforward. There was one negative month in the first quarter. As I mentioned, trying to be objective about it, the average monthly sales in the first quarter were still negative. So we're still below the zero line. But the trend, if you start counting Q2 of 2009, Q3, Q4, Q1 shows a very significant ramp up toward and close to the zero line. And what it suggests to me is the trend is intact. And variably, it's lumpy on the way down, a bit lumpy on the way up, which is why I look at the average monthly. But I do expect that to cross imminently, let's say. So when I look out rest of this year, it's really more relevant for what does 2011 look like now. You know roughly, what our expectation is for this year. I'm pleased with the book of business that's building towards next year, especially given the Elektron launch, Eikon later in the year, Reuters Insider next week. So I think Markets is in a good shape. Everyone in the team has done a great job.

And next, we'll go to the line of Michael Meltz [JPMorgan]. David Lewis - JP Morgan Chase & Co: This is Dave Lewis for Michael Meltz. I just wanted to see if you guys could touch on the -- just following up on the last question. Do you guys get us a touch on the pricing environment for Markets, if that's improved over the past quarter or so?

Well, Bob and I will both jump in. So two data points to look at. One, we in fact, did put through a price increase, our normal annual one. Yield was just a little bit under 2%. So even in the environment, when those letters went out, call it last October for effectiveness, January 1, a little bit later in Japan, first quarter. So even in a difficult environment, it has been possible to price. And again, I'd stress, that's an average price. So some parts of the product line have priced up significantly more than that. I think we've returned to a stable pricing environment. If we can deliver value, new content, new functionality for clients, they'll pay for it. That's been clear through the crisis in Enterprise, and I think we're now seeing stability come back into both the Desktop business and other parts of the market.

I would just add that while that yield for this year's price increases, roughly, some of it was a year ago. The environment, I'd say, was far more favorable, meaning that you always get certain push backs from some clients or whatever, and you should try to consider that in your thinking. We had far or less of that. The price increase in 2010 was, I think, far better received than the price increase in 2009. So the market environment seems to be improving in that regard.

And our next question will go to the line of Tim Casey with BMO Capital Markets.

Given its importance, could you refresh our memory and update any changes to the rollout of Eikon? And I know it's a multi-year product rollout, but any more granularity you can give us on when you think the really big customer impacts will be? Is it really a 2011 story or would it even be 2012 before you really start to see the breadth of customers on the new platform?

Nothing has really changed in the last quarter, other than we're that much further along in testing of the platform, and it looks very good. Scheduled release is on time. I've been saying at least for a year, that I think the impact really is a 2011 and then continuing. So there's not going to be a significant Eikon component of our revenues until then. But I think we will see very positive effects before 2012, just like we're beginning to see them in WestlawNext. And a bit similar to that, the smaller shops where you have less of a major opening up of the infrastructure are first go in. New clients and smaller shops with the larger global accounts taking a while to schedule in with their own release agendas.

And Next, we'll go to the line of Mark Braley with Deutsche Bank.

I wonder if I can just come back to you on some comments during the slides about currency. I just want to clarify what the benefit was within the Markets business from FX on the margin, and I think what the hits was within the Legal business on margin from FX? And then my follow-up, if I can, was basically, can you sort of give us a steer as to what the second quarter integration charge number will be, because it's not really a number we've a prayer of forecasting, to be frank?

The impact in the Markets division for foreign exchange was roughly about 70 basis points. So it really was roughly actually, about 100 basis points, I should say. Correct that.

So 100 basis points favorable in Markets?

Yes.

And in Legal?

I don't know if I have that granularity here. I think it's probably less of an impact if any, in Legal. I would say, it probably doesn't have any.

The second part of the question of Mark's question was whether we had any visibility for him on the Q2 integration cost number.

The answer to that is not really. I think that we look at it and we said we've projected about $475 million. I think that the $97 million is a bit lighter than probably we would have expected. But as I've said frequently, these integration program is a series of quite a few different projects. And knowing when they come together, we're honestly, very focused on making sure we drive these projects to completion during the specific time periods. My expectation would be that we'd see a little bit of a catch up in integration spend in the second quarter. So if you to took the $475 million and divided it evenly, that gives you about $120 million roughly, a quarter. So my estimate should be a little better than, a little more than $120 million in the second quarter.

Our final question will come from the line of Randal Rudniski with Crédit Suisse. Randal Rudniski - Crédit Suisse First Boston, Inc.: First of all, Bob, you referred to some revenue to synergies in the Markets division in Q1. Is there any way to sort of quantify how large that was and what that might be for the full year?

Randy, that's a question that we really have trouble with, because 40,000 customers, all these different platforms, we probably would grind our internal systems to a halt if we we're trying to track that. We know it's a negative impact. I wouldn't even hazard a guess. We know it contributes, like I said, to the revenue decline. But we're focused on the positive side of that, and that is, that as we eliminate these platforms and products and consolidate, we're improving the efficiency and effectiveness of that company. And over the long-term, we feel confident we're going to recoup that growth. So I wish I could be more specific. But we made a conscious decision that we were going to do this, take these actions and we look and said, can we track it, and the answer was, boy this would be really tough to do. So I can't give you a specific on that. We do know that it's having an impact though. Randal Rudniski - Crédit Suisse First Boston, Inc.: And second of all, you renewed the NCIB. And in that paragraph you indicated you haven't repurchased any shares since in 2008, but you might in 2010. So I guess the question is, what sort of criteria are you really looking for in order to become active with that buyback program?

First of all, the reason why we renewed it primarily was because it expired. And the NCIB is like a shelf offering for debt. And so I think, we all think and the board agrees that having a standard ability for the company to enter the market to buyback shares is good part, prudent part of our long-term capital strategy. I don't think you should read into this, says that we have any intentions of buying stock at this time. We are spending our money right now appropriately so, on investing in our business and returning a healthy dividend to our shareholders. And we have always had a preference for using dividends as a way to return value and that certainly, that's still is our preference. But I don't think that you should read into it as anything more than just prudent good financial management that the company has filed for and keeps the capacity for the NCIB should the opportunity warranted and should our cash availability warranted.

Right, we want to keep the flexibility without having to go back to the market and say that our intention has changed. So our intention is agility. You can judge over the past year what the likely results may be. But we don't want to be pinned down because it would sort of undermine the benefit of having that flexibility in the capital structure.

Okay. With that question, I will conclude our call. I'd like to remind those of you who would like to join does for our Investor Day, which will focus on our Legal business at our headquarters in Eagan, Minnesota. That will take place on June 3. If you had not received our invitation, then by all means, please contact my office and we will forward you the invitation. That's June 3 in Eagan Minnesota. So with that, that concludes our call. Thanks very much for joining us.

. Thank you. Ladies and gentlemen, this conference will be available for replay after 10:30 a.m. Eastern time today through Tuesday, May 11, 2010 at midnight. You may access the AT&T teleconference replay system at anytime by dialing 1-800-475-6701 and entering the access code 153995. International participants, please dial (320) 365-3844. That does conclude our conference for today. Thank you for your participation and for using the AT&T executive teleconference service. You may now disconnect.