Ladies and gentlemen, good morning. Thank you for standing by, and welcome to the Thomson Reuters Third Quarter 2010 Earnings Conference Call [Operator Instructions] I would now like to turn the conference over to our host, Senior Vice President, Investor Relations, Mr. Frank Golden. Please go ahead.

Thanks, very much, and good morning, and thank you for joining us as we report our results for the third quarter. We'll begin today with Thomson Reuters CEO, Tom Glocer, who'll be followed by our CFO, Bob Daleo. Following Tom's and Bob's presentations, we'll open the call for questions. I'd ask that you please limit yourselves to one question each, so that we can get to as many as possible. Now 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 that this provides the best basis to measure the underlying performance of the business. Today's presentation does contain 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's now my pleasure to introduce the Chief Executive Officer of Thomson Reuters, Tom Glocer.

Thank you, Frank, and thanks to everyone for joining us today. I'm pleased to report that the company returned to revenue growth in the third quarter. We're past the bottom and on the way back up. Our markets are slowly improving, and we're encouraged by what we're seeing in the business, revenue growth, positive net sales and strong customer uptake of our new products. For Q3, revenues were up 3% with both divisions recording growth. The Professional division's revenues grows 5%, and growth was good across each of Professional business units, with the Tax & Accounting and Healthcare & Science businesses, achieving particularly strong results. Legal revenues were up 3%, it's best performance in almost two years in what continues to be a challenging environment for law firms. Nevertheless, we continue to believe our growth rates exceed those of our peers and the industry as a whole. The Markets division returned to growth in Q3 on the back of improving sales trends. This quarter marked the second consecutive quarter of positive net sales, which has steadily improved from their bottom in Q2 2009, and these trends bode well for continued revenue growth in Q4 and 2011. Underlying operating profit declined 4% for the firm as a whole, primarily due to ongoing product investment, product mix and the dilutive effect of acquisitions. We continue to believe we'll meet our full year operating margin guidance of low 20% margins, and we're making good progress on our integration program, with run rate savings exceeding $1.3 billion, and we remain confident that we'll achieve our previously announced goal of $1.6 billion by year end 2011. Adjusted earnings per share for the quarter was $0.49 compared to $0.43 in the prior period, helped by lower integration-related cost and lower interest expense and a decline in…

Thank you, Tom, and again, thank you all for joining us on the call today. I'm going to discuss the results for the third quarter, and I'm going to provide a brief update on where we are on integration issue. Now you will recall that in the second quarter, we anticipated that based on encouraging net sales performance, and a more constructive environment in our markets, we've return to growth in the third quarter and we had. We're tracking to our expectations with few surprises, and three quarters of the way into the year the results are consistent with the full year outlook, which we presented to you all in February. The encouraging net sales performance that Tom outlined had an improved market environment. We wish to believe this trend is likely to continue into 2011. Now as of prior quarters, I'm going to speak to the revenue growth before currency. The reported revenues are also highlighted on each of the slides. In the third quarter, foreign exchange had a negative impact on both revenues and the consolidated margin for the company. Our overall revenues in the third quarter were $3.3 billion. This is up 3% versus the prior year, with 2% of that benefit coming from acquisitions. Let me point out that we provide organic revenue growth rates for each of our business segments on the P&L, found in today's earnings release. Both Professional and Markets division achieved organic revenue growth in the quarter. Underlying operating profit was $681 million in the quarter. The corresponding margin decreased primarily due to previously announced investments in new product in which is the product mix from our current sale of revenues and the dilutive impact of acquisitions, which at the company level was 50 basis points. Each factors more than offset integration…

Thanks, very much, Bob. We'd like to now open the call for questions and as I mentioned earlier, in my comments, I would appreciate if you could keep it to one question each. So can we have the first question, please?

[Operator Instructions] And we'll begin today from the line of Drew McReynolds with RBC Capital Markets.

Maybe for you, Tom, just looking at the sequential recurring revenues markets, obviously, some modest kind of 0.2% sequential growth in Q3 and in Q2, just wondering if you can kind of drill down into the current net sales trends, visibility into 2011 and just within the context of what everyone realizes is a slower sluggish trading environment out there in certain asset classes?

So just to remind everyone, through -- and I know you know well, what we're seeing show up in the current period-on-period performance in markets is really the economic activity from the second half of last year into the beginning of this year. So as you note, the recurring line is flat to just slightly up. That's already a pretty good thing, given what the markets were looking like last year. But the important thing from a trend perspective is that we were seeing net sales improved pretty much quarter-on-quarter right through the period. In particular, we only had, call it, two weeks of Eikon in the quarter and of that, essentially no revenue at all. So from a going-forward perspective and looking into 2011, it will be very helpful to have Eikon in there to increase significantly the competitive position on the desktop. Enterprise, as you've seen, continued to do well right through the bottom of the recession, and has now strengthened to about a 10% quarter-on-quarter. So I put all of that together, and what do I extract at this trend. Number one, the trend, the substitute technology, wherever possible for headcount growth and financial services continues. That's really what's being driving the enterprise unit all along. Although there are talk in the market about trimming or reallocating heads, and we may e see a little bit of that at the end of the year, nothing on the order of the wholesale cutbacks that we saw, obviously, 2008 and to 2009. And generally, it's a sort of reallocation growth, in particular, markets like commodities and energy, FX, treasury, growth in regions like Asia, Brazil, Middle East, offsetting reductions in large city centers. So put all of that together, plus the competitive impact of having Eikon now on the desktop and what it looks like to us is not spectacular growth, but good, steady progress in a positive Markets division.

Our next question comes from Colin Tennant with Nomura.

The question I had was on Eikon and I just wondered, I know that you've actually had to test, you've had to launch and getting some orders in. Which segments of the market is it most attractive to both geographically and by activity?

Okay, so in version one, right out the door, it's attractive to basically anyone who has a 3000 extra on their desktop today, and we will be seeing a significant amount of migration activity. But as I pointed out in my remarks, the thing that I'm probably happiest about is the very strong start in what I usually call new, new positions. So people who had no Thomson Reuters position before, and that's either a competitive displacement for a new source of growth. By region, we will be introducing in 2011 Chinese language version, Japanese language version, which is more than just changing the language of some of the content. The entire software framework goes into localized version. So we will have to wait until that to really see a significant geographic pickup in Asia, but that's all good sales to come I believe. So it's off to a good start. It's the Sales & Trading core where we're focused now. And I guess, the only thing else I'd have is, that there'll be an ongoing and rolling basis of functionality and content upgrades, in particular, the Asia and in particular, more by-side oriented functionality, which will be coming over the next, call it, six to nine months.

So I mean, what I was trying to get at is, I guess, is it in your traditionally strong markets like money markets and so forth, that is getting the best reception so far? Or are you seeing a bit of a fight back in the areas there? I guess, you've traditionally lost some share to Bloomberg like in equity markets, or is it too early to say at this point?

The bottom line is it's too early to say. However, the version that's outright now is perfectly suitable for international equity markets, certainly the large treasury money market franchise. And I do expect, with the combination of Tradeweb, trading functionality, some of the enhanced pricing and analytics and always the strong news offering, you'll see a much more competitive showing in fixed income as well.

Next we will go to the line of Brian Karimzad with Goldman Sachs.

As you think about the pricing for the Markets division next year, I know, Bob alluded to some modest year-over-year gains this year. And I know with Eikon, you're selling it as a complimentary upgrade to existing users. Explicitly, there's not a price increase there, but implicitly, as you look at the overall price increases you're seeking for 2011, do you see an acceleration in what you're asking for and any sense on communication you've had with customers about that?

First of all, we have already set out price increase letters for 2011. And they, of course, vary depending upon the product, I think, on average or about 2.5%. But the responses that we've gotten, the ones that I'm aware of, have been positive and in the sense of that they understand the basis for it. And with Eikon, well, we're not increasing Eikon's price, but the fact that we've been able to go to the market and say that we have launched a meaningful new product improvements and a meaningful introduction, certainly, they understand that these price increases that we've gotten from them in the past, we have used to their benefit to continue to invest back into the business. So our strategy is that like anything, in all of our business, you price to value, and our strategy with Eikon is to offer this value to our customers because we realize that there's a whole new generation of financial managers out there, as Tom talked about, and with Eikon is about really the longer-term positioning of Thomson Reuters in this market place.

And I may just quickly, I know you gave out the organic versus all-in color on the broad segments, but within legal subscription there, there was a nice acceleration, any sense when you classified a couple of acquisitions today following to that subscription revenue component?

No, we would have to pull it out for organic purposes. We're reporting as organic.

Our next question comes from the line of Vince Valentini representing TD Newcrest.

A question on the margins. In the Legal segment, Bob, can you give us any sense of how long these kind of drags from both the acquisitions? And from the new strategic initiatives, how many more quarters you expect to that kind of pressure? And also, is it possible to give the same margin impact figure from Eikon start up cost in the quarter as well?

Let me start with the Legal side of it. I think that our investments that we've made that have a drag in the quarter, we'll certainly continue to drag, certainly, throughout the balance of this year, and into a bit into next year, but to a lesser degree. I think that so, for example, let me take on a part, like acquisitions, what causes it. When you acquire a business, two things. First, they don't tend to have the same margin as our existing businesses, so it takes a while to integrate them. And second of all, many of these acquisitions are software, like they have been in Tax & Accounting, and you take a portion of the purchase price, and set it up as software cost. And our policy is we amortize them over three years. So for those that fall in that category, we'll have three years. Now you'll see, obviously, margin accretion as we integrate them and as we grow them, but certainly, there'll be a drag. In terms of the investments, I think a significant portion of them are this year. We'll see them start to decline, certainly, in 2011. But the product mix issues is a longer-term issue for us. It's no secret that when you lose $1 of print revenue versus gaining say, $1 of final revenue, that changes. So I think that the return to growth that we will -- the margin improvement will still return to growth will come from volume more than a shift in our product mix. I think the product mix that we have is really a permanent one. And so I think that as we think about that long term, that's the perspective we have on Legal. In terms of Markets, really, if you look at -- I don't have it separately, but if you look at Eikon, Elektron and we have the internal project called Aurora, which really has to do with streamlining our technology infrastructure. Those three items are together represent about 130 basis points of margin investment in the quarter.

Next we will go to the line of Thomas Singlehurst with Citigroup.

The question I had was on as far as the differential between constant currency tax growth and organic growth. Got a lot of excitement if i think about the level of outlook in Professional and then the matrix but actually in organic basis, the Legal side is actually flat. The question is this. Firstly, that's quite a big step up in differential versus the previous quarters. Is that going to be more of a feature going forward? And then sort of longer term, what's the balance between acquisition and organic in terms of the anticipated drivers of growth over the next sort of 12 to 18 months within Legal, in particular, but also across the rest of the business?

And I'm sure Tom can jump in on the strategic. Let me talk a little bit about -- let's step back and understand our model, again, the subscription model. The reason that we lag going into declines and lag coming out is just the mathematics of that. So we continue to record revenue growth even as we see perhaps negative sales or slowing sales. And we continue to show revenue decline or slowdown, although lower revenue growth even as we build sales momentum. So the significant part of the Legal performance this quarter is the fact that we've continued to see strengthening sales and in fact, have seen a flat performance in terms of overall revenues. That is a positive sign, and we expect to see accelerations. But given the model, it does take us a while. I think that's the beauty of our model is its tremendous consistency on our business, and while we understand and anticipate and can plan for movements. So we tend to be -- we are obviously very patient with it, but I can understand why you would expect to see a more significant move. That's not the way it happens. In terms of, as we think about going forward, I think that as we look forward, we will see an improving balance between what comes from our acquisition and what comes from organic as the overall growth of the division accelerate into 2011. I think that the benefits from a number of these acquisitions that we make will actually drive organic growth for us, certainly, into 2011 and into 2012. So our objective is not to drive growth through acquisitions, to drive growth through organic performance. We use acquisitions to achieve that goal over both the short and longer-term.

But for 2010, should we interpret the increase in revenue guidance as being purely a function of that?

Well, I did say when we talked about it, that there's a little bit of improvement in organic performance, but the majority of it does comes from acquisitions.

The next question comes from the line of Philip Wong, representing UBS.

It's obviously encouraging to see that you signed up more than a thousand new desktops in less than two months after launching Eikon. And I know these are not migrations, but for your existing customers, just wonder if I could get an understanding of the process to migrate those customers to Eikon. So for example, say, some of your larger customers with more than, say, 50 users, can you maybe talk a bit about how long the migration process is on average? And is it closer to two weeks or six weeks and whether there may be any dual cost to support the two systems during migration process?

Let me jump in on that one, Philip. So let's start with the cost element. To the extent that there are dual cost, and I'll address both ours and customers, from the Thomson Reuters point of view, there are dual costs running these two systems. They are in the run rate now of the business and therefore, they offer the promise as we get deeper into the migration and ultimately convert and shutdown old systems to reduce the cost of dual running. And that will obviously have implications and that's one of the main ways in which we intend to get the Markets margins up. From a customer point of view, there's always some level of dual running, but it's really not significant, because there's a sharing of infrastructure. And in terms of the timing, no two customers are completely alike, so we already have several hundred folks actually migrated, let's say 3,000 extra, over to Eikon. If you were reasonably standalone, let's say, you're a small to medium-sized shop and you wanted to transfer over your 20 terminals, it would not be a significant undertaking could be done in a matter of a couple of weeks. Typically, with our largest customers, there will be a fair amount of customization into the trading room of that bank, as well as an internal schedule of testing, when is the bank planning to, let's say, upgrade servers any way. And therefore, unlike maybe the electricity company and the water company, who tear up the street twice, our experience is most of our clients are much more efficient with that and wait and have us do it on their schedule. But we've got ambitious targets and all of the Markets division is focused on taking clients up to our latest and greatest offerings. So it looks good.

And obviously, just a quick follow-up, obviously, there's several versus of the platform to be rolled out in the years ahead, but based on the current version of the product, is there a specific region or asset class that the sales force is currently more focused on primarily?

Well, just to come back to you on the sort of way you've asked the question, because I think it includes an important business model change that Eikon represents. There's actually only a single flavor of the platform. It is the common platform that we've talked about for several years, and in that is very important sort of scale economics advantages. You are right in that. It will allow a variety of different flavors right out of the box today a form of, let's call it mass customization that allows the fixed income trader to see something different than an FX options trader. But over time, additional functionality and content both localized let's say, in Asia markets, but also specialized in different industry markets, that we can add without major site visit remotely which was not a feature typically of let's say the 3,000 extra architecture. Going back to my answer to Collin's question earlier, I guess, the day one fit for purpose of Eikon is the large installed base of 3,000 extra treasury, in particular, more cell site orientation than buy side, Western Europe and U.S. before, let's say, Asia. But all of those are in the plans and as this may suggest, there are good things to come in the natural rollout from here. What I'm happiest about is, we've got a version out, as you know, we waited until we felt it was of high quality. Not only did we get it out on time for that schedule, but the testing we did ahead of time has -- this is a very good piece of software that's holding up well in its first weeks of, really, critical customer use.

Next question is from Mark Braley, representing Deutsche Bank.

Following on Legal, could you give us a feel for how significant the timing benefits in print were in the third quarter, and whether if those is actually a pull forward from the fourth quarter. And if so, should we assume it would actually be an organic growth illegal in the fourth quarter? And then just one for Bob, the tax rate comment you made, 20% to 24%, is that on the adjusted earnings? And if so, can you give us a feel for why that is such a wide range on the adjusted figure?

I can actually answer both of those, Mark. First of all, I apologize you might have misinterpreted my comments. The timing benefits that we had were actually last year, not this year. And this year, there are no timing benefits either in the quarter or actually year-to-date.

So we should be quite well positioned on that basis then for organic growth in Legal in the fourth quarter? I just asked the question because the half-year you were talking about expecting good growth in the second half, I might sort of implicitly feel that the third quarter has been slightly disappointing in Legal, organic.

We do expect overall organic performance to improve across Professional division and in order for that to happen, Legal has to be a part of that. So that is true. In terms of the tax rate, we've given this guide us through the year our tax rate, it is for adjusted earnings, not for the GAAP or IFRS earnings, which is really, I think, more meaningful for you to understand where the company's going. The reason we a provide a range like that is because it is so subject to the source of earnings and the timing benefits and so on. So today, I'd say that you probably are going to be towards the middle of that range, I think, and right now, it's down a little bit, maybe from -- probably when I think about it, I'd say it's probably 20% to 23%, not 20% to 24%. So there's so many things that could happen at the end of the year in terms of the source of revenues and incomes, and how we book provisions and so on. So I think it's a reasonable guidance, what we've given in the past, and so I encourage you to kind of, as you think about it, kind of split the difference that go towards the middle.

Our next question is from the line of Tim Casey, representing BMO Capital Markets.

Tom, questions on Legal, could you comment on what impact you're seeing, if any, from Bloomberg Law? And I was thinking another one -- you've provided great detail on the rollout of Eikon. Is there anything to add with respect to the rollout of Westlaw? Obviously, it's been very well-received and you've given some details. Is there any milestones obviously or targets or accelerated rollouts that we should be aware of going forward?

Well, let me start with the second part of the question. Yes, WestlawNext has gone, I think, amazingly well. We have high hopes for the product. As you know I'm sort of proud of the -- and we've spent a lot of time around the development process because this is what I use to do. I understood what a good product and how much of a step forward it was. But the 9,000 contracts actually concluded to date is well above our own internal forecast rate. So both on a number sign, number of passwords at firms, we're penetrating large and medium-sized firms, as well as the smaller ones. We're doing particularly well at some of the smaller ones. There have been very significant competitive wins. And that I attribute it to the significant increase in efficiency that the product allows a lawyer to be. In terms of penetration, we're heading up pretty much towards 20% of the installed base. And in terms of price uplift, we're still seeing very high single digit increases, again, attributable to the performance advantage. So on pretty much any metric I look at, WestlawNext is a really great success. Now I suppose that also begins to, if not answer, at least, add some color to the Bloomberg Law question. Well, we have a very healthy respect in the DNA of this organization for what Bloomberg can do and obviously, their success in financial services. They are starting from a very different place in law. I've had it expressed to me that their real target is probably the number two player in this market. It doesn't mean that one day, they might not set their sights on us, but we don't see that whether it's in the subscription revenues, up 8%, the particular performance of WestlawNext, the anecdotal feedback on wins and losses in the field. They're obviously making a serious run, but it doesn't look to be in the core Legal research market as much as around the edges of sort of current awareness in news with the Legal thrust, the BGov initiative or sort of corporate dealmaking and the like. And beyond that, I can't really say we're sticking or knitting in. It's knitting a nice sweater at the moment.

Our final question today will come from the line of Paul Steep with Scotia Capital.

Tom, one for you. Slide 8, I guess, in your slide decks, and maybe you could talk as we head into sort of 2011, your perspective on that balancing of investments and return and the view towards either now maybe undertaking another material acquisition or where you're at today in terms of the higher level on the right side of the scale to return to shareholders?

Yes, all I really meant to do by highlighting the balance of investment and return on that slide or in my remarks is to say, I guess I am personally grateful that our board and investors are frankly been patient with us. Obviously, integrating a business of the size of Reuters is not sort of three months and you're done effort. And we've been doing it against the backdrop of the most significant disruption in financial markets and a great recession. But we feel, as I turn and Bob and I work on 2011 plans, that it is appropriate for us to begin to show, I suppose, more of the R in the ROI equation. We've always been confident it's there. You've seen a lot of cost savings come out, really, ahead of plan in the integration. But I think it's also fair to say that because growth has been essentially flat over two years, a good amount of those cost savings has is basically gone in to catch-up for revenue that's not there. As even slow revenue growth returns and it's faster in obviously some of our segments, we expect to bring more of that to the bottom line, so you'll see margin expansion and that's a very good thing. In terms of acquisition, obviously, nothing to discuss specifically, given our general no comment policy. You've seen the types of acquisitions we've made to date, they are probably a little bit more international, i.e. global in nature. They continue to be acquisitions in furtherance of a strategy rather than just sort of portfolio effect acquisitions, and may likely see as cash increases going forward, those sort of naturally ramp-up. But we have nothing other to say in terms of anything bigger other than we've got plenty of really good things to do on our plate. So we are not wanting for challenges.

That would be our last question. In concluding our call, we'd like to thank you all for joining us today.

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