Thomson Reuters Corporation (TRI) Q1 2011 Earnings Report, Transcript and Summary

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

Good morning, and thank you for joining as we report our first quarter 2011 results. We'll begin today with Thomson Reuters' CEO, Tom Glocer, who will be followed by our CFO, Bob Daleo. Now following Tom and Bob's presentations, we'll open the call for questions, and I'd ask that you please limit yourselves to one question each. Throughout today's presentation, keep in mind that when we compare performance period on period, we look at revenue growth rates before currency, as we believe this provides the best basis to measure the underlying performance of the business. In today's earnings release, we announced that we have signed an agreement for the sale of our BAR/BRI Legal Education business, which is expected to close late this quarter. And earlier this month, we closed on the sale of our Scandinavian Legal and Tax & Accounting business. We also announced today our intention to sell our Enterprise Risk and PORTIA businesses in the Markets division. These dispositions are expected to close in the second half of this year. Today's presentation and discussion excludes the results of these 4 disposals. Now on our website, you'll find the results for the first quarter, including these businesses for purposes of comparability. Lastly, also on our website, we provide 2 years of financials excluding the results of these disposals. Now today's presentation contains forward-looking statements. Actual results may differ materially due to a number of risks and uncertainties discussed in reports and filings that we provide to regulatory agencies. You can access these documents on our website or by contacting our Investor Relations department. It's now my pleasure to introduce the Chief Executive Officer of Thomson Reuters, Tom Glocer.

Thank you, Frank. And thank you, all, for joining us this morning. I plan to cover 3 topics today. First, I'll discuss our first quarter 2011 results. Second, I'll comment on a few major developments in the quarter. And third, I'll provide an update on our 2011 outlook before turning it over to Bob. But before I begin, I'd be remiss if I didn't acknowledge that it's just over 3 years since the acquisition of Reuters. And over that period, we've integrated the company, rolled out innovative product platforms, built to #39 global brand, safely navigated the financial crisis and returned to growth. We've accomplished a lot, but there's much more to do. The investments that we've made in our new product platforms position us to compete successfully and achieve results from scale. And we're finding new ways to leverage and combine assets across our businesses to meet evolving customer needs and to further consolidate platforms. It's gratifying to me to see the fruits of this progress just beginning to be borne out in our financial results that I'll share with you now. I'm pleased with the first quarter's results for both the Professional and Markets division. The positive momentum we experienced in the fourth quarter carried into the first quarter as revenues increased 5%, the strongest quarter since Q4 2008, and a significant improvement compared to a 2% decline in the first quarter of 2010. The Professional division's revenues were up 8% and the Markets division's revenues grew 2%, which would've been 3% excluding recoveries. And Bob will provide you with more detail in a moment on this. As I mentioned last quarter, the current economic environment for us is one of rising business optimism, although that optimism and the opportunities for growth are unevenly distributed across the globe. Conditions in the financial and legal services markets continue to improve, the environment in legal has certainly picked up with overall demand for services increasing, and small law firms, corporations, government and academic institutions opening the spigot a bit more. However, large law firms are still cautious in their buying patterns, and I'd certainly be worried if we didn't have a great platform like WestlawNext. And over in the Markets division, we are seeing good uptake of our new Eikon and Elektron platforms, but the overall environment in financial services is still far from robust. For the quarter, our underlying operating margin was 17.2%, dampened by $39 million in one-time charges to fund efficiency measures. Excluding these charges, the margin was 18.4% versus 18% flat in the prior year period. And importantly, these one-time charges highlight that even as our integration process winds down, we continue to find and execute against efficiency opportunities to streamline our operations and to improve margins long-term. And I'll discuss this in more detail on the next slide. Adjusted earnings per share in the quarter were $0.39 compared to $0.36 in Q1 2010. And included in this, one-time charges had a $0.03 impact on earnings. Lastly, we're affirming our full year 2011 outlook, given the first quarter results and the favorable trends in the business. Against the backdrop of improving global markets, our priorities for 2011 remain the same: accelerating growth and improving efficiency. Our growth strategy has 3 components: continued to focus on our ongoing investments in core businesses such as U.S. Legal and Sales & Trading in developed markets, accelerated investment in faster growing international markets; and third, reallocation of investment to faster growing segments within and throughout our existing markets. In the Legal segment, the benefits of our investments over the past few years are reflected in a 10% increase in revenues in the quarter, with contributions from across the unit. And in Markets, our $1.1 billion Enterprise business also grew 10% from increased demand for our low latency real-time offerings delivered over our new Elektron platform and from global expansion. We opened an Elektron hosting center in India in the first quarter and plan to open one in Brazil this quarter. We're also finding new ways to leverage and combine assets across our businesses and consolidate platforms. In short, to work smarter and more efficiently. Margin improvement in the first quarter was masked by the one-time charges I mentioned earlier, but will clearly show through in the coming quarters and for the full year. Excluding these one-time charges, the EBITDA margin grew 70 basis points and the operating margin grew 40 basis points, both compared to Q1 2010. The good news is that we expect to achieve savings of $40 million this year and will deliver more than that in 2012 from having taken the actions associated with these one-time charges. Lastly, we're also focused on accelerating our organic growth by reallocating capital and talent to drive growth in returns across the company. Today, we announced the planned divestiture of 2 businesses in the Markets division, which, when combined with the proceeds of the previously announced sales of BAR/BRI and our Scandinavian Legal and Tax & Accounting businesses, are expected to deliver approximately $1 billion for reinvestment in the attractive opportunities that we continue to find in our core businesses. So in conclusion, let me reiterate that I'm pleased with the start to the year. Momentum continues to build off the turnaround we began to see last year. My priorities are unchanged from what I outlined in February, just as our outlook remains unchanged for the year. With higher expected top line growth, efficiency initiatives gaining speed, integration spend ending this year and a planned reduction in capital expenditures, we're positioned to achieve strongly expanding margins and increased cash flow. And let me now turn it over to Bob Daleo.

Thank you, Tom. And good morning and good afternoon to everyone. Today, I'll cover the first quarter results and I'll provide an update on our full year outlook. Now our results in the first quarter were consistent with our expectations that we outlined at the time of the fourth quarter results. And they provide the confirmation that we're tracking to the outlook we discussed in February for accelerating revenue growth and strong margin and free cash flow improvement. As in our prior quarters, I will speak to revenue growth before currency. Reported revenues are also highlighted on each slide. In addition, for consistency and comparability with our previously reported results, all the results that I'm going to discuss today are on an ongoing basis and exclude the BAR/BRI and Scandinavia Enterprise Risk and PORTIA businesses, all of which are included in disposals. And as Frank mentioned, appended to this presentation on our website are a set of slides including the results for Enterprise Risk and PORTIA. With the consolidated business, revenues in the first quarter were up 5% versus the prior year, with a 3% benefit from acquisitions. Growth accelerated during the quarter, and both Professional and Markets divisions achieved organic revenue growth. Adjusted EBITDA was up 4% in the quarter and underlying operating profit was up 1% in the quarter despite recording these $39 million of one-time charges. Now as you can see from this chart, growth has accelerated as our markets recover and we realized the benefits of the investments we made last year. This growth was driven by 3 primary factors. First, coming off a year of investment in new product platforms such as WestlawNext, Eikon, Elektron, the ONESOURCE global tax workstation and Advantage Suite 5.0, we've never had a more advanced set of products delivered to our customers. Second, and as Tom mentioned, both the financial services and legal services markets continue to improve, albeit, at a slower pace that we would like to see. Legal demand is up especially at smaller firms and in the corporate general counsel's office, while large law firms remain cautious. Our products have targeted the right markets and we're positioned to capture growth. Lastly, acquisitions and global expansion have contributed to an acceleration of growth. Two examples to share with you. Last year, the Professional division entered Brazil through the acquisition of Revista dos Tribunais in the first quarter and we launched the online product this quarter. This is the first online research service in Brazil and we built it on the WestlawNext platform. Now Brazil is a market with over 600,000 attorneys. We expect strong growth on the Brazilian legal market over the next several years. In Markets, we are positioned to continue to capture growth from rapidly developing economies, including the Gulf region, China and Brazil. Now in Brazil, as Tom mentioned, we are launching Eikon in São Paulo later this quarter. And we're confident that this will be a driver of growth in that market over the next few years. So overall, we expect the underlying trends will continue through the balance of 2011. However, further acceleration in the road of growth will be a bit challenged as we cycle over acquisitions in the second half of this year. Now during the quarter, we recorded $39 million in one-time efficiency-related charges, $28 million in the Markets division and $11 million in Professional division. Both these actions were taken earlier in the year, so we expect to realize cost savings of $40 million this year, which will contribute to an acceleration in margins as the year progresses. As Tom mentioned, these are underlying long-term improvements that reflect our continued drive for greater efficiency and effectiveness. And they are on top of the benefits from the integration process that is drawing to a close. Excluding these charges, the adjusted EBITDA margin increased 70 basis points and underlying operating profit margin rose 40 basis points. Our business outlook for the full year calls for a 100 basis point plus improvement in our operating profit margin, and we remain on track to achieve that. Now I'll turn to the operating divisions, starting with Professional. Professional division recorded first quarter revenue growth of 8%, 4% organic and 4% from acquisitions. This was driven by solid performance from each of the 3 business units. EBITDA increased 6% compared to the prior year, and the corresponding margin was 30.4%, down 90 basis points. This decline in margin was due to the $11 million in one-time charges and the dilutive effect of last year's acquisitions. Operating profit was up 4% compared to the prior year and the margin declined 90 basis for the same reasons I discussed regarding EBITDA. Now I'll talk about the results for the segments within Professional. As mentioned, we saw good growth across Professional division in the quarter, particularly in Legal. Legal first quarter revenues were up 10%, 4% on an organic basis, with the balance coming from acquisitions. The Corporate, Government & Academic businesses grew 12%, of which 8% was organic and partly aided by the acquisition of Serengeti. The Business of Law segment, which includes FindLaw and Elite, was up 20%, 16% of this was organic. Revenues from small and solo firms were up 1% and current revenues also increased partly related to timing. Operating profit increased 3% from revenue flowthrough and savings from efficiency initiatives, which offset $10 million in one-time charges. The margin declined to 24.4%. Excluding the $10 million in one-time charges, operating profit rose 8% and the margin declined 80 basis points to 25.5% from a year ago. And again, this is primarily due to the dilutive effect of the impact of last year's acquisitions. Now turning to Tax & Accounting, where first quarter revenues grew 4%, 3% was organic. Growth was driven by sales of income tax software and Global Tax technology products, such as our tax provision solutions. Tax & Accounting continues to show strong EBITDA growth, recording its third consecutive quarter of double-digit growth. The business is reaping the rewards following a period of heavy investment and acquisitions and organic growth initiatives. Now likewise, operating profit increased 17% and the associated margin was up 160 basis points to 15.1%. Healthcare & Science revenues grew 6% in the quarter, which 5% was organic. Growth was driven by the Payer business, which was up double-digits and the Life Science business, which was up 14%, of which 8% was organic. Scientific & Scholarly Research revenues were down 2%, primarily related to timing. Operating profit was flat and the corresponding margin declined 120 basis points to 20%. The decline in operating margin was due to timing of revenues and a difficult prior year comparable. Now let's turn to the Markets division. In the first quarter, the Markets division's revenues grew 2%, almost all of this was organic, continuing to show an improving trend from both the prior year and the prior quarter. The improvement was driven by 2% growth in recurring revenues, which account for 77% of the division's revenues. And transaction outright revenues grew 15% and 3%, respectively, more than offsetting a 5% decline in recoveries revenues. In a moment, I'll show you what our growth looked like excluding these recoveries. EBITDA declined 1%, and as expected, the margin fell 120 basis points from the prior period to 25.3%. This includes a $28 million in one-time charges. Excluding these charges, EBITDA increased 5% and the margin expanded by 30 basis points. Segment operating profit in the quarter grew 4% and the margin was flat from the prior period at 17.7%. Excluding the one-time charges, operating profit increased 13% and the margin expanded 150 basis points. We expect further improvement in both EBITDA and operating margins as the year progresses, and we continue to achieve further integration savings and realize the benefits of revenue growth. Now before I turn to the results on the individual segments within Markets, let's spend a minute on the impact of recoveries revenues on the division. Now let me remind you that recoveries are low-margin pass-through revenues generated by third parties, largely exchanges. Recovery revenues were down 5% in the first quarter, as exchanges continued to move clients to a direct bill model and we lose these lower-margin exchange fees. Recoveries had a 100 basis point negative impact on the division's reported growth in Q1, despite the fact that they constitute only 10% of the division's revenues. This trend may lower growth, but over the long term, it is positive for our margins. Our Q1 recurring revenues excluding -- our Q1 revenues, excluding recoveries, grew 3% versus the 2% that we have reported. Now I will discuss the revenue results for each of the market segments. Sales & Trading revenues were up 2% driven by Tradeweb growth of 35%, primarily due to the change in our ownership in the business, which was partly offset by a 9% decline in recoveries revenue. Now excluding recoveries, revenues in Sales & Trading were up 5%. The Commodities & Energy segment was up 9%, primarily due to the acquisition of Point Carbon. The Treasury business grew 1%, while Exchange Traded Instruments declined 6% due to planned shutdowns of low-margin products and the impact of the recoveries, which is in the segment. Investment & Advisory revenues declined 1%, with Corporate revenues increasing 3%, Wealth Management revenues rising 1%. However, Investment Management revenues declined 4% as its performance continues to be affected by competitive pressures. Enterprise continued to perform very well, growing 10% in the quarter, all of which was organic. This was driven by continued strong customer demand for its innovative data distribution platform. Elektron now has 12 hosting centers around the world. Real-Time Solutions grew 10% and the Enterprise Content was up 17% due to continued strong demand for pricing and reference data. And finally, Media's revenues increased 1% in the quarter, driven by 2010 new sales performance. Now let me turn to adjusted earnings per share. Underlying profit in the first quarter was $556 million, including the $39 million of one-time charges. To arrive at adjusted earnings, we make the following adjustments. We deduct $70 million of integration program expense. We deduct $101 million of interest expense. We deduct $53 million of income tax expense. Note that our tax rate in the first quarter was 22% versus 23.7% last year, and this results in flat income tax despite the higher profits. And finally, we deduct $7 million of noncontrolling interests. The net result is $324 million of adjusted earnings or $0.39 per diluted share, an increase of $0.03 versus a year ago. A complete reconciliation from net income to adjusted earnings is available in the press release, which we issued this morning. Now turning to free cash flow. The first quarter has historically been weaker for free cash flow for the company, and it is not at all reflective of what we expect for our full year performance. Underlying free cash flow for the quarter was $13 million and this represents a $94 million decline versus the prior period, primarily due to unfavorable working capital, which is timing-related and as we discussed in the fourth quarter call. For the full year, we expect to generate strong levels of free cash flow. Now just turning briefly to our 2011 outlook. As Tom mentioned, we affirmed our full year outlook as our expected performance this year, and this is before any currency impact. First quarter revenues were up 5% for the full year. We continue to expect revenues to be at the mid-single-digits. Our first quarter adjusted EBITDA margin was 23.2%. However, excluding one-time charges, this was 24.4% and we believe we are on track to achieve a 300 basis point plus increase from our 2010 margin. Our first quarter underlying operating margin was 17.2%. However, excluding one-time charges, it was 18.4%. Again, we believe we are on track to achieve a 100 basis point plus increase from our 2010 operating margin. Let me remind you that the first quarter is typically the smallest quarter of the year from a profitability standpoint. We continue to expect that strong EBITDA growth in 2011 will contribute a 20% to 25% growth in reported free cash flow. So just wrapping up, in summary, our revenue growth and trends continued to improve in the first quarter, signs that our markets are improving and our new products are gaining momentum. Our results in the first quarter were consistent with our expectations and confirm that we're tracking to our outlook, which we discussed with you in February for strong margin improvement and free cash flow growth. And we continue to optimize our portfolio, announcing disposals this quarter that will improve our growth prospects while enhancing our long-term returns. Now let me turn it back over to Frank to open it up for questions and answers.

Okay. Thanks very much, Bob. Operator, we are happy to take questions now. So if we could field the first question, please?

[Operator Instructions] And our first question will come from Paul Steep with Scotia Capital.

Tom, I wonder if you could talk a little bit about the adjusted EBITDA margin gain expected in the back half of the year. How much of that is dependent on revenue growth versus completed integration programs that are sort of already in hand? And how should we think about that sort of phasing in over the back end of the year?

Well, as you could see from our results, there is a significant phasing effect. Bob just mentioned that the first quarter is typically the smallest quarter from a profit point of view. And I know some of you have properly phased the expectations through the year and others seemed to have just put it through exactly equal each quarter. And I think the best I can tell you is we've sat down and redone all our forecasts on the basis of the most recent data and the sales information we've got. And it still looks strongly like we're tracking to the guidance, 300 basis points plus over the full year, and it'll obviously be more back-end weighted. But we always expected it would be. As between the revenues and the cost, at this point in the year, frankly, on a subscription model, the revenues still can move, but we're far enough in that there's no pronounced effect, whether it's cost or revenue.

Okay. And just a last follow-up on that. The use of proceeds out of the $1 billion from the sale, how should we sort of think about where that cash gets redeployed into the business or how it will be redeployed?

Since Bob grabs that cash immediately, I'm going to let him answer that.

Okay. Paul, I think that this cash, like any cash that we generate in our business, we think of in -- as within our capital allocation model. So our primary objective in this cash would be to redeploy it into the business. We think we have a long runway of opportunities of growth and investments. We're not going to be solely about this and it's not going to burn a hole in our pocket. And like anything else, if -- as we have demonstrated in the past, we have as our capital strategy, I think we're very well disciplined between what we allocate to reinvestment and how we return cash to shareholders. And so over the longer term, as we generate this cash, if we -- and the cash we generate from the business, if we can't find the appropriate uses for it, which I have no doubt we will be able to do, but if we can't, we'll certainly find ways to return it to the shareholders, either in dividends or buybacks as we have done in the past.

Our next question in queue, that will come from the line of Drew McReynolds with RBC Capital Markets.

Just my question on margin guidance for 2011, as of the end of last quarter, the basis that we were using was 19.3%, which excluded the divestitures that you announced last quarter. Does that 19.3% base, by which 2011 guidance is determined, do the 2 new divestitures impact that at all? Should we be using something that's higher or lower as a result?

I think you should continue to use that basis because those businesses in the aggregate [ph] were about the same.

Our next question in queue, that will come from the line of Vince Valentini with TD Securities.

I'm hoping I can sneak in a clarification as well as a question. On Slide 24, you say free cash flow was $2 billion last year, and then you have 20% to 25% growth as your guidance. It was my impression that 20% to 25% growth was off of the free cash flow after integration costs last year, which was more like $1.6 billion. So I'm hoping you just clarify that. The question I have is on these new restructuring costs of $39 million. Can you just give us some more detail on what those actually entail? And can you confirm that the 100 basis point of margin increase for the year on your guidance would absorb those $39 million in costs, you'd expect to still grow 100 bps even with that drag?

Well, I'll answer the first one, I'll turn it over to Tom for the second. And the answer to the first one is easy. Yes, it is free cash flow after integration.

And you are right on the basis on which you were comparing 2010. So it was a 20%, 25% growth off of the underlying, or actually off of the actual which was around $1.6 billion. And in terms of the $39 million, let me back up and first say, I view this as a really good thing, right? We have taken large integration charges associated with the Reuters integration. That program is ending this year. It's on track. Obviously, we produce more savings than we initially thought, and that's all great. But we don't stop looking for regular, annual, incremental efficiencies in the business. And what you see us doing here with the $39 million is identifying early in the year new opportunities. In this case, to answer to your question, Vince, it's mostly people cost. We did a streamlining and delayering in the Professional division and similarly, in Markets. They're beginning now that we're through with integration to go through and look at spans of control and number of layers. So that's where most of the costs are, it's severance-related. And not only does it pay for itself in the year incurred, which is how we can get back to answer your third part of the question, to the still 100 basis points improvement, it will pay a dividend greater than that next year because we'll get the full year effect.

Our next question in queue, that will come from the line of Phillip Huang with UBS Securities.

I just want to -- actually, I have a further clarification on the one-time charges. Just given that these efficiency opportunities are ongoing, I was wondering what you think in terms of how much more of such costs do you expect to see in the coming quarters.

How much more of related to this particular activity or additional activities? Is that your question?

Yes, or just in general, given that this is sort of one-time in the quarter. But I think you also mentioned in the release that these efficiency opportunities are ongoing. I was wondering if we can expect to see these type of costs from, I guess, like every couple of quarters or so.

We really don't have anything at this particular time. But I think that, that reference was more towards just taking opportunities as they arrive. But we don't have any. I think that we'll probably see another $5 million or $6 million over the course of the year, really maybe second quarter related to these. But then again, they're all self-funding, they're all included in our ability to achieve our outlook. But there's nothing significant beyond that on the horizon at this point.

I guess, do you guys look at this on an annual, like do you guys look at it every year? Or do you think that this is kind of like as you go along, if you find opportunities, that's something that you would do?

It's just a normal course of managing the business. As we evaluate, situations change and opportunities present themselves, and we encourage our businesses to always think about how to be more effective and more efficient. And so...

Yes, I think the way, Phillip, I look at it is this, if you're on an annual guidance basis and you're looking at EPS for the year or any of the lines, there should be no effect. But because people are sensitive quarter-to-quarter, we're calling out the extraordinary costs incurred early in the year, so you don't think that, that's actually the underlying trend in the business. So you may have, every year, something similar, but on an annual basis, it all washes out.

Got it. And I think you just mentioned that the 100 basis point improvement in the margin for your outlook, that excludes the restructuring charges. Is that correct?

No, that includes -- well, what we have said was we would spend $39 million. And during the course of this year, we will recoup virtually the same amount of savings, so it is netted into that number.

And our next question in queue, that will come from the line of Michael Meltz with JPMorgan. David Lewis - JP Morgan Chase & Co: This is David Lewis for Michael. Could you provide an update on the customer conversations you were having with the rollout of WestlawNext now that we're a year in? Given the significant efficiencies of the WestlawNext drive, could the value proposition support more attractive pricing as the legal market slowly recovers?

It's Tom, David. The conversations continue to be very positive. And you see that playing out in the continually upticking of the percentage of our revenues converted over to WestlawNext and the number of users. Undoubtedly, there is additional pricing room, given the productivity increase. We've been careful, though, and recognizing that many of the law firms are still coming out of a very difficult period. And so we've been conservative in our approach and looking to get as much migrated and rolled out while still achieving, I think, quite an attractive overall increase in it. And we look at it -- actually, the people running the business who are closest to it look at it constantly and tweak these models.

And our next question in queue, that will come from the line of Tim Casey with BMO Capital Markets.

First, a clarification then a question. Just on the guidance that you reaffirmed, that you've reaffirmed the growth rates, but it is essentially going to be off a lower base because of the divestitures. I just want to make sure I'm looking at that correctly. And secondly, on the proceeds, you mentioned $1 billion. That includes all announced divestitures, including the 2 that were announced today, I'm assuming. And is there a way you can give us a breakdown of how you're getting to the $1 billion? How much is with the Markets group and how much is with the previously announced ones?

I'll take the second question, Tim, and leave the clarification for Bob. Normally, I'd be happy to provide that breakdown, but for one thing, which is we've just announced the last 2 in Markets. These are really valuable assets, and we've had a good track record at even surprising ourselves sometimes in how much comes in from them. So I'd rather not start signaling expectations for the market. But after the facts, we'd be more than happy to do it.

But you're quite confident you'll get the cash this year, Tom?

Yes, I think it's -- given where we are in these processes, yes, there's always the possibility that, depending on who the buyer is, that there's an antitrust delay. But given what these particular assets are and the structure of those markets, I'd expect that these can get done this year.

And to answer your first question, Tim, the guidance is off of the base, which would exclude these businesses, okay? So the percentages hold, but the base is different because of the dispositions.

And our next question in queue, that will come from the line of Brian Karimzad with Goldman Sachs.

On the emerging markets within the Markets division there, can you give us a sense on how growth is there and kind of what's been holding it back a bit? Because the latest headline, we look at the growth in Asia and EMEA, and I know you have Japan and Western Europe in those numbers. It's certainly not meaningfully above what we're seeing in the Americas. I was wondering if you can help us understand what's going on and potentially what could accelerate it.

Well, I think you're seeing -- certainly in the Asia-Pac, you're seeing the sluggish, for a good reason, performance in Japan pulling down. I mean, last time, I looked at relative breakdown, Japan was about 40% of overall Asia in Markets. And although we all hope in all of our businesses to see a recovery in Japan, that did have a pronounced effect in the first quarter for us. The other thing I just mentioned, this is really in the weed for people who love to tweak their models, but the way the Japanese market works, the beginning of the year is actually April 1 there. And so although, we put through our price increases January 1 and the rest of the year, it's April 1 in Japan, and that has an effect given the size of Japan also.

All right. And any color just on some of the developing markets themselves and what their growth rates have been and some initiatives?

Well, I was just through the Gulf a couple of weeks ago, and that's reasonably large market for us. And that's recovering nicely after a sort of flat to negative time in growing out of the Dubai restructuring. Southeast Asia, still strong. Latin America, really strong for us, especially on the Professional side as we launched Revista Online in Brazil, which looks really, really promising.

And our next question in queue, that will come from the line of Patrick Wellington with Morgan Stanley.

A couple of points of clarification, Tom. I mean, firstly, on organic growth in Markets, I think twice in the presentation you refer to it as 2% in the quarter, although the table on Page 10 refers to it as being 1%. So I was wondering which is the correct number. Second question is on the disposals in Markets. As you say, Enterprise Risk and PORTIA looked like they could be valuable businesses. Can you give us some idea of what their organic growth rates are? Were they above or below average for the division? And really, why you think it is suitable to sell these businesses? And then finally, can you give us a little bit more on 2 specific markets, what's going on in Sales & Trading, which is still sort of dropping along at 0 growth, maybe a little bit disappointing? And what you think will start to move the large law market in due course?

Okay. There are a whole bunch of questions. I'll start taking them apart, and at least Bob will pick up. So on the reasons for the divestitures in Markets, you're right, these are very attractive businesses. But we're also very serious in Markets, to follow the 2 platform strategy that Devin Wenig outlined at the recent Investor Day, Elektron and Eikon. The Risk Management business is really a trade risk, trade management business. It's a deployed software business, as you know, done on an outright basis as opposed to the rest of our business, which is much more a recurring subscription basis. So both the nature of the business itself, selling large deployed software systems on a once-off consulting like basis, and the business model accounting, which is on an outright versus the recurring, just doesn't fit the overall way we run that business. It's attractive, it's growing, but it shouldn't have a pronounced effect one way or the other on the growth rates in Markets. Now large law. Large law is recovering, but they're still quite cautious. I see a lot of those folks. The very strong performance you see in our Business of Law segment, that's separate from WestlawNext, sales of things like our Elite ERP system, very strong in large law. So you're seeing the refresh of technology cycle apply there. And I've been out on a whole bunch of the sales calls there, and that's very positive. But law firms themselves are being cautious in adding heads. There's still a couple of law firms here or there that haven't worked through their problems from the last couple of years. So I think it will be steady and recovering in large law, but not an instant pop.

And Patrick, the organic growth is 2%, excluding recoveries and 1% including recoveries.

And Tom, just Sales & Trading, flat for the last couple of quarters. You want it [ph] to sort of be a little bit better at this stage?

Yes. Well, my view, it always should be better. The business, our model always tends to be slow to slow down and slow to pick up speed. But when it does, very attractive operating leverage. In particular, in Sales & Trading, what you're seeing for us is the Exchange Traded Instruments unit has been slower, in particular, impacted by recoveries. So if you took recoveries out, which as you know is other people's revenues that we're forced to account within our own, you'd see a stronger performance in Sales & Trading. It will pick up. Fixed income has been improving for us. Commodities & Energy has been growing strongly. And on the transaction side, FX volumes have been good. On the information terminal side, there's slow progress, but I do expect that will improve.

And that final question will come from the line of Jonathan Helliwell with Berenberg.

Just specifically going back to that organic growth question in Markets. The 1% figure you're giving us or the 2% excluding recoveries, you said was mainly driven by change of ownership at Tradeweb. Can you just remind us the broad shape [ph] of what you did there, and in particular, whether you've treated a change in consolidation of Tradeweb as organic growth?

No, we did not. That was in -- core Tradeweb actually grew 9% without change in ownership.

Right. And the organic figure, 1%, that you gave us is driven by the 9% core growth, not by the change of ownership.

Absolutely, yes.

Okay. That will conclude our call. We'd like to thank you for joining us today.

Thank you. And ladies and gentlemen, this conference call will be available for replay after 10:30 a.m. Eastern Time today through May 5, 2011, at midnight. You may access the AT&T teleconference replay system at any time by dialing (800)475-6701 and entering the access code of 200869. International participants may dial (320)365-3844. And that does conclude your conference for today. We do thank you for your participation and for using AT&T's executive teleconference. You may now disconnect.