Thomson Reuters Corporation (TRI) Q3 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you, for standing by. Welcome to the Thomson Reuters Third Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to our host, Senior Vice President of Investor Relations, Frank Golden. Please go ahead, sir.

Thanks, very much. Good morning, and thank you, all, for joining us as we report our third quarter 2011 results. We will begin today with Thomson Reuters' CEO Tom Glocer who'll be followed by our CFO, Bob Daleo. Following Tom and Bob's presentations, we'll open the call for questions and I'd ask that you please limit yourself to 1 question so we can get to as many as possible. 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. 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. Here's a snapshot of our results for the third quarter. The numbers themselves are positive, but I'm not yet satisfied that they represent the sort of performance that our company is capable of delivering. They also do not yet reflect the actions we have under way in the former Markets businesses, and across the company, to take up our game. So rather than summarizing these results, I'll leave that to Bob Daleo and I'll focus instead on the actions we've taken since last I spoke to you in this forum in July. First, I'll recap what our action plan was moving into Q3, then review what we've accomplished over the past 90 days. And finally, I'll provide you with our early thoughts about 2012 as we work to complete our budgets for next year. On July 28, I told you that I'd take firm leadership for our Markets division and put it back on track for success. To accomplish that goal, I laid out a 5-point program that is outlined on this slide. We needed to: simplify the business structure; drive an accountable performance culture through the appointment of a strong management team; realign the sales force with its markets, customers and products; draw in proven managers and resources from other parts of the company to support these efforts; and reset our product strategy to emphasize new sales of Eikon and Elektron over more internally focused migration targets. These changes are all about performance, putting proven managers into clear and accountable roles, speeding decision-making and improving collaboration. All of which makes me confident that we can take the company to the next level of performance. So let's talk about what we've accomplished so far. The most significant change I announced during the quarter was appointing Jim Smith as COO and Stephane Bello as our next CFO. Jim is a world-class operating executive and is excited about this new opportunity. I'm also very pleased that Stephane will serve as CFO when Bob retires next year. Stephane has been with the company for over 10 years, having been the Treasurer and most recently, the CFO for the Professional division. Jim and Stephane bring an enormous amount of operating and financial experience, as well as deep knowledge of our businesses and markets, and I'm looking forward to continuing to work closely with them in their new roles. Meanwhile, at the corporate level, we're replacing our former 2-division structure with a flatter, streamlined organization that will drive simplicity, performance, accountability, and collaboration across the company. This will enable us to better leverage our scale and achieve efficiencies. For example, by building innovative technology platforms that can be shared across the company. The divisional structure served us well during the Reuters integration. That job is done and now is the time to marshal all of the assets and all of the people of Thomson Reuters to drive our business by focusing the full power of the company on such cross-unit opportunities like Governance, Risk & Compliance to help us grow. In the sales organization, we've begun to see the benefit of putting the right people in the right roles. Chris Perry, a 15-year company veteran, has greatly streamlined our go-to-market approach, by putting more resources on the ground in front of customers, organized around global accounts, regional firms, and emerging markets. Lastly, we're also leveraging the strength of the entire financial business in our approach to developing, marketing and selling Eikon. We understand that a significant part of the value that we bring to customers lies in our unique ability to serve the entire firm's needs, from desktops to mobile accesses, to heavy-duty data feeds, and infrastructure. And so we've organized ourselves and reset the Eikon development path accordingly. Eikon remains our flagship desktop offering and is now being sold as part of this integrated strategy alongside Elektron. All of these changes are designed to promote agility, speed decision-making, and place authority and accountability as close as possible to the front line, putting the customer first, and thereby, driving growth. Now with all this change in parts of Markets, let's not lose sight of the balance and strength of our portfolio as a whole. As you can see from this chart, 80% of our businesses grew in the first 9 months of this year, and about half are growing over 5%. And this isn't just our former Professional unit businesses such as Tax & Accounting, IP and Science, and Legal, but also Enterprise, Fixed Income, and Tradeweb in our former Markets division. And we're working aggressively to strengthen the 20% of our business, primarily the desktop-related business, which is highlighted in red, in order to deliver mid-single digit revenue growth that I believe the company is quite capable of achieving. So how are we positioned for the balance of this year and into 2012? Well, our Professional division businesses, as well as the Enterprise and trading marketplaces units in Markets, should continue to perform well and support overall company results. And I'm confident that the strength of our franchises, as well as the strategic product and organizational changes that we're making to those parts of our current Markets division that are not performing up to our expectations will help to improve sales performance in 2012 and drive 2013 revenue growth. I want you to know that we will be satisfied with nothing less than all of our units performing at their best, and we've begun to deliver on our plan to achieve this. And with that, let me turn things over to Bob to walk you through our Q3 performance. But first, let me just say, I believe this is Bob's 53rd quarterly results presentation. I've only been lucky enough to be at his side for 12 of those, but I just wanted to say what a personal pleasure it's been and what a professional master class in doing things the right way. Bob, over to you.

Thank you, Tom. It's quite an introduction, thank you. And good morning, good day. Well, as in the prior quarters, I'm going to speak to revenue growth before currency. Reported revenues are also highlighted on each of these slides. In addition, for consistency and comparability with our previously reported results, all the results I'm going to discuss today are on an ongoing basis and exclude all disposed announced to date, including the planned sale of the Healthcare business. For the consolidated business, revenues in the third quarter were up 5% versus the prior year, with 3% coming from acquisitions. Adjusted EBITDA was up 23%, and underlying operating profit was up 12% in the quarter. Adjusted EBITDA growth and underlying operating profit growth across both divisions was due to flow-through from higher revenues and integration savings. Currency had virtually no impact on margins in the quarter. The underlying operating profit margin also expanded 80 basis points. Now let's turn to the divisions, starting with Professional. As you can see from this chart, growth has continued to accelerate as professional markets recover and we realize the benefits of the investments we've made since 2009. The third quarter marked the highest growth rate for Professional division since the third quarter of 2008. As we discussed last quarter, revenue growth trends have been strong and have been driven by 3 primary factors. First, growth from the launch of new product platforms such as WestlawNext and the ONESOURCE global tax workstation. We've never had a more advanced set of products to deliver to our customers. We continue to see good acceptance of WestlawNext, which is offsetting downward pressure in the core legal research market, especially in large law firms. We now have over 29,000 customers, including half of the Am Law 100 and more than 25,000 small law firms and 2,400 corporate legal departments. We have and are continuing to invest in WestlawNext, and in order to ensure the return on these investments, we intend to continue selling our product at a premium in the market. Second, the legal services markets have improved, albeit at a slower pace than we would like to see. Legal demand is up, not quite as much as we saw in the first and second quarter, but demand continues to grow. Third, acquisitions and global expansion have contributed to an acceleration of growth. Last year's acquisition of Revista dos Tribunais and this year's acquisition of Mastersaf have given us a strong presence in the legal and tax and accounting market in Brazil. We are seeing strong organic growth from these investments. The acquisitions of Complinet and World-Check allow us to further expand our presence in the rapidly growing governance, risk and compliance market where we will soon have a $200 million business. So overall, we expect these trends will continue through the balance of this year and into next. Now the Professional division has recorded 10% revenue growth, and as noted on the prior slide, 4% was from organic and 6% from acquisition. And this is driven by solid performance from each of the 3 business units. EBITDA increased 12% compared to the prior year and the corresponding margin was 36.1%, an increase of 20 basis points. Operating profit was up 12% compared to the prior year and the margin was up 20 basis points at 27.8%, and this is despite absorbing 110 basis points of margin dilution from acquisitions. Now I'll discuss the results of the segments within Professional. Legal's third quarter revenues were up 8%, 2% on an organic basis with the balance coming from acquisitions. Law firm solutions revenues grew 3%, of which 1% was organic, driven by Business of Law which is comprised of fine line Elite, which was up 17%, partly offset by a 3% decline in research-related revenues. Corporate, Government & Academic, and Risk & Compliance grew 13%, of which 3% was organic. Global businesses were up 10%, of which 4% was organic, with strong growth in Latin America and Canada. Revista online continues to do very well with sales starting to ramp up. Now EBITDA for the division increased 7% compared to the prior period and the corresponding margin was 38.3%, down 60 basis points. Operating profit also increased 7% from the higher revenues and efficiencies. The margin, however, declined 40 basis points to 30.1% due to business mix and a 100 basis point impact from acquisitions. Now Tax & Accounting had another very strong quarter. Revenues grew 20%, of which 6% was organic, driven by growth in income tax software sales, electronic filing of tax returns, Checkpoint, and acquisitions. Tax & Accounting continues to show strong EBITDA growth, up 24%. This is the fifth consecutive quarter of double-digit EBITDA growth and the related margin was up 90 basis points. Higher revenues and effective cost management led to the increase. Operating profit increased 22%, and the associated margin was up 30 basis points to 18.4%, benefiting from revenue growth and efficiency initiatives, partly offset by 110 basis point dilution from acquisitions. Now this is the first quarter that reflects the results of Mastersaf and Manatron. These transactions are important in our strategy as Mastersaf provides an extension of our Global Tax platform in Brazil, a country with one of the most complex tax regimes in the world. Manatron is focused on the fast-growing global government tax automation market, and this represents a new growth opportunity for us. While these businesses are growing double-digit and have EBITDA margins which are comparable to a greater than Tax & Accounting segment as a whole, they result in some near-term operating profit margin dilution from the amortization of acquired software. As we have demonstrated in the past, we expect operating profit margins will improve as these acquisition-related costs fall away after the 3-year period. Now, turning to IP and Science. Revenues grew 10%, of which 8% was organic. Growth was driven by IP Solutions, up 12%, led by our sales of our IP manager software and services offering. Scientific & Scholarly Research grew 8% due to timing benefits related to a significant backfile sale -- sales I should say, and growth in core information offerings. Life Sciences increased 9% due to continued demand for biology and disease analytics products, and acquisitions. EBITDA increased 23% over the prior period and the corresponding margin was 36.7%, up some 350 basis points. And the operating profit was up 28% and the corresponding margin increased 390 basis points. Now the increase in EBITDA and operating margins in the quarter was primarily due to timing of revenues. The year-to-date performance on the operating profit margin is more reflective of what we expect in this business for the full year. Now let's turn to the results for the Markets division. In the third quarter, the division grew revenues 1%. Excluding recoveries, revenues grew 2%. Recovering revenues, which account for 77% of the division's overall revenues, were flat. Transaction revenues grew 15% due to higher volumes and acquisitions, including our increase in the company's ownership of Tradeweb. Outright revenues and recoveries declined 9% and 5%, respectively. EBITDA was up 11%, and the margin increased 150 basis points from the prior year to 28%. Operating profit grew 8%, and the margin was up 60 basis points from the prior year, at 20.3%. EBITDA and operating profit growth was driven by flow-through of integration savings and efficiency initiatives. Now I'll turn to the results for the individual segments within the division. Sales & Trading revenues were up 2%, driven by Tradeweb's 11% organic growth and an increase in the company's ownership in this business. Revenue growth was partly offset by a 9% decline in recoveries. Excluding these recoveries, Sales and Trading's overall revenues were up 4%. The Treasury business was up 1%, while Exchange Traded Instruments declined 6% from planned shutdowns of low margin products and the continued decline of recovery revenues. Eikon sales are now at over 32,000 desktops, up 14% from the second quarter. Now 27,000 of these are migrations from existing clients and 5,000 are new customers. Active users now total around 8,000. Investment & Advisory revenues declined 3%. Corporates increased 4%, while Investment Banking was flat, and Wealth Management declined slightly. We continued to see weakness in our Investment Management business where revenues declined 8%. We have launched a new retention program in May and are beginning to see improved customer retention already, an important first step in stabilizing this business. Enterprise continued to perform well, growing 8% in the quarter, and this is all organic. Our innovative data distribution platform, Elektron, now has 14 hosting centers around the world. The Enterprise Content business grew 16%, driven by the continuing trend among customers to invest in pricing and reference data. And finally, Media revenues were flat in the quarter. Now turning to some of the consolidated results for the company. We'll start with adjusted earnings. Underlying profit in the third quarter was $717 million. If they're accounting for the other expenses reflected on this slide, the net result is $470 million of adjusted earnings or $0.56 per diluted share. This is an increase of $0.11 per share versus a year ago. The increase is largely attributable to higher underlying profit and lower integration costs. Currency actually accounted for about $0.02 of the increase. A complete reconciliation from net income to adjusted earnings is available in the press release issued this morning. Now turning to free cash flow. Year-to-date reported free cash flow is $933 million. Underlying free cash flow, which removes $198 million of integration-related cash spending, is $1.1 billion. Reported free cash flow increased $81 million versus the prior period primarily due to lower integration costs. For the full year, we expect to generate strong levels of free cash flow. Through today, the company has repurchased 10.8 million shares of its stock for an aggregate purchase price of $325 million. These purchases were pursuant to the Normal Course Issuer Bid program, which was renewed in May and provides authorization for the company to purchase up to 15 million common shares. Now, this slide is an interesting one. It talks about the highly-generated cash nature of our business, with stable recurring revenue streams and robust capital structure which enables us to return a significant and increasing amount of cash to shareholders while continuing to reinvest for growth in the company. This past year, we increased the dividend 7% and we remained committed to maintaining growing dividends as an important component of overall shareholder return. As you can see from this chart, we have returned approximately $7 billion to shareholders since 2005, through a combination of dividends and share repurchases. As we move through the year, we will continue to consider the best use of proceeds, including reinvesting in our business and share repurchases. With integration programs coming to an end, we expect to return to our target dividend payout ratio which is 40% to 50% of free cash flow, and to grow dividends with free cash flow. Now as we've noted, we have reaffirmed our 2011 output -- outlook for our expected performance this year, and this is before any impact of currency. Year-to-date revenues are up 4%. For the full year we continue to expect revenues to be in the mid-single digits. Year-to-date adjusted EBITDA was up 26.6% and we are on track to achieve a 300 basis point plus increase from last year's margins. And our underlying operating profit margin was 20.1%. Again, we believe that we are on track to achieve a 100 basis point increase from 2010's operating margin. We continue to expect that strong EBITDA growth in 2011 will contribute to a 20% to 25% growth in reported free cash flow. So as we look to finish out the year, we continue to focus on executing on our action plan. As Tom outlined, we have made a number of changes that we believe will help drive revenue growth and achieve operating efficiencies across the organization. These changes will speed decision-making while placing authority and accountability in the business units, resulting in a better customer experience. Now, 2012 may be a challenging environment, and we are planning accordingly. Nevertheless, I believe the strength and resilience of our franchises will continue to serve us well. Now let me turn it back over to Frank to open it up for Q&A.

Thanks, very much, Bob. Now that concludes our formal remarks. And at this point I would like to open the call for questions. So we will take the first question, please.

[Operator Instructions] And our first question today comes from the line Suzi Stein with Morgan Stanley.

Given what we're hearing, as far as headcount reductions and cost cutting from customers in the Markets division, are you seeing any changes from your competitors just in terms of pricing? And I guess you also mentioned that you are at about 5,000 new customers for Eikon. Can you just talk about where that is relative to what your expectations were?

Sure. It's Tom. I'll take that one. Let's start with the Eikon one. I mean, I think we're being, maybe, unusually transparent. I'd like to think, as transparent as this company always is, that we have a set of issues, we wouldn't have taken such bold action in our Markets division absent that. So Eikon is behind -- where, certainly, I and I know Bob would've wished it to be by now. That said, we've identified what the issues are. We've got a very good plan, both organizational and development around it, and we'll get this right. And then we'll be firing on all cylinders. In terms of the pricing effect from competitors. The biggest issue really is just the headcount action at the large institutions, in particular sell side, obviously, it's less any explicit change in pricing strategy. And, rather, that the overall pools are reducing as the overall heads in these institutions are going down. There hasn't been a dramatic change. It's been a competitive market as is, but our big customers are looking for help from us and others to make ends meet.

Are you guys using pricing at all, more aggressively now, to try to migrate customers from competitors?

No. I mean, I think we -- in a way, we always use pricing aggressively in the following way: Which is, since we just don't sell 1 product at 1 price, but rather have a graduated product line where people can, in effect, self-select the bundles of content and functionality at price, there is a built-in option to, in effect, buy just what you need. And we also run a very transparent global discount program for our largest purchasers to encourage them to consolidate their activity, which they do. But beyond that, no. No particular special arrangements.

And our next question comes from the line of Vince Valentini with TD Securities.

I'm wondering if you can give us an update on the divestiture of Healthcare. Is that process still going well? And if it does conclude in the next few months, any signal on the use of those funds? Given the aggressive share buybacks recently, should we cue from that, that you'd be looking to do even more if Healthcare closes?

Well, Vince, we're still in the middle of that process and so I don't really want to comment on where we are. We do expect to sell the business. And as far as the proceeds go, I think that we're always looking for the right opportunity to deploy our cash in the most effective way. And if we feel that our stock continues to be undervalued, and we continue to feel that it's good use of cash, we'll use it there. We also have, as you know, a lot of opportunities inside the business. So it's always that balance between internal use of capital versus returning cash to shareholders and we're not shy, certainly, doing either of them.

And we do have a question from the line of Paul Steep with Scotia Capital.

Tom, could you maybe provide an update for Eikon. The timing of the launch, when you actually plan to push forward with the reworked plan that you talked about. Maybe the magnitude of the investment cycle that's left in that product at this point.

Sure. So, to me, the single largest requirement is that we deliver the performance and quality of the code base through all of our clients. And that involves a server-side or a set of server-side releases which have been ongoing, and a desktop release scheduled around the end of this year. That will introduce significant new functionality and content, some real exciting things in commodities and energy, in particular. But it will also herald a much more performance -- real-time data infrastructure. So that's a big deal for us. And that should help across the board in terms of Eikon next year. That is by no means the last release along the development path. I think I've signaled already at midyear that, in terms of Investment Management's content and functionality, some of those advanced analytics don't come until much later in the year. But we think this will certainly help the Eikon franchise. And in terms of actual cost, you've begun to see the large amounts of spend roll-off associated with the integration and the work that was done on common platform. Those are still working their way through depreciation, so you should be sure to note that in your models. But going forward, really, the Eikon development spend is, in effect, substitutional for the spend on the development of all the other products that migrate to it. And there comes a point where the depreciation begins to roll off from the push. We closed down some of those old infrastructures and we see a benefit, but don't crank those in yet for next year.

And we do have a question from the line of Michael Meltz with JPMorgan. Michael A. Meltz - JP Morgan Chase & Co, Research Division: A question for you, Tom, on the kind of soft outlook you gave -- soft isn't the right word -- the early outlook you gave for next year. Can you just clarify? You're talking about improvement in sales and driving better revenue growth in '13. What are you actually seeing in net sales trends at Markets? Was Markets up or down in the third quarter? And your expectation for next year, is it actually for revenue growth at Markets or net sales growth? Or both?

Yes. I'm going to let -- Bob and I will tag team you. So first, let me say exactly what I meant in the closing, in case I wasn't clear enough. I wanted to point to 2 things. First is, that I'm pleased with this quarter. I think it's good, positive performance. We have a very good business. And I wanted to make sure that people did not yet think that the actions we took in July and are ongoing, the actual plan that Bob and I talk about, that you're already seeing those results in the third quarter and should say, congratulations, plan is working. The fruits of those actions will play through in 2012, I'd expect, in terms of better sales in Markets than we would have had in the absence of those changes. And then part 2 is, and you know this well, Michael, the recurring subscription model that we like so much, does have an inherent lag. So if net sales go up next year, then you'll actually see the benefit in period on period growth statistics in 2013. Now to bridge over to Bob and I'll let him talk about the numbers in particular, we did run slightly negative on net sales in the third quarter. That's not a surprise to me. Frankly, I wouldn't have fired half the team if things were going swimmingly in Markets. But that does obviously have implications. And Bob, I don't know if you want to take that anymore.

Sure. The sales through this year have not been as robust as we had hoped and that's why, as Tom said, we made the changes. And what that plays through is to expectations for revenue growth for next year. While we fully expect -- given the changes we made, we're going to sell a lot more of our Products and services in 2012 than we sold in 2013, it doesn't have the same impact in terms of revenues. So, my guess would be -- my expectations would be that we wouldn't expect revenue growth materially stronger than it was in 2011. And that plays through, also, into things like operating margins, because to grow the business, and expand the margins dramatically, you need to have more growth than that. So we've had significant expansions in margins in the Markets through some really incredibly robust efficiencies and cost cuttings and things like that, and we will continue to do that in 2012. But without some growth in revenues, it would be a bit of a challenge to see significant margin expansion next year. Michael A. Meltz - JP Morgan Chase & Co, Research Division: But at this revenue growth level you're, I believe, 1% organic year-to-date. Do you think you could drive margins in Markets next year, if you did that revenue level?

I think it's too early in our planning process to answer that. I know that we will be very much directed at making sure we continue to do that. But it's just too early for us to really say that.

And the answer, Michael, is we can always do that, but the art of it is can we do that and also aim for the sort of sustainable growth we're looking for in outer years? We're managing for that value in a sustainable franchise, but I think we've been good on the cost lines to date.

And again, I just want to reemphasize. We're actually confident that we're going to see growth in this business next year. It's going to be sales growth, and given the nature of our model, it doesn't always translate immediately to revenues. So all the things we're doing, we're very positive about the changes that we're making and the impact it's going to have on our business. But the sales model that protects us on the downside, in terms of a lag, also gives us a bit of a challenge on the upside.

And our next question comes from the line of Drew McReynolds from RBC Capital.

Just a question on the free cash flow guidance for 2011. Just getting a lot of questions on how do we kind of square off your reported free cash flow year-to-date with the 20% to 25% year-over-year increase. Maybe, Bob, if you could kind of walk us through how we do that.

Yes. Sure, I'm happy to. I think cash is one of our most challenging items to forecast, and we -- traditionally, the fourth quarter is usually a very big cash quarter. And frankly, we had a strong cash quarter last year at this same time. And we're anticipating that we should have the same thing. Now there are other puts and takes, in terms of timing of cash tax payments and things. It could work for us or against us. But I feel significantly confident in the run rate of the business, that any changes would be as a result of timing and not really fundamental business performance. That's why we continue to guide that way because we do feel the business will continue to see significant cash generation. And as I said, that fourth quarter is a really big one for us and we feel confident that we can achieve it.

And we do have a question from the line of Sara Gubins from Bank of America.

I was hoping to continue the conversation about your early expectations for 2012 on the Professional side. If the macro environment remains kind of as is, how would you think about Professional headed into 2012?

It's Tom. At the moment, we don't see any significant change to the positive trends you've seen, which doesn't mean that, in as large a business and made up of multiple units, you don't have some swings and roundabouts there. But those businesses are performing very well and the market outlook remains generally positive. Although, obviously, if European debt crisis melts down the world's economy, it will have an effect on those businesses as well. We have not seen that, to date, in the way that we have seen that pall over, let's say, over the large sell side banking franchise.

I would add that the Professional division has a lot of momentum going into 2012. The product innovation we've talked about, which are just starting to really take hold in the marketplace, the acquisitions that we've talked about that are really in growth segments of our Markets, both globally and sectionally. So, like Tom said, barring any global melt down, we feel the business is in an excellent position to continue to sustain a very, very good growth momentum.

And we do have a question from the line of Tim Casey with BMO.

Bob, I know you've been asked several times, but can you just walk us through the margin impacts for 2012? What the drivers are within the Markets group, because you've -- as Tom said, the biggest movements on the pipeline, sort of thing on the costs associated with common platforms. And now we're into, I guess, operating efficiency or operating leverage on the revenues. But should we anticipate significant margin declines in the absence of revenue growth? Or is the underlying cost base, there kind of stable?

Tim, we should not anticipate significant margin declines at all. And like I said, this is the -- we're talking about we're just in the middle of our planning process. I think the management team has done a great job of bringing effectiveness and efficiency out of the businesses, and those are sustainable efficiencies. So I think that the real question is to get more -- to get accelerated margin expansion in any business, not just Markets. In Professional, in Legal, we need to have organic growth rates that are like, 3%, 4%, right? And so -- and we will see those in this business in, we believe 2013 and beyond. But we won't see them next year. And so as a result of that, it's likely that we won't enjoy the kind of margin expansion we've seen in the past. And I'll leave it at that. But I will tell you for sure, we don't see dramatic margin decline in this business in any fashion. In any fashion.

Our next question comes from the line of Phillip Huang of UBS.

I want to go back to -- I think it was asked earlier. I was wondering if you could provide a bit more detail on your visibility to the impact of your business from the bank headcount reductions announced through the summer. You've mentioned that net sales is slightly negative in Q3. But how should we think -- how do you think -- where do you think it troughs in 2012? And how do things compare relative to the last downturn? And also, from your comments, it sounds like 2012 is certainly a bit of a transition year. You've talked about sales growth but I was wondering if you could potentially see organic revenue growth turn negative in 2012.

Okay. So Bob and I will gang-tackle this one. There are 2 -- to my mind, there are 2 phenomenon going on in the overall financial Markets as they relate to our performance. First is a set of cyclical issues, and we can look to the last cycle, which I hope was a deeper one, i.e. 2009 and '10, for guidance there. That one ended up being more shallow for us despite the obvious existential risks to the banking system. And although that will affect us and you see that on lines like ETI, which are more to do with market, necessarily, than a particular set of product issues for us, we think we can weather those reasonably. There is also going on, at the same time, and UBS -- you see this more perhaps more than anyone else, a set of structural issues, like how does UBS deal with the Swiss potential requirement of a 19% reserve requirement? What businesses, that you're currently in today, are no longer profitable? All of the major banks, European in particular, are grappling with that question. And so what we're seeing play out simultaneously is a set of cyclical issues and that longer-term structural one. Let me just say while addressing it, though, that the very same trends that do have an effect on headcount-related businesses tend to benefit our Enterprise business. And you saw not only how it continues to grow now, but right through '09 and '10, it grew at 8%, 9%, 10%. We see those trends continuing and in many ways, strengthening. And finally, with our trading marketplaces business, Tradeweb is very well positioned from a regulatory point of view. FX volumes have been strong in our FX businesses. Those help by, in effect, sheltering around half of our Markets revenues from these very headcount-driven reductions. So put it all together, we're not immune, we're not going to make a specific organic revenue projection for next year beyond what we're already doing this early in the year, which is to give you a sort of early look. But those are the factors and I think you're probably able to put them together as well as we.

If I could tag on to that, with the collapse of your divisions structure. I was wondering if you might be able to comment, initially, how you might look to report those results going forward.

This is Bob. I think that right now, we're in the process of determining that. And while we're not prepared to comment on it today, I am certain that when we issue our fourth quarter results, we will have greater clarity. But it's safe to say that we will certainly continue to have transparency that equals or exceeds what we currently provide today, not less.

And you'll get the comparables, so that...

And our next question comes from the line of Matt Chesler with Deutsche Bank.

Earlier you addressed trends in Professional more broadly. But can you do the same specifically for the demand environment in Legal? Which slowed organically another point in the quarter. Are you seeing an overly intensification of the tight cost control behavior for expenditures other than productivity measures? Or is this just a rounding error in the numbers?

This is Bob. We continue to see a tightening in the marketplace for large law firms in core research, and that's what you see as reflected in the numbers. There is also some timing, in the quarter, relative to other segments that would have had a little bit higher sales to offset that further. But there is a reality here that the core legal research marketplace, as exemplified by large law, has changed dramatically in the past couple of years. And I would point you back to that slide that I showed for the overall Professional division. Because I think that the Professional team has done a great job of understanding what's going on in that marketplace, and with their strategic initiatives and investments, have very definitely moved the business to other positions in other segments and markets to be able to sustain overall organic growth rates and indeed they accelerated then. So I think there is a reality that core legal research is a market that has slow if no growth and perhaps declining marketplace at least in the current term. But the opportunities that we see in Professional beyond that, both in the Legal market place and in places like Tax & Accounting, and IP & Science, and Investments in Brazil, we feel very comfortable that any declines in that segment, or the sluggishness, can be more than offset by growth opportunities in other areas.

I mean, has there been any progress in being able to get rate on, on WestlawNext or is the aggressive pricing behavior of your competitors still a factor in the larger firms?

Well, I think that pricing is always a factor when businesses are challenged, right?. And large law firms, even though demand has increased, continue to be a bit challenge. There is, clearly, a shift in -- if you want to call it the power between suppliers and purchasers, and that shift moving to the corporate space. And we have been definitely following that, with investments in businesses that serve the Corporate Legal segment. So yes, there's no doubt that pricing is something that the competition has used. And we have reason [ph] to respond, but not in every case. We continue to see premium pricing for WestlawNext in the marketplace because of the value that it provides. And I think that this is simply a reality of today's environment.

And, Matt, let me tag on here, because I think there's an important point to make about the action plan and what we expect in Markets. We're disaggregating Legal here, which is obviously one whole business. And were we not separately pointing to the success we're having at the Corporate General Counsel, the success in growing our GRC business, the success in Latin America and other emerging markets, they're all part of Legal. And so we're sort of abstracting in saying, core research is negative, but we're taking a lot of the offensive weaponry away and saying, well, those are growth initiatives. And when you look at our Markets business, and one of the things that Jim, Stephan, and I are doing as we approach our plans for '12 and beyond is to say, we have those comparable growth vectors in Markets. Enterprise, Commodities & Energy, RDE Markets, our FX business, we just don't have as many growth vectors and that's why you're seeing some of the headcount-related business in Markets pulling us backwards. So that gives me confidence. The playbook we run in Legal is a really good playbook. I wouldn't get depressed about a couple of points back in core research because it's a bit of an abstraction. And think about that playbook running as a growth playbook across the whole company.

And our final question of the day comes from the line of Nick Dempsey from Barclays Capital.

Just a follow up on that Legal question. I wonder if you could remind us what proportion of your total Legal revenues are in print. And to what extent a decline in print is explaining that minus 3% in the research-related revenues that we just talked about.

About 1/4 of the revenues in Legal are in print. And they do represent -- they've declined a couple of percentage points. So that would certainly contribute to the overall decline in the research area.

So you mean that the print revenues declined a couple of percentage points or they contributed a couple of points to decline, to the revenue growth division?

I looked at the wrong -- they're about flat. They're about flat.

The print revenue growth in the quarter was flat. Okay.

That's right.

Okay, that will conclude our Q&A session. Before we close, I'd like to turn it back over to Bob Daleo for some closing comments.

Well, as Tom mentioned when he opened the -- when he turned it over to me, I've been at this for a while. And I'm certainly going to -- even though I am stepping down from this role at the beginning of the year, I'm certainly going to assist Stephane and Tom with closing out this year and planning for 2012. But Stephane will be sitting with Tom for the Q4 call next February, as well he should be. So this is a bittersweet moment for me. Sweet because I've been doing this for a long time, and both the organization and I are ready for change. And this is relatively easy to do with Stephane sitting in the wings. I hired him about a decade ago and since, have watched his career progressed. Admittedly I've had a hand in charting some of his course. I'm confident about his succession as just -- and most of you probably know this, he would be the third sitting CFO in modern history, at Thomson, and its successors Thomson Reuters. He brings integrity, financial discipline, a knowledge of the business, an incredible intellect and energy to the role. He was a partner with me in developing the capital strategy and financial processes, which are now embedded in the business, and he's backed up by a strong team, and they're quite experienced. In short, we won't miss a beat. Now the bitter part is because I've been doing this for a long time, and I thoroughly enjoyed my time, I'd have to say some perhaps more than others. It's been a privilege serve you, the investor in our company and to work, over the years, with a dedicated and talented group of professionals who I count on as colleagues and friends. It's been a great run and I will always apply the experiences and cherish the memories in the years ahead. Thanks.

Thanks, very much, Bob. And that will conclude our call. Thank you, all, for joining us.

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