Ladies and gentlemen, good morning. Thank you for standing by, and welcome to the Thomson Reuters Second Quarter 2013 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Senior Vice President, Investor Relations, Mr. Frank Golden. Please go ahead.

Good morning, and thanks for joining us as we report our second quarter results this morning. We'll begin today with our CEO, Jim Smith; followed by our CFO, Stephane Bello. Following their presentations, we'll open the call for questions. [Operator Instructions] 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 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. Let me now turn it over to the CEO of Thomson Reuters, Jim Smith.

Thank you, Frank, and thanks to those of you on the call for joining us. Today, we'll begin with a review of the second quarter results, then I'll update you on the progress we continue to make and the overall market conditions we're seeing midway through the year. I'll then turn it over to Stephane, who will review the results in more detail. Now to the results for the quarter. The second quarter's performance was again consistent with our full year expectations, and I'm pleased with the progress we continue to make. We are tracking to our plans despite the fact that a few of our markets are still quite challenging. Total revenues were up 2%, reflecting continued good growth from the resilient Legal, Tax & Accounting and IP & Science businesses, which were up 6% on a combined basis. But that was partly offset by a 1% revenue decline in our Financial business. As you've heard me say on prior earnings calls, given the subscription nature of our business and its lag effect, our progress will not translate into top line improvements in 2013. This year's performance in our Financial business reflects last year's negative sales. Now despite the top line pressure in F&R, we continue to make consistent, tangible progress in rolling out new products while at the same time reducing our cost structure in a sustainable manner to grow margins and free cash flow. And you can see that reflected in today's results. At the consolidated level, EBITDA was up 3% despite a 1% decline in organic revenues, and underlying operating profit was up slightly despite the decline in organic revenues and a $20 million increase in depreciation and amortization. Stephane will share more details on that in a moment. And finally, this morning, we are reaffirming…

Thank you, Jim. And it's a pleasure to speak with you today. Consistent with what we've done in the past, I will speak to revenue growth before currency throughout today's presentation. And reported revenues are also highlighted on each slide. Second quarter revenues were up 2% due to acquisitions. Organic revenues declined 1% primarily due to the lag effect from negative sales in our Financial & Risk segment last year and to the timing of revenues in our IP & Science business. Overall, our Professional businesses once again delivered a robust performance, growing 6% during the quarter, 1% organic, while F&R declined 1% and was down 3% organically. More on that in a moment. Adjusted EBITDA was up 3%, and the related margin increased 40 basis points, reflecting the continuing progress we are making to rightsize the business and bring down our cost structure in a sustainable way. Underlying operating profit was up slightly, and the margin decreased 10 basis points to 18.3%, reflecting higher depreciation and amortization expense from recent product launches and acquisitions. And finally, foreign exchange only had a nominal impact both on EBITDA and underlying operating profit margins during the quarter. Now let me provide you with some additional color on the performance of our individual businesses, starting with our Legal segment. The U.S. legal market remains challenging with little growth in demand from law firms. That said, we are pleased with the progress our Legal business continues to make as it is benefiting from having invested in growth areas over the past few years. During the quarter, Legal grew 5% and grew 1% organically. Now this 1% organic growth rate represents a sequential improvement over the flat organic growth we reported in Q1. And it is worth noting that this improvement also came on the…

Terrific. Thanks very much, Jim and Stephane. So that concludes our formal remarks, and we would like to open the call for questions. So Tom, if we can have the first question, please?

[Operator Instructions] Our first question today comes from the line of Drew McReynolds representing RBC Capital Markets.

I just want to kind of shift to the pricing environment. So kind of my question is in terms of large contracts that you need to renew looking into the back half of 2013, are there chunky contracts? And then maybe, can you just talk to the pricing environment as you're clearly migrating legacy onto Eikon?

Well, yes, there are some chunky contracts yet to be negotiated in the latter half of the year. It -- interestingly, we're not seeing any increased pressure on pricing per se. The conversations are all around features and functionality that we deliver. And also, it's more about total cost of ownership. And where we're facing pressures for downgrades have all to do where banks are retrenching, getting out of lines of business and/or cutting heads. And those are the things that still have to work their way through the system. As far as pricing goes, it has been pretty consistent over time and remains so today that the price increases that we're getting are sticking. And we're not seeing any significant change in the pricing pressure there.

Our next question today comes from the line of Sara Gubins with the Bank of America.

You talked about getting to 140,000 to 150,000 Eikon terminals by the end of the year. I wanted to check to see if you think you're still on track for that given the current pace. Or would you expect the pace to accelerate given some of those chunky contracts that you just mentioned?

Yes, Sara, let me take that question. What I think we said at the time, we had -- at the end of the first quarter when we had 45,000 Eikon installs[ph] that we would expect the full rate for the end of the year to be 2 to 3x that number, and we are very much on track to achieving that. And that should represent essentially the conversion of a vast majority, if not all, of -- or 3,000 extra terminals. We -- we're very much on track to achieve that.

Okay, great. And then separately, given the worsening print trends that you mentioned in Legal, how should we think about Legal growth in the second half of the year?

Well, I think that the -- in the second half of the year and going forward, if you look at '14 and '15, what we would anticipate is that this shift in revenue mix that we've been talking about for the last few quarters where -- will essentially continue. So what we would expect to see is a continuing, I would say, slightly negative growth rate in core Legal research, offset by strong growth in all the other business. And as all these other businesses represent an increasingly large percentage of the total revenue base of Legal, the organic growth rate of Legal should gradually improve over time. Now as I just said, the third quarter will be a little bit of an exception because of the print factor I mentioned, but that doesn't change the long-term trend at all that we've seen for the Legal business.

Our next question comes from the line of Peter Appert with Piper Jaffray.

So Jim, I may have just missed this, but I wasn't sure that you gave a specific net new sales number here for the second quarter other than saying it was substantially improved. Can you be more specific?

No, we've never given those numbers out specifically, and we talked to the trends and whether they're positive or negative.

Okay. And then your comment on positive net new sales for the second half looking more challenging, sorry to try to be more specific on this. But is the message that we should just tone down our expectations for the year?

Well, I think that -- I just want to emphasize that we are incredibly confident in the trend lines and in the improvement that we see underlying. But as we look at the renewals that we're working through the system for the balance of the year, it's apparent that the downgrades at a handful of big European banks are going to temper the success we're seeing across the rest of the business. It's important to note that even with these customers who are cutting back, our competitive position has never been stronger, and we're really optimistic about our long-term relationships. But as I've said before, it's difficult to outrun gravity, at least in the near term. So I just think that we should temper our expectations with the reality that we're experiencing in the market.

Our next question today comes from William Bird with Lazard.

It's actually Thomas Le in for William Bird. I just have one question on margins. What needs to happen to hit the higher end of the margin guidance range? And how do you think about your margin expansion profile just beyond 2013? What would be a reasonable annual expectation?

Tom, let me take that question. I would say directionally, we would expect margins in the second half to be better than in the first half. And the reason is that in the first half, we obviously had to take on these severance expenses that we referred to. I think they were -- year-to-date, they are to the tune of about -- a little bit higher than $8 million, and we're not expecting the same magnitude at this point in the second half. So margins should improve from the 26%, I think, that we achieved for the first half of the year, which is at the low end of our margin. I'm not sure what needs to happen to get to the higher end, but we've just reaffirmed the guidance. So we expect to be obviously within the range of the guidance that we gave of 26% to 27%. And then going forward, we continue to provide guidance on an annual basis. I mean, one thing we've stated, just to remind you, that was a bit more specific than that, was what we said with regard to our Financial & Risk business during Investor Day, where at the time, we mentioned that we absolutely saw a path to get our margins in that segment closer to 30% within like the next 3 years or so, which is a pretty significant margins improvement. So that's really where we see the greatest margin potential for the business over the next 3 years.

Next question today comes from Vince Valentini with TD Securities.

A couple of questions. First, just on that last point in terms of the 30% margin target, given the tougher external environment you're seeing for net sales, does that in any way impact the timing of achieving the 30% goal you're hoping for? Or is that just all cost driven and it doesn't matter about what revenues are doing?

Well, Vince, I would say what we know we need to do is to the extent the environment is not as robust as we hoped, we just need to redouble the effort on the cost side. And that's what we absolutely intend to do.

Okay. Second, I'm not sure I caught you, but on the Legal side, I think there were some big software installations that didn't fall into Q1. I think you were expecting a boost in Q2. Did you actually see that? Or have those-- completion of those installations been pushed into Q3?

Yes, you'll see the transaction business from the Legal business -- in our Legal segment being a little bit better in the same quarter, and that's really what [indiscernible] that was what you're referring to.

Okay, great. And last just little one. You're still saying you'll do $100 million in restructuring costs for the year. And so that leaves another $13 million for the second half. Do you have any idea, is that mostly going to fall in the third quarter or fourth quarter or evenly mixed?

It's hard to say, Vince. But, I mean, it's not going to have as big an impact as it had in the first quarter, of course, whether it's in the third or the fourth quarter.

And we'll go to the line of Tim Casey representing BMO.

I just wanted to come back to net sales, which is a metric that a lot of investors are focusing on. And it's a bit of a challenge for us, obviously, because Jim, as you mentioned, you've never published any numbers on that. Can you just maybe help us with the definition of what you mean by that? Are we talking like-for-like when we talk about deletions and additions? Or is there anything you can help us out on that metric given there's nothing to -- no numbers to associate with it?

Yes, I think we're talking about the revenue value of the net of all the gross sales that we make minus the cancellations and/or downgrades that we take from existing customers and contracts. So it's an aggregate number. And I would agree with you that we could probably find a more helpful way to talk about it with you in the future, and we'll take that away as an assignment. But it's just the aggregate of all the gross sales activities minus the cancellations and downgrades.

Our next question comes from the line of Aravinda Galappatthige with Canaccord Genuity.

In the past, you've indicated that as Eikon is rolled out to the existing contracts, there's not going to be any major changes to the pricing. However, as -- I was wondering, as these contracts going to come up for renewal and are resigned down the line, is there potential for significant price growth for those contracts that are sort of being resigned to the higher end product, Eikon in this case?

Well, I -- you're right. And our first intention has been to get the better product out in hand and because we believe that, that would improve both our retention rates and our customer satisfaction rates. And we're very pleased that, that is indeed what has happened. So one would hope certainly that with better retention rates, with higher customer satisfaction, with a much better product out there, that we would be in a stronger position when it came time to negotiate renewals on the contracts. As to whether or not that will relate to specific price increases, I think the answer is I think it will help our ability to improve our retention rates. And I think it will help our ability to sell additional content sets within the Eikon framework, right? We see Eikon as a desktop platform that ties also with our Elektron enterprise platform. And we've done a lot of work on how we will be more disciplined in our approach to pricing and offer more tiered packages, tiered pricing packages, for content sets. So I think that having a world-class product out there gives us a much better platform from which to be smarter about how we productize all the content we have and to be smarter about how we price all that product. So I would hope we would get a price lift at the end of the day in ways other than just a simple pass-through of a price increase.

We'll go to the line of Matthew Walker with Nomura.

Just 2 questions, please. One is on the Financial business, which is, can you give us any color on how the Data Feed business is doing versus last quarter? That's the first question. And the second question is just if you could explain the math behind the Legal results. So you've improved your organic growth rate overall. Hasn't been that much change in Business of Law. U.S. print is down much more significantly, down 7% versus down 2% before. I think print -- as you've mentioned the past, print is a $600 million business. How do you get to the actual improvement in Legal with print going down 7%?

Stephane, would you like me to take me the first one and you will do the second one? I think it's product pipeline. We've got the strongest new product pipeline in Legal that we've had in years, and we've got new products out there like Concourse, Firm Central, My Business Intelligence, of -- a suite of things around those litigation solutions. So I think that we're seeing those growth vectors that we have identified several years ago catching fire and adding to our kind of organic sales initiatives there and leading to an uptick in our revenues. On the organic side, it's just on the new product.

And Matthew, on your second question, I think on what's happening with regard to the dynamic in the revenue mix in the Legal segment in the second quarter, in the first quarter, we had a weak quarter from a transaction perspective, and that turned around. As I said, the transaction revenues were better. And the reverse happened on U.S. print essentially. U.S. print was down 2% in the first quarter and down 7% in the second quarter. So overall, subscription revenues remained pretty steady, I would say, from one quarter to the other.

And are you seeing any improvements in hiring or in your end markets in the U.S. in Law. And obviously, Government revenue is under pressure and people don't like print very much when they are trying to save money. But is there any chance of the Legal business -- stripping out the international staff, is there any chance of the domestic U.S. business accelerating from this year into next year, i.e. higher growth in Legal in the U.S. segment next year?

Look, I think what's happening, as you said, like the new phenomenon this quarter was the fact that Government was weaker. And as you pointed out, print is a big factor of that. About 40% of our print revenue is actually within our Government segment. And so that's why we saw both the Government segment going down and the overall print revenue going down. I'm not going to make any prediction regarding like the growth next year other than what I said earlier, which, as a whole, I would absolutely expect the revenue growth rate for our Legal segment to gradually improve over time because of this change in the revenue mix that we're saying. And part of that is the increasing proportion or increasing exposure we have to global businesses, and part of that is frankly the greater exposure we have on revenues other than core Legal research, whether print or online. And that will affect positively both the U.S. and the international segment.

And on the Data Feed businesses?

Oh, the Data Feed businesses, these were about -- I mentioned that the Enterprise Content and Investor rose 9%. So that's a portion of our Data Feeds business. And in -- I think in the Trading segment, they were about flat in the first quarter.

We have a question from the line of Nick Dempsey with Barclays.

I've got 3 questions left. The first one, you talked about a stretched internal target for Financial & Risk EBITDA margin, i.e., being the same last year. You've achieved a good margin there in the second quarter. So does that target does -- look like less of a stretch now? So first question. Second one, looking a those 61,000 Eikon customers, can you just tell us how many of those are new customers? I think you shared something like that with us at the Investor Day. And lastly, those weakening print trends in Legal, do you expect at some point in the day a restructuring charge to help you wind down some of your cost base in print and Legal?

Okay, let me take the first and the third questions. Jim, you -- if that's okay, you'll take the middle one?

Sure.

Okay, on the first one, about the margin targets we have for F&R, as I said before, this is a stretched target that we've put -- it's a stretched internal target. It's not a formal external guidance, but a stretched target we have for F&R to be flat margin. Now in the first half -- you're right, the second half really showed what they can do from a margin perspective. That was a good performance given the negative organic growth of 3%. But if you look at the first half as a whole, F&R was down 140 basis points on the margin. And that was entirely due to the heavy severance charges that they took in the first quarter. So for them to get to like a flat margin overall means they really need to do -- perform very strongly in the second half. That's still very much the stretched target. It hasn't changed, but I wouldn't call it a walk in the park by any stretch of the imagination. And the -- what was your other question, if I may ask, Matthew, sorry?

Yes. So the first one was out of the 61,000 Eikon customers, how many are new customers? And the other one was about the restructuring charges in print to wind down the cost base?

Okay, okay. So on the restructuring charge, look, we've been able to manage our workforce in our print operation along [indiscernible] than we've seen in the print business. So we've been able to do that through natural attrition. And at this stage, we very much expect to continue to be able to do that.

So -- and thanks, Stephane. And on the other one, the -- it is about 10,000 of the total Eikon numbers at 61,000. 10,000 are new.

Our final question today then will come from the line of Jeff Volshteyn with JPMorgan. Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division: My questions have been answered.

Okay.

[indiscernible]

We like those types of questions. All right. Well, with that, we will conclude our call, and we'd like to thank you all for joining us for our second quarter earnings results. Take care.

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