Ladies and gentlemen, thank you for standing by. Welcome to the Thomson Reuters Third Quarter 2013 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Frank Golden, Senior Vice President, Investor Relations. Please go ahead.

Good morning, and thank you for joining us as we report our third quarter results. We'll begin today with our CEO, Jim Smith; followed by our CFO, Stephane Bello. Following their presentations, we'll open the call for your questions. [Operator Instructions] 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. 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. 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, I will begin, as I always do, with a review of the quarter's results, which continue to track to our expectations. Following Q3 results, I'll discuss the announcements we made this morning regarding the opportunity we see to accelerate our progress. I'll then turn it over to Stephane, who will review the quarter's results in more detail. And he will update you on a modest but important adjustment to our capital strategy. First, to the results for the quarter. The third quarter 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 good growth from the resilient Legal, Tax and IP businesses, which were up 6% on a combined basis. But that was partly offset by a 1% revenue decline, as expected, in our Financial business. I am particularly pleased to report that the Financial business achieved positive net sales for the first time in over 2 years. This represents an important milestone, one of several we achieved during Q3. The positive trend in net sales is clear, and Q3 marked the fourth consecutive quarter of year-on-year improvement in quarterly net sales. That said, we continue to expect challenging conditions in the coming quarters, particularly with the largest global banks. But this is a significant step in returning our Financial business to a growth footing. Our consolidated EBITDA margin was up 100 basis points, primarily due to the Financial business. Despite the top line pressures in Financial, we continue to make consistent tangible progress rolling out new products while, at the…

Thank you, Jim. It's a pleasure to speak with you today. I will first discuss our third quarter results before spending some time discussing the evolution of our capital strategy, which Jim just alluded to. Consistent with what we've done in the past, I will speak to revenue growth before currency throughout today's presentation. As always, reported revenues are also highlighted on each slide. Our third quarter revenues were up 2% due to acquisitions. Organic revenues declined 1%, primarily due to the continuing lag effect from negative sales in our Financial & Risk segment last year and earlier this year. Overall, our Professional businesses grew 6% during the quarter, 1% organic, while F&R declined 1% and was down 3% organically. Adjusted EBITDA was up 4% and our EBITDA margin increased 100 basis points, reflecting the continuing progress we are making to rightsize the business and bring down our cost structure. Underlying operating profit was up 3% and the margin increased 30 basis points, this despite higher depreciation and amortization expense from recent product launches and acquisitions. Finally, foreign exchange had a 50 basis points positive impact on the EBITDA margin and a 40 basis points positive impact on underlying operating profit margin during the quarter. Now let me provide you with some additional color on the performance of our individual businesses, starting with Legal. The U.S. legal market remains challenging. Year-to-date, demand for legal services, as measured by Peer Monitor, was down 1%. During the quarter, our Legal business grew 3%, but was down 1% organically. Excluding U.S. print, revenues rose 6% and were up 1% organically. So the negative earning growth rate in Q3 was primarily attributable to 2 factors. First, as we predicted during our Q2 earnings call, we did experience a more pronounced decline in print revenues.…

Terrific. Thanks very much, Stephane and Jim. And that concludes our formal remarks. So operator, I'd like to open the call now for questions, please?

[Operator Instructions] And we'll go to the line of Drew McReynolds with RBC Capital Markets.

Obviously, a lot going on. My question is just with respect to the positive net sales within F&R in Q3. I'm just wondering, Jim, if you can you just provide a little bit more context as to within the portfolio, what were the strengths and weaknesses? And then what kind of visibility would you have on the net sales trends post Q4 which, obviously, is going to be a little bit challenging for you?

Yes, sure. The overall net sales were -- I mean, the trajectory was positive across the face of the business and, geographically, across the face of our footprint. We had improving trends everywhere. We were positive in the Americas, we were positive in Asia, we were positive in emerging markets. We were down in Europe, but up relative to past performance. So we saw pretty positive trends across the face. And I would say 2 things about visibility in the future. The fourth quarter is always the most difficult net sales quarter for us, it has been ever since we did the Reuters acquisition, and I anticipate the fourth quarter will be difficult now. That's the period in which the big banks make all of their kind of year-end adjustments and try to set the baseline for going into the new year. So I suspect that will be a challenging environment, again, as I say, particularly with the big European players. That said, we remain confident in our overall trajectory of the business. I don't yet have, and couldn't make, predictions quarter by quarter by quarter, but I can tell you I'm confident in the overall trajectory.

And next, we'll go to the line of Sara Gubins with Merrill Lynch.

This is David Chu for Sara Gubins. Can you provide some more details in terms of timing of margin expansion? So should we think '14 being more significant '15 or should it be evenly split over the 2 years?

David, it's Stephane, I'm going to take that question. We will -- as we always do, we will provide more specific guidance on margins in connection with our Q4 calls early next year. At this point, I'm just not in a position to do that because, as Jim mentioned in his remarks, some of the restructuring charge we are taking will slip into 2014. We expect the majority to hit 2013, but there will certainly be some impact in 2014. And we will not know that, the exact proportion, until early next year. So what I will expect, with regard to the guidance Jim gave you and the guidance related to like F&R's margin approaching 30% in -- by 2015, this is, obviously, a bold target we are giving out there given the context of continuing low revenue growth environment. I would expect that the majority of that margin improvement will take place in '15, but that you will see some clear improvement in 2014.

Okay, that's helpful. And I'm not sure if you guys addressed this in your prepared remarks, but when do you expect to make a significant push into equity investment management?

You mean in terms of conversion of the products to Eikon?

Yes.

It's starting now, and I would say it will take place over the next couple of years. We'll use a more gradual approach than we have done for the conversion of 3000 Xtra. But it's starting in earnest in the fourth quarter.

And next, we'll go to the line of Vince Valentini with TD Securities.

First question on the margin. The incremental $350 million in charges, does that change your longer-term margin assumption for F&R? Is it now over 30% in 2016 or are these charges just to basically get to the 30% level?

Vince, let us get to 30% first, right? This is a -- if you look at it, our margin in F&R is like sub-25% at this point in time, and that's where it was last year. So we're talking about a 500 basis points improvement over 2 years. Let's first get there and then we'll set some more objectives as soon as we get there.

Okay, fair enough. And then second question on the Bridge conversion, Jim, you said that the retention rates were strong. Can you quantify that at all? Is it in the same 97%, 98% range as the former 2 conversions you did?

Yes. No, that it wasn't that high. It was more around 75%. But that's what we had expected going into it because it's just a different kind of conversion. And we wanted to make certain that we held on to the most profitable and sticky customers as we went through it. And it was just a more complicated process.

Okay. So that conversion rate, I guess, is factored into your kind of guidance for net sales in Q4, I assume?

Absolutely.

And last one, the government shutdown that, thankfully, is over now, is -- did that have any material impact on your revenues in October?

Well, it certainly didn't help. But to the extent to which it had an impact, we'll have to -- we'll see what may have shifted around or not shifted around. I don't think there's a material impact that we could point to right now. But I would say, like most businesses, it sure didn't help.

And next, we'll go to the line of Andrew Steinerman with JPMorgan. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Could you go over how the Eikon upgrades has affected the net sales numbers both in terms of positives and then also in terms of negatives. As you just mentioned, the Bridge retention was only 75%.

It's a good question, Andrew. I would say on the -- you mentioned, I think, the main negative, which is, as you convert customers from one platform to the other, there is always a chance to lose some revenues along the way, as Jim said. I think that it hasn't been certainly something extreme and it has certainly been very much within the expectations. Now the main positive from the conversion to Eikon is that we've seen a gradual improvement in our retention rates. Across F&R, it was in the mid-80s about a year ago. We are trending more towards the high-80s at this point in time. And that's really primarily attributable to the bigger proportion of Eikon desktops we have. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: So Stephane, I think what you just said is, as you upgrade someone from Bridge to Eikon, it doesn't positively affect the net sales number, right, because it's just basically a customer upgrade, it's not a revenue upgrade?

Correct. So you lose one, you gain one. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Right. Okay. Perfect. And could you also talk a little bit more -- you did start the conversation about Eikon 4.0, when does that roll out? Would you expect there to be a revenue effect from that?

We will do Eikon 4.0 like we did Eikon 3.0, which is to start with a softer rollout throughout the fourth quarter. The official bells and whistles will be targeted for the beginning of next year, but we'll start the soft rollout in Q4. And then shoot for the major push when we unleash all of the new products and features into the sales force at the beginning of the year. We expect that it will create a lot of excitement in the marketplace, and we expect we'll have a pretty fired up sales crew next year with an even better product than they have today. So we don't have specific targets to share with you at this point, but we're excited about the added features and functionality that we'll be putting into the market. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: And is it more asset classes?

It's more of everything, I think, would be the answer.

And next, we'll go to the line of Andre Benjamin with Goldman Sachs.

My first question, would you be able to comment a little bit on the pricing environment for your F&R division? I think, a month ago, I saw you indicated that you were getting pricing increases as you were upgrading and converting contracts. What have been the trends in the last month as you've been shutting down Bridge? And we talked a little bit about retention being around 75%, have you actually seen any new desktop customers in the last month? Or any market share color would be helpful.

Sure. I mean, nothing's changed in the price dynamic. We are indeed able to maintain price, and it's been one of the encouraging things that we've seen actually throughout the last couple of years. Despite the challenges in the market, they haven't translated into price concessions, and those contracts have been pretty sticky. And again, we continue on the -- when we go head-to-head in competitive bake-offs, we are winning at least our fair share, and sometimes more than our fair share. So I think we're continuing to perform quite well in terms of our market share and our competitive position. In all honesty, our competitive position has never been stronger and my strong sense out there knowing of the things we're pitching right now is that our competitive position continues to improve.

And with respect to your chat program that -- there was a pretty big announcement, I think it was a few weeks ago, maybe a month now. Any update on the level of adoption, what you expect that to be over the coming quarters? And then I know the ability to interact with Bloomberg chat is something that has been a focus. Have you seen any change in customer behavior either in terms of Eikon usage or subscriptions or anything like that as a result of the announcement?

I think it's too early for us to give you metrics by which to measure the chat activity. I will say that we have seen increases in activity on Eikon on messaging. But we've seen them kind of steadily, certainly throughout this year, as we've added functionality there. And as people have been spending more time in the Eikon product, we've seen some growing user communities around the world. As to the market open-messaging initiative, again, it's very early days for that. But I would say there is great excitement in the market. There's been a lot of talk and a lot of interaction with customers, and it's been a very positive catalyst for us to engage in dialogue with our customers.

And next, we'll go to the line of Paul Steep with Scotia Capital.

Jim, maybe just clarify a little bit some of the comments you made around the portfolio optimization and where you stand in that process. Maybe apart from just beyond Financial & Risk where a lot of the focus has been, how are you feeling about the broader portfolio across the rest of the groups?

Look -- sure, I like it. We like the businesses that we're in now. And as I've said in my prepared remarks, the year of portfolio churn is largely over for us. It's not -- we don't plan any big lurching moves in our portfolio. We like the businesses we're in. They're all performing well. They're in solid markets. And frankly, although they address different end users, the commonality around what they do in terms of applying technology to complex information problems for professionals in the information age, there's a heck of a lot of commonality in those businesses and they're very -- we think they're solid marketplaces for us to play in. And we're very comfortable with the portfolio of businesses we have today. And I am increasingly not thinking of them as a portfolio of businesses but rather an enterprise that we can bind together and leverage and deliver to our customers even greater and more powerful solutions.

And next, we'll go to the line of Peter Appert with Piper Jaffray.

So Jim, just a follow-up to an earlier question. In terms of the positive net new sales, is there any possibility to quantify how much of that is being driven by just improved market environment, in terms of spending budgets by customers, versus the market share side of things?

Boy, that would be quite difficult to do. We don't look at it that way. I'm not seeing a lot of activity other than certain regional players in emerging markets. There's not a lot of increased spending by customers. It's mostly market share.

Got it, okay. And then separately, in terms of the evolving capital allocation strategy, could you give us any longer-term quantification in terms of how should we think about just pace of buyback activity beyond the $1 billion pace of acquisition activity, maybe in terms of percentage allocation of the free cash flow or actual dollar amounts, if you could?

Sure, Peter, let me take that one. We've announced the $1 billion buyback that we're going to complete by 2014, as I said. You followed us for a number of years. You know that we tend to take a very conservative stance with regard to our capital structure, and we really believe it's important to keep it at a very strong level. And all the announcements we're doing today are very much in line with that, even though we are slightly increasing our leverage targets for the reasons I mentioned. One thing I will say, though, is that what we do -- and if you look at the metrics we focused on, I think you've heard us talk a lot about metrics like free cash flow, growth in free cash flow per share. One thing I will say that we will use all the levers at our disposal to drive that metric. And so that means, obviously, primarily focus on growing the top line. That's the best way to drive free cash flow growth per share in the long term. It means looking at scale opportunities we have across the business. And it will also mean, going forward, reducing the denominator of that equation, which is free cash flow per share, meaning reducing our share count. So I don't want to be more explicit about what we do for the long term other than saying that this is, obviously, a lever that we are considering as being more important than we have in the past at this point in time, given the change in business strategy.

Is there a specific thought around dollar amounts in terms of acquisitions annually?

Yes. What I would say is -- as I mentioned on the call, if you look at our activity over the last 3 years, we've done about $1.3 billion per year and that consisted in a large number of deals, probably like 30 or 40 deals a year. It's pretty hard to push the agenda, the simplification agenda when you keep adding that many tactical deals every year. So I will expect decrease, as I said, both in terms of amount and size. And we don't have a specific number, but I would say probably targeting half of what we've done in the past is probably not a bad guess.

And next, we'll go to the line of Tim Casey with BMO.

Can you talk a little bit about the Legal business? You highlighted some of the areas of softness in the quarter, but are you expecting a return to EBITDA growth in that segment as some of these short-term things kind of normalize?

Yes. Tim, it's Stephane. This year, one item that had a big impact on the EBITDA margin of Legal was, obviously, the acquisition of PLC, which we did earlier this year. And as I mentioned in my remarks, what we've been pretty successful at doing over the last few years was to kind of offset the negative revenue mix dynamics with gradual cost-cutting throughout the business. And obviously, that was disrupted by the dilutive impact of PLC. Now that acquisition happened early in the first quarter, which means that if you look at next year, we will not have to cope with that dilutive impact starting in the second quarter of next year. One thing I'd like to remind you also is that, and you know it well, right, like the margins, EBITDA margins in the Legal segment are quite attractive. They're about twice as high as our nearest competitor. So just keeping these margins steady in the face of a negative revenue mix environment is already, in our mind, a pretty good objective to shoot for.

And next, we'll go to the line of Toni Kaplan with Morgan Stanley.

You talked about getting to mid single-digit growth. Assuming no change in the macro environment, how long would you expect it to get there?

I'll refer you to the slide that Jim showed in the presentation, right, where we're saying for the next couple of years, we would expect the revenue growth to be still low single-digit and then gradually improve to like mid single-digit. So it's probably not going to happen for the next couple of years. And after that, it's going to depend both on how quickly we're changing that revenue mix and also on the external environment. So it's really hard to predict how long it's going to go, but we certainly see that as our long-term target, without any question.

Okay. And you've spoken in the past about a tiered strategy for Eikon. Are you expecting that customers who are only using like maybe a web-based Thomson ONE product are going to be moving to like a light version of Eikon? Or do you think that there could be some cancellations if the light version isn't as light as maybe some of the products that are out there now?

Yes, I think we will have tiered versions. And frankly, no, we're not anticipating that lots of people will not take them because they won't be light enough. I think we have a pretty good plan strategy and a pretty good and thoughtful tiering system to deliver, so we're actually excited about it. We think we'll be able to deliver a better solution into the market. We're pretty optimistic about it.

And next, we'll go to the line of Doug Arthur with Evercore.

Jim, just to clarify on the net sales trend. Are you -- you're citing the issue with the banks and year-end budget setting. Are you suggesting that net sales will have sort of short-term downdraft in Q4 and then sort of reset going into 2014?

Certainly, it could happen, yes. Yes, that -- Q4 is always a down and it -- let me -- let's define downdraft, right? We are now -- Q3, we went into positive territory. We've had now a series of quarters where we've had improving performance. We may well continue to have improving performance, but we may not be in positive territory in Q4, right? That's the issue. So I suspect the momentum in the business is solid, but I know Q4 has been a negative net sales quarter ever since the Reuters acquisition. So it would be highly unlikely for it to be a positive net sales quarter. Okay?

Okay. And Stephane, just one follow-up. You threw out a percentage on print as a percent of total Legal revenues in Q3. Can you just repeat that?

I think it was 16%, Doug.

16%. And so is that -- is it fair to say, in terms of organic growth for the Legal segment in Q4, that the mix is going to work more in your favor there?

Well, we expect another -- I mean, as I mentioned, right, for Q4, we're looking again at mid to high single-digit declines for U.S. print. So that's still going to be weighting on the overall growth rate of the business. We're hopeful that we generate a better performance in our Latin American business because I've -- as Jim said, this is something that hopefully is not a long-term factor.

And we'll go to the line of Aravinda Galappatthige with Canaccord Genuity.

Just really on the F&R division, the organic revenue growth number sort of remained at negative 3%, which is what we saw in the first half of 2013 as well. Given the sequential improvement in net sales that you've been seeing, I mean, I think you've indicated that the second half of '12 was better than the second half of '11. Is there a reason that we're not seeing that, the corresponding improvement in the organic revenue number? Is it -- I was wondering if it's pricing or other transactional factors.

Yes, it's a very good question. It's really -- in Q3, it's really attributable to the lower transaction revenue, which is driven by market volumes really, that's why we didn't see an improvement in the overall organic growth rate.

Okay. So that will be our final question, and we will conclude our call. And we'd like to thank you, all, for joining us.

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