Ladies and gentlemen, thank you for standing by. Welcome to the Thomson Reuters First Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] 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, Frank Golden. Please go ahead, sir.

Good morning and thank you for joining us as we report our financial results for the first quarter of the year. Our CEO Jim Smith will start today's discussion, followed by Stephane Bello, our CFO. Following their presentations, we'll open the call for questions. We would appreciate if you would limit yourselves to one question each in order to enable us to get to as many questions as possible. Now several items to point out before we get started. First, a reminder that throughout today's presentation, 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 our business. Second, we are pursuing the sale of IP & Science as you know, so its results are now classified as discontinued operations and are no longer in our reported results except for free cash flow. As a reminder IP & Science is not included in our 2016 guidance. Again except for free cash flow. And third on our website today, we have posted quarterly 2015 restated results as well as full year 2013 and 2014 excluding, again IP & Science. 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 and with that, I'd like to turn it over to Jim Smith.

Thank you, Frank, and thanks to those of you on the call for joining us. As I stated on our fourth quarter earnings call in February 2015, was a milestone year for Thomas Reuters. Today's results reflect the progress, we continue to make building from that foundation. Yes, market conditions were turbulent to start the year and many companies were understandably cautious in the face of so much uncertainly. This was reflected in longer lead times to close deals. We will have to see, whether this period of uncertainty persists in the coming months or whether confidence returns along with the improving market conditions, we've seen over the past few months. As I've said before, we're ideally positioned to take advantage of global trends impacting the industries we serve, at the intersection of commerce and regulation. Therefore, we continue to ramp up our efforts and our investment to help our customers be more efficient, reduce their overall cost and deal with the increasing burden of regulatory compliance. That means, we will continue executing and focusing on everything in our control. If we do that well, the results will follow. Now to the results, of the quarter. Our highlight both our reported results and our results before currency, so you can see the underlying progress we're making. You'll note, that currency had a far less impact on our reported results than in the prior year period. First, the reported results. Reported revenues were down 1%, as currency had a 200 basis point negative impact. Reported EBITDA increased 2% with the margin up 80 basis points. And underlying operating profit was up 8%, with the margin up 150 basis points. Adjusted EPS increased 23% to $0.48, that's $0.09 better than Q1, 2015. Currency benefited EPS by only $0.01. Moving to the underlying…

Thank you, Jim and good morning or good afternoon, to you all. Before, I begin discussing our first quarter results. I would like to cover two housekeeping items. First, as Frank mentioned when discussing our performance against the prior year. I will be comparing year-on-year results excluding IP & Science, which is now classified as a discontinued operation. These will hold true for all metrics except free cash flow, which includes IP & Science and is not restated as has always been our practice. Second as Jim mentioned, currency had a smaller impact on the results than last year. However and always, I will talk to revenue growth before currency. So onto our results. On a constant currency basis, our first quarter revenues were up 1%. Our financial business was down 1%, while our legal and Tax and Accounting business grew 4% in aggregate during the quarter. Adjusted EBITDA was up 2%, with the margin of 80 basis points to 26.8%. Currency had a 70 basis points favorable impact on the margin. Operating profit was up 8% in the first quarter, with the margin at 17.8%, up 150 basis points, and currency had also 70 basis points favorable impact on the margin. So the pre-currency improvements of 10 basis points at the EBITDA level and 80 basis points at the operating margin level reflected genuine improvement in the underlying performance of the business, as there were no material severance charges taken either in the first quarter last year or this year. Now let me provide you with some additional color on the performance of our individual businesses, starting with legal. Demand for legal services in the US market as measured by Peer Monitor showed a modest improvement in the first three months of the year. As Jim said, it's too…

Thanks very much, Stephane. And now we would like to open the call for questions. So operator, if we could have the first question, please.

[Operator Instructions] ladies and gentlemen, our first question comes from the line of Vincent Valentini with TD Securities. Your line is open.

Two things, mostly related to Tax and Accounting. One, you haven't provided any exclusion of acquisitions in your revenue number this quarter, so nothing organic. Does that imply that, there was no material contribution from acquisitions and does that apply in the Tax and Accounting segment as well because it has been still been somewhat material there in recent quarters? And just slightly related to that, the growth rate in Tax and accounting, it seems very strong still but yet you're taking severance charges. So I wonder if you can just explain that, a little bit, why business is growing, so much would be doing that kind of cost cutting? Thanks.

Sure, Vincent. Good morning and let me take your questions. On your first question, there has been virtually no impact from acquisitions on our reported growth rates and that's why we didn't distinguish between organic growth and total revenue growth rate. If there were meaningful difference, we would continue to report it, but that was not the case and the case of our Tax and Accounting business. I think there was no impact whatsoever from acquisition actually, so the number that you see is really that organic growth performance from the business. And on your second question, in every single business we continue to look at opportunities to always streamline the business and there's always some parts of the business, where we find opportunities to do that and that was the case in our Tax and Accounting business. It happened mostly in the Knowledge Solution segment of the business and we did at the beginning of the year, as part of the run rate of the business essentially.

I think if I might add Jim here, Vince. You see that's a good question, I think it's a good example when we talk about refocusing our resources and our efforts on those areas that have the greatest opportunity for us to grow and we continue to manage the businesses with a keen eye on the cost line, in areas where we think we have opportunities to take cost out, at the same time we're investing then disproportionately in the areas that can grow. So we would have actually added, well at the same time, we've taken some severance to right-size the business in certain parts of Tax and Accounting. We've actually increased headcount in other areas that we think can grow, that are, as we say right at that intersection of regulation and commerce. Particularly outside United States and you've seen the rapid growth of our Tax and Accounting business, outside The United States over the last few years and we're continuing to support that. But that's a big part of the pivot that's ongoing as we look, at our transformation efforts to take cost out of the business, so that we can, yes improve profitability, but more importantly redirect them to growth efforts that are more important.

Thanks.

Our next question comes from Toni Kaplan with Morgan Stanley. Your line is open, go ahead.

Just wondering, just a big picture of question on the industry. I'm just wondering are you expecting that the financial terminals industry becomes more fragmented in the next five to 10 years. And if so, how would you adapt your strategy to sort of gain market share in that type of environment? Thanks.

Sure, Toni. Our belief has been for the past several years and the strategy we've been executing I guess, is to believe that open wins. So we've actively embraced in open world. We've tried to create an open platform, where a number of our customers and our colleagues and third-party partners can innovate on our platform and we've been open to connecting with other platforms. And I think, we will continue to see a great deal of shifting in the financial services market and in those of us, who serve that market. So we've been very open in our embraced and support for in open world and we think that's ultimately going to be the solution, as one that we think, we can thrive in.

Thank you.

Your next question comes from the line of Paul Steep with Scotia Capital. Please go ahead.

Jim, maybe you could talk to in terms of your 2017 plans for driving organic growth, whether you see that as a broad-based initiative, is that's across multiple lines of business or is it narrowed? Does this rely on single set of product introductions or is it improved execution? And then one clarification just as well, on the network infrastructure shutdown. I don't know, if you'd mention that in terms of the dates and the timing there. Thank you.

Let me take the first part of that and then, I'll turn it over to Stephane for the latter part. I think what we're seeing in the business is what we're relying on the trend to be in the future and that's a steady improvement and across the face of the business. And I think, as we've talked in the past, there are certain parts of our business that can continue to grow at disproportionately high rates. We identified those four sectors or four areas that now constitute about a quarter or so the business that are growing double digits, that's really attractive but also equally important is getting all of our businesses on an improving growth trajectory and when you see things like our online legal research business getting back to 2%, that's a big chunk of revenue that's going in the right direction and it's also incredibly profitable. So I think, we see underlying growth opportunities, although of different scale in virtually all of our businesses. There will be couple of places, US Legal Print is one. Where they were will be an inevitable decline. But if you look at the vast majority of our businesses, we're looking for growth from each of them, albeit at the rate, the market will allow.

And Paul just to answer, the other part of your question and build little bit upon, what Jim just said. The continuing improvement in organic growth rate next year is predicated as much as our ability to continue to drive our highest growth businesses like our Solutions Business in the legal segment or Tax and Accounting business or Risk business. As it is frankly, to the gradual elimination of some of these headwinds we've been talking about, like recoveries we said, will have a big impact in 2016, we don't expect the same impact in 2017. The pricing adjustment we said would be largely through them, by the end of the first half of this year. So it's very much a combination of these two factors and I think that, our confidence in the latter is also, driven by the fact that we're now seeing the end of this migration of legacy products we've been talking about for a number years now and that's the answer to your second question. I don't know, your question was related to like the shutdown of the IDN Bond [ph] network that was done in the fourth quarter of last year. With regard to our legacy desktop products, we send end-of-life notices and these end-of-life notices go for one year, so we send them at the end of March. Which means that in March of 2017, we will no longer support the legacy desktop products on the buy side, everything or will be replaced by then, by our Eikon Solution.

Perfect, thank you.

Next question comes from the line of Sara Gubins with Bank of America. Your line is open.

Some margin questions. The F&R margin came in, well above our expectation and I'm wondering if you can help us, with how you're thinking about F&R margins for the year. And then, a bit more holistically, I recognized that there are some timing issues in Legal Print that help margins, this quarter. But overall, I'm wondering as you look at the low end of the operating margin guidance. It strikes me as being somewhat less likely given the trend that we saw in the first quarter and so, I'm wondering if there's something that we should keep in mind aside from Legal Print that might explain how you might end up at the lower end versus the higher end when we look at the full year?

Hi, Sara. It's Stephane, thanks for your question. We still feel pretty good about the guidance we've given for the full year. We always caution everyone not to look at one quarter's performance and extrapolate for the full year. There's always puts and takes in every given quarter. It depends sometimes with timing of the investments that we're making in any given segment. You're right, the improvement in margin for F&R was quite stronger in the first quarter. I would not expect the same kind of basis points improvements pre-currency for the full year. You will see, as we always said, a nice improvement in F&R's margin for the full year but probably not as high as what we've seen in the first quarter. So I wouldn't change anything in terms of our guidance for the full year, that's the one thing as you pointed out, that was. There were two things that were different. Each going in one direction in Q1. I think the Tax and Accountings margin were artificially depressed in Q1, so they like, they were abnormally low and that would expect some of the rebound in the balance of the year and little bit reverse for our legal business because of the lower print decline, we experienced in Q1 versus, what we expect for the balance of the year. But overall, no change in our guidance for the full year.

Thank you.

Your next question comes from the line of Aravinda Galappatthige with Canaccord Genuity. Please go ahead.

Maybe a question for Jim. With respect to the dividend. I mean, obviously you followed a fairly lower growth policy off late, but as we look ahead beyond the sale of IP & Science. You're going to have even better balance sheet. Your payout ratio is now below 60% and with the buybacks that you're doing, your share count is falling and your ability to pay even more dividends, shows up even more. In that backdrop, is there a case to be made to maybe revisit that dividend policy starting next year?

Well I think, as we've always said, the dividends is an important part of our total shareholder return and it has been for a couple of decades now. And as we also said, we're comfortable with that kind of dividend payout ratio being in the 40% to 50% free cash flow range and we're not quite there. As we get back to that range, we'll have a conversation with our Board of Director and we'll discuss what our options are, as we do every year, when we assess our capital strategy and we'll obviously reassess as we do every year, in light of the facts where we stand, that is a fair assumption that will be one of things will be on the table, as we get back into that range.

Great. Thank you.

Your next question from line Ato Garrett with Deutsche Bank. Please go ahead.

Just have a question about your thoughts for the balance of the year. You mentioned that the headwinds from the recovery revenue, those are going to be over in the first half of the year as well as the impact of the commercial pricing adjustments. Just want to get your thoughts on whether we could expect kind of organic revenue growth to accelerate from here? And also, how should we think about CapEx. You said that you had a boost free cash flow in the first quarter due to timing of CapEx. Thanks.

Sure. Just to be clear. We do expect there's two different types of headwinds at this point. One is recoveries, the other one is commercial adjustments. We said that, we would expect the impact of a commercial adjustments to be far diminishing in the second half of the year. For recoveries, you're still going to see a fairly significant impact in the second half of the year, maybe not as high as the first, but still a very significant impact in the second half of the year. So, if you combine these two things. We should see all other things being equal. We would expect to see growth to nudge up a slightly in the second half of the year compared to the first half of the year. In terms of your question on CapEx. CapEx can vary from one quarter to the other. We're not changing our guidance for the full year. So I would expect a level of CapEx which is in-line with what we've seen in the prior years in terms of CapEx as a percentage of revenue, no change year-on-year in that regard.

Okay, great. Thanks.

Our next question comes from the line of Andrew Steinerman with JPMorgan. Go ahead.

Could you give an Eikon desktop count and give us the sense of the recent additions in desktops, where are they coming from, are they upgrades from legacy desktop products for Thomson Reuters, are they new desktop users, meaning did they have a competitive product before, are some of them win-aways from competitor products?

The Eikon desktop count, Andrew is at about 130,000 at this time. You know, it's a mix of all the factors that you mentioned. So it's still, the conversion of the legacy product on the buy side that's helping us. We're actually seeing an increase on buy side. Count of Eikon desktops, we do have some initiatives with various large banks about trying to see, if they can use Eikon in areas where more sophisticated or pricier desktop rather or may not be always necessary. So it's really combination of all these factors.

Okay, thank you.

We do have time for one more question. Our last question comes from the line of Drew McReynolds with RBC. Your line is open.

Two questions, if I can squeeze that in. First on the Corporate and Other Cost in the quarter you talked about transformation cost, in there. Just wondering if, Q1 is the run rate for the rest of the year, Stephane. And then secondly, on the FX side we saw a nice boost to margin from FX. If you look at the rest of the year given where exchange rates are today. Do you expect a similar tailwind from FX on margin, just given where all the hedges are at the moment? Thank you.

Sure, Drew. Let me start with the currency question that you have. The reason that, currency had a positive impact on margin in the first quarter was really driven primarily by or over a short position in Pound Sterling and as you know we have a portion of our employee footprint that is based in the UK. So weakening of the Pound Sterling is essentially beneficial from a margin perspective for us because it reduces our cost structure when expressing US Dollar. So it really will depend on what your view is about the Pound Sterling and you know given the level of uncertainty in the UK and the political front right now. It could really go, either way. So I would certainly not venture to make a forecast of where that will go, but that's really what has been driving them in, beneficial impact of currency on margin. And in terms of your questions for Corporate and Other Cost. We would continue for the full year to expect Corporate and Other Cost to be in the $375 million to $400 million area.

Okay, thanks very much.

Operator, we have time for one more question.

Okay. Our next question comes from the line of Andre Benjamin with Goldman Sachs. Your line is open.

You actually answered my question there at the end. I was hoping to get some color on the provided run rate should be corporate and [indiscernible] but this is all I picked up.

Okay, perfect. So that will be our final question and that will conclude our call. So thanks very much for joining us this morning and we will speak to you again on Q2 in July. Have a good day.