Ladies and gentlemen, thank you for standing by and welcome to the Thomson Reuters First Quarter Earnings Call. At this time, all participants lines are in a listen-only mode. Later, there will be an opportunity for your questions, instructions will be given at that time. As a reminder, today’s conference call is being recorded. I'd now like to turn the conference over to the Senior Vice President, Investor Relations, Frank Golden. Please go ahead.

Good morning and thank you for joining us today. Our CEO, James Smith; and our CFO, Stephane Bello will review the results for the first quarter in a moment. When we open the call for questions, we’d appreciate if you would limit yourselves to one question each to enable us to get to as many questions as possible. Now there are several items to mention before we get started. Today’s results are shown for our continuing operations, legal tax and latest news. Potential and risk business is reported for the first time and a discontinued operation and will continue to be shown that way until we close the transaction with Blackstone. Therefore, adjusted earnings per share no longer reflect any revenue or operating income contribution from the financial and risk business. Now consistent with that treatment, our 2018 guidance is for our continuing operations and again does not include F&R. However, since we do not yet have a closing date for the financial and risk transaction, we’re not able to provide guidance for interest expense for the second half of the year and we’re also not including in our revenue guidance portion of the $325 million payment news we are seeing from the partnership post close. We’re also net yet in a position to provide specifics regarding the timing, size for the structure of the [indiscernible]. We anticipate providing details on the tender offer or [indiscernible] in connection with the close of the transaction in the second half of the year. Lastly, in today’s press release we include a schedule that provides detailed first quarter results for the financial and risk business, the information included in that schedule will be provided each quarter following the close of the transaction. As a reminder, throughout today’s presentation, when we compare performance period of period we discuss 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. Now I’ll ask James Smith to take us through the results for the quarter.

Thank you, Frank. Good morning and thanks to all of you for joining us today. Before we begin, I just want to say I don't think I ever so look forward to being in the seat for an earnings call. In fact, the only thing better this year, we’re learning that our Reuters News team has been awarded [indiscernible] surprises of our first day back in the office. So, I want to publicly offer my congratulations to our journalists and let all of you know how proud we are of the work they do around the world each and every day. And personally, I also want to thank those who you reached out [indiscernible] this year. Given that results, what we here to discuss are the best we have reported in some time, it feels as I should be spending more time in the office. Now in all seriousness, I am very pleased with our results to start off the year, particularly when it came to revenue growth. I’ll separate my remarks in the two parts. First, I will highlight first quarter’s performance and second, I’ll update you on our partnership with Blackstone. First, the results for the quarter. I’m pleased to report that the year is off to a good start with reported revenues for continuing operations up 4%. Continuing operations include our legal, tax and Reuters News business. Reported revenues were $1.4 billion, up 4% on a reported basis and up 3% at constant currency. Adjusted EBITDA for the quarter was up 4%, $430 million. The EBITDA margin was unchanged with the prior period at 31.2% on a restated basis and currency gained no impact on margins in the quarter and EPS was up 12% in the prior year at $0.28 per share. Now the results on this…

Thank you, Jim and good morning, or good afternoon for everyone. As you know Frank mentioned earlier, this marks the first quarter of the results of our financial business, our reporting as a discontinued operation. Since this business represented more than half of our revenue base, all financial results will obviously be distorted for the next few quarters as we navigate through a transition towards a smaller, but more focused business. For instance, our profitability metrics at a consolidated level will be temporarily depressed by stranded costs. As discussed previously, we’ve intent to gradually eliminate most of these stranded costs over the next couple of years. Importantly, virtually all of these costs will be held within the corporate center meaning that the performance by business unit will remain relatively clean throughout this transition period. Also, while rating our performance will no longer improve the contribution from our financial business, both our debt level and share count will remain the same for most of 2018. Once we close the maximum partnership, we will use a large portion of the cash proceeds to buy back share and reduce outstanding debt which will allow us to bring down our interest expense and improve earnings per share and free cash flow per share performance. As we always do, we assure to give you as much transparency as possible on these various distorting factors and it will take a few quarters before the full impact dissipates. And now to our quarterly results. On a constant currency basis, first quarter revenues were up 3%. Adjusted EBITDA was up 4% with a margin unchanged versus the restated prior year period. Corporate cost decreased slightly versus the prior year, but looking ahead to the remainder of the year, as you can see in the guidance we provided in…

Thank you, Stephane. So, to conclude, we are encouraged by the best start to the year that we have had in several years with each business having performed at or above our expectations. We have teams dedicated to closing the F&R/Blackstone transaction as quickly as possible and preparing both sides to hit the ground running on day one as two separate companies, enabling the rest of them to stay focused on delivering against current business opportunities. As we approach day one, we are excited about the opportunities we see to further strengthen our Legal and Tax businesses both organically and inorganically. Both of these businesses are the market leader in their respective segments and I'm confident that we have great opportunities to accelerate their growth performance in the years ahead. As discussed today, we have the financial wherewithal and flexibility to capitalize on the growth opportunities we see in these markets. So, in closing, I'm excited about the opportunity we have to effect significant change as we transition and position the company for growth. We will further develop our digital capabilities from the front end to the back end, which will impact how we sell to customers, how we service our customers and how we deliver our products to our customers, all of which I believe will lead to attracting new customers and revenue streams. Now let me turn it back over to Frank.

Thanks, Jim and thanks Stephane for those comments. And now operator, we'd like to open the call for questions please.

[Operator Instructions] We will go a question from the line of Paul Steep. Please go ahead.

Good morning. Jim, welcome back. Good to hear that you are feeling better. I guess the first question is maybe for you. If we think about the use of proceeds post the deal, how would we think about your level of patience to waiting before you either reliever the business back to sort of the target range Stephane talked about? And then I have a quick follow-up as well.

Yes, I want to assure everyone on the call, we are not going to let that money burn a hole in our pockets. We will take the same disciplined approach that we have taken in the past at looking for opportunities to support our key growth vectors and we think there are a number of interesting ones out there, but they will be and will have to be opportunities that fit both within our strategic framework and our financial guidelines and our expectations for return. So, we will be very disciplined about that process and don't feel any pressure around timing. We will take the opportunity and the opportunities as they present themselves.

Great. Then the quick follow-up is for Stephane. Stephane, in the release, you guys talked about, and maybe you should talk about it. At the operating group level, excluding all the other costs we talked about, you talk about making incremental product and marketing investments in the quarter. If we think about that ongoing business, talk to us a little bit about the investment there, whether that's temporary or permanent and maybe the magnitude. Thanks.

Sure. There are some investments particularly in our Legal group happening this year and I think you will have a better sense of what these investments are when you see some of the product introduction we make I would say probably in the middle of the year. So, stay tuned on this. So, I would say they are temporary from that regard.

Next we'll go to a question from the line of Manav Patnaik.

Thank you. Good morning, gentlemen. My first question is I guess embedded in your revenue guidance is the current run rate in each of the businesses. Is that the trend we should expect? I guess since we didn't really focus on these businesses before, I was just wondering if you could give us more colour on what the trends are that we should keep an eye on.

Sure. And let me maybe try to take that question. I think that's exactly right. That's what is projected in the guidance and we will have to reacquaint everyone with the dynamics of each of the businesses and that is why, as Jim said, we intend to have an Investor Day sometime in the fall to really do a deep dive on each of the businesses with you. But I would say at a high level, if you look at our Legal business and you refer to the pie chart that we show during the presentation, the foundation, the base of that business is a very solid US online business that is currently growing at 2%. We believe we can probably improve that a little bit, not massively, but a little bit perhaps to the 3% range. And that is about 42% of the revenue base. We then have a 40% portion that is the solutions business. That is currently growing at 4%, 6% subscription, but it is basically tracked by transactions. That is probably the place in the business where we had to make inorganic investments, you should expect us to make inorganic investments. So, the faster we can make that portion of the business bigger, the faster we can get the growth rate to accelerate our Legal business. And then you've got the Print, which is less than 20% of the total revenue and that is in secular decline as we all know. If you turn to our Tax & Accounting business, that business, the dynamics there remain very healthy. You have seen the growth rate at about 5%. That is really driven both by the corporate segment, which really sells large software modules to multinationals primarily and driven by what we call the Professional business, which is…

Okay, that's super helpful. I guess just a quick follow-up there is, the question is, because you have been so focused on F&R before, is it true that maybe you hadn't paid as much attention to these remaining businesses and there is a lot of opportunity now that you do have that time?

I would hate to say that we didn't pay a lot of attention to them. I will say we will have an opportunity to pay even more attention to them in the future once we complete the separation. I also can say that, as many of you know, those are businesses that are very near and dear to my heart and I'm looking forward to spending a lot more time focusing on them. I am looking forward to our Investor Day later in the year so we can give you some real detail around why we are so excited about the growth prospects in those businesses, all those businesses where we have a clear leadership position. So yes, it's safe to say we will be able to concentrate more of our energy, attention, focus, capital resources, everything on those businesses than we did in the past.

Next we'll go to a question from Aravinda Galappatthige.

Good morning. Thanks for taking my question and it's for Stephane. Stephane, thanks for the details on the corporate cost component, that's really helpful. I guess my thought and my question related to that is these are such large numbers we are talking about and a substantial decline going into 2020. Could you, and I don't mean in terms of numbers, but could you maybe just talk about the nature of these costs? When we say stranded costs, when we say new investments to reposition, could you give us some items that you are talking about so we have a sense of the nature of it? And the ability you would have to actually eliminate or reduce it as you get to 2020?

Absolutely. And thank you for coming back on this point. It's an important point. So, we said we get about $500 million to $600 million of these investments that we are going to make. I would say, if you look at that $500 million to $600 million over the next couple of years, I would break that into like three buckets of roughly the same size. So, each of them about $150 million to $200 million. The first bucket consists in very specific initiatives we will take to generate savings that will help us bringing the stranded costs down or rather finding savings that offset the stranded costs [indiscernible]. So, think about $150 million to $200 million that will be spent to essentially generate savings, if you take my number, $130 million to $150 million. The second bucket are essentially capabilities that we need to, and by the way, to give you some specific examples in this first category, it would be for instance bringing some of our finance HR strategy function to a smaller level, it could be bringing down our ET&O organization to a lower level. So that is going to be rightsizing some areas in our organization. That is really what we are talking about. The second bucket really represents capabilities that we need to redevelop for the new company and one example that I would give you is that we have been -- I think I mentioned that after we close the transaction, we will be using the Financial & Risk networks, communication networks system and we have shut down our networks on the other side where we need to re-establish these. We will have a number of our servers that are residing in data centers and these data centers will be transferred to F&R. What…

Okay, great. That's really helpful, Stephane. And just a quick follow-up. In terms of the spend, the $1 billion to $3 billion in new investments, which I guess are definitely separate from this, which could be M&A, which could be organic investments in the Legal and Tax & Accounting. The timing of that I suppose is not clear. It will happen I suppose after the closing, but how that would shape is not determined at this point. Is that how you are presenting it?

Yes, I think just to be really clear, what Stephane talked about includes build opportunities that we see to accelerate our growth, particularly in those digital areas that he just mentioned. The other pool would be reserved primarily for inorganic opportunities. And as I said earlier, we will not let that money burn a hole in our pockets. We will be judicious and we will be thoughtful about how we spend that and we do not have a timeline on it.

Next we'll go to the line of David Ridley-Lane.

Good morning. I wanted to check something. At the midpoint of your 2018 guidance, it implies about a 33.3% adjusted EBITDA margin before the corporate expenses compared to 34.5% on the restated 2017 basis. So just wondering what the headwinds you are seeing to the underlying segment margins in 2018 would be.

Sure. Let me take that question if I may. I think that the biggest factor to include is the fact that later in the year and that is why we have given for the first time some guidance based on an absolute EBITDA, not on a margin basis, it's because what's going to happen later this year we're suddenly going to have the impact of the Reuters contract kicking in. So, this $325 million payment we are getting from Reuters is going to increase revenue at some point really dramatically, but with no corresponding increase in EBITDA. And so that will have a depressing impact on the overall margin of the company, of course. We are not sure exactly when that will happen; it depends on the exact date of the closing and that's why you can understand now why we provided EBITDA guidance rather than EBITDA margin guidance is because we know we have a better sense of what our EBITDA will be. That contract will not impact EBITDA very much, but we have no idea how much revenue will be recorded this year from that $325 million payment. That depends on the timing of the closing.

And our next question comes from the line of Andrew Steinerman. Please go ahead.

Hi, good morning. This is Michael Cho in for Andrew. Just had a quick one on the F&R segment. I was wondering if you can just give us some commentary on how year-over-year revenues performed for desktop versus feeds.

Yes, happy to do that. So, desktops for the first quarter represented about 35% of the revenue base and they were down 3% and the feeds and risk portion of the business represented about 42% of the revenue base and that was up 6%.

Okay, thanks. And just one quick follow-up on that. When would you expect to or will there be a new F&R leadership team announced at the close as well?

Our expectation is that right now the current F&R leadership team is the one you would see at the close.

And our next question come from the line of Doug Arthur. Your line of open.

Yes, thanks. Jim, I wanted to ask you, and by the way, great to hear your voice; it's good to see you're back. I wanted to ask you about the general spending environment in Legal right now. And I say that kind of remembering over the last five years that the big law firms have been in a cutback mode and you have been trying to develop services to help them cut costs. Do you think that the better growth here is partly a function of sort of stronger animal spirits and spending by the big firms or is this really more of a mix issue here in the first quarter?

I don't think it is a mix issue. I would start by saying I don't think there has been any sea change when you think about law firms. In fact, overall law firm demand was slightly down in the first quarter. The demand for legal services. We've seen the same dynamics at the bigger firms doing better, small and medium firms having a tougher time, so there's not been a change in those dynamics. What we have seen though is while they have been pushing to cut costs, they have been adopting more and more technology and there's more professional management of law firms, there are more general managers in large law firms. There are more chief technology officers and the like and I think as we have tried to transition our positioning from just the library into the workflow, I think that's paying off. So, our underlying core legal information subscription businesses, it was great, had a solid low single digit growth start to the year, but we continued mid-single digits in some of the other areas where we are providing workflow tools, software and solutions. So, I think what we're banking on and where we are seeing lots of traction is in working with those firms not necessarily just to get more of their legal information spend, but to help them as they think about what their technology spend is going to look like in the future, what their software spend is going to look like in the future and how technology is likely to impact the shape of their firms in the practice of law. That is why we are so excited about some of the work we are doing around applying artificial intelligence and cognitive computing to the legal process and in fact, we have a big gathering of law firm managing partners next week together to talk about exactly where we are. But we are very excited about opportunities to take that labs infrastructure that we built and focus it full tilt on the legal and tax workflow solutions. So, I hope that's helpful. The environment is largely the same, but we are trying to help in other areas.

Next we'll go to the line of Drew McReynolds. Please go ahead.

Thanks very much and welcome back, Jim. On the margin profile for Legal, Tax & Accounting, not in the next couple years because I think everyone is acknowledging a lot of the temporary noise in the numbers, but once we get beyond that, let's say, 2020, is there any kind of anticipated change in the margin profiles of those two businesses? Clearly, the revenue mix will evolve and we are aware of solutions, for example, in Legal being a little bit low margin and Westlaw Next. But outside of mix, is there kind of any reason we should be thinking differently on margin? And one follow-up, just in terms of free cash flow for 2018, obviously F&R will be in the numbers until it is not. Could we pencil in on an annualized basis about $1 billion in free cash flow from F&R? Thanks.

I will try to take these two questions. First, the margin question. And I will expand a little bit on the answer I gave earlier. So overall, at the total company level, the margin will be depressed because of the factor I mentioned, the fact that the Reuters News business is going to be a bigger part of the revenue and doesn't have the same margin profile as the other two businesses. If you look at the other two businesses, which was your question, I would say no major changes in terms of trends or trajectory. For 2018, I would expect the margins in our Legal business to be a bit lower than they were in 2017. That is because of these investments that they are making and again, you will hear more about the nature of these investments later in the year, but I would view this as being temporary. And in the case of our Tax & Accounting business, this year given the growth profile, I would expect for the full year to see a slight improvement in their margin actually. So really nothing fundamentally changed from what we talked about in the past in terms of revenue mix impact and the like. In the case of your question about the free cash flow coming from the Financial & Risk business, I think that's a really tough question to answer because they will be obviously a private company going forward. They will certainly take a number of initiatives early on to really accelerate any cost take-out that can be taken so that they can make re-investments in the business early also. So very hard to say what the free cash flow of the business will be initially. I think we will have to see and figure that out over the next few years, but the goal is obviously for that business to accelerate any initiatives that are in place and accelerate any re-investments that they want to push behind the key growth initiatives.

And just a quick follow-up there, Stephane. Up until closing though, are we to assume the contribution is what it historically has been plus or minus for the trend in the business? Obviously, a lot will change post-closing, but is that a reasonable assumption?

I would say the way the agreement is set between Blackstone and ourselves, there is a portion of the free cash, which you remember, that's generated by F&R. That's being shared between the two parties even before closing, but you are generally right in terms of saying that you are going to see the impact of the free cash flow for F&R as you have seen in the first quarter.

Next we go to the line of Tim Casey. Please go ahead.

Thanks. A couple of quick ones from me. Just on the core Legal and the core Tax business, on Legal, is there any update on what you are seeing in terms of what we used to call litigation search, which at one point was a core of the business? My impression was that there were actually some encouraging trends there. A lot of it likely cyclical related to the economy. But just any colour you can provide on that? And with respect to Tax & Accounting, are you expecting any lift or tailwinds based on the systemic changes in the US tax code that have been brought about because my impression was that any major changes is usually good for business? Just some colour on that. Thank you.

Sure. Let me try both of those and Stephane, please feel free to elaborate. First, litigation activity still remains surprisingly depressed; even IP litigation, which was taking off prior to the downturn. So, we haven't really seen an uptick in kind of that core litigation, particularly in the United States. That was a big driver for us in the past. Conversely, we have seen an uptick in corporate work and overall corporate work and things like employment law and that sort of stuff. So, the mix is shifting a little bit. Overall, all-in demand for the first quarter was slightly down, I think 0.5% according to our own internal Peer Monitor. We did last year see a couple of quarters of encouraging movement in the right direction, but it's bouncing around pretty flat, to be honest and that hasn't changed a great deal. On the Tax side, it's interesting. All the tax changes, particularly those in the US, are definitely good for our business. They don't lead, however, to massive spikes. That's actually a good thing because most of our Tax products now today, as we moved Print to Online, most of those products are now subscription-based products, so people sign up for the long term. So, what happens is there is an incremental opportunity to help our sales process and if I look at our net sales performance, Q1 this year versus Q1 last year in the Tax business, there has been a nice healthy double-digit increase in having that sales outperform, but what they do, we can have a pretty big change. It makes our products even more sticky and so we would expect overall nothing is better for our business than complicated regulations except for complicated regulations that change frequently. And that's kind of what we've got in the tax environment right now. So, we think that's a positive trend, but I wouldn't expect a major spike in activity because of the nature of our products.

Next we go to the line of Giasone Salati. Please go ahead.

Hi, guys. Just one question and I feel real bad asking this even before the deal is closed, but when you look at F&R long term three to four five years, how will you decide when to supposedly exit the whole business? Do you have a set IRR in mind? Do you have a milestone timing or else?

The honest answer is no.

And our final question is from the line of George Tong. Please go ahead.

This is Gene on for George. So, first question is with 45% ownership stake in F&R, what's your philosophy on managing this segment and what do you see as the anticipated revenue and cost improvements coming onto the JV?

So, let me take the first and Stephane can take a stab on the second. So, for the first part of your question, we are forming a Board of Directors for the JV and that Board will have nine voting members. Blackstone will have five and we will have four. So, we will actively participate in the overall management of that Board. I can tell you that today leading into the transaction, I suspect given how closely integrated we are going to be this will continue, we have biweekly calls now of senior management at Blackstone and senior management at Thomson Reuters to talk about issues, needs, co-dependencies, everything that we have to accomplish over the next two weeks until we speak again. And I suspect there will be maintained for some time to come a pretty healthy dialogue on an operational basis just because, one, of the size of the investment and two, how intricately tied together these businesses have been in the past. Stephane?

And then on your other question, Jean, on the trajectory of revenue and profitability, I would break that down into two pieces. The next 12 months, what you are going to see is essentially primarily the outcome of the net sales performance and all the actions we have done in the prior 12 months and the first quarter in that regard, that 3% revenue growth, as I said, was very pleasing to us because it's very much in line with, as I said, what we were expecting once all these headwinds we have to deal with will dissipate. Now, in the first quarter, a lot of that 3% performance was helped by strong transaction performance. I think as we look at the remainder of the year, we don't know what is going to happen with transactions, but we would expect the core recurring revenue growth, so the 75% subscription base of the business, to improve gradually over the year. It was about 1.5% in the first quarter and we would expect that number to in fact start improving over the balance of the year. After the close of the transaction and once the influence of our partner starts to become more and more visible, we would expect the revenue growth of the business to hopefully accelerate. And that's really why we entered into that transaction. It was primarily not on the fact that we were not confident into the revenue trajectory of the business but based on the strong belief that we could actually even accelerate and improve that trajectory with a contribution from Blackstone. And in terms of profitability, I would say very much the same thing. What you are seeing in this year is essentially given the results of some of the actions we took over the last few months and you have seen the EBITDA profitability being at 33% in the first quarter, which is the highest EBITDA margin this business has ever realized and I would expect again with the contribution and the help and the expertise of Blackstone that we could see that margin trajectory continue to improve going forward.

Stephane, I think that's a very good point. I would just like to add to that because it calls to your attention something that I think is really important to emphasize. We realize and clearly, from these questions we've had today, we realize this is a complicated transaction and we realize there is some clarity to important questions that we won't be able to provide until the smoke clears around the transaction. But the most important and encouraging thing to me about the first quarter is that the underlying trajectories of both of those businesses continue to move in the right direction and in fact each performed as well as they have performed, if not better than they have performed in years. So, we believe those businesses are well-positioned. They are again in good places and that we will sort through the details of this transaction and look forward to getting it together when that smoke has indeed cleared.

Perfect. Thanks, Jim, Stephane. Thanks all of you for joining us today for our first-quarter call. That was our last question so we will conclude the call and we will speak to you again in Q2 in early August. Have a good day.