Ladies and gentlemen, thank you for standing by. Welcome to Thomson Reuters Second Quarter Earnings Call. At this time, all participant 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 would now like to turn the conference over to the Senior Vice President of Investor Relations, Frank Golden. Please go ahead.

Thank you and good morning, everyone. Thanks for joining us today. Our CEO, Jim Smith, and our CFO, Stephane Bello, will review the results for the second quarter in a moment. When we open the call for questions, we'd appreciate it if you would limit yourselves to one question each to enable us to get to as many questions as possible. Today's results are shown for our continuing operations defined as Legal, Tax and Reuters News. And I'll remind you that consistent with how we reported Q1, the Financial & Risk business is classified as a discontinued operation and will continue to be shown that way until we close the transaction with Blackstone. Therefore, adjusted earnings per share do not reflect any revenue or operating income contribution from the Financial & Risk business. Now, as you will hear from Jim, we expect the F&R transaction with Blackstone to close early in the fourth quarter, and although we are not yet in a position to provide specifics regarding the planned tender offer or SIB, we do expect to be able to provide details once we have greater clarity on the actual closing date of the transaction. Lastly, in today's press release, we include a schedule with Financial & Risk's results for the second quarter and year-to-date. The information included in the schedule will be provided each quarter following the close of the transaction. And as a reminder, throughout today's presentation when we compare performance period-on-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 that we discuss 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. I'd now like to turn the call over to Jim Smith.

Good morning. Thank you for joining us today. I plan to cover three topics this morning. First, I'll review our results for the quarter. Second, I'll provide a preview of the new organization structure we announced several weeks ago. And lastly, I'll update you on the timing of status of the partnership venture with Blackstone. Now, to the results; I'm pleased with our results for the quarter as we're tracking to plan and we're also pleased to reaffirm our full year 2018 outlook. The reported results include our Legal, Tax and Reuters News businesses and they exclude Financial. Let me start by pointing out that currency had no impact on our consolidated results for the quarter, as 100 basis point positive impact on Legal's reported revenue growth was offset by 100 basis point negative impact on Tax & Accounting. Revenues rose 2% to $1.3 billion, with Legal and Tax both up 3% on a reported basis. And as expected, both EBITDA margin and earnings per share declined from the prior year period due to higher corporate costs related to the transaction with Blackstone and investments being made to reposition the company post close. Adjusted EBITDA for the quarter was down 8% to $348 million and the margin was 26.5% versus 29.7% a year ago. Adjusted EPS came in at $0.17, a $0.02 decline from a year ago. And lastly, the Financial business grew by 3% both organically and on a reported basis during the quarter. Stephane will provide more detail in a moment related to results for the Financial business. Now, following the close of the deal with Blackstone, Thomson Reuters will be in a position to play offense, with the businesses where we already have leading positions and where we're considered trusted partner by our customers. We now have…

Thank you, Jim, and good morning or good afternoon to all of you. Before I turn to the results, let me remind you, once again, that our Financial business is now excluded from our consolidated results and is reported as a discontinued operation. And since this business represented more than half of our revenue base, all financial results are currently distorted as we navigate through the transition towards a smaller, but more focused business. Specifically, our profitability metrics at a consolidated level are depressed by stranded costs and charges resulting from the separation. As discussed previously, we intend to gradually eliminate most of these stranded costs over the next 18 months. And importantly, virtually all of these costs are held within the corporate center, meaning that the performance by business unit will remain relatively clean throughout this transition period. Also, while our EBITDA performance no longer includes the contribution from our Financial business, our debt level and share count both remain essentially unchanged until after the transaction closes, at which point we expect to use a large portion of the cash proceeds to buy back shares and to reduce our outstanding debt. And this will, in turn, allow us to bring down our interest expense and improve both earnings per share and free cash flow per share. We try to give you as much transparency and we will continue to try to give you as much transparency as possible on these various distorting factors, but it will take a few quarters before their impact fully dissipates. Now, as we always do, I will talk to revenue growth before currency. So, on a constant currency basis, second quarter revenues were up 2%. Adjusted EBITDA was down 8% with the margin down about 300 basis points versus the restated prior year period.…

Thanks, Stephane and Jim, for those remarks and now we'd like to open it up, operator, for questions. So, if we could have the first question, please.

Thank you. It's the line of Toni Kaplan with Morgan Stanley. Please go ahead. Toni M. Kaplan - Morgan Stanley & Co. LLC: Hi, good morning.

Good morning. Toni M. Kaplan - Morgan Stanley & Co. LLC: In one of your recent filings, you stated that F&R can achieve up to $650 million of run rate cost savings by the end of a five-year period following the close of the transaction. I was hoping you could talk about how much you're planning to reinvest and maybe just give a little bit more on what's included in that $650 million, like you've done a lot of cost cutting in F&R over the years and I was just wondering how you could identify an additional $650 million. So, just wanted to know if it was a result of a new strategy or if you could just give any color, that'd be helpful. Thank you.

So, Toni, we would work with our partners at Blackstone, obviously, to decide how much of the amount of savings we will generate over the next five years will be reinvested in the business. To be completely frank with you, I don't think that we have a absolutely firm idea at this point in time. We will evaluate the reinvestment opportunities and decide on that basis. Now, where the amount comes from, I would say a portion of this amount was very much included in our future plans and you see some of the savings continuing to flow through the results this year. You've seen in the second quarter, the margin was up a very healthy amount as a result of some of these cost savings. And so they're reflecting that $650 million. And I think one of the benefits that the partnership with Blackstone brings is that, obviously, they are helping us to relook entirely at the cost structure of the Financial business and certainly are able to add additional contributions to what we would have planned ourselves in terms of cost savings. But you remember from our earlier remarks last year that we did expect the potential for the business to continue to improve its margin beyond the 30% that we have achieved and that we have targeted five years ago. And in Q2 alone, I think the margin was above 33%, so continuing improvement and we expect that to continue going forward. Toni M. Kaplan - Morgan Stanley & Co. LLC: Okay. Great. And just for my follow-up, we saw earlier in the week that a competitor of yours won a large contract away in wealth management, away from your F&R business. I guess, what happened there? Was it price or service-driven and how will you, I guess, prevent it from happening going forward? Thanks.

Well, I'll take that one, Toni. Look, we were very disappointed with the result of that process. We serve 180,000 wealth management professionals and 2,000 firms around the world and we hate to lose any of them. That particular contract was a unique event. The decision was made at the end of a nearly yearlong RFP process that was highly competitive. And at the end of the day, we were not successful and were disappointed not to be successful. We remain committed to serving those 2,000 firms that rely upon us for wealth management tools, and we will do everything that we can to keep serving all of those clients. And furthermore, we've shifted our focus more to the overarching relationship that we have with Bank of America Merrill Lynch, the parent company where we see a lot of opportunities to improve that overall relationship. So, all in all, we have a good relationship with Bank of America Merrill Lynch. We were disappointed to lose this bit of the business, but optimistic about the future. Toni M. Kaplan - Morgan Stanley & Co. LLC: Okay. Thanks. Sorry. My questions were all F&R focused this time. I'm sure I'll focus on the other ones in the future. Thank you.

Thanks, Toni.

Next we go to the line of Paul Steep with Scotia Capital. Please go ahead.

Good morning. So, could we maybe talk – Jim, you'd made a comment or two, I think, this morning about acquisitions and I think we've had that as a question. Can you talk about how you're thinking about it in terms of – you obviously said no new segments, but should we think about these more as deals like a Clarient or a REDI? Or are these more strategic deals? I know it's a hard question, but any insight there would be helpful. And then, I've got a quick follow-up.

Yeah. Sure. Thank you very much. I'd just start by saying, as I always do, we will not let cash on the balance sheet burn a hole in our pockets and race to spend it. We'll be as judicious as we ever have been about making those investments, so that's the backdrop. I'll reiterate what I said before, we're not looking for new frontiers to conquer. We believe we have great opportunity in the businesses we have today. But I do think we're analyzing it in the light of the fact that we're in a fundamentally different place than we were with a couple of the acquisitions that you just mentioned, we're essentially plugging gaps in our product offerings. Post close, we're going to have the unique position of being market leaders and what we're looking at are the kinds of acquisitions that could support those market-leading positions by perhaps adding features, functionalities, bringing certain kind of even talent into the organization, the skills that we don't necessarily have today, but not plugging gaps that we have on our offerings, but rather supplementing and supporting positions of strength.

Great. The quick follow-up would be, I guess, for Stephane or either of you, on Legal within the global solutions segment, the first half of the year has been exceptionally strong, I guess, versus our expectation. Can you talk a little bit about what's driven that, in particular? Thanks guys.

Sure. We were very pleased to see actually the growth rate accelerate in the legal solutions business. These are the businesses that – these really represent the future of our legal businesses, so having seen this acceleration and particularly having seen the acceleration happening in the recurring revenue base of the solutions business was very encouraging. And it's a number of factors. As you know, these solution businesses, not businesses it includes and reflected very strong performance from CLEAR or a government-related product. Elite and FindLaw are doing better than they were last year. So, I would say it was pretty consistent across the solutions business that we saw improvement. And as we look forward to the second half of the year and maybe beyond, what we hope to see is a continuation of a strong performance in the solutions business and hopefully a slight acceleration of our performance in the U.S. online business, which would be triggered by the introduction of Westlaw Edge which, as Jim said, is the most profound and innovative product introduction we've done since WestlawNext. So, if we can keep the solutions business continuing to deliver as they've had and accelerate slightly the growth rate in our U.S. online business, we think that we can be well positioned in the overall Legal segment.

Thank you.

Next we go to the line of Peter Appert with Piper Jaffray. Please go ahead. Peter P. Appert - Piper Jaffray & Co.: Thanks. So, Jim, I'm wondering if you could just talk a little bit about how you think about the trade-off between your plans for increased investment spending, the desire for faster growth versus profitability. And specifically I'm wondering if – how important improving margins is in the context of driving faster revenue growth?

Well, I mean that's the $64,000 question as they say, I guess, and it's something we try to balance all the time, Peter. And I would say the way I look at it is, you look at the core growth in our business and remember the dynamics of our business. We have a high fixed cost business. And as we've always said, we kind of get over that 3% organic revenue growth number, you start to see a lot of flow-through and that should help us on the margin front, while at the same time we'll make some conscious decisions to invest in things and some of our newer businesses often come out at lower margins and some of our newer offerings require some added investment. But we try to balance that mix and once we can get the organic revenue growth accelerating somewhere at or above 3%, we certainly have a lot more room to see margin expansion or to invest in higher top line growth without margin degradation. And that's kind of the way we look at it and we try to balance that every single day. Peter P. Appert - Piper Jaffray & Co.: Could I ask you then specifically on Westlaw Edge, that you saw a little bit of margin degradation because I think you mentioned the incremental marketing rollout costs, et cetera.

Yeah. Peter P. Appert - Piper Jaffray & Co.: Longer term, is Westlaw Edge accretive to the margin and how big do you think the opportunity is?

Absolutely, I couldn't size it because it's early days now. We're really encouraged about that. The important thing to remember about the Westlaw Edge launch is this is not like a lot of product launches you've seen in the past where we're going to migrate customers to a new platform, right? These are new tools and capabilities that are built on the existing Westlaw platform, right? And it's being offered as a premium sale to the new Westlaw. So, we do not envision a forced migration or a migration strategy and the way we're bringing this product out, it's a new set of tools that runs on top of the same platform. So, therefore, the launch costs and some of the early development costs are in and some, they will not be – those are not ongoing costs. And as we see uptake, at a premium price we think that's going to be accretive. Peter P. Appert - Piper Jaffray & Co.: Thanks, Jim.

Next we go to the line of Manav Patnaik with Barclays. Please go ahead.

Thank you. Good morning, gentlemen. My first question is just your decision to make the Corporate (sic) [Corporates] line sort of a separate line. Just wondering what the composition there is and how we should think about the opportunity?

Are you speaking about the corporate cost or the new Corporates segment?

Corporates segment.

No, the Corporates segment that you just – you're going to break out new?

Oh, sure. Look, I think what we've tried to do is to reflect in the new reporting segments the way we want to manage the business and the way we look at the business, and really to get our organization focused around and organized around the customer segments as opposed to the product groups, right? And so, that's why the world looks like Tax Professionals, Legal Professionals and corporations. If you look at the suite of tools that we provide under corporations, they are different. We share some of the same underlying content. We share some of the same underlying, say, legal and tax research products and things like that, but we have specific tools for corporate tax departments that we only sell to corporate tax departments. We have specific tools for compliance professionals that are largely sold into compliance officers. We have specific tools for general counsels, things that allow them to manage their legal affairs and their – we can control the kind of flow of matters with outside counsel, track their spending with outside counsel, analytics around all that kind of stuff and those are sold into corporations. And frankly, we think we have an opportunity with greater focus on those corporations to expand our relationships in each of those corporations by increasing the cross-selling and up-selling that will be possible with the right kind of focus.

Okay. Got it. And then, just on the $1 billion to $3 billion that you plan on using for M&A, just for perspective, like are these deals that you've been tracking for a while and now that the separation that now is happening, you can actually use the cash? Or just some perspective on was this something you would have done before, or is this just being enabled now with the proceeds.

No, I don't think we've ever felt constrained in the past by financial limits or strictures. We have always been looking at opportunities in the market. We've been really focused on organically driving the business forward, getting off of the kind of growth by acquisition train that we run. We never ever intend to go back to the days of doing two dozen acquisitions a year. But we've always been looking at a couple of moves that could really strengthen our leading positions. And should those things come to pass and the opportunity be right and the investment makes sense, we would move on than we would have in the past. Anyway, it just gives us even greater, I guess, flexibility in doing that. And I would say again, we're not going to go back to the days of doing tons of small fold-in acquisitions, but there will be some tactical things that we'll do, but we're looking at other moves that can strengthen the leading market positions we have.

All right. Thanks a lot, guys.

And next we go to the line of Andrew Steinerman with JPMorgan. Please go ahead.

Hi. Jim, could you give us a sense of the current selling environment of Thomson's legal professional market? And when I look at slide 17 which is the Legal revenue by segment, how much is Thomson Legal revenue growth tied to legal professional head count? And does the pricing mechanism of Westlaw Edge position any shift away from ties to head count?

Look, I think what we're seeing in the competitive environment in Legal is a bit of a tale of two cities, right? If you look at overall legal demand, overall legal demand was up in the second quarter over the first quarter, which is encouraging to see and the first quarter was up over the preceding quarter. So, we're seeing an increase in demand there, but it is a tale of two cities in that the largest law firms in, say, The Am Law 100, the Magic Circle, are benefiting disproportionately from this increased demand and we're seeing more pressure in the medium and smaller law firms. I'd rather not go into the specific pricing around Westlaw Edge, because we are just introducing it, we have had great success in selling it as a premium product. We would hope that it would be a bit of insurance against any head count-related reductions just because of the real must-have nature of those tools.

Great. Thank you.

Next we have a question from Aravinda Galappatthige with GE Canaccord Genuity. Please go ahead.

Good morning. Thanks for taking my question. With respect to Westlaw Edge, I mean, obviously with the development of software and AI and machine learning, we're seeing in that landscape a lot of sort of start-ups and maybe some semi-mature companies emerging with lots of interesting products for law firms. Jim, I was wondering if you can talk to sort of how, on one hand, that's an opportunity because it gives you targets for M&A, gives you targets for partnerships, but on the other hand, potentially represents a threat down the road as some of these entities sort of develop into genuine players in that space. Just wanted to get your thoughts on that longer-term picture. Thanks.

Sure. Look, I think it's a very exciting place to be and I think Westlaw Edge is a great example of what you can do, if you have a market-leading position and you continue to innovate. I mean we built this thing in-house, but we built it based on a hundred years of attorney edited content. We built it on far and away the greatest collection of legal data in the world. So, we can develop the same kind of tools that many of these start-ups are developing. Yes, and we work with them, we look to partner with them. We consider acquiring them, but in this case we were actually able to build a better tool than we could buy and one that could scale. And if you just think about the breadth of what we're able to do by pointing those cutting-edge contemporary tools at an absolutely unrivaled set of content, I mean we're pointing these analytics at 8 million federal dockets, the whole Delaware Chancery and 100 million state court dockets that we have, no one has anything close to that. So, I think it's a great example of what you can do if you have an established position and you continue to innovate. And remember we really think our secret sauce is a combination of the content we have, right, the human expertise to make that content relevant and the application of the technology to do that.

Great, thanks for that. And just a quick follow-up for Stephane, if I may, on the corporate cost. I know you've elicited that quite well in the prior conference call, but just wanted to get a sense of the one-time cost in that $600 million number. I mean included in that is a lot of restructuring intended to bring down stranded cost and part of it is also I know that sort of new capabilities, which you're developing which also might be one-time in nature. I was wondering if you can sort of break that out for us, Stephane, in terms of what's really one time just by the nature of that cost. Thanks.

Sure. And I think no change from what we said earlier. These costs which will total between $500 million and $600 million, I would say, over the next few quarters really, four to five quarters, are really broken down into three main categories. About a third represent investments we get to make to reestablish capabilities we're losing as we separate Financial & Risk. About a third represent cost that we will incur to bring down – or to generate the savings that will essentially bring down the stranded cost to the level and the targets that we've outlined which is bring them down to like less than $50 million in 2020. And the last third represents new investments we're making in what we call new TR, which is really things like digital capabilities and other things. So, we're taking this opportunity to really try to reposition the business for success going forward in a pretty short period of time and accelerate investments we would otherwise have done over a longer period of time.

Thank you.

Next we go to the line of David Chu with Bank of America. Please go ahead.

Hi, thanks. So, in the quarter, how much incremental costs were there for the legal investment?

You mean for Westlaw Edge?

Yeah.

It was not huge in the quarter. I think it was, maybe, about $5 million or around that number. It's probably going to pick up a little in the third quarter and that would be the bulk of it, I would say.

Okay. And then just on – I'm sorry, go ahead.

Go ahead. No, no, please go ahead.

Okay. And then, just in terms of F&R and subscriber count, I mean have you seen any material changes since the Blackstone news?

No. I don't think we've seen any material changes. If you think about it and you looked at the last quarter net sales were positive and we've been net sales positive in 16 of the last 17 quarters, so that's still growing.

Okay. Got it. Thank you.

Next we have the line of Doug Arthur with Huber Research. Please go ahead.

Yeah. Thanks. Two questions. Stephane, and just to go back to Legal, not to beat a dead horse here, but given the incremental marketing and new product investment, do you expect margins in the second half for Legal to be slightly below a year ago, or is that not the expectation?

We would expect the margins for the Legal business in the second half to be very much in line with what they were in the first half.

Okay. And then, Jim, in terms of – I mean you talked about a fourth quarter potential close of the F&R deal, are there any other significant regulatory kind of benchmark timeline events you're waiting for here in the next couple of months, anything specific to get this thing over the...

No, we – so, I mean obviously a deal of this size has a number of regulatory hurdles to get through. I'm pleased to report that we are substantially through all of the required regulatory approvals. All of the largest regulators have ruled, not surprisingly most countries have their own individual regulators and we are down to the last mile of regulatory hurdles and we don't anticipate problems. It just takes time.

Okay. So, you would hope to have that wrapped up sort of in terms of a regulatory review by sometime in September, I would assume.

Yes, absolutely. We would hope it would be actually before that, but it certainly should be. And as we said earlier, I think we said earlier our anticipation would be to get all those regulatory hurdles cleared by Labor Day and then Blackstone's intention would be to begin marketing the bonds after Labor Day.

Terrific. Thank you.

Next we go to the line of George Tong with Goldman Sachs. Please go ahead. George Tong - Goldman Sachs & Co. LLC: Hi, thanks. Good morning. I'd like to revisit your recent launch of Westlaw Edge. Can you elaborate on when you expect your sales force to be productive in selling this product and what the phasing of revenue benefits from this launch will look like?

Sure. Well, we had a big session this summer for our sales force, getting folks trained up and familiar with the product. We have specialists that are supporting it. It does take more training, it takes a bit of time because we have to show people how to use the new power in the tool. So, I suspect it will be a gradual launch and buildup. We also are wanting to make certain that we're really successful on the early installations and that the folks who take this product understand how to fully use it, but I'd say our sales force has already been trained up on the force in selling features and we have begun rolling it out. I'm delighted to report that the uptake amongst customers who've trialed it has been extremely encouraging and we'll continue to roll it out – and we think there's a chance that we could have a material number of our customers take this by the end of next year. George Tong - Goldman Sachs & Co. LLC: Very helpful. Thank you.

I think we'll take one more call, operator.

Very good. It's the line of Drew McReynolds from RBC Capital Markets. Please go ahead.

Yeah. Thanks very much. Good morning. Stephane, just a question for you. Within F&R, you flagged $39 million in separation costs in the quarter. Is that the $35 million in rough quarterly costs that we are adding to F&R per guidance a quarter or so ago?

No, those are really separation cost, a one-time cost, so it may include – so, it's not including the run rate. It's things like – it's not $39 million, but things like branding cost and things like that.

Okay. Okay. No, that's great. And then bigger question, I guess either for you Stephane or Jim. Just when we look at M&A, I think for those that have kind of covered the company for quite a long time, when you've done M&A in the past of a certain size, we haven't really got a lot of financial detail around those acquisitions. So, I'm just wondering, could you update us on the financial criteria that you will stick through as you kind of redeploy that $1 billion or $3 billion in proceeds? And particularly within the context of what presumably will be kind of higher multiple transactions just given the nature of the M&A market at this point in the cycle. Thank you.

Sure. And, look, it's difficult to give you exact levels of hurdles. Even in the past the way we've looked at all acquisitions is on a range of factors and those factors have to do with the return, the time to integration and a number of factors and it's always been a traffic light kind of thing, just clearly clears our hurdles. This is questionable, this one doesn't hit the hurdle, but no one traffic light necessarily throws you off, if it's the right thing to do strategically or financially for the whole company. I would say that in the future the kinds of strategic things we're looking at right now, we would look at more holistically in what they do for the whole of the business than necessarily what that individual investment will do as a stand-alone business under our ownership in the future. Because we're looking at things we can either quickly integrate and put on our broader platform as with Practical Law, which is a great example of bringing that in-house and then that suddenly supercharged the whole of our online legal research business and drag along a lot of Westlaw sales and took Westlaw from decline back to growth. And that's encouraging and that's the way we will look at any other business that we had. Can we drag them on to our platform and what's the whole of the business look like? Or is there a platform that we can drag some of our things on to and what that's whole business look like? So, I think we'll take a more holistic impression of how businesses would fit in our current structure. We're going to be religious about understanding how quickly we can integrate these things. I've always said I don't want another office building, I don't want another business system, I don't want another accounting system, another payroll system. All that stuff still applies, but we'll be thinking a lot about how we can support the whole of the business, not just making another acquisition to hold it in a portfolio.

That's great. Thanks.

So, I guess we can tell it's all this, because that's our last question in the queue. So, we'd like to thank you all for joining us today and we'll be following up with you. Feel free to give us a call with any questions you have. And we'll speak to you again for the third quarter call. Take care.

Thank you.

Ladies and gentlemen, this conference is available for digitized replay after 10:30 a.m. Eastern Time today through August 15 at midnight. You may access the replay service at any time by calling 1800-475-6701 and enter the access code of 451059. International participants may dial 320-365-3844. Those numbers again are 1800-475-6701 and 320-365-3844 with the access code of 451059. That does conclude your conference for today. Thank you for your participation and for using AT&T TeleConference Service. You may now disconnect.