Ladies and gentlemen, thank you for standing by. Welcome to Thomson Reuters Fourth Quarter and Full Year 2018 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'd now like to turn the conference over to Frank Golden, Senior Vice President of Investor Relations. Please go ahead, sir.

Thanks very much. Good morning, everyone, and thanks for joining us today. Our CEO, Jim Smith; and our CFO, Stephane Bello, will review the results for the fourth quarter and the full year in a moment, and they will also discuss our outlook for 2019 and 2020. 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. Now, as a reminder, we no longer control Refinitiv, given that we own 45% and beginning with the fourth quarter, Refinitiv's results are accounted for as an equity method investment on our income statement. As a result, Refinitiv isn't included in our adjusted earnings nor in our adjusted earnings per share as of the fourth quarter. Finally, on our website today, we have posted our quarterly results for 2018 as well as our full-year 2017 and 2016 results, reflecting our new segment structure, so you can access that information again on our website. Now 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 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 now turn it over to Jim Smith.

Thank you, Frank, and thank all of you for joining us today. Today I plan to recap several highlights from 2018. I will review our results from the fourth quarter and I’ll finish up discussing our priorities for this year, including our outlook for 2019 and 2020. So let's begin. 2018 was truly a watershed year for the company. One year ago the task ahead of us seemed daunting. We entered the year with a 1% growth business, a highly complex transaction to execute, significant stranded costs to resolve, and a major repositioning of the go forward business on the horizon. What a difference a year can make. As we enter 2019, I am pleased to report that we have successfully executed against all of our key objectives. We have, of course, closed the transaction with Blackstone, successfully completing the separation of our Financial business from Thomson Reuters and launching Refinitiv smoothly. We have also restructured the company to a customer-focused segment structure and reframed our opportunity around meeting our customers’ evolving needs, including better efficiency tools and a growing shift from content to software. And lastly, we have repositioned the new, in quotes, “Thomson Reuters” and begun executing on a clear growth strategy, building from the important 3% organic growth rate that we achieved in the second half of 2018. Now any one of these objectives would have been a lot of work for an organization to take on in any one year. So I am particularly pleased that through much hard work and dedication, our people successfully accomplished all of that and more. And they did not miss a step from a performance standpoint, as evidenced by the stronger than expected sales and revenues for the full year. These achievements allow us to now focus on accelerating growth…

Thank you, Jim. Before I turn to the results, let me point out that as Jim just mentioned this is the first quarter that we are reporting based on our new organizational structure with five customer segments. And the results on this slide exclude Refinitiv. Let me also remind you that our results remain distorted as we continue to navigate through a transition of the Refinitiv separation. And I will try to provide you with as much transparency as possible with regard to these distorting factors throughout the rest of this presentation. Now as we always do, I will talk to revenue growth before currency. In this quarter, currency had a 2% negative impact on growth. So, on a constant currency basis, fourth-quarter revenues were up 9% including the first quarterly payment by Refinitiv to Reuters of $81 million. On an organic basis, revenues grew 3% during the fourth quarter, excluding the impact of the News contract with Refinitiv. If you break down the growth further by revenue type, you can see that recurring revenue grew strongly, up 14% and they were up 5% organically. We continue to see an encouraging progression of our recurring revenue performance, which represents 77% of total revenues, and which is truly the foundation for the future growth rate for the company. Transactions revenues declined 3% and Global Print revenues declined 4% during the fourth quarter. Turning to profitability. Adjusted EBITDA was $285 million in the fourth quarter. EBITDA was down 30%, which was driven primarily by additional cost and investments related to the separation of the two companies. And I will provide some additional color on these factors in the next few slides. Now, before turning to the results by segment, I believe it would be helpful to look at the impact of the…

Thank you, Stephane. So we are off to a good start as we enter the year. We started the year executing on a clear growth strategy with our teams 100% focused on expanding our positions in our core, Legal and Tax domains and our strong capital position provides us with significant flexibility and opportunity to drive growth. We expect to invest organically and inorganically to further accelerate revenue growth and these investments are all intended to add critical capabilities and expand the range of products we can cross-sell to our customers, to add features to our products that will support premium price points and continue to improve our customer service, thereby supporting even higher levels of retention. We also want to add new customers particularly by capitalizing on digital channels to address the long tail of our market opportunity with small law and accounting firms. So I am very confident in the trajectory of the business as we enter 2019 and look forward toward 2020. As I said earlier, our aim for this year is to maintain the focus, pace and determination with which we ended 2018, accomplishing those objectives will position us very well toward achieving our targets over the next two years. With that, let me turn it back over to Frank.

Thanks very much Jim and Stephane. This concludes our formal remarks for the fourth quarter and the full year and we’d now – operator, like to open the call for questions please.

[Operator Instructions]. We’ll go to the line of Toni Kaplan with Morgan Stanley. Please go ahead.

Thank you. Good morning. I wanted to ask a couple of things with regard to the first quarter. With all the changes in tax reform that were put in place last year, are you expecting to see a better than normal growth in the Tax Professionals segment in the quarter and should we see any impact on results from the government shutdown as well?

Let me start with the second one and come back to the first one. We don't anticipate any impact from the government shutdown. Had that postponed the filing season, the tax filing season in the United States that would have shifted perhaps when we'd recognize some revenue, but it didn't, so we don't expect that. And as far as specific bumps, I think, all of us in the industry saw a healthy bump in Q4 from all the tax changes. We would expect it to be a healthy market, again, in Q1, but not have a material impact. If you think about looking at Q1 of 2018 as well, what we actually saw was a delay in spending while people were waiting on the new rules to be formulated. So we don't think there's going to be material swings about that. I would just say that any change in regulatory complexity or tax complexity is generally good.

Terrific. And then for my follow-up, can you just give us an update on the client response to Westlaw Edge and how sales are trending versus your expectations? Thank you.

The reaction has been quite gratifying. It's strong. The pipelines are strong and it continues to be very well received by clients. And I think, as Stephane mentioned in his prepared remarks, we continue to see attractive pricing dynamics with that product.

Thank you.

Next we go to the line of Vince Valentini with TD Securities. Please go ahead.

Yes. Thanks. My question is going to follow up the Westlaw Edge, but can I just clarify something first Stephane? The free cash flow guidance of $0 million to $300 million, if I'm looking at slide 28, do I compare that to the $358 million number of free cash flow from continuing operations is that the best basis for comparison?

I think Vince you -- 2019 is going to be very distorted. Right? We quoted about $700 million of one-time items, so I think the best way to compare it is just add $700 million on that $0 million to $300 million to get a sense of what the underlying free cash flow looks like.

So, if I had $700 million then I can compare to the bottom line, sort of, normal free cash flow. Okay.

Right.

So just back to Westlaw Edge can I – these new segments, obviously, we don't have a good basis for comparison. So you've said the law firm’s sub segment of Legal Professionals, revenue growth was 2% in the fourth quarter. It seems to me like that may be a bit light, if you're seeing this great traction on Westlaw Edge and pricing gains. I know you haven't migrated a lot of customers yet, but do you have any basis of what that 2% might've looked like in Q3 or Q2, like, is that -- are you already seeing an acceleration? It used to be 0 or 1, now it's 2 and heading upwards? Or is 2 kind of flat with where it has been?

It’s slightly better, so demand for legal services improving very, very marginally. It's still pretty low overall, but there's not a direct correlation between the growth in demand for legal services and the growth rate of our Legal business, because the Legal business is much more than just giving legal content, right. It's being helped, of course, by the software solutions we are getting in that segment and C2R so it gives a good solid underpinning to the performance we expect from that business. And I will say that the growth in Legal Services is actually an improvement from what we've seen in the prior year, which it had been negative for a number of years prior to this year.

And I think if I could just add something to that, Vince, because it's a very good question and you are exactly right. We don't have comparable prior segments to look at and if you think about overall, some of the things that would've been recorded in overall growth in our old Legal segment are now in the Corporate segment because they are serving General Counsels and the like. So I think it is more important to look at a holistic look at how those three underlying businesses are running. They are not specifically comparable to our old Legal and Tax businesses.

Got it. Thanks.

Next we go to the line of Aravinda Galappatthige with Canaccord. Please go ahead.

Good morning. Thanks for taking my question. I just wanted to go back to the $2 billion investment fund you have. Any update, Jim, on the M&A landscape, what you're seeing there, and anything -- I know that you made the Integration Point acquisition. Are you seeing sort of a greater number of targets that interest you both on the Legal side and the Tax side, and sort of connected to the capital allocation theme, I wanted to get a sense of the buyback, obviously, you are at 0.5 in terms of leverage ratio. Arguably you have more room to buy back stock beyond the 250. Just wanted to get your thoughts on that as well. Thank you.

Sure. Let me give you the kind of strategic landscape for acquisitions and Stephane can talk about the financial dynamics as we look at the buyback. So to start with, I would say, yes, we see opportunities out there. I would say the thing about M&A is it takes a willing buyer and a willing seller at a reasonable price for both sides and, in fact, what you have to do is kick a lot of tires before you find the right deal. So we are out kicking a lot of tires right now. But what we are also trying to do is to work with each of our new segments to identify what the most important capabilities are going to be for their customers five years from now. Not necessarily expanding the place just where we are today but we are looking within our customer set. We are looking for things that are additive to the offerings that we bring to customers in those existing markets and then looking at those capabilities. And look, we have a number of potential targets that we are looking at. We are right in the process of prioritizing those targets and in some cases beginning some discussions, but we are not on the verge of pulling the trigger on something big right now. When you look at Integration Point though that would be a great example of the kind of thing we are looking at, right, because it’s a -- it has an underlying technology in a customer set that’s highly complementary to our ONESOURCE corporate tax workstation, helping corporations manage their cross-border trading needs. We had some strength outside the United States and a growing business inside the United States. We were building out a technology to have an extensive global platform. By doing the Integration Point acquisition, we were able to bring in a large number of US customers and to take an underlying technology that we thought was extensible and that could be interfaced into that ONESOURCE platform offering and in return really make a buy build decision on the CapEx we would've spent over the next three years to finish building out our own platform.

And Aravinda, on your second question about buybacks, you can hear from Jim like our focus at this point in time is really to more on the acquisition side with regard to how we would prefer to utilize that $2 billion of reinvestment fund. So, the $250 million buyback program we announced this morning is really a smaller buyback that will enable us to keep our share count at about 500 million shares throughout the year. As you know there's some issuance of shares that result from the dividend reinvestment plan that we have and also obviously executive share issuances. So, we just want to stay at about 500 million. I would say if in 12 to 18 months, we find ourselves in a position where we have not been able to identify the right acquisition opportunities, we will reconsider our options and buyback would have easily be one of the options on the table at that time.

Great. Thank you very much.

Next is line of Andrew Steinerman JPMorgan. Please go ahead.

Hi there. I'm looking at Slide 18 about the Legal Professionals. Stephane you just mentioned that demand for legal services is improving slightly. I wanted to know what you meant by that? Did you mean the end market, the law firms themselves are doing better, or did you just mean the receptivity of Thomson's products is increasing in its attractiveness? And then also on that same page, the green bucket of Global, is that international law firms and should it continue to grow at high single-digits?

So, the answer to your first question I would say is both. We've seen slightly better dynamics in the legal market from what we've seen in the prior years and as Jim mentioned the reception for Westlaw Edge continues to be very strong. So, I think we are benefiting from these two trends in the Legal Professionals segment. And with regard to the -- your second question--

Global, yes.

Global, look that's not a really very large proportion of our overall business. It's potentially bolstered by -- or we've got some business in Latin America and we've got some business in the U.K., Australia, and Canada. And these businesses are performing reasonably well at this time.

And those are law firms right?

Yes.

Okay. Thanks.

Next is the line of Paul Steep with Scotia. Please go ahead.

Good morning. Jim or Stephane could you talk a little bit -- Stephane, you referenced free cash flow going back into the LTIP metrics from 2016, I guess, we missed it last year, we had an adjusted EBITDA less CapEx as a proxy and then organic growth. Do you still have the ACV metric in there? I guess, we'll see in April, but maybe you could give us a sneak peek at that. Thanks.

Yes, Paul. Thank you for the question. Let me try to clarify what I said, what I refer to are our long-term incentive plans. So, we have two plans, the one year short-term bonus plan and that one has not changed. It's still based on book of business, net sales for one-third, on revenue for one-third, and on what we refer to cash OI for one-third. No change there. What has changed is that the long-term which is a three-year plan that essentially represents a fairly large amount of the total compensation of our senior executives; that one is based now on two metrics free cash flow per share and organic growth over a three-year period.

Perfect. That's great. Thank you very much guys.

Excuse me; next question is from Manav Patnaik with Barclays. Please go ahead

Thank you. Good morning guys. Stephane I just wanted to confirm the $1 billion to $1.2 billion free cash flow guidance in 2020, is that equivalent to the 2.4 per share guidance you gave before and I guess does that include the M&A that I think you had baked into that 2.4?

Yes, Manav and that’s why we have to give a bit of a range. I mean, we obviously are targeting to achieve $2.40. Since we don't yet have certainty about how we’re going to deploy $2 billion reinvestment fund, we don't know if we have achieved that $2.40 by either increasing the numerator by completing some acquisitions that we’d obviously hopefully be accretive to our free cash flow, or whether we’re going to achieve that somehow by improving the denominator, meaning if we don't find acquisitions, we may reduce our share count. But if you look at the underlying free cash flow that I tried to describe during the presentation for 2018, a reported free cash flow was $1.1 billion, but if we -- you strip out all the noise coming from Refinitiv, IP & Science and so on, you see the underlying free cash flow was just under $700 million at $685 million. So if you try to think about how you bridge from that number to the $1 billion to $1.2 billion that we need to achieve in order to hit that $2.40 target, we feel we've got a pretty good level of visibility on how we can get there and what the building blocks are, and if I had to summarize them, pretty simply I would say that just simply from the reduction in interest expense, we should get about $120 million. You can do the math based on the debt reduction that we had. Then on top of that, you know, we very much are targeting a better level of capital efficiency, bringing our CapEx as a percentage of revenue from about 10% last year to between 7.5% and 8%. Well, that itself should add another $100 million a free cash flow and we can do that we feel very confident without affecting growth because this is just about driving more efficiency and our infrastructure and the rest. And then you look at the efficiency initiative we’re trying to push through to strip out these stranded costs that should be also $100 million to $150 million, so if you just add these three elements, you can see that you already have a pretty nice path to get to where we need to be, and then on top of that, obviously, you need to add whatever we can get from higher revenue growth if we achieve what we are aiming at, obviously, net that of cash taxes, but you can see why we feel confident about the path to achieving that target that we gave last year.

Okay. And then just quick follow-up, the Print, I guess, revenues growth in margin declines I guess, I mean it still a quarter of EBITDA. Is there strategy for that or do you just let it bleed because that’s just the reality of the business?

Look, I think it's a good question. I think what we’re trying to look at is, there is no question that in all areas of publishing around the world today there is a move from printed products to online delivery and to more tools and less referential content, so that's just a general trend, which is unlikely to change. The way we're trying to look at our print base is to say in that base are several hundred thousand customers that have a print relationship with us. And we’re trying to build on that print relationship and look at that as a customer relationship and find ways that sell them more tools to find a novel ways of bundling print with other electronic options to provide them with services, and to generally retain of those customers and grow with them and have them grow with us as we expand our product offering. So our goal would be to look at them not just as the kind of product we are supplying them, although we have to manage that differently, right, but rather how we build on the customer relationship?

Got it. Thanks guys.

Next we go to the line of David Ridley-Lane with Bank of America. Please go ahead.

Sure. Good morning. Could you give us some early data points for investors on the returns from setting up the corporate segment? It sounds like you did have some standup costs there. Are you getting the kind of cross-sell momentum that you expected? How are things going in that new segment here in the early days?

Yes. Thanks David. Look as you just said, it's very early days, but we have obviously pretty high ambitions for this Corporate segment. We see a lot of nascent opportunities and so we wanted to make sure that we staff that segment in such a way that would support growth of that segment whether it’s organic or inorganic and that's why you saw some additional cost in the fourth quarter to stand up that business. The other thing that’s going to impact margins in that segment is what I referred to during the presentation, it’s the Integration Point acquisition that’s dilutive obviously for the first year. So what I would expect to see in that segment hopefully is an improving growth rate over time and from a margin perspective, as I said the margin will continue to be negatively impacted. So pretty flat margin, I would say for the next three quarters or so as we go through that Integration Point acquisition. And then from thereon we should see the flow-through of the higher revenue growth that we expect to see in that business.

Thank you. And as a quick follow-up, I hate to go back to Print, but you’ve warned us in the past when print volumes decline, we should expect a pretty high flow through to EBITDA given the fixed cost base and it's just really surprising to see the print -- Global Print margins holding up, actually expanding in 2018. Just want to make sure, there wasn't some large one-time cost savings and just sort of what you’re expecting for that segment in 2019?

That have -- Jim here. That team has done a great job of looking at the cost base. And they are becoming more and more efficient in the way they are printing and distributing those materials and there is just a heck of a lot of innovation going on in that Print organization right now and I don't think they are going to stop innovating anytime soon.

Thank you very much.

I think we have one additional question in the queue, so we will take that operator please.

All right. That’s from the line of George Tong with Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. Your 2019 guidance includes organic revenue growth of 3% to 3.5% which then steps up to 3.5% to 4.5% in 2020. Can you give us color and how this organic outlook breaks out by segment and specific initiatives at the segment level you have in place to drive the accelerating growth? I know you touched on Westlaw Edge in Legal, but any others you would point out?

Sure. Well if you look at our three key segments, right; Corporates, Tax and Legal, they all have a very large portion of the revenue base that’s subscription and recurring base. So it’s all dependent on what’s the book of business growth that you achieve in these three businesses. And as Jim mentioned during his remarks, we saw actually a very encouraging momentum in the book of business of performance of each of these businesses in 2018 and that came in the face of what would have been a very distracting year with everything that did happen. So, I would say it comes down to what we spoke about in prior calls, right; there is now 100% focus on these three businesses. We have a level of granularity that we didn't have frankly before in managing the book of business, managing that net sales pipeline, looking at what our cross-selling opportunities on a segment-by-segment basis, sub-segment-by-sub-segment basis, and customer-by-customer basis literally. And so I think what we are seeing broadly speaking is us using more levers than we had -- than we used in the past to foster our organic growth rate. Of course, we relied pretty heavily on up selling in the past, we're going to look more at net sales through -- new sales through digital initiatives, we're going to look more cross-selling by having like better analytics that we are in the process very much of establishing. So, it -- George, it really comes down to a matter of like focus and greater focus now that these of the businesses that we are focusing on.

Great. Thank you.

And I think we do have one additional question, so we'll take that please.

Very good. It’s Doug Arthur with Huber Research. Please go ahead.

Frank, I'll actually spare you. I'm covered. Thank you.

Okay Doug. Thank you.

Okay. So, no other questions in the queue. So that will conclude our call and we'd like to thank you all for joining us this morning and we will update you again in the first quarter when we report in early May. Thank you.

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