Thomson Reuters Q2 2010 Earnings Call Transcript

Thomson Reuters Q2 2010 Earnings Call Transcript
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Thomson Reuters (TRI)

Q2 2010 Earnings Call

July 29, 2010 8:30 am ET


Frank Golden - Senior Vice President of Investor Relations

Thomas Glocer - Chief Executive Officer and Director

Robert Daleo - Chief Financial Officer and Executive Vice President


Claudio Aspesi - Bernstein Research

Michael Meltz - JP Morgan Chase & Co

Paul Steep - Scotia Capital Inc.

Patrick Wellington - Morgan Stanley

Phillip Huang - UBS Investment Bank

Colin Tennant - Nomura Securities Co. Ltd.

Drew McReynolds - RBC Capital Markets Corporation

Tim Casey - BMO Capital Markets Canada

Vince Valentini - TD Newcrest Capital Inc.

Brian Karimzad - Goldman Sachs Group Inc.



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Ladies and gentlemen, thank you for standing by, and welcome to the Thomson Reuters Second Quarter 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Senior Vice President of Investor Relations, Frank Golden. Please go ahead, sir.

Frank Golden

Good morning, and thank you for joining us, as we report our second quarter 2010 results. We will begin today with Thomson Reuters CEO Tom Glocer, who'll be followed by our CFO, Bob Daleo. Following Tom's and Bob's presentations, we'll open the call for questions. Please limit yourselves to one question.

Now as Tom and Bob discuss the quarter's results, keep in mind that when we compare performance period-on-period, we look at revenue growth rates before currency as we believe this provides the best basis to measure the underlying performance of the business.

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.

It's now my pleasure to introduce the CEO of Thomson Reuters, Tom Glocer.

Thomas Glocer

Thanks, Frank, and thanks to all of you for joining us today. I plan to cover four topics: First, I'll discuss obviously our second quarter results; second, I'll give you a couple of highlights from my perspective for the quarter; and third, I'll update you on new product launches so far this year and remaining for the balance of the year; and fourth, I thought I'd describe some of the additional near-term growth opportunities that we're pursuing.

The results that you see here on the screen, again confirm that 2009 was the bottom of the cycle for us in terms of economic activity, and 2010 was the bottom in terms of reported results. And I think it's a testament to the strength of our business and our leading market positions that during this cycle, revenues never declined more than 3%, which occurred in the fourth quarter of 2009. And behind this resilient performance, we've continued to invest in a powerful business model, enabling us to strengthen our competitive position, while also positioning us for growth.

While our markets are only slowly improving, we expect it and have seen accelerated results in terms of revenues, net sales and customer uptake of our new products. So based on these encouraging trends, we now expect to return to growth in the third quarter. You may recall that earlier in the year, we had said we expect it to occur sometime in the second half of the year.

For the second quarter, revenues were down 1%, but sequential growth continued off of Q4 '09's 3% decline. Yes, we continue to feel the impact from last year's negative net sales. However, from a consolidated net sales standpoint, the second quarter of 2009 was the bottom for net sales, and trends have continued to improve with each of the last three quarters having been positive in net sales.

The Professional division revenues rose 2%, which we believe to be a good performance compared to our peers and the industry as a whole. Growth was driven by the Tax & Accounting and Healthcare & Science businesses. Legal revenues were unchanged from the prior year period, which is a marked improvement from the first quarter's 3% decline.

The Markets division 3% period-on-period decline was again due to last year's negative net sales. However, June, the all-important end of quarter month, net sales were very positive, and for us, that's always an important milestone. It gives us confidence that we'll achieve positive net sales for the second half of the year.

As anticipated, underlying operating profit declined 17%, which was 12% on an excluding-currency basis due to the anticipated revenue declines in the ongoing investments, including new product launches that I'll get to in a moment. We continue to make good progress with our integration program, with run rate savings of $1.3 billion as of June 30, and we remain confident that we'll achieve our total savings programs target of $1.6 billion by the end of 2011.

Adjusted earnings per share for the quarter were $0.47 compared to $0.58 in the prior period, primarily due to the lower underlying operating profit. And lastly, we're reaffirming our full year 2010 outlook, given the first half results and the favorable trends in the business, and Bob will go into a little bit greater detail on the outlook.

Now let me discuss some highlights for each division. Trends in the Legal business continue to improve. New sales were up double digit in the second quarter, and it's our best performance in Legal in over two years. And the launch WestlawNext really helped to drive growth and strengthen our competitive position. For the quarter, Legal revenues were unchanged from the prior period, as the 5% increase in subscription revenues was offset by lower print and non-subscription revenues. Legal is expected to report good revenue growth for the balance of the year, improving sales, growth in subscription revenues and lower print attrition, which is now back down near historical levels.

Tax & Accounting and Healthcare & Science continue to perform well as revenues grew 8% and 3%, respectively for the quarter. We expect revenue growth rates for both businesses to accelerate in the second half of the year based on flow-through from improved sales.

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