Thomson Reuters (TRI)
Q3 2010 Earnings Call
October 28, 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
Paul Steep - Scotia Capital Inc.
Phillip Huang - UBS Investment Bank
Colin Tennant - Nomura Securities Co. Ltd.
Mark Braley - Deutsche Bank AG
Thomas Singlehurst - Citigroup Inc
Drew McReynolds - RBC Capital Markets Corporation
Tim Casey - BMO Capital Markets Canada
Vince Valentini - TD Newcrest Capital Inc.
Brian Karimzad - Goldman Sachs Group Inc.
Ladies and gentlemen, good morning. Thank you for standing by, and welcome to the Thomson Reuters Third Quarter 2010 Earnings Conference Call [Operator Instructions] I would now like to turn the conference over to our host, Senior Vice President, Investor Relations, Mr. Frank Golden. Please go ahead.
Thanks, very much, and good morning, and thank you for joining us as we report our results for the third quarter. We'll 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. I'd ask that you please limit yourselves to one question each, so that we can get to as many as possible.
Now throughout today's presentation, keep in mind that when we compare performance period on period, we look at revenue growth rates before currency as we believe that this provides the best basis to measure the underlying performance of the business.
Today's presentation does contain 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 the 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 Chief Executive Officer of Thomson Reuters, Tom Glocer.
Thank you, Frank, and thanks to everyone for joining us today. I'm pleased to report that the company returned to revenue growth in the third quarter. We're past the bottom and on the way back up. Our markets are slowly improving, and we're encouraged by what we're seeing in the business, revenue growth, positive net sales and strong customer uptake of our new products.
For Q3, revenues were up 3% with both divisions recording growth. The Professional division's revenues grows 5%, and growth was good across each of Professional business units, with the Tax & Accounting and Healthcare & Science businesses, achieving particularly strong results. Legal revenues were up 3%, it's best performance in almost two years in what continues to be a challenging environment for law firms. Nevertheless, we continue to believe our growth rates exceed those of our peers and the industry as a whole. The Markets division returned to growth in Q3 on the back of improving sales trends. This quarter marked the second consecutive quarter of positive net sales, which has steadily improved from their bottom in Q2 2009, and these trends bode well for continued revenue growth in Q4 and 2011.
Underlying operating profit declined 4% for the firm as a whole, primarily due to ongoing product investment, product mix and the dilutive effect of acquisitions. We continue to believe we'll meet our full year operating margin guidance of low 20% margins, and we're making good progress on our integration program, with run rate savings exceeding $1.3 billion, and we remain confident that we'll achieve our previously announced goal of $1.6 billion by year end 2011.
Adjusted earnings per share for the quarter was $0.49 compared to $0.43 in the prior period, helped by lower integration-related cost and lower interest expense and a decline in income tax expense. Lastly, we continued to be confident that we'll achieve our full year 2010 outlook, given the year-to-date results and the favorable trends in the business. In fact, we now expect our revenue performance to be slightly better than previously forecast, with revenues flat to slightly up for the full year versus flat to slightly down before.
All in all, the third quarter was a period of continuing solid execution, with positive net sales, the launch of new product platforms and steady progress on the integration programs. Trends in the Legal business continued to improve. Revenue growth of 3% was driven by an 8% increase in subscription revenues, thanks to good growth at FindLaw, IP business and the international Legal businesses. WestlawNext sales, now at 9,000 positions, continued to be strong, helping to drive growth and further strengthen our competitive position. And for the first nine months of the year, net sales for prints are up compared to a decline in the prior year period, as print attrition is close to historical levels, some 9%.
Tax & Accounting and Healthcare & Science continued to perform well as revenues grew 9% and 7%, respectively, for the quarter. The Tax & Accounting market continues to be healthy, and we expect revenue growth for this business to accelerate in the fourth quarter.
Turning to Markets, trends continued to be encouraging. Net sales were positive for the second consecutive quarter, reflecting positive customer reaction to our new offerings, including Thomson Reuters Elektron, our new low latency data distribution platform, and of course, Thomson Reuters Eikon, our new flagship desktop product. Enterprise revenues were up 10%, with strong growth across the segment, except for Omgeo, which was negatively impacted by lower equity volumes over the summer. Tradeweb grew 9% due to higher volumes for U.S. treasuries and mortgage-backs. By geography, revenues grew across all major regions of the world except North America. Customers in rapidly developing economies continued to demand our products, as evidenced by Asia as a whole, up 4%, of which China grew 12%, India, 7% and over in the Middle East and Africa, we are up 15% and in Brazil, up 8%. Transaction revenues were up a healthy 5% despite a dip in FX volumes during the summer months.