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Thomson Reuters Corporation (NYSE:TRI)

Goldman Sachs Communacopia Conference Call

September 26, 2013 11:20 AM ET

Executives

James Smith - President and CEO

Analysts

Andre Benjamin - Goldman Sachs

Andre Benjamin - Goldman Sachs

All right. Great. Well good morning everyone. Thank you for hanging around for the last presentation of the conference. My name is Andre Benjamin, I am the Information Services Analyst here at Goldman Sachs, and I am pleased to have with me Jim Smith, the CEO of Thomson Reuters. Jim has been the CEO since January 2012, he previously held a number of roles at the company, beginning his career as a journalist at Thomson Newspapers. Prior to being CEO, he also ran the Professional Division after the acquisition of Reuters Corporation in 2008. So thank you very much for being here with us.

James Smith

Delighted. Thanks for the invitation.

Andre Benjamin - Goldman Sachs

So, I will spend about 35 minutes or so, going through a couple of questions, and then I'd try to leave some room for investors to get a chance to ask what may be on their minds. So I will kick it off with some strategy questions. Thomson Reuters is a collection of pretty diverse, and some would argue, unrelated businesses, including the financial and risk information. You have got legal, you have got tax, and you have got science. Why do you believe it makes sense for all these businesses to be combined, and what are some of the strategic priorities for the corporation on those individual businesses over the next couple of years?

James Smith

Sure. I mean, that's obviously a question that we think about a lot and spend a lot of time debating. It's interesting, when you look at a company like ours, we certainly have not been shy about getting in or out of businesses that we didn't feel fit together, or that where there wasn’t growth opportunities for us over time, and while I think on the surface we do address many different markets if you look under the covers of our businesses today, there are lot more similarities in operating them than you might see from the outside.

When you think about it, the vast majority of our businesses are all about that intersection of information and technology today, right? And they are all about professional workflows. If you think about the end users that we serve, and the way we have to serve up solutions to them, there are lot of commonalities about the underlying application of technology to information. There are a lot of underlying commonalities about the way you apply metadata to underlying information. There are lot of commonalities about professional search and professional workflow tools.

Also I think there are opportunities in each of our businesses that are global in nature, and we are just beginning to tap the surface I think in our potential for exploiting the global footprint of our organization, to tap global opportunities for all of our businesses. So I think underlying, there are a lot more commonalities between the businesses, in terms of the things you have to do to be successful in those businesses although they address different end markets, and we like the footprint right now. I think, the great trick will be in the [ultimate answer] [ph] will come when you judge how successful we are at generating the benefits of scale across the face of the enterprise.

Andre Benjamin - Goldman Sachs

That's very helpful. As with 20/20 hindsight, we wish we all had that right. So do you believe a combination of Thomson and Reuters businesses still make sense in the current form, as what might have been done differently, and is there any potential that some of these businesses could be reconfigured in the future?

James Smith

It certainly hasn't been an easy ride. I feel the 20/20 hindsight, I might have picked different timing, effectively, going big in a financial services industry in 2008 doesn't look like the most fortunate timing, particularly for a company that's coming -- timing right a lot more often than not. But in truth, the industrial logic behind putting those two businesses together, the old Thomson Financial business which was strong in North America, and stronger on the buy side, along with the Reuters business which was -- very global and very strong on the sell side.

The industrial logic is the same, right? And again, I think there were difficulties around timing, but if you also think back to where we were at that time, it's easy to project that the old Thomson company had a $1.5 billion business in the financial services sector, and going at it tooth and nail in a more bifurcated market and it was a very tough place to be, and I think in retrospect, the analysis that we have done shows that our financial and risk business and our old markets division, actually has performed hell of a lot better from 2008 forward than did the standalone Reuters or the standalone Thomson Financial in the last downturn. So I think it is a much stronger business. If you just look at the results, it has been far less volatile. So I think it did help us build a really solid base there.

If you look back, what lessons did you learn? Well I would pick a different timing, which you couldn't do. So that's outside your control. I think within our control, we would have done a better job of executing the integration right up front, and I hope we have been -- I don't know if apologetic is the right word, but honest enough about admitting that some of the mistakes that we made early on, if I had to do over again, I wish we hadn't released the early version of Eikon, before it was ready. I think that was a very difficult product misstep for us.

But all-in, we have recovered from that now, and I think we are beginning to -- begin to realize the benefits of putting those two businesses together. We are beginning to see the integration, and we are certainly beginning to see a more solid base and an improved, I think, competitive positioning in the marketplace. So if I had to do it over again, I would’ve hoped for a better timing, and I would have made -- would have focused more on the integration and getting it right out of the box.

Andre Benjamin - Goldman Sachs

And I'd say, in terms of the F&R segment, the financial and risk, you are in the process of executing a turnaround there will the rollout of a new and improved Eikon, amongst other things. Still sticking to the strategy, assuming that turnaround goes as planned, and that business looks healthier, could you envision potentially putting a -- splitting the company in a way that you maybe have a financial business that looks more like the -- [inaudible] McGraw-Hill and then a professional business, or should we assume that -- still think that these should stay together?

James Smith

Well look, I think this is a business. So you never say never, and you look at the track record, certainly of our organization, and I am a Thomson lifer, 26 years. We have always confronted reality and we have taken opportunities in the marketplace; never been afraid to make big bold decisions. But that is not on my plate right now. We are not sitting there contemplating today we build to a point of separation. In fact, quite the opposite. My focus right now, is on how do we operate the enterprise to get the true benefits of scale, and I'd say how do we exploit the commonalities between the businesses as opposed to the differences between the businesses. So that's just something that's not on the radar screen right now. If it turns out -- if that's a smart thing to do down the road, we certainly never have shied away from big bold decisions, or tough decisions, but frankly, you got to make sure that there is a smart decision, and just because someone else has found a different path, doesn't necessarily mean it’s right for you.

As I said, there are a lot of commonalities in the business in terms of the application of technology, the information. There are lot of commonalities in how you manage, what everybody today is calling Big Data, but those -- the metadata connections between various databases, and we are finding lots of opportunity to share -- better to share best practices, to learn from one other, and to leverage off those resources, and then that global footprint is something we have been exploring pretty actively for the last 18 months, about how we can better go to market in -- particularly in rapidly developing economies, as a Thomson Reuters, not as a legal business, or a tax business, or a financial services business, and how we can serve global corporations around the world, in a unified sort of way.

So that's what we are focused on right now, and that's where our attention has to remain, certainly for the near term.

Andre Benjamin - Goldman Sachs

Then in terms of capital structure and allocating capital, I understand you are in the process of trying to turn around a bigger part of your business. But in terms of spending money, do you think that the priority -- if you can rank them, you have got organic growth, got M&A, pay down debt, dividend and stock buyback. So as you think about all those things, as you are also focused on operating the business, what should we view as the optimal ranking of those?

James Smith

Look, I think like everybody today, we are constantly reevaluating what the right thing to do is versus the market opportunity and the opportunities we see inside the company as well. And if you look at our capital structure, we have always been committed to maintaining an investment grade rating. That's just the fundamental that we are, and we are always going to do that. We do want to be sound and strong.

That said we have this really remarkable business that has very solid free cash flow characteristics, so we have a lot of cash that we generate, and we have the luxury of deciding where and how we are going to allocate that.

In the past, we have always given preference and precedence, and our greatest attention to those kind of tactical acquisitions that can help us build out a footprint, right? And I think in recent years, as we have been redeploying the assets from some of our portfolio sales, we have had an extraordinary level of acquisition activity.

I think, in the near term what you will see, is that we will move away from that extraordinary level of acquisition activity. In fact, we will dial that back, in what I would anticipate to be a significant way, and put a finer filter on those acquisitions. We will always be looking for some level of tactical acquisitions to buy in the capability of the product set, or a customer set, that we can immediately integrate and scale and we can do a lot more than that business can do alone, and increasingly that comes as a result of buy versus build analysis, where clearly buy has a strong payback.

But that analysis in this day and age kind of turns, right, the world is a different place, and I think we will give increasing consideration in our deliberations to all manner of creating value for shareholders. And that we believe strongly in the cash generating capability of the business, and we believe there will be plenty of opportunity for us to have that debate. We have always been solidly behind the dividend, as a strong way of returning cash to shareholders. We are still committed to the dividend. Of course, we have a dividend flow now that's above our target range, 40% to 50% of our free cash flow in terms of being paid out. We certainly like to get that back within that range; part of that free cash flow, increasing the free cash flow, and part of that is thinking long hard about what to do with that free cash flow, and I'd just say we will take, I suspect a more balanced approach in those deliberations in the future, with all the levers.

Andre Benjamin - Goldman Sachs

So, I think a lot of investor focus on the financial and risk segment, so a few questions there, specifically. You have acknowledged some of the challenges rolling out Eikon too early, and this has led to some customers probably not being as receptive as you’d hoped to the integrated desktop solution that you offer. Where do you currently stand in the goal of getting Eikon fully rolled out and Bridge retiring by the fall?

James Smith

We are absolutely on track. We are just -- we couldn't be in a better place. In fact, it's interesting, it is the story, and I mentioned it myself, boy, I wish we hadn't stubbed our toe coming out of the gate on Eikon. But that story is over, really. I mean, Eikon is a world class product now. The reception in the market from our customers couldn't be better. I feel very confident that we have stabilized our business and are now back on a positive track. So that's terrific. We don't have objection to the product anymore. It's just -- it's terrific, and I feel very-very comfortable about that. I feel particularly comfortable, and that is not just an Eikon story, but more importantly, what we have done, is build this unified platform that allows us to deliver Eikon as a viewer for individuals to have access to our complete stack of data and information, but also that is the same infrastructure that we are building to kind of deliver the feeds to the machine readers as well.

So that's completely on-track. We have talked publicly about being completely of the Reuters Xtra 3000 terminals by the end of the year. We will be there. We’ve talked about being -- about shutting the Bridge network. We will be there. We will do that. We have set targets early in the year for other platform shutdowns, most notably, our European mid-tier platform shutdown on time, on budget. Our hosted terminal access platform shut down on time and on budget, and with 98% conversion rates to the customers. So it's very-very sticky. I think the metric I am most proud of, is not only that retention rate couldn't make the conversions, but for every five that we convert, we generally get another sale, a new sale in the same shop.

So just getting Eikons out there improves our retention rates overall, and getting Eikons out there, creates more people interested in having an Eikon. So that's definitely pretty gratifying. And I know it sounds boring to say we are on track, but we are on track, and I think the Reuters Xtra 3000s are -- they will be shut down at the end of this year, we’ll be off of the Bridge network at the end of this year, and then next year, we will begin formal rollout of moving into the investment management space, and then all the Thomson ONE products will start to roll on to an Eikon platform, and we will be largely through that process next year.

So far so good, and everything is on track.

Andre Benjamin - Goldman Sachs

That's great. Then I guess in terms of the operating environment; two pronged question. First, could you talk a little bit about how things are going just in your financial service customers, in terms of lot of attention on headcounts and has that slowed or actually reversed? Are customers actually initiating interest and spending more on services versus keeping it flatter going down?

James Smith

Yeah. So in thinking about the macro environment, it's certainly interesting these days, and it's certainly fragile and changing, as everyone in this room knows, right? But I would categorize the overall environment, particularly in financial services, as a world in which everything is not getting worse all the time any more, right? And there was a point, I don't know it was a year ago or 18 months ago, where everybody was cutting everything that moved, right? And there was no thought to offense, and how we are going to build our business in the future? It was just, how quickly could we get costs out.

There is still an intent of cost pressure across the face of the business, and I think that's just reality and it’s going to be here for a long-long time to come, and we feel that across the base of the customers. That said, if we look geographically, we do see improvement and we see people doing offensive things, and the Americas have certainly improved, right; particularly North America, we are seeing solid improvement. Asia feels a lot better today than it did a year ago. Europe is still very challenged, but again it's in that boat of not everything is getting worse all the time, right? The large global banks are still under incredible pressure, particularly the large European based global banks are under incredible pressure, and that's where we are seeing the bulk of our pressure coming, and we are seeing a lot of gains under the covers, being offset by the large global banks, right? And that dynamic is still playing out.

I think on the -- in fact, even in Europe, if you looked at our second quarter numbers, what we call our direct sales channel, which was the smaller financial customers across Europe, that don't have a dedicated account team assigned to them, if you look to that direct channel, we saw actually an increase in net sales amongst that direct channel, but offset by the big globals, and you can just understand, those are -- the top 20 banks are 20% of revenue in our financial business for example. And also those move in fairly big chunks when they retrench, and we still fight that.

But I do find it kind of interesting that, we do see increasing opportunity with the cost pressure, for us to engage in different kind of dialogs. Both of it with the big banks, who see us as a way of providing technology and automation and services, that can help replace some of the costs inside the bank, right, and we have a number of strategic discussions with a number of players there. It is obviously very good timing on our part, I talked about bad timing in a question, talking earlier -- unfortunate timing earlier. Building out our capabilities around regulatory risk and compliance has actually been quite fortunate; because if there is one place, where every bank, even banks that are cutting overall headcount, are adding headcount in the compliance space, right, and we have a lot of solutions that can help offset costs, doing regulatory compliance work in-house, and that's a really solidly growing business for us. So that's attractive.

And I think also when you look at how the global financial markets are restructuring themselves, as the large global players begin to pull back more and that economic activity transfers into emerging markets per se, but particularly some of the big regional hubs, I think there is great opportunity for us and we have been working quite hard to make sure we capture that economic activity as a new group of regional aspirants step up, and fill some of that void that has been left behind, and as you start to see emerging market or so called emerging market players, opening trading floors in New York or along the north or wherever, and reaching out to be dominant regional players. I think there is a great opportunity for a company like us, that can offer the kind of breadth of solutions that we have, from terminals to feeds to other infrastructure support opportunities, that can help them scale to the opportunities that they are seeing as the big players pull back.

So that's actually a positive side to the dislocation, or a couple of positive sides to the dislocation. But overall, everything is not getting worse anymore. Americas looks solid, Asia looks solid, Europe challenged; and I would just say that, as the caveat to all of that, everywhere it still feels that the world is a little more fragile place these days, and in my sense of all the customers that I speak with, everyone is still trying to grapple with what the opportunities are in a new lower growth world, with a different regulatory environment, and I think there is a lot of cautiousness on pulling the trigger to make huge investments in the future right now, and you just have to look at, I think, kind of the tone of business dialog right now, as everyone waits to see what the U.S. Federal Government is going to do, in terms of the upcoming budget negotiations to see how quickly people can kind of slow [inaudible], yeah so much, that's right. So everybody is struggling with that uncertainty right now.

Andre Benjamin - Goldman Sachs

There is one nuance point I would like to dig in a little bit on your comment is, I think, there has been a lot of investor focus on the challenges at the big banks versus the backdrop that the strong capital markets and strong equity flows have provided for those on the buy side of the business. So are you seeing much of a difference amongst your buy side clients, and how does that feed into how you are thinking about placing the business going forward with the Eikon rollout?

James Smith

There is absolutely no -- there is no question. If you had that crystal ball a few years ago, you would have moved more quickly to be developing Eikon for the buy side, and putting your best foot forward on the buy side. And it is a bit of a tale of two halves here, right? There is certainly a different level of optimism and a different level of aggressiveness on the buy side, and it's the one that we are moving as fast as we possibly can, to take advantage of, and working to expand and build our relationships there, and I would say that its very interesting to see the emergence of slightly different dynamics around the world in how those buy side players are shaping up.

But I think -- you strike at what is one of the great challenges, I think for all of us as managers, when there is a great disruption like this, there is the tendency for those of us who run successful businesses, and particularly in developed markets, to look at all the change and say, oh my god, here is -- this change is a threat to all the historic things that I know. It's a threat to the stability of the business that I know.

And I was just back recently from a trip [with our] teams in Latin America and it was struck on the second day of the trip about -- they were having the same discussions about change, all right, change, change. But it was -- change was opportunity. Change was -- it was a chance to reinvent the game, the chance to do something new and to reinvent paradigm. So I think that's the challenge for all of us running businesses, to look at this kind of disruptive change, and figure out ways to make it opportune.

Andre Benjamin - Goldman Sachs

Great, and I think a follow-up to that would be a discussion of not just the volume growth opportunity, but pricing obviously has a big impact here. Could you talk a little bit about the pricing environment? You offer a lot of products, so it's not really fair to say what's pricing, I mean, there has to be a [reliable] answer I think. Maybe some discussion about how things are doing in desktops versus data feeds, another big growth area for you, and then you also got a ton of software in trading platforms, are you seeing big differences across those?

James Smith

No, I think one of the -- this has been more about -- particularly on the desktop side, there has been more about headcount than it has been about pricing, and I think if anything has been a bit of a pleasant surprise to me, I'd say pricing is pretty much held up throughout the discussions, and we are not seeing a huge pushback on price. I would say on the financial services side, we are in the advantage of not being the price leader in the market, therefore it's probably not as -- our prices -- we have got a really good high quality product at a better price point overall, and I think that's an attractive place to be. I would say that, across the face of the contracts we have been renewing, we have been renewing them with 1.5% to 2.5% kind of net price built into them, and uplifts into subsequent years, and we really haven't seen an issue at holding pricing. So pricing itself has held up fairly well across the face of the company.

I also think that for us, pricing is an opportunity for us to be more disciplined frankly, and for us to bring a little more rationality to our pricing and product mix permanently, as we put more discipline into it. So I think there is a -- as we work behind the scenes, the Eikon story and [everyone] understands the product story or platform consolidation, right. But underneath the covers, there is also a commercial simplification story, that goes along with collapsing platforms, right? And I think our ability to offer fewer, more valuable variants of our information solutions, gives us an opportunity to rethink how we package our pricing, right, and it's my belief that we can deliver greater value, and have greater pricing yield, if we are more disciplined about that. And I think you will see a lot more about that.

I think we spoke on our Investor Day in a little more detail about that, and particularly when you move to the investment management side, I think you will see even more -- in a more granular way, how we will be collapsing a number of products into the variance and packages of products.

Andre Benjamin - Goldman Sachs

So is it a fair characterization; I know you have talked about 1.5 and 2.5 across the company, that's the average. Should we assume that more of that is biased to areas where you are more of an entrenched competitor like the data feeds or the trading platforms, or should we be assuming a similar paradigm or event or --?

James Smith

No that would be -- that would be across the face of everything, and wherever possible, we try to give customers, the benefit of the totality of the relationship. So that would be an all-in kind of price.

Andre Benjamin - Goldman Sachs

Yeah. Instant messaging has been -- people have thought about Bloomberg as the entrenched competitor that -- everyone loves their Bloomberg and has been a big stickiness factor to them. There has been some attention to the desire of other competitors, including yourself, to develop some alternatives. You have been developing something with open architecture. Could you may be talk a little bit about receptivity on your efforts there, how progress has been going and what you think the milestones that we should be looking to, going forward?

James Smith

Sure. We have been a big proponent of open messaging for obvious reasons. You are right. I mean, this Bloomberg Messaging is a really sticky part of their product, and it's in fact, in many ways -- market participants think it's a part of their identity to be able to play in the market. We have been behind an open messaging initiative for a long time. We believe that there is great advantage to opening up the ability for participants in the market to interact with lots of folks, not just those who are in a particular club or a particular user group, but to choose which groups that you want to join and to expand those networks beyond one proprietary network as you know, and as a lot of people have talked about.

There have been a number of folks in the industry who have been involved in that discussion. Those discussions continue, and I think there is ever more interest in creating a truly open industry environment, where more and more people can confederate their address books, and open up the world to broader and bigger groups of participants, and to a wider and broader community. We view our role as working with the industry, to connect the industry together, and as far as milestones go, I don't really want to front run anything. In the due course of time, I am very optimistic, that there will be some meaningful output from all of the discussions that have gone on, particularly over the past year. But as I say, it would be premature for me to predict what might happen in the coming weeks, and in the old American football analogy, I would hate to spike the ball on the 10-yard line. But I do think there is a lot of momentum behind creating open [inaudible].

Andre Benjamin - Goldman Sachs

Yes the last one I will ask before I check the crowd for questions is, I think another good part of the story has been the opportunity for the cost reduction. There has been a decent amount of cutting that has already happened in the F&R division, but there is a goal that you put out there for 30% EBITDA margins for the overall corporation, I think that F&R is a big part of that. Could you talk a little bit, I know you have identified $150 million in cuts by shutting down legacy systems. How you feel about the risk around that, and what we should be thinking about to hit 30% [inaudible] revenue versus cost cutting [attribute to] get there?

James Smith

I think that -- when we talk about reducing operating margin target in our financial business, that does imply that you get to a low single digit revenue growth rate, right? No business can just cut its way to the future, right, into prosperity. You know, we don't want to ever be in a position where we are managing only costs to a margin target. That said, I believe there is ample opportunity inside our financial business, but inside all of Thomson Reuters really, to be a lot more disciplined about our cost structure, to be a lot smarter about how we move to automate processes to employ the latest technology to make certain that we are focusing our internal resources on the things that, that create the greatest value add for our customers, right?

So I think there is ample opportunity inside the business for us to continue to take costs out for the foreseeable future, and particularly in near term. So it's a blend, the 30% margin in the overall, does imply low single-digit revenue growth to get there. But it's not -- it's difficult, but not a stretch of the imagination when you see the opportunity I think to work smarter to work more effectively and to deploy today's technology, particularly in areas like content aggregation and to share best practices across the company. And again we, we talked earlier about why you hang together as a company, was your initial question, right; part of that is to get some of the benefits of scale, like a -- doing things like managing data centers in a common way, managing entitlement systems in a common way, managing billing systems, managing all that back office stuff in a common way, inside the company or in a common way with outsourced providers, if that's the better alternative.

Andre Benjamin - Goldman Sachs

Great. I have got tons more questions, but I'm sure the audience may have a few as well. I think we have one here.

Question-and-Answer Session

Unidentified Analyst

Thank you. I have two unrelated questions. I'm wondering on the -- it seems reasonable to think that when you collapse down some of your legacy desktops and your legacy, sort of, other products into standardized new generation that you can see costs on technology and perhaps personnel. How about on the -- sort of customer service side? From my discussions with big banks, as well as my own experience, the customer service on the financial product isn't what it is from some of your largest competitors. Is that an area of investment, do you reinvest from those savings or does your sort of intelligence above the competitiveness of the customer service tell you differently?

James Smith

No. Customer service, we are investing more in. We have been investing more in, in the last 18 months, we'll continue to invest more in. I mean it's not just a blanket -- that's why it was -- I was trying to be little circumspect to my last answer. It's not just about taking, and that's not just about cutting costs. You do have to make certain that you're fueling the revenue and it's going to get you to the future. We have been lagging in our customer service and we're investing more there and I anticipate continuing to invest more there. But I want to invest more there by moving resources from things that don't matter, to things that do.

Unidentified Analyst

That's good to know. The other question is, you mentioned in your talk that you're getting for every five legacy desktops you upgrade, you get six Eikon desktops, with ones [going to have a] new desk that wasn't previously equipped with Thomson Reuters. And you said that the customers who are turning to the new contracts are pretty firm -- sometime a little bit higher pricing. So how do I reconcile that with the trading and the -- these investors categories of your financial revenue, which I think is a bulk of the financial revenue, comparing down at least through the June quarter, so it's still declining. Where if the units are good and growing and the pricing is firm, then how are the -- there must be something that's happening, that has caused revenue to still decline?

James Smith

Yeah no. And that well could come from -- it could come from other products as well. You may remember, we still do have a net downtick from -- just from pure cancellations, right? So when I talked about the -- when I talked about the renewals, right, those are the renewals that doesn't include the -- its cancellations from big banks, that's what it is.

Andre Benjamin - Goldman Sachs

Any others? I guess I'll take this one. I'll kick in with a slight shift in the financial business side. You talked a lot about that, but you do have another pretty good business in the legal business that, that matters as well. If you characterize it, that business is somewhat like a Tale of Two Cities and that you've got the high margin legacy business that is declining, and offset by the growth of lower margin, newer products and workflow solutions. So could you talk about what trends you're seeing for both of those and how you expect that growth translates into bulk growth and margin [applications]?

James Smith

Sure. You have characterized the business exactly right. We do have a Tale of Two Cities going on. The good news is, if you take the growth businesses -- if put together the businesses that are growing kind of on average 6% to 9%, that's 50% of the business now, right? So just the math starts to help here, as that gets bigger, right, in terms of overall growth rates; and I think you will begin to see those margins to expand, and already have, particularly in some of those that we've had and made investments in, earlier in the cycle. So those businesses are doing really well. Our strategy there is just to continue to, you know, put more resource behind them, and to try to get them to grow faster, and to get them to be bigger and a bigger part of the pie.

On the legacy business, which today is declining, I think that's the kind of core legal research business, particularly in the United States, right. And that's -- there are kind of three parts to that story, I think the biggest part is the large law firm market, which went through a bit of disruption over the last few years. But seems to have stabilized in many-many ways and frankly, it's a position where we're really strong. We have great customer relationships and I feel very good about our place in the kind of large law firm market, and as well 100 Magic Circle in UK that's a -- we're really well there. We were the preferred provider and the premium provider, and we have very deep and broad relationships across multiple services in those large law firms.

The next aspect is print; and print has always been the most cyclically sensitive part of our legal publishing business and the first to go in and the first to get cut. And if you look at the US alone, we still got $550 million of print, and that's a very vulnerable bit. I think we're always looking at print to say at what point is this a cyclical phenomena; and at what point does the business become a -- just a structural change, where print is fundamentally going to go away. And we're in the midst of that analysis right now, and the question is, what can we do with that print business to turn it into perhaps a more stable subscription-like business via packaging -- more tightly packaging it with the online services and/or moving as rapidly as we can, to E-Reader, and we've been working very hard over the last few years, to develop what we believe, is the best E-Reader technology for professional users and doing things that -- in a way professional researchers use print material. So we got a number of initiatives underway, attacking what we are going to print.

And then I think the third aspect of that story is small law firms, particularly small law firms in the U.S., which collectively is a pretty -- is a pretty big market and one that's incredibly price sensitive, and it's a market where we see lots of competition and lots of switching back and forward. And again, sensitivity of the price, where the breadth of legal research solution is as important as it is in the large law firm market. And I think if you look from an opportunity standpoint there, it's also a market where roughly half of that market, as we define it, doesn't buy anything from us or LexisNexis today. The question is, what kind of solutions can we sell into those markets to -- to provide a different kind of value proposition. So that's where the legal space is.

Overall, we like our position in the legal space, it's challenged in those bits of the market that I highlighted. But it's one we're very comfortable in, and its one where -- if I look at it today, our challenge is how we get it back to a higher growth position, kind of low mid single-digits I think are achievable certainly over the cycle. Right now, we're looking to preserve margins in that space, not to grow margins in that space. But I think as anyone, who operates inside the business, I would be lying if I didn't tell you that I see opportunities to -- works more smartly and more efficiently within that space as well, particularly as we think about a lot of process that we had in place and were built on manual practices, where we have perhaps moved to lower cost locations for labor. Or where there might be the opportunity to automate with modern technology.

Andre Benjamin - Goldman Sachs

Great. Well I appreciate your time. We are out of time. So thank you for coming and listening with us, and hope everyone has a good day.

James Smith

Thank you very much.

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