Thomson Reuters Corp (TRI) 2007 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Thomson third-quarter 2007 conference call. (Operator Instructions). As a reminder, today's conference is being recorded.

I would now like to turn the conference over to your host, Vice President of Investor Relations, Mr. Frank Golden. Please go ahead.

Thank you and good morning, and welcome to The Thomson Corporation's third-quarter 2007 earnings call. Those of you listening should have a copy of today's earnings release and the related slides, which are posted on our website at thomson.com.

Dick Harrington, our President and CEO, will begin this morning by discussing the third-quarter highlights, and he will provide an update on the proposed Reuters acquisition. Bob Daleo, our CFO, will then take us through the details of the quarter and year-to-date results, and Bob will also review the Company's financial metrics. Following Dick and Bob's presentations, we will open the call for questions. We're also joined this morning by Jim Smith, our COO, and Mike Wilens, our Chief Technology Officer. Please limit yourselves to one question each to enable us to get to as many questions as possible.

Now, today's earnings release has appended to it some additional UK-required reporting schedules related to our 2007 profit margin outlook. When we originally provided our outlook in February, which was prior to the announcement of the Reuters transaction, we noted that our 2007 operating profit margin was expected to be at or above 2006 levels, despite increasing efficiency initiatives, i.e., THOMSONplus. Today, we are updating our profit margin forecast to exclude costs related to the Reuters transaction. This is the only change we have made to the previous guidance.

Due to the UK takeover code requirements, when we update a profit forecast while the Reuters transaction is ongoing, we are required to describe the bases and assumptions related to the forecast within the release. We're also required to include opinions and letters related to the forecast from PwC and our financial advisors for the Reuters transaction, Perella Weinberg and Bear Stearns. While this is unusual from a U.S. and Canadian perspective, it is a UK requirement.

The following discussion contains forward-looking statements that relate to future results and events and are based on Thomson's current expectations. Actual results may differ materially from those currently expected due to a number of risks and uncertainties discussed in documents that we provide to the regulatory agencies.

This presentation also contains disclosures of certain non-GAAP financial measures. As required by regulatory rules, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the Investor Relations section of our website, found at thomson.com.

Let me now introduce the President and CEO of The Thomson Corporation, Dick Harrington.

Thank you, Frank. Good morning and thank you for joining us. This morning, I will begin by reviewing the Company's third-quarter operating results. Next, I will discuss the growth drivers of our business, or the businesses that are delivering our growth and returns. Third, I will provide a regulatory update related to the Reuters acquisition. I will also touch on the opportunities the Thomson-Reuters combination will bring for our customers, employees and shareholders.

Let me begin with the financial results for the quarter. After posting a 6% organic growth rate in the first half of the year, we continued that momentum in the third quarter. The higher organic revenue growth is the direct result of our success in building workflow solutions and investing in technology platforms that are being used across the Company to drive growth.

Revenue for the quarter was up 9%, led by our Legal and our Tax & Accounting businesses, though every segment contributed. Operating profit decreased 1% due to several one-time costs that Bob Daleo will describe later. Removing these costs from both periods, underlying operating profit increased 16% and the margin improved 80 basis points.

Adjusted earnings per share for the quarter were up 55% to $0.48 per share. Given the results for the first nine months of the year and the continuing strong business environment, we are well positioned for a solid finish to the year.

As I discussed at our recent Investor Day meetings, we're helping our business and professional customers become more productive by delivering integrated information solutions. We are number one or number two in the market segments in which we compete, which positions us to meet and exceed our customers' needs.

We deliver our information solutions electronically to enable us to roll out new products and services, like Westlaw Business and FindLaw, quickly and cost-effectively, with high incremental profitability. 80% of our revenue is from electronic products, software and services, and 80% is recurring, and we have a very loyal customer base.

Combined with stable capital spending and a balanced capital structure, this model has led to a 20% compound annual growth rate in free cash flow over the last five years. The direct result of this model is our ability to quickly develop and launch innovative solutions.

This chart shows a number of our leading solutions. These solutions represent 40% of our revenue for the first nine months of the year, and they have significantly contributed to our organic revenue growth. Faster product development and velocity is translating into higher organic growth and margins.

Now let me turn to the Reuters regulatory approval process and recap where we stand. As you know, we were informed by the European Commission on October 8 that it will proceed to a Phase II review. The Commission's move was not a surprise, given the deal's size and complexity. We're comfortable with the process and have always planned for the possibility of a Phase II review in our business planning. We anticipate that the review will be completed during the first quarter of 2008 and hope we can work with the regulators to expedite this process and complete the transaction in or around the first quarter of next year.

As we have said since we announced the transaction in May, we continue to believe a combined Thomson and Reuters will enhance competition as well as customer value.

In the U.S., we have entered into a timing agreement with the Department of Justice related to its regulatory review. Under the agreement, the DOJ will provide us with a decision by January 15, 2008.

And lastly, the integration planning teams have been in place for several months and continue to make progress. The teams are laying the groundwork to ensure that when the deal closes, we will be off to a running start, having identified the opportunities that will drive the business and better serving our customers.

Now let me discuss the opportunities that the acquisition of Reuters presents for Thomson and our shareholders. As I said when we announced the Reuters acquisition in May, this combination is the next logical step for Thomson. We have developed the strategy, the business model and the capital structure to support this acquisition and to take this major step.

When the deal closes, we will become the largest provider of information services and solutions to business and professional customers across the globe, supported by a world-class news service. We will deliver high-end critical content electronically, with software, tools and services that enable our customers to perform at a higher level. The acquisition enables Thomson to achieve a global footprint, combined with a global brand, faster than we could have achieved on our own. This global footprint will be set on a solid foundation in North America and Europe and will also give us over $1 billion in revenue in the growing Asia-Pacific market.

In addition, we will have the management talent and financial strength and a strong operating position to capitalize on the opportunities in our markets. The net result is that we believe Thomson and Reuters will create shareholder value and will be beneficial for our customers.

In conclusion, let me say that our management team remains focused on driving the business and achieving strong full-year results. We have built leading positions in some of the most vital markets in the world, which enable us to continue our momentum and expand our position, while at the same time, these markets are also demonstrating favorable business trends. With the acquisition of Reuters, Thomson's business model becomes even more attractive, gaining a first-class brand and a global reach. And with a clear strategic vision, sound operating performance and financial stability, Thomson remains well positioned to drive shareholder value for years to come.

I now want to introduce Thomson's Chief Financial Officer, Bob Daleo.

Thank you, Dick. Good morning, everyone. I'm going to begin by reviewing the third-quarter and nine-month results, and will also discuss several items affecting our overall expenses. As you will see, there are several moving pieces within the business this quarter, which mask a strong operating performance. I will also review several of our key metrics and conclude with our outlook for the balance of the year.

Now, the results -- continuing operations for the third quarter saw revenue growth of 11%. 6% was organic, 3% was acquisitions and 2% foreign exchange. Operating profit declined 1%. However, underlying operating profit rose 16% after adjusting for several unusual items, and these include $29 million of Reuters acquisition-related integration costs; $11 million of incremental THOMSONplus expense, which totaled $24 million versus $13 million in the prior period. The good news is we are running ahead of these costs because we are ahead on the program. I will talk more about this a little bit later. And we also incurred a $13 million charge related to the anticipated settlement of a lawsuit in our Legal segment.

Excluding these items, the operating margin increased 80 basis points to 21%. Year to date, revenues are also up 11% and 6% organically, and excluding the one-time items I've previously mentioned, margins are up 130 basis points.

Now I will discuss the third-quarter results within each of the five business segments, starting with Legal. Our Legal segment had a very strong quarter, building on its solid first-half results. Revenue was up 11% -- 8% organic, 1% from acquisitions and 2% from exchange. Online revenue increased by 10%, almost entirely organic, and was once again driven by U.S. Westlaw, which now has grown at least 8% organically for the last 10 consecutive quarters. U.S. Westlaw growth continues to benefit from the success of the Litigator suite of products, which grew 34% in the quarter. International online revenue grew 19%, led by Westlaw UK.

In July, we introduced Westlaw Business, a Web-based legal research and workflow solution built specifically for business or transaction law market. And I am pleased to report that 30 of our top 100 customers have already signed up for the service. It's a solid start, and an example of another new product that will help to continue to drive organic revenue growth.

Software & Services revenue grew by 23% in the quarter, 14% organically, led by the continued success of FindLaw, which grew nearly 30%. Print and CD revenue was up 4% in the quarter compared to the prior year and represented 37% of total revenue. Approximately $5 million of the print revenue growth is attributable to the timing of shipments that took place in the fourth quarter of last year.

Let me highlight that print products are weighted toward the second half of the year and typically represent about 37% of the overall Legal revenues in the last six months versus 31% in the first six months. This somewhat dampens revenue growth.

Operating profit for the quarter grew 6% and the margin declined to 32%, resulting from the $13 million anticipated settlement recorded in the quarter. Adjusting for this expense, the margin was essentially flat.

Year-to-date operating profit is up 12%, and the operating profit margin is up 60 basis points to 31.7%, while revenue is up 10%.

Now, Thomson Financial -- Thomson Financial delivered strong growth in the quarter, with revenue up 7%, 5% organic and 2% from exchange. The core solutions businesses, represented by Investment Management, Investment Banking and Corporate Services, achieved a combined growth of 7% in the quarter, all organic.

Our transactional and trading platforms continue to show solid results, led by Omgeo. This is Thomson Financial's straight-through processing joint venture, which was up 24% in the quarter. TradeWeb's revenue grew 1%, as the difficult trading environment in U.S. Treasuries continues. I will talk about the recent announcement on TradeWeb in a minute.

Enterprise Solutions, comprised of news, publications and real-time commentary, grew 20% for the quarter.

The International operations performed well, with Europe up 10%, of which 7% was organic, and Asia increasing 22%, all organic. These figures reflect the expanded capabilities in these markets and the continued penetration of our new localized solutions. Overall, we continue to migrate clients to Thomson ONE desktops, which are up over 10% from a year ago.

Thomson Financial continues to drive operating profit, which grew 21% in the quarter. Margins improved 240 basis points due to solid flow-through from revenue growth and ongoing efficiency efforts. Year-to-date revenue is up 8%, operating profit has grown 19% and the margin has increased 180 basis points to almost 20%.

Now let me discuss the TradeWeb transaction, which we announced earlier this month. Thomson Financial has agreed to form a partnership with a consortium of nine global securities dealers to further expand TradeWeb. The partnership will utilize TradeWeb's established market position to create a global multi-asset class execution platform for clients. These dealers have signed long-term agreements.

The transaction is very much in keeping with Thomson's history of partnering with leading providers and originators of financial information, as well as financial market-makers, to provide greater transparency and liquidity, creating greater value for our customers and shareholders.

You may recall that First Call was a partnership formed between Thomson Financial and a consortium of banks which created a global database that provides real-time electronic access to equity research reports from more than 700 brokerage firms worldwide. This partnership created a whole new market and an efficient way of compiling and distributing research estimates, immediately adding value and increasing our customers' productivity.

And Omgeo, a joint venture with the Depository Trust and Clearing Company, has become the market leader in the development and deployment of post-trade, pre-settlement solutions, partnering with clients in 42 countries worldwide to create automated solutions that improve the speed and efficiency of their post-trade processes.

Both of these partnerships are examples of how Thomson successfully leverages relationships, its understanding of financial markets, and electronic platforms to build strong, growing and profitable businesses, which also benefit our customers.

Now, in order to accomplish this current venture, we are forming two new separate companies, TradeWeb Markets and TradeWeb New Markets. TradeWeb Markets will be 85% owned by Thomson Financial and 15% by our bank partners. TradeWeb New Markets will be 80% owned by the banks and 20% owned by Thomson.

Under the terms of this agreement, the dealers will invest $180 million of cash in TradeWeb Markets for a 15% interest, valuing TradeWeb at $1.2 billion. Thomson will contribute AutEx and its Order Routing assets to TradeWeb Markets. AutEx is the global industry standard connecting buy- and sell-side traders by providing electronic databases and real-time networks for trade order indications for equity securities. Thomson's Order Routing provides execution services, which enables trading partners to accurately record their trades.

TradeWeb Markets will handle traditional asset classes such as treasuries, asset-backed securities and several others that are listed on the table -- on the slide, rather.

Thomson and the dealers will fund additional investments in asset-class expansion through a new company called TradeWeb New Markets. Under the terms of the agreement, the dealers will invest $60 million of cash and will contribute contracts valued at $180 million. In addition, they are committed to invest up to an additional $40 million to fund future expansion.

Thomson Financial will invest $30 million of cash and will contribute certain assets valued at $30 million, and we are committed to invest up to an additional $10 million to also fund future expansion.

TradeWeb New Markets will trade in U.S. and European corporate bonds, convertible bonds and several other asset classes, which are listed on the slide.

The infrastructure and management of TradeWeb Markets will support both companies. They will run on the existing TradeWeb platform, and TradeWeb New Markets will pay a fee for services provided by TradeWeb Markets. The transaction is expected to be completed within the next few months.

This is an exciting opportunity for Thomson. We believe this combined business will enhance liquidity and trading in the marketplace, better serving customers -- buyers and sellers, and ultimately create significant value for our shareholders.

Turning back to our segments, Tax & Accounting continued its momentum in the third quarter, with revenue up 19%, of which 10% was organic and the balance was from acquisitions. The acquisitions include CrossBorder Solutions, eProperty Tax, and Deloitte Sales & Use Tax, all focused on the corporate market.

Organic revenue growth is being driven by solid performance across all three of the segment's businesses. Research & Guidance was up 11%, all organic. Professional Software & Services was up 13%, all organic. Corporate Software & Services was up 38%, of which 7% was organic.

Checkpoint continues to drive growth in online revenue, increasing 22% in the quarter and marking the 19th consecutive quarter of at least 15% organic growth. Segment operating profit increased 24% and the margin rose 70 basis points due to significant revenue growth and the benefits from efficiency programs. Year-to-date revenue is up 18%, and a 30% increase in operating profit has led to margin expansion of 190 basis points.

As I pointed out last quarter, please keep in mind that the Tax & Accounting segment is a seasonal business, historically generating roughly one-third of its revenue and over half its operating profit in the fourth quarter. This cyclicality is reflective of the market itself, where significant activity by our customers takes place in the fourth quarter in preparation for the upcoming tax season. As a result, roughly 40% of this segment's print products typically ship in the fourth quarter.

Scientific revenues were up 8% for the quarter -- 5% organic, 1% acquisition and 2% exchange. Information Solutions, which is 60% of total revenues, was up 10%, all organic, driven by strong performance from the Web of Science. Software & Services, which is about 12% of revenue, was up 28%, of which half was organic, driven by -- and the balance driven by the ScholarOne acquisition.

However, the legacy business, which represents 28% of total revenue, was down 8% for the quarter. Operating profit increased 8%, with the margin declining 10 basis points, largely due to a nonrecurring royalty expense paid within the quarter. Year-to-date revenue has increased 7%, operating profit is up 14%, and the operating margin has increased 160 basis points.

Healthcare revenue increased 26% in the third quarter. Organic revenue was actually down 4%, and growth from acquisitions, mainly Solucient, was 30%. The Payer segment of Healthcare, which is Medstat, which comprises one-third of total revenue, was up 18%, of which 10% was organic, reflecting strong renewals and new business sales.

Healthcare's revenue was impacted negatively by the timing of shipments and weak custom sales products from the Physicians' Desk Reference print product. A $4 million supplement to PDR shipments, which took place in the second quarter this year versus third quarter last year -- this had a big impact in the quarter because of the relatively small revenue base.

Likewise, the segment operating profit increase of 50% is off a small base, while the margin improved 240 basis points. Year-to-date Healthcare revenues are up 36%, operating profit is up 40%, and the margins have improved 20 basis points. Let me remind you that Healthcare segment historically generates over 40% of its revenue and 70% of its profit in the fourth quarter, again driven by the PDR.

Now let me discuss corporate costs. For the quarter, corporate costs totaled $95 million, a significant $43 million increase from the prior year. The $43 million increase consisted primarily of $29 million of Reuters acquisition-related integration costs, and $11 million increase in THOMSONplus costs, from $13 million to $24 million.

For the first nine months, corporate costs totaled $258 million, $116 million of which was related to THOMSONplus and Reuters acquisition costs. And the $142 million of underlying corporate costs, by the way, is a good estimate, when annualized, of where we believe we will finish the year.

Our investments in THOMSONplus continue to lead to greater efficiency and effectiveness across the Company. At the end of the third quarter, our run-rate savings were $85 million, up from $65 million at the end of the second quarter. To date, we are running ahead of schedule, and we believe we can achieve our run-rate savings target of $150 million by the middle of next year, which is at least six months earlier than originally expected.

Achieving this will require an additional $30 million of investment this year, for a total of $130 million in 2007. However, the incremental 2007 spend does not change our total estimated spend for THOMSONplus, since we originally had anticipated that we would spend $30 million in 2009.

Now let's turn to our operating profit margin, where operating performance, excluding one-time costs, has led to significant underlying margin expansion. Prior to adjustments, our margin for the first nine months of the year decreased by 60 basis points. However, after adjusting for $129 million in THOMSONplus and Reuters acquisition-related costs, the operating margin has increased 100 basis points.

Now let's turn to free cash flow. Reported free cash flow for the first nine months of the year is $638 million, down from $886 million in the prior-year period. Recall that according to GAAP, cash flow from discontinued operations is included in our reported results. However, excluding free cash flow attributable to discontinued operations for both periods, free cash flow increased 7%, to $819 million from $716 million [sic -- see presentation materials] a year ago.

Now, I wanted to remind you that in 2006, we had three quarters of Thomson Learning cash, which included the third quarter, which is when it begins to generate profit and cash. In 2007, we only had the first half, which is only losses and cash outflow, and that is why there is that dramatic swing.

Now, earnings attributable to common shares were $3 billion compared to $418 million in the prior year. Adjusted earnings were $310 million, or 56% higher than last year. Adjustments include the removing of the discontinued operations, certain tax benefits and the normalization of our tax rate, and the costs associated with the Reuters transaction. After adjusting for all items, EPS rose 55%, to $0.48 from $0.31 a year ago.

Now let me talk about the business outlook, which essentially remains unchanged, but for one item that deserves highlighting. You can see on this slide that operating profit margin has been added back to our 2007 outlook, for the reasons that Frank had already discussed. You should note the revised language, that our full-year operating profit margin that is projected to be at or above the 2006 level now excludes costs associated with the Reuters transaction.

Now, I want to end up with this slide, because I think it is important. Now, as you know, we do not give quarterly guidance in any respect. However, I would like to reiterate several items, which I noted at various points during the presentation, that will affect the fourth quarter's results. And while many of these items translate to long-term growth opportunities for Thomson, they do present anomalies within the coming quarter.

First, the fourth quarter historically represents our biggest concentration of print revenue. Last year, we recorded one-third of our print revenues in the fourth quarter, and print accounted for about 23% of consolidated revenue. As I pointed out earlier, this trend is driven by our Legal, Tax & Accounting, and Healthcare segments. In addition, remember that we had a timing shift in the third quarter of $5 million of Legal revenue from fourth into third quarter. So you can see that this will have a dampening effect on our expected revenue growth rates.

Second, we have made several acquisitions in our Tax & Accounting business that are contributing to current revenue and will drive long-term growth. However, these acquisitions will be dilutive in the fourth quarter, resulting in a $0.01 to $0.02 impact on our earnings per share.

Third, as I pointed out previously, since THOMSONplus is ahead of schedule, we anticipate spending about $45 million in the fourth quarter and approximately $130 million for the full year.

Lastly, we will continue to make the necessary investments to best facilitate a smooth integration with Reuters and expect to incur additional acquisition-related integration costs of about $30 million in the quarter.

In conclusion, let me reiterate that we are pleased with our results for the first nine months of the year and are looking forward to a solid finish for the year.

Now I would like to turn it over to Frank.

Thanks very much, Bob. That concludes our formal remarks, and we will open the lines for questions. So if we could have the first question, please.

(Operator Instructions). Drew McReynolds, RBC Capital Markets.

Just on the THOMSONplus program and the acceleration, maybe you can provide just a little color on what is behind the acceleration here, and also maintaining the $150 million in savings. Is there a chance that you can outperform that number when it's all said and done? Thanks.

Drew, this is Bob. First of all, I will tell you that we certainly are not going to stop at $150 million. I mean, if we have the opportunity to exceed that, we will. Right now, though, it looks as though that certainly will be well in hand.

What is driving the acceleration are a couple of things. First, it is simply just better execution and it's taking us less time than we thought. And second of all, I think what is motivating us to try to move these quicker is we want to have these complete before we really get into the middle of the Reuters integration that we anticipate when we complete the proposed acquisition. So those two things combined are what is driving it.

Tim Casey, BMO.

I'm wondering, can you talk about when you expect to have some sort of roadmap that you will be able to present to your customers in the Financial segment? Obviously, you've got some big decisions to make on integrating Reuters and Thomson. When do you think you'll be out talking to customers so that they can decide what products they are going to continue to take, some they may drop and obviously some they may accelerate purchase of?

Tim, I think it's really difficult for us to answer the question while we are in the middle of the DOJ and European Commission process.

Karl Choi, Merrill Lynch.

I just want to ask, in the Thomson Financial area, have you seen any changes in renewal patterns or more or more pricing resistance, given some of the market turmoil? And actually, to sneak in a second question, the Thomson Learning proceeds in the quarter -- should we expect a tax payment down the road, or just the final proceeds? Thanks.

I will answer the second one. The tax payment will be -- there will be a tax payment down the road. Because of the timing of the transaction, the actual tax payment is due toward the end of this year as opposed to when we completed the transaction.

The anomaly on Thomson Financial, I would say there's been obviously some minor issues with customers who want to take a wait-and-see attitude on what the new products are. But, that said, I think we are performing -- the units that are performing -- Bob mentioned a number of units that are performing at 7%-plus organic growth. Those units we would expect to perform regardless of the transaction, and so we feel pretty comfortable that Thomson Financial is basically achieving market rate growth based on the product line that we have. And so, although there is some noise out there from some of the customers, it has had minimal effect on Thomson Financial.

Bob, can you quantify the tax payment?

Can I quantify the tax payment?

It's going to be about $1.3 billion, roughly. I'm sorry, I missed that part of the question.

Peter Appert, Goldman Sachs.

Can you talk a little bit about how deep you are able to go pre-transaction in terms of planning the integration? And I ask specifically in the context of the $29 million in costs you cite, which seems like a very high number, at least based on my understanding of the restrictions that are on you currently. So how deep can you go, and why are those costs so high?

Well, Peter, first of all, what we can do is obviously anything dealing with basically what the corporate office is going to look like, which is HR, finance, etc., certain infrastructure costs. What we have not been able to do -- what we won't be able to do until a review is done is do a deeper dive into customers, into products, etc. So as far as the costs are concerned, I will let Bob go over the costs with you.

Yes, there are really two large components of it. One is consultants, because we have hired Deloitte and McKinsey to help us manage that, and they are working with us full time in terms of laying out the planning. So the consultants' costs are up-front in terms of helping you plan, and then once you acquire the business, then you execute. And those consulting costs fall away -- well, the bulk of them fall away.

The other thing is that we have put in place, as you would expect, a series of retention bonuses with our own people to make sure that we get the continuity of performance in the business and that we treat our employees fairly, particularly as it relates to Thomson Financial, because as we've said and it's known by our employees that we're integrating Thomson Financial into Reuters. So there are many good people there and we want to make sure we continue to motivate the sales organization, keep management in place, and there are costs associated with that that are above and beyond the normal run rate costs of the business. And that's why these costs, because they're our own employees, these costs we need to expense as opposed to include them as part of any deal costs.

I understand. And $29 million, would that be a run rate for the next couple of quarters, or for the fourth quarter, let's say?

As I've said, it certainly would be for the fourth quarter. I think that as we get closer into 2008, we will share what information we have.

Michael Meltz, Bear Stearns.

Just two questions. One, to follow up on Peter's question there, the $60 million you are talking about, is any of that -- is there a separate capitalized cost regarding that integration effort? And then I have a follow-up.

In terms of the integration costs, the integration costs are not -- there are deal costs that are separate from this. Those would be things like bank fees and legal fees and others. Those costs are capitalized. In fact, you see some small amounts of them reflected in our cash flow, where we've made payments to the banks and so on, so roughly about $20 million in the quarter. So those are separate. These costs, integration costs, are actually costs that we need to expense because they are in preparation of the transaction and don't qualify for being capitalized as part of the transaction.

And Bob, the detail you gave on TradeWeb and that deal, can you talk a little bit about the actual economics for Thomson? How is this -- what you are contributing and then how you are going to account for all this going forward, how should we be thinking about that?

We will account for TradeWeb Markets. We will have a minority interest. So we will eliminate 15%. The TradeWeb New Markets we will account for on an equity basis. So it will not appear -- it will appear in the segment, but it won't appear in the revenues. You'll just see the portion of the profit that we get.

So you're still going to consolidate all the revenue that you currently have right now?

Yes, but we would not consolidate revenues out of TradeWeb New Markets, where we have a minority interest. We would only be showing our share of the profits.

So when we are thinking about the growth TradeWeb has been putting up recently, is the New Market opportunity, is that presumably just New Markets you are going to be leading into here, or is your growth rate going to be impacted because of that separation?

Part of the agreement with the banks is that they are going to continue to support and actually strengthen their support of the core TradeWeb business in the markets we're currently in. So we would expect to enjoy a better growth rate in the core TradeWeb business.

The other thing that we will see is that, as I mentioned, there is a relationship between -- think of the New Markets as a way for us to capture the ability to expand into different asset classes. But the reality is, the sales, the operations, the platform will all be supported out of TradeWeb. And there will be a fee that will be charged to the New Markets business by TradeWeb, which will have a reasonable markup in it, so that will contribute to profits. So between that and between our share of the profits representing the growth, we will see -- we will be able to share in that benefit.

Now, going forward, in the interest of clarity, we will certainly report on what is going on in the New Markets business, even though it may not be directly added to our overall revenues. So we will try to make it as clear as we can, because ultimately, what happens here is that our shareholders get value out of that -- get value creation out of that. So we want to be able to share with you how that's going.

Mark Braley, Deutsche Bank.

Just a couple on TradeWeb, kind of continuing the theme. Can you just tell us what the revenue base would be for the TradeWeb Markets business, i.e., TradeWeb plus AutEx, and Thomson Order Routing? And then am I correct in thinking that the revenue base for the New Markets business is actually zero on day one, or are the banks actually contractually committed to putting a certain amount of business through that? So does it have a kind of base revenue level when it starts?

I'll answer the second question first. TradeWeb New Markets today has a small amount of revenue, about $7 million, in terms of contracts that we have transfered in. But they have, as I said, the banks have committed contracts that they will move in there, and importantly, they have committed to support this operation with their future liquidity. So we expect to see some significant growth there. In terms of TradeWeb and our equities business, the revenues there are about $270 million.

And of that, TradeWeb alone was about $200 million?

About $200 million, yes.

Brilliant. Thank you.

Vince Valentini, TD Newcrest.

Bob, can you tell us, if there's no further acquisitions from now to the end of the year, approximately how much would prior acquisitions add to fourth-quarter revenue?

I really don't have that in my head. But I would tell you that in the fourth quarter last year, we acquired Solucient towards the end of the quarter, and that's the largest contributor. So I think that the fourth-quarter acquisition revenue will fall away. I don't know how much, though. I really can't put my finger on that right now.

I guess the follow-up to that is, my math suggests in order to do only 9% for the full year, seeing as you've done 11% year to date, you'd need to do 4% revenue growth in the fourth quarter. And I know you've talked about some of the items in the $5 million print shift, but it doesn't seem like enough to me to get all the way down to 4% unless there is virtually zero acquisition contribution.

Well, remember, you've got foreign exchange as well.

Okay. So you are saying 9% is sort of a hard ceiling, or is there a possibility you'd do greater than 9% for the year if markets hold up stable?

I wouldn't speculate on that. We don't talk about quarters. You know that, Vince. I would say that we've had good momentum in the third quarter and our businesses are doing well.

Randal Rudniski, CSFB.

Also a follow-up on the TradeWeb transaction. Can you explain the rationale for contributing AutEx and Thomson Order Routing to that TradeWeb Markets, given that they are somewhat distinct businesses?

The real key -- this is Dick Harrington -- is that first of all, the Order Routing goes with TradeWeb. That is an integral part of TradeWeb and AutEx. And AutEx is being converted over to the TradeWeb platform to basically have one unit doing these types of transactions. So don't forget it is a trading platform. AutEx will be -- AutEx is a trading platform, although not as sophisticated as TradeWeb. So what we're doing is combining those trading platforms on one. So we would have the large block shares as well as the Treasuries and other instruments. And the Order Routing is just a natural process that goes with that. It's almost like -- it's almost part of the plumbing.

And those two business units, they do equities trades as well. Does the equities part of the business get transferred over to TradeWeb Markets as well, or do you --

Yes, the entire business goes over, and that same system can be plumbed for fixed income, which is why.

And then secondly, the THOMSONplus costs in 2008, will they be in the range of $30 million? Is that where we're going to get to after you accelerate the spending in 2007?

The number that we had given, which we still stand by, is $50 million for 2008 on the expense side. The 30 million that Bob had mentioned that we anticipated spending in 2009 is now being moved into 2007.

Gentlemen, there are no further questions in queue at this time. Please continue.

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