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Financial Planning & Analysis San Diego 2012
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Thomson Reuters
Linking Strategic Planning with Operational Planning
Dan SuretteDirector of FinanceFebruary 24th, 2012
Special Note
Safe Harbor / Forward-Looking Statements • This presentation contains forward-looking statements, including those about Thomson
Reuters outlook and prospects. Forward-looking statements are those which are not historical facts. These and other statements that relate to future results and events are based on Thomson Reuters current expectations.
• Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties. The risks and uncertainties that we believe are material are outlined in our disclosure filings and materials, which you can find on www.thomsonreuters.com. Please consult these documents for a more complete understanding of these risks and uncertainties. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. Our outlook is provided for the purpose of providing information about current expectations for 2012. This information may not be appropriate for other purposes.
2
Our Business
333
We are the world's leading source of intelligent information for businesses and professionals, combining industry expertise with innovative technology to deliver critical information to leading decision makers
TAX & ACCOUNTING: $1.1B
Checkpoint is used by all of the top 100 U.S. accounting firms
HEALTHCARE & SCIENCE: $0.9B
Informing healthcare decisions affecting over 150 million lives
Used by over 20 million researchers worldwide
MEDIA: $0.3B
Reuters news and information reaches one billion people daily
FINANCIAL: $7.1B
Provides financial applications for over half a million professionals globally
LEGAL: $3.7B
Westlaw is relied upon by 99% of the National Law Journal's top 250 U.S. law firms
MARKETS DIVISION: $7.4B PROFESSIONAL DIVISION: $5.6B
Note: Represents legacy structure, as of January 1, 2012 Thomson Reuters eliminated its Professional and Markets Divisions and reorganized into four reportable segments: Legal, Tax & Accounting, IP & Science and Financial & Risk
Competitive Advantage
444
Industry Leader
True Global Presence
Combining deep employee expertise across our verticals with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, healthcare and science and media markets, powered by the world's most trusted news organization
For Professionals, By Professionals
Attractive Business Model
• Over $10 billion in revenue• The world’s leading source of intelligent information for businesses and
professionals
• Serving customers through offices in more than 300 cities in more than 100 countries
• Revenue stream: 59% Americas, 30% EMEA, 11% Asia
• Subscription based• 86% of portfolio recurring revenue• Strong & consistent cash generation capabilities
Key Financial Principles
555
Drives shareholder value by providing:• Optimal financial flexibility to
support business/strategic objectives
• Ability to “stretch” if/when requiredfor the right opportunities
Drives shareholder value by:• Deploying capital towards most
attractive opportunities• Exiting underperforming and/or non-
strategic businesses• Capital allocation linked to business
strategy & operating performance
• Portfolio Optimization• Disciplined Acquisition
process • Disciplined Capex
management process
Drives shareholder value through:• Attractive and growing return of capital
to shareholders (dividends and stock buybacks) balanced with re-investment in the business (Capex & acquisitions)
• Target strong growth• Capital intensity• W/C management
#2 Focus on
free cash flow
• Target Net Debt / EBITDA of 2.0x
• Access to capital markets• Balance investments and
returns
#3 Support business objectives with a
robust capital strategy
#1 Invest to drive
long-term growth & returns
Business Model
666
• Strong financial profiles• Mission critical information• Many professionals, highly
distributed• Complex or risk-oriented
• Deep domain expertise• Managing structured and
unstructured data• Applying user context• World-class technology
leadership• Global / large communities
Attractive professional information market segments… …where we can deploy our core competencies
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STEP 2: Measure our Performance
STEP 3: Take Action
For each segment we participate in, we ask:
• Is the sector large & growing?
• What is the short- and long-term outlook for growth?
• Are there benefits or efficiencies of scale?
• Do we have any natural advantages that position us for success?
How do we stack up?
• How does our financial performance compare to our competitors’?
• Are we gaining or losing market share?
• Are our margins best in class, average or below average?
• What is our trajectory?
Proactively shift the business
• Invest to add the right capabilities (buy or build)
• Transition away from or evolve businesses that no longer have the right characteristics
• Example: Transition from print to electronic
STEP 1: Evaluate our Market Segments
Putting Growth & Returns into Practice
8
Disciplined Approach
• Deliver a disciplined review of the growth & returns performance for share in each segments
• Track the size and estimated future growth rates for the market segments we participate in
• Identification of segments for further study
Revenue Growth
Margin
High
Low
HighLow
Business Growth vs Market GrowthExample: for discussion purposes only
9
$X.XBAvg. Revenues
+1% Below Market Growth %
+1% Above Market Growth %
Key:
Market Growth Line
“Above Market Growth”
“Below Market Growth”
Segment Revenue Growth % is:
Market Growth % CAGR
Within 1% of Market Growth %
Org
an
ic R
ev
en
ue
Gro
wth
% C
AG
R
0%
5%
10%
15%
0% 5% 10% 15%
10
Past Process
Strategic Plan Operating Plan
July• Developed by Strategy Groups
and presented to the Board• Analyze markets where we
compete• Develop view of Thomson
Reuters in terms of markets• Size in terms of relative market
share• Growth vs market• Internal view of company
Growth and profits in certain markets
December• Developed by Finance Groups
and delivered and delivered to the Board
• Aggregate financials across the company
• Develop view of the company in terms of management reporting
• Growth rates determined as reasonable based primarily off of past performance
• Analysis around growth, revenue flow through and FCF conversion
Str
ateg
y
Fin
ance
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Strategic Planning
Westlaw Online
Legal Briefs
Large Law
Small Law
Corp Law
Large Law
Small Law
Corp Law
Market Segments Operating Segments
12
Proposed Changes
Key Shortcoming Proposed Solution
• Strategic rollup of businesses based on Market segments
• No way to translate results in market segments to results in operating segments
• No way to use market growth as key indicator of business growth
• Align Operating segments with Market segments
• Or at least a way to reconcile between the two
13
Revised Process
Strategic Plan Operating Plan
• Partners with Finance in development of Strategic and Operating plans• Agrees with Finance on agreed upon market/operating segments where we have revenues• Provides short term and long term market growth in agreed upon segments• Utilizes business growth as provided by Finance• More grounded and robust analysis as market share revenues tie to Business forecasts
• Partners with Strategy in the development of Operating and Strategic plans• Agrees with Strategy on agreed upon operating/market segments where we have revenues• Provides short term and long term business growth in agreed upon segments• Utilizes market growth as provided by Strategy• More grounded and robust analysis as market growth projections are a leading indicator for
Business Growth
Strategy
Finance
July December
14
Systems SupportExample: for discussion purposes only
2010 2011 2012 2013 2014 2015 2011 2012 LT CAGR 2010 2011 2012 2011 2012 LT GrowthLearning Division
k-12 1,000 1,050 1,113 1,180 1,262 1,351 5% 6% 6% 5,000 5,250 5,565 5% 6% 5%College 500 520 541 562 585 608 4% 4% 4% 5,000 5,150 5,305 3% 3% 4%Post Grad 400 428 467 513 564 621 7% 9% 10% 6,000 6,300 6,678 5% 6% 7%Continued Ed 400 424 437 445 450 454 6% 3% 2% 8,000 8,320 8,653 4% 4% 4%Testing Services 300 315 334 354 375 398 5% 6% 6% 1,200 1,260 1,336 5% 6% 8%
Revenues Organic Growth Total Market Market Growth
Business Data Market Data
K-12 SBU
Rest of Market
-
1,000
2,000
3,000
4,000
5,000
6,000
2012
Market Growth % CAGR
Org
anic
Rev
enu
e G
row
th %
CA
GR
0%
5%
10%
15%
0% 5% 10% 15%
15
Execution on Strategic Planning
Strategic Plan
InvestmentsOperating Plan
• High growth sectors• Investment needs
• Acquisition assessment• Large capex projects
• Consistency in Targets• Market Growth –
leading indicator
16
Insights
• Market growth is a leading indicator for operating segments long term
• Short term variability depending on health of business vs market• Can highlight consistent underperformance or overperformance
• Large investments are not always in the highest growth businesses• Portfolio investing is more about largest returns• Leveraging large profitable businesses (low growth) can have
larger rewards than investing in growth
• Forcing businesses to reconcile between market segments and operating segments provides increased visibility
• Reduces flexibility around ‘soft’ targets• Increased communication/visibility to hedges