CLVT - Earnings call 3 2023

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Operator

Good morning. Thank you for attending today's Clarivate Third Quarter 2023 Earnings Call. My name is Fora, and I will be your moderator for today's call. [Operator Instructions] It is now my pleasure to pass the conference over to our host, Mark Donohue, Head of Investor Relations. Mr. proceed. please Donahue,

Mark Donohue

Jonathan good the for and With Thank for take Officer; you today will Officer. Thank available of be third morning, the quarter us to and Executive Chief the Jonathan questions Call. Chief XXXX joining Financial are Both at you, your Gear, everyone. Collins, conclusion Earnings me Conference call.

in call Clarivate. part of . webcast clarivate.com. and in property of Any As of of prohibited. and whole prior Clarivate a is Relations website, is And earnings without recorded in or reminder, written consent the section is being the Investor company's this call information rebroadcast conference available this is the copyrighted presentation companying

applicable securities Such results, involve we differ company's developments to differ risks, the and the and performance statements about or could call, uncertainties and filings Clarivate's laws. unknown make developments known of results actual achievements from with forward-looking to our in results, factors, expressed business cause the statements found the from actual the may factors the or achievements cause the in that within or may other forward-looking forward-looking During of certain the anticipated Information meaning be such by anticipated on performance materially results statements. materially website. Clarivate's implied that or performance, can SEC industry or

on and website. measures to in are GAAP or a our an to of for these Clarivate measures. non-GAAP in supplement our our supplemental results these understanding adjusted operating financial Reconciliations available are from they believes will order discussion considered of measures isolation numbers, measures presentation in to non-GAAP should as Our enhance be or include performance, earnings release not and GAAP useful are ongoing but substitute

that, prepared a to remarks, to pleasure the it's with your call And Jonathan we'll call Gear. to over After turn up questions. the open

Jonathan Gear

everyone, Good and joining for Mark. you, morning, Thank thanks us today.

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return in growth and performance Healthcare. & positive Academia strong & a Life to in Government momentum by Our driven was organic Sciences

long-term and Adjusted we were with our year, contract to of both the EBITDA continue last States to start progress and momentarily. face as Trademark $XXX ongoing such and of and the date EBITDA a XX%. EPS strike, U.S. on continue delayed make temporary $X.XX IP, Office headwinds to million We elaborate modest of towards from United of Patent in both margin will impact I targets which up Actors

discuss this more will Collins detail. in Jonathan

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continued like let to turn me I'd collaboration the in my hard financials. sharing colleagues I look X Collins Jonathan all for our With over you forward call progress and thank that, you to again dedication, with their time. to work. through months' walk our to

Jonathan Collins

an intra-annual Page impact acquisitions . Operating Global a of is quarter and same changes working onetime XXXX XX results and capital year. basis higher of now MarkMonitor period year. quarter XX QX Slide closer everyone. a X% was our last the of adjusted last $XX in of by Adjusted in stemming line divestiture due was impairment, payments million EBITDA timing goodwill quarter, morning, $XXX offset from foreign of drivers decrease Good at points the period from the primarily the EBITDA. higher overview period our was impairment look same which the Jonathan. renewals the like to the flow organic same with same charges CPA due last increase diluted $XX entirely you, the IP $X.XX exchange. $XXX the Thank entirely revenue XX a year, period million compared by associated top to million bottom turn versus growth of with third cash, [Audio $X.XX as Gap] third expanded an million, driven was requirements, excludes impact last year. improvement margins QX, Adjusted the for EPS, ProQuest to or me in the over the Please items primarily business. of in cash recorded

with revenue were our results by line right factors. expectations X quarter are key and Our driven profit in and third

X.X%. of up was revenue on $XX growth million organic First,

As A&G due of as continue year segment investments analytics over subsegment best in the the accelerated growth in the a it's been Web organic is Jonathan Science highlighted, see in the product. growth the to research the to the in of we benefits and

discipline as we're offset from the a prescription growth soft on of last headwinds cost real-world the on on, stemming comps result to due few despite business LS&H more sales strong quarters. pressure in from the basis macro to year, to segments a we forewarned the the in exercising our continue than grew segment Our The pressures. the profit due see particularly the from file past business. we soft data was IP over transactional organic conversion These the

last revenues of $XX the $XX MarkMonitor Second, profit million year business inorganic activity, and this the divestiture namely year. million lowered

the currencies million U.S. from $XX subsidiaries dollar in translation acquisition the as the And contributed foreign Third, profit. denominated revenue cost of increased incurred impact currencies of did remains than was last quarter year. million in synergies foreign ProQuest a The of of weaker gains profit incremental time by compared same this to finally, $XX year basket increase transaction last negligible not as third year. recur the the

prior we than of the million. in the conversion million debt year, cash to $XX of Page and was was improvement the quantum Please half capital year conversion QX. decrease Cash this quarter, as nearly in last first how million source cash recognized with use a $XXX last year-to-date $XX from a were cumulative year. to EBITDA of XX lower year. million due benefit period million same payments the QX turn $XX in fourth same were so the this the adjusted EBITDA free period the in a and taxes it on increases me rate capital as deleveraging to this flow flat the quarter, step of the to adjusted period was far when over the XX% million to planning cash $XX now and of impact million Free year, of the we Interest of $XX to over through year initiatives. in year of bringing were same in Working last quarter $XXX allocated the lower offset base the flow the by the last

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Please now to current move view the for with XXXX. Slide on our XX me of remainder

results midpoint ranges near on us in of to deliver Our August. third provided quarter track full results place year the the we

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we to and Page convert expect million billion Please $X.X will cash all largely Nearly in flow quarter our nearly free quarters and the year the line of delivered working be turn EBITDA fourth improved the of capital how now in the to same augmented onetime XX this adjusted is as QX. than capital the with X which been in $X.X cash free walk the allocating by free plans for period year, of we in will through billion projected for $XXX to the remainder first of of turn lower more due year. flow costs flow last has full to roughly cash improvement anticipate

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to $XX ] to million. accelerate about capital improvement requirements capital of We this growth. will remain year off leveled have organic and working million by track about spending on Our increase [ an $XX yield

$XXX million percentage of $XXX million approximately is free is of conversion cash the EBITDA increase in adjusted to an all flow impact at which the about of XX improvement on the range, The these points. changes of midpoint in

use term year We of all million prepay and million $XXX of full quarter total cash our leverage of on another Xx. balance the flow our free just fourth our million cash to expect below net $XXX the to bringing sheet $XX loan additional to to an and

now Please tracking at for to to Page objectives. look our financial XX we're a turn long-term me how

our we recall to at outline our primary financial when Investor our growth. organic that objectives in Day accelerate March, aim business You'll our for was the

committed area subsegment to The achieve organic we in track growth segment momentum, and X%. first in was this delivering remains with growth on to [indiscernible] its A&G excess analytics and research within improve quarter the the plans of third continued

However, we the to pace rates economy IP us the related product laser-focused us to segments market their leave facing few lift end expected. our remain growth market next the over segments that softness and But will we these the behind help LS&H on innovation years.

X tracking behind progress made we've outlined. despite we first But other towards objective, the on the solid

profit our Our drive capital second we points product accelerate expanded to quarter is by and innovation. expenditures XX even on we executed our the as third basis increased growth. goal this margins margins maintain to our to as We operating in durable invest as objective

an on The third first objective we we the with outlined significantly delivered improved of free and free flow, flow, improve the was cost year which onetime to X increase working slightly of improve months capital. XX% cash lower cash our our in

to leverage this remains and the QX million And deliver repayments entire focused committed question stock to balance repurchasing our committed on in objectives. of as limit in debt manner. execution your And going QX. area capital We've morning. want back through allocate target financial all to continued by finally, all to I in team then $XXX remain deliver questions. the listening of for a solid our demonstrated we that for of disciplined year-end yourself additional. a you completely the to X will Fora to Clarivate please The to return in this and in turn to call queue reminder, take any over thank now I'm these

ahead. go please Fora,

Operator

from Toni of [Operator line Stanley. first Morgan question comes the Instructions] Kaplan Our . with

Toni Kaplan

you together few of generate XXD And a thoughts and latest light as as can quarter, X any view not to of give from together? your additional sort having in during on just core you them businesses you filings are what think whether if valuable us are the synergies more portfolio? you the there Just assets the that

Jonathan Gear

of we for just those feel that we renewed the some the renewed mean are that Toni, you from mentioned obviously, of and set I interest great have question. commitment thanks investor fantastic. about Yes. first, the and kind

And part so and we feel community. of honored lucky to have very a our investment

I has as really, remarks, executing highlighted portfolio, right still on we against We're plan of changed. Toni, focused the have terms very that now. my in In nothing

in we're year. think X have our on care. And close rates. we'll of made We headwinds market health getting very around improving, segments, science we in and again, market growth life which One short-term we're some to improvement we turn and IP, focused next

in So putting Toni, remarks. looking and portfolio where have our that the changed collection we we we of right good course, has really, but now. about always, -- We're make, nothing should very our at at feel we can

Operator

Our comes line Barclays. Patnaik the next Manav from question with of

Manav Patnaik

perhaps? if I that how the subscription contracts you apologies rate growth run directionally it, talked but out Academia talk you and the I if help could nonsubscriber the subscription and the about & on growth just momentum highlighted about side Government you break new and these just -- missed

Jonathan Collins

for the Thanks question, Sure. Manav.

we've in Science throughout -- our an seen highlighted rates business first A&G that seen segment, in improvement largely and we've by business, product. the driven So in renewal growth some quarters, Web new our X of we've the

in to augments we In active in that up some investment late usage or saw So follow in product that monthly really meaningful enhancements nice we the in a we significant made pretty XXXX. then XXXX, product increases XXXX. with and

rates put in in have we've That's A&G renewal nice ] that and rates where Theses started do subscription thoughtful growth impact increased a You'll receive some of [ the some in to products improvements recall, factor, as integrations with & the segment. we Dissertations us ProQuest the seen very we journals such of significantly a place the that helped the Journal number to collection. the improve

quarter have comments, within in in highlighted basis did Jonathan As we a on nice QX A&G. a transactional his

little QX the saw growth quarter a nice lumpy be can business from perspective. for fourth we that bit The really from quarter-to-quarter, that wasn't great a business quarter. important but a third So in is rate transactional in

transactional in focused a subscriptions. year-end the heavily team on delivering [indiscernible] improvements side on augment strong to So team the seen remains we've the

Operator

comes Surinder from Thind line Our Jefferies. the of next with question

Surinder Thind

Just upside a little here. in things or question of if business were and the big if part look items. the have picture exposure think cycle quarter downside we the was macro that's maintain kind get characterize to that we onetime the of levels either as we then perhaps When move cyclical the business to commentary to some would the kind current a the in you perspective. about the And through of last that of a left economic you tougher that things current ahead -- from were how or

Jonathan Gear

Surinder. Thanks, to have It's the great Great. you call. on

of few faced macro last Just summertime a certainly since and now. right of for We year. are we the couple those -- case first, we of facing the comments. pressures it I trademark quarters, in mean next

spending see of it this areas. view, from macro few gets, So to bad . And their in we our in it different patterns you of clients a view. talk a a sense is get our impact, and as as is as kind

and know, to tends solid. Government, Academia as macro very, the from which, very I most be for academia break you part, -- immune the down, primarily & budget largely is driven really So pressures. it It's very is government if

heavily, So heavily half would I insulated. business, our say,

immune. of parts but completely largely business, other not insulated our the On

our business. the is, will through economic or impact -- we've actually on So impact before, a we're summer is of our year. greatest the see which since talked most that of we within And trademark as we business seeing late And seen portfolio, part trademark cycle. the it summer will one negative an sensitive, our in IP, last is mid

right the feeling the Part Actors already and seen worse. products We impacting are care, part commercial on new we side But [indiscernible] on mentioned merchandising as we of we've a even strike, this next of was new in product macro, launches. back it that impact, us. new launches year. of launched. drugs the Guild new today, now. like the year. approved getting on That see fewer contracting business is And films the spend call pipeline on And improve being number impacts was that on by things then as health don't We've Screen the FDA. seen of cut the in year pharma has particularly that on our of We're last seeing should

So the feeling good kind And pressures. of to this from it again, we're certainly our you're now. the just no macro say right half will is And other half, virtually from I A&G then summarize business, downside impact year maybe that. seeing

Operator

next line William Our Andrew Blair. question comes of from Nicholas the with

Thomas Roesch

maybe factors as about saw through of Tom last how to the for in is was of and how some seeing you're I you Andrew quarter saw on Roesch into know transaction This XXXX? other macro head and if could we kind wondering you into the I want quarter they recurring those factors you was [indiscernible] Nicholas. kind dive talk trends revenues. I consulting. improvement wondering progressed -- I those

Jonathan Gear

do, Yes. Sure. We'll Tom.

highlight. I things X really the So would

Again, care, about really budgets. in commercial it's those Healthcare are commercial And & Sciences spend. First, those Life

R&D. And year. they and throughout about budgets. really in a seeing, seen That then launch. company's into of hasn't business, If pharma entering kind improvement. you product And think company, they they gets we've improvement an we're have access, once since the the hope we the it and strategy approved it happen for get year, have What market goes

being in spend general year. the on is commercial very tight pharma industry this -- is As

Sciences we're new launches. major continued tied by this, Healthcare. and Life of every And bit are most impact there, is obviously on certainly as an for minor. it's we're last business, & And that mentioned IP, positive, right product a towards is scrambling our a So within in around we simple as commercial major that the do and can there some team uptick was in see consulting the see we where of the throughout now call, pressure our dollar. as do trademarks. products. for side then trademarks . But as primarily We seeing the great saw job is the

a a XX-year you're create multiple product, that product an registrations going you're or you of and cycle different BXB annual if doesn't from if can are those consumer patents new If part. countries, they're cycle you're it trademark most registrations. do into launching you the company, that instead matter, for new a to And

we've industry. more to from our So is product again, they're similar pressures. portfolio. seen susceptible And to the what this think fewer launches economic And just is we're customer year, I what very much last in across hearing starting

we And major are the that's part in then of side part. of seeing the customers. a So minor a on patent terms bit

Just they at taking played renewing, highlighted that exactly out of are look we frankly, QX a we QX the and in has the the call, expected that call. patents as that coming hard out,

Operator

Our the with comes from Wells Fargo. of question John Mazzoni line next

Unknown Analyst

on for kind the get really wanted into this Seth I well for just morning. are your of thoughts what expectations I'm on OCC any 'XX? subscription quick XQ initial around growth to in just And a as one as

Jonathan Collins

Sure.

in updates based where the our subscription we results, to So on see in headwinds quarters. indicated entirely been we file preceding X and QX we Sciences the had Life did. the almost August data X you'll what business pattern expected on we sales some pullback recall at on see the from for QX's real-world call to a on That's the

a subscription and this our lot obviously, So We expect on going do very sequential next QX. work of that in month is QX improvement from And January month expected. we important growth out A renewal a our to played cycle. then month. as in

early year-end much of a better into business So across we'll together the when the in the results. subscription March we're growth line sight for have

Operator

Our Lau with Oppenheimer. of next the question line comes from Owen

Kwun Sum Lau

AI selected customers? has So the you Yale potential product broadly some leveraging and link talk you launches as your about progress more products? engagement increase of to key and for also such ] please Ohio near [ about with Clarivate are cloud. the data the Could AI existing the talked And any term to of in what capabilities

Jonathan Gear

question. the for you Thank

year technologies are, this companies really think, AI in cover few. be years. discussed XX-plus So before GenAI in couple I'll we've prepared and so and -- we're we've specific. ways -- go information I coming ourselves. of seeing like see for and out generically ahead we'll game X as discussed tech-enabled and the a content as I used go my a comments, I'll But I for and business And we in a mean changer

the terms our content segments. products out across First, we find now all X use the segments. content, efficiencies see all enhanced and incredible the that leveraging curated right right out customers. testing our . And ability capabilities, clients, true are of across enhanced to is right as And of rolled we're as expect in of search GenAI our to drives with search faster curated we and roll to our for

And top they're clients content That is I our for in think their one stakes. that just as area. terms is our going secondarily, a enhancement And of to curated of insights of little on tool it certainly -- clients. efficiency content be then a to that generic using of changer to combination proprietary way targeted. then get unlock of efficiency workflow. a And strong table in our a incredibly you is help and more game as additional example, is

IPMS We've multi-multi has to of needs within that. my Forecast the to on IP it's one process, historically to managing comment large challenge spend. at been in that been multimillion this deep portfolio what patents manual has of in manage one we enhance about do did and and something very about you've on our and Owen, have [indiscernible] providing managed, to a that clients' that we're you're increase just and workflow a and for in with a tools the reacting is best where is think them systems portfolio tools Forecasting [ launched, the IP, a if remarks is workflow to dive tool always to really And work decades been of the value terms our challenge the how customer best with ] will on assist value been dollar important the clients, which I that one. help base. that

going It's So their allows and it to technology a the It's about great to discovery we they educational we're help tool. tools reach works to doing made a answer out way students, have it's a great we is but We their question small question in that a bought that X college the knowledge. can content Owen as test this really I students. how students And as and acquisition, knowledge, there. will and to guided I then acquisition to the talked answer their imagine, student's so further help lead test bespoke really A&G. professors that

areas. the way be going of heavily it's to of the We're future. think in wave and those investing education the I

Lots a calls. in that So We'll those examples. to are more future just be few come. sharing

Operator

the Our next Sabadara of RBC. question from Ashish comes with line

Ashish Sabadra

organic is out growth more the thanks the focused one for understanding, there called for particularly and RWD quarter budget headwinds question guidance. revenue, quarter strong was seasonally the on my detailed just of [ providing commercialization fourth commercial the ] that just QX these How -- the what's And to RWD the how progressing? the assumed the transition therapeutic progress end the business on I to and users? TRG solutions platform from deliver wondering directly business. perspective. was is that was is

Jonathan Collins

Ashish. for Yes. includes is quarter question, fourth we side, we're on, a commercialization R&D spending. and even certainly the capture that seasonally Business, quarter Thank products looking year-end spot the to Sciences Life described, usually our on but the you're you services Transactional the for And higher

in which where position earlier drug particularly this year. As we've the talked a that down the year, approvals through year us last are on play out budgets puts commercialization, seen commercialization We've about lower were year. in

the only indication the the the We're or outlook change the we what in will We and talking into part current couple just be for expectation a year-end sight of have trimmed organic a line think million we of few dollars QX. availability of there better funds as modestly.

focused been of So there. really customers. I March module more got early development your We've on higher progress. and out launch that's is XXXX. about in tools come to next there'll track of year talk be the year-end really very in position for to year. We've what in out year, made point, a fourth go relevant this be plans with standpoint To information to our from the quarter good first the better the at the quality for second expect on more that earnings be this we'll product sciences a we've content, building life will driver that

for thank tuned you for But stay the that. So question.

Operator

next [Operator line the comes Peter with Citi. question from Instructions] Our of Christiansen

Peter Christiansen

follow up to the previous wanted just on question. I

should setup if into as think in our the what just for any terms about of be that spending quarter. clients, discretionary A&Gside maybe maybe on we your the you're the maybe fourth perhaps revenue discretionary quarter? wondering science. can we As mindful I you fourth from get -- year-over-year for seeing outside of was we And of life frame comparisons

Jonathan Collins

you touch the Thank I'll on Yes. for that, segments. X other Pete.

So year. on A&G, it of is the largest quarter the transactional

in in we U.S., quarter. QX, but that make year. there's of important more signs get or between to fair an end performance particularly the plenty that sure a left next to work couple the do standpoint, now a funding school from market year good our a that it's of in within and to of share and months the our helped the seeing than of that there, solid good share signs -- So there calender or budgeting are The them we're led

in But positive. are say overall I forces that would area the

QX coms. point Life in saw the in had this side, of why very Sciences real-world we a pretty quarter soft. performance growth of of the year That's on you a On QX transactional last year. fourth in data good good We last raised was year.

business. we about. quarter, some the down data So more building data. which we've Life to that into forces as on about with really pressure that, the in be just is we to in talked the sales of customers going set talked selective bit a where and a sell we to focused we're solution sell out addition that we're directly being But fourth are expecting real-world the Sciences Certainly, will transactional economic our

QX. those going we going are more pressure expect will in as a an We'll year-over-year drug we saw the we tailwind that look both few us. that's last that we a next some we to have in on other to talk offer year, modest those approvals I year. be the think transaction that of an there impact to it commercialization then think and on of in And to be into aid side, due products number So a area for commercialization, are there's months. about But

the up prior in approvals the drug year. U.S. are So over

we in into So on months. going some give in more we'll budgets should some XXXX, color few a that but see commercial improvement

Operator

question Shlomo Rosenbaum the Stifel. next with line of comes from Our

Shlomo Rosenbaum

getting LS&H renewals, does like of Jonathan, mean and commentary are of impact about of business I seeing. bit contract H that cancellations? want bit just Or midterm some what to anything that movements we're little delayed? And ask more the a the color maybe the any exactly? contract There's on little then give that Why would about you timing why USPTO or why over you did to concerns the with pretty there marquee And a I us big get as assume that's could there? contract? customers. a is cancellations

So on any be going helpful. amongst contract these just would color movements different what's all on

Jonathan Gear

pass on question Collins LS&H. your Mr. to on answer I'll your for USPTO, I'll then

USPTO public. talk government the On this because contract was happy the obviously, about

the in the -- Alexandria we've contract awarded in us great an the to and public a a domain. ]. this ours, customer relationship so and and And earlier been [ they They of with provider particular But with another awarded us long-term all -- they've been a partner year. USPTO enhanced contract,

to a them. a that, So win through went of then who review contracts. process, contested their government and a partners as confidence us it received someone back a was enhanced the on not just original did support process. that we consolidation the that they there's word have it with that process awarded of And

good the losing the a It an We feel little because just process. is a So has who's was on delayed the it. appropriate over delayed was very someone contract benefit we of larger were outcome. concerned that It on by government quarter review never that.

confirmed. next not So it but we'll see has been in year, that coming early

to on pass Jonathan, you I'll LS&H. the

Jonathan Collins

Sure.

most data highlighted business. the in real-world pressure from on On that of the Life side, the the file came we Shlomo, Sciences QX subscription

going declining So to seen a over sales quarters. business knew file. past where it the We few that's the we've impact was subscription

we our rates spoke we when the fourth We budgetary on feedback pressures group is renewal also a see of of around with pressure small have in group ability outlook quarter. have little what we the customers, products and and that got that feeds, part informing bit to the that's of some a on did stop

this mentioned, big on impact in well file. that growth improve in going the I is carefully sight of But and the be a too QX expect have as to other we'll and really cycle is I That renewal year. areas, for next managing pretty performance. then QX, good we've XXXX got very will line on subscription the do subscription important

Operator

Sachs. Goldman Our the comes from final with George of Tong line question

Keen Fai Tong

& data Healthcare, real-world broader data sales real-world you for In you Life on saw strategy Sciences growth because managing revenue your to drive product growth? improved cancellations. your lower and some Can negative elaborate subscription of

Jonathan Gear

me ahead let cover Yes, so and Sure. that. go

a key X strategy product. shift that business. focused last of we So the just the or middle a the Levy some prior the And this is heavily after as joining post on since years a data we've year made to reminder, -- been as the in X Henry selling DRG,

to providers which tools companies. as pharma data our then out So to end customer, the taken Real other platform is who it we've have sold World Data sold analytical to the and provide enhanced

pharma. and focus that believe platform lumpy large then to because ourselves away value that enhanced deals directly adding we're the That ourselves on we a last to more we and creating this made ahead these from and and analytic late really year. and started it that best decision this make year migrating to a have we We begin to investment positioned do selling more to -- really is go and

dump And then on pull you that that it revenue near-term both and a will, sale, little you subscription you get comes profile, means when dump, gets if a transaction on revenue of do client a of if what of sell sale. What so a content there. you transactional hit make a away is shifting you a in from a bit a means transaction the

that a X-year [indiscernible] it's updating if bit throughout so and content contract, along we're then And a there. subscription pull of

you'll see you'll near term, time pullback will Healthcare terms as transactions. is build those in higher we out Life Sciences value the a higher platform, see going over the and And coming to in of build impact on growth, within to that's tied year which on is transactions forward, product, an primarily results large subscription what years so a we subscription in our and & come. financial much that But next more sustainable,

Operator

will our question-and-answer I today's session pass This thank call. for concludes any back for now remarks. final you.

Jonathan Gear

but We Sure. very Obviously, I'll just Thank progress. do, joining work wrap we're still good the about much. call. seeing again. to again, in you. the you Thank to Thank expected good for feel, go so quarter, and the everyone, results you, the see. progress overall we

talking everyone. and Goodbye. a with thanks, forward to great look week, you So Have soon.

Operator

This concludes today's Thank third participation. you quarter XXXX your call. for earnings

lines. disconnect now may You your

Clarivate (CLVT) 7 Nov 232023 Q3 Earnings call transcript