NYSE:CLVT Clarivate Q4 2023 Earnings Report $4.32 +0.11 (+2.61%) As of 03:59 PM Eastern Earnings HistoryForecast Clarivate EPS ResultsActual EPS$0.21Consensus EPS $0.21Beat/MissMet ExpectationsOne Year Ago EPS$0.20Clarivate Revenue ResultsActual Revenue$683.70 millionExpected Revenue$687.80 millionBeat/MissMissed by -$4.10 millionYoY Revenue Growth+1.20%Clarivate Announcement DetailsQuarterQ4 2023Date2/27/2024TimeBefore Market OpensConference Call DateTuesday, February 27, 2024Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Clarivate Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 27, 2024 ShareLink copied to clipboard.There are 12 speakers on the call. Operator00:00:00Hello all, and welcome to Clarivate's 4th Quarter and Full Year 2023 Earnings Call. My name is Lydia, and I'll be your operator today. I'll now hand you over to Mark Donahue, Head of Investor Relations to begin. Speaker 100:00:25Thank you, Lydia. Good morning, everyone. Speaker 200:00:27Thank you for joining us for the Clarivate 4th quarter and full year 2023 earnings conference call. As a reminder, this conference call is being recorded and webcast and copyrighted property of Clarivate. Any rebroadcast of this information in whole or in part without prior written consent of Clarivate is prohibited and an accompanying earnings call presentation is available on the Investor Relations section of the company's website, clarivate.com. During our call, we may make certain forward looking statements within the meaning of applicable securities laws. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the business or developments Clarivate's industry to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward looking statements. Speaker 200:01:15Information about the factors that could cause actual results to differ materially from anticipated results or performance can be found in Clarivate's filings with SEC and on the company's website. Our discussion will include non GAAP measures or adjusted numbers. Clarivate believes non GAAP results are useful in order to enhance an understanding of our ongoing operating performance, but they are supplemented to and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliations of these measures to GAAP measures are available in our earnings release and supplemental presentation on our website. With me today are Jonathan Geer, Chief Executive Officer and Jonathan Collins, Chief Financial Officer. Speaker 200:01:53Both will be available to take your questions at the conclusion of the prepared remarks. After the prepared remarks, we'll open the call. With that, it's a pleasure to turn the call over to Jonathan Geer. Speaker 100:02:03Great. Thank you, Mark. Good morning, everyone, and thanks for joining us today. As I begin my 2nd full financial year as CEO of Clarivate, I would like to provide an update on our turnaround journey, including the timing and actions required in the years ahead. 2023 was a critical year for Clarivate as we executed significant changes. Speaker 100:02:26These changes allowed us to set the foundation for future growth. I will cover some of these changes on the next slide. It also was a year where we were impacted by macro pressures that to varying levels impacted each of our segments and contributed to lower organic growth than originally expected. Nonetheless, these changes required to set us up for the next phase of Clarivate where we innovate for growth. Beginning on prior investments and changes, we expect to see continued progress in academia government and new success in our focus areas in intellectual property and life sciences and healthcare. Speaker 100:03:05This will accelerate in 2024 into 2025. We expect new product introduction to lead to increased renewal rates, new sales, better ability to capture pricing and drive revenue growth. I now fully expect us to exit 2025 position to drive value as we couple mid single digit organic growth with our scaled business model to accelerate our ability to be a cash generation machine for investors. I should acknowledge that this revised outlook is a year longer than the plan I set forth at Investor Day last year. The macro environment hampered us in 2023 and we pivoted our strategy in life science and healthcare under a new leader. Speaker 100:03:51Nonetheless, with 1 year under my belt and the changes complete, I am more confident than ever in the potential for Clarivate's success and growth. 2023 was a foundational year for Clarivate. It was a year where we drove significant changes in 3 areas to position us for growth. Prior to 2023, our operating model was primarily aligned by function and this allowed us to rapidly realize cost synergies from the 3 large acquisitions completed over the prior few years. However, there were trade offs namely less accountability and a fragmented key account management strategy. Speaker 100:04:33I recognize that we needed to drive more accountability and build a more effective way of operating closer to our customers. From this view, we created our segment operating model to tighten our customer focus, accelerate decision making and bring innovations to market faster. The result was an organizational alignment into 3 segments: Academia and Government, Intellectual Property and Life Sciences and Healthcare. In May 2023, I appointed Presidents to lead each segment. I hired 2 external industry leaders, Barb Weinstein to run academia and government and Henry Levy to run life science and healthcare. Speaker 100:05:13I reassigned Gordon Sampson from his role as Chief Product Officer to run the IP segment, an industry in which he's had nearly a decade of experience. With new experienced leadership in place that has full accountability for their respective segment P and Ls including sales, go to market, product leadership, technology and operations, we are in a better position to drive improved performance across the organization. At our Investor Day, we highlighted the lack of investment in flagship products and innovation over several years, which we needed to reverse. We commenced a significant level of investment and executed against the roadmap to reinvigorate our portfolio. This includes creating new products, enhancing existing solutions and accelerating the use of artificial intelligence to move faster, be more agile and bring solutions to market more quickly. Speaker 100:06:11Starting in 2023, we increased our annual capital investment by around $40,000,000 an increase of around 20% to propel product innovation across all segments. We are seeing early evidence that these investments are paying off. The reinvigoration of Web of Science where we made the earliest investments is our first example as that platform has returned to growth with further growth acceleration expected. Patent intelligence services and IP is our second example. We hired a new product team in late 2022. Speaker 100:06:45They engaged deeply with our customers in the first half of twenty twenty three and began executing against a roadmap to reinvigorate this platform. We plan to take it to market in the first half of twenty twenty four and look forward to sharing KPIs with you in future calls. In Life Science and Healthcare, we made a major pivot on our real world data platform after the arrival of Henry Levy. We invested in a new focused strategy in the second half of twenty twenty three and expect to share initial customer wins later in the year. Finally, and related to our new org structure, we renew a focus on aligning with and what we can do better. Speaker 100:07:34As a result, we realigned our customer facing teams including sales, marketing, customer care with the product teams and sharing our differentiated industry expertise is front and center in every customer interaction. With the foundation now built over the next 2 years, we will focus on specific organizational segment priorities to improve organic growth to a low single digit range. 1st, with our organizational wide priorities, with our segment model now in place for a year, we are better equipped to drive excellence across Clarivate to build a winning culture, focus on innovation, customer centricity and accountability. We will continue to pursue operational efficiencies including utilizing AI and its many benefits to further enhance productivity. This will help us maintain and improve our operating margins while still investing in innovation. Speaker 100:08:31It will also help us generate even stronger cash flow to reduce our leverage to the low three times range. Finally, we are actively evaluating opportunities to prune the portfolio of smaller diluted products. This will sharpen our focus on core growth markets and generate cash to reinvest in our business and reduce our debt. Moving on to our segment priorities, our prior year investments in the Web of Science have delivered improved usage and renewal rates. With additional product innovation, we are targeting enhanced performance across content aggregation within the A and G segment. Speaker 100:09:07In addition, we continue to pursue advancements in AI as well as in business development opportunities such as acquisition sorry, our acquisition of Alethea, and AI student engagement solution. In 2023, our IP segment experienced some of the most challenging economic and budget pressures in years. This has now stabilized and we expect improvements in second half of twenty twenty four as we lap the prior year comps. Last year, we launched 2 new AI powered workflow solutions, the brand landscape analyzer and an IP forecast tool. We look forward to launching our new IP intelligence platform this year and extend our current IP management system win rates through service integration with AI enabled workflows. Speaker 100:09:57Our Life Sciences and Healthcare segment which has the greatest upside potential has been our most volatile business over the last 2 years. While this segment also experienced macro headwinds last year, we believe the growth potential far exceeds our other two segments. With a change in leadership and the change in our go to market strategy it has brought, we are now better positioned to optimize the long term success of the analytics platform. In addition, on prior earnings calls, we discussed investments we're making to drive innovation across our variable data platform supported by generative AI functionality. The increase in capital spending in 2024 is primarily targeted to accelerate innovation within this very important high growth segment. Speaker 100:10:45Each of our presidents looks forward to sharing more details on these growth strategies over a series of upcoming investor webinars. We will be sharing more details of the timing of these events soon. As we exit this year, we will be well on our way in our transformational journey. Under our updated outlook, we believe we can achieve our mid single digit organic growth target in 2026. This is approximately 1 year longer compared to the targets we provided last March. Speaker 100:11:14We of course will continue to look at every opportunity to accelerate this timeline. I'm confident that we have the people, customer relationships, products and solutions to succeed. By achieving a mid single digit growth rate, we will be well positioned to deliver margin accretion, stronger cash flows, capital allocation optionality and deliver significant value for our shareholders. I now want to briefly discuss our 2023 financial results. Even in a challenging growth year, we improved on our underlying financial position. Speaker 100:11:51Organic subscription revenue grew more than 2% in 2023 and we achieved record renewal rates of 92%. We generated our highest free cash flow ever at more than $500,000,000 of which $300,000,000 was allocated towards accelerated debt repayment dropping our leverage ratios below 4 times. We also repurchased $100,000,000 of our ordinary shares. With an improving balance sheet and strong cash generation, we continue to invest in CapEx spending to drive additional product innovation. We will continue to be disciplined in capital allocation and currently expect to use approximately $400,000,000 primarily for deleveraging in 2024. Speaker 100:12:36I want to thank all of my colleagues for their ongoing dedication in helping Clarivate achieve its full potential. I'm confident that the significant structural and operational changes we made last year have created the path to accelerate and sustain organic revenue growth. I look forward to updating you on the progress in the quarters ahead. With that, let me now turn the call over to Jonathan Collins to walk you through our financials. Speaker 300:13:01Thank you, Jonathan. Good morning, everyone. Slide 12 is an overview of last year's Q4 and full year financial results compared with the same periods from the prior year. Q4 revenue was $684,000,000 an increase of $9,000,000 versus 2022, bringing the full year to $2,629,000,000 a decrease of $31,000,000 compared to the prior year. The decline was entirely due to the MarkMonitor divestiture and was partially offset by favorable foreign exchange. Speaker 300:13:33The 4th quarter net loss was $863,000,000 due to the non cash goodwill impairment charge related to the businesses in the IP and LS and H segments. This was also the primary driver of the full year net loss of $987,000,000 which was an improvement of $3,000,000,000 over 2022 as this year's non cash goodwill impairment charge was lower than the one recorded in the prior year. Adjusted diluted EPS, which excludes the impact of one time items like the impairment, was $0.23 in Q4, a $0.01 improvement over the same period last year. The full year result was $0.82 $0.03 lower than 2022 stemming from the MarkMonitor divestiture. Operating cash flow was $191,000,000 in the quarter, an increase of $54,000,000 over the prior year's 4th quarter as the working capital timing issue from the Q3 unwound. Speaker 300:14:27Full year operating cash flow improved 235,000,000 dollars or 46 percent over 2022 to nearly $0.75 billion on lower one time cost and working capital requirements. Please turn with me now to Page 13 for a closer look at the drivers of the full year top and bottom line changes from the prior year. On our Q3 earnings call, we indicated Q4 organic growth was expected to approach 1%. However, it came in slightly below those expectations closer to flat. Q4 has historically been the largest transactional sales quarter of the year for our A and G segment and the outcome for this area was modestly lower than not only our expectations, but also the prior year's results. Speaker 300:15:13Adjusted EBITDA was right in line with our expectations despite the modestly lower revenue. The full year changes to the top and bottom line were driven by the 4 key factors highlighted on this chart. 1st, revenue was up $7,000,000 on organic growth of 0.3%. Despite the softer year end transactional sales, A and G accelerated growth on the back of the research and analytics sub segment as we reap the benefits of the investments in the Web of Science product. Our LS and H segment declined led by a double digit drop in transactional revenues due to the challenges with our legacy strategy of selling our real world data that we discussed in prior calls and is in the process of being addressed. Speaker 300:15:56Finally, our IP business was down slightly in our Patent Intelligence Solutions, which is also being reinvigorated in 2024, as well as previously discussed macro related softness in our patent renewals and trademark services offerings. The adjusted EBITDA impact was negligible as we were able to achieve efficiencies that offset most cost inflation. 2nd, inorganic impacts, namely the divestiture of the MarkMonitor business in 2022 lowered revenues $63,000,000 and profit $32,000,000 last year. 3rd, cost synergies from the ProQuest acquisition contributed $40,000,000 of incremental profit and not only buoyed profit margins, but were completely responsible for the expansion over the prior year. And finally, the foreign exchange translation impact of non U. Speaker 300:16:46S. Dollar denominated subsidiaries increased revenue by $25,000,000 compared to 2022. The profit increase was negligible as transaction gains were lower than the prior year. Please turn with me now to Page 14 to step through the conversion from adjusted EBITDA to free cash flow at the highest rate we've seen since the IPO in 2019. Free cash flow was $127,000,000 in the 4th quarter, an increase of $36,000,000 over the same period the prior year, bringing the full year amount to more than $500,000,000 growth of nearly $200,000,000 over 2022, which represented an 18 percentage point improvement in the conversion on adjusted EBITDA. Speaker 300:17:27The majority of the improvement, $155,000,000 was caused by lower one time cost as we completed the integration of the acquisitions. Interest payments were up $22,000,000 over the prior year as the impact of base rate increases was partially offset by the lower debt quantum due to the deleveraging in Q4 of 2022 and H1 of 2023. Cash taxes were $21,000,000 lower than the prior year as we recognize the benefit of planning initiatives, jurisdictional mix and the timing of payments. Working capital was a $5,000,000 source of cash compared to a $73,000,000 use the prior year. The timing of payments within our patent renewal business in our IP segment was a meaningful contributor to the year over year improvement. Speaker 300:18:13Capital expenditures rose $40,000,000 to nearly a $250,000,000 or 9% of revenue as we ramped up our investment in product innovation. We used our free cash flow to service our preferred stock with a dividend, prepay $300,000,000 of term debt and repurchase 14,000,000 shares of our common stock. This balanced capital allocation brought our net leverage ratio to our year end target of less than 4 turns. Please move with me now to Slide 15 as we turn the page on 2023 and provide our guidance for 2024. Beginning at the top of the page, we expect organic growth to improve over last year to about 1% at the midpoint of our range. Speaker 300:18:55From a segment perspective, we anticipate A and G's growth will continue to improve modestly, LS and H to improve to about flat and IP to return to low growth. In terms of revenue types, we expect the subscription file will grow between 2% 3%, in line with last year, reoccurring to grow about 1% and transactional to decline about 2%. It's worth noting that we expect to be off to a slower start in Q1 with a decline of more than 2%. While we anticipate the subscription file will continue to grow, we're likely to see high single digit declines in both the reoccurring and transactional order types, driven by tougher comps in our IT segment, namely patent renewal and trademark servicing volumes. We expect organic growth to be modestly positive excluding these product areas and our full year guidance predicts positive organic growth for each of the remaining quarters of this year. Speaker 300:19:541% organic growth for the full year would yield revenue of about $2,620,000,000 at the midpoint of the range. Moving down the page, we expect adjusted EBITDA in the range of $1,055,000,000 to $1,115,000,000 resulting in a profit margin of about 41.5 percent at the midpoint of the range. We anticipate diluted adjusted EPS between $0.70 $0.80 down $0.07 from last year at the midpoint. The adjusted EBITDA decline, which I'll detail on the next page, will account for about $0.04 and higher D and A from increased capital spending to drive growth will cause $0.03 And finally, at the bottom of the page, we anticipate free cash flow between $420,000,000 $500,000,000 Please turn me now to Page 16 for a closer look at the full year top and bottom line changes we're expecting compared to last year. Speaker 400:20:48Since the benefit of the Speaker 300:20:49cost synergies from the ProQuest acquisition are completely embedded in last year's results, the full year change to revenue and adjusted EBITDA this year is driven by 3 key factors. 1st, organic growth at the midpoint of our guidance range will add about $30,000,000 to the top line, but will have no impact on the bottom line, leading to a modestly lower profit margin as we remain committed to investing in product innovation that we believe will accelerate organic growth in the coming years. 2nd, the inorganic impact from selling a small business line in the IP segment will remove some revenue this year compared to last year. We expect the transaction will close this quarter and will deduct about $30,000,000 of revenue and about $15,000,000 of profit this year. As Jonathan highlighted earlier, pruning the portfolio of small growth dilutive products to improve execution is a priority to accelerating our organic growth, and this is another step in this direction. Speaker 300:21:46And finally, we anticipate a $10,000,000 foreign exchange translation headwind on the top line and a slightly higher headwind of $15,000,000 on the bottom line as last year's transaction gains are not expected to recur this year. These changes to adjusted EBITDA account for 3 quarters of the change in free cash flow compared to last year. Let's turn to Page 17 to step through some of the other items. One time costs are expected to continue to decline this year to $40,000,000 an improvement of $20,000,000 over last year as the ProQuest integration is completely behind us. We do expect cash interest to decrease by about $15,000,000 dollars caused in part by the debt we prepaid in Q4, the rate benefit from refinancing our Term Loan B earlier this month and the expectation that base rates will fall later this year. Speaker 300:22:35Taxes will increase by approximately $15,000,000 due to timing of payments and jurisdictional mix. We expect the change in working capital this year will be negligible just as it was last year. And we remain committed to investing in product innovation and plan to raise capital spending by about $20,000,000 taking it to about 10% of revenue. The net impact of these changes is free cash flow of 4 $60,000,000 at the midpoint of the range. From a capital allocation perspective, the free cash flow reduction of $40,000,000 will be largely offset by lower dividend payments on our preferred stock. Speaker 300:23:10We have 2 more coupon payments to make before they convert the common shares in the second quarter, freeing up an additional $35,000,000 of cash in the second half of the year. As a result, we expect to have $400,000,000 available to prepay debt or repurchase shares just as we did last year. We intend to use most of this to prepay debt and closing in our long term net leverage target of about 3 turns. Please turn with me now to Page 18 for a look at how last year's results and this year's guidance affect the trajectory of our organic growth acceleration in the form of our revised long term targets. As Jonathan acknowledged at the onset of the call, it's going to take us longer to reach our mid single digit organic growth target with a lower starting point than originally anticipated. Speaker 300:23:56When we outlined our recovery path at the Investor Day last March, we expected to reach about 6% in 2025 and we now believe it will take us another year to touch this level of growth. We now anticipate making steady progress towards the range of 4% to 6% in 2026. A key driver of this progression includes modestly pruning small lower growth assets that are distracting our teams focused on core product innovation. As a reminder, to reach our market potential in each segment, we must modernize platforms and enhance our solutions in 1 key sub segment in each. 1st, we expect to build on last year's momentum in research and analytics within A and G, lifting growth to mid single digits in this category through expanding platform capabilities and breadth of content. Speaker 300:24:442nd, within LS and H, we plan to launch our new pharma grade real world data product in H1 and 2 specific therapy area aligned products in H2. Combined with AI enhanced capabilities in our commercialization products, these investments will drive the growth acceleration in the highest potential business in our portfolio. And third, we're targeting to deliver 4 enhanced solutions this year in our Patent Intelligence sub segment with NIP built on our unparalleled data that we expect will lead to double digit monthly active usage growth by the end of this year, setting us up for a meaningful improvement in organic growth in this sub segment next year. As our organic growth accelerates, we expect profit margins will return to last year's levels over the next few years and will compound to accrete $0.15 of EPS from this year's expectation, lifting free cash flow conversion to 50% over the same time horizon. Please moving now to Page 19 to put these long term targets in the context of the financial objectives that we outlined last year. Speaker 300:25:52Our primary aim is to accelerate our organic growth lifting us from last year's level of essentially flat to mid single digit growth in a few years. Our second goal is to maintain durable profit margins as we make the investment to achieve the primary goal. We are committed to providing the resources to drive product innovation in all our businesses and are finding operating efficiencies to fund some of these, but are also willing to modestly lower our profit margins in the near term to benefit the long term health of the enterprise. The 3rd objective we outlined was to significantly improve our free cash flow, which we've done by reaching $500,000,000 last year, but we see room to continue to expand our cash flow conversion to 50% as we improve our top line growth. And finally, we remain committed to allocate our capital in a disciplined manner. Speaker 300:26:43We've demonstrated balance in this area by using about 3 quarter of last year's available free cash flow to prepaid debt, bringing our net leverage below 4 turns and also used about a quarter of it to repurchase stock. We see a clear path to bringing leverage below 3 in the next few years maintaining a similar balance. I'd like to use this opportunity to thank my more than 12,000 teammates here at Clarivate for your tireless work to get us to this point and your commitment to executing our plan to help us achieve these objectives. I want to thank all of you for listening in this morning. I'm now going to turn the call back over to Lydia to take your questions. Speaker 300:27:26Lydia, please go ahead. Operator00:27:29Thank you. Our first question today comes from Owen Lau of Oppenheimer. Your line is open. Please go ahead. Speaker 500:27:45Good morning and thank you for taking my question. So both Jonathan, you talk about some of the investments for future growth in 2025 2026. Could you please add more color on kind of like which what kind of product do you expect to invest into? When do you expect to launch this new product and the return on these investments? Thanks a lot. Speaker 100:28:09This is Jonathan here. I'll go ahead and go first. And maybe I'll walk around just through each of the segments to give a complete picture. So as I mentioned in my remarks, Owen, in A and G, that's a segment where we made the earliest innovation investments around Web of Science and that's where we see the initial returns from that. As we discussed in Q1 of last year, we saw the uptake of renewal rates and that really was on the back of a complete refresh of that platform. Speaker 100:28:35Now that is was the beginning of that journey. We continue to invest in Web of Science primarily by creating additional analytic tools to drive value and increase in the work flow of our researchers there. That will drive usage, allow us to capture price and now as price differentially. We're also seeking ways to expand our pricing model to move into different segments of the market that we typically haven't been able to address with our existing pricing model. All that is to say, within A and G, I think the path is the most advanced of the three segments in terms of the innovation and the results we're seeing from that. Speaker 100:29:10In IT, the biggest area of focus is around our patent intelligence and search analytics platforms and that is the group that includes Derwent, Enography, Anchopath and related services around patent search. This is an area Owen, I think as you know that we've been underperforming in the past. We've the team has done a phenomenal job of getting close to customers, having customer user groups drive this innovation and we expect to launch the first two of a series of additional new modules in this area in the first half of this year. So we expect that to launch. And then as you know, that given our revenue model, these would be subscription products. Speaker 100:29:52If we launch it then, sales happening more second half of the year, the revenue will appear more next year. But we feel very good about the path there. Then in life science and health care, I would call out 2 areas. 1 is the real world data analytics platform. And this is the area which as you know, we pivoted substantially middle of last year where we pulled back on the previous strategy of selling our data to competitors. Speaker 100:30:18As I've shared at Nazzym in the past, it was a flawed strategy and we continue to accelerate exiting that as a channel. At the same time, with Henry's arrival and his industry experience, we've really refocused the investments on that product to create pharma ready data, which we have largely achieved at this point. So that's largely done. And then we're going to be rolling out some therapeutic areas in the first half of this year. So that's one big area. Speaker 100:30:44And then we also the other areas around R and D, which is kind of second element or the second portion of our life science and healthcare offerings. And there we've had incredible content, but very, very dated platforms and we've been investing in refreshing those platforms and adding more analytics to really unlock the value of our underlying data. So all of those are again, web of science, I would say is we kind of launched the first phase of it and we continue to improve against it. That will be ongoing improvement. The other two areas in both IP and life science and health care expect some major product launches this year. Speaker 100:31:20Thank you. Operator00:31:23Our next question comes from Manav Patnaik of Barclays. Speaker 600:31:32My question is, the pruning of the portfolio that talked about, can you just help us size how much of the portfolio is up for pruning? And also, just what is the Board's aversion to doing something bigger? It sounds like you have 3 disconnected segments, life science is the smallest and the most volatile. So why not do something bigger? Speaker 300:31:55Yes. Thanks for the question, Manav. This is Jonathan Collins. I'll touch on the portfolio of earning and let Jonathan take the second part. So the small business that we are exiting in the IP segment that I mentioned in the prepared remarks that we will likely close on in Q1 and that will affect Q2 through Q4. Speaker 300:32:15That's about the size that we're looking at. So the focus here is identifying areas that are growth dilutive and distractive to the teams to help improve the probability of success in execution and product innovation by focusing the team. So that is about the size. It could be slightly larger, slightly smaller, but there are opportunities in all three of our segments to winnow down the areas that we are really focusing on and investing in to drive the organic growth acceleration. Speaker 100:32:49Great. And now this is Manav, this is John. I'll touch on your second question on kind of a larger move. I mean, certainly the Board and myself are completely aligned that we are here to drive value for shareholders. As I've described in the past with you and others, we certainly see value of these segments being together and the value has been driven by shared content, shared technologies, in particular around IP and Life Science and Healthcare, some shared customers and certainly on the significant cost synergies we have been able to drive over the last few years as we brought these 4 large platforms together. Speaker 100:33:22That being said, we will always optimize what's in the situation for our shareholders and for our customers. And to do that right now where the board has me focused and what I have the team focused is on operating and improving every single segment as we described. Thank you. Speaker 200:33:46Next question please. Lydia? Operator00:34:23Thank you. Our next question comes from Heather Wrobleski of Bank of America. Hi, this Speaker 700:34:31is Heather Rebulsky. Thanks for taking my question. I was hoping you could talk a little bit more about the increase in CapEx spend and the investment spend you're doing and just help us understand how much of it is Gen AI initiatives? How much of it is other investments in the business? And how you talked about investing to drive growth, just how we should think about spend over the next few years and how you're thinking about if there's incremental opportunities to invest, just balancing that with the margin growth and cash flow growth? Speaker 700:35:09Thanks. Speaker 300:35:11Yes. Thank you for the question, Heather. So with respect to our CapEx increase, most of that is adding development capacity, which we capitalize at a relatively high rate when we're enhancing and improving products. So maybe I'll just touch on a couple of the areas that Jonathan mentioned a bit ago in the A and G segment. We continue to ramp up the investment in the web of science to stay ahead of adding features to the platform and ingesting new mediums of content to make it a great experience. Speaker 300:35:46And there certainly is an AI overlay there. All of our businesses are starting to move towards conversational discovery, which is an example of embedding AI in the products. And it certainly comes with a development effort in all of those areas, weather science certainly doing that as well. As we move into life sciences, it's a combination of development capacity and some content or data for the real world data offering. As Jonathan highlighted, we spent a lot of effort in the past couple of quarters building out pharma grade data and the technology investment there. Speaker 300:36:22And then the next step for us is start to build these therapy area platforms or offerings that will take meaningful development efforts. So that's really how we're spending within the life sciences segment. And then on the IP side, the 4 new platforms or modules that will be put on top of the Derwent data set for search, for watch, for strategy and for R and D. Those applications have pretty meaningful technology developments that will happen over the course of this year and into next year. Just in terms of the time horizon, we indicated last year and the cash flow guidance that we highlighted today getting to that greater than or about 50% conversion in a couple of years does contemplate CapEx being at a reasonably steady dollar level over the next few years as revenue grows that margin on CapEx should drop a bit, but we do expect that we'll need to continue to make that investment over the next few years. Speaker 300:37:25Thanks for the question. Speaker 200:37:29Next question please. Operator00:37:29Our next question comes from Tony Kaplan of Morgan Stanley. Your line is open. Speaker 800:37:37Hey, good morning. This is Greg Parrish on for Tony. Thanks for taking our questions. I just wanted to dig into the change since Investor Day in March. What really drove the difference in the turnaround trajectory that you were targeting? Speaker 800:37:50You're ramping up investment here, so is more investment required than you thought back then or they're really just macro or is the end market more challenged maybe than you thought, if you can kind of help bridge the gap there? Thanks. Speaker 100:38:03Sure, Greg. And the way I think about it and I encourage you to think about it is really 2 different things. First is, macro certainly impacted us far more than we were anticipating in 2023, primarily in IP. And we talked about that in our Q2 call, Also in life science and healthcare with commercial markets there, those are the most impacted and to a lesser degree with some on the margin within A and G with some discretionary transactional items, but primarily again in life science and healthcare and IP. So macro was part of it. Speaker 100:38:35So it ended up impacting kind of our starting point, if you will, on the 3 year plan. And the other element of it really was around as we brought in more brought back in more industry expertise back into the business as we reestablish some of the teams that we'd had before. We began to slightly modify and change some of our go to market product strategies, particularly around life science and healthcare. And with Henry coming on board middle of last year, spending time with him, again, we really made a decision to change our life science and healthcare. RWD platform strategy, absolutely the right thing to do and it makes me even more confident in the future. Speaker 100:39:15But that did pull us back a year in terms of the timing around that platform. So those are really the 2 kind of key areas I would call out. Thank you. Speaker 200:39:25Great. Thank you. Next question please. Operator00:39:28Next question is from George Tong of Goldman Sachs. Please go ahead. Speaker 900:39:34Hi, thanks. Good morning. It looks like in your guide you're expecting improved organic growth this year in subscription and reoccurring. It's really the transactional piece that's going to be the offset. So can you talk a little bit more about how much of the transactional revenue headwinds are cyclical versus structural and steps that you're taking internally to drive improved performance here? Speaker 300:40:01Sure, George. Yes, just to reiterate what this year's guidance range contemplates on organic growth. So we do believe that the subscription business will be relatively consistent with last year. We grew about 2.5% last year. I think we'll be in that 2% to 3% range. Speaker 300:40:17As Jonathan highlighted, those investments that we are making this year in Life Sciences and in Patent Intelligence within IP should start to improve usage in the second half of this year and help to lift subscription growth next year and we should continue to see some traction in A and G as the Web of Science product continues to improve. Most of the impact in reoccurring, which we think will grow modestly this year, is going to come from a modest improvement in the second half of the year on volumes within that market. We'll have tough comps early in the year, which is why I indicated growth will be lower, particularly in Q1. But to your point on transactional, we continue to expect and are conservative around commercialization budgets in 2024. We do think there is some opportunity in the second half for things to improve modestly, but we've been pretty conservative on the rate of improvement in that market. Speaker 300:41:18On the IP side, from a transactional search and watch, we've been relatively consistent there. It's been lower than in the past couple of years. And then on the A and G side, which is the only place that we were a bit softer in the Q4, we've been a bit conservative about the expectation there. So that's what's leading to the anticipation that transaction will be down a couple of percent. In terms of what we are doing about it and the things that we can control, the primary area to focus on is within life sciences. Speaker 300:41:49So the investment that we are making in these therapy area focused offerings for our real world evidence and the pharma grade data will lead to opportunities to sell this in a subscription model. So that's a place where the headwinds we've seen in transactional over the last couple of years, we expect to see come back to us in the form of subscription growth. So that's a little bit more color on how we're seeing 2024's growth expectations by order type. Speaker 200:42:20Next question please. Operator00:42:23The next question comes from Seth Weber of Wells Fargo. Please go ahead. Speaker 1000:42:30Hey, guys. Good morning. I was wondering if you could just touch on the pricing environment, where it sits today and kind of what you're contemplating for pricing as you ramp into 2026? Like how much better do you think or how much of a bigger contributor do you think pricing will be as you get further down the road with more products and better more cross selling, things like that? If you could just sort of talk through where pricing is today and how you see that trending over the next couple of years? Speaker 1000:43:02Thank you. Speaker 100:43:04Sure, Seth. Yes, I mean, I'll go ahead and comment on that and see if J. C. Has any additions. I mean, in general, pricing has been a net contributor for us across all three product lines with our subscription products. Speaker 100:43:15Now certainly if you unpack that and look on specific products where we have innovated in the past, where we are creating new updates to the products, that's where we're able to capture more price in areas where we've done less so and I will call out Durbin, for example, not able to capture price. There's a direct correlation between our ability to innovate, drive the innovation to impact customer workflows and our ability to capture price. When I look forward to the plan this year, we've been fairly modest in terms of assuming any improvement on price capture for our plans for 2024. That being said, we are amping up our rate of innovation. Henry Levy has announced that he's going to be every product is going to have an update this year in terms of his portfolio, and that will be able to capture price. Speaker 100:44:00But I think we're going to take a wait and see in terms of when we actually see that coming through. J. C, anything you want to add to that? C. Durrant:] Yes. Speaker 300:44:07I think the indication we would expect 20 24 to be pretty consistent as Jonathan highlighted. In 2025 and 2026 as we launch these new offerings, we certainly think that this will be an area that will help contribute towards the growth acceleration as we move up a bit in those key product areas that we haven't been able to price meaningfully in the last few years. Thanks for the question, Seth. Speaker 200:44:31Thanks, Seth. Next question, please. Operator00:44:35The next question comes from Ashish Sadabra of RBC Capital Markets. Please go ahead. Speaker 400:44:43Thanks for taking my question. Maybe just following up on an earlier question around the revenue growth trajectory in 2024. The visibility historically has been pretty low. So I was just wondering what gives the confidence in that back half acceleration in second half twenty twenty four? And in order like what could drive upside or downside risk there? Speaker 400:45:05Is it mostly macro or are there certain client wins which are ramping up that can provide further confidence on that growth improvement? Thanks. Speaker 300:45:16Thanks for the question Ashish. This is Jonathan. On the expectations and the cadence for this year, it's mostly driven by the comps from the prior year. So we have not built in to your point because of visibility challenges the last couple of years a meaningful improvement in the markets in the second half of the year. But you'll recall, for example, in our patent renewal business, we started to see the softening in the second quarter, late in the second quarter. Speaker 300:45:44So we have tougher comps in the part of the year. That's also true with the trademark business within IP. So that's the reason we expect that growth will be slightly negative in the Q1. We'll return to growth in the Q2 and have better growth in the second half of the year is less to do with the run rate improving and more about the comps. And we have expected the transactional business to decline by a couple of percent as I indicated. Speaker 300:46:12So we think we've been a bit more conservative with our outlook on those sales that have been a bit more challenging to predict over the last couple of years. Thanks for the question. Operator00:46:25Thank you. Our next question comes from Shlomo Rosenbaum of Stifel. Please go ahead. Speaker 1100:46:41Hi. Thank you very much. Some of the players in the life sciences like IQVIA and VIVA are talking about improved optimism amongst the client base and they're thinking that we should see a second half improvement. Is that square with what you guys are expecting in your numbers? Are you not seeing that? Speaker 1100:47:03Are you not expecting that? And then just, Jonathan, I want to touch on one thing that at the Analyst Day, the 2025 target was 6% growth and you're now pointing to 26 at 4% to 6%. Can you just address is that lowering the growth expectation even in the next year? Speaker 100:47:23Sure, Shlomo. This is Jonathan here. I'll go ahead and address the first question and have JC address the second. So on Life Sciences, I think what as others are seeing, we are seeing renewed optimism within our life science customers. The commercialization budgets appear to be higher. Speaker 100:47:40And we're seeing kind of across the board, both on large pharma, large biotech and even small biotech. So there is renewed optimism coming back into it. That being said, we're going to want to wait and see in terms of how quickly that converts into really increased demand for our products and services and consulting. So we've while we are seeing that certainly in the macro environment, we've been cautious about putting that optimism into our guidance in second half. JC, do you want to address some of the other questions? Speaker 300:48:10Yes. In that conservatism around the macro, Schlomo is the other factor that's really driving the change in the last year of the guide we gave. So to your point, we had previously indicated in the 5.5% to 6.5% range or 6% at the midpoint. We're now in the 4% to 6% range. So we'd have to get to the higher end of that to touch the prior midpoint. Speaker 300:48:30That is primarily due Speaker 100:48:31to our conservatism around the rate of improvement Speaker 300:48:31in the end markets. What could cause us acceleration, for example, in the commercialization market that Jonathan just highlight, a better outlook on the patent renewal front would be another example. So that is the primary difference in the change between the two outlooks. Operator00:48:56Thank you. Speaker 200:48:58Thank you. Next question please. Operator00:49:02Next question comes from Andrew Nicholas of William Blair. Please go ahead. Your line is open. Speaker 100:49:10Thanks and good morning. I just had a small question on A and G. Jonathan Collins, I think you mentioned it's the largest transactional quarter. I think that's mostly back file sales within Web of Science. But just if you could confirm that's where the weakness was? Speaker 100:49:26And then just any color on the drivers of that? Is that also budget related, typical pressures? Or is there is it just a timing issue, and you'd expect some of that to come back next year? Thank you. Speaker 300:49:42Yes. Thank you for the question, Andrew. So as a reminder, we have multiple types of transactional sales within the A and G segment. You touched on one of them where we're selling the back file of Web of Science, which makes the analytics of the platform much more valuable to the users. Other examples are digital collections, historical collections that we've digitized and preserved and also our books business. Speaker 300:50:06So it's a combination of those. Q4 usually is the largest quarter for us. What we saw a bit later in the quarter is our customers in that space pausing a bit. What we heard from them is that they want to wait and see on some other spending factors. Most of our customer base is in North America within that part of the business and their budget years run similar to the school year. Speaker 300:50:32So their budget year will end in the second quarter. So we'll see how that plays out in the coming quarters. But that's most of the feedback that we heard from that market and those were the sales that were affected. Thanks, Andrew. Speaker 200:50:46Thanks, Andrew. Great. Thank you, Andrew. Speaker 100:50:48I think that was our last question. Just as I wrap, I just want to thank everyone for joining our call today and listening with our remarks, engaging with us. As we look forward to next year, again, as we said in the call, 2023 was a foundational year for us as we made the changes that we needed to make to really propel Clarivate. And I look forward to sharing with you over the ensuing quarters coming up, the results of investments we're making innovation as we drive this company to grow. Thank you very much everyone. Speaker 100:51:14Goodbye. Operator00:51:18This concludes today's call. Thank you for joining. You may now disconnect your line.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallClarivate Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Clarivate Earnings HeadlinesClarivate Plc (NYSE:CLVT) Q1 2025 Earnings Call TranscriptApril 30 at 9:33 AM | insidermonkey.comClarivate PLC (CLVT) Q1 2025 Earnings Call Highlights: Navigating Challenges with Strategic GrowthApril 30 at 4:37 AM | finance.yahoo.comTrump Orders 'National Digital Asset Stockpile'‘Digital Asset Reserve’ for THIS Coin??? Get all the details before this story gains even more tractionApril 30, 2025 | Crypto 101 Media (Ad)Clarivate Plc (CLVT) Q1 2025 Earnings Call TranscriptApril 29 at 1:18 PM | seekingalpha.comClarivate Plc 2025 Q1 - Results - Earnings Call PresentationApril 29 at 12:33 PM | seekingalpha.comClarivate Reports First Quarter 2025 ResultsApril 29 at 6:00 AM | prnewswire.comSee More Clarivate Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Clarivate? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Clarivate and other key companies, straight to your email. Email Address About ClarivateClarivate (NYSE:CLVT) operates as an information services provider in the Americas, the Middle East, Africa, Europe, and the Asia Pacific. It operates through three segments: Academia & Government, Life Sciences & Healthcare, and Intellectual Property. The company offers Web of Science and InCites, that analyzes and explores the academic research landscape and manages research information; ProQuest One and Ebook Central that provides comprehensive content collections to institutions in a cost-effective manner; and Alma and Polaris, that manages academic resources and services, connect users, and support research publications. It also provides Patent and Trademark Renewals, that supports paralegal and admin tasks throughout the patent and trademark protection and maintenance process; CompuMark and Derwent, that supports critical decisions around patent and trademark protection, risk, and value creation throughout the innovation and brand lifecycle; IPFolio and Foundation IP that creates a structured environment for the protection and management of global patent and trademark assets. In addition, the company offers Cortellis Competitive Intelligence and Cortellis Drug Discovery Intelligence, that supports the development of new drugs and medical devices from discovery to clinical trials; Cortellis Regulatory Intelligence and OFF-X to monitor drug safety issues and adhere to regulatory protocols; Real World Data and Optimize that inform commercial launch strategy and set pricing for optimal reimbursement. It serves corporations, universities, law firms, government agencies, public libraries, and other professional services organizations. The company was formerly known as Clarivate Analytics Plc and changed its name to Clarivate Plc in May 2020. 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There are 12 speakers on the call. Operator00:00:00Hello all, and welcome to Clarivate's 4th Quarter and Full Year 2023 Earnings Call. My name is Lydia, and I'll be your operator today. I'll now hand you over to Mark Donahue, Head of Investor Relations to begin. Speaker 100:00:25Thank you, Lydia. Good morning, everyone. Speaker 200:00:27Thank you for joining us for the Clarivate 4th quarter and full year 2023 earnings conference call. As a reminder, this conference call is being recorded and webcast and copyrighted property of Clarivate. Any rebroadcast of this information in whole or in part without prior written consent of Clarivate is prohibited and an accompanying earnings call presentation is available on the Investor Relations section of the company's website, clarivate.com. During our call, we may make certain forward looking statements within the meaning of applicable securities laws. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the business or developments Clarivate's industry to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward looking statements. Speaker 200:01:15Information about the factors that could cause actual results to differ materially from anticipated results or performance can be found in Clarivate's filings with SEC and on the company's website. Our discussion will include non GAAP measures or adjusted numbers. Clarivate believes non GAAP results are useful in order to enhance an understanding of our ongoing operating performance, but they are supplemented to and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliations of these measures to GAAP measures are available in our earnings release and supplemental presentation on our website. With me today are Jonathan Geer, Chief Executive Officer and Jonathan Collins, Chief Financial Officer. Speaker 200:01:53Both will be available to take your questions at the conclusion of the prepared remarks. After the prepared remarks, we'll open the call. With that, it's a pleasure to turn the call over to Jonathan Geer. Speaker 100:02:03Great. Thank you, Mark. Good morning, everyone, and thanks for joining us today. As I begin my 2nd full financial year as CEO of Clarivate, I would like to provide an update on our turnaround journey, including the timing and actions required in the years ahead. 2023 was a critical year for Clarivate as we executed significant changes. Speaker 100:02:26These changes allowed us to set the foundation for future growth. I will cover some of these changes on the next slide. It also was a year where we were impacted by macro pressures that to varying levels impacted each of our segments and contributed to lower organic growth than originally expected. Nonetheless, these changes required to set us up for the next phase of Clarivate where we innovate for growth. Beginning on prior investments and changes, we expect to see continued progress in academia government and new success in our focus areas in intellectual property and life sciences and healthcare. Speaker 100:03:05This will accelerate in 2024 into 2025. We expect new product introduction to lead to increased renewal rates, new sales, better ability to capture pricing and drive revenue growth. I now fully expect us to exit 2025 position to drive value as we couple mid single digit organic growth with our scaled business model to accelerate our ability to be a cash generation machine for investors. I should acknowledge that this revised outlook is a year longer than the plan I set forth at Investor Day last year. The macro environment hampered us in 2023 and we pivoted our strategy in life science and healthcare under a new leader. Speaker 100:03:51Nonetheless, with 1 year under my belt and the changes complete, I am more confident than ever in the potential for Clarivate's success and growth. 2023 was a foundational year for Clarivate. It was a year where we drove significant changes in 3 areas to position us for growth. Prior to 2023, our operating model was primarily aligned by function and this allowed us to rapidly realize cost synergies from the 3 large acquisitions completed over the prior few years. However, there were trade offs namely less accountability and a fragmented key account management strategy. Speaker 100:04:33I recognize that we needed to drive more accountability and build a more effective way of operating closer to our customers. From this view, we created our segment operating model to tighten our customer focus, accelerate decision making and bring innovations to market faster. The result was an organizational alignment into 3 segments: Academia and Government, Intellectual Property and Life Sciences and Healthcare. In May 2023, I appointed Presidents to lead each segment. I hired 2 external industry leaders, Barb Weinstein to run academia and government and Henry Levy to run life science and healthcare. Speaker 100:05:13I reassigned Gordon Sampson from his role as Chief Product Officer to run the IP segment, an industry in which he's had nearly a decade of experience. With new experienced leadership in place that has full accountability for their respective segment P and Ls including sales, go to market, product leadership, technology and operations, we are in a better position to drive improved performance across the organization. At our Investor Day, we highlighted the lack of investment in flagship products and innovation over several years, which we needed to reverse. We commenced a significant level of investment and executed against the roadmap to reinvigorate our portfolio. This includes creating new products, enhancing existing solutions and accelerating the use of artificial intelligence to move faster, be more agile and bring solutions to market more quickly. Speaker 100:06:11Starting in 2023, we increased our annual capital investment by around $40,000,000 an increase of around 20% to propel product innovation across all segments. We are seeing early evidence that these investments are paying off. The reinvigoration of Web of Science where we made the earliest investments is our first example as that platform has returned to growth with further growth acceleration expected. Patent intelligence services and IP is our second example. We hired a new product team in late 2022. Speaker 100:06:45They engaged deeply with our customers in the first half of twenty twenty three and began executing against a roadmap to reinvigorate this platform. We plan to take it to market in the first half of twenty twenty four and look forward to sharing KPIs with you in future calls. In Life Science and Healthcare, we made a major pivot on our real world data platform after the arrival of Henry Levy. We invested in a new focused strategy in the second half of twenty twenty three and expect to share initial customer wins later in the year. Finally, and related to our new org structure, we renew a focus on aligning with and what we can do better. Speaker 100:07:34As a result, we realigned our customer facing teams including sales, marketing, customer care with the product teams and sharing our differentiated industry expertise is front and center in every customer interaction. With the foundation now built over the next 2 years, we will focus on specific organizational segment priorities to improve organic growth to a low single digit range. 1st, with our organizational wide priorities, with our segment model now in place for a year, we are better equipped to drive excellence across Clarivate to build a winning culture, focus on innovation, customer centricity and accountability. We will continue to pursue operational efficiencies including utilizing AI and its many benefits to further enhance productivity. This will help us maintain and improve our operating margins while still investing in innovation. Speaker 100:08:31It will also help us generate even stronger cash flow to reduce our leverage to the low three times range. Finally, we are actively evaluating opportunities to prune the portfolio of smaller diluted products. This will sharpen our focus on core growth markets and generate cash to reinvest in our business and reduce our debt. Moving on to our segment priorities, our prior year investments in the Web of Science have delivered improved usage and renewal rates. With additional product innovation, we are targeting enhanced performance across content aggregation within the A and G segment. Speaker 100:09:07In addition, we continue to pursue advancements in AI as well as in business development opportunities such as acquisition sorry, our acquisition of Alethea, and AI student engagement solution. In 2023, our IP segment experienced some of the most challenging economic and budget pressures in years. This has now stabilized and we expect improvements in second half of twenty twenty four as we lap the prior year comps. Last year, we launched 2 new AI powered workflow solutions, the brand landscape analyzer and an IP forecast tool. We look forward to launching our new IP intelligence platform this year and extend our current IP management system win rates through service integration with AI enabled workflows. Speaker 100:09:57Our Life Sciences and Healthcare segment which has the greatest upside potential has been our most volatile business over the last 2 years. While this segment also experienced macro headwinds last year, we believe the growth potential far exceeds our other two segments. With a change in leadership and the change in our go to market strategy it has brought, we are now better positioned to optimize the long term success of the analytics platform. In addition, on prior earnings calls, we discussed investments we're making to drive innovation across our variable data platform supported by generative AI functionality. The increase in capital spending in 2024 is primarily targeted to accelerate innovation within this very important high growth segment. Speaker 100:10:45Each of our presidents looks forward to sharing more details on these growth strategies over a series of upcoming investor webinars. We will be sharing more details of the timing of these events soon. As we exit this year, we will be well on our way in our transformational journey. Under our updated outlook, we believe we can achieve our mid single digit organic growth target in 2026. This is approximately 1 year longer compared to the targets we provided last March. Speaker 100:11:14We of course will continue to look at every opportunity to accelerate this timeline. I'm confident that we have the people, customer relationships, products and solutions to succeed. By achieving a mid single digit growth rate, we will be well positioned to deliver margin accretion, stronger cash flows, capital allocation optionality and deliver significant value for our shareholders. I now want to briefly discuss our 2023 financial results. Even in a challenging growth year, we improved on our underlying financial position. Speaker 100:11:51Organic subscription revenue grew more than 2% in 2023 and we achieved record renewal rates of 92%. We generated our highest free cash flow ever at more than $500,000,000 of which $300,000,000 was allocated towards accelerated debt repayment dropping our leverage ratios below 4 times. We also repurchased $100,000,000 of our ordinary shares. With an improving balance sheet and strong cash generation, we continue to invest in CapEx spending to drive additional product innovation. We will continue to be disciplined in capital allocation and currently expect to use approximately $400,000,000 primarily for deleveraging in 2024. Speaker 100:12:36I want to thank all of my colleagues for their ongoing dedication in helping Clarivate achieve its full potential. I'm confident that the significant structural and operational changes we made last year have created the path to accelerate and sustain organic revenue growth. I look forward to updating you on the progress in the quarters ahead. With that, let me now turn the call over to Jonathan Collins to walk you through our financials. Speaker 300:13:01Thank you, Jonathan. Good morning, everyone. Slide 12 is an overview of last year's Q4 and full year financial results compared with the same periods from the prior year. Q4 revenue was $684,000,000 an increase of $9,000,000 versus 2022, bringing the full year to $2,629,000,000 a decrease of $31,000,000 compared to the prior year. The decline was entirely due to the MarkMonitor divestiture and was partially offset by favorable foreign exchange. Speaker 300:13:33The 4th quarter net loss was $863,000,000 due to the non cash goodwill impairment charge related to the businesses in the IP and LS and H segments. This was also the primary driver of the full year net loss of $987,000,000 which was an improvement of $3,000,000,000 over 2022 as this year's non cash goodwill impairment charge was lower than the one recorded in the prior year. Adjusted diluted EPS, which excludes the impact of one time items like the impairment, was $0.23 in Q4, a $0.01 improvement over the same period last year. The full year result was $0.82 $0.03 lower than 2022 stemming from the MarkMonitor divestiture. Operating cash flow was $191,000,000 in the quarter, an increase of $54,000,000 over the prior year's 4th quarter as the working capital timing issue from the Q3 unwound. Speaker 300:14:27Full year operating cash flow improved 235,000,000 dollars or 46 percent over 2022 to nearly $0.75 billion on lower one time cost and working capital requirements. Please turn with me now to Page 13 for a closer look at the drivers of the full year top and bottom line changes from the prior year. On our Q3 earnings call, we indicated Q4 organic growth was expected to approach 1%. However, it came in slightly below those expectations closer to flat. Q4 has historically been the largest transactional sales quarter of the year for our A and G segment and the outcome for this area was modestly lower than not only our expectations, but also the prior year's results. Speaker 300:15:13Adjusted EBITDA was right in line with our expectations despite the modestly lower revenue. The full year changes to the top and bottom line were driven by the 4 key factors highlighted on this chart. 1st, revenue was up $7,000,000 on organic growth of 0.3%. Despite the softer year end transactional sales, A and G accelerated growth on the back of the research and analytics sub segment as we reap the benefits of the investments in the Web of Science product. Our LS and H segment declined led by a double digit drop in transactional revenues due to the challenges with our legacy strategy of selling our real world data that we discussed in prior calls and is in the process of being addressed. Speaker 300:15:56Finally, our IP business was down slightly in our Patent Intelligence Solutions, which is also being reinvigorated in 2024, as well as previously discussed macro related softness in our patent renewals and trademark services offerings. The adjusted EBITDA impact was negligible as we were able to achieve efficiencies that offset most cost inflation. 2nd, inorganic impacts, namely the divestiture of the MarkMonitor business in 2022 lowered revenues $63,000,000 and profit $32,000,000 last year. 3rd, cost synergies from the ProQuest acquisition contributed $40,000,000 of incremental profit and not only buoyed profit margins, but were completely responsible for the expansion over the prior year. And finally, the foreign exchange translation impact of non U. Speaker 300:16:46S. Dollar denominated subsidiaries increased revenue by $25,000,000 compared to 2022. The profit increase was negligible as transaction gains were lower than the prior year. Please turn with me now to Page 14 to step through the conversion from adjusted EBITDA to free cash flow at the highest rate we've seen since the IPO in 2019. Free cash flow was $127,000,000 in the 4th quarter, an increase of $36,000,000 over the same period the prior year, bringing the full year amount to more than $500,000,000 growth of nearly $200,000,000 over 2022, which represented an 18 percentage point improvement in the conversion on adjusted EBITDA. Speaker 300:17:27The majority of the improvement, $155,000,000 was caused by lower one time cost as we completed the integration of the acquisitions. Interest payments were up $22,000,000 over the prior year as the impact of base rate increases was partially offset by the lower debt quantum due to the deleveraging in Q4 of 2022 and H1 of 2023. Cash taxes were $21,000,000 lower than the prior year as we recognize the benefit of planning initiatives, jurisdictional mix and the timing of payments. Working capital was a $5,000,000 source of cash compared to a $73,000,000 use the prior year. The timing of payments within our patent renewal business in our IP segment was a meaningful contributor to the year over year improvement. Speaker 300:18:13Capital expenditures rose $40,000,000 to nearly a $250,000,000 or 9% of revenue as we ramped up our investment in product innovation. We used our free cash flow to service our preferred stock with a dividend, prepay $300,000,000 of term debt and repurchase 14,000,000 shares of our common stock. This balanced capital allocation brought our net leverage ratio to our year end target of less than 4 turns. Please move with me now to Slide 15 as we turn the page on 2023 and provide our guidance for 2024. Beginning at the top of the page, we expect organic growth to improve over last year to about 1% at the midpoint of our range. Speaker 300:18:55From a segment perspective, we anticipate A and G's growth will continue to improve modestly, LS and H to improve to about flat and IP to return to low growth. In terms of revenue types, we expect the subscription file will grow between 2% 3%, in line with last year, reoccurring to grow about 1% and transactional to decline about 2%. It's worth noting that we expect to be off to a slower start in Q1 with a decline of more than 2%. While we anticipate the subscription file will continue to grow, we're likely to see high single digit declines in both the reoccurring and transactional order types, driven by tougher comps in our IT segment, namely patent renewal and trademark servicing volumes. We expect organic growth to be modestly positive excluding these product areas and our full year guidance predicts positive organic growth for each of the remaining quarters of this year. Speaker 300:19:541% organic growth for the full year would yield revenue of about $2,620,000,000 at the midpoint of the range. Moving down the page, we expect adjusted EBITDA in the range of $1,055,000,000 to $1,115,000,000 resulting in a profit margin of about 41.5 percent at the midpoint of the range. We anticipate diluted adjusted EPS between $0.70 $0.80 down $0.07 from last year at the midpoint. The adjusted EBITDA decline, which I'll detail on the next page, will account for about $0.04 and higher D and A from increased capital spending to drive growth will cause $0.03 And finally, at the bottom of the page, we anticipate free cash flow between $420,000,000 $500,000,000 Please turn me now to Page 16 for a closer look at the full year top and bottom line changes we're expecting compared to last year. Speaker 400:20:48Since the benefit of the Speaker 300:20:49cost synergies from the ProQuest acquisition are completely embedded in last year's results, the full year change to revenue and adjusted EBITDA this year is driven by 3 key factors. 1st, organic growth at the midpoint of our guidance range will add about $30,000,000 to the top line, but will have no impact on the bottom line, leading to a modestly lower profit margin as we remain committed to investing in product innovation that we believe will accelerate organic growth in the coming years. 2nd, the inorganic impact from selling a small business line in the IP segment will remove some revenue this year compared to last year. We expect the transaction will close this quarter and will deduct about $30,000,000 of revenue and about $15,000,000 of profit this year. As Jonathan highlighted earlier, pruning the portfolio of small growth dilutive products to improve execution is a priority to accelerating our organic growth, and this is another step in this direction. Speaker 300:21:46And finally, we anticipate a $10,000,000 foreign exchange translation headwind on the top line and a slightly higher headwind of $15,000,000 on the bottom line as last year's transaction gains are not expected to recur this year. These changes to adjusted EBITDA account for 3 quarters of the change in free cash flow compared to last year. Let's turn to Page 17 to step through some of the other items. One time costs are expected to continue to decline this year to $40,000,000 an improvement of $20,000,000 over last year as the ProQuest integration is completely behind us. We do expect cash interest to decrease by about $15,000,000 dollars caused in part by the debt we prepaid in Q4, the rate benefit from refinancing our Term Loan B earlier this month and the expectation that base rates will fall later this year. Speaker 300:22:35Taxes will increase by approximately $15,000,000 due to timing of payments and jurisdictional mix. We expect the change in working capital this year will be negligible just as it was last year. And we remain committed to investing in product innovation and plan to raise capital spending by about $20,000,000 taking it to about 10% of revenue. The net impact of these changes is free cash flow of 4 $60,000,000 at the midpoint of the range. From a capital allocation perspective, the free cash flow reduction of $40,000,000 will be largely offset by lower dividend payments on our preferred stock. Speaker 300:23:10We have 2 more coupon payments to make before they convert the common shares in the second quarter, freeing up an additional $35,000,000 of cash in the second half of the year. As a result, we expect to have $400,000,000 available to prepay debt or repurchase shares just as we did last year. We intend to use most of this to prepay debt and closing in our long term net leverage target of about 3 turns. Please turn with me now to Page 18 for a look at how last year's results and this year's guidance affect the trajectory of our organic growth acceleration in the form of our revised long term targets. As Jonathan acknowledged at the onset of the call, it's going to take us longer to reach our mid single digit organic growth target with a lower starting point than originally anticipated. Speaker 300:23:56When we outlined our recovery path at the Investor Day last March, we expected to reach about 6% in 2025 and we now believe it will take us another year to touch this level of growth. We now anticipate making steady progress towards the range of 4% to 6% in 2026. A key driver of this progression includes modestly pruning small lower growth assets that are distracting our teams focused on core product innovation. As a reminder, to reach our market potential in each segment, we must modernize platforms and enhance our solutions in 1 key sub segment in each. 1st, we expect to build on last year's momentum in research and analytics within A and G, lifting growth to mid single digits in this category through expanding platform capabilities and breadth of content. Speaker 300:24:442nd, within LS and H, we plan to launch our new pharma grade real world data product in H1 and 2 specific therapy area aligned products in H2. Combined with AI enhanced capabilities in our commercialization products, these investments will drive the growth acceleration in the highest potential business in our portfolio. And third, we're targeting to deliver 4 enhanced solutions this year in our Patent Intelligence sub segment with NIP built on our unparalleled data that we expect will lead to double digit monthly active usage growth by the end of this year, setting us up for a meaningful improvement in organic growth in this sub segment next year. As our organic growth accelerates, we expect profit margins will return to last year's levels over the next few years and will compound to accrete $0.15 of EPS from this year's expectation, lifting free cash flow conversion to 50% over the same time horizon. Please moving now to Page 19 to put these long term targets in the context of the financial objectives that we outlined last year. Speaker 300:25:52Our primary aim is to accelerate our organic growth lifting us from last year's level of essentially flat to mid single digit growth in a few years. Our second goal is to maintain durable profit margins as we make the investment to achieve the primary goal. We are committed to providing the resources to drive product innovation in all our businesses and are finding operating efficiencies to fund some of these, but are also willing to modestly lower our profit margins in the near term to benefit the long term health of the enterprise. The 3rd objective we outlined was to significantly improve our free cash flow, which we've done by reaching $500,000,000 last year, but we see room to continue to expand our cash flow conversion to 50% as we improve our top line growth. And finally, we remain committed to allocate our capital in a disciplined manner. Speaker 300:26:43We've demonstrated balance in this area by using about 3 quarter of last year's available free cash flow to prepaid debt, bringing our net leverage below 4 turns and also used about a quarter of it to repurchase stock. We see a clear path to bringing leverage below 3 in the next few years maintaining a similar balance. I'd like to use this opportunity to thank my more than 12,000 teammates here at Clarivate for your tireless work to get us to this point and your commitment to executing our plan to help us achieve these objectives. I want to thank all of you for listening in this morning. I'm now going to turn the call back over to Lydia to take your questions. Speaker 300:27:26Lydia, please go ahead. Operator00:27:29Thank you. Our first question today comes from Owen Lau of Oppenheimer. Your line is open. Please go ahead. Speaker 500:27:45Good morning and thank you for taking my question. So both Jonathan, you talk about some of the investments for future growth in 2025 2026. Could you please add more color on kind of like which what kind of product do you expect to invest into? When do you expect to launch this new product and the return on these investments? Thanks a lot. Speaker 100:28:09This is Jonathan here. I'll go ahead and go first. And maybe I'll walk around just through each of the segments to give a complete picture. So as I mentioned in my remarks, Owen, in A and G, that's a segment where we made the earliest innovation investments around Web of Science and that's where we see the initial returns from that. As we discussed in Q1 of last year, we saw the uptake of renewal rates and that really was on the back of a complete refresh of that platform. Speaker 100:28:35Now that is was the beginning of that journey. We continue to invest in Web of Science primarily by creating additional analytic tools to drive value and increase in the work flow of our researchers there. That will drive usage, allow us to capture price and now as price differentially. We're also seeking ways to expand our pricing model to move into different segments of the market that we typically haven't been able to address with our existing pricing model. All that is to say, within A and G, I think the path is the most advanced of the three segments in terms of the innovation and the results we're seeing from that. Speaker 100:29:10In IT, the biggest area of focus is around our patent intelligence and search analytics platforms and that is the group that includes Derwent, Enography, Anchopath and related services around patent search. This is an area Owen, I think as you know that we've been underperforming in the past. We've the team has done a phenomenal job of getting close to customers, having customer user groups drive this innovation and we expect to launch the first two of a series of additional new modules in this area in the first half of this year. So we expect that to launch. And then as you know, that given our revenue model, these would be subscription products. Speaker 100:29:52If we launch it then, sales happening more second half of the year, the revenue will appear more next year. But we feel very good about the path there. Then in life science and health care, I would call out 2 areas. 1 is the real world data analytics platform. And this is the area which as you know, we pivoted substantially middle of last year where we pulled back on the previous strategy of selling our data to competitors. Speaker 100:30:18As I've shared at Nazzym in the past, it was a flawed strategy and we continue to accelerate exiting that as a channel. At the same time, with Henry's arrival and his industry experience, we've really refocused the investments on that product to create pharma ready data, which we have largely achieved at this point. So that's largely done. And then we're going to be rolling out some therapeutic areas in the first half of this year. So that's one big area. Speaker 100:30:44And then we also the other areas around R and D, which is kind of second element or the second portion of our life science and healthcare offerings. And there we've had incredible content, but very, very dated platforms and we've been investing in refreshing those platforms and adding more analytics to really unlock the value of our underlying data. So all of those are again, web of science, I would say is we kind of launched the first phase of it and we continue to improve against it. That will be ongoing improvement. The other two areas in both IP and life science and health care expect some major product launches this year. Speaker 100:31:20Thank you. Operator00:31:23Our next question comes from Manav Patnaik of Barclays. Speaker 600:31:32My question is, the pruning of the portfolio that talked about, can you just help us size how much of the portfolio is up for pruning? And also, just what is the Board's aversion to doing something bigger? It sounds like you have 3 disconnected segments, life science is the smallest and the most volatile. So why not do something bigger? Speaker 300:31:55Yes. Thanks for the question, Manav. This is Jonathan Collins. I'll touch on the portfolio of earning and let Jonathan take the second part. So the small business that we are exiting in the IP segment that I mentioned in the prepared remarks that we will likely close on in Q1 and that will affect Q2 through Q4. Speaker 300:32:15That's about the size that we're looking at. So the focus here is identifying areas that are growth dilutive and distractive to the teams to help improve the probability of success in execution and product innovation by focusing the team. So that is about the size. It could be slightly larger, slightly smaller, but there are opportunities in all three of our segments to winnow down the areas that we are really focusing on and investing in to drive the organic growth acceleration. Speaker 100:32:49Great. And now this is Manav, this is John. I'll touch on your second question on kind of a larger move. I mean, certainly the Board and myself are completely aligned that we are here to drive value for shareholders. As I've described in the past with you and others, we certainly see value of these segments being together and the value has been driven by shared content, shared technologies, in particular around IP and Life Science and Healthcare, some shared customers and certainly on the significant cost synergies we have been able to drive over the last few years as we brought these 4 large platforms together. Speaker 100:33:22That being said, we will always optimize what's in the situation for our shareholders and for our customers. And to do that right now where the board has me focused and what I have the team focused is on operating and improving every single segment as we described. Thank you. Speaker 200:33:46Next question please. Lydia? Operator00:34:23Thank you. Our next question comes from Heather Wrobleski of Bank of America. Hi, this Speaker 700:34:31is Heather Rebulsky. Thanks for taking my question. I was hoping you could talk a little bit more about the increase in CapEx spend and the investment spend you're doing and just help us understand how much of it is Gen AI initiatives? How much of it is other investments in the business? And how you talked about investing to drive growth, just how we should think about spend over the next few years and how you're thinking about if there's incremental opportunities to invest, just balancing that with the margin growth and cash flow growth? Speaker 700:35:09Thanks. Speaker 300:35:11Yes. Thank you for the question, Heather. So with respect to our CapEx increase, most of that is adding development capacity, which we capitalize at a relatively high rate when we're enhancing and improving products. So maybe I'll just touch on a couple of the areas that Jonathan mentioned a bit ago in the A and G segment. We continue to ramp up the investment in the web of science to stay ahead of adding features to the platform and ingesting new mediums of content to make it a great experience. Speaker 300:35:46And there certainly is an AI overlay there. All of our businesses are starting to move towards conversational discovery, which is an example of embedding AI in the products. And it certainly comes with a development effort in all of those areas, weather science certainly doing that as well. As we move into life sciences, it's a combination of development capacity and some content or data for the real world data offering. As Jonathan highlighted, we spent a lot of effort in the past couple of quarters building out pharma grade data and the technology investment there. Speaker 300:36:22And then the next step for us is start to build these therapy area platforms or offerings that will take meaningful development efforts. So that's really how we're spending within the life sciences segment. And then on the IP side, the 4 new platforms or modules that will be put on top of the Derwent data set for search, for watch, for strategy and for R and D. Those applications have pretty meaningful technology developments that will happen over the course of this year and into next year. Just in terms of the time horizon, we indicated last year and the cash flow guidance that we highlighted today getting to that greater than or about 50% conversion in a couple of years does contemplate CapEx being at a reasonably steady dollar level over the next few years as revenue grows that margin on CapEx should drop a bit, but we do expect that we'll need to continue to make that investment over the next few years. Speaker 300:37:25Thanks for the question. Speaker 200:37:29Next question please. Operator00:37:29Our next question comes from Tony Kaplan of Morgan Stanley. Your line is open. Speaker 800:37:37Hey, good morning. This is Greg Parrish on for Tony. Thanks for taking our questions. I just wanted to dig into the change since Investor Day in March. What really drove the difference in the turnaround trajectory that you were targeting? Speaker 800:37:50You're ramping up investment here, so is more investment required than you thought back then or they're really just macro or is the end market more challenged maybe than you thought, if you can kind of help bridge the gap there? Thanks. Speaker 100:38:03Sure, Greg. And the way I think about it and I encourage you to think about it is really 2 different things. First is, macro certainly impacted us far more than we were anticipating in 2023, primarily in IP. And we talked about that in our Q2 call, Also in life science and healthcare with commercial markets there, those are the most impacted and to a lesser degree with some on the margin within A and G with some discretionary transactional items, but primarily again in life science and healthcare and IP. So macro was part of it. Speaker 100:38:35So it ended up impacting kind of our starting point, if you will, on the 3 year plan. And the other element of it really was around as we brought in more brought back in more industry expertise back into the business as we reestablish some of the teams that we'd had before. We began to slightly modify and change some of our go to market product strategies, particularly around life science and healthcare. And with Henry coming on board middle of last year, spending time with him, again, we really made a decision to change our life science and healthcare. RWD platform strategy, absolutely the right thing to do and it makes me even more confident in the future. Speaker 100:39:15But that did pull us back a year in terms of the timing around that platform. So those are really the 2 kind of key areas I would call out. Thank you. Speaker 200:39:25Great. Thank you. Next question please. Operator00:39:28Next question is from George Tong of Goldman Sachs. Please go ahead. Speaker 900:39:34Hi, thanks. Good morning. It looks like in your guide you're expecting improved organic growth this year in subscription and reoccurring. It's really the transactional piece that's going to be the offset. So can you talk a little bit more about how much of the transactional revenue headwinds are cyclical versus structural and steps that you're taking internally to drive improved performance here? Speaker 300:40:01Sure, George. Yes, just to reiterate what this year's guidance range contemplates on organic growth. So we do believe that the subscription business will be relatively consistent with last year. We grew about 2.5% last year. I think we'll be in that 2% to 3% range. Speaker 300:40:17As Jonathan highlighted, those investments that we are making this year in Life Sciences and in Patent Intelligence within IP should start to improve usage in the second half of this year and help to lift subscription growth next year and we should continue to see some traction in A and G as the Web of Science product continues to improve. Most of the impact in reoccurring, which we think will grow modestly this year, is going to come from a modest improvement in the second half of the year on volumes within that market. We'll have tough comps early in the year, which is why I indicated growth will be lower, particularly in Q1. But to your point on transactional, we continue to expect and are conservative around commercialization budgets in 2024. We do think there is some opportunity in the second half for things to improve modestly, but we've been pretty conservative on the rate of improvement in that market. Speaker 300:41:18On the IP side, from a transactional search and watch, we've been relatively consistent there. It's been lower than in the past couple of years. And then on the A and G side, which is the only place that we were a bit softer in the Q4, we've been a bit conservative about the expectation there. So that's what's leading to the anticipation that transaction will be down a couple of percent. In terms of what we are doing about it and the things that we can control, the primary area to focus on is within life sciences. Speaker 300:41:49So the investment that we are making in these therapy area focused offerings for our real world evidence and the pharma grade data will lead to opportunities to sell this in a subscription model. So that's a place where the headwinds we've seen in transactional over the last couple of years, we expect to see come back to us in the form of subscription growth. So that's a little bit more color on how we're seeing 2024's growth expectations by order type. Speaker 200:42:20Next question please. Operator00:42:23The next question comes from Seth Weber of Wells Fargo. Please go ahead. Speaker 1000:42:30Hey, guys. Good morning. I was wondering if you could just touch on the pricing environment, where it sits today and kind of what you're contemplating for pricing as you ramp into 2026? Like how much better do you think or how much of a bigger contributor do you think pricing will be as you get further down the road with more products and better more cross selling, things like that? If you could just sort of talk through where pricing is today and how you see that trending over the next couple of years? Speaker 1000:43:02Thank you. Speaker 100:43:04Sure, Seth. Yes, I mean, I'll go ahead and comment on that and see if J. C. Has any additions. I mean, in general, pricing has been a net contributor for us across all three product lines with our subscription products. Speaker 100:43:15Now certainly if you unpack that and look on specific products where we have innovated in the past, where we are creating new updates to the products, that's where we're able to capture more price in areas where we've done less so and I will call out Durbin, for example, not able to capture price. There's a direct correlation between our ability to innovate, drive the innovation to impact customer workflows and our ability to capture price. When I look forward to the plan this year, we've been fairly modest in terms of assuming any improvement on price capture for our plans for 2024. That being said, we are amping up our rate of innovation. Henry Levy has announced that he's going to be every product is going to have an update this year in terms of his portfolio, and that will be able to capture price. Speaker 100:44:00But I think we're going to take a wait and see in terms of when we actually see that coming through. J. C, anything you want to add to that? C. Durrant:] Yes. Speaker 300:44:07I think the indication we would expect 20 24 to be pretty consistent as Jonathan highlighted. In 2025 and 2026 as we launch these new offerings, we certainly think that this will be an area that will help contribute towards the growth acceleration as we move up a bit in those key product areas that we haven't been able to price meaningfully in the last few years. Thanks for the question, Seth. Speaker 200:44:31Thanks, Seth. Next question, please. Operator00:44:35The next question comes from Ashish Sadabra of RBC Capital Markets. Please go ahead. Speaker 400:44:43Thanks for taking my question. Maybe just following up on an earlier question around the revenue growth trajectory in 2024. The visibility historically has been pretty low. So I was just wondering what gives the confidence in that back half acceleration in second half twenty twenty four? And in order like what could drive upside or downside risk there? Speaker 400:45:05Is it mostly macro or are there certain client wins which are ramping up that can provide further confidence on that growth improvement? Thanks. Speaker 300:45:16Thanks for the question Ashish. This is Jonathan. On the expectations and the cadence for this year, it's mostly driven by the comps from the prior year. So we have not built in to your point because of visibility challenges the last couple of years a meaningful improvement in the markets in the second half of the year. But you'll recall, for example, in our patent renewal business, we started to see the softening in the second quarter, late in the second quarter. Speaker 300:45:44So we have tougher comps in the part of the year. That's also true with the trademark business within IP. So that's the reason we expect that growth will be slightly negative in the Q1. We'll return to growth in the Q2 and have better growth in the second half of the year is less to do with the run rate improving and more about the comps. And we have expected the transactional business to decline by a couple of percent as I indicated. Speaker 300:46:12So we think we've been a bit more conservative with our outlook on those sales that have been a bit more challenging to predict over the last couple of years. Thanks for the question. Operator00:46:25Thank you. Our next question comes from Shlomo Rosenbaum of Stifel. Please go ahead. Speaker 1100:46:41Hi. Thank you very much. Some of the players in the life sciences like IQVIA and VIVA are talking about improved optimism amongst the client base and they're thinking that we should see a second half improvement. Is that square with what you guys are expecting in your numbers? Are you not seeing that? Speaker 1100:47:03Are you not expecting that? And then just, Jonathan, I want to touch on one thing that at the Analyst Day, the 2025 target was 6% growth and you're now pointing to 26 at 4% to 6%. Can you just address is that lowering the growth expectation even in the next year? Speaker 100:47:23Sure, Shlomo. This is Jonathan here. I'll go ahead and address the first question and have JC address the second. So on Life Sciences, I think what as others are seeing, we are seeing renewed optimism within our life science customers. The commercialization budgets appear to be higher. Speaker 100:47:40And we're seeing kind of across the board, both on large pharma, large biotech and even small biotech. So there is renewed optimism coming back into it. That being said, we're going to want to wait and see in terms of how quickly that converts into really increased demand for our products and services and consulting. So we've while we are seeing that certainly in the macro environment, we've been cautious about putting that optimism into our guidance in second half. JC, do you want to address some of the other questions? Speaker 300:48:10Yes. In that conservatism around the macro, Schlomo is the other factor that's really driving the change in the last year of the guide we gave. So to your point, we had previously indicated in the 5.5% to 6.5% range or 6% at the midpoint. We're now in the 4% to 6% range. So we'd have to get to the higher end of that to touch the prior midpoint. Speaker 300:48:30That is primarily due Speaker 100:48:31to our conservatism around the rate of improvement Speaker 300:48:31in the end markets. What could cause us acceleration, for example, in the commercialization market that Jonathan just highlight, a better outlook on the patent renewal front would be another example. So that is the primary difference in the change between the two outlooks. Operator00:48:56Thank you. Speaker 200:48:58Thank you. Next question please. Operator00:49:02Next question comes from Andrew Nicholas of William Blair. Please go ahead. Your line is open. Speaker 100:49:10Thanks and good morning. I just had a small question on A and G. Jonathan Collins, I think you mentioned it's the largest transactional quarter. I think that's mostly back file sales within Web of Science. But just if you could confirm that's where the weakness was? Speaker 100:49:26And then just any color on the drivers of that? Is that also budget related, typical pressures? Or is there is it just a timing issue, and you'd expect some of that to come back next year? Thank you. Speaker 300:49:42Yes. Thank you for the question, Andrew. So as a reminder, we have multiple types of transactional sales within the A and G segment. You touched on one of them where we're selling the back file of Web of Science, which makes the analytics of the platform much more valuable to the users. Other examples are digital collections, historical collections that we've digitized and preserved and also our books business. Speaker 300:50:06So it's a combination of those. Q4 usually is the largest quarter for us. What we saw a bit later in the quarter is our customers in that space pausing a bit. What we heard from them is that they want to wait and see on some other spending factors. Most of our customer base is in North America within that part of the business and their budget years run similar to the school year. Speaker 300:50:32So their budget year will end in the second quarter. So we'll see how that plays out in the coming quarters. But that's most of the feedback that we heard from that market and those were the sales that were affected. Thanks, Andrew. Speaker 200:50:46Thanks, Andrew. Great. Thank you, Andrew. Speaker 100:50:48I think that was our last question. Just as I wrap, I just want to thank everyone for joining our call today and listening with our remarks, engaging with us. As we look forward to next year, again, as we said in the call, 2023 was a foundational year for us as we made the changes that we needed to make to really propel Clarivate. And I look forward to sharing with you over the ensuing quarters coming up, the results of investments we're making innovation as we drive this company to grow. Thank you very much everyone. Speaker 100:51:14Goodbye. Operator00:51:18This concludes today's call. Thank you for joining. You may now disconnect your line.Read morePowered by