Clarivate Plc

Good day and welcome to the Clarivate Q2 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mark Donohue, Head of Global Investor Relations. Please go ahead, sir.

Thank you, Sarah. Good morning, everyone. Thank you for joining us for the Clara of Eighth second quarter 2020 earnings conference call. With me today are Jerry Stead, Executive Chairman and Chief Executive Officer, Richard Hanks, Chief Financial Officer, Mukhtar Ahmed, President, Science Group, and Jeff Roy, President, IP Group. All will be available to take your questions at the conclusion of the prepared remarks. As a reminder, this conference call is being recorded and webcast and is copyrighted property of Clara of Eighth. Any rebroadcast of this information in whole or in part without prior written consent of Clarivate is prohibited. This morning, Clarivate issued a press release announcing our financial results. The period ended June 30, 2020. The release, as well as an accompanying supplemental presentation, is available in the Investor Relations section of the company's website, clarivate.com, under Events and Presentations. During our call, we may make certain follow-looking statements within the meaning of the applicable securities laws. Such follow-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 in Clarivate's industry that differ materially from the anticipated results, performance, achievements, or developments expressed or implied by such follow-looking statements. Information about the factors that could cause actual results that differ materially from anticipated results or performance can be found in Clarivate's filings with the SEC and on the company's website. Our discussion will include non-GAAP measures or adjusted numbers, including adjusted revenue and adjusted EBITDA. Clarivate believes non-GAAP results are useful in order to enhance an understanding of our ongoing operating performance, but they are supplement 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 earnings release and supplemental presentation on our website. After I prepare remarks, we'll open the call to your questions. And with that, it's a pleasure to turn the call over to Jerry.

Thank you, Mark. And thanks to all of you for joining us this morning. 2020 has been a very productive year for Clarivate, and we still have five months left to go. What the team's accomplished in seven months is simply incredible, including our announcement this morning of a very, very solid second quarter results. Amazingly, we've been able to accomplish so much while close to 100% of our people are working from home. This is a great credit to all colleagues and their ongoing commitment to exceed productivity and service levels while continuing to execute on our strategic initiatives to drive profitable growth and long-term shareholder value. The improved results from our recent colleague engagement and customer service customer delight surveys validate the outstanding performance of our more than 5,300 colleagues that are in the great work they're doing every day. I'll cover those results in a moment. Yesterday, we took another big step forward in enhancing our product offerings with the announced proposed strategic combination with CPA Global, creating a world leader in intellectual property information and services. This transformative combination creates a full-service IP organization, which will provide customers with numerous products and services to meet their ever-increasing needs. Once the combination is completed, we will form a true end-to-end global solution covering the innovation and intellectual property lifecycle. Earlier this year, we acquired DRG, creating one of the largest and most complete providers of life science information in the world. with offerings across the entire life science value chain. Integration of DRG is well advanced. We are delivering on cost synergies and have initiated revenue synergy opportunities. The growth strategy we outlined at our investor day last November 12th is coming to life ahead of schedule, and we're just getting started. For the second quarter, we reported adjusted revenue of $277 million. an increase of 16% at constant currency. Excluding divested businesses, adjusted revenue increased 21%. In addition to recent acquisitions, sales growth was driven by a 4% increase in organic subscription revenue from new businesses and annual price increases. This more than offset a decline in transactional revenue due primarily to reduced demand resulting from the pandemic. I'm very pleased with the significant improvement in our profits this quarter, driven by the increase in sales and the cost efficiency initiatives that we are currently pursuing. Adjusted EBITDA increased 37% to $100 million for the second quarter, and our adjusted EBITDA margin continued to improve to 36% for this quarter compared to 30% last year. These strong results boost our adjusted earnings per share to 18 cents, the highest level since we became a public company. On our first quarter call in early May, we highlighted our expectations for the first half and second half considering the COVID pandemic. We continue to expect a gradual lifting of restrictions and a recovery starting in the fourth quarter. Our results for the first six months are exactly in line with our expectations. And we expect the second half will show a significant improvement over the first. Richard will cover the details in just a few minutes. In May, we completed our first colleague engagement and customer delight surveys for 2020. I'm very proud of our improved results. In a time of great uncertainty and disruption, the confidence in our company from our colleagues and from our customers has never been higher. Our success always begins with colleague engagement. We saw exceptional participation across Clarivate with a 91% participation rate, up 10% from last year. The engagement score increased a healthy seven points to 76 from our 2019 score of 69. Our score came in above the benchmark average of 72. Importantly, our company response and communications around COVID-19 scored an exceptional 93% favorable. That was our highest score. The improvements we have made internally are also making a real difference externally. This was validated by an improved results from our customer delight survey. In a time where we have limited virtual only customer interaction, we received a decisive score on the customer delight survey of 79. This represents an improvement from 76 we received in 2019. Best practice is 82. So while we still have some work to do, we are well on our way to reaching and eventually exceeding this target. Our improved score confirms the importance that our customers place on the work we're doing every day to help them be successful. We saw an increase in scores on key items, including information and insights and quality of products and services. Our biggest opportunity, which has not changed since last October, is our ability to be the easy-to-do business with company. While this is our lowest score question at 59%, we increased our performance by four points. This is a good improvement and reflects the focused effort we've made on delivering customer delight scoreboard actions. Our customers have given us a roadmap to world-class delight, and we will remain unrelenting in our pursuit of this goal. To help us get there in June, we acquired Customer First Now, a company led by Terri Nelson. Terri worked for me back at IHS and has built a business that is instrumental in introducing the discipline of superior customer experiences through their work on customer delight surveys, and very importantly, customer journey mapping. She's working closely with the science and IP groups to improve customer experience while building a customer-centric operational model across all of Clarivate. We will continue improving customer engagement as we quickly move ahead implementing the plans of our new global business centers. We are setting up three centers to drive improvements in productivity and customer delight and have made significant progress so far. London is up and running. Chandler, Arizona opens next week and Penang, Malaysia in December. Despite the global health pandemic, hiring is on track and we're seeing excellent quality candidates come forward. We're also looking into other parts of the business outside of inside sales and customer service that will too benefit from these centers, including more solid cost savings to come. Now, turning to our internal response to the epidemic, most of our colleagues continue to work from home. Our COVID response task force is working through our return to office plan. A very thoughtful plan is now in place. We continue to manage expenses very closely and extended hiring restrictions until November 1st as of now. We remain optimistic that we'll see a gradual lifting of restrictions with the recovery starting in October. Based on a solid first half of the year, We remain optimistic about the second half of 2020. We reaffirmed our outlook yesterday. Adjusted revenue at 1.13 billion to 1.16 billion dollars. Adjusted EBITDA 395 million to 420 million dollars. Adjusted EPS of 53 cents to 59 cents. And adjusted free cash flow of 220 million to 240 million dollars. This outlook does not reflect any impact with our plan combination with CPA. With that, I'll turn the call over to Richard.