Clarivate Plc

Hello, and welcome to the Clarivate Q1 2021 Earnings Release Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal your conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. And now I'd like to turn the call over to your host today, Mark Donahue. Mr. Donahue, please go ahead.

Thank you, Keith, and good morning, everyone. Thank you for joining us for the Clarivate First Quarter 2021 Earnings Conference Call. With me today are Jerry Stead, Executive Chairman and Chief Executive Officer, Richard Hanks, Chief Financial Officer, Mukta Ahmed, President, Science Group, Jeff Foy, President, IP Group, and Gordon Sampson, Head of APAC Strategy and Growth. 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 Clarivate. 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 for the period ended March 31, 2021. 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 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 in Clarivate's industry to differ materially from the anticipated results, performance achievements, or developments expressed or implied by such forward-looking statements. Information about the factors that cause actual results to differ materially from anticipated results or performance can be found in Clarivate's files at 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 a supplement to and should not be considered in isolation from or 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, Mark, 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. We're off to a very, very good start in 2021. As expected, our organic revenue growth is improving following last year's challenges due to the pandemic. We're also benefiting from the many operational enhancements that we've been implementing across Clarivate and our acquired companies in the last two years. We reported adjusted revenue for the first quarter of $432 million, an increase of 75% on a constant currency basis, driven by the acquisitions of DRG and CPA Global. Adjusted organic revenue at constant currency grew 7%, with subscription revenue increasing 6% and transactional revenue up 10%. This represents our best organic growth quarter since going public two years ago. While we do expect some timing impacts on our quarterly organic revenue growth this year, our first quarter results demonstrate that we are absolutely on the pathway to achieving 6% to 8% organic growth exiting 2021. Adjusted EBITDA was $165 million, up 111%. And our adjusted EBITDA margin improved by 600 basis points, to 38% compared to last year's first quarter. Today, we issued a Form 8K and discussed in our earnings release the recent SEC position on accounting for warrants. The unfortunate timing of events made it impractical to finalize our full set of financial statements to meet our April 29th earnings date. We expect to issue our first quarter financial statements and file our Form 10Q by May 10th. which will show the non-cash impact of the SEC's position on warrants. Importantly, and very, very importantly, the changes have no impact on our quarterly revenues, adjusted EBITDA, or cash flow in this year's first quarter or in any prior period. I'm very proud of the significant progress our team has made on the many operational improvement initiatives that are underway or have been completed. For example, We're well ahead of our schedule to integrate DRG, which is now complete. We're running four months ahead of plan with the more complex CPA global integration. The accelerated progress has allowed us to capture cost synergies quicker and to get a jump start on mapping out revenue synergy opportunities as we begin to realize these sooner than originally expected. Our ability to accomplish such work following our move to a connected workplace whereby our colleagues are largely working remotely, gives me great confidence that we have the internal resources in place to continue to pursue small and large-scale M&A opportunities. Last year, we made the decision to permanently move a large percentage of our colleagues to a connected workplace following the success we experienced working in a virtual world. With this move comes cost savings but also environmental benefits that we have covered in our recently released sustainability report. Our connected workplace initiative has already led to the closing and downsizing of 35% of our global real estate footprint out of our total target reduction of 60%. Since opening our three global business centers, the commercial teams have been successfully moving customers to inside sales, Our goal is to migrate 80% of our customers that generate approximately 20% of our revenue into these three centers. This frees up our outside sales team to focus their attention on the larger customers who are the engine room for our future growth as we increase our penetration in those accounts. We're on target to move 20% of our revenues into these three centers by the end of the second quarter. The change to our commercial operations will make it easier to do business with us, drive better experiences, and help us delight our customers. By simplifying processes and approvals, we're even more efficient and quicker to respond to customer needs. At Clarivate, we're building a world-leading organization centered around our core purpose. That is, we believe human ingenuity can transform the world. Our essential products and services play a very big and very important role in helping our customers discover, protect, and commercialize innovation. The world's innovators need us like never before, and accelerating ideas and innovation is not just our opportunity, but it's our responsibility. We will meet this responsibility when we bring all of our resources, talent, and focus together as one clarivate. We recently launched, one quarter of eight, a critical shift in our strategy. We're transforming from being a collection of distinct market-leading products and services to becoming a key partner to our customers by delivering the critical data, insights, and workflow solutions coupled with deep, deep domain expertise that they need to drive their innovations and their businesses to help their customers with confidence. This new approach means we're changing from product-centric organization to a customer-centric organization, starting with our commercial approach. We will be industry-focused rather than product-focused and approach these industries from the outside in. We're now focusing our customer-facing activities on five global industries or customer segments. Life science and healthcare, professional services, academic and government, manufacturing and technology and consumer products. We look forward to sharing more information with you as we take the next step and building the world leading information services company serving these very attractive in markets. In 2020, we made great progress on improving how customers view us and we received actionable feedback. We exceeded our customer delight score in 2020. In two weeks, we will be launching our first Customer Delight survey of 2021. The survey is being sent to 50% of our customer contacts, which includes both end users and decision makers. As part of our progress towards one clarity, we are including all of our acquisitions in this survey for the very first time. Our Customer Delight goal for this year is 77. We're very much looking forward to sharing the results of this year's surveys with you and future earnings calls. Two weeks ago, we issued our first annual sustainability report. I'm very pleased with the work our entire team did. This was a significant undertaking, and our team produced an extensive report on our 2020 progress and our 2021 and future goals. In the report, you'll find information covering what we've done, what we are doing, and what we will do for our environment, government, governance, colleagues, and community. We hope you'll take the time to visit our website and read through the report. Sustainability is at the very center of our goals. We look forward to sharing that progress with you in the years ahead. Now, turning to our 2021 outlook, We're tightening our revenue and adjusted EBITDA guidance because of our strong start. Adjusted revenue guidance is now $1.79 billion to $1.84 billion. And adjusted EBITDA is now $790 million to $825 million. There's no change to adjusted pre-cash flow of $450 million to $500 million. Once we file our Form 10-Q for the first quarter, we will reissue our adjusted EPS guidance for 2021. I'll now turn the call over to Richard.