Clarivate Plc

Good morning and welcome to CLI RAGE Q2 2021 Earnings Release Conference Call. All participants will be in listen-only mode. To generate 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. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would like to turn the conference over to Mark Danayou, Vice President and Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining us for the Clarivate Second Quarter 2021 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 Gordon Sampson, President IP Group. All will be available to take your questions to the conclusion of the prepared remarks. As a reminder, this conference call is being recorded and webcast in the 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 June 30, 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 your actual results to 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, adjusted EBITDA. Clarivate believes non-GAAP results are useful in order to enhance an understanding of ongoing operating performance, but they are supplemented to and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliation of these measures to GAAP measures are available on earnings release and supplemental presentation on our website. After a prepared remark, we'll open the call to questions. 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 had a very busy, eventful, and exciting first half of the year. I am very proud of what our team has accomplished. In addition to the positive financial results, we are well ahead of schedule on integration of CPA Global. We've identified an additional $25 million in cost synergies, taking the CPA program to $100 million, which we will deliver. Our track record of success with quickly integrating acquisitions gives us the confidence and bandwidth to do more M&A. This certainly includes the proposed acquisition of ProQuest, an acquisition we are very excited about. We've also made excellent progress in our customer account transition to inside sales in the global business centers, and we launched several new and enhanced product offerings, including a new web of science platform. We also completed our first colleague engagement and customer delight surveys for 2021 and issued our first ever annual sustainability report. My colleagues continue to be highly energized in our pursuit to be the best information service companies and one of the very best places to work in the world. Turning now to our second quarter results. Adjusted revenue from the second quarter was up 57%. to $447 million on a constant currency basis, driven by the acquisition of CPA Global and organic revenue growth of 5%. Organic transactional revenue increased 16%, and organic subscription revenue increased 1.5% in constant currency. As we have consistently said, we expected subscription growth to be lighter in this year's second quarter after a strong first quarter, our first quarter increased 6% due to the timing benefits that were realized in this year's first quarter. For the first six months, adjusted organic revenue increased 6%, which is a better reflection on our performance and normalizes COVID-related events in 2020. As a result of the favorable first half, we've tightened the range of our 2021 outlook. We currently expect to exit the fourth quarter with organic revenue growth towards the upper end of our 68% organic growth target. For the second quarter, adjusted EBITDA was $189 million, up $89 million from the prior period. Our adjusted EBITDA margin continues to improve at 42% compared to the 36% in last year's second quarter. We also delivered strong adjusted free cash flow in the second quarter of $95 million and $259 million for the first half of this year, both up more than 100% over last year's periods. Richard will cover our results in more detail soon. In May, we were pleased to announce our proposed acquisition ProQuest, which we continue to be very excited about. The combination will enrich our value chain across research lifecycle with solutions across content, analytics, and workflows with our highly complementary products, we will be in an even better position to serve the evolving needs of researchers, learners, and innovators in academia, governments, corporations, schools, and libraries around the world. This proposed acquisition will strengthen Clarivate's revenue and EBITDA growth, and we anticipate it will further enhance our subscription and reoccurring revenue base. Additionally, we expect this transaction to result in double-digit accretion to Clarivate's earnings. Late yesterday, we received a second request from the FTC in order to help them analyze this transaction. We are cooperating with them fully. We remain confident that after conclusion of this process, antitrust concerns should not interfere with our acquisition of ProQuest in any significant way. We're hopeful we can complete the proposed acquisition in the second half of this year. Since acquiring CPA Global 10 months ago, our team has swiftly brought our two organizations together. We are more than four months ahead of schedule and have identified, as I mentioned earlier, an additional $25 million of cost synergies. Therefore, we will deliver $100 million of savings compared to our original estimate of $75 million. The majority of the additional savings is coming from facilities rationalization and our digital workforce transformation projects. As I said before, we've made great progress in our customer accounts transition into inside sales and global business centers. We're nearing completion of the first phase with 80% of accounts, 20% of our revenue being served by these centers, including DRG and CPA global customers. Our plan is to continue to expand this capability, leading to higher sales and leading to client retention rates improvements. In April, we launched OneClarity, a critical shift of 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 very deep domain expertise that our customers need to drive their innovations and their businesses with confidence. With our customer-focused facing activities focused on five industries, our customer segment. We're now training our colleagues in sales on these segments. For example, understanding the industry dynamics, the sub-segments and key organizations. We're teaching our sales folks to gain better understanding of the roles and responsibility of our users, our customers, and their customers, helping us to build further credibility as a trusted advisor. Importantly, the combination of the move to inside sales and our OneClarivate strategy is expected to help push our retention rates higher. To lead our transition to OneClarivate across all sales, we welcome our Chief Revenue Officer, Steen Lomholt-Thompson, who will join Clarivate starting August 2nd. In this new role at our company, Steen will be responsible for driving global revenue and customer engagement. He will align our sales teams under his leadership, ensuring that we pursue a one-clarified approach for new business and with our existing customers. In May, we completed our first of two colleague engagement and customer delight surveys for this year. We're in pursuit of becoming and being recognized as one of the best places to work in the world. To get there, it is essential that we regularly listen to and act on our colleagues' feedback. One of our core values is we value every voice. We had terrific survey participation of 88% and more than 6,000 write-in comments. I personally read as our leadership team has every comment and they're very helpful for us. As you can see, we have a highly engaged workplace for which I'm very thankful of. This past year has taken a toll on each of us in dealing with the pandemic in both our personal and professional lives. Julie Wilson, our new chief people officer, joined us in April as working with her team and many leaders across our organization in developing new options and ideas to promote and enhance our colleagues' well-being and work-life balance. I look forward to sharing our progress with you. Our customer delight score in the recent survey came in at 75 as compared to our score of 76. for 2020. The last year brought many unique challenges, such as the global pandemic, along with economic fluctuations and societal unrest, to name just a few. Comparing our score across other industries, we saw a one to three point decrease worldwide, which means our results are at the very top of the global trend. We did see a number of positive developments, including a higher proportion of positive writing comments versus opportunity areas. We also receive strong scores for quality of products and services and information and insights. Additionally, we're very pleased to see DRG's Delight score improve five points under our ownership. We will run a second colleague and customer survey in DePaul, and we'll share those results with you at our November 9th virtual investor day. Turning to our 2021 outlook, we are tightening our revenue and adjusted EBITDA guidance because of the strong first half. Let me give you a bit of color to frame how we see the second half of this year. Organic revenue in the first half was almost 6%. We currently expect to deliver 6.5% to 7% plus in the second half of this year, with a big pickup in fourth quarter compared to the second and third quarters. What's driving the increase? As an important reminder, 60% of DRG's business comes in the second half of the year, with 60% of this in the fourth quarter. We will also benefit from a full quarter of organic growth from CPA Global in the fourth quarter and realize the benefits of the cost synergies that will drive significant margin expansion in the fourth quarter. Additionally, transactional revenue is seasonally strongest in the fourth quarter. These items together will drive our organic growth rate into the upper end of our 68% target rate exiting 2021. Taking all of this into account, adjusted revenue guidance is now $1.8 billion to $1.84 billion. Adjusted EBITDA is now $795 million to the top at $825 million. Adjusted EPS is now expected to be $0.70 to $0.74. This is due to a higher fully diluted weighted average score count for 2021 as a result of our June primary and convertible share offerings with proceeds which are intended to be used to fund the proposed acquisition of ProQuest. There is no change to our adjusted free cash flow of $450 million to $500 million. I'll now turn the call over to Richard.