Clarivate Plc

Good day, and welcome to the Clarivate Third Quarter 2021 Earnings Release Conference Call. All participants will be in a 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. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Mark Donahue, Head of Investor Relations. Please go ahead.

Thank you, Betsy, and good morning, everyone. Thank you for joining us for the Clara Bay Third 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, Gordon Sampson, President, IP Group, and Steen Lumhoff-Thompson, Chief Revenue Officer. All will be available to take your questions at the conclusion of 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 September 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 Clara Bates' 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 the anticipated results or performance can be found in Clariate's funds with the SEC on the company's website. Our discussion will include non-GAAP measures or adjusted numbers, including adjusted revenue and adjusted EBITDA. Clariate 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 an isolation from or as a substitute for GAAP financial measures. Reconciliations of these measures to GAAP measures are available on our earnings release and supplemental presentation on our website. After prepared remarks, We'll open the call up to your 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 reported improved third quarter results compared to last year. Adjusted revenue was up 54% to $442 million on a constant currency basis, driven by the acquisition of CPA Global and a three plus percent increase in organic revenue. For the first nine months, adjusted organic revenue increased 5%, with subscription increasing 4% and transactional up 9%. You've heard us highlight many times this year that we expect a strong fourth quarter with organic revenue growth between 6% and 8%. We are realizing the many benefits from the transformative acquisitions of DRG and CPA Global and the many operational improvement initiatives that have been put in place, including our inside sales structure and field sales realignment. With a strong fourth quarter, organic revenue growth for the full year of 2021 is currently expected to be in the six to six and a half percent range. Over the past two years, we've made significant changes across many segments of the organization, including sales and reorganizing around our one Clarivate strategy. These changes align us more closely with our customers and the markets they serve. We continue to invest heavily on improving our customer interface and experience and ensuring that we are providing the best products and services in the industry. This year alone, we have introduced more than 60 product enhancements or new product launches that are expected to improve our revenues and profits in the quarters and years ahead. We are benefiting from acquisitions, both financially and by offering our customers enhanced offerings, which has helped drive our growth in adjusted EBITDA and margin expansion. For the third quarter, adjusted EBITDA increased $82 million to $190 million from the prior year period. The benefit of our actions also shows up in the significant improvement in our adjusted EBITDA margin. which was 43% in this year's third quarter compared to 38% in the prior year period. We continue to generate strong adjusted free cash flow, which was $70 million in the third quarter and $329 million for the first nine months of this year. Richard will cover our results in more detail soon. Since announcing the pending acquisition of ProQuest in May, we've been working with regulatory authorities to complete this transaction. We're very excited to get started on integration work and have spent time formulating plans so that we are ready to go on day one. We will announce once we receive that regulatory approval and complete the transaction. We remain hopeful that we can complete the proposed acquisition by the end of this year. In early August, We announced a $250 million share repurchase program that was to run through the end of October 2021. This morning, we announced that our board approved the extension of this buyback through the end of January 2022. Due to the secondary ordinary share offering in September, we had to postpone the share repurchase program. Prior to then, we had purchased $65 million of our shares in the open market prior to the secondary offering. Our board is confident, very confident in both our short and long-term growth prospects and believes repurchasing our shares represent an attractive investment opportunity. We are generating strong cashflow, which is providing us with the resources to repurchase shares as well as support organic growth, pursue value creating M&A and fund our debt. We've also announced this morning that the board of directors declared a cash dividend of $1.31 for Series A mandatory convertible preferred share payable on December 1st to holders on record on November 15th. Our strong cash flow also allows us to enhance our portfolio with tuck-in acquisitions. In August, we announced that we acquired BioInfoGate, a leading provider of analytic solutions in life science and a producer of the OffEx portal. This acquisition will further our strategy to become an essential provider of solutions for life science companies along the entire drug development lifecycle. In combination with Cortellus, we deepen the end-to-end value chain from R&D through commercialization and compensation. Beyond Cortellus, OffEx will also strengthen other Clarivate products and services, including our Web of Science. We have a deep pipeline of tuck-in acquisition candidates that we are exploring across both science and IP that can strengthen our product offerings as well as expand geographic reach. Our goal is to do four to five tuck-ins acquisitions per year, which we define as $25 million of revenue or less. I am very pleased with how efficiently our team has integrated CPA Global. We announced on our last earnings call in July that we had identified an additional $25 million of cost savings, bringing the total savings to $100 million. We completed $99 million of that savings work through the end of third quarter and will exit 2021 having captured all the savings several months ahead of our schedule. Our team's done an outstanding job of capturing cost savings and swiftly folding in acquisitions into our business structure. This includes getting non-public companies like CPA Global and DRG aligned with public company internal controls and they are now SOX compliant. At our upcoming Investor Day in November, you'll hear us talk a lot about OneClarivate, our OneClarivate initiative, our customer migration to inside sales, and how the field sales force is now more closely aligned with our largest customers. We've completed the migration of more than 24,000 customers to our centers of excellence, formerly known as our global business centers. With this now complete, our field sales account coverage was further streamlined from approximately 60 accounts per person down to 15 accounts for the 250 field account managers. We are also deploying an additional 100 dedicated field sales specialists focused on accelerating new business sales. This transition provides many benefits, including enhanced focus on top accounts, which is expected to benefit retention, cross-sell, and up-sell opportunities. Last week, we launched our second colleague engagement survey for the year. The results of this will be available at our upcoming investment day. We spent a lot of time enhancing our workplace communications and other benefits for more than 8,500 of our colleagues around the world. We continue to closely monitor the impact of COVID and are now pleased to report that more than 40% of our colleagues can now access a Clarivate or third-party shared site. This includes our Center of Excellence, which are critical to our success. We launched the second half of our annual Customer Delight Survey in early October. First part was launched in May, where we scored a 75. Our publicly announced goal for 2021 is 77. Putting the customer at the center of our strategy is critical to our success. This survey gives us direct access to the voice of customers, helping us identify immediate opportunities to improve and build on our business. We'll update you on November 9th, Investor Day, on the recent colleague and customer survey results. This morning, we reaffirmed our 2021 outlook. Adjusted revenue guidance is $1.8 to $1.84 billion. Adjusted EBITDA is $795 million to $825 million. Adjusted EPS is 70 to 74 cents. And adjusted free cash flow will be between $450 million to $500 million. If you remember, we raised the low end of our revenue and adjusted EBITDA guidance twice this year after our first and second quarter results in total The low end of revenue was increased by $20 million, and the low end of adjusted EBITDA was increased by $10 million. With a strong fourth quarter, including organic revenue growth of 6% to 8%, we expect full-year organic revenue growth to be in the 6% to 6.5% range. Please join us on November 8th for our virtual product demo day and November 9th for our virtual investor day. We'll have more than a dozen presenters participating in the demo day, covering many of our new and existing products. At our investor day, I'll be joined by six members of our executive team, whereby we will update you on the many things we're working on, including our one Clarivate strategy and how we will grow our business. If you need an invitation, please reach out to Mark in investor day. Now I'll turn the call over to Richard.