Clarivate Plc

Good day, and welcome to the Clarivate fourth quarter and full year 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then 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 yourself, press star, then two. Please also note this event is being recorded. And I would now like to turn the conference over to Mark Donahue, Head of Investor Relations. Please go ahead.

Thank you, Tom, and good morning, everyone. Thank you for joining us for the Clarivate fourth quarter and full year 2021 earnings conference call. With me today are Jerry Stead, Executive Chair and Chief Executive Officer, Jonathan Collins, Chief Financial Officer, Gordon Sampson, President, IP Group, and Steen Limholt-Thompson, Chief Revenue Officer. 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 consent of Clarivate is prohibited. An accompanying earnings call presentation is available in the investigation 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 the 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 follow-up or statements. Information about the factors that could cause actual results to differ materially from anticipated results or performance can be found in Clarivate's funds, the SEC, and the company's website. Our discussion will include non-GAAP measures or adjusted numbers, including adjusted revenue, adjusted EBITDA, They believe 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 in earnings release and presentation on our website. And after our prepared remarks, we'll open the call to your questions. And with that, it's a pleasure to turn the call over to Kerry.

Thank you, Mark. Thanks to all of you for joining us today. First, let me welcome Jonathan to his first earnings conference call. He's been with us for three months and his contributions are having a very, very positive impact on our company. We are happy to have him and look forward to working closely with him in the months and years to come. Since we went public in May of 2019, we've transformed and improved our company. While the journey has not always been linear, we've accomplished so much in a short period of time We're in a far better position operationally and financially than ever before. We will continue to evolve and embrace change. We are much more responsive and our improved colleague engagement and customer life scores confirm we're moving in the right direction. We still have lots to do to take advantage of the many opportunities that lie in front of us. My colleagues and I are 100% committed every day to meet or exceed our very achievable goals. Just three years, we've grown Clarivate from, in fact, less than three years, we've grown Clarivate from a company producing less than a billion dollars of annual revenue to the point we hope to exit 2022 on a $3 billion run rate. Our adjusted EBITDA margins have expanded more than 1,000 basis points, and our free cash flow continues to deliver significant increases each year. As we achieve and maintain a sustainable growth rate, the rewards for all of our stakeholders will be ever greater. 2021 was certainly a productive and yet challenging year for us. We made significant progress on transforming our business with value, enhancing acquisitions, new and improved product offerings, and a new customer-focused go-to-market strategy. We also made progress across many ESG initiatives and strengthen our executive leadership team. These positive changes better position us for short, medium, and long-term profitable growth. However, we did face headwinds late in the year. I'm personally very disappointed with how the year ended. We've taken steps, which I'll discuss in a minute, to address shortfalls within our transactional revenue base. I also want to add that with the addition of Jonathan and other members of the finance team, We are very, very committed to improving our internal controls and financial reporting functions to ensure we have a best-in-class infrastructure. While the past few months have been a challenge, Clarivate is really becoming a great company with industry-leading products and services and an outstanding group of more than 11,000 colleagues around the world. Our board of directors, our executive leadership team, and I are very positive about the future of our company and the opportunities ahead. An example of the confidence in our business was demonstrated when we announced last month that our board has authorized us to spend up to $1 billion to repurchase ordinary shares of Clarivate stock over the next two years. We believe that the company has so much potential for continued profitable growth and success, and that the current share price represents a compelling investment opportunity. We continue to generate strong cash flow, which Jonathan will cover in more detail in his remarks, and expect this to continue to grow. The revenue retention rates are high at over 90% and improving and remain stable in the last two years despite the pandemic. We have initiatives in place to move our rates higher, and we've repositioned the company through our One Clarivate strategy. I'm 100% convinced that we're on the path to ever greater success in our pursuit of excellence. We were very excited to finally bring ProQuest and Clarivate together late last year. While we were optimistic that the transaction could have closed in early July, we used the time to refine our integration plans and we hit the ground running on day one. This acquisition is reshaping our future and will drive future and further growth and greater success. Together, we now have more than 11,000 colleagues serving over 50,000 customers in 180 plus countries. Our future success depends on unlocking the tremendous potential of our newly united team. Acquiring ProQuest gives us a compelling opportunity to offer multidisciplinary curated content of one of the world's largest collections and best-of-breed SaaS software solutions, serving our strategic partners at governments, corporations, academia, and public libraries across the globe. We are now better positioned to help our customers help their customers. We're looking forward to updating you on our integration progress, including realizing more than $100 million in cost synergies over the next two years. and how we are maximizing the value that ProQuest brings to Clarivate. Jonathan will walk you through the benefits of these savings on our EBITDA and margin in a few minutes. Throughout 2021, we implemented many revenue improvement initiatives, including the customer migration to the Insight Sales Centers of Excellence. This migration was critical for us to be able to move to the one Clarivate structure which we announced in November of 2020, to better, far better serve our customers. Our one Clarivate strategy is to be a customer-centric organization that puts greater focus on our customers by providing end-to-end solutions to meet their industry needs. We've aligned into four customer verticals, which is focused outside in on our customers and the complete portfolio of products and solutions we can offer them. We also realigned our field sales force with the focus on our fewer accounts per rep so that we can create closer relationships and partnerships with our largest customers. We operate with a $100 billion plus addressable market with significant white space available to us now. Today, we capture less than 3% of that total market. That's why we are so excited about the growth opportunities in front of us. Last year, our product development teams did amazing work. We launched more than 90 new product offerings and enhancements, including a new web of science platform. We will continue to invest heavily to ensure we offer best of breed products, services, and solutions to our global customers. Our teams continue to deliver cost savings ahead of schedule and more than our targets. Through the end of 2021, We've removed $215 million of costs since going public in May of 2019. We completed the $100 million of cost synergy work for CPA at the end of last year. The integration team has moved quickly on to the more than $100 million of cost synergies we expect to realize from the ProQuest acquisition, with $50 million of this expected to benefit 2022 EBITDA. We are closely monitoring the impact of inflation on both our expenses and our customers' buying habits. We will continue to look for opportunities to efficiently run our business internally while continuing to positively increase the high quality of product services and solutions expected of us by our customers. 2021 was a good year of growth and evolution for sustainability. as we participated in numerous sustainability assessments and surveys for the first time to better understand our strengths and areas of opportunity while advancing at a very rapid pace in all areas of the environment, social, and governance dimensions. A few of our 2021 milestones include publishing our first annual sustainability report, reporting on global environmental metrics for the first time, launching the global volunteer recognition programs in our diversity, achieving ISO 27001 certification, and we issued board diversity policy. As we move into 2022, we've simplified our sustainability framework to align with the language of our customers to include the three dimensions of government, governance, environment, and social, and we'll continue mapping all we do to sustainability development goals. Since becoming CEO in June of 2019, we've made a number of executive leadership changes designed to help drive further success. We recently completed these organization changes in coordination with the rollout of one of our Clarivate strategy. This included the creation of the Chief Product Officer role now led by Gordon Sampson. I'm very pleased that Gordon agreed to step into this role as he continues to drive growth and success in our business, while enhancing our focus on bringing industry-specific end-to-end solutions to our customers. Uttar Ahmed, who led the science segment, has contributed significantly to Clarivate's growth and focus on our science customer. We thank him for his leadership. His role on the executive leadership team has helped drive our strategy, helped refine and improve our processes. Turning to the fourth quarter performance, let me share a few qualitative thoughts before Jonathan walks you through the numbers in more detail. First, again, I express how disappointed I was in how we ended the quarter due to the late December shortfall in our transaction revenue, which offset a very solid quarter of subscription and reoccurring revenue growth. We planned and we expected to have a strong fourth quarter, which did not materialize due to the very late year-end weaknesses, primarily within the transactional part of our health data solutions business. The basis of our optimism stemmed from strong recovery we saw in transactional revenue through the first nine months of the year. and a great backlog pipeline going into the end of the year. We were up more than 9% through the first three quarters, and a strong pipeline, as I said, through the quarter. Accelerating inflationary pressures on our customers' year-end budgets led to last-minute freezes on spending. We also experienced impact from the quick spread of Omicron variant. Additionally, like others, we are dealing with a tight labor market, where we had vacancies not filled that led to missed opportunities. We've taken actions to address all of these shortfalls. This includes having our sales force drive sales far earlier in the calendar year to reduce last year's dependence on year-end customer budget. We are also hiring aggressively to fill open roles, and we're planning and assuming higher levels of attrition as the labor market continues to be very tight worldwide. I'm confident we will overcome the recent obstacles and that we are headed absolutely in the right direction. I want to express how grateful I am to my colleagues, 11,000 plus, for their impressive work around the world to serve our customers, especially during these times when many of our workplaces have changed and the way we connect and work together have shifted. I'm very thankful for our colleagues' attention through our strategic goals and desire to delight our customers. I'll now turn the call over to John.