Clarivate Plc

Hello and welcome to today's Clarivate first quarter 2022 earnings conference call. My name is Bailey and I will be your moderator for today's call. All lines will be muted during the presentation portion with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to Mark Donoghue, Head of Investor Relations. Mark, please go ahead.

Thank you, Valerie, and good morning, everyone. Thank you for joining us for the Clarivate First Quarter 2022 Earnings Conference Call. With me today are Jerry Stead, Executive Chair and Chief Executive Officer, Jonathan Collins, Chief Financial Officer, Gordon Sampson, Chief Product Officer, and Steve Mumholt-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 on 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. An accompanying earnings presentation is available in the investor relations section of the company's website, clarivate.com, under events and presentations. During a call, we may make certain follow-looking statements within the meaning of 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-up and statements. Information about the factors that cause actual results that differ materially from the anticipated results or performance accounting found in Clarivate's files with the SEC and on the company's website. Our discussion will include non-GAAP measures or adjusted numbers, including 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 substitute for GAAP financial measures. A reconciliation of these measures to GAAP measures are available in earnings release and supplemental presentation on our website. After prepared remarks, we'll open the call up 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 today. I'm very pleased to report that we're off to a good start in 2022. We delivered improved first quarter performance as a result of the operational improvements we have put in place. We also benefited from acquisitions as we offer our customers a wider portfolio of products to meet their ever-growing needs. Our move to one clarivate, our strategy to be more customer-centric and outside-in focused, is starting to deliver some early cross-sell wins. For the first quarter, revenue of $662 million increased 58% at the constant currency and was up 4.4% on an organic basis. We delivered a very strong profit conversion of 73% as we continue to benefit from cost synergies and operational improvements. And the power of our business model is generating strong cash flows. with adjusted free cash flow of $191 million for the first quarter. Jonathan will cover the results in more detail soon. Our business represents a very compelling investment, even more so in the concurrent economic environment. Almost 80% of our revenue is subscription and recurring based, with a renewal rate of more than 92%. We have the ability to raise prices to offset inflation, which in an inflationary environment helps offset cost increases. And we have little or no exposure to rising raw material costs. These are just a few of the many reasons I'm very excited about the growth potential of Clarivate. For over a year, our team has been working very hard on constructing the OneClarivate strategy. One Clarivate presents significant opportunities for us to sell more solutions to existing customers while improving our renewal rates and generating more new business. With a total addressable market of over $100 billion, there is significant space for us to grow average customer stand and to add new names to our customer list. I'm very pleased with what my colleagues have accomplished in developing this strategy. tremendous effort for this organization to build out the four customer verticals. Our team identified gaps within our workflows and prioritized hiring to ensure we have the appropriate team in place. They also streamlined workflows to support the new organization structure and the go-to-market realignment. This has resulted in improved pipeline management and information and performance reporting. We officially deployed this go-to-market strategy in the first quarter and are now starting to enjoy the benefits. One of the many benefits of the one Clarivate strategy is focusing on cross-selling products into new customer verticals. As we exited the first quarter, we saw signs that our strategy is beginning to work with deeper penetration of more than one product within the account base and a higher average spend as we sell bigger deal sizes. We delivered some early cross-sell wins in the first quarter. For example, our Web of Science platform, which has historically been sold within academia and government space, was purchased by several companies, including Fortune 1000 organizations across the other three verticals, which are life sciences and healthcare, consumer manufacturing and technology, and professional services. We saw similar results across other verticals, including healthcare data sold outside of life sciences into professional service companies and universities. We are just getting started with our OneClarivate strategy and very, very much look forward to updating you on our progress. Our portfolio includes many leading information service products across our customer verticals at our annual investor day last november i highlighted the high scores we receive from customers for quality of products and services and information and insights in our semi-annual customer delight survey we will survey our customers starting tomorrow may 10th in our first customer delight survey of the year including with those customers from all of our acquired companies. We look forward to sharing the results with you at our next quarterly earnings call. To ensure we stay as a leader in our products and markets, a significant amount of our annual capital spend is for new product development, product enhancements, and improved technology. In 2021, we launched more than 90 new products and enhancements, which will contribute to our growth this year. In 2022, we expect to spend approximately $185 million on CapEx, with about 75% of this on R&D projects. In addition to internal R&D, one of the many benefits of acquisitions is the ability to enhance and create new product offerings. Recently, we launched a new offering, which combined the power of Clarivate life science data, and DRG healthcare data to deliver unmatched deep insights into market opportunity for new and existing drugs. This is just one example of how we're creating enhanced offerings for our customers and capitalizing on revenue synergy opportunities from acquisitions. Turning to the integration of ProQuest, we are quickly integrating and capturing cost synergies. If you recall, we completed the integration of DRG and CPA Global several months ahead of our original schedule with additional cost savings. We are accelerating now the integration of ProQuest in a similar manner. Within the next four months, with the first four months since closing, we have removed $33 million of the more than $100 million in targeted savings, which we expect to realize by the time we exit the second quarter of 2023. Our team has been working with colleagues at ProQuest to swiftly integrate systems and workflows. We completed several product integrations to provide more value to our customers with cross-product interoperability and enhanced data capabilities for the leading products in our combined portfolio. For example, universities can better manage and assess their research and ProQuest, as plural, with the integration of web science data and metrics for smart harvesting by an application protocol interface. Very exciting. This is expected to improve usage and value of the web of science data for research management, which will increase web of science retention and price realization. It will also increase value proposition and demand, as plural, which should help to accelerate new sales from university research offices. We also indexed the entire Web of Science back file data into the ProQuest Summon and Primo library discovery services, which benefit customers of these products. This significantly increases the value of both of those products to the scholarly researchers with Web of Science indexing and links. This is expected to improve renewal and price realization of all three of the products. This acquisition has proven timely considering the tight labor market by providing us with experienced colleagues to fill open roles. Our sales organization has been aligning to identify opportunities to leverage our offerings across the four customer verticals and to provide greater value and resources to our customers. I look forward to sharing revenue synergy opportunities with you as we detail our combined portfolio across the global customer base. Sustainability is at the foundation of everything we do at Clarivate. It is woven throughout every aspect of our business strategy. By adhering to the highest social, environmental, and ethical standards and embracing the power of human ingenuity, we will improve the future of our global community while bringing financial rewards to our colleagues and to our shareholders. We recently mapped the breadth and depth of Clarivate solutions across all 17 United Nations Sustainability Development Goals. We then identified those that are most relevant in terms of customer impact based on our current SDG alignment and our potential increase of SDG alignment. This process provided us a clear view of our current state, and we identified four key focus areas where our solutions have the biggest impact. We also uncovered opportunities where we can continue to embed sustainability into our business strategy to broaden our impact worldwide. The analysis showed that our products and solutions have a very, very high positive impact. For example, 46% of our revenues are aligned with the SDGs, and 51% of the companies in the Dow Jones Sustainability World Index work in partnership with us. More than 26,000 public and academic libraries rely on our solutions, and 47 of the top 50 global R&D organizations work with us to accelerate progress. Within the next couple of weeks, we will publish our second annual sustainability report, which will be available on our website. We encourage you to read the entire report to see how we are making a difference as we strive to be one of the leading ESG companies in the world. In closing, as I said up front, we're off to a good, solid start. I feel great about where we are today. We now have the leadership team in place to deliver ever-improving performance as we achieve the targets we set for this year and for our mid-range financial objectives. This, of course, would not be possible without the everyday contribution from the more than 11,500 colleagues we have around the world. I want to express to them how grateful I am for their continued dedication in delighting our customers. I'll now turn the call over to Jonathan. Thank you, Jerry.