Clarivate Plc

Hello and welcome to today's Power of Eight Q4 and full year earnings conference call. My name is Bailey and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call 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, Vice President of Investor Relations. Please go ahead.

Thank you and good morning, everyone. Thank you for joining us for the Clarivate fourth quarter and full year 2022 earnings conference call. With me today are Jonathan Gier, Chief Executive Officer, and Jonathan Collins, Chief Financial Officer. Both 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. An accompanying earnings call presentation is available in the investor relations section of the company's website, clarivate.com. During our call, we may make certain forward-looking statements within the meaning of the applicable securities law. 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 filings with the SEC and on the company's website. Our discussion will include non-GAAP measures or adjusted numbers, including organic 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. Reconciliation of these measures to GAAP measures are available in earnings release and supplemental presentation on our website. After our prepared remarks, we'll open the call up to your questions. And with that, it's a pleasure to turn the call over to Jonathan Gere.

Great. Thank you, Mark. And good morning, everyone. And thank you for joining us today. In my six months as CEO of Clarivate, I have made it a point to personally visit many of our colleagues and customers globally. These learnings have given me an even deeper appreciation of our company, a strong culture, and Clarabate's leading products in the large markets that we serve. We will hold an Investor Day next Thursday, where we look forward to sharing with you our compelling investment thesis and our detailed plan to accelerate our growth profile. I will share more about this event in a few minutes. Turning to our financial results and business highlights for 2022, I want to give you an update on our progress in continuing to transform Clarivate for the better as we seek to accelerate our growth and bridge to the market trajectory. I am proud to report that we implemented important organizational changes through segment restructuring of our major segments. The past one year was also a trying period as we navigated a highly dynamic macro environment marked by high inflation and economic uncertainty. Despite these headwinds, our business grew and remains strong and resilient. We continue to serve our customers well by providing mission-critical products, and we are benefiting from long-term industry tailwinds, all while holding a strong competitive position in the marketplace. Last year, we delivered improved performance across many of our key financial metrics, Full-year revenue was $2.66 billion, an increase of 47% at constant currency, primarily driven by the acquisition of ProQuest. Organic revenue growth increased 2.6%. Our combined subscription and reoccurring revenue, which represented almost 80% of revenue, improved 4% on an organic basis over the prior year period. Operationally, we delivered 74 million of cost synergies in the first year of the ProQuest integration, $24 million higher than planned. We divested Mark Monitor, a non-core asset. We used the proceeds along with our normal cash from operations to reduce our debt by $500 million and lower our net leverage ratio. This places us in a favorable position to deleverage below four times by the end of the year. Jonathan Collins will cover the financial results in more detail shortly including our 2023 outlook. On my first earnings call in November, I shared a new lens of how I looked at the business. I highlighted how we are pivoting our operating model and began to report our results across our three segments of academia and government, life sciences and healthcare, and intellectual property. This approach is an intuitive way of looking at our business, and this reorganization will help us accelerate decision-making and ensure that we are offering our customers the right set of solutions in each end market. As part of the pivot to the new segment operating model, we announced in December that each segment will be led by a president. We are close to finalizing the evaluation of candidates now and expect to have this process completed during the second quarter. I believe having designated leaders overseeing these segments will help us execute on our growth strategy and sharpen our focus on how we best serve our customers. One of our primary initiatives is to enhance our investments in product development across all of our segments to drive organic growth towards the market growth race, which we highlighted last November. I will highlight some of last year's accomplishments by segment, starting with academia and government. Our A&G segment grew organically at 2% in 2022, in line with its prior three-year kegger. This past August, we had one of the most exciting ANG software wins ever. Our workflows solution unit was selected to implement our integrated library solution tool, Polaris Vega, across Singapore's nationwide library system. This is one of the largest library workflow software implementations ever. This is a major testament to our product feature strengths, our strong commercial relationships, and our robust segment-specific go-to-market capabilities. Customers have been asking us to help them present the research accomplishment in an easier-to-access format so they can leverage them for their own needs. We responded by launching Web of Science Researcher Profiles, which unites our Web of Science and Publons, our peer review platform. Now all our core research information is available in one central place providing an opportunity for researchers to showcase their accomplishments on a single page. To help our librarian end users cut through the noise and choose the right content at the right time for the right price, we developed a cutting-edge procurement marketplace, Rialto. Rialto provides seamless workflows and data-driven recommendations to accelerate and enhance the content procurement process. Encouragingly, Rialto has rapidly gained traction now reaching over 300 university customers across 24 countries. Turning now to life science and healthcare, this segment delivered 4% organic growth last year, below its recent growth rate primarily due to a pullback in professional services revenue. The growth potential in this end market is highly attractive, and we remain focused on accelerating our growth by continuing to invest in enhanced products and analytics. For example, we delivered a multimillion-dollar custom data integration and analytics platform for a top-five pharma customer to drive holistic patient journey and needs insights. Combining our proprietary content with the client's and other third-party data into a cloud-based analytics platform enabled a single source of truth across numerous functional teams. This is an excellent example of our ability to deliver value-added strategic services alongside our data with the potential to convert individual projects into multi-year engagements with ongoing recurring revenues. Last year, we partnered with another top five pharma company by empowering digital health initiatives with deep learning AI to expedite disease diagnosis. We are enabling leading pharma companies with AI capabilities to manage their data, and better understand the health states and symptomology of specific patient populations across time. These insights can lead to earlier health interventions, more precisely targeted drug regimens, and ultimately better patient experiences and outcomes, a true value add for all stakeholders. We are also investing to enhance our AI machine learning powered predictive analytics to inform investment decisions and strategic portfolio management for increased R&D productivity, namely as it relates to predicting drug development timelines and success rates. Moving on to our IP segment, which grew just over 2% on an organic basis in 2022. It was slightly below its three-year cumulative growth rate of 3%, primarily due to a short-term pullback in trademark services, which we had previously discussed, as a result of the macroeconomic environment. During the fourth quarter of 2022, we closed a few multimillion-dollar deals in Japan for our flagship cloud-based IP management software, IPfolio, and related professional services. Although these customers had complex innovation and IP filing requirements, we were able to win these deals given our deep domain expertise, local presence, and understanding of regional IP practices. Last year, we launched Brand Landscape Analyzer to disrupt traditional trademark search. This platform combines rich proprietary Clarivate trademark and litigation data alongside AI-powered analytics to provide a broader picture of the risk landscape surrounding new brands. This is an excellent example of our future in tech-enabled services as we leverage our rich proprietary content, AI machine learning-powered analytics, and deep domain expertise. We have extensive knowledge of the patent and trademark application process, which is helping customers improve and streamline their IP administration process. For example, we were approached by a large pharma company who was looking to outsource their entire IP docketing process. We were able to optimize their costs and create efficiencies within their global IP process. I look back on 2022 as a pivotal year where we made progress on many fronts and truly set the company up for future achievements. As we turn the page to 2023, we are focusing on reaching a higher level of success. First and foremost, we are focused on delivering organic growth above the 2022 level of 2.6%. We expect the operational changes we made last year and our go-forward execution plan to catalyze this acceleration. The acquisition of ProQuest was an important addition to our energy segment. Given the progress we have made on the cost synergy front, we are now increasingly shifting our focus to revenue synergies. Since going public almost four years ago, we have removed $300 million of costs, which has provided resources for reinvestment while also improving margins. Reinvestment will remain a focus as we look to drive more product innovation that will ultimately help us to accelerate top-line growth. I believe the single most important enabler of success and growth is culture. Given the natural cohesiveness of our segments, we continue to implement initiatives to bring our colleagues together to increase collaboration and idea generation. Last year, we generated more than $300 million of free cash flow, excluding the proceeds from Mark Monitor. This year, we expect to generate close to a half billion in free cash flow, which puts us on track to further reduce our net leverage ratio to under four times by year end. As mentioned, we will host Investor Day in New York City next Thursday, March the 9th. The live in-person event will also be streamlined live from 9 a.m. Eastern Time to approximately noon. We are looking forward to providing a comprehensive look at our business and our detailed strategy to take us from where we are today to our medium-term growth outlook. In closing, I want to extend my continued thanks to all my colleagues at Clarivate for all they are doing to serve our customers and make our organization better. As we enter 2023, I feel confident we are moving in the right direction and I look forward to sharing our progress with you. I will now turn the call over to Jonathan Collins.