Clarivate Plc

Good morning. Thank you for attending today's Clara Vate third quarter 2023 earnings call. My name is Forum and I will be your moderator for today's call. All lines will remain 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 one on your telephone keypad. It is now my pleasure to pass the conference over to our host, Mark Donahue, head of investor relations. Mr. Donahue, please proceed.

Thank you, and good morning everyone. Thank you for joining us for the third quarter 2023 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 the call. As a reminder, this conference call is being recorded in 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 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 could 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. Clarivate believes non-GAAP results are useful in order to enhance an understanding of our ongoing operating performance, but they are Supplement 2 and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliations of these measures to GAAP measures are available in our earnings release and supplemental presentation on our website. After prepared remarks, we'll open the call to your questions. And with that, it's a pleasure to turn the call over to Jonathan Gere.

Thank you, Mark. Good morning, everyone, and thanks for joining us today. Before I begin, I would like to share some thoughts about the situation in Israel. Clarabate has over 500 colleagues in our Jerusalem office, and the recent terrorist attack changed their lives. While we were fortunate not to lose any colleagues that day, everyone in the office knows someone who has been impacted by a loss, casualty, or the ongoing hostage crisis. Our colleagues are our number one priority, and we have established a fund of $200,000 for the local team to use to support colleague connections and community outreach. We have arrangements in place for operational continuity at all levels and do not expect any disruptions. All of us at Clarivate hope for peace in the region. Now let me turn to our third quarter results. I am pleased with the progress of our business this quarter, which demonstrated sequential improvement in two of our three operating segments, while also achieving our company's highest organic growth on a consolidated basis since I joined Clarivate a year ago. We are moving in the right direction. Despite the ongoing challenges in the macro backdrop, which are having a greater impact on our transactional businesses, we delivered several key wins. highlighting the resilience of our business and the mission-critical nature of our data and products. We continue to innovate our products and establish new generative AI solutions in our IP and life sciences and healthcare segments. As discussed at our investor day in March, driving value enhancements to our mission-critical data through product innovation is core to our long-term strategy. We remain focused on accelerating organic growth to industry growth rates and continue to see generative AI as a very large untapped opportunity for our company. Revenue in the quarter was 647 million, an increase of 11 million on an organic basis or 2% growth. This was in line with our expectations. Our performance was driven by strong momentum in academia and government and a return to positive organic growth in life sciences and healthcare. We continue to face temporary headwinds in IP such as a delayed contract start date with the United States Patent and Trademark Office and modest impact for the ongoing U.S. after strike, both of which I will elaborate on momentarily. Adjusted EBITDA of $281 million and EPS of 21 cents were both up from last year, and we continue to make progress towards our long-term EBITDA margin targets of 42%. Jonathan Collins will discuss this in more detail. Now, turning to our segments, beginning with academia and government, Last quarter, you heard me discuss improved performance in A&G as our investments are helping drive new subscription business, account updates, and higher retention. This quarter, I'm happy to report we were able to build on that momentum with organic revenue growth accelerating to 3%. This is our strongest growth quarter since last year's second quarter. We believe this is confirmation that our strategy is paying off. In the quarter, growth was strong across content aggregation, transactional sales, which has historically been a strength for us, but we also recorded wins with three major universities for workflow solutions. Accelerating adoption of our workflow solutions through our actually risk catalog of products has been an important area of focus for us and is a prerequisite to bridging our gap to industry growth. I'm confident we will get there, and this quarter is just the beginning. In October, we were selected by Yale University to provide its library services and discovery platform. By implementing Alma and Primo, Yale will unify its workflows and data onto a single platform, elevating the user experience and enhancing services within its library ecosystem. As a reminder, Alma is our cloud-based library management platform which unifies print, electronic, and digital collections, while Primo provides fast access to scholarly materials and intuitive ways to discover new content. Yale will implement these services in both its main and law libraries workflows and data. Combining the benefits of generative AI with trusted content sources will enable users to find new insights fast and at scale. Another win in the quarter was OhioLINK, which is the entire state of Ohio's academic library consortium of 117 member libraries. OhioLINK chose Alma for its cloud-based shared library services platform as it bolsters its investment in higher education technology infrastructure. A key factor behind our win was the investments we have been making in the Alma platform and our roadmap which best meets the consortium's current and future expected needs. In addition to Alma, OhioLINK will implement Primo and a wider suite of Ex Libris products that will enhance services for users, staff, and administration. Lastly, we established the Academia and Government Innovation Incubator late in the quarter. We expect this will further accelerate our strategy to advance knowledge through research and education by introducing novel solutions for our customers and academic users. As part of the incubator's first program, we made the small but important acquisition of Aletheia, an AI-powered student engagement platform. Aletheia facilitates meaningful engagement with academic techs class readings, and assignments through personalized and adaptive guidance, which helps to realize better learning outcomes and student success. As you can tell, we're seeing strong momentum in our A&T business, and I was very pleased with the performance this quarter. We remain confident that we are well on our way to bridging the gap to market growth rate. Moving to IP, in the quarter, organic revenue growth fundamental pressure from the ongoing U.S. actor strike which began in mid-July and impacts on our trademark business. Trademarks are a critical part of the movie industry where film studios use trademarks to protect movie titles and register other elements related to films which can pave the way to potential licensing and merchandising agreements. We also saw a delay in the start date of a new contract with the United States Patent and Trade Office which was awarded to Clarivate earlier this year. This enhanced contract was laid by the client, and we recently received word the contract will start in early first quarter next year. The delay will have a modest impact in Q4. I am pleased to share with you that we secured a multi-year deal with a large Indian telecommunications provider to deliver patent services. On the product side, we launched Forecast in September. Forecast is an AI-powered tool that delivers powerful capabilities for predictive budgeting and is fully integrated with leading IP management systems. The rising cost of managing IP as a strategic asset is an issue of increasing importance for customers, and Forecast enables IP professionals to create budget scenarios to make smarter filing and maintenance decisions while collaborating more seamlessly across your organizations. And out of all this, the view of our IP business remains the same. I remain confident that the slight pullback from organic growth for IP is only a short-term event, and we continue to expect return to normal growth next year. Turning to life science and healthcare, I am pleased to report improved performance with positive organic growth for the first time in four quarters at 2% year over year. Though we remain cautious on the macro and are still seeing pressures on parts of our transactional business as a result of the lower drug approval pipeline last year and a still challenging funding environment biotech, we did see some pockets of relief in the quarter. Our consulting business delivered 7% growth in the quarter, and we secured a large engagement with a global top 20 pharma to extend our partnership in epidemiology analytics, supporting market access and clinical trials. We also signed a strategic agreement with a leading U.S. biotech to accelerate commercial and market strategies for their lead drug candidate. Lastly, in our regulatory and safety portfolio, we continue to demonstrate consistent growth, which is up 5% from last year. As I shared with you at our Investor Day, commercialization is a key area of focus for us to accelerate our vision to market growth rates. Real-world data offers our customers a wealth of information around the activities and outcomes of key healthcare providers, patients, and payer stakeholders. Analyzing medical and pharma claims and other specialty data sets enables manufacturers to maximize their impact in launch planning by understanding the diagnosis, referral treatment, and reimbursement dynamics among stakeholders in their target markets. We continue to add to our existing data sets to drive further value to our customers. In the quarter, we enhanced our real-world data business with additional German hospital prescription data that will reinforce our position as a leading provider of real-world data solutions in Europe. We are also making progress on our software platform. In August, we launched Enhanced Search powered by Generative AI as part of the latest iteration of our patent-pending platform. The new capabilities enable clinical, regulatory affairs, and strategy teams to interact with complex datasets using natural language to obtain immediate and in-depth insights. The beta version of the Enhanced Search platform is now available to select customers and general availability is anticipated later this year. As part of the commercial launch, we will further extend the platform by integrating additional data sets across our Cortellus line, including clinical trials, deals, drug discovery, and more. This is all part of our long-term strategy to enhance the value of our critical data through more analytics and insights, while shifting an even greater mix of our business to subscription. In closing, we have a great business with an unparalleled suite of mission-critical products world-class customers, and a long-term strategy is intact. Like everyone in the industry, we wish we knew when the macro pressures would ease. Nonetheless, we made financial progress in two of our three operating segments. And more importantly, we're not standing still. Our company is accelerating its innovating efforts, and we're seeing positive early signs of our strategy based on our customer conversations and highlighted wins. But understand, we still have much work to do. I'd like to thank my colleagues for their continued dedication, collaboration and hard work. I look forward to sharing our progress with you all again in three months time. With that, let me turn the call over to Jonathan Collins to walk you through our financials.