Clarivate Plc

I will be your conference operator today. At this time, I would like to welcome everyone to the Clarivate third quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to the company to start the call. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining us for the Clarivate third quarter 2024 earnings conference call. As a reminder, this conference call is being recorded and webcast, and it's the copyrighted property of Clarivate. Any rebroadcast of this information in whole or in part without the prior written consent of Clarivate is prohibited. The accompanying earnings call presentation is available on the investor relations section of the company's website. 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 clarity of 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 ClaraBate's filings with the SEC and on the company's website. Our discussion will include non-GAAP measures or adjusted numbers. ClaraBate believes non-GAAP results are useful in order to enhance understanding of our ongoing operating performance, but they are supplement to and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are available in our earnings release and supplemental presentation on our website. With me today are Maddy Shentog, Chief Executive Officer, and Jonathan Collins, Chief Financial Officer. After our prepared remarks, we'll open the call up to your questions. And with that, it is a pleasure to turn the call over to Maddy.

Good morning, everyone, and thank you for joining us today. Yonatan is going to cover our quarterly results in just a few moments. Our financial performance has been disappointing, and not what we aim to achieve at Clarivate. But I would like you to take away from today's call is that while Clarivate has a lot to do to improve performance, we also have a lot of value levels and opportunities in front of us. And with that comes the possibility of a significant upside. I'd like to talk about how do we plan to reposition Clarivate to realize its potential. First, I would like to share a bit about myself and what brought me to this leadership role. I have 19 years of experience as CEO, including 14 years at Exprimis and five years at Corpus, now a meaningful part of Cloudbase. Under my tenure, Exprimis grew six times into a tough education technology leader. During this period, we accelerated our focus on innovation, transforming the company from an on-premises technology to SaaS technology provider by introducing the Xlibris Alma cloud solution. We expanded our offering beyond lobby and invested in strategic acquisition to deliver more value to our customers. As CEO of ProQuest, I continue to focus on driving growth through operational discipline, product innovation, and strategic acquisitions. We introduced ProQuest 1, bringing together our deep collection of academic content, e-books, videos into a single platform. We launched the Reato Content Marketplace, the company's first homegrown solution in many years. We have acquired and integrated five companies, including Innovative Interface, a public lobby software leader. We delivered strong, sustainable growth with revenue increasing from $1750 million to more than $900 million and substantially increasing our EBITDA. This led to the acquisition of ProQuest by Cloudbase in 2021 for more than $5 billion. Ultimately, my passion lies with people and products. I enjoy learning from colleagues, customers, and partners. I see innovating and challenging the status quo as a key to our success. I take a lot of pride in bringing major product to market, and I have a tremendous passion for what we do. These experiences will serve me well in my new role and will benefit CloudAid and shareholders. Slide six. I've been in the CloudAid CEO seat for 90 days now, and I'm starting to form my view on current state of the businesses. First, I conducted detailed business reviews with over 100 leaders, including strategy, product management, sales, technology, and customer service. I've spent time with our teams assessing our three segment operations and go-to-market strategy. I've engaged with 2,000 plus employees in Ann Arbor, Kansas City, New York, Philadelphia, Jerusalem, and London. I've also started to meet with our customers, including some of our largest around the world, to strengthen my insights and learning. I've begun to better understand what we are doing well and where we need to improve. My comprehensive review was helpful to identifying and validating key strategic priorities leading to the development of an initial value creation plan, which I will discuss in a few minutes. As you see on slide seven, Climate has an exceptional foundation consisting of major critical solutions across the innovation value chain. Our flagship solutions are underpinned by best-in-class data and workflow assets. This includes ProQuest 1, Web of Science, Derwent, CompuMark, Cortellis, Alma, IP Folio, just to name a few. We are recognized as a trusted provider in the market we serve, and we have an impressive low-chief customer base, leading academic institutions, top pharma companies, top tier corporates, and leading law firms. Most importantly, we have an experienced and talented team of global colleagues with strong expertise across segments and across disciplines. Our people know our markets, know our customers, and our solution inside out. A key learning for me is that climate decision to reorganize into three segments was the right one. It leverages our talent set by aligning our people's deep domain expertise to our customer, and as a result, we are better able to partner with our customers to develop products to meet their evolving needs. Unfortunately, the company has become disrupted over the last few years. We have grown through acquisitions, which is an important value creation tool, but this represents challenges in terms of integrating different solutions and people at the same time. Additionally, it is easy to lose focus on product innovation and organic goals. We have also taken on product initiatives that were overly dependent on transactional revenue, which can be underpredictable and less profitable with weak cash flow conversion. This revenue is susceptible to macro headwinds. Our third quarter results clearly reflect some of the challenges and inconsistencies from this unpredictable source of revenue. Also, the sales model and ultimate execution has been suboptimal. We have combined a generalized account management motion with an extensive portfolio of products, which undermines the ability to sell expert solutions. We have also underinvested in customer success, leading to lower renewal rates in some segments. In addition, we have suffered from product technology debts which hinders the pace of product innovation, destructs its focus away from new developments. Certain non-core legacy solutions have led to insufficient management of product lifecycle and aging products requiring significant levels of investment to refresh. While near-term challenges have impacted our ability to execute effectively and deliver results, we see meaningful opportunities to renew our focus and improve performance. Put simply, we have fundamental elements to significantly grow our business. We need to improve on execution. I have been down this road before as a clueless and progress. I have a clear understanding on the steps and process required to accelerate growth along with passion, strong passion to deliver and execute for success. Slide nine. In keeping with that spirit, the executive team and I developed an initial value creation plan focused on improving execution and accelerating revenue growth. I plan to go into more detail on each of these initiatives on our year-end earning call in February, but certainly it will be important to provide you with a preview of our plans. First, we must optimize our business model by focusing on core subscription and reoccurring revenue. To achieve that, we plan to rationalize certain transactional product lines that are declining and have low profit margin and cash characteristics. We will also continue to look for opportunities to convert transactional sales to subscription to business model innovation. For example, We have an initial success converting our life science, disease landscape, and forecast reports from transactional to subscription revenue. By focusing on subscription first model across the business, we will improve revenue predictability and profitability and be better positioned against market . We must improve sales execution. We plan to achieve this by strengthening our sales organization, putting in place better territory alignment, reviewing our incentive plans, and enhancing customer engagement. We will invest further and put more focus on customer success to ensure improvement in renewal rates. This will create more time for each sales rep to focus on smaller number of products and better align the domain expertise with the customer's needs. I believe this will increase our ability to grow the pipeline and sales and revenues. I will be working closely with the sales leadership on this effort, and I'm confident we will receive the improved results. From product perspective, we will encourage a build versus buy mentality We will work closely with our customers to validate interest and clear business use cases through more formalized development partnership methodology. I've used this model successfully before. It will help ensure investing in the right places and being responsive to our customer needs. This includes accelerating innovation and leveraging AI as key enabler. For example, our proven success Introducing academic research assistance in both Web of Science and Primo is currently being replicated in additional energy products like PQIS and books. We are also extending IP and lab sciences capabilities utilizing various AI technologies. Furthermore, our forthcoming Web of Science research intelligence platform is next-generation software solution powered by AI. This product will empower researchers to accelerate breakthroughs and research institutions to better measure and showcase the impact of their research. And finally, we will seek to carefully rationalize our portfolio. This will likely involve investing in non-core solutions that decrease our probability of success. The company has taken steps to simplify the organization, as seen with the investment of ScholarOne and Valipass this year. My experience has taught me that a simplified and focused organization is the first step to creating operational excellence. I also see great opportunity to drive future further cost rationalization to fund more product innovation and protect and expand our market. Going forward, our goal is simple. We plan to deploy both human and capital resources to work towards our most attractive opportunities that will grow our subscription and reoccurring revenue. We are committed to implementing this growth initiative as quickly as possible as we embark on a multi-year turnaround. As we optimize the business, enhance sales execution, advance our product offering, and align our portfolio to core product, we are setting the stage for predictable long-term organic growth. That said, as I mentioned at the beginning of the call, we are disappointed with the third quarter top line results, particularly the rapid decline in certain transactional products. As part of my transition and the strategic work we are currently focused on the value creation, we have decided to remove our full year and long-term and long-range guidance. Our entire focus needs to be planning and executing the value creation plan, which is expected to deliver shareholder value. In summary, I have reviewed the entire portfolio, and I plan to reduce climate exposure to more volatile transaction product lines that have been affecting our business. When we complete the initiative that I have laid out, assuming nothing else changes, we expect that we will improve our organic growth, revenue growth, have a revenue mix even more to subscription and reoccurring, and higher EBITDA margins, and have a better free cash flow conversion. I want to emphasize that I'm very confident in the initiatives underway. Our team is energized for this journey, and we are excited to see this effort come to life in quarters ahead. I look forward to sharing more details on our next earning call in February. And with that, I will turn it over to Johnson.

Thank you, Marty. Slide 11 is an overview of our third quarter and year-to-date financial results compared with the same periods from the prior year. Q3 revenue was $622 million, a decrease of $25 million compared to the prior year, bringing the year-to-date to $1.9 billion. The third quarter decline was largely organic. but was also impacted by the Valley Path divestiture. The third quarter net loss was $66 million, $59 million lower than last year, largely attributed to a $40 million increase in FX losses due to the weakening of the U.S. dollar, and a $14 million non-cash goodwill impairment charge recorded in the IP segment. Adjusted diluted EPS, which excludes the impact of one-time items like the impairment, was $0.19 in Q3, a $0.02 decline over the same period last year due to lower adjusted EBITDA. Operating cash flow was $203 million in the quarter, an increase of $40 million over the third quarter last year, taking the year-to-date to over a half a billion, which is down $48 million over the prior year. The decline is almost entirely driven by lower adjusted EBITDA as higher working capital requirements were offset by lower work timefall. Please turn to page 12 for a closer look at the drivers of the third quarter top and bottom line changes from the prior year. We previously anticipated the business would return to slightly positive organic growth in Q3. However, our results came in below those expectations at a decline of 2.6%, lowering revenue by 17 million versus the third quarter last year. Our subscription business grew at just under 1%, which was slightly below our expectations. but in line with the prior report. Some strength in A&G remains strong at 3% so far this year, but we continue to experience headwinds in our LS&H and IP segments as customer budget pressures persisted ahead of our key product refreshments. The vast majority of the shortfall of our expectations was in our transactional lines of business, which declined by 14%, and was concentrated in our A&G and LS&H segments, where we experienced more market headings than anticipated, causing a lower pipeline conversion. In the case of A&G, transactional sales of books and digital collections are off to a slow start in the new fiscal year in North America, and research and analytics back file sales were lower than expected in Asia. Our LS&H project-driven sales and services that support drug commercialization were lower than expected as budget pressures persisted at our top farming customers. Operating expenses were reduced by $6 million to mitigate the revenue shortfall, resorting to an $11 million decline in adjusted EBITDA on the organic revenue change. We experienced an inorganic decline of $9 million on the top line and a $6 million decline on the bottom line due to the devalued patent investiture, which was nominally affected by the acquisitions of Motion Hall, GlobalQ, and Rowan. Foreign exchange had a negligible impact on the top and bottom line compared to the same period last year. Page 13 provides an overview of the drivers of the year-to-date top and bottom line changes from the prior year. Our third quarter results brought our year-to-date organic change to a negative 1.5%, lowering revenue by 30 million. Our subscription business growth was at just over 1%, which is in line with our organic ACV growth at the end of September. Our transactional lines of business have declined 9%, and while the declines in our AMG to LS&H segments are at or slightly below this level, driven largely by market headings, we did see growth in Q3 and IP, driven by a recovery in our trademark services, bringing a year-to-date decline in this segment of the mid-season. Operating expenses for the first nine months of the year were essentially flat with the same period in the prior year, as cost inflation was largely offset by cost efficiencies. The Valley Pat divestiture, now a small offset by the acquisitions of Motion Hall, Global Q, and Rowan, caused an inorganic decline of $17 million on the top line and a $10 million decline on the bottom line. Similar to the third quarter, foreign exchange had a negligible impact on the top and bottom line, compared to the same period last year. Please turn with me now to page 14 to step through the conversion from adjusted EBITDA to free cash flow. Free cash flow was 126 million in the third quarter, an increase of 24 million over the same period the prior year, driven largely by timing differences in working capital. This brings year-to-date free cash flow to 298 million, a conversion of 39% on adjusted EBITDA, and a decrease of $77 million over the same period in the prior year on lower adjusted EBITDA due to the top-line headwinds and elevated capital spending aimed at accelerating product innovation. One-time costs, interest, and taxes per quarter were generally in line with Q3 of last year. Working capital was essentially flat in Q3 versus a $64 million use in the same period last year primarily due to timing differences in receipts from customers and brings the year-to-date timing impact to $23 million in comparison. Capital expenditures were up $15 million as we continue to invest in product integration to drive organic subscription growth. We used most of our free cash flow in Q3 to repurchase 15 million shares of CommonStop and to complete the Roland acquisition. As we move into the fourth quarter, we're working diligently to finalize our new value creation plan and are eager to share the more detailed roadmap and the impact it will have on our outlook for the business when we report our fourth quarter and full-year results in February. Thank you for listening in this morning. I'm now going to turn the call back over to Regina to take your questions. And as a reminder, please limit yourself to one question and then return to the queue for any addition. Regina, please go ahead.

At this time, I'd like to remind everyone, in order to ask a question, press star, followed by the number one on your telephone keypad. Our first question will come from the line of Owen Lau with Oppenheimer. Please go ahead.

Owen Lau, Oppenheimer, Well, I'm taking my question. Could you please talk about the actual organization?

I know you talked about the organization.

Oh, and I'm sorry there. The connection was poor. We had a hard time making out. Oh, sorry.

Yeah, let me try again. Could you please talk more about why the actual organic growth was so far off from the expectation? And I know you talk about transactional revenue and some weakness in all three key segments, but where was the disconnect and how do you plan to change it? Thanks.

I'll start with a little more color on the quarter, and then I suspect Madi will want to touch on how the value creation plan will help to address this. So, as I mentioned in the prepared remarks, the transactional performance compared to expectations in Q3 was largely concentrated in our A&G business and in our life sciences segments. IP was reasonably close to what we were expecting on transactional, on recovery, and on train farm services business. Within AMG, you'll recall we have a few different lines of transactional services. We're providing digital content and historical research and analytics information. In particularly in North America, we saw less spending on the digital content that is transactional in nature. The pipeline development and conversion was lower than is anticipated and would be normal for those lines of business. And then additionally, in Asia, where we still see significant market opportunity for historical research and analytics content, the sales were lower there. The pipeline conversion was particularly low. In addition to that, on the life sciences side of the business, as we touched on, where we support our large pharmaceutical customers in commercialization products and services. A number of those projects that were anticipated did not materialize or push during the quarter as well, too. So those are the reasons I'll maybe let Mahdi touch on the things we're focused on.

Basically, this is a great segue to what we're actually doing. And part of my three-month journey talking to people, sales organizations, products, and some of our customers' volatility and exposure to one-time revenues. Also, we can see that during the last quarters and going forward, we are going to take away some of the volatility and rationalize some of the one-time transaction business. We're looking further into the one-time business. It's low margin. It's low profit. It's low growth. It's extensive. It's very hard to predict. And part of the we are currently contemplating taking away this volatility and making moves to help us focus more on product innovation, subscription, reoccurring, predictable profits. That's where we're going.

Thanks for the question, Lauren.

Thanks. Next question.

Our next question comes from the line of Ashish Subhadra with RBC. Please go ahead.

Hi, good morning. This is David Page on First Sheesh. Thanks for taking our question. I was wondering, maybe you could just parse out some of the weakness that was driven by just general macro headwind or, you know, I know in the initial value creation plan, you have to improve sales execution and get more focused on product portfolio. But maybe you could just parse out, like, what was a macro headwind versus what was an internal product portfolio that needs to be fixed. Thank you.

Yeah, thanks for the question, David. So we certainly believe that it's a combination of both. We think a meaningful portion of what we experienced in the quarter were market headwinds being higher than we expected. But as Marty touched on in his remarks, we certainly acknowledge that there's significant opportunity to improve our sales execution.

There are several factors which relate to sales execution. I want to actually mention, you know, We're all aware of the story of Drive 8.1 and the reversal of Drive 8.1. Some of the sales, existing sales set up within the different segments. And I'm going to reiterate the smart and right decision by previous management to bring back the three-segment approach. But still, there are some work to be done on the specific sales organization of the different segments. There are the concept of the sales generally approach doesn't really work in some of the segments. So what we actually want to do is actually introduce the sales. We're going to emphasize further on the sales specialist and trying to rely on the customer buying, the customer actually buying our product with our sales expert. This is one of the drivers for the improvement on the sales organization. There are some other elements of the says that we are doing. The company somehow was under-invested in customer success in some of the segments, making sure that people are actually using our product to the fullest and understand the new functions and features coming on. And we are identifying some shortage of staff that we will maneuver from other places of the organization to be closer with our customers and close engagement to make sure Our radio waves are actually going up, and they are going up in some of the segments. Thanks for the question, David.

Next question, please.

Our next question comes from the line of George Tong with Goldman Sachs. Please go ahead. Hi, George. Your line might be on mute. We'll take our next question from the line of Tony Kaplan with Morgan Stanley. Please go ahead.

Thanks so much, and I appreciate the information on the value creation plan. I wanted to just ask, you know, I think when you think about moving transactional to subscription, improving sales execution, accelerating product innovation, you know, makes total sense, but I think a lot of these were items that prior management had tried to work on as well, and so Just wanted to understand, you know, I guess what's going to be different this time. And also, you know, should we expect a higher level of investment going forward? You know, does that mean that, you know, maybe we see a little bit of a hit to margins to try to drive some of the growth? Just wanted to understand those two aspects. Thank you.

So maybe I'll start with the first question. So I'm not here to comment on the previous management. I actually reiterated already. I think the previous management has done a good decision to, you know, to realign the company with having three segments. They also started the investment into product innovation. I'm simply different. I've come from a different background. I have my strong passion for people, product, and sales. So I'm going to invest myself in making sure we have the right talent and we do have the right talent. We need to do some minor alignment with our talent. And I got to focus a lot into product. I told you, look at my bio. I've been a product person since my, you know, early in my career. So I'm going to put a much stronger effort and go deeper into the product innovation lifecycle. I developed during my long career with activities and purpose and methodology that work with our customers to develop products and then making sure that we, you know, align our product development with customers needs and evolving needs. And lastly, the sales execution. I've been involved in ever during my career, I was focused a lot in sales execution and delivery the product. So I'll bring my three person people, products and sales into the climate environment, and I'm sure these expenses will work well for putting back the company on an organic growth trajectory, great value for our customers, and obviously great value for our shareholders as well. Thank you for the question, Tom.

Next question, please.

Our next question will come from the line of Andrew Nicholas with William Blair. Please go ahead.

Hi, good morning. Thank you for taking my question. I think there's a lot of experience with turnarounds and people, product sales. Just kind of curious, and I'm not asking for specific guidance. I know you're going to talk a little bit more about the plan next quarter. But based on your experience, how long do some of these different pieces tend to take? I'm just kind of curious how quickly some of these go-to-market motions, for example, can be revitalized. based on what you've seen within the business to this point?

So based on my experience, I've been around for 90 days. I don't want to jump ahead of myself. I've been investing my time meeting our people and meeting some of our customers and trying to see what's working, what can be further improved. I have some very clear ideas about the way forward. some of the changes will be up and coming pretty quickly. Some will take more time and evolve all the time. Obviously, some changes in different levels of the management, some product innovation. It takes time to renew a product. So I would be expecting to give you more details in February, but it will evolve, like improvement will evolve over time. And one of the ideas that we have that we actually going to give you some KPIs and some KPIs at some point that will allow you to track our progress against the plan. So, this will come in February and beyond. We're not going to give a, you know, specific before the February, but we understand that you need to be able to track our progress and we will address this in February and .

Great. Thank you for the question. Next question, please.

Our next question comes from the line of Manav Bhatnaik with Barclays. Please go ahead.

Thank you. Good morning. Maddy, you talked about, you know, all the time and effort you put into ProQuest to fix it and kind of turn it around. I think there you had the benefit of it being a private company and a lot of kind of time and cover, if you call it. From what you're describing, it sounds like all three of these segments that, you know, most of us don't think belong together have issues as well. And it's probably best done private versus public. If you're not going to split it apart, it sounds like you aren't. So just curious, your discussions there with the board, why isn't that something that's part of this effort that you're going through right now?

First of all, let's talk about whether these three businesses belong together or not. So all these three segments have some very similar characteristics. They're all enriched data, provide analytic insights, deliver workflow solutions via SaaS to provide some expert services. This is one. There's also the three businesses that have the same abilities and the same technology infrastructure. We're talking about content, we're talking about technology, and we're talking about shared commercial channels to deliver efficiency and scale. At the same time, I recognize what you're saying. We have some background thinking. It's too early to comment on what you said, but there are no secret accounts.

Thank you for the question, Marlon. Next question, please.

Our next question comes from the line of Shlomo Rosenbaum with Stifel. Please go ahead.

Hi. Thank you for taking my question. Um, Matthew, I just want to ask you between some of the stuff that you were talking about in terms of, you know, getting rid of products that are, you know, marginally profitable and, you know, simplifying the business and potentially looking at areas to, you know, get out of. Should we expect a substantial kind of shrink to grow strategy over here where the business has to actually be decently smaller than what it is today? particularly on that transactional side of the business? Or is that really, you know, that's not really a huge factor. It's just kind of marginally making sure that the business is not so volatile and you're in a more, a better position to sell the products. I'm just trying to think of, you know, strategically how we should be thinking about this in terms of trying to layer things into our thinking.

So we have identified, thank you for the question, we've actually identified, you know, some potential businesses that we want to invest, wind down, maybe shrink in different ways. And we're still deliberating on what should we do and how do we go about this, because if we invest the business and we are staying in a certain segment, we want to protect our reputation, we want to protect our other business, as we said, with that respective business. respective segments, so there are currently, you know, different teams are working on different ideas and opportunities, and they are for real. But you have to be there with me, you know, first 90 days, and you have to be patient. In February, we'll lay it out in February. We have some good ideas. It will be much more concrete and specific in February. Thank you for the questions.

Next question.

Our next question comes from the line of Peter Christiansen with Citi. Please go ahead.

Good morning. Thanks for the question. I think one of the original bull pieces on on Clarivate over the years has been driving revenue synergies either within segment by expanding the value chain presence on the value chain or across segments. Obviously, the companies a decent job in driving cost synergies there but just curious on your assessment on whether you think there are potentials for revenue synergies between the three various businesses and and likewise uh within segments where uh the company has had capabilities thank you so

I think we all know the history went one, like the chapter pendulum go one way, you know, with one player base, he brought it back to the other side. I believe, as for my initial view, that there is some revenue synergies between the three organizations. There's something I still need to check and dive in and come back with some specifics. The potential is there. The concept of putting the three together was a sound concept. Execution, we can argue about the execution. There is some, definitely there is cost synergies, and this was taken to an extreme in our situation. There should be also some revenue synergies and some cross between some customers of The different segments are buying from other segments as well. But I want to wait some more time before I give you some complete answers about revenue synergies between the different segments. There's definitely something there.

Thank you for the question, Pete. Regina, let's go to our next and final question.

Our final question comes from the line of George Tong with Goldman Sachs. Please go ahead.

Hi. Thanks. Good morning. And sorry for the technical issues earlier. In each of your segments, can you talk a little bit more about some of the end market trends that you're seeing, what we need to improve externally to help support some of the internal initiatives you have to transform the business?

First of all, it's a given. We are operating in three different segments, the very good segments to be in. And I believe that, you know, the return growth of those segments, and I'm talking about, I'm being very careful, I'm talking about the segments themselves. I'm not talking about the company at the moment. I think those segments grow four or five, maybe even more on the life science side. That's our belief. Those segments are growing. We have different characteristics or different situations in the three segments themselves. We see I'll start with the A&G. The current situation with the university, we see less of an appetite to invest in capital expenses. That's why we see some softness on the digital collection front. This is why we're also talking, this is seen already in the, we keep talking about the softness of capital expenditure on the ANG side, which impacts our one-time revenue. That's on the ANG side. On the IP side, we've seen, again, it's 4-5% lower on the market side itself. We do see some softness on the annuity side, not only from us. If you take the Dutch PTO as an example, you see from the Dutch PTO, because the indication that our annuity is Suffer the entire industry suffering on your new team. We do expect this to come back and certainly the life science. Is it seems to be the most promising in terms of growth, but we see Edwin's especially on the commercial side of the life science where we see that R&D is still doing well on the commercial side of R&D of of the of life science. We see we see some talk at the moment, but since the beginning they are all good. segments to be in for 5% growers as an industry, Dynascience may be even more. Got it.

Thank you for that question. And, Regina, I think we have one final question.

And that question will come from the line of Colton Feldman with Jefferies. Please go ahead.

Hey, this is Colton for Surrender. One quick question I just wanted to ask. You guys had mentioned seeing some lower renewal rates in some areas of the business. Just wanted to ask kind of what you're seeing there and kind of, you know, if there's any certain segments you're seeing higher churn or if you can generally just kind of talk about what you're seeing from kind of a churn perspective, if it's quantitative or qualitative, just kind of generally. Thank you.

Yeah, thanks for that, Colton. So in our prepared remarks, we highlighted the fact that the subscription growth for A&G remains solid. So renewals in A&G continue to be very strong. Where we saw renewal pressure in the third quarter that had a small impact or smaller impact was within the life science and the IEP segment. So, as we touched on, we know there's pressure on spending even for recurring revenues within the life sciences space, particularly in our large farmland customers. And as my fashion, we do continue to see some pressure on spending in IP on our recurring business, but also within subscriptions ahead of the new Derwent launch that's happening as we speak. So those are the two areas that we were a bit softer on in the third quarter. And obviously the things that we discussed in the VCP between sales execution, being closer to the customers, making sure that we're driving a strong usage of the product through training. will help to alleviate that, in addition to the product innovation investments we've made. So, thank you for that question, Colton. Regina, I think that's our last question, so I want to thank everyone for joining in this morning.

Ladies and gentlemen, that will conclude today's call. Thank you all for joining, and you may now disconnect.