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.