Clarivate Plc

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Clarivate Q4 and full year 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 followed with the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Mark Donoghue, VP 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 2024 earnings conference call. 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, and 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 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 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. Reconciliation of these measures to GAAP measures are available in our earnings release and supplemental presentation on our website. With me today are Mahdi Shemtov, Chief Executive Officer, and Jonathan Collins, Chief Financial Officer. After our prepared remarks, we'll open up the call to your questions.

And with that, it's a pleasure to turn the call over to Mahdi. So good morning, everyone, and thank you for joining us. On this call this morning, we are going to provide additional details of our value creation plan, our 2024 results, and our 2025 financial outlook. Our results demonstrate we have a strong foundation of products and assets and workflow solutions. They also show that we have work to do to deliver healthy organic growth and build for the future. We are underway to return to organic growth. We have already started to implement our VCP, which I presented to you in November. Today, I will provide more details on this plan, including some of the things we have already completed and will be doing in 2025. We also announced that we have retained financial advisors to help us in evaluating strategic alternatives to unlock value. This may include divesting business units or an entire segment. There is no guarantees that anything actual will arise from this process. We will provide update when appropriate. I'm confident this is the right plan to deliver shareholder value and return a to healthy organic growth. Turning to slide seven, let me give you a reminder of our value creation plan. Our VCP is focused on improving execution and accelerating revenue growth. The first three pillars include revenue optimization, improving sales execution, and accelerating innovation. These initiatives will improve our business performance, drive better revenue flexibility, and improve financial and operational efficiency. Our fourth pillar. Portfolio rationalization addresses opportunities to streamline our solutions portfolio through divestitures. Now let's talk about what was accomplished in the last three months in executing our plan and what lies ahead for the remainder of 2025. Improving the predictability of our revenue and driving cost subscription and reoccurring sales is key priority of the plan. In academia and government, we recently announced that we are moving to subscription-only strategy for ProQuest eBooks and digital collection. This is a meaningful step change in our go-to-market strategy for this product line. ProQuest eBooks. It is the world's largest subscription of academic eBooks, including more than 700,000 titles. ProQuest Digital Collections. offer more than 160 million primary source items plus scholarly journals, videos, and audio specs. With the launch of this new product offering, we will phase out one-time transactional sales of e-books, digital collections, and print books by the end of 2025. The change will allow us to focus our growth on investing in subscription-based solution, which will make up 90% of ANG portfolio. In life science, we launched DRG Fusion, a new modular subscription-based real-world data analytics product. This will shift focus from transactional data brokering to new patient insight subscription products. We will dispose the increasingly high-cost, high-risk data reselling business model We are positioning ourselves to offer a broader set of complementary healthcare insight products, which increase our value proposition to our life science buyers. We plan to exit real world data direct line system market, winding down by fourth quarter 2026. As Jonathan will discuss, we expect benefit from moving in this strategic direction. It will. Reduce volatile transaction revenue by approximately $200 million. Accelerate organic growth. Make leverage more predictable by increasing our recurring revenue mix from 80% to 87% and potentially higher over time. Improve our profit margin by approximately 150 basis points and have a minimal impact on our free cash flow. Now let's discuss what we've done on our sales execution. We have taken steps to improve sales execution in each of the three segments in the area of talent, organization, customer engagement, and sales force in incentives. Starting with people, we are attracting and promoting experienced proven sales leader to lead specific functions. Second, we have optimized reporting structure to increase accountability and empower regional sales leaders to drive new business. This will strengthen our go-to-market capabilities and drive closer alignment with core strategic priorities. We have also realigned account management models around specialist solutions area to capitalize on in-house expertise and more closely align with our customer needs. Third, we are scaling and investing in dedicated customer success team. We are enhancing our resources and tools to improve customer engagement and coverage. Ultimately, this will help us to strengthen and grow retention rates along increasing our upsell and cross-sell opportunities. And lastly, we are refocusing incentive models across the company to reward success for driving subscription, and reoccurring revenue growth. There is more work to do in all this area, but we have made substantial progress in a short time. Turning to our third pillar, product innovation. In recent years, we have made a lot of smart investment to harness the power of technology and AI. we are seeing growing adoption and positive usage trends. For example, academic AI platform was introduced and developed in a number of ANG products, including Research Assistant for Web of Science and Primo. It was also introduced in live, it is also introduced within live sciences with our new product offering, DRG Fusion, and in IP with Delvin AI Patent Search. We continue to develop and enhance our product across all the three segments, which will drive improved customer adoption and usage. Across academia, we are leveraging academic AI, which includes the use of large language models to drive innovation. ANG is also strengthening the academic AI platform with agenting AI capabilities and will introduce a powerful AI agent builder and pre-built AI agents in 2025. Within life science, the team is rapidly enhancing the Cortelis R&D platform through integration of scientific AI research assistance by leveraging the AI, the A&G AI platform. We also started for implementing the implementation of Cortelis regulatory intelligence conversational research within IP. We have a series of exciting AI product launches in 2025 that will provide solutions across the IP lifecycle. This includes enhanced AI patent drafting, a new AI patent monitoring product, alongside a series of AI search capabilities trained on the Derwent unique proprietary data. We expect this new product offering to start to inflect in our ACV this year, and currently expect most of the revenue benefits will come in 2026 and beyond. The fourth pillar of the VCP involves streamlining our solution portfolio to increase execution, optimize capital allocation, and unlock values. Last year, we completed the divestiture of two product lines, ScholarOne and ValleyPath, we intend to continue to rationalize our portfolios throughout the year. As I mentioned, we are already working with our financial advisor to help us evaluate strategic alternatives for business units or an entire segment. Since rolling out our VCP plans last November, we undertook several important actions and achieved several key milestones. We recently completed company-wide review of our teams, processes, and operations to streamline and improve efficiency. This is an important step in the value creation plan to fund investment and lower cost structure. Looking ahead, slide 12 outlines our expected cadence of new product releases, advancing the disposal, and transition certain transactional products to subscription. During the second half of 2025, we expect to complete the disposal of transactional books business and the transition of digital collection from transaction to a subscription model. In summary, the VCP is well underway. We expect it will return the business to healthy organic growth and now include a review of strategic alternatives, which will include the sales of a business unit or an entire segment. We are aggressively moving forward to improve operational performance, our financial results, and create shareholder value. I look forward to sharing more details on future earning calls. And with that, I would like to turn it over to Jonathan. Jonathan, please. Thank you, Bobby.