Clarivate(CLVT) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q1 revenue was $594 million, with a net loss of$ 104 million attributed to higher restructuring expenses related to the value creation plan [22][23] - Adjusted diluted EPS was $0.14, flat compared to the same period last year [23] - Adjusted EBITDA margin increased by more than one percentage point due to improved cost management [24] Business Line Data and Key Metrics Changes - Organic annual contract value (ACV) grew sequentially, with total organic revenue increasing for the first time in over a year, and recurring organic revenue grew nearly 1% [6][8] - In the IP Patent Annuity business, organic recurring revenue grew 5% due to higher volumes [12] - Subscription renewal rates in Life Science and Health improved to 90%, an increase of three percentage points over the prior year [13] Market Data and Key Metrics Changes - The mix of recurring revenue to total revenue is now 83%, an improvement of 200 basis points compared to the prior year [6] - The company noted that less than 3% of total revenue comes directly from the U.S. Federal government, indicating limited exposure to government funding cuts [10] Company Strategy and Development Direction - The company is focused on optimizing revenue, improving sales execution, and accelerating innovation through a subscription-centric model [5][8] - The value creation plan is on track, with a focus on business model optimization, sales execution, and accelerated product innovation [15][18] - The company is evaluating strategic alternatives to unlock value and maximize shareholder returns [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future of research in academia despite potential government funding cuts, indicating minimal impact on business so far [39][40] - The company remains cautious about the macroeconomic environment but believes its products' recurring nature positions it well during uncertain times [34] Other Important Information - Free cash flow was strong at$ 110 million, with nearly half used for share repurchases [26][28] - The company expects annual contract value to accelerate by approximately 60 basis points to 1.5% at the midpoint of the range [29] Q&A Session Summary Question: Concerns about government funding exposure - Management indicated minimal impact from government actions and noted strong renewal rates in the A and G segment [39][42] Question: Inquiry about private equity interest in the IP segment - Management stated they are evaluating strategic options but had no specific comments on the private equity interest [47] Question: Drivers behind higher renewal volumes in IP - The primary driver for the increase in organic recurring revenues was a return to healthy growth in patent and trademark renewals [50][51] Question: Impact of funding cuts on large universities - Management confirmed that less than half of the A and G segment business is in the U.S., with a significant portion already renewed this year [55] Question: Expectations for transactional revenue growth - Management remains conservative about transactional revenue growth, focusing on improving recurring revenues [58] Question: Changes to the sales incentive model - Management highlighted upgrades in sales leadership and changes to the incentive model to reward subscription revenue growth [66] Question: Cyclical nature of patent renewals - Management acknowledged that while patent renewals can be cyclical, they expect the long-term trend to remain positive [70]