Clarivate Plc Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Value Creation Plan: Driving improved focus, growth, and innovation. Launched 12 products and AI-powered capabilities over the past year. Sales execution improved, achieving organic growth outlook through the first 9 months of 2025.
• A&G Segment: Transitioned to subscription-based revenue streams, secured over 100 contracts for new content subscription framework, and completed multimillion dollar renewals.
• IP Segment: New President of IP, investing in AI-based products, introduced IPfolio's AI product taxonomy, and made improvements to the Derwent platform.
• Life Science and Health Segment: Launched DRG Commercial Analytics 360, an AI-powered regulatory assistant, and embedded AI agents across key offerings while launching new AI native products.

Segment Performance

• Academia & Government (A&G) Segment: Positive sales performance with 2% ACV growth. Subscription mix has improved to 93% (up from 81% last year). Secured over 100 contracts for new content subscription framework. Completed multimillion dollar renewals of Web of Science with a large US library consortium and finalized an agreement with the University of Melbourne.
• Intellectual Property (IP) Segment: Patent and trademark maintenance services reoccurring revenue was flat YTD vs prior year, but showed 3% organic growth improvement. Introduced AI-powered products like IPfolio's product taxonomy and Derwent patent monitor's AI threat rating feature. Chosen to supply China Petrochemical Corporation with IP solutions and Web of Science platform.
• Life Science and Health Segment: Returned to 2% ACV growth. Launched DRG Commercial Analytics 360, an AI-powered regulatory assistant in Cortellis Regulatory Intelligence, and embedded AI agents across key offerings.

Guidance

• Raised revenue guidance to $2.44 billion midpoint due to organic annual contract value acceleration, weaker US dollar, and slower attrition in disposals.
• Adjusted EBITDA expected at the high end of the range, with diluted adjusted EPS and free cash flow near the midpoint.
• Anticipate organic growth to be flat as recurring revenues offset transactional decline, with strategic disposals lowering revenue by $90 million in 2025 and over $100 million in 2026.

Risks

• Market volume headwinds for IP patent renewal business.
• Impact of foreign exchange fluctuations on financial results.
• Timing and impact of strategic disposals on revenue and EBITDA.

Question and Answer

Q: Dive into the patent renewal business competitive landscape and year-to-date pressures.

A: Jonathan Collins and Matti Shem Tov discuss IP segment progress, market recovery, and product investments.

Q: Talk about new innovations like Specto or AuthX AI Research Assistant.

A: Matti Shem Tov discusses product innovation, AI enablement of existing products, and new AI-native products.

Q: Quantify the impact of large book transactions and potential of the business.

A: Jonathan Collins talks about transaction impact, and Matti Shem Tov discusses business potential and long-term outlook.

Q: ACV acceleration drivers and room for improvement.

A: Jonathan Collins discusses segments contributing to ACV growth, particularly Life Sciences and IP.

Q: Underlying trends in IP market and catalysts for recovery.

A: Jonathan Collins talks about patent in force growth, innovation upswing, and market trends.

Q: AI initiatives on content side and proprietary content.

A: Matti Shem Tov discusses AI innovations in informational services and proprietary data.

Q: Transactional revenues impact on guidance and next year headwinds.

A: Jonathan Collins discusses timing of disposals and FX impact on guidance.