Q1 2020 Earnings Call

Good morning, welcome to quite a bit first quarter 2020 earnings conference call all participants will be in Boston only model.

Do you need a certain leased secondly conference specialist I pressing the star keep followed by zero on your telephone keypad.

After today's presentation, there will be an opportunity to ask questions.

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Withdraw your question. Please press Star then too. Please note this about just being recorded.

Now, let's turn the conference over to Mark Donohue, Vice President of Investor Relations. Please go ahead.

Thank you Andrew Good morning, everyone. Thank you for joining attached to declare late first quarter 2020 earnings conference call.

Me today are Jerry's dead Executive Chairman, Chief Executive Officer, What's your tanks Chief Financial Officer.

Tom Miller, President Science group in Jeopardy, President Pete.

I will be that will take your questions at the conclusion of prepared remarks.

As a reminder, this conference call is being recorded webcast and is copyrighted property of clarity analytics.

Any rebroadcast of this information in whole weren't part without prior written consent of clarity it is prohibited.

This morning clarity issued a press release announcing our financial results for the period ended March 31 2020.

The release, well then accompanying supplemental presentation is available in the Investor Relations section of the company's website clarity dot com under events and presentations.

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.

For MACI bunch of the business, where development Sinclair and ate industry to differ materially funny anticipated results performance achievements are developments expressed or implied by such forward looking statements.

Information about factors could cause actual results could differ materially from anticipated results or performance can be found encouraged filings with the FCC and the company's website.

Discussion will include non-GAAP measures are adjusted numbers, including adjusted revenue adjusted EBITDA clarity. Please non-GAAP results are useful one order to enhance and understanding of our ongoing operating performance, but they're supplement to and should not be considered nicely from or sub super GAAP financial measures.

So Asians are these measures to GAAP measures are available at our earnings release and supplemental presentation on our website.

After our prepared remarks, we'll call to your questions with that right my pleasure to turn the call for Jerry.

Thank you Mark and thanks to all of you for joining US this morning I.

I sincerely hope you and your families are healthy.

We look forward to returning to some.

Normalcy and well really welcome the day that we'll be able to meet all of you again a person.

Despite the many distractions of Cobot 19, we had a very solid first quarter adjusted revenue, including the acquisitions of DRG for one.

Darts, IP and excluding the divested Mark monitor businesses increased by 10.5% to $243 million at constant currency. In addition to recent acquisitions.

In addition to recent acquisitions revenue growth was driven what's driven by new business I'm price increases subscription revenue, excluding divestitures increased 8.4%.

It was resolved the temporary work stream disruptions experienced by a few of our customers arising from the virus. We did experience some delay in getting a few contracts renewed during a corridor. This prevented us from delivering even stronger subscription revenue growth.

We expect these contracts to be renewed in Q2 and consider this or Q1 Q2 timing, it's true arising from the pandemic.

Adjusted total company organic revenue growth at a constant currency was 2.2% and was affected by the timing of the.

The contract renewals I just metric.

Our efforts to improve our operational and financial performance are really delivering results as demonstrated by the 32% increase in adjusted EBITDA to $78 million. This drove an almost 700 basis points improvement in our first quarter margin just 32.2%.

And we benefited from revenue growth acquisitions portfolio rough rationalization and cost savings initiatives, Richard will cover the financials in detail in few moments.

During the first quarter, we continued to make enhancements to our product offerings across our portfolio.

Within our science group beyond the DRG integration work, we launched core tell us drug discovery intelligence as the successor platform to integrity, which was very well received by the market. We also released Portales generics intelligence the new version of Newport.

Within the electrical property group, we successfully launched the Derwent Atms database platform with the new user interface and a great experience. This was very well received by our customers and we expect improvement and user interface or work flow to lead us into new buying centers to drive further growth.

Integration a sequence based a third quarter 2019 talked yeah.

Acquisition Tuck in acquisition for the patent business added new functionality capabilities also integrated into <unk>, it's progressing well and integration will be completed by the end of second quarter. We also completed integration Darts IP business, we acquired last years fourth quarter within the comp your mark.

Product suite.

We continue to drive product enhancements across the portfolio and I'm pleased to report there's been no disruption of our product development Roadmaps.

This week, we will launch our first customer delight in college engagements surveys or 2020 as you know our colleagues to gauge man and customer life focus is the way I boys led companies to ever faster profitable growth.

These surveys identify actions for us to take that we expect will make a significant difference and driving our performance and continuing to build a high value company. We look forward to sharing those results with you on our second quarter earnings call. This past February we closed the acquisition the DRG into meet.

It like kicked off integration activities well most of our company is currently in a work from home status due to the help pandemic I'm. So pleased that our team has not slowed down the integration work at all that are working to ensure the capture and realization of cost and revenue synergies as well as employees.

Many rigorous controls to execute on track the synergies the team is focusing on a seamless transition and protection of existing businesses and independent revenue and growth targets for clarity and DRG. We remain on track to meet our cost synergy target of $10 million 2020.

And to meet our 30 million dollar run rate synergy target that we promised over the first 18 months of our ownership.

On the revenue side. Our sales teams are very excited about cross selling initiatives to drive revenue synergies. We're enthusiastic that early pipeline new general interest from customers that was very promising.

Turning to coal that up to the coal bed 19 pandemic I couldn't be prouder about how we as a company with responded during the crisis.

Collaboration across clarity there has been outstanding during times of crisis, the company's cabinets and values are tested and I can attest that my colleagues are truly going above and beyond what.

We saw the early affects a pandemic in our business in federal and in China, which we highlighted our last earnings call in late February sense that the pandemic quickly the swap across the world. We immediately took steps to ensure the health and safety of our colleagues by implementing social dispensing.

Activating business continuity planning programs and moving all of our college still work from home stylus. Thanks to the well planned and very smooth transition. This team worldwide, just managed to meet or exceed its productivity in service level agreements today all of our colleagues are working from home other than those.

As in China, where many of the colleagues are now back in their offices, we do have the capability to have 100% of our entire workforce outreach seamlessly in a work from home work anywhere anytime at Barb.

We've developed a return to work plan and safety protocols for our colleagues and are really well prepared for when other regions begin to relax stay at home restrictions were very proud of the fact that during these.

We've not missed a beat and collecting processing content, our colleagues were up and running working from home with a few days.

The content teams are processing high volume of material across our business groups, we're seeing work flow increasing due to large amounts of information. They received from numerous sources, including the Chinese patent office press releases and pharmaceutical pipeline data and financial deals we're working very.

Very closely with our customers to meet their needs and I'm delighted their needs and I'm delighted to report Theres been no disruption of any service we provide to them.

With our industry, leading portfolio products available on <unk>, they can be accessed by our customers from anywhere. We're also doing our part to assess the coal bed research. This aligns with our purpose is a company and that we believe human ingenuity can transform the world and improve our future.

Well, we regularly work that many large pharmaceutical companies and governments are consultants and professional services teams are now also working with many of them on coal bed related projects and we're also supporting researches with our Cove at 19 website, which makes research readily and freely available.

For not for profit researchers that want to reference the work that's already been done.

Our core talus product is playing an important role all coal had related trials from all registry sources included in our databases. We have the most competitive information available on clinical trials with our content t., placing priority on processing Cove at nine <unk> data.

We delivered significant.

Retrospective coverage in March for all available trials from all registers, representing 969 trials as we recover from pandemic. We believe there will be an increase in interest and requirements from around the world governments organizations for all of our products and the.

Thanks for all of our product, particularly life Sciences, the world recovers from thus pandemic lastly, we expect to see more new it opportunities from or for our business than ever before and further position us to realize our company's vision of improving the way the world creates protect and advances innovation.

Good morning, we reaffirmed our 2020 out what for adjusted EBITDA up 395 billion to 420 million of adjusted EPS of 53 cents to 59 cents, an adjusted free cash flow of $220 million to $240 million.

We evaluated various scenarios based on what we currently no and how things could play out for the rest of the your our assumptions include the covert bars is brought under control late in the second quarter that serves a gradual lifting up restrictions and the free movement of labor in the mid to late third quarter.

And that we begin to see a pickup in economic activity early in the fourth quarter.

We're optimistic that the health crisis will improve in the coming months, if harbor things do not improve or they get worse. We are prepared to take additional actions as needed, but what we do know about her business is we have numerous competitive advantages that help us insulet helped insulate us help us weather.

Through the current environment, our products and services, our monistat not nice to have they're focused on b to b markets with unique content, our customers rely and trust us in our solutions and our services are very very useful even more so on the times you're living through we have more than 18000 cars.

You moves we sell into durable mark in markets, including government research institutions in life Science companies. We are highly resilient company with 80% of our revenue from re occur from recurring subscription and re occurring revenue streams, we have a strong revenue retention rates.

Ladies around 93% and we have low levels or capital intensity and low cash taxes.

We maintained our outlook on key profitability metrics, we revised our revenue down.

What down by 2.5% at the midpoint compared to our prior guidance.

We did during the first quarter, we did great. Our colleague salary increases effective April 1st we have not nor do we plan any layoffs, although the previously announced redundancies. We also introduced our companywide Shareowner program, if we meet or exceed our customer delight goals people our own.

Only sustainable advantage and we're blessed with surely great colleagues.

Except the revenue softness and maintain our EBITDA guidance, we've implemented approximately $30 million of new cost savings measured for 20 25 million, which we expect will be permanent.

Savings include a hiring freeze no travel policy and reduce incur certain non critical S.G.I. expenses. These savings are in addition to the cost optimization program already underway to deliver $45 million event period savings and 2020 and 70 to 75.

5 million on a run basis as we exit the first quarter of 2021, when combined with the DRG synergy savings of 39, we have to levered or expect to deliver approximately $110 million and permanent cost savings over two year period importantly, we're doing this without impacting.

And the way, we do business our ability to continue our investment in R&D.

With the steps, we're taking we believe will be with an EBITDA range. We previously provided in February.

While the current environment presents many challenges, we will be even better position to achieve our long term objectives. This includes striving towards our goals of exiting twentytwenty was 68% organic revenue growth and that does adjusted EBITDA margins, 37% to 40% I'll now turn the call.

Over to Richard.

Thank you Jerry we delivered a very good first quarter to start the year, which is even more impressive given the present stay at home waters.

We reported adjusted revenues of $243 million, an increase of $8 million for 4% a constant currency.

The first quarter includes a one month contribution from the acquisition of D. L G and a full quarter from dots IP, which together added 8% to revenue growth.

This was offset by the divested products, which were sold on January the first of this year and which reduced revenue by 6% compared to last year's first quarter.

As a reminder, we divested these product lines, because they were subscale for us capital intensive and my margin.

Excluding the domestic product lines total revenue increased by 10.5% to constant currency in the first quarter.

With the most sensitive our revenues being you're still the denominated there was less than a 1% negative impact from foreign exchange due to tell the strength as compared to last year's first quarter.

The EBITDA impact from FX is minimal in the first quarter due to our company's natural hedge.

Ongoing business revenue, excluding acquisitions divestitures and foreign exchange increased 2% as higher subscription revenue was partially offset by slightly lower transactional revenue.

Total subscription revenue was $193 million and excluding the divested businesses increased 8% at constant currency.

Ongoing business subscription revenue grew 3% to the first quarter, driven by new business and price increases within both the science and IP groups consistent but the growth in the annualized contract value.

As Jerry mentioned subscription revenue growth was partly impacted by the timing of some renewals. This was juice. So really the pandemic and these timing issues will result in some subscription revenue being pushed from Q1, it's coming into Q2 as we complete these renewals.

On the reported basis subscription revenue increased zero point $7 million up 1% to constant currency.

Recent acquisitions added 5% to subscription revenue growth, which is primarily offset by the divested product lines, which discrete which decreased subscription revenues by 7%.

Subscription renewal rates were 93% in the first quarter consistent with the prior year period, the slightly affected by timing renewal as previously discussed.

Transactional revenue increased to $49 million up $7.5 million for 18% year after year driven by the acquisitions.

Recent acquisitions added 23% a transactional revenue growth on the product line divested sheds loads transactional revenues by less than 2%.

On going transactional business revenues decreased by $1 billion for 3% as high as sells a tech street will offset by slightly lower weapons sights backfile slate sales and slightly lower comping off such volumes.

He CV growth was 7% for the first quarter, which includes the addition of DRG.

Excluding acquisitions, a CD growth on an ongoing basis increased by 3% I'm was adversely impacted by high open renewals that we expect will be closed out in Q2.

Looking out performance across all to product groups.

The science group revenue increased by $18 million or 14% to $147 million driven by the acquisition of DRG.

Ongoing business revenue increased by 2% that by higher subscription revenue, particularly within the life Sciences product family.

The intellectual property group revenue for the first quarter, excluding divestitures increased 5% to $95 million driven by ongoing business growth and the dots IP acquisition.

Ongoing business revenues, the IP group increased by 3% driven primarily by continued growth in subscription revenue across the product lines.

Well this growth in transactional Tritech Street sales, partially offset by another company not such volumes.

On a reported basis IP revenue.

He group revenue declined 9% due to the divested products.

Adjusted EBITDA in the first two quarter increased an impressive $19 billion school, 32% to $78 million compared to the prior year period.

This was driven by the increase in revenue and strong margin flow through.

Contributions from acquisitions and portfolio rationalization as well as the benefits at the cost saving initiatives.

As Jerry mentioned, our adjusted EBITDA margin improved by nearly 700 basis points to 32.2% as compared to 25.3% in last year's first quarter.

Other operating income was $6 million into first quarter, an increase of $11 million year after year compared to an operating expense of 5.6 million in last year's suppose Coursa. The change was primarily related to gains in foreign exchange this quarter compared to a loss in the prior year period.

So the first quarter 2020, the provision for income taxes increased almost $15 million compared to last year's first quarter.

The increase is principally due to timing how much it related to the inclusion of the DRG tax provision and increases in taxable income and respective tax expense for the first quarter 2019 through this year this quarter, primarily from India balancing in Singapore, That's why there's a mix of other tax jurisdictions.

Cash taxes in the first quarter with $5 million compared to $8 million in the prior year period.

Our cash tax expense for 2020, including DRG is projected at $28 million inline with expectations.

Adjusted net income was $26 million, an adjusted diluted EPS was seven cents for the first quarter 2020, the first quarter was negatively impacted by the tax provision of $50 million or four cents per share, which is principally due to timing as previously mentioned.

Additionally, our weighted diluted average share count increased by 37 million shares or 11% since December 31st 2019.

Due to the issuance of shares relating to the acquisition of DRG and the exercise of public warrants in exchange for ordinary shares in the quarter.

The weighted average number of fully diluted shares outstanding in the quarter was 367 million shares.

Capital expenditures were $90 million the tools quarter due primarily to continued application development investment across all product portfolio.

We also made a onetime purchase of hardware such as laptops in preparation for the changed what from higher.

Cash and cash secret funds with $309 billion as at March 31st an increase of $235 million in the quarter.

The increase was primarily driven by 278 million tones of proceeds from the public warrant exercises.

In addition, during the first quarter, we repaid $65 million outstanding on our revolver, which was used to acquire thoughts IP in November 2019.

Cash flow from operations net capital expenditures in the quarter was $27 million, which included onetime material transaction expenses relating to the DRG acquisition.

Adjusted free cash flow was $78 million at the quarter, an increase of $14 million compared to last year's first quarter due to improved working capital management insisted in assisted in part by zero payments to Tom's rewards in the quarter as we have now completed the final payments under the transition services agreements with Thomson.

Which is which was completed in the second half of 2019.

As of March 31st we have total gross debt of $1.96 billion. This includes $360 million offerings rates into the DRG acquisition, which is a senior secured term loan b issued a paul with an interest rate consistent with our existing timeline facility.

Net debt was $1.65 billion.

We are required to report Standalone adjusted EBITDA on a trailing 12 month basis assumes the reporting covenants contained in our credit agreements at indenture.

Standalone adjusted EBITDA takes adjusted EBITDA and includes certain committee that backs an adjustment the standalone expenses.

Oh Gee adjusted EBITDA run rate contribution cost savings, including DRG synergies and the impact of foreign exchange Standalone. Adjusted EBITDA was $425 billion for the last 12 months ending March 31st 2020.

With net debt of $1.65 billion on net leverage ratio improved from 4.7 times at the end of Q4 2019 to 3.9 times at the end of Q1, driven by the increase in Standalone adjusted EBITDA.

We ended the quarter with significant liquidity.

In addition to the $308 billion a cash on hand, we have an untapped triple by $250 million.

Additionally, with the expected estimated adjusted free cash flow of approximately 220 million to $240 million. This year, we have the resources to reduce our debt improved net leverage and continue to invest in accreted M&A opportunities.

With that I'll now turn the call back to Jerry.

Thanks, Richard Great job before we open the lines for questions. Let me reiterate that we're very well positioned to manage through the current environment. We have a suite of health care science and IP products that are essential to our customers. This year, we expect to generate over $200 million of free cash flow what's wrong.

Allow us to continue to invest internally reduce our debt and invest in business development and M&A.

Next week, we'll celebrate our one year anniversary as a public company I'm very proud of what we've accomplished over the past year.

Beyond our operational and financial growth, we'd been enhancing our corporate governance. Our board has transitioned to an independent board and independent committees with a lead independent director. This year, we will continue to evolve by introducing a far reaching program aimed at becoming an industry leader in sustainability.

Focused on our impact on the environment Our society, our customers are ethics, our communities on our responsibilities I want to thank my colleagues that clarity for their dedication hard work and strong collaboration as we manage through this current global health crisis I also want to thank our customers for their country.

You'd support lastly, due to the health crisis, we moved our 2020 Investor day that was scheduled for May 19th we're now planning to hold the event on September 22nd Please Mark your calendars and join US for our website will be sharp sharing a thorough review a clarity and our profitable growth strategy.

We're now ready to take your questions. As a reminder, please limit yourself to one question then returned to the queue. Thank you operator.

We will now begin my question and answer session to ask a question in the press Star then one on your telephone keypad.

If you're using the speakerphone. Please pick up your handset equal pressing the keys if at any time. Your question. That's been addressed and you would like to withdraw. Your question. Please press Star then to once again. Please ask one question and then you may return to the question in queue. At this time that we'll pause momentarily to assemble.

Our roster.

First question comes from Seth Weber of RBC capital markets. Please go ahead.

Hey, you guys. Good morning, I Hope I hope everybody is doing well.

I wanted to ask about the pricing environment, just given the you know the obvious challenges in the macro at Jerry you had previously talked about targeting I think little bit over 3% for 2020.

Is that still a good number to think about and can you just give us any.

You know any additional color on the two vertical you know science versus IP on the pricing side. Thank you.

Sure Great question SAP, Yes, we said we would you know last year, we did about nine to 2019 about 2.12, 0.2%. We said we were building at 3.2% or thereabouts for 2020.

Just as a reminder for everybody 50% of our annual subscription base is renewed in Q1, 20% in Q2, so a 50%.

What was the number for Q1, the only exception we've made and by the way our team with motoring Jeffs leadership and Richard and me supporting it was done a great job by renewing in this crazy World, we're living in and the only exception on pricing that has happened is.

That there are some countries, where the dollar is much stronger as much as 25% to 30% stronger than it was at this time last year. There. We've obviously taken because 80 plus percent of our our revenue in our renewal <unk> renewals are in dollars, we've taken the currency issues index.

Otherwise I feel really good we will get more input which will provide you.

At the end of Q2.

Particularly from our customer delight surveys that start today, great question on I'm really pleased with the work that's been done, particularly as our sales force learns to do an ever better job selling valley. Thanks next question.

Next question comes from and then Nicholas of William Blair. Please go ahead.

Hi, good morning.

I can you.

Good morning can you speak to the health of your website customer base, specifically and the extent to which you'd expect.

Terry pressures on University to affect those sales conversations whether it be.

That's a renewal rates or I guess, you talked a bit about price increases, but I'm I'm interested in particular over the next couple of years there. Thanks.

Yeah, Great question I'll start booked Carl pick up two or three things are we measure output everyday on each of our products. The output in web of science is up actually significantly which makes sense. If you think how many universities around the world are are doing online.

The occasion.

1.2, as a reminder, we're a very very small piece, but a critical piece of the investments that the university's make and in fact, we help them make decisions on what they should be spending the larger dollars.

But most tar please pick up.

Sure. Thank you Gerry.

I think I think Africans very good for US you know remember were.

Streets, beating benchmark for.

So the evaluation of reset chino within the academia and to cross research and we very much expect that to continue 70 within academia. The universities will probably have to look at you know some of their underlying business models and for example by perhaps shifting to distance.

Angle or maybe embracing the electronic means to engage with students in researches, but that plays very well full a you know do you sell web design to not data assets that lend well too.

Those types of.

Actual communities online collaboration in social so I think I think this 70 positions us in a one of you know all strengthen the necessity a few cheers.

Thanks spoke to our I would add one thing because it's a great.

Question, we put in place a team that Richards cheering along with Jeff The most are.

Some of our other T.

To review twice a week any request changes.

On terms, because if we were expecting to see any issues that would be biggest and web science. They meet twice a week. Thus far I would tell you it's been minimal and that will make sure and keep you posted on that too, but I'm very very please. Thank you next question.

Thank you Sir the next question comes from Ashwin Shirvaikar of Citi. Please go ahead.

Thank you Hi, Gary Hi, detect.

Hey, I'm good thank so could dig rather and the current environment.

So my question is on intermediate to longer term revenue opportunity.

Based on your prepared remarks, I took away that the.

Subscription revenue Sharklets should catch up in Q2.

The full year shortfall due to transaction revenue thinks like we have a science backfile sales and so on can you talk to be client conversations you're having now as it relates to the Enlightenment for these sales in the intermediate to longer term as that is separately the longer term opportunity for things like that.

You didn't you did he said.

Great question I'll start.

Then I'll have moved to our comment and then Jeff comment because as you would expect we pay a lot of attention to that right now we think it and I actually said they're done.

Call, we're doing a weekly call by the way with all of our colleagues worldwide. We do Q in a update them on what's going on I said on that same question that we got from some of our colleagues a couple of weeks ago. We actually see this is a medium long term significant upside.

For us and I reiterate that to them as I did to you. All this morning that we believe we'll exit a 2021 of the 8% to 10% organic level with a significant part of that building on a double digit growth in life science, but moved tar pick up on that and then let's get Jessica.

That's because we see the same thing and IP.

Yes, I mean first and foremost we maintained a full continuity help our operations and that saw sales operations.

Inside sales you know customer engagement and of course, our data operations in all of those we've maintained absolute continuity way not what's out about control is of course.

I think you know economies around the world certain geographies.

And that's down too specific.

Government legislation then policy in those countries.

Those economies open up you know went went with poised.

You know two to respond didn't adjust accordingly, we're in constant contact with or without customers in some cases certainly in the world of services. We for example shifted from onsite delivery of our services to remote delivery of our services. So I think it's.

Very much in a continuity in that but it's certainly for the foreseeable future.

Jeff.

Thanks moved our yes sure. Thanks, Gerry I'd say, it's a couple of things on the IP side to hit that since you have in wine is that these businesses had not fully benefiting yet from all of the cross unit revenue synergies.

And we're starting or hoping to see that really start to tick effect within Q2, and that's principally built around assembling packages.

Between the various business units former business units that will help solve customer problems a little bit more effectively I think longer term and we're definitely focused on adding more service and expertise into our our product offerings and then one of the things that you can never forget about the clarity IP assets. These are phenomenal data assets. So we have an increased focus on.

Separating our content from the platforms. So that we can realize additional revenues through adjacent markets and other use cases, so we feel pretty good about long term intermediate and I don't think the current operating environment is really impacting our plans whatsoever.

Thanks, Jeff Great question next question. Please.

Yes, Sir the next question comes from George Tong of Goldman Sachs. Please go ahead.

Hi, Thanks, Good morning, you've taken part of your revenue guidance slightly morning up to reflect the impact of the Corona virus can you deconstruct the revenue guidance update to reflect how much of the update reflects changes in assumptions around pricing versus retention versus new sales and tightening and then talk about the expected in time.

Between your science in IP product group.

I will start Richard will pick up really thoughtful question George.

A couple things, we reduce that as you saw a midpoint by a little less than two and half percent.

A large part of that is because of a slowdown in the first quarter of a one off transactional businesses. There was a softness in one off on patent searches, which makes sense a one off on the on.

Getting trademark searches we expected that interestingly enough.

Fit into a bit stronger into Q1 than we were expecting so.

The big piece of that would be coming up the 30 million. If you go midpoint to midpoint would be coming off of a timing issue meeting we won't see that probably come back in full and Twentytwenty, but we'll expect to the 2021 Richard pick up from there.

Yeah, Thanks, George I.

I mean, when we look at the 2.5% <unk> point.

Submit the one caution that shifted subscription revenue, where we're taking a more cautious view in terms of new business, which which is not surprising.

The bulk of it 75 cents that comes from transactional revenue streams, and taking a cautious view on professional services as well.

So that's the that's the approximate split between the two.

Principal revenue drivers.

That's very helpful. Thank you.

That's great quite so let me just add two other things to that because.

When we knew.

When we knew because we had the early warning in China.

We did we did a us review.

I had Richard do with his team a standalone up what we thought could happen.

And then we had Jeff and his team and look chart and his team. If you look at all three of those it was remarkably close in fact I was amazed that we then just looked at a nine plus three year course, and and I felt very very good because I think the assurants each.

Month goes up on what we'll do I think Richards descriptions very accurate.

Of course, very modest a change in the and Andrew subscription base. Some of that would be the comment I made earlier, where we've got and subscription base business with incumbent in countries that have suffered as much as 25% a reduction in costs.

Currency local right now and like I said, we're clearly taking that into cow and then the one off transactions, but I couldn't feel better about where we're at right now so thanks George next question.

Thank you again, if you have a question. Please press Star then one.

Next question comes from formal Rosenbaum of Stifel. Please go ahead.

Hi, Good morning. Thank you for taking my question Hey, Jerry can you talk a good [laughter] could you talk a little bit about the impact from Corona virus on the acquisition, particularly she DRG had a higher higher slug of consulting revenue.

Is that performing now and how much of the impact that $30 million reduction in revenue is really just because we're going to have a temporary hit to the.

Consulting revenue can DRG.

Yeah, Great question.

As I mentioned that the job the tar and the team has done on the integration is amazing to me we get out we have a weekly update meeting and it's it's as good as I've ever had.

In this crazy World were 11.

All stuck at home so that feels really good I think it's a question so important because we.

Feel very good about where we're at with DRG right now.

I'll have Richard and booked our pick up we'll end point of whether we will make up during the year any loss in the.

So call it consulting again I'd stress that for DRG, that's really helping our customers use their data in our data to make decisions.

So feel very good about that Richard.

Yes, good morning Schlemmer. Thanks. The question, Yes, weeping I mean look Tonight and the team have been really impressed with the robustness of the DRG business period, I think if there's one vertical you want to be selling into currently its life sciences and so.

Yeah. The business is holding up very well to your point Tom consulting on they do have a DRG does have a very nice positioning consulting I'd add that these are very long term deep deep client relationships, we haven't seen that's much disruption.

So overall, it's it's progressing very very well look to anything you would like that.

Yes, I think I think you you have summarized it very well Richard.

The revenue and cost synergy plans are on track. The integration has gone very smoothly DRG has held up very very well within the current climates remember.

The bulk about revenues reoccurring revenue with many of the customers.

So these are long term relationships as Richard just pointed out and as I.

Mentioned earlier on indicates a consulting where we are unable to actually sit with customers on site, we've moved to a remote delivery on those services. So again.

Very good continuity.

Under the context of the World today, We've also got an eye towards post Covitz way clearly the data assets, we have a the software and the expertise are going to be absolutely critical across that health Sciences landscape, which is which is very important.

Thanks booked aren't great question next question. Please.

The next the next question comes from Zach Cummins of B. Riley FBR. Please go ahead.

Oh, Hi, good morning, Jerry and Richard Thanks for taking.

Yeah. So it sounds like you definitely have some nice tailwind and the life Sciences portion of the business, but can you just remind us.

In terms of how do all the other portions of your business tend to operate in a more recessionary environment.

Great question I'll start and.

And then in this case all have.

Both motor and Jeff make quick comments.

If you go back to the last quote major economic downturn, which would have been late 2007, eight and nine these businesses actually stayed flat or grew at that.

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And then all due respect out where that these businesses where that were 100 miles ahead today 2020. So.

It's really important that everybody understands were built into the Workstreams. The work flows of our customers to help them make decisions and then a critical time like this they need our help even more perhaps than other times. So just feel very very good about that moved tire.

Yeah, I think you know <unk> in the history the difficult one too good to go by way of as a gauge but.

Generally if I take you know our web besides business. It's you know its divide that pretty well.

You know over the as and I think in the context aware we are right now.

The bulk.

Bulk about content is opening up even greater value to the scientific community. Both so then you know perhaps in a previous years I'm. So so yes, moving forward I think again in that sort of post cobot scenario I think that there's going to be a greater demand for the things that we have.

Weapons websites the show.

Thanks, Jeff.

Yeah, I would add that pretty IP business. The bottom a segment is still a critical segment for us and we can quite a bit of business. There I mean, I think it's fair to say as Jerry and Richard mentioned on the transactional front you do see some some one off.

Hey, Mike filings can be pulled back a little bit during a bad macro situation, but we've got a phenomenal and diverse product mix, we do a good job offsetting that.

And frankly, it's difficult to grow any business without investing in protecting your IP. So our positioning in the mix of products that we had in the market I really do help us whether in store.

Great. Thank you Jack next question.

The next question comes from Peter Christianson of Citi. Please go ahead.

Thank you good morning, gentlemen.

Hoping you could talk.

Hoping you could talk about as you as you moved into April if there any noticeable changes in user engagement weather and Loggins. Our time spent on the platform at and T. discussed that by by the major product categories that that would be helpful. Thank you.

Let me make it really simple. Thank you we measure by day by every product the input.

She is critical for us obviously and the output in every case, it's up flat or up.

Input is actually up as I mentioned in my script.

For updates Dave several examples and output is the highest we've ever had I think that one of the things it's interesting and I think we're all learning.

About what's going on this new world of work from home people actually have more time and so they're looking at using our products probably better than they ever out as they do that we're all hopeful that they'll stick with that when and if they go back to the there.

There are workplaces away from home so that feels very good and in fact, that's the first thing we all look at every morning, we get a full.

Update from Singularity project, which is making great progress and were very thankful to have that and then for MRI T. organization. So we feel very good about that we measure that like I said by product by day and see really in total.

Were up from where we were before this all happen. Thanks next question.

And our last question today will be a follow up from Seth Weber of RBC capital markets. Please go ahead.

Hi, Thanks for taking the followed by it was kind of along the same lines and what you just address Jared I just kind of wanted to ask about you know now that China is starting to stabilizing and kind of come out of this you know what.

You know is that a fair parallel to think about how you think the rest of the world will react and you know.

Lessons learned in China relative to kind of how you see the rest of the business I guess kind of coming out of this I you may have just address that but if you have any any additional thoughts there. Thanks.

Thanks, Seth, but it's a good one to wrap up but.

We were fortunate and one standpoint, I happen to be a with the Jeff and boats are and others in Bangkok.

On January 15th and 16th.

And that happens to be our Asia Pacific sales kick off and we heard we were hearing before the rest of the world early a lot of what was going on so we started to prepare for that literally on that day.

Hi, Dan flew from there to London to have a special board meeting so we could get a approval to do the DRG deal, which we did.

Flew back the teams were often running I couldn't be prouder of all the work that was done Oh, we did pay a lot of attention to David Lou Our outstanding leader from in Asia Pacific of what they were seeing at what they were doing we were high.

Having every other day calls and we put in place an everyday call. That's now gone on for seven eight weeks.

That makes it with worldwide.

Teams from each of our locations and the location leader that we get updated on everything every day and it and we've used a lot of what we learned in China, including all the game plans we have in place when we go one our people return to our offices as a rule of thumb by the way on that.

Well wait at least three weeks after.

Our government makes a decision for returned to office well wait at least three weeks before we do that and I must say, it's a bit incredible for me I I've done. This you all know a long time never gone through one like this nor never out by senior team react.

And do better than what we did if you think about us having about 6200 people yeah I'm different countries all over the world all working from oil and working well it was an amazing accomplishment and one I'm very proud of and as I said as we move forward for the balance or 2020 and then.

2021, I'm more enthused and excited than I think I've ever been about the position were and where we're going to be and how we're going to get there. So I think you all very very much for the morning wish you all while stay well more to come thank you operator.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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