Q2 2021 CLARIVATE PLC Earnings Call
Yeah.
Yeah.
Good morning, and welcome to calibrate the Q2.2021earnings release conference call all participants will be in listen only mode.
Did any of the assistance mixed signal of the conference.
In France, the Sunny Smith by pressing the star key followed by zero.
After today's presentation of the we'd be an opportunity to ask questions.
The question you May Press Star then 1 on the telephone keypad to be sort of your question. Please press Star then 2.
Please note today's event is being recorded.
I would like to turn the conference over to Mark Donohue, Vice President Investor Relations. Please go ahead.
Thank you and good morning, everyone. Thank you for joining us for the clarity of second quarter 2000 of 21 earnings Conference call with me today of Jerry debt Executive Chairman and Chief Executive Officer, Richard Hanks, Chief Financial Officer Mukhtar.
The Ahmed President Science Group Gordon Sampson President of IP group, all will be the Apple take your questions conclusion of the prepared remarks as a reminder of the conference call is being recorded and webcast and is copyrighted property of clarity any rebroadcast of this information in whole or in part without prior written consent of clarity is prohibited.
This morning clarity of issued a press release announcing.
With the results for the period ended June 32021, the release as well as an accompanying supplemental presentation is available on the Investor Relations section of the company's website <unk> dot com under events and presentations.
During our call we may make certain forward looking statements within the meaning of the applicable securities laws such forward looking statements involve known.
The unknown risks uncertainties and other factors that may cause the actual results performance or achievements of the business or developments of <unk> industry to differ materially from the anticipated results performance achievements or developments expressed or implied by such forward looking statements information.
Information about the factors that could cause actual results to differ materially from anticipated results of performance can be found in classic styling.
For net at the center of the company's website.
Our discussion will include non-GAAP measures or adjusted numbers, including adjusted revenue adjusted EBITDA clarity. Please non-GAAP results are useful in order to enhance the understanding of our ongoing.
Operating performance, but they are a supplement to and should not be considered in isolation from or the substitute for GAAP financial measures.
Following the reconciliation of these measures to GAAP measures are available on the earnings release and supplemental presentation on our website.
After our prepared remarks of open the call up to questions without the pleasure to turn the call over Gerry. Thank you Mark and thanks to all of you who are joining us. This morning, we had a very busy eventful and exciting first half of the year.
I'm very proud.
All of our team has accomplished in addition to the positive financial results. We are well ahead of schedule on the integration of CPA Global we've identified an additional $25 million net cost synergies, taking the CPA program to $100 million, which we will deliver.
Our track record of success.
With the quickly integrating acquisitions gives us the confidence of bandwidth to do more M&A.
This certainly includes the proposed acquisition of probe question for an acquisition. We are very excited about we've also made excellent progress in our customer account transition inside sales and the global business centers.
Proud of and we launched several new and enhanced product offerings, including a new web of science platform. We also completed our first colleague engagement and customer delight survey for surveys for 2021 and issued our first ever annual sustainability report.
My colleagues continue to be.
<unk> really energized and our percentage of the.
The best information service companies and 1 of the very best places to work of the World.
Turning now to our second quarter results.
Adjusted revenue for the second quarter was up 57% to $447 million.
Constant currency basis.
The higher driven by the acquisition of CPA global and organic revenue growth of 5% organic transactional revenue increased 16% and organic subscription revenue increased 1.5% of constant currency as we have consistently said, we expected subscription growth to be lighter.
<unk> in this year's second quarter after a strong first quarter.
Our first quarter increased 6% due to the timing benefits that were realized in this year's first quarter for the first 6 months adjusted organic revenue increased 6%, which is the better reflection on our performance and normalizes.
The COVID-19 related events in 2020 as.
As a result of the favorable first half we've tightened the range of our 2021 outlook. We currently expect ex of the fourth quarter with organic revenue growth towards the upper end of our 68% organic growth target for the.
The second quarter adjusted <unk>.
EBITDA was $189 million.
Up $89 million from the prior period, our adjusted EBITDA margin continues to improve at 42% compared to the 36% in last year's second quarter. We also delivered strong adjusted free cash flow in the second quarter of 95.
$5 million and $259 million for the first half of this year, both up more than 100% over last year's periods, Richard will cover our results in more detail soon.
May we were pleased to announce our proposed acquisition of Pope Quest, which we continue to be very excited about the.
In the nation will enrich our value chain across research lifecycle with solutions across content analytics and workflows with our highly complementary products, we will be an even better position to serve the evolving needs of researchers learners and innovators.
In academia governments corporations schools and libraries around the world. This proposed acquisition will strengthen the clearer of its revenue and EBITDA growth and we anticipate it will further enhance our subscription of reoccurring revenue base. Additionally, we expect this transaction to result in double digit.
The caution to clarify interest earnings.
Late yesterday, we received the second request from the FTC in order to help them analyze this transaction we are cooperating with them fully we remain confident that after the conclusion of this process antitrust concerns should not interfere with our acquisition.
A quick question in any significant way.
We're hopeful we can complete the proposed acquisition in the second half of this year.
Since acquiring CPA global 10 months ago. Our team has swiftly brought our 2 organizations together we are more than 4 months ahead of schedule and have identified as I mentioned.
<unk> of Prolia and the additional $25 million of cost synergies. Therefore, we will deliver $100 million of savings compared to our original estimate of $75 million. The majority of the additional savings is coming from facilities rationalization and our digital workforce transformation project.
And as I said before we've made great progress in our cost of customer.
Customer accounts of transition into inside sales and global business centers were nearing completion of the first phase was 80% of accounts of 20% of our revenue being served by the centers, including DRG and CPA of global customers.
Our plan is to continue to expand this capability, leading to higher sales and leading to client retention rates of improvement in April we launched 1 clarity of critical shift of our strategy, we're transforming from being a collection of distinct market, leading products and services to become.
As a key partner to our customers by delivering the critical data insights and workflow solutions, coupled with very deep domain expertise that our customers need to drive their innovation and their businesses with confidence with our customer focused facing activities focused on 5.
The company does producer customer segment, we're now training our colleagues at the sales on the segments. For example, understanding the industry the industry dynamics of a subset of segments and key organizations, we're teaching our sales folks to gain better understanding of the roles and responsibility.
By the end of our users of our customers and their customers, helping us to build further credibility as a trusted adviser and importantly, the combination of the move to inside sales and our 1 clearly the strategy is expected to help push our retention rates higher.
The lead our transition to 1 clarify <unk> across all.
All sales we welcome our Chief revenue Officer, Steve Long hole Thompson, who will join clear of a starting August sector. In this new role at our company, Steve will be responsible for driving global revenue and customer customer engagement, you will align our sales teams under his.
The leadership, ensuring that we pursue a 1 clarity of approach for new business and with our existing customers.
In May we completed our first of 2 colleagues colleague engagement and customer delight surveys this year for.
For this year, we're in pursuit of becoming and being recognized as 1.
Of the best places to work in the World to get there. It is essential that we regularly listened to enact on our colleagues' feedback 1 of our core values as we value every voice.
Had terrific survey participation of 88% and more than 6000 write in comments.
Personally read as our leadership team has every comment and they're very helpful. For us as you can see we have a highly engaged workplace for which I am very thankful of this past year has taken a toll on each of us in dealing with the pandemic and both of our personal and professional lives Julie Wilson.
Our new Chief people officer joined US in April as working with 13, and many leaders across the organization and developing new options and ideas to promote and enhance our colleagues wellbeing and work life balance I look forward to sharing our progress with you our customer delight score.
Score and the recent survey came in at 75 as compared to a score of 76 for 2020. The last year brought many of unique challenges such as the global pandemic, along with economic fluctuations and societal unrest to name just a few comparing our score across.
Across other industries, we saw 1% to 3 point decrease worldwide, which means our results are the very top of the global trends, we did see a number of positive developments, including a higher court.
Proportion of positive rating comments versus the opportunity areas. We also received strong.
<unk> scores for quality of products and services and information and insights. Additionally, we're very pleased to see Drg's delight score improved 5 points under our ownership.
We will run the second colleague and customer survey and the Paul and we'll share those results with you at our November 9.
Virtual Investor day.
Turning to our 2021 outlook, we are tightening our revenue and adjusted EBITDA guidance because of the strong first half let me give you a bit of color the frame how we see the second half of this year organic revenue in the first half was almost 6%.
<unk> currently expect to deliver 6.5% to 7% plus in the second half of this year with the big pickup in fourth quarter compared to the second and third quarter of what's driving.
Diving the increase is the important reminder, 60% of Drg's business comes in the second half of the year with 60.
<unk> percentage of this in the fourth quarter, we will also benefit from a full quarter of organic growth from CPA global in the fourth quarter and realize the benefits of the cost synergies that will drive significant margin expansion in the fourth quarter. Additionally, transactional revenue is seasonally strongest in.
For the fourth quarter. These items together will drive of our organic growth rate into the upper end of our 60% target rate existing exiting 2021taking all of this into a kind of adjusted revenue guidance is now $1.8 billion to $1.8 4 billion adjusted.
<unk> EBITDA is now $795 million.
To the top of $825 million adjusted EPS is now expected to be 70 to 74.
This is due to a higher fully diluted weighted average score count for 2021 is the result of.
Just in the primary and convertible share offerings with proceeds which are intended to be used to fund. The proposed acquisition of the progress. There is no change to our adjusted free cash flow of $450 million to $500 million I'll now turn the call over to Richard.
Thank you Jerry.
Adjusted.
Of our June use for the second quarter with $447 million, an increase of $170 million of 57% of constant currency compared to last year's same period. The increase was primarily driven by the acquisition of CPA Global last October and a 5% increase.
And organic revenue at constant currency the gain was partially offset by the Tech Street disposal last November.
For the second quarter of the foreign exchange impact on revenues was a very favorable for 3% due to the continued weakness of the U S dollar as compared to last year's second quarter.
Subscription revenue.
It was $244 million, an increase of 8% of constant currency, primarily driven by acquisitions and partially offset by divested products.
Second quarter organic subscription revenue growth was about 1.5% of constant currency organic subscription growth in the second quarter was primarily impacted by timing.
<unk>, which we benefited from in this year's first quarter, when we delivered an increase in organic subscription revenues of 6%.
For the first 6 months of 2021 organic subscription growth increased 4% of constant currency.
The subscription revenue renewal rate at the end.
End of the second quarter was 91% down less than 2% from last year's second quarter approximately half of the decline can be attributed to an IP customer cancellation.
Obviously disappointed anytime a customer cancels, but we are optimistic that we'd be able to serve this particular client through other channels.
Including on the transactional and services basis.
ACB growth at constant currency was 8% for the second quarter as compared to the same period prior year, which includes acquisitions of <unk>.
Organic basis ongoing ACB increased just over the 2% at constant currency.
Transactional revenue was $90 million, an increase of 49% year on year on a constant currency basis, primarily driven by our acquisitions, but also organic growth organic transactional revenues increased by $10 million or 16% at constant currency due to strength in.
Our professional services business, which increased 11%, including a strong performance from HTS, All health care and data solutions unit previously known as DRG and an increase in trademark search volumes in <unk>.
We continued to see a nice recovery in this segment of our business with the transactional.
You use increasing 13% on a constant currency basis for the first 6 months of 2021 we're.
We're seeing a subtle shift in the growth profile of the transactional business compared to subscriptions, which transactional revenue growing at a faster rate and we believe the sustainable.
The increase is primarily across health.
Data services and the life Sciences segment, we serve many of the largest customers within the healthcare space, including the top 50 life Sciences companies, we have established senior relationships and transact on a repeat basis with the small key client base.
Reoccurring revenue.
Revenue, which is the right from the CPA Global patent renewals business was $114 million in the second quarter with no stake for the comparative period as the <unk> business was acquired in October 2020.
Subscription plus reoccurring revenue accounted for 80% of adjusted revenues in the second quarter demonstrating.
Predictable and reliable revenue model.
Turning to the business segments.
Ganic revenue growth within the science group for the second quarter increased by 5% or $10 million driven by strong transactional revenue growth due to strength in professional services and backfile income.
Hi, custom data sales.
For the IP group second quarter organic revenue increased by 3% or $3 million on a constant currency basis, primarily due to an increase in transactional revenue from entry from improved trademark search volumes.
Geographically.
Customer revenue growth in the Americas for the second quarter was almost 9% of constant currency, primarily driven by the strength in transactional revenue.
So both EMEA and Asia Pacific regions organic revenue growth from the second quarter grew less than 1% with these regions favorably impacted by the timing benefit.
<unk> of 7% increase in each region in this year's first quarter.
The customer cancellation of the IP group also impacted the lower growth rate for Asia in the second quarter.
Adjusted EBITDA for the second quarter increased by $89 million to $189 million driven by contributions from acquisitions.
Of the organic revenue growth and strong margin flow through and the benefit of the cost saving initiatives.
Adjusted EBITDA margin once the growth once again improved up to 42% for the second quarter up 610 basis points versus prior year.
Cash taxes in the second.
<unk> 2 of $10 million compared to $3 million in the prior year period the.
The increase in cash in cash taxes. This quarter was due to the addition of CPA global and lower tax payments in last year's second quarter. As a result of the Covid pandemic, whereby U S. Federal estimated tax payments were deferred.
Second quarter until July of 15.
Adjusted net income increased by $41 million to $110 million for the second quarter, while the adjusted EPS declined by <unk> <unk> to <unk> <unk> compared to the prior year period the.
The decline is due to the significant increase in wages.
For the new shares which increased by 247 million shares primarily related the ordinary share issuance for the CPA Global acquisition in October 2020.
Capital expenditures in the second quarter were $29 million.
A decrease of $4 million compared to the prior year period.
Primarily due to additional COVID-19 related equipment spend in last year's second quarter as compared to this year's quarter.
Adjusted free cash flow was $95 million in the second quarter, an increase of $54 million compared to the prior year period, driven by the strong operating results and an improvement.
Moving to the working capital for the first 6 months of 2021 adjusted free cash flow was very strong at $259 million, an increase of $139 million over the prior year period.
We ended the June 30 of 2021 period with $2.6 billion of cash.
Behind an increase of $2.3 billion from the prior year period. This is primarily primarily the result of the 2 billion equity offering in June to fund the proposed acquisition of part of Quest.
Additionally, we added $2 billion of restricted cash in the second quarter. This represents the cash in escrow.
Cash from the June debt offering of $2 billion with proceeds also targeted for the acquisition of credit Quest.
The recent debt offering is shown as a current liability on our balance sheet until we closed the proposed acquisition.
With that I'll now turn the call back to Gerry Thank you Richard and conclusions.
In the first half was a really great start for us this year and we are eager to deliver even better results and achievements of the second half again I want to thank all of our colleagues from around the world who continue to do great things every day, we're now ready to take your questions. As a reminder, please limit yourself to 1 question.
<unk>, then return to the queue operator of the fleet.
We will now begin the question and answer for them to asked the question you May Press Star then 1 of unintended from Keybanc go away from.
Your question please.
Yes.
The first question is from Toni Kaplan with Morgan Stanley. Please.
Yeah.
Thank you so much just wanted to delve a little bit more into the science organic growth I agree with 5 per cent. This quarter, there and embedded in that you of DRG, which is growth accretive. So is that implying the legacy business is growing roughly around let's say for.
For person and mostly all from pricing just wanted to understand the the different pieces going on within science. Thank you.
A great question, Tony Richard will start to move for our own pick up on the.
Good question. Thanks.
We acquired and for.
We acquired in February 2020, the.
Go ahead of LNG business, which we've now renamed HTS.
As you can see from the 10-Q that we filed pre market HTS grew 18% in the second quarter.
Foster growing assets.
In the not very attractive life sciences space in the second quarter.
The.
The other elements of weapons. The other elements of the science group being web of science in particular.
Didn't have the same level of growth that we generated in the in the first quarter, principally due to timing because we obviously renewed our subscription base on a more timely basis in Q.
Q1, as compared to prior year. So there was a lag effect into the second quarter.
But all in we're very satisfied with the science product group performance and as you said 5% growth.
For the quarter impressive results and most importantly, the pipeline for the life Sciences business is looking particularly strong for the.
The second half of the year.
Once we get booked are off of view as well.
All of it too but.
Let's go ahead for the next question Tony Thanks, So much.
Thanks.
Next question please.
The next question comes from George Tong with Goldman Sachs. Please go ahead.
Hi, Thanks, good morning.
You touched on progress with transitioning to inside sales and new product launches the meat in the quarters such as the new web of science platform can you elaborate on these areas and other initiatives that you're working on that should help.
Accelerate organic constant currency revenue growth.
Over the remainder of this year.
And to the high single digit range over the long term.
Yeah, Great question and Richard picked it up we were talking about just before.
The call this morning.
So I think the structurally the.
The transition.
<unk> to 1 tower of 8 and the focus on the 5 industry segments or customer segments. The Jerry referenced earlier well ensure that our sales organization is is really a tune to supporting our clients in those particular verticals in being a truly value added solutions provider number 1 number 2.
As we focus on price realization as we look into 2020 to.
Jeremy <unk> Gordon and myself have reviewed our pricing algorithms for next year and we're very confident that we will realize plus 4% across the portfolio next year.
The transition to inside sales.
Structurally very important we are.
Moving approximately 20, we've moved approximately 25000 clients accounts into inside sales in all 3 global business centers Chandler, Arizona, London Slash Bell grades for EMEA, and then Penang, Malaysia that will generate a strong.
The interface with our clients, particularly in the long tail, which will drive improved retention rates. So.
Those final pieces within include professional services, particularly in the life Sciences space. We also see some really attractive opportunities in the IP, So I think professional services, which.
<unk> and on previous calls not just being important transactional growth for us, but also giving a vehicle for us to sell subscription products and behind US is a really important interaction we have with our clients. So those would be some of the elements.
We have that support second half.
Growth, but also our expectations with respect to organic growth in 2022.
We'll talk more about it on November 9.
Virtual conference moving cargo back and picked up if you would.
The Tony's question than anything you'd like to add to the Georgia is too.
Sure happy to do so I'm, not going which you just touch on most of the important elements, but the key thing here is we continue to invest in our products. We continue to invest in our world class data assets and.
We released the number of.
New versions of some of our.
Products, particularly the new web of science clock for which.
It really enhances the personalized experience for both researches and research practitioners and I think this in combination to some of the investments that we're making in the life Sciences discovery and preclinical and pre.
The stage I think all of those will pay the dividend terrorists as we roll those out and drive adoption in you know in our no long standing customer bases. So we would expect we expect to see some of some good growth there.
You know in the remainder of the year instead of going into next year.
Thanks, Mukhtar Gordon just picked up if you would on the efforts that are underway with you in the car.
Of the consulting if you will professional services as we bring that into IP.
Sure. Thanks, Gary.
The approval working looking across the organization to see where we have both strength in depth.
Capability.
Looking to see where we can look at those market verticals, where we deeply understand the client requirements and pull together, both the consulting and professional services group that's focused on client solutions.
I think the quotes from the past.
The personal services sales products and that's absolutely true and I think we have a much greater opportunity across the IP <unk> science business for acting as 1 in that space and both consulting on the professional services I'm pretty excited about that Gerry.
Thanks, Gordon just 1 other quick comment.
For the next question please.
We talked about the 5 global markets that were going in.
For the fourth.
Just with the.
The <unk> will be already off and running it is the $102 billion total market potential for us through those 5.
2 of the largest of where we're strong today.
The 26 billion at 33 billion faster growing so that makes it a very exciting step for the great question George Thank you next.
Okay.
The next question is from Manav Patnaik with Barclays.
Barclays. Please go ahead.
Thank you good morning.
Was just hoping you could just refresh us with any of the cadence of growth that <unk> seen the DRG and CPE.
The vs.
Last year, because I know they both were impacted obviously by Covid and obviously the acceleration is.
The reason for your kind of fourth quarter optimism as well. So I was just hoping that 18% of you talked about for.
<unk> I guess, how has that changed and then maybe something similar for the CPU.
That's a great question I'll have Gordon commented the CPA the minute we're done.
Lighted with him leading our it might be.
<unk> ears of experience from from.
From CPA, but move targets.
Troy of sharing the great progress that we've made with DRG.
We are at and where we will go into the second half.
Sure I mean last year, you know of course, we were in the throes of our of the pandemic.
And I think the real.
Also in the many of the economy is kind of slow down and shut down the decision making was was to a large extent so with DRG. What we saw was was low single digit growth last year.
And now this year our growth is being.
So in the in line too.
The industry.
From a lot of demand certainly in the post approval space.
The consequence of that.
Real World solutions, particularly in that healthcare space of.
The performed extremely well and we expect those to continue to do so.
And then the other really is really in the medical technology space that market is certainly.
Quite buoyant. So we've had really good success there in the game the growth there was in line to.
You know what we you know seeing by way of market dynamics and also in response to just customer demand here.
And you know as I said earlier, there's also revolves around the investments that we've made in terms of enriching the honor of that takes the experience. The data I know to me the value that we're creating through our assets for our customers.
So great start much more to come.
Gordon.
The b.
Yeah.
Thanks, Jerry Thanks for yourself, so on CPA, a similar story during the Covid intensive period, where there were impacts on some of the transactional business, which of course is the smaller part of the legacy CPA business.
Southern plants by pruning our portfolio.
And so reducing some fulfill the numbers in the core of annuities business.
Those of those factors the changed as we been emerging from Covid.
We've seen a very strong performance out of all this year and we expect a CPA coming towards the end of this year to be in the.
Historic growth.
Totally out of that you've seen before in the 5% to 6% range.
And the other thing which is making that.
Feel good is we're focusing on integrations between products not just with CPA, but with car of the 8 in the CPA, where the combination of our products gives us a much greater opportunity to penetrate new.
New parts of the market. So those 2 dynamics together make me feel good about legacy CPA performance, but more importantly, I'm positive about the IP group performance in H 2.
Thank you thanks, Matt.
I'd add 1 thing to that because of what.
What we've tried to point out is that the fourth quarter is the way the.
Randall plays out our strongest quarter will be that's why we've got the high confidence and ending exiting 'twenty 'twenty 1.
For end of the 6% to 8% organic we're tracking the part of the day of confidence increases each day and then the other thing I'd just.
Just add is that as we leave a 2021into 'twenty 'twenty 2 of the changes that we are making particularly when you think about the inside sales and all the efforts there.
We will see that reflected in Q1 and Q2 because of a large percentage of.
This amount of duals, particularly on the very long tail that we have of smaller customers comes up that's where the weakness has been in historically.
And that's why we're so pleased with the progress on the inside sales. Thanks, Matt next question. Please.
The next question is.
Is from Shlomo Rosenbaum for go ahead.
Hi, Good morning, Thank you for taking my questions, Hey, I noticed this.
This is the change in <unk>.
Kind of the 1 has to have fall fallout of the EBITDA was supposed to be the 40.
258 is now moving to $44.56.
Is there something changing operationally in the business that is making it that youre, having more of the EBITDA in the first half of the year than expected or is there just some kind of timing issues that are happening I'm trying to understand because like the.
As you know the strong EBITDA.
Peter It implies a little bit on the on the forward basis that maybe things would go down a little bit I'm trying to understand if there's a pull forward or a shift or just what the dynamics are there.
No great question, just as a refresher.
My script I said, you should think about it. This is as close in my 42 soon to be 40.
The queers, leading public companies I've ever gotten to giving quarterly guidance and we need to do that but everything's going on what you should have heard from my comments was Q3 will be pretty close to where we are with the work.
With where we were with Q2 and Q4 will be very strong as well as.
Tuesday, and it actually part of it Shlomo is timing only from the standpoint of all of the cost savings that we got remember we increased another $25 million with CPA etcetera, great question of pick it up Richard.
Yeah. So on the revenue profile, we have held for the 40 gig.
52, <unk> 2 split, which we explained in the first quarter of results.
Youre right. We did say 40 to 50 out of an EBITDA excuse me.
We know of 44.56 was slightly ahead of of why we are expecting to be which is a positive feature of our results for the year.
And as.
We I said, we've executed flawlessly on the integration of CPA global into the portfolio as Jerry referred to in his script, we've increased our run rate cost savings target for that business from our commitment of $75 million exiting this year to $100 million exiting this year and we will.
As we have done in the second quarter, you will continue to see sequential quarterly margin EBITDA improvement in Q3, and then obviously peak margin in Q4, when we get the superior revenue results flowing through to improve margins. So.
We see it as a positive feature of our results.
All of them.
And thanks for asking because that that shift in places 1 debt will really reflect the Q4 youre going to see what this business model can do when we get the kind of top line growth that we expect to get.
And you'll see very significant improvement.
But with the margins as we exit 'twenty.
'twenty, 1 and then we're going to continue basically with the same.
Present.
For first half second half of it's you'll see as we go into 2022, but well clear of that up with guidance.
That will give on November 9th Thanks Shlomo Great question next please.
Yeah.
Well, Dan if you have a question please press the number.
1.
The next question is from coming from a variety with Jefferies. Please go ahead.
Hi.
As Mary of court of Lockheed filling in for Hamzah.
Could you just talk about how your contract renewals work and specifically, how you think about annual contracts switching to the multi year.
And maybe the pricing that's associated with that.
Correct me, if I'm wrong, but I think the maybe 70% of your contracts of annual today.
And just maybe you can give us an update on that figure if there's any change yeah.
Yeah, Great question, Thanks for picking up Richard you're spot on on the 7 day, Yeah. You'll profile is correct I'd also add that with respect of multiyear contract renewals, we all mud.
Much more disciplined now in ensuring that we have.
The price increases baked into those multiyear contracts and what we have done what I've done historically, what we as a team of done collectively in our different experiences is also give a.
The commission bonus to a sales colleague the.
Delivers a multiyear contract with an annual price increase.
Baked into it and that is expected to be that is essentially our policy.
So.
As you know sort of the book when you use in the first half of the year.
So we got 30 percentage of the book still through new and H 2.
But what you will see in the second half of the year of its a real focus.
Focus on driving net installations.
2 H, 2 and driving the entry rate going into the first quarter of 2022 to drive that year on year of growth, but so yes. It is.
Good question Andrew.
70% of the book.
And a very very strong focus on delivering.
Price increases into our multiyear agreements I'd just add 1 thing just thanks, Richard the what he said is.
In general we're much much more disappointed on everything we do for.
From a selling standpoint today than we were including particularly what Richard just touched on and I am very pleased.
The progress and with the addition of <unk>.
Partnering with the Richard Gordon look tired of myself the rest of the team will continue to see that discipline, improving everything that we do from an organic standpoint for years to come. Thanks next question. Please.
With the price.
The next question is from Andrew Nicholas with William Blair. Please go ahead.
Hi, Thank you for taking my question.
Was hoping you could just spend a bit more time on or provide a bit more color on the client loss impacting renewal.
The rates just curious kind of what the driver of that decision was the nature of that relationship and maybe how we should think about that revenue impact on a net basis because it if I heard you correctly I think you said that the.
You expect some of that hit.
Hit to come back in the form of transactional revenue so any additional.
And on what happened there would be great.
Learning lesson for sure Richard will start and Gordon I'll close it up good question. Thanks.
Yeah. Thanks, Andrew side of it was the relationship in Asia.
Hum.
A per 1 renewal there was a change in scope of the.
The clients.
And so we will be working with them going forward in terms of what additional data and services. We can provide to meet their needs. We do have an ongoing transactional relationship with them that we need to the fact that frankly build upon but it was essentially.
Color of the change in scope.
And the we obviously you need to now respond to but the Golden can provide some more color and just as a refresher for everybody Gordon's has done a great job for us.
Leaving the Asia Pac for the first 6 months, that's the first place we have set up.
The 1 clarity it's got a great job now it continues to have that.
And of course of very pleased that he's got IP Gordon please.
Okay.
The army.
Gordon you're on mute.
So all of sell the.
The intelligence has completely the.
Thank you for the summary of Richard which is spot on.
The thing I would add that.
We do the deep have an ongoing relationship side. This is the long standing clients and remain the longstanding client the change of scope and process within their operation is what principally drove the ability.
The to find the way to make our existing caught up in the service and not part of our relationship work for them.
We are actively servicing them elsewhere and indeed, we are participating in a couple of all of Rfps, which are in the market for them. So very active relationship.
We have opportunity to Regal.
<unk> business that it may not be in the same product line, but there is substantial opportunity within that client.
And some of the subsidiary organization. So we're very focused on that and age to the as we enter 2020.
And the last thing I'd add to that thanks for the question.
We've built in any.
The loss of revenue from that.
The annual or biannual actually subscription base into the numbers that we're talking about today. Thank you of great question.
Next question please.
The last question is a follow up from Shlomo Rosenbaum.
With me.
Sir Please go ahead.
Hey, Jerry Thanks for taking my questions again here from the last Guy here here are you still get a hold me to just 1.
[laughter] I've never of held you successfully so much.
[laughter] alright.
So I'll just start of world.
It's a little bit.
Just on the pro quest of a couple of different questions. There number 1 it looks like you know.
<unk> wise.
This is slipping a little bit it seems like that's what's happening just in general are there any significant concerns about.
<unk> the regulatory approvals.
With the get this deal done and then just as the second.
Second thing just in the regulatory wise outside the U S. There's been a big China crack down on all kinds of verticals.
Verticals and.
The point from Pro question is your ability to take pro question to the clients that you have there in China.
Are you anticipating any issue from what's going on in China in terms of potentially impeding the cross sell on that side.
Yeah, no great question.
I'll just start with the first part of your of your part of day Shlomo.
But the I think the say I'm just kind of re read.
Because I want to stick to the script with it.
We received the second request from the FTC yesterday to help them analyze this transaction further we're cooperating with them, we're very well prepared for that we remain very confident that after conclusion of the process antitrust concerns should.
Would not interfere with our acquisition of probe question in any significant way and as I said working for.
We can complete the proposed acquisition of the second half of this year or so.
I think we're good.
Shameful of cooperate with them in every way, we can and look forward to getting.
Getting our debt really exciting editions of our company the.
Good day.
The question I'm going to start in the.
Then I'm gonna have moved Char and Gordon both comment out of China.
I was delighted by the way if you have not read you should take the new ambassador.
From China, who was appointed in appeared yesterday for the first time.
Read what he said it's interesting it's the first thing I have seen really positive.
In the last couple of months very conciliatory. So that that's always welcome to see but book charge you start and then Gordon you close it up because it's.
Question for Us.
Sure happy to do so hey, Shlomo.
Listen I think I think the way the way to look at this is that the there will be no change to how we do business.
In China, you know, we have you know fabulous relationships day and long standing customers.
The way, we're very strong in academia, we're strong in life sciences and across the corporate sectors and you know, we we we value those relationships now and in terms of how we operate them. You know we have strong governance in place, we've got strong business and corporate controls and you know we abide by the set of.
Values in terms of how we operate as the business and we will continue to operate against those and we'll continue to work in China of in that part of the world. So we at this stage don't you know I don't foresee any issues in terms of screen of how we act behave and upgrade to the you know in that part of the world.
The chart <unk>.
Gordon and wrap it up.
I would say all of the right total notes I would just out of couple of things I think our approach to monitoring both locally as well as how we manage monitor from government.
Regulations all of the World, China, obviously of the topic of the question is very strong.
And I think our local team all very well connected to the marketplace.
Some of you all said no change in our approach the business, which we feel is well placed and the fact.
Very excited by the protocols the acquisition, which we feel fits very well without approach in the Chinese market.
Thanks, guys.
And I'm going to close just thinking you. All are just 2 quick comment I'm feeling really good about our progress we've done so much made so many changes all of which are now starting to bloom or are booming. So as we exit 2021 and I.
Think back to when we went public on May 14th the 2.
2019 progress is huge and will continue to make that will deliver the kind of numbers that are U S. A.
The sell side and investors deserve and we expect to see that to come for your.
Yours to come but I'm, just so pleased with the progress. Thank you all very much.
And that concludes our call. Thank you very much.
Yeah.
The conference call of Jessica concluded thank you for attending to.
This presentation in the May now disconnect.
[music].
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