Q3 2021 CLARIVATE PLC Earnings Call
Good day and welcome to the clarity <unk> third quarter 2021 earnings release Conference call all participants will be in a listen only mode.
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Please note. This event is being recorded I would now like to turn the conference over to Mark Donohue head of Investor Relations. Please go ahead.
Thank you Betsy and good morning, everyone. Thank you for joining us for the declared a third quarter 2021 earnings Conference call with me today are Jerry Scott Executive Chairman and Chief Executive Officer, Richard Hanks, Chief Financial Officer, Mukhtar Ahmed President of Science Group, Gordon Sampson, President IP group, and <unk> Mimo Thomson Chief revenue Officer.
All will be available to take your questions at the conclusion of our prepared remarks. As a reminder, this 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 issued a press release announcing our financial results for the period ended September 32021, the release as well as an accompanying supplemental presentation is available on 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 the applicable securities laws such forward looking statements involve known and unknown risks uncertainties and other factors that may cause the actual results performance or achievements of the business or developments in clarity its industry to differ materially from the anticipated results performance achievements or developments expressed or.
Implied by such forward looking statements.
Information about the factors that cause actual results to differ materially from anticipated results or performance.
I'll be standing theories bonds with the FCC on the company's website at.
Our discussion will include non-GAAP measures or adjusted numbers, including adjusted revenue adjusted EBITDA Claret believes non-GAAP results are useful in order to enhance an understanding of our ongoing operating performance, but they are a supplement to and should not be considered in isolation from or as a substitute for GAAP financial measures.
Reconciliations of these measures to GAAP measures are down more earnings release and supplemental presentation on our website.
After a prior prepared remarks, well open the call up to your questions that is a pleasure to turn the call over to Jerry.
Thank you Mark and thanks to all of you for joining US. This morning, we reported improved third quarter results compared to last year adjusted revenue was up 54% to $442 million on a constant currency basis, driven by the acquisition of CPA Global and the Street.
Plus percent increase in organic revenue for the first nine months adjusted organic revenue increased 5% with subscription increasing 4% transactional up 9%.
You've heard US highlight many times this year that we expect a strong fourth quarter with organic revenue growth between six and 8%. We are realizing the many benefits from the transformative acquisition of DRG and CPA global and the many operational improvement initiatives that have been put in place.
Clothing, our insight sales structure and field sales realignment.
With a strong fourth quarter organic revenue growth for the full year of 'twenty or 'twenty. One is currently expected to be in the six to six 5% range.
Over the past two years, we've made significant changes across many segments of the organization, including sales and reorganizing around our one clarity strategy. These changes align us more closely with our customers and the markets they serve.
We continue to invest heavily on improving our customer interface and experience and ensuring that we are providing the best products and services in the industry.
This year alone we have introduced more than 60 product enhancements or new product launches that are expected to improve our revenues and profits in the quarters and years ahead.
We are benefiting from acquisitions, both financially and by offering our customers enhanced offerings, which has helped drive our growth in adjusted EBITDA and margin expansion for the third quarter, adjusted EBITDA increased $82 million to $190 million from the prior year.
The.
Fit of our actions also shows up in the significant improvement in our adjusted EBITDA margin, which was 43% in this year's third quarter compared to 38% in the prior year period.
Continued to generate strong adjusted free cash flow, which was $70 million in the third quarter and $329 million for the first nine months of this year, Richard Ward, who will cover our results in more detail soon.
Since announcing the pending acquisition of probe question May we've been working with regulatory authorities to complete this transaction. We're very excited to get started on the integration work and has spent time formulating plans. So that we're ready to go on day one.
We'll announce once we receive regulatory approval and complete the transaction we remain hopeful that we can complete the proposed acquisition by the end of this year.
In early August we announced a $250 million share repurchase program that was to run through the end of October 2021. This morning, we announced that our board approved the extension of this buyback through the end of January 2022.
Due to the secondary ordinary share offering in September we had to postpone the share repurchase program. Prior to then we have purchased $65 million of our shares in the open market prior to the secondary offering our board is confident very confident in both our short and long term growth prospects.
Leaves repurchasing our shares represent an attractive investment opportunity.
We are generating strong cash flow, which is providing us with the resources to re purchase shares as well as support organic growth pursue value, creating M&A and fund our debt.
Also announced this morning that the board of directors declared a cash dividend of $1 31.
Our strong cash flow also allows us to enhance our portfolio with tuck in acquisitions in August we announced that we acquired <unk>, a leading provider of analytic solutions and life science and producer I'd be off X portal. This acquisition will further our strategy to become an essential provider.
Our solutions for life science companies, along the entire drug development lifecycle and combination with cartel us we deepen the end to end value chain from R&D through commercialization and compensation.
Cartel Us Opex will also strengthen other Claire vape products and services, including our web of science, we have a deep pipeline of tuck in acquisition candidates that we are exploring across both science and IP that can strengthen our product offerings as well as expand geographic reach our goal.
All of us to do to four to five tuck in acquisitions per year, which we define as $25 million of revenue or less.
I am very pleased with how efficiently our team has integrated C. P. A global we announced on our last earnings call in July that we had identified an additional $25 million of cost savings, bringing the total savings to $100 million, we completed $99 million of that savings.
Work through the end of third quarter, and we will exit 2021, having captured all the savings several months ahead of our schedule. Our team has done an outstanding job of capturing cost savings and swiftly folding in acquisitions into our business structure. This includes getting nonpublic companies like CPE.
Global and DRG aligned with public company internal controls and now they are now Sox compliant.
At our upcoming Investor day in November you'll hear US talk a lot about one clarity are one clarity initiative, our customer migration to inside sales and how the field sales force is now more closely aligned with our largest customers. We've completed the migration of more than 24000 custom.
Through our centers of excellence formally known as our global business centers with this now complete our field sales account coverage was further streamline from approximately 60 accounts per person down to 15 kind of accounts for the 250.
Account managers, we are also.
Deploying an additional 100 dedicated field sales specialists focused on accelerating new business sales. This transaction provides many benefits, including enhanced focus on top accounts, which is expected to benefit retention cross sell and upsell opportunities last week, we <unk>.
<unk>, our second colleague engagement survey for the year. The results of this will be available at our upcoming investment day.
We spent a lot of time enhancing our workplace communications and other benefits for more than 8500 of our colleagues around the world. We continue to closely monitor the impact of Covid and are now pleased to report that more than 40% of our colleagues can now access clarity or third.
<unk> shared site. This includes our centre of excellence, which are critical to our success.
We launched the second half of our annual customer Delight survey in early October 1st part was launched in May where we score to 75 are publicly announced goals for 2021 is 77, putting the customer at the center of our strategy is critical to our success. This survey gives us.
Access to the voice of customers, helping us identify immediate opportunities to improve and build on our business. We'll update you on November <unk> Investor day on the recent colleagues and customer survey results. This morning, we reaffirmed our 2021 outlook adjusted revenue guidance is 182.
$1.84 billion adjusted EBITDA of 795 million to $825 million adjusted EPS of <unk> 70 to 74 and.
And adjusted free cash flow will be between 450 million to $500 million.
If you remember we raised the low end of our revenue and adjusted EBITDA guidance twice. This year after our first and second quarter results in total the low end of revenue was increased by $20 million and the low end of adjusted EBITDA was increased by $10 million with a strong fourth quarter, including organic revenue growth.
A 6% to 8%, we expect full year organic revenue growth to be in the six to six 5% range.
Please join US on November eight for our virtual product demo day in November night for our virtual Investor Day, we'll have more than a dozen presenters participating in the demo day covering many of our new and existing products at our Investor day I'll be joined by six members of our executive team, whereby we will up.
Date, you on the many things we're working on including our one <unk> strategy and how we will grow our business. If you didn't have the take invitation please reach out to Mark and Investor Day, now I'll turn the call over to Richard.
Thank you Jerry.
Adjusted revenues for the third quarter increased by 54% to 444.
$442 million at constant currency compared to last year's third quarter, driven by the acquisition of CPA Global last October partially offset by the divestiture of <unk> again lots of the benbow.
Revenue increased by 3% at constant currency driven by increases in both subscription and transactional revenues.
The foreign exchange impact on revenues, which was favorable during the first two quarters of 2021 with less so in the third quarter less than 1%, but the U S.
But all of a strengthened over the last few months compared to the first half of 2021.
Subscription revenue was $247 million, an increase of 11% at constant currency, primarily driven by acquisitions and partially offset by divested products.
The third quarter, a 3% organic subscription revenue increase was primarily due to an increase in subscription revenues in life Sciences health care data solutions and clunky Mark.
Year to date through September organic subscription revenue growth increased 4% at constant currency.
The subscription revenue renewal rate at the end of the first nine months of 2021 was 91% basically flat with a 91% for the same period last year.
ACD growth at constant currency was 9% for the third quarter as compared to the same period prior year, which includes acquisitions.
On an organic basis ongoing ACD increased by 3% at constant currency.
Transactional revenue was $85 million, an increase of 33% year over year on a constant currency basis, primarily driven by our acquisitions organic transactional revenues increased by three percentage of constant currency, primarily due to higher trademark search volumes those search volume slowed during the <unk>.
Due to the summer period.
You'd think through September organic transactional revenue growth has increased by 9% year over year at constant currency.
Reoccurring revenue, which is derived from the Tpa global patent renewals business was $110 million in the third quarter with no kick in for the comparative period as the CJ business was acquired in October 2020.
Starting with this year's fourth quarter CPA Global we included organic revenue reporting.
Turning to the business segments organic revenue growth within the science group for the third quarter increased by 4% right million dollars constant currency driven by higher life Sciences health care data solutions and backfile in custom data sales.
The IP group third quarter organic revenue increased by just over 1% or $1 million on a constant currency basis, primarily due to an increase in transactional revenue from improved trademark search volumes.
This was partially offset by the lingering impact of the cancellation of the government customer in Asia, which we called out during our second quarter earnings report.
Geographically organic revenue growth in the Americas for the third quarter was up 5%.
Asia Pacific was up 2% and EMEA increased by 1% all at constant currency for the first nine months of 2021, Americas was up 7% Asia Pac and EMEA up over 3% at constant currency.
Adjusted EBITDA in the third quarter increased by $82 million to $190 million.
Driven by contributions from acquisitions organic revenue growth strong margin flow through and the benefits of the cost saving initiatives.
Adjusted EBITDA margin once again improved to 43% for the third quarter up 420 basis points year on year, we have delivered sequential quarterly margin improvement. This year attributable to revenue growth plus the cost savings programs, which is driving sequential operating expense decreases.
During the quarter.
We expect to deliver adjusted EBITDA margin expansion in the fourth quarter, driven by higher revenues and the continuing benefits of the cost saving initiatives.
Cash taxes in the third quarter were $10 million compared to $12 million from the prior year period.
Adjusted net income increased by $55 million to $114 million for the third quarter.
Adjusted EPS was <unk> 16 per share compared to <unk> 14 per share in last year's third quarter.
Our weighted average share count to calculate adjusted EPS increased by 72% to 700 million shares.
This is a result of the share issuance the CPA Global acquisition in October 2020, the June 2021 ordinary share issuance and the issuance of the convertible preferred shares to fund a portion of the pending.
Acquisition.
Capital expenditures in the third quarter were $24 million, a decrease of $2 million compared to the prior year period.
The decrease is primarily due to slightly higher levels of put it application development across the portfolio, probably a content contracts as well as some timing impacts from accelerated spend on laptops in last year's third quarter that related to the digital workplace initiative arising from the Covid pandemic.
We continued to generate strong free cash flow adjusted free cash flow was $57 million in the third quarter, an increase of $48 million for the period and for the first nine months of 2021.
<unk> free cash flow was $316 million, an increase of $187 million over the prior year period.
In August we launched a private exchange offer for the three and five eights sorry.
Three and seven eight senior secured notes due 2028 and the.
<unk> hundred 70, <unk> senior unsecured notes due 2029, which were issued in June 2021 for total proceeds of $2 billion to fund a portion of the pending acquisition of <unk> a.
A total of more than $1 8 billion of these notes were tendered and accepted for exchange.
And the equity holders pre quest entered into an amendment extending the outside date for the completion of the acquisition to December 31, 2021, with an option to extend the new outside date April 29 2022.
We ended the September 30th period with $2 $5 billion of unrestricted cash an increase of $2 $2 billion from December 31, 2020, and they were primarily a result of the 2 billion equity offering in June to fund the pending acquisition of pre quest.
We also have approximately $1 $9 billion of restricted cash on the balance sheet.
Which represents the cash in escrow from the June debt offering associated with quest acquisition funding.
Before turning it back to Jerry I want to thank all the members of our accounting and finance teams for all their hard work. This year they've been extremely busy completing the integration of DRG CPA global and a few smaller acquisitions in record time, they've made great progress in improving our internal controls and enhancing our financial reporting since going public.
On behalf of the executive team, we are very much appreciative of directors.
With that I'll now turn the call back to Jerry.
Thank you Richard before we take your questions I also want to thank all of our colleagues around the world who continue to do great things every day with two months remaining in the year. We are determined to finish the year strong and deliver a great fourth quarter and year for clarity, we're now ready to take your questions.
As a reminder, please limit yourself to one question and then return to the queue operator. Please.
Thank you we will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
And the first question comes from George Tong with Goldman Sachs. Please go ahead.
Hi, Thanks, good morning.
Organic constant currency.
On an organic constant currency basis, the transaction revenue growth moderated to two 7% year over year in <unk>, but can you elaborate on the factors other than seasonality that contributed to the deceleration in growth.
Great question, Richard you start and then we will have others pick it up.
Yeah. Good morning, George at the principal drivers were.
Slightly lighter lifestyle isn't DRG transactional revenue in the quarter.
I'd add that we've got a good order book going into the fourth quarter.
Also had this is the seasonality point I will cover it clunky Mark trademark search volumes.
In Q3, principally seasonality July and overseeing the summer months.
We typically have slightly lower volumes.
I think that really covers that well thanks George next question.
The next question comes from Manav Patnaik with Barclays. Please go ahead.
Yes. Thank you I was just hoping you know obviously fourth quarter I think seasonally is usually a big quarter. I was just hoping you could help us just.
The bridge to get a little bit more comfortable with.
You know, both the organic growth and kind of the EBITDA number.
Yeah, Great question, Matt I think.
Let's just start looking at the base of $427 million that we delivered in Q3, which was very consistent with our expectations and to think about the midpoint of the revenue that we've given.
Let's make it simple it says we've got about $500 million of revenue to deliver in Q4. So we're looking at a pickup of $73 million three big pieces are fourth quarter is always up significantly last year. It was up $42 million. So that's the base.
We will operate with as we move forward. It's the first time that will include the CPA and our organic.
Revenue in all in and that will add that happens to be CPA largest quarter for many reasons I'm gonna have Gordon comment on that just a minute.
Then DRG.
If you remember 35% of their total revenue as of Q4.
The love right. So that's the next big piece is simply move Taro will comment on that so that that will put us.
Right Smack on as we would expect and have so far.
500 million to go in Q4, which would be the midpoint of the range Gordon plays.
Thanks, Jerry Yeah, Q4 full CPA.
Traditionally a strong quarter.
We see good performance to plan in recurring income.
Also see good performance and a strong performance indeed in a subscription business and legacy CPA, which of course is supported by.
Our real time implementation professional services that land in the quarter that these are these deals are struck in so we expect to see it on plan and good performance in Q4.
Thanks Gordon Mukhtar.
Yeah, I mean, I think you touched on this journey.
You know typically DRG, which of course now we.
You referred to.
David <unk> HTS.
Typically Q4 is is very strong.
In data analytics and also in consulting we have a consulting backlog that we typically if you remember in Q4.
This also.
Typically.
A number of deals that come through.
But we can vote in quarter as well.
Yeah.
Hello. This is typical of the household segment.
Thanks, <unk>, that's a new voice for everybody. We're gonna have you just make a comment because as I mentioned during my part of the script 24000 of our customers are now in place being operated that are three centers of excellence.
And inside sales give our views staying fresh eyes. If you will of what we're doing as we go into Q4, where we're at and your thoughts on the pickup will get.
From inside sales.
Thank you very much Jeremy I'm delighted to be on this call.
So first of all we have completed the transition of 'twenty Bolthouse and account planning sales, which really means that we can manage how inside sales execution exiting through that improve our retention rates in Q4, and we are really seeing already optimistic signs that we will see that improve in Q.
For this really also means that all our field sales account managers working on all accounts in our territories will have more capacity and more time to make sure that we deliver a very very strong performance in Q4, So really pleased with the configuration that we now have in the business and then last but not least.
We continue to improve our operational rigor and control. So that we can track our execution on a daily basis and make sure that we can take any corrective actions to drive the outcome. We're looking for in Q4 so.
We are pleased with that configuration.
The outlook for Q4 is it's just hard to say.
Got it.
That he mentioned defense Darren.
Thank you and I I must tell you as CEO of the company, having this great threesome of leaders Gordon <unk> is a joy for me.
Because I feel better about where all the work that everybody has done is amazing manners question is a critical one you can believe that we look at it.
Every week actually every day to make sure we're on track with new sales et cetera.
You've done I just step back for a minute that's remarkable where are we right that we did say late last year actually in November last.
Last year.
When we did investor day that we expected to exit 6% to 8% organic growth all in.
With the numbers that we've now presented I feel really good about where we're at the things we have going on and look forward to reporting in February of next year.
Great results that we're going to get in Q4, Thanks, Matt next question.
The next question comes from Andrew Nicholas with William Blair. Please go ahead.
Hi, Thank you and good morning.
First question or actually I guess were limited to one is just on the <unk> deal.
You mentioned still being hopeful that that will close by year end could you speak a bit further to where you are in that process, what what the regulators primary hang ups or at this point and maybe.
Speak to the likelihood of any portfolio changes are required in order to get this through thank you.
Hi, Thanks, I'd love to answer all of that however, I am going to just keep it really simple we've done everything we need to to comply with their request.
As I said, we're very hopeful that we get it closed by year end.
And when we do I'll answer all those questions with Joy as we have it behind us.
Thanks next question please.
The next question comes from Toni Kaplan with Morgan Stanley. Please go ahead.
Thank you.
I wanted to ask a question about the legacy business when I think about the original thesis you had Jerry.
Really high quality assets needed some investment put in cars that historically been underinvested in.
You've been implementing some sales and organizational initiatives and you continue to do so to drive the organic growth.
Just talk about.
The acceleration that you hope to see in the legacy business you know.
Outside of obviously you bought some great assets that are fast growing but just talk about the sort of legacy strengths and if it's sort of we need a little bit more time to see that play out if more investments required or.
Just your thoughts on the sort of overall there were.
Great question, Tony Thanks, So I'll start with boat Charter, then Gordon and <unk>, each with different views on that.
I'm <unk>.
Said in my script that we've actually made we'd probably not done as good a job as we should be on public reporting but.
<unk> six the significant either new products.
Our enhanced products during <unk>.
2021 that is the result of the investments we've been making we're going to see a lot of that play out but the booked here you start then Gordon and then staying because.
Manish question and yours, Tony answer what everybody deserves to know where are we where we're going Little chart. Please.
Of course, Jay so so.
You only have to look at our press releases over the last 12 months or so.
<unk> seen just all of the products like jewelry has just mentioned over 60 release dates.
The major of the oceans or brand new products and so let me just pick out a couple of examples because it does of course take time to release, a new product can drive adoption.
As well as a major versions, but we've made fantastic traction with with those products. So as an example, with web of science, We've got a brand new version of the web of Science next generation. The adoption of that is for long, though we've already seen great traction here.
<unk> primary universities that have adopted it.
The factory standard.
So 2022 unfolds, we expect that adoption certainly to continue.
We also released what we call a minor or my research assistance applications. So that's very much driving access to the power of web of science.
But putting it in the hands of the end user the research.
That mobile application, we released this year, so naturally like mobile applications, we expect those to gain significant traction in the end user community and to drive even more consumption and usage of our data.
Another example is core tennis.
If you take out generics product we've just.
Last quarter release, the supply chain network product, which is designed really to create them.
Our marketplace with generic companies to come together and we use the power of the data too.
Really interact.
Drive.
By changing decisions amongst 70, the API vendors and so the last example, hanes in.
The real World data space, we released a number of data assets against it around co tenants in the regulatory space. So.
All great examples of products, we've released that we fully expect will really drive transformation for our customers.
We expect significant adoption of the motion.
Thanks, Luke chart, just as a reminder, for everybody garden took over IP.
End of last second quarter prior to that he led that an incredible job at CPA. So he's got fresh eyes on the existing products to Tony's question that we had one.
When we took over.
The carve out.
From Thomson Gordon.
Gordon you there.
Yeah.
So you should see.
Let's jump to stay in and then back to Gordon.
Thank you Jerry.
As we look forward I would be thinking about the legacy businesses, both the terabyte, the DRG or the Cta as we moved to one side. This is really what about going into.
Integrated onto the <unk>.
One Brian.
Debate.
And I'm actually convinced as we moved through the one terabyte that we can achieve.
Oh and strategically.
So first of all wanted to practice, we know is that.
Only 30% of our installed base and use more than one product from <unk>. So we have an incredible cross sell opportunity across both the legacy business.
<unk> business and also the CPA business we.
We also know that as we move to one we're going to move from being more product, we're going to be more customer centric in how we approach our clients and how we meet their into it needs and through that we believe that we will be able to accelerate and drive.
The growth of our opportunities across the whole portfolio.
And we have identified.
A significant.
And opportunities that we're looking to drive.
And I think this is going to this performance across all the different areas of our legacy businesses and all of this going to do on the <unk>.
Brand positioning.
One clarity going forward so.
Our significant growth has been laid out for next year and we are very convinced that on the one survey, which we'll talk more about at the Investor day by the way is going to help us drive the growth that we're looking for including the legacy therapy business I think with that I hand, it over to Hugo.
Thanks.
Thank you, Steve and apologies to all my network provided decided I couldnt use my phone for a moment.
Just picking up on Jeremy's comments about relatively fresh eyes.
I can tell you joining carbonite was super exciting on the basis of what we could do together, but let me focus on the legacy product question.
The business has been very busy in the background doing two things.
Third one I'll come to in a moment.
First of all it's making sure that the fundamentals of these leading products saw sound on future. Bruce. So that's doing does hold you're always investing in the sort of speak to an assumption, making sure that the service provision that's offered by these.
Household names like <unk> and <unk> are actually not just today.
Today, but also future brings a lot of that is until then you don't see that the second thing, which you'll beginning to see in the marketplace and some of our success is driven by this now is the.
<unk> integration and making sure that we're using our data assets across product suites on those data integrations bring greater insights and analytics to our customers and that's definitely beginning to yield dividends.
Third thing I would say is that we have now got a very clear and established strategy for how we bring out products together, including our hybrid hybrid cloud journey.
And if you can attend will download the videos some investor day on the product demo days I think you'll then see what we're beginning to do so now bring the next generation evolution of these products to lives.
All the hard work has been about so those are three things I wish Eric.
Okay. Thanks to all three of you I'd just add two more piece.
Pieces to this we said at the beginning that we needed to learn how to cross sell because we have not at all and that we must increase our renewal rates.
I think I feel better today than any time I have in the last two and a half years on both of those subjects. Each of our leadership team just mentioned things that are going on inside of the one clarity, we'll make it no longer cross selling will make it selling packages solutions and youre going to.
Here from <unk>.
Gordon MOOC Char.
And others exactly.
And staff, our Chief Technology Officer exact actual examples of us moving from a very helpful insight out product basis to an outside solution. So and that's really exciting youll hear Steve talk about it with his view of where we are and what we've accomplished.
So I feel the best I've felt about that last comment is this is the first year that we've had.
Cross selling rewards are built into our commissions as you remember we started it in late 2020.
Now as we move.
Just couldn't feel better about it to the wound Clair of a system.
Going into 2022, we'll pick that both working significantly on renewals.
You'll get a pretty good view of that in Q4, and then we'll wrap that up where 70% of our total renewals come in Q4 and Q1, so you're going to hear a lot about that but couldnt feel better great question Tony Thank you.
Your next question comes from Missouri.
Missouri with Jefferies. Please go ahead.
Hi, This is Mario <unk> filling in for Hamzah.
Hi, Mary.
How are you I just wanted to see if you can give us a sense for how the sales force is executing right now obviously, you've made a few tweaks over the past quarter to help kind of focus the efforts but.
Could you also just remind us what the head count growth has looked like recently and what the expectations for growth are over the next 12 months and then I guess, just the last piece of that around execution.
If you could talk about.
How you are measuring salesforce product productivity going forward.
Great questions.
Actually yeah.
Steve and Richard and I actually have the conversation about the additional resources in 2022, and the field sales force yesterday, but just to step back Steve great questions element.
Thank you Jerry.
Obviously the sales force is extremely motivated. This is the this is the end of May.
They don't have a chance to deliver very strong performance in many of them have the chance to all perform at that target. So there's really really great momentum and motivation and the sales force as we are.
In Q4, and we've always seen and I see really really great momentum in October we were also putting out further incentives to the.
I want to make sure that we maximize.
The performance and the revenue that we're looking for in Q4 and then we are obviously very very focused on the strategic transactions, that's going to drive the revenue outcome that were looking for as well and we have a very targeted list of those opportunities that both Gordon booked.
John.
Going with the sales force on a daily basis to make sure that we close the deal that's going to maximize revenue for Q4.
So really really great momentum.
Our operational focus and rigor and a relentless focus on execution over the over the quarter of Q4.
In terms of productivity.
I think that's a really really important topic.
It into next year I see a lot of areas, where we can drive increased sales productivity, we couldnt do that burning.
We will need to do that when we did it always a one terabyte because that's going to give you a much clear roles and responsibilities for the Salesforce and for each of the account managers, but also how they sell together with the pre sales the Carson of success and also with the product sales organization as well.
So as we get into FY 'twenty, two we will look at sales productivity.
The key metrics and we will find ways to increase that within the sales force and then last but not least.
Really really blessed with the amazing support from our board and from our CEO to continue to invest in the sales force. So that we can continue to expand and the investments we want to make next year and the sales force is really centered around having more said those that is unseen and driving new business for the organization.
So that we can drive a high organic growth in FY 'twenty two.
I will do that through productivity through better execution and through increasing the capacity of the sales force. So those are some of the areas that we focus on to improve potency. Both next year and I think with that faster huge area.
And I, just think you're seeing when.
When you see <unk> presentation on November night, you'll see what I call a pyramid.
Very specifically.
Lining out who's an unsafe sales what that'll be on the three global.
Centres of excellence, they account execs et cetera, I've mentioned today.
We have 250 account managers.
That's not a clothing anybody an insight sales for north of about 120 and that we are now.
<unk> some of our salespeople to new only sales about 100 of them. So that'll give you a get a view and Steve will give you an exact view.
Very much actively supported by Gordon booked are Richard and myself of where we're going in 2022 feels really good though I think the thing that I've thought a lot about we've also work really hard in the back room.
Get rid of bureaucracies that.
I could tell you stories, you wouldn't blame but.
That's well God.
I'm very proud of what Gordon moved chart and others have done their.
Making it simpler for our field salespeople to have the tools, they deserve and working very hard thanks to the customer delight surveys of things we had to do to get better two quick questions on that comments and then we'll go there next question.
We have consistently said and I think we'll see that same thing with the survey results, we get the highest scores I've ever been part of 78 to 80 plus in the view by customers thousands of customers of the quality hopeful that our products do to help them in their work streams, we get a low score.
Sure.
That is improving.
Was it actually was at a base of 58 of easy to do business with we are have and will continue to streamline things upside down and backwards example, Ole.
Listen in our whole leadership team does to at least 10, if not more calls for our customer care centers of what we're doing to help to it's amazing.
If I had time, we let you listen to some of them, but there are we've increased productivity a lot and the view of the customers when they call and is as high as anything I've ever seen so we've made great progress. There. However, I think that's the last thing that we get credit for you you've got it.
The lever you gotta make it simple and we will see that.
The way, there's a direct correlation to renewals and organic growth direct to that easy to do business with so we will see an improvement in 2021 over 'twenty 'twenty significant improvement in 2022, but.
That's thanks to everybody who has great hard work. Thank you next question.
The next question comes from Ashish <unk> with RBC capital markets. Please go ahead.
Thanks for taking my questions just wanted to pick up on the comment you just made on strong momentum going into 'twenty. Two. So my question. There was as we exit this either at north of 6% to 8% range.
How do we think about the organic growth momentum going into 'twenty two.
Any one time.
And fourth quarter are that strong momentum in the fourth quarter should sustain us going into the 22. Thanks.
I'll comment and then Steve too because.
It's a great question I am obviously eager to give guidance on behalf of everybody for 2022.
We've got to get close to give.
Giving you that guidance.
We will do it subject to final approval.
Right.
Federal Trade Commission and we'll put all the appropriate caveat took place, but we will give you that guidance for 2022.
It's a great question no because there's.
I'll use my words, but Steve you pick up.
What we're doing in Q4 is consistent with where we work to get to the <unk> and where we will go into it.
2022, there's nothing peculiar about Q4 other than the fact that.
R R.
Two of our businesses.
Their biggest quarter and it will continue that they had always said at the beginning of the year should think about 49, 48%.
Of our total revenue being in first half 52 in the second half and that's where we're going to end up plus a bit steep.
Thanks Terry.
So just continuing on your clients. So clearly Q1 is a very big quarter for us and we're already right now very focused on all of them will speak with you all.
Customer conversations are taking place as we speak and we are setting up the renewal process already now unless we get into Q1, we can make sure that we can have a sidetrack to execution of the renewal base in Q1.
We will also have a very specific focus on new business.
In Q1.
The report very very dedicated and compelling incentive out to the sales force to ensure that we can have a very fast start to FY 'twenty, two and make sure that one we achieve our new target and two that we drive the new business that we're looking for we've also like Santa rated our hiring.
Already mentioned for inside sales and for our product sales organization. So that we can begin to see some of them hopefully have an impact at the end of Q1 and coming in to the second quarter as well as the rerunning, an accelerated hiring program to add sales capacity, we need to be successful.
In FY 'twenty, two as well and then last but not least as we move through the one player base model.
By January the first we're absolutely convinced that at that.
That would give us improved business performance as we get closer to our customers and we will be able to much better match their rent to our needs with our best in class solutions with I am convinced will drive one bigger deals.
Obviously, you'd make sure that we can drive a higher volume up yields as well as we get into FY 'twenty two as well so I think with all of that momentum we have in Q4, we talked that we had.
Hockey in Q3, as well that will continue.
FY 'twenty, two and would move into one terabyte I'm actually convinced that that will help us continue to improve our organic growth outlook and performance.
With the further investment in the sales force, we should be able to have more capacity to dry bulk business, especially on the new business side. So so that is the current game plan an outflow for coming into FY 'twenty two I think back to you Jeremy Thanks, Steve next question.
The next question is from Shlomo Rosenbaum with Stifel. Please go ahead.
Hi, good morning.
Continued.
Continued continue the line of questioning in terms of the sales force and the changes you've made.
Talk a little bit about timing wise did the move to inside sales and everything to work out on the timeframe that you guys expected in terms of how it should come together.
As long as it going to take for the sales force and the changes both to move into inside sales and then giving the people.
That our field sales force the ability to focus.
Much great than a great much greater detail, how long should it take till everyone's really hits their stride in other words.
What point in time should we think about hey, the sales forces.
Really starting to click or is this really just an ongoing evolution and this is just the kind of the first piece that we need to look towards I'm. Just trying to this is it's the question is really trying to map towards that everyone else is trying to do is saying hey.
How do I put the pieces together to get.
Four key numbers and then again 2022.
The confidence that you guys will be able to deliver what you are talking about in terms of improved sales growth.
Sure.
Great question, I'll start <unk> pick up and Gordon and booked or two because we've been prior to staying of course, we were very busy for the last seven quarters getting the three centers of excellence set up inside sales et cetera.
I couldn't feel better as I said, we've transferred over 24000 customers to inside sales massive job out of about 28500 customers. So huge job in coating cleaning up customer data et cetera, So feel very good about that progress.
Steve you started the year.
Your view.
Have both charter and Gordon and then I'll wrap up on it of where we are at.
With.
Whereas the steam or are we going.
Gary.
I think you should see it.
It's a continuous evolution.
So Gary mentioned insight sales and that is completed so they now have their accounts there on a stand alone business.
They will do well.
The execution side and that will definitely drive.
<unk> and retention.
Inside sales, let's say a young organization with lots of young talent that we have brought in they have now build that skills. They have increased their learning about our customer solves the lubes business.
And we havent improve operational route.
Two inside sales so that by default will improve tension push RCM and Audi.
Okay.
Fuel side, where we have all 2000 biggest accounts.
And then I want to recognize China for that.
A decision on.
Already in APAC, we have moved to Asia.
Customer centric model. So we already today go to market in our APAC region aligned around our customer segments, and having account management <unk> biggest accounts. We've also done a lot of that changes within the IP business. So we've also driven account consolidation within the.
Business as well so it would be really taking those two elements and then.
Integrating that and scaling that across the whole business as we drive the last transformation to being customer centric outside.
And really becoming far more strategic with our accounts to build deeper relationships and obviously to drive the organic growth that we will aspire to and want to drive.
My personal view is that we will we will we will.
We'll complete this as we get into.
So early to about 42, but you should not see this as a significant transformation.
This is an evolution building blocks that we have done over the last 12 to 18 months. So I think that's come up.
Out of Q1.
Uh huh.
Hi.
<unk>.
So as we look for that.
Then.
Should we get into the second half.
Really begin shipping before.
That road.
So that would be my outflow.
I mean, how much patient.
And then.
Take off in the second half.
Thanks smoke tire it please comment on professional services, because that's such an important part of all the changes we've made that was not in place two years ago. So it's really important.
Two to add to that.
And then Gordon you wrap up but great question.
Yes, I will do I mean, we we started to embrace the industry segments.
The five segments that of course, we have communicated a number of times you know we start with that.
Transformation at the beginning of the year and you know one of the key reasons. We did so so that we could very much hope on cost.
With solutions that span across the enterprise and when we talk about solutions. It's important to remember that this encompasses of course on a world class subscription and analytical products. It includes all day too and then Jerry just mentioned and also includes our expert consulting services and this is really where we help our customers using all of all.
Know how in data science and analytics, but also deep domain expertise, we help those customers really adopt and leverage the data. So it's a very important part of our <unk>.
Solutions offering.
<unk> value to <unk>.
Customers and as Jerry said this is something that we put in place just over two years ago or so.
And it's an important part of our strategy moving forward, especially with.
Some of the larger customers that we have where it's extremely important to work with them to so that they can obviously leave their childhood <unk> solutions across their respective enterprises.
Briefly on an inside sales in particular, because this is al.
Great strategic importance to us and this is Steve says it is a continued evolution.
And.
We fully expect to go deeper in certainly the mid market accounts.
The 60, new products and enhancements so far this year, how should we think about revenue contribution does this more a pricing retention tour do you actually see a decent amount of new logos associated with these launches and then also in terms of pricing how much more is the new web of science on average.
So, let's do desk, Richard you start out with that on the pricing question screen and milk Charl wrap up on the second part of the question. Thank you.
Sure. So collectively we will enjoy 3% price increases across the portfolio in 2021, and we have absolute conviction to deliver 4% north they're all for 2022, and we consider annual <unk>.
Realization at equilibrium to be approximately between four and 5% per annum year in year out driven by all the products and solution improvements you just referenced so that's where things down from the from the price realisation for this year and next year.
Thanks, Richard <unk>, just a quick comment on the whereabouts science huh.
Sure I mean with with the new version of rubber Science and the fact, there were occasion for additional <unk> I mean, they're clearly we're creating additional value. So you know very much incremental revenue by going to the depot.
With existing customers cause of course, the spray to buy new but we also service in new persona is in need. So that's expanding you know they use and product space and then of course, we're looking at new load, especially with some of the innovations not just around where the science and then but you know in India the industry that's cool.
Those types, that's a compromise with us.
Thanks, and well make sure and add to this an investor day, because connect which is a very critical part of new customers. In addition says C. P. A you'll get a great view of that and November eight am and you're gonna hear about the examples of what a great difference that may.
<unk> next question.
The last question today comes from Tony Katherine with Morgan Stanley. Please go ahead.
Hey, Thanks for taking the file up yeah, there's something really quick in and just mathematically I think it's important that you know DRG does very well in the fourth quarter. Just given you know that it is sort of weighted towards you know back half and especially fourthquarter. So.
Can you talk about how D. R. G gross what it was in the third quarter, how it you're trying to it this year just to give us. Some you know increase confidence in in the fourth quarter performance.
Tony Great question, Great wanted to wrap up I think most important is we get a view every week of what we've got to go to hit the number that will deliver the kind of results. We expect in in the queue for US <unk> said, that's now part of D. R. G. A very significant part of.
The business, but just give them that view of where we are to wrap up a great queue for.
Book Tour, and then we'll be done.
Yes of course, we we have you know to actually insight into <unk> into the backlog.
And and you know going into into cute for that backlogs pretty strong as well as his line of sight, you know to to key deals that upon convulsion.
No. We plan to then subsequently to convert to regularly so kaden stop focus the <unk> those are all in place and that's the reason might be you know we have confidence in <unk> <unk> <unk> H B S business in queue for.
Thanks, everybody just wrap up by thanking them for great questions I feel the best I've felt in the last two and a half years about where we're at and where we're gonna go and we'll keep you posted on everything between now and November 9th. Thanks, All have a great day bye bye.
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