Q4 2022 Clarivate PLC Earnings Call
Speaker 1: Hello and welcome to today's Power of 8 Q4 and 4-year earnings conference call. My name is Bailey and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by 1 on your telephone keypad.
Speaker 2: I would now like to pass the conference over to Mark Donohue, Vice President of Investor Relations. Please go ahead. Thank you and good morning everyone. Thank you for joining us for the Clarivate fourth quarter and full year 2022 earnings conference call. With me today are Jonathan Geer, Chief Executive Officer and Jonathan Collins, Chief Financial Officer. Both will be available to take your questions at the conclusion of prepared remarks. As a reminder, this conference call is being recorded and webcast and is copyrighted to Property of Clarivate. Any rebroadcast of this information in whole or in part without prior written consent of Clarivate is prohibited. An accompanying earnings call presentation is available in the investor relations section of the company's website, Clarivate.com.
Speaker 2: measures or adjusted numbers, including organic revenue and adjusted EBITDA, clarably non-GAP results are useful in order to enhance and understanding of our ongoing operating performance. But there are supplements too, and should not be considered an isolation from or substitute for GAAP financial measures.
Speaker 2: I can sow the Asian of these measures to get. Measures are about what earns me some supplemental presentation on our website. After I prepare remarks, we'll open the call up to your questions. And with that, it's a pleasure to turn the call over to Jonathan Gear. Great. Thank you, Mark. Good morning, everyone, and thank you for joining us today.
Speaker 2: In my six months as CEO of Claribate, I have made it a point to personally visit many of our colleagues and customers globally. These learnings have given me an even deeper appreciation of our company, its strong culture, and Claribate's leading products in the large markets that we serve. We will hold an investor day next Thursday where we look forward to sharing with you our compelling investment thesis and our detailed plan to accelerate our growth profile. I will share more about this event in a few minutes. Turning to our financial results and business highlights for 2022, I want to give you an update on our progress in continuing to transform Claribate for the better as we seek to accelerate our growth and bridge the market trajectory.
Speaker 2: I am proud to report that we implemented important organizational changes through segment restructuring of our major segments. The past one year was also a trying period as we navigated a highly dynamic macro environment marked by high inflation and economic uncertainty. Despite these headwinds, our business grew and remained strong and resilient. We continue to serve our customers well by providing mission-critical products and we are benefiting from long-term industry tailwinds all while holding a strong competitive position in the marketplace. Last year we delivered improved performance across many of our key financial metrics. Full year revenue was $2.66 billion, an increase of 47% at constant currency, primarily driven by the acquisition of ProQuest.
Speaker 2: Organic revenue growth increased 2.6%. Our combined subscription and reoccurring revenue, which represented almost 80% of revenue, improved 4% on an organic basis over the prior year period. Operationally, we delivered 74 million of cost energies in the first year of the ProQuest integration, 24 million higher than planned. We divested Mark Monitor, a non-core asset...................
Speaker 2: We use the proceeds along with our normal cash from operations to reduce our debt by 500 million and lower our net leverage ratio. This places us in a favorable position to de-leverage below four times by the end of the year. Jonathan Collins will cover the financial results in more details shortly, including our 2023 outlook. On my first earnings call in November , I shared a new lens of how I looked at the business.
Speaker 2: I highlighted how we are pivoting our operating model and began to report our results across our three segments of academia and government, life sciences and healthcare, and intellectual property. This approach is an intuitive way of looking at our business and this reorganization will help us accelerate decision making and ensure that we are offering our customers the right set of solutions in each end market. As part of the pivot to the new segment operating model, we announced in December that each segment will be led by a president. We are close to finalizing the evaluation of candidates now and expect to have this process completed during the second quarter. I believe having designated leaders overseeing these segments will be a great opportunity
Speaker 2: will help us execute on our growth strategy and sharpen our focus on how we best serve our customers. One of our primary initiatives is to enhance our investments in products development across all of our segments to drive organic growth towards the market growth race, which we highlighted last November . I will highlight some of last year's accomplishments by segment starting with academia and government. Our ANG segment grew organically at 2% in 2022 in line with its prior three-year kegge. This past August , we had one of the most exciting ANG software was ever. Our workflow solution unit was selected to implement our integrated library solution tool, Stellaris DeBega, across Singapore's nationwide library system. This is one of the largest library workflow software implementations ever.
Speaker 2: This is a major testament to our product feature strengths, our strong commercial relationships, and our robust segment-specific go-to-market capabilities. Customers have been asking us to help them present the research accomplishment in an easier act of this format so they can leverage them for their own needs. We responded by launching WebAsscience Researcher Profiles which unites our WebAsscience and PubLons our peer-review platform. Now all our core research information is available in one central place.
Speaker 2: Providing an opportunity for researchers to showcase their accomplishments on a single page. To help our librarian and users cut through the noise and choose the right content at the right time for the right price, we developed a cutting edge procurement marketplace Realtto. Realtto provides seamless workflows and data driven recommendations to accelerate and enhance the content procurement process. Encouragingly, Realtto has rapidly gained traction, now reaching over 300 university customers across 24 countries. Turning now to live finance and healthcare, this segment delivers 100% organic growth last year, below its recent growth rates primarily due to a pullback in professional services revenue. The growth potential in this end market is highly attractive and we remain focused on accelerating our growth focus noise solving and developing a new detailed?? reach.
Speaker 2: by continuing to invest in enhanced products and analytics. For example, we delivered a multi-million dollar custom data integration and analytics platform for a top five pharma customer to drive holistic patient journey and needs insights. Combining our proprietary content with the clients and other third party data into a cloud-based analytics platform enabled a single source of truth across numerous functional teams. This is an excellent example of our ability to deliver value-added strategic services alongside our data with the potential to convert individual projects into multi-year engagements with ongoing recurring revenues.
Speaker 2: Last year, we partnered with another top five farmer company by empowering digital health initiatives with deep learning AI to expedite disease diagnosis. We are enabling leading farmer companies with AI capabilities to manage their data and better understand the health, faith, and symptomology of specific patient populations across time. The insights can lead to earlier health interventions, more precisely targeted drug regimens.
Speaker 2: and ultimately better patient experiences and outcomes, a true value ad for all stakeholders. We are also investing to enhance our AI machine learning powered predictive analytics to inform investment decisions and strategic portfolio management for increased R&D productivity, namely, as it relates to predicting drug development timelines and success rates. Moving on to our IP segment, we've screwed just over 2% on an organic basis in 2022. It was slightly below is 3-year cumulative growth rate of 3%, primarily due to a short-term pullback in trademark services.
Speaker 2: which we had previously discussed as a result of the macroeconomic environment. During the fourth quarter of 2022, we closed a few multi-million-dollar deals in Japan for a flagship cloud-based IP management software, IPfolio, and related professional services. Although these customers had complex innovation and IP following requirements, we were able to win these deals given our deep-domain expertise, local presence, and understanding of regional IP practices. Last year, we launched Brand Landscape Analyzer to disrupt traditional trademark certs. This platform compiles rich proprietary, clear-of-ate trademark and litigation data.
Speaker 2: alongside AI-powered analytics to provide a broader picture of the risk landscape surrounding new brands. This is an excellent example of our future in tech-enabled services as we leverage our rich proprietary content, AI machine learning powered analytics, and deep domain expertise. We have extensive knowledge of the patent and trademark application process, which is helping customers improve and streamline their IP administration process.
Speaker 2: For example, we were approached by a large farmer company who was looking to outsource their entire IP docketing process, where we were able to optimize their costs and create efficiencies within their global IP process. I look back on 2022 as a pivotal year where we may progress on many fronts and truly set the company up for future achievements.
Speaker 2: As we turn the page to 2023, we are focusing on reaching a higher level of success. First and foremost, we are focused on delivering organic growth above the 2022 level of 2.6%. We expect the operational changes we made last year and our go-forward execution plan to catalyze this acceleration. The acquisition of ProQuest was an important addition to our ANG segment. With the progress we have made on the cost synergy front, we are now increasingly shifting our focus to rear revenue synergies.
Speaker 2: Since going public almost four years ago, we have removed $300 million of costs, which has provided resources for reinvestment while also improving margins. Reinvestment will remain a focus as we look to drive more product innovation that will ultimately help us to accelerate top-line growth. I believe the single most important enabler of success and growth is culture. Given the natural cohesiveness of our segments, we continue to implement initiatives to bring our colleagues together to increase collaboration and idea generation.
Speaker 2: Last year we generated more than 300 million of free cash flow excluding the proceeds from Mark Monitor. This year we expect to generate close to a half billion in free cash flow which puts that on track to further reduce our net leverage ratio to under four times by year end.
Speaker 2: As mentioned, we will host an investor day in New York City next Thursday, March the night. The live in-person event will also be streamed live from 9 a.m. each and time to approximately noon. We are looking forward to providing a comprehensive look at our business and our detailed strategy to take us from where we are today to our medium-term growth outlook. In closing, I want to extend my continued thanks to all my colleagues at Clarevade.
Speaker 2: for all they are doing to serve our customers and make our organization better. As we enter 2023, I feel confident we are moving in the right direction, and I look forward to sharing our progress with you. I will now turn the call over to Jonathan Collins. Thank you, Jonathan. Good morning, everyone. Slide 12 is an overview of our 2022 fourth quarter and full year results, compared with the same periods in 2021. Fourth quarter revenue with 675 million.
Speaker 3: an increase of $115 million compared to the same period last year, driven primarily by inorganic growth from the ProQuest acquisition, as well as a half a percent organic growth, both of which were partially offset by a substantial foreign exchange translation headwind, as the US dollar remains strong against primarily the pound sterling and euro compared to the same period last year. Full year revenue was $2.66 billion, an increase of $783 million for growth of more than 40 percent.
Speaker 3: Fourth quarter net income was $304 million, up $434 million over the same period in the prior year, on higher income from operations and lower interest and income tax expenses. Full year loss of $4 billion is entirely attributed to the non-cash goodwill impairment charges recorded in the third quarter, primarily for the CPA Global and ProQuest acquisition. But the diluted EPS, which excludes the impact of one-time items like the impairment.
Speaker 3: was 22 cents in Q4, a two-cent improvement sequentially over Q3, and a one-cent decrease over Q4 of last year, bringing the full year to 85 cents, a 13 cent or 18 percent increase over 2021. Operating cashflow was 137 million in the quarter, an increase of 119 million over Q4 of 2021, bringing the full year to 509 million, which is an increase of 185 million over last year. Currently now to page 13, for a closer look at the drivers of the full year top and bottom line growth over the same period last year. Full year revenue of 2.66 billion came in at the top-
Speaker 3: in more than a quarter billion to the bottom line for a profit conversion of 30% on a pre-cost synergy basis. This growth has primarily attributed to the ProQuest acquisition. Third, cost synergies, net of certain operating expenses required to achieve them contributed 74 million of incremental profit from carry-over savings on the CPA acquisition and solid execution on the ProQuest cost action.
Speaker 3: Finally, the translation impact of subsidiaries denominated in foreign currencies impacted revenue by nearly 100 million and profit at just over 30 million. The profit conversion is lower than normal as the translation impact was ameliorated by 14 million of transaction gains largely recognized in the fourth quarter. Please turn it to page 14 to step through the conversion from adjusted EBITOP to free cash. Free cash flow was 91 million in the fourth quarter, an increase of 105 million over last year's fourth quarter, and topped 300 million for the full year, which was just over 100 million higher than the full year of 2021.
Speaker 3: Adjusted free cash flow, which excludes the impact of one time cost, came in at 522 million, which was near the midpoint of our guidance range as the outperformance on Adjusted Evita was offset by higher working capital requirements. For the full year, the profit growth I outlined on the prior page was partially offset by higher interest cost from the debt used to fund the ProQuest acquisition, higher cash taxes on the increase in taxable earnings, higher working capital requirements, and the increased capital spending largely from the ProQuest business.
Speaker 3: Move with me now to slide 15 as we turn the page on last year and provide our outlook for this year. During our third quarter earnings call in November , we estimated the organic growth rate of our serviceable, addressable market of roughly 25 billion today to be approximately 6%. As Jonathan mentioned just a few moments ago.
Speaker 3: At our investor day next week, we will specify the areas of the business that are underperforming the market, outline the specific actions we will take to close these gaps, and provide the timeline of when we expect to reach the market growth rate. This morning, we're providing the first step, our organic growth rate guidance for 2023. As we also indicated back in November , we expect organic growth to improve in 2023. We're now dimensioning that improvement from 2.6 percent last year to about 3.25 percent this year at the midpoint of our range. Exuming exchange rates remain relatively constant, we expect to deliver revenue at 2.68 billion at the midpoint of the range.
Speaker 3: Given the strong comps in the first half of 2022, we do not expect Q1 organic growth to improve sequentially from Q4. We'll provide additional color on the quarterly phasing of organic growth as we move through the year. We do anticipate about a 75% profit conversion on the full year revenue growth of approximately $20 million at the midpoint of both ranges as a result of the carryover impact of the request cost synergies, which should help drive nearly 50 bits of margin expansion. Free cash flow is expected to reach a half a billion dollars at the midpoint of the range. This represents a nearly $200 million increase over the prior year.
Speaker 3: and is largely driven by significantly lower one-time cost incurred to integrate the acquisitions. Adjusted diluted earnings is expected at 80 cents per share at the midpoint of the range. The five-cent decrease from last year is attributed in nearly equal parts to higher interest expense as a result of base rate increases, affecting our floating rate debt, and higher depreciation expense from capital expenditures aimed at accelerating our organic growth in the coming years. Please turn it off me now to page 16 for the major drivers of the expected revenue and profit growth for the full year compared to last year.
Speaker 3: Our accelerating organic growth, the divestment of the Mark Monitor business, the carry-over impact of the ProQuest cost synergies, and foreign exchange will drive this year's expected top and bottom line growth over last year. Organic growth of 3.25% should add about 85 million to the top line and convert it 30 percent contributing about 25 million to the bottom line. As we've indicated before, organic growth will need to accelerate to the 4 to 5 percent range to expand margins from current levels. Jonathan mentioned earlier in his priorities for this year. We're also making the conscious choice to fund investments that will deliver product and service innovation that will catalyze accelerating organic growth to these levels in the near term.
Speaker 3: Our accelerating organic growth, the divestment of the Mark Monitor business, the carry-over impact of the ProQuest cost synergies, and foreign exchange will drive this year's expected top and bottom line growth over last year. Organic growth of 3.25% should add about 85 million to the top line and convert it 30 percent contributing about 25 million to the bottom line. As we've indicated before, organic growth will need to accelerate to the 4 to 5 percent range to expand margins from current levels. Jonathan mentioned earlier in his priorities for this year. We're also making the conscious choice to fund investments that will deliver product and service innovation that will catalyze accelerating organic growth to these levels in the near term. We'll go into greater detail on this at our investor day next.
Speaker 3: week. For the first time in our history, inorganic actions will be a year over year headwind to our results. We closed on the sale of Mark Monitor and Q4 and this will reduce our revenue by 65 million and adjusted EBITDA by 30 million. The team has executed the integration of the ProQuest acquisition remarkably well, delivering more than half of the cost synergies in the first year. We are in the final stages of completing the integration in the first half of this year and as a result, we will deliver 40 million of higher profit in 2023. Over the course of the past few months, the relative strength of the US dollar has receded against the pound sterling in Euro. Given current exchange rates, we do not expect a meaningful foreign exchange impact to the top line on a full-year basis. However, we do expect a revenue headwind in the first half of the year, but that should be offset by tailwinds in the second half. We also do not expect to repeat the transaction gains we saw late last year, which creates a new nearly 15 million profit headwind. Please turn this to me now to page 17 to walk through how we expect the more than 1.1 billion of the year.
Speaker 3: will convert to about a half a billion of free cash flow. Last year, we incurred more than 200 million in cash outflows associated with one time cost related to the acquisitions. The majority of this came from restricted cash from the CPA employee benefits trust that was funded at closing of the acquisition back in 2021. We expect a material infringement in one time cost of about 175 million this year, as we incur about 40 million largely to complete the pro quest integration. We do expect a cash interest increase of about 20 million, as current base rates and projections via the forward curve have increased meaningfully compared to last year.
Speaker 3: As a reminder, through deleveraging and derivatives, we reduced our floating rate debt from just under half to about a quarter of our total debt significantly reducing our exposure to further rate increases. Our working capital requirements are expected to level off this year yielding an improvement of about 65 million, augmenting the profit growth and lower one-time cost, partially offsetting by the cash interest increase, leading to an operating cash flow improvement of about 230 million.
Speaker 3: We do intend to increase capital spending by about 35 million to accelerate organic growth. All of this translates to a nearly 200 million improvement in free cash flow at the midpoint Turn it me out at page 18 for an update on our capital structure and our plans for allocating the cash flow we expect to generate this year. As we've consistently indicated for the past couple of quarters, we plan to use the majority of our cash flow in the near term to reduce our debt. We paid down a half a billion dollars of debt in the second half of last year by utilizing operating cash flow and the proceeds from the Mark Monitor Investiture. This lowered our debt balance to just over 5 billion and brought our net leverage to just over 4 turns at year end. As we turn to 2023, we will continue to service our preferred shares with a cash dividend of about 75 million for the...
Speaker 3: as we built scale and end-to-end capabilities in all three of our segments through three transformational acquisitions.
Speaker 3: Profit is nearly quadrupled, bolstered by 300 million of cost synergies that drove margin expansion of 1,200 basis points. And critically, most of the integration work for these transformational acquisitions is now behind us, which supports a significant improvement in cash flows moving forward. Through this period, organic growth has durably remained at about 3%.
Speaker 3: despite a global pandemic. However, we need to drive our organic growth rate higher to reach and eventually exceed that of our SAM. We know we have a few key product areas that are underperforming, but with the right execution and product innovation, we will be able to close the growth rate gap as we shift our operational focus and financial resources from delivering efficiencies to accelerating growth. Please join us next week in person at the New York Stock Exchange or virtually.
Speaker 3: As we outline in detail, the steps we will take to accelerate growth and unwashed significant value for shareholders in the process. I want to thank all of you for listening in this morning, and I'll now turn the call back over to Bailey so we can take your questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad.
Speaker 1: If for any reason you would like to remove that question, please press star followed by two. Again to ask a question, please press star followed by one. As a reminder, if you are using a speaker phone, please remember to pick up your handsets before asking your question. Our first question today comes from the line of Manav Patnack from Parklist. Please go ahead to your line that's now open. Hey, this is Brendan on from Anav. I just want to ask on the guidance. Obviously there's been some, you know, there's a lot of your trend to actional kind of exposure in different parts of your business that you guys this past year and.
Speaker 2: Just wondering, what are you assuming in that outlook for next year for that part of the business and then back into also the description part just trying to see how much of that is helping or hurting you guys next year? Thank you for the question. This is John the Guilt answer then call us at some color here. I mean first when we there is a different philosophy of how you build out a budget. With this here we've gone through a very granular bottoms up build on this budget. Under the news segment strategy at a product by product level. And it's one that certainly myself, John and Collins and the team have put a lot of fidelity into building up building up this plan.
Speaker 2: So the guidance we've raised right now, overall, the math is not a heroic guidance. It just has this executing against the outcomes we saw of coming out of Q4 than heading through the year. Now, on the transactional side, you know the base for our business, age percent is occurring in nature, 20% is transactional. A couple of things I would call out. First, on some real world data wins, we had in Q4 rather than being completely one times, we built up some backlog heading into this year, so we've de-risked some of the RWD assumptions heading into 2023. And then with the rest of the portfolio, it's the normal kind of risk I would say around the transactions, primarily in life science health care, because he less risk than the other segments. But certainly, I think the key theme is we haven't built up a bottoms up build in the budget that requires a lot of positive assumptions to take place. We know we're in a tough environment.
Speaker 3: We're no rent-auff macro. We know that some of our clients are not leading into one time, one time spends right now they're being cautious and all that's been built into our budget. But Jonathan, do you want to add to that? Yeah, just highlight that the improvement in the organic growth will largely come from the transactional order type. So when we think about the things that will help accelerate the growth rate, obviously not having the ceasing of our operations in Russia will offer some benefit. That'll benefit the subscription order type. There are some other puts and takes there, but as we've highlighted before we've rebuilt capacity.
Speaker 3: in 2022 in our life sciences and healthcare consulting practice. We expect the utilization rates in that practice to progressively improve through the year, and that'll get our transactional order type. And then as Jonathan touched on one of the real benefits of last year's sales execution campaign with our real-world evidence in life science and healthcare is building a backlog. So last year, almost everything that we recognized as revenue we sold in the year, this year we come in with a very nice proportion of this year's revenue already sold that has to be delivered in 2023. So that helps the D-risk and reduce the volume.
Speaker 1: is in the update on the products.
Speaker 2: Yeah, I'm going to make a brief comment here at Brennan. So the investors for making are across all three of our segments. If you remember coming out of the last call, we talked about investments in Lifetime and Healthcare around former COVID-19 and building out that rear-wheeled data platform to create more of a recurring predictable...
Speaker 2: And, Jim, both of those are well underway in the product development cycle. We continue to make investments in A&G, get across the past, but I would call out what we've done with WebAscience and the investments we've made there in improving the interface and some of the comments I made in the transcript earlier around how we're improving just the usability and impact at the researcher level. And then an IP very focus on Durant and those solutions there to get and lift those products that we know will be...
Speaker 4: mentioned that the improvement in organic revenue growth for 2023 is going to come primarily from transactional revenue improvement, especially around the consulting side. Can you elaborate a little bit more on that and then also on the subscription side, putting Russia aside?
Speaker 3: What are some of the key drivers of organic revenue growth acceleration for subscription revenues in the year ahead? Sure, George. On the transactional side, I mentioned the consulting, also the solid real-world evidence backlog that we bring into this year. I'll also point to our IP segment. We do expect to lapse some pretty difficult comps in the first half of this year. And as we move into the second half of next year, we think the trademark portion.
Speaker 3: both maintenance and the servicing of trademark and even some of the discovery to improve, which will also help the bolster the IP segments growth improvement. As we think about the subscription file, what we're counting on is strong retention and starting to monetize some of the investments that we've already made. Jonathan alluded to Web of Science, we're really encouraged by the feedback we got last year from the new UI and some of the feature functionality there. We've expanded the journal impact factor to include thousands of new journals.
Speaker 3: And then finally we just announced the pre-print citation index that's going to be included in the product this year. We're already getting early great feedback on that addition. So those are examples of investments that we've made that we hope to will continue to firm up renewal rates, help us to be able to capture some of that value in the form of pricing. And those are the things that will help to be with the subscription performance in 2023. Got it. That's helpful. And then just a quick follow up. Can you highlight your expectations for 2023 organic revenue growth by segment? So academic and government.
Speaker 3: Life Sciences and Healthcare and Intellogonal Property? Yeah, we certainly expect modest improvement in ANG Web Science, which I just highlighted is going to be a key component there. On the IP side, we do expect some improvement in the trademark portion of business that I highlighted. But really, much of the improvement next year is going to come in life science and healthcare as we continue to see the recovery and the consulting practice that I highlighted, as well as strong execution compared to a pretty challenging last year in portions of our transactional business in that segment.
Speaker 2: more conservative guidance, but just want to see if anything has really changed in your mind on the growth profile. Thanks, Tony. No, has not changed at all. This is a business. When we, as we peel back and I've got to know that business is much, much better at the customer level and their product level, this is a business which should be growing at mid-single digits. And, uh...
Speaker 2: I think as we view 2023 as a bridge year to help us get us there and head on that path and certainly at an investor day, Tony, we'll be sharing more on exactly what that path looks like to take us there. But no, my confidence, if anything, is stronger now than it was. She must have gone last time. We were on this call and talked about it. Great. And then as a quick follow up, and I know you talked about the...
Speaker 5: to a couple of questions ago, but just wanted to get an update on how you view your position in the market on some of the legacy products like WebBub's Science and Durwent. Basically, I guess your investment strategy more to enhance the product capabilities there or is it more on the newer investments in the newer products and platforms? Sure thing Tony. So yeah, let me go on both of those products.
Speaker 2: I mean, those are both products that are dragging down our growth rate. And that's, I think I've shared that in previous calls and as we dug into it, that hasn't changed. Now what's interesting again, when I talk to clients about Web of Science and we just visited one of our university clients yesterday, it is still the gold standard. It is absolutely the gold standard and a critical, critical product. What we allowed to do over our call for the last 10 years is allow that product to be
Speaker 2: become, frankly, a little, some of the users word dusty, a little dusty in terms of user interface, in terms of not leveraging analytics. And so we allowed that to happen and I will call that very much an own goal. So we're focused right now on making investments. The initial phase was around the interface and the usability of web to science. The second thing is we look forward to how to leverage the underlying content and web to science and the impact that has on the publishing market to drive additional synergies as we drive that content with other content sets we have across Clarivate.
Speaker 2: Really, same story with Derwent. It is still at the high users of IP, kind of the most IP intensive companies in the world, it's still the gold standard. But it is a not easy to use tool, it's clunky, and as a result, we've allowed some ankle biters to come in around the edges. We are very focused. I'm actually sitting in our Ann Arbor office today and I was here in January with our new leader of that product in particular and he outlined the plan or how we're going to lift that product. So very focused on improving that. So to come back, Tony, to come wrap around your question.
Speaker 2: we have to fix those products. We will fix those products. I feel very confident plans in place. At the same time, the investments we're making are not limited there because there's so many things we can do with AI machine language to combine different content sets, but that is certainly a core area of focus, those two products. Thank you. Thank you. Next question, please. Thank you.
Speaker 4: The next question today comes from the line of Seth Weber from Wells Fargo Security. Please go ahead. Your line is now open. Good morning. I wanted to just try to tie together some of the data points from the call this morning. So it sounds like a first quarter organic revenue growth is going to be kind of around what fourth quarter looks like. So what I'm trying to understand is to get to the full year guide. Are you comfortable with kind of a fourth quarter exit rate?
Speaker 2: close to 5% on an organic revenue growth basis just to get to your full year guide. Thanks. Sure, maybe I'll make quick comment and pass it off to JC here. I mean, Seth, the short answer is yes. That's how we view the budget. I would just remind you we have some structural things built into this year and year comps with some very tough first year comps, particularly in Q1, but also a little bit Q2. And we have to fully lap the impact of both Russia, the Russia impact.
Speaker 2: as well as the impact of the macro environment on our trademark services. That makes it slightly tougher over the year. It also makes it much easier in the second half of the year. So that's some of the structural of a de-risk we have in the business. But Jonathan, do you wanna add some additional color? Yeah, the only other thing I'd highlight, Seth, is I think we'll definitely, or we're anticipating exiting the year with a four handle. But as I mentioned in the comments, we'll give you more color on the quarterly phasing of the growth rate as we step through the rest of the year.
Speaker 4: year. Okay. Thank you. And then just as a follow-up, can you just comment on the pricing environment, what you're seeing, whether from a competitive perspective or what your customers are willing to tolerate at this point, and how much?
Speaker 3: is, you know, how that factors into your calculus for this year. Thanks. Sure, that's always an important component of the subscription growth that we are projecting. Broadly speaking, we are seeing normal receptivity to...
sharing in the incremental value that we're creating within the products. A few moments ago we gave the Web of Science example, but we have those examples of enhanced feature functionality, incremental new content, bringing VAR to the products, and those are being reasonably well received. The one soft spot that we're keeping a very careful eye on is some of our international customers. ??? committees in the community throughout the province pass, provided access for the tech developments of the products, ?
that are buying products that are priced in dollars. So certainly the most recent move on the dollar has helped that, but that's something that we're carefully navigating with. For example, some of our ANG customers that have much greater budgetary pressures having to live within those means. We're working with them on some of those price increases. But probably I would say it's pretty positive. And we see that as being a good momentum moving into 2023. Got it. Okay, thank you guys. I appreciate it. Yep, thanks. Thank you.
The next question today comes from the line of Peter Christensen from Citigroup. Please go ahead. Your line is now open. Good morning. Thanks for taking my question. Jonathan Geer, Jonathan Collins. I was just hoping at least qualitatively you could provide us a sense of some of the components of growth towards the outlook as it relates to the growth in the economy.
pricing, cross-sell, volume, those sort of elements. And then just as a quick follow-up, Jonathan Collins, could you provide us with a sense of the pro forma trajectory for the ProQuest business and how that rounded out through the end of the year? Thank you. Okay, great. So I'll go ahead and tackle the first piece in the past, up to Jonathan. So in terms of the growth, it's fairly balanced. As Jonathan just mentioned in the previous question, price does continue to be an important component of our metric of growth.
And so I think what roughly about, I would say, a third of the total growth you could describe to, to price specifically. So the remaining two thirds is from volume total and total. And the volume, as you know, Pete has many components. The first is making sure that the retention rate continues to improve. We did improve it in 2022 at the point. And that's significant for us. You continue to notch that thing up through being closer to customers, serving them better, making sure we're refreshing our products, appropriate rates so they're seeing the value. That's how you notch up retention. The cross sell, cross sell, what I would call, interest segment is important for us.
We've now realigned the sales teams around the segments, and so they're just rolling out quarters right now, and they're very, very focused on making sure we have line of sight, intersegment. Then the intersegment is also an important component, and in my scripts I talked about a key win we had within IP services at a pharma company. Great example of how we kind of leveraged the broader footprint of the company across the different segments. And then of course driving both volume and also new business and new logos, which as you know is a little less important for us, but still important in some of our segments, still important also in life science with a long tail of biotech. So it's all those things that are kind of coming together to drive the underlying growth formula.
Jonathan, do you want to add on? Yes. And then, Pete, your question on ProQuest, it generally came in line with expectations last year. We do believe it's going to be a contributor to accelerating organic growth, as it will be fully included in the organic growth calculation for 2023. I'll highlight one of the real exciting wins that Jonathan pointed to the Singapore ILS win is a real positive that will come online, big implementation product on that, and 2023, and I'll start moving into the subscription base towards the end of the year. That combined with some of the improvements in Web of Science should really help to put some wind in our sales within the A&G segment.
Sure, so maybe I'll get some color there and then John think that anything that I miss. So it's not a great macro environment and that certainly is the case, not to say the obvious. And as I mentioned earlier, John , as we built our budget, that budget assumed a not great macro environment. Now, I think the news when you look at our business overall and this environment, we're so growing. We're still a highly resilient business model with.
Again, my experience of being 20 years in this business information industry transactions all of the piece that can be pinged at a little bit. Consulting projects can be a little delayed, market research reports can be put off for a quarter or two. And we saw a bit of that in...
Q4 and we assume that will continue. We assume that will continue. That's certainly in the plan we've laid out. We also have to say, regionally, in Europe is still feeling the impact of the Russian invasion of Ukraine. You see it as government-sare in particular have shifted dollars from areas we would normally be supporting into refugee support service.
But those are really the two areas that I would call out. Now I will just wrap a bow around that.
Those are the two key areas I'll just emphasize, John . The vast majority of our business, the IP, academic budgets, so on and so forth, our subs for Life Science Healthcare aren't really impacted by these macro headwinds. That's great color, thank you. Maybe just piggybacking on George's question, could you give us some more color on the subscription growth cadence in terms of...
in the transactional business. And just as to re-emphasize a couple of key points, we expect life science and healthcare consulting to improve progressively through the year. There will be some timing impacts associated with our patent renewal business that we will build into the color that we provide on the quarterly cadence.
Pull ahead, we help our customers with to support the best economic outcome for them in their renewals. So that will have some of an impact. But also as we indicated, we do believe that the volatility of the transactional component of our life science and healthcare products or data that we're delivering.
will improve this year as we're entering in the year with a much higher back clog than we started last year. So really encourage by that that should help to level it out a bit. But we'll continue to give you some colors we move through the year on what that's going to look like.
Thank you.
The next question today comes from the line of Stephanie Moore from Jefferies. Please go ahead, your line is now open.
Hi, good morning. Thank you. I appreciate the color, kind of, good morning. I appreciate the color around the O'Branite Growth Guidance and certainly the bottoms of the approach and clearly the more visibility on the transactional side. Would love for you to maybe kind of talk for Rue. What would be the factor?
It would, I'll take a step back. As I've said a few times, we have built in a cup macro environment into our guidance right now. Now, so to go into the lower end of that range, it would have to be an incredibly bad macro environment. It have to be some exogenous impacts, particularly to our lifeline's business, so a real real...
meaningful and unexpected slowdown of our transactions there. That's what you would have to see to get to low end, low end of that range. The upper end of the range is a couple things I'll call out. I think you know, obviously a little more health on, I guess, a little bit of the opposite here.
It would mean we were a little too conservative in our outlook on the on the macro environment, particularly with the transaction spend within a lifeline healthcare. It speeds up a little bit faster. We do a bit better with our ANG with our collections business there that goes a little bit better than we expect.
And that was probably the two big areas I think are swing, but Jonathan, do you want to add anything that I missed? No, I think you highlighted it, and obviously as we move through the year we'll be pushing for those additional opportunities to drive us to the higher end of the range, which are largely going to be on the transactional part of the business.
Great effort for me. Thanks so much. Thank you. Thank you. The final question today comes from the line of Shloma Rosenbach from Steeffle. Please go ahead. Your line is now open.
Hi, this is Adam Montfouch. I'm on. Can you talk about any recent impact on inflation throughout the business? Any updates on Moscow? Yeah, I think we've mentioned before about three quarters of our operating expenses. Our people costs. It's just the nature of our business, largely employees, but also contracted services. So as we move through, yes, last year,
That was a challenge for us that we managed carefully, certainly with a very hot job market higher than normal levels of attrition helped to address that. We've planned for that to kind of settle into the guide that we've provided for this year. So certainly that's a component of the organic profit conversion that we highlighted that that component alone won't really deliver much margin expansion. So I think that's how we think about it from managing our internal costs.
We have a pretty decent line in the side of what's going to happen this year and we've got that embedded in our out for 2023. And then I think we've talked before about the commercial impact of that. Certainly, it helps a little bit with the pricing conversations and we saw some of the best price utilization we've ever seen as a company in 2022. We do expect some of that to carry into this year, but generally speaking, we've got that embedded in our outlook for 2023.
Okay. And what's the significant improvement, DSO, in the quarter year on year, and how should we think about the quarterly pattern of foot and capital this year? Yeah, I'm sorry, Adam, I didn't catch the first part. Did you say that again? Okay. Which of the significant impact in AR DSOs in the quarter year on year? Now should we think about the quarterly pattern of foot and capital this year? Yep, so 2022 is our full...
first full year of having pro quest in our seasonal working capital. So I would say we now have a decent line of sight into what that's going to look like. I expect that to be our new normal. Late in the years, I saw a little bit of pressure on timing of payments, which caused the slightly higher working capital use than we were anticipating.
for joining our call this morning. We really enjoy sharing both our results from 22 as well as our outlook for 23. And again, would really encourage and invite all of you to join us at our investor day, next Thursday at March 9th in New York City. Look forward to there to really sharing our outlook and growth plan for the the next few years as we as we continue to accelerate growth across Clarevay. Thanks so much everyone.
This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.