Q1 2023 Clarivate Plc Earnings Call
[music].
Good morning. Thank you for attending today's clears eight Q1 2023 earnings conference 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'd like to queue for a question on today's call you can do so by dialing star one.
I would now like to pass the conference over to your host Mark Donohue VP of Investor Relations with clarity. Thank you you May proceed.
Thank you Joe and good morning, everyone. Thank you for joining us.
Okay.
We declared a 2023 earnings conference call with me today are Jonathan Gear, Chief Executive Officer, and Jonathan Collins, Chief Financial Officer, both will be available to take your questions at the conclusion of the 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.
And accompanying earnings call presentation is available on the Investor Relations section of the company's website clarity dot com.
During our call we may make certain forward looking statements.
Within the meaning of the applicable securities laws, such forward looking statements about known and unknown risks uncertainties and other factors that may cause the actual results performance or achievements of the business or developments claret <unk> 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 could cause actual results to differ materially from anticipated results or performance can be found in <unk> filings with the SEC and on the company's website.
Our discussion will include non-GAAP measures or adjusted numbers, including organic revenue and adjusted EBITDA.
<unk> believes non-GAAP results are useful in order to enhance an understanding of rock.
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.
Conciliation of these measures to GAAP measures are available on our earnings release and supplemental presentation on our website.
After our prepared remarks, we'll open the call for your questions with that it's a pleasure to turn the call over to Jonathan.
Great. Thank you Mark good morning, everyone and thanks for joining us.
So let's start by briefly covering our first quarter results then I will provide an update on some key improvements and announcements as part of our commitment to accelerate our growth.
As we discussed at our Investor Day in March we are driving change and investing across our segments, which will create a compounding cash generation machine for our shareholders.
Turning to our financial results. The first quarter was in line with our expectations and as a result. This morning, we reaffirmed our 2023 full year outlook.
We continue to expect an improvement in our business throughout the year as we begin to realize the benefits of our growth initiatives and cost savings.
While there has been much external discussion about global economic challenges, we have not seen any impact to our outlook for the year.
As a reminder, our business has proven resilient during prior recessions due to the critical nature of our products and services.
Revenue in the first quarter was $629 million down from the prior year's first quarter because of the divestiture of the monitor business and the strengthening of the U S. Dollar.
Organic revenue growth as expected was essentially flat in the first quarter.
We did deliver 3% subs growth, which was driven by the academia and government segment, including improved performance from the web of science, which I'll cover in more detail shortly.
The strength in our total subscription base helped to offset the difficult first quarter comp comparisons across reoccurring and transactional revenues compared to the prior year period.
We delivered strong free cash flow of $168 million in the first quarter, which was used to prepay debt, while still reinvesting in product development to accelerate growth opportunities.
We are seeing the initial benefit of this focus and investment in the academia and government segment, where.
Where we made the earliest investment into growth I will spend the next few minutes diving deeper and the progress. We are seeing in this segment. We are off to a great start with web of science, which is starting to yield benefits from last year's investments.
At the end of 2021, we completely overhauled the user interface of the platform to drive ease of use and customer engagement. We started to see positive develop in 2022 with active usage up 78% versus the prior year.
As we turn the calendar to 2023 and the heavy renewal period in the first quarter. We saw a 350 basis point improvement in the web of science renewal rate. We also delivered a 16% improvement in new subscription sales growth.
These two improvements in our subs base for web of science bode well for continued improvement.
Initial results the rest of the year.
In addition, one of the value add we delivered recently was the creation of the Preprint Citation index.
This utilizes information from pre published content to accelerate discovery for academic research. This enhancement makes it even easier for researchers to include pre prints and their existing research workflows.
The web of science can be used as a single portal to search across journals books proceedings datasets and now pre prints streamlining the research process and helping to make important connections faster that's driving more customer value into this critical platform.
Following the <unk> acquisition, our teams have been working on exciting new integrations between our products to enhance value. We have integrated holdings data from our flagship Libre software platform AMA into our leading research analytical tool insights to generate custom collection management reports.
This allows universities to obtain unique insights into how faculty interact with publications based on published papers citation activity and other key indicators.
This also helps customers identify journals that theyre researcher site and helps locate titles that site their organizations research to help make purchasing decisions. This enhances value for both platforms.
In Q1, we announced the expansion of our journal impact factor into new content areas and journal coverage. This will increase the appeal to parts of the market that we currently underserved.
These improvements to increase the combined value proposition and is an enabler of getting customers to add the product. Additionally, with an enhanced and improved product there are opportunities to sell the web of science of corporations that are heavy investors in R&D.
In the coming quarters, as we accelerate investments in the IP and life science and healthcare segments I look forward to sharing details of additional areas of progress with you.
Our products and services are used by thousands of people daily to direct and guide the work put simply we help people and organizations think forward.
By bringing together enriched proprietary data across our three segments, we leveraged the power of our insights and analytics to identify the worlds top innovators and spot key future trends for example in Q1, we revealed our 2023 list of top 100 global innovators and our <unk>.
<unk> report. These are just two examples of our thought leadership programs and depth of expertise in our markets designed to create demand and build customer advocacy to support our growth initiatives.
Another exciting development in Q1 has been our continued adoption of AI to enhance <unk> value proposition of our solutions.
As I'm sure you're all aware the output generally generated by AI are only as good as the input data.
As you can see on the bottom left at Clair base, we have billions of proprietary best in class data assets, which are expertly curated and interconnected.
These proprietary assets beat our machine deep learning and large language models to a richer data and power our insights our services and our workflow solutions.
I'd like to share a few examples of how we are currently leveraging AI across our solutions.
Academia and government, we are using this technology to identify and remove questionable academic journals from our journal impact factor. This is critical to enhancing web of science as the continued gold standard for academic research content.
And intellectual property, we are leveraging large language models to instantly translate and summarize patents.
We're also using image recognition and deep learning for faster and accurate classification of trademarks for.
For example brand landscape analyzer combines AI with human expertise and Claire <unk> proprietary trademark and IP litigation content to assist clients in making informed trademark risk decisions spitz.
Specifically the darts IP litigation data is utilized to develop an automatically garrett generated risk score, which can be used to identify which potential trademark opposition as are most likely to succeed.
Finally in life Science and healthcare, we are drawing upon our connected delays to generate predictors of future success relating to clinical trials progressions.
Tori approvals and even valuations on M&A candidates.
As these examples demonstrate we are actively using AI, including large language models to ensure we provide our customers with the highest quality integrated public and proprietary content and insights.
We strongly believe the use of generative AI represents a significant opportunity for our business to accelerate our expansion into predictive analytics as we discussed at Investor day, leveraging our proprietary enrich data and content.
The team continue to develop ways to enhance our overall offerings with generative AI and engaged with our customers to prioritize critical use cases, I look forward to sharing more examples with you in the future.
Moving onto our organization I announced the end of fourth quarter, our new segment structure to drive agility innovation and accountability I am very pleased that we have now completed the hiring and appointment of leaders for each of our segments.
Barb Weinstein, who brings more than 25 years of leadership experience is leading our academia and government segment. He previously spent 11 years with extra labor. Some progress. He was initially responsible for the transformation of <unk> products and business to a cloud based SaaS model with the release of AMA and later as president of <unk>.
Risks he led the organization toward a new era of growth with the launch of innovative products, such as the explorer and wrap it up.
Most recently he was chief Executive officer at <unk>, and AI powered agricultural intelligence provider, where he drove significant business growth and accelerated the company's AI strategy.
Is it fast experience in the industry existing connections to customers and in depth knowledge of our products and drive innovation bar is the ideal leader for our <unk> segment.
Gordon Sampson, who most recently served as our Chief product Officer has been appointed President of the intellectual property segment.
Gordon has made many significant contributions to Claire basis, joining us through the acquisition of CPA Global in October of 2020.
In the last three years. He has held a number of executive leadership roles around the company, including leading the transformation of our APAC region and successfully bringing together our entire portfolio product portfolio with a very for the very first time as our chief product officer.
His experience and knowledge of both <unk> and the IP industry is second to none as we pivot our operating model to align with our core customers and markets.
Perfectly place to accelerate growth across the segment.
Henri Levy, who I've appointed as president of the life Sciences, and healthcare segment is a well respected life sciences expert and the author of multiple articles on drug development and technology trends Henry.
Henry has an excellent track record in the industry with more than 25 years of experience, helping life science companies use data and technology to transform their business.
He joined US from Veeva systems, a global leader in cloud software, where he most recently served as president of global R&D and quality.
Previously he was chief commercial officer for PPD, where he defined new models for biopharmaceutical company to partner with contract research organizations to drive down cost and improve the speed of drug development.
Also spend time as a consultant leading accenture as life Sciences R&D practice.
I also want to thank the acknowledged leadership with <unk> long haul Thompson, our chief revenue officer, who will be leaving us in July <unk> was instrumental in elevating our commercial and go to market processes and culture across the business I wish him all the success in his future endeavors.
In addition to improving our leadership team, we recently enhanced our governance through changes to our board of directors.
With the transition of our board composition. Our board size is now 11 members compared to 2014, which will help improve efficiency on behalf of the board myself I wish to thank Sheryl von Blucher costly Gillis Bala Ayer and Roxanne wide for their valuable service on our board they have been instrumental in helping to guide the company forward.
Since its public offering a few years ago.
We are very pleased to welcome Dr. <unk> to our board Dr saw as a physician scientist pharmaceutical executive and biotech entrepreneur dedicated to discovering and developing novel life changing medicines. He.
He will bring a great deal of experience in the pharmaceutical and biotech industries and his guidance will provide valuable insights and perspective, especially as we continue to execute on our growth strategy and the life Sciences and health care segment.
Before I turn the call over to Jonathan Collins I wanted to update you on one of our near term financial initiatives, which we outlined at our Investor day in March.
We are generating strong cash flow and currently expect to deliver between 450 and $550 million of cash this year.
At our Investor day, we discussed the importance of getting our leverage level to where it needs to be under four times net leverage this year with a path to under three turns by 2025.
In the first quarter, we prepaid $125 million towards the term loan b, which creates a clear path to achieve our 2023 net leverage objectives.
Importantly, this will not impact our ability to invest in R&D to drive greater performance across our business.
In closing I want to thank my colleagues for their dedication hard work and strong collaborations as we continue to build <unk> into a leading information services company. 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 and good morning, everyone. Slide 14 is an overview of our first quarter results compared with the same period last year.
Q1 revenue was $629 million, a decrease of $33 million or 5% compared to the same period last year driven entirely by the Mark monitor divestiture and foreign exchange as organically the business was essentially flat as we expected.
Adjusted EBITDA margins expanded 60 basis points over the prior year to 42% in Q1 due to the cost synergies from the pro Quest acquisition.
First quarter net income was $25 million down $26 million due to a 100 million mark to market gain on the private warrants last year that did not recur this year, which was partially offset by a favorable resolution of an international tax dispute worth $70 million adjusted.
Adjusted diluted EPS, which excludes the impact of both items was 18 cents in Q1 of <unk> decline over last year <unk> of the reduction was attributed to higher interest expense due to increases in base rates and <unk> was attributed to the Mark monitor divestiture.
Operating cash flow was $228 million in the quarter, an increase of $160 million largely due to the $141 million payment made last year from the employee benefits Trust for the CPA Global equity plan. This also drove the entire increase in free cash flow is higher interest and capital spending was offset by lower working capital requirements.
Please turn with me now to page 15 for a closer look at the drivers of the first quarter top and bottom line changes from the same period last year.
Our first quarter revenue came in exactly as we anticipated the top and bottom line changes over last year were driven by four key factors first revenue was essentially flat organically. However, we began to invest in earnest to accelerate organic growth through product innovation, which led to a nearly $10 million increase in operating expenses.
And lowered profit by the same amount.
Inorganic activity, namely the divestiture of the Markmonitor business lowered revenue $19 million and profit $9 million.
<unk> cost synergies from the <unk> acquisition contributed $13 million of incremental profit and finally, the translation impact of subsidiaries denominated in foreign currencies lowered revenue by $13 million as the U S. Dollar remains stronger than a basket of foreign currencies compared to the same time last year. This caused a profit decline of three.
And the impact was muted as the translation effect was ameliorated by a couple million dollars of transaction gains.
Turning now to page 16 to step through the conversion from adjusted EBITDA to free cash flow and how we use these proceeds to continue prosecuting our plan to deleverage as Jonathan touched on just a few minutes ago.
Free cash flow was $168 million in the first quarter, an increase of $142 million over the same period last year.
<unk> from adjusted EBITDA improved by 56 percentage points to 66%.
We incurred $33 million of one time costs in Q1 to substantially complete the integration of the <unk> business, culminating in a $100 million of annual cost synergies going forward.
These costs were down $133 million as a result of last year's payments for the CPA Global equity plan.
Interest payments were $41 million in the quarter up $13 million over the prior year as base rates have increased and about a quarter of our debt remains floating cash.
Cash taxes were negligible in the first quarter just as they were last year due to the seasonal nature of our payment cycle.
<unk> capital was a source of cash of $51 million in Q1, when it was relatively flat last year, leading to a significant improvement driven largely by the timing of payments within our patent renewal business in our IP segment.
And finally capital expenditures were $59 million in the quarter, an increase of $18 million over last year as we ramp up our investments in product innovation and experience the timing of payments as well, we still expect to increase our full year capital spending by between 35 and $40 million we.
We used the first quarter free cash flow to continue servicing our preferred stock with a cash dividend of $19 million and to prepay $125 million of our term loan b, lowering our leverage and reducing our interest rate exposure.
Please move with me now to slide 17 for our perspective on the remainder of this year.
Our first quarter results place us squarely on track to deliver our full year outcome within our guidance ranges, which remain unchanged from what we outlined back in March we continue to expect organic growth will improve sequentially in 2023 to about 3.25% at the midpoint of our range assuming exchange rates remain relatively flat this would deliver.
Revenue of about $2 $6 8 billion at the midpoint of the range.
The year over year organic revenue comps will remain relatively challenging in the second quarter of this year. So we expect first half organic growth to approach, 1% and second half growth of about 5%. There are a few factors driving this phasing first we'll lap the revenue impact of ceasing our operations in Russia in the second.
So this remains a headwind in the first half of the year largely in our <unk> segment.
Second the consultancy within our <unk> and each segment began to improve late last year and while our utilization rates continue to progress our revenue will be lower than the first half of last year and finally in our IP segment. We had some significant acceleration of renewal payments in March in June last year, leading to H one order.
<unk> growth of 8% in the reoccurring order type. These accelerations will not recur this year and as a result, we expect an organic decline in our reoccurring revenue in the first half, but expect full year organic growth for reoccurring revenue to be in line with last year's results. We also started to see a downturn in our cyclical trademark business in there.
Segment last year, but we'll lap the higher comps towards the end of the second quarter.
We anticipate adjusted EBITDA and profit margin at one one to one 6 billion, a 116 billion and 42% to 42, 5% at the midpoint of the ranges respectively, resulting in 80.
Adjusted diluted EPS at the midpoint of the range.
And finally, we continue to expect free cash flow of a half a billion at the midpoint of the range.
Please turn with me now to page 18 for the major drivers of the expected revenue and profit growth for the full year compared to last year.
The drivers of the expected full year top and bottom line growth compared to last year are the accelerating organic growth the inorganic impact of divesting the mark monitor business. The carryover impact of the <unk> cost synergies that are nearly complete and foreign exchange organic growth of 3.25% should add about $85 million to the topline.
And convert the profit at 30% contributing about $25 million to the bottom line as we've indicated before organic growth will need to accelerate to the 4% to 5% range in order to expand margins, we're making a conscious choice to fund investments that will deliver the product innovation that will catalyze accelerating organic growth to these.
Levels by next year as we outlined in detail at our Investor Day in March and as Jonathan highlighted earlier, we're off to a great start in the research and analytics group within our <unk> segment and this performance in Q1 increases our confidence in our full year outlook.
Inorganic actions will be a headwind to our results. This year, we closed on the divestiture of Mark monitor in the fourth quarter of last year, and this will create a $65 million headwind to revenue and a $30 million decline in adjusted EBITDA. The team is wrapping up the integration of the <unk> acquisition, enabling us to deliver the remaining $40 million of cost synergies. This year, we do.
We anticipate a meaningful foreign exchange impact to the top line on a full year basis. However, we expect to continue to experience a revenue headwind in the next few months that should be offset by tailwind in the second half. We also do not expect to repeat the transaction gains. We saw late last year, which will cause a nearly $15 million profit headwind.
Please turn with me now to page 19 to walk through how we expect no more than $1 1 billion of adjusted EBITDA will convert to about a half a billion dollars of free cash flow and our plan to allocate this capital.
Last year, we incurred more than $200 million in cash outflows associated with onetime costs 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 2020, we expect an improvement in onetime cost of about $165 million. This year as we.
We incur about $50 million largely complete the pro quest integration most of the improvement was recognized in the first quarter. So the balance of the year will be more in line with last year.
We do expect a cash interest increase of about $20 million as base rates and the forward curve has moved up meaningfully compared to late last year.
Most of the increase occurred in the first quarter. So the balance of the year will be more comparable to last year.
Our working capital requirements are expected to level off this year, yielding an improvement of about $65 million much of this improvement incurred in the first quarter. So we anticipate a modest enhancement in the balance of the year subject to normal seasonality.
We intend to increase capex by about $35 million to $40 million to accelerate organic growth. The impact of all of these changes is a nearly $200 million improvement in free cash flow to $500 million at the midpoint of the range as we indicated in March and have reiterated today, we plan to use the majority of this year's free cash flow to continue to prepay debt.
On our term loan b to deleverage.
To a level of less than four turns by the end of the year. Please.
Please turn with me now to page 20 for our perspective on how our near term results position us to achieve our long term financial objectives.
Our Q1 results are a step in the right direction towards delivering the financial objectives, we outlined at our Investor day in March as Youll recall, our primary aim is to accelerate organic growth. The first area. We committed to improve was the research and analytics sub segment within AMG and our first quarter top line metrics.
Namely the four percentage point improvement in the renewal rate and the double digit new subscription sales growth that delivered 3% revenue growth bodes very well for delivering the improvement in this area in 2023 or.
Our second goal was to maintain durable profit margins as we invest to accelerate our growth we execute on this objective in the first quarter as our margins expanded by 60 basis points, even as we increased our operating and capital expenditures to drive product innovation. The third objective, we outlined was to significantly improve our free cash flow, which we delivered.
In Q1, as our conversion reached 66% on significantly lower onetime cost and.
And finally, we committed to allocate our capital in a disciplined manner in the near term we were clear it's imperative for us to lower our leverage to below four turns and we continue that journey by prepaying $125 million of term debt in the first quarter.
The entire <unk> team remains laser focused on unleashing the product innovation that will connect our customers to intelligence with the power to transform the world, enabling us to achieve these financial objectives I want to thank all of you for listening in this morning, and I'm now going to turn the call back over to Joel to take your questions and as a reminder.
Please limit yourself to one question and then return to the queue for any additional.
Joel Please go ahead.
We will now begin the Q&A session, if you'd like to ask a question. Please press star followed by one on your Touchtone key patents.
For any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question, we'll pause briefly to allow questions to generate in Q.
The first question is from the line of George Tong with Goldman Sachs. You May proceed.
Hi, Thanks, good morning.
You mentioned that Youre not seeing any currently macro impact of the business because of its resilience to recession and the critical nature of its products.
<unk> seen some macro sensitivity around trademarks.
Patent volumes has that dynamic changed and if so what's driven that change. Thank you.
Yeah, George Thanks for the question. So a couple of comments I would make.
As we commented at Investor Day, we are extremely resilient as you well know to macro Rocco.
Trends in downturns, I mean, certainly we built our outlook heading into this year, we expect that there'll be challenges and so there's been I would say no no surprises on the biotech side, specifically, there's been very little impact as you know the vast majority of our revenue comes from large biotech large pharma, which have not been impacted by funding.
Really we haven't seen any material impact.
Yeah.
Thanks George.
Next question please.
Thank you. The next question is from the line of Andrew Nicholas with William Blair You May proceed.
Hi, Good morning. This is Tom brought Sean fragile Nicholas.
I just wanted to.
Color and if some of them yes.
And see if you could provide additional detail on kind of what happened on the trash the transactional side of the business during the quarter.
Yes, just maybe a couple of things to highlight the changes from last year. So the transactional and reoccurring order types. The non subscription parts of the business were down versus last year. The reoccurring order types were entirely due to the acceleration we saw in March of last year four.
Patent renewal payments, so that was intentional and supporting our customers by providing them. The best value. There that did not recur this year as I mentioned in the comments, we expect that to unwind in the second half of the year.
And at the full year results for reoccurring.
Order type revenue growth organically will be pretty comparable to last year on the transactional side I'll point to a couple of areas by segment I highlighted in some of the prepared remarks that we have the consultancy, which is transactional within life Sciences, where that business was declining in the first half of last year It started to.
Prove late in the year. So the comps for Q1 are pretty challenging there. So that drove some of the decrease in the life Sciences category.
We have very strong real world data sales towards the end of Q1 of last year and they were pretty decent this year, but a little bit of a headwind there and then within our IP segment on the transactional side as we just touched on a moment ago, but one part of our business that see some impact related to the macro is our trademark business that started to turn.
Down late in the second quarter of last year. So we still had really tough comps on that part of the business in the first quarter of this year. So when you package all of those you get to a place where we had a headwind in Q1 on the non subscription order types compared to last year.
That's very helpful. Thank you.
Sure. Thanks, Thank you.
Next question is from the line of Toni Kaplan with Morgan Stanley You May proceed.
Thanks, So much Jonathan you mentioned the inflection in web of science. This quarter I know you talked about having the overhaul in late 'twenty. One so I wanted to understand do you.
<unk> view this positive trend in web of science as sustainable or was there anything that we should know about like in terms of what is it an easy comp or some other factor of that.
Two positive growth this quarter, but you know like good trajectory, but maybe not continuing so just wanted to see your confidence there.
Sure. Thanks Toni.
We are very confident this is a turning point within a web of science.
And I'll kind of walk through the litany list first the pickup we're seeing isn't subs and we thought first and increase usage last year and as you know Tony usage drive value that shows we're driving value to the product we saw that and some of the highlights I mentioned in my.
Prepared remarks around both renewal rates as well as new sales and our subs base in the subs base, which can be driving and lifting the product. This year heading into next year. So we're feeling very very good about that I mean last year, we were impacted by by Russia, We're getting no benefit in Q1 of that.
Jonathan Collins mentioned his remarks that'll issue through Q2, so the turnaround we're seeing we're feeling great about it the team has done a phenomenal job the customers are reacting whether with wallets into sub space. So it certainly is sustainable and we feel it is the turning point we were expecting.
Terrific. Thanks.
Great. Thanks, Tony.
Thank you.
Our next question is from the line of Peter Christiansen with Citi. You May proceed.
Good morning, Thanks for the question.
The 90, St Peters renewal rate.
Good morning.
The 96%.
<unk> rate is that just for web of science or our total subscription and then I just wanted to dig into that number a little bit like.
How should we think about like what areas, where you saw like end markets or end users did you see.
The most improvement in renewal thank you.
Okay got it so the 96% is for the research and analytics sub segment within AMG. The vast majority of that is the web of science product, but it also includes products like insights that Jonathan referenced that's being integrated with <unk>.
Our ERP for the library, if you will and other small products like and note as an example, but that category improve so that 96% is calculated based on the ACB.
That's a great leading indicator for how the subscription revenue will play out for the balance of the year. We've said in the past that in this category.
Significant majority of the renewals occur early in the year and in particular in the first quarter. So it bodes really well for how the revenue will play out in this area on a subscription basis for the balance of the year.
Okay.
Thank you.
The next question is from the line of Seth Weber with Wells Fargo. You May proceed.
Hey, guys good morning.
I wanted to go back to the transactional discussion for a second I think.
On the fourth quarter call, you talked about having a bigger pipeline or a bigger backlog of transactional data services data sales and stuff like that.
I guess my question is has that changed at all and.
When would you expect transactional comps to turn positive.
Yes, great point. So the answer is yes that is giving us the way we highlighted that in the commentary was it increases our confidence in the stability of those sales. So we have a better line of sight. So the fact that our first quarter results came in right, where we expected was enable.
<unk> or supported by the fact that we had a nice backlog for some of our transactional business in terms of when the comps improve and I'll just go by area in the consultancy the comps get better in Q2, So we'll start to see some progress there in life Sciences.
You'll world data comps for Q2 are still going to be pretty challenging within life Sciences. We had one of our best quarters ever at the time it was our best quarter ever in that area. So there'll still be a little bit tough. So broadly in life sciences that will get a little bit better, but still some pressure from real world data on the IP side, we start to see some of the pressure.
DVA, particularly in the trademark business. So as we mentioned that business started to see a downturn in towards the end of Q2 of last year. So towards the end of the second quarter, we will start to see a little bit of relief. However on the reoccurring order type we had a high single digit growth in Q2 of last year within the.
Renewals servicing business in the IP segment, so that comp is still going to be really tough. So that's why we indicated that we think that first half organic growth is probably going to be approaching a percent because we're still going to see some challenges in the second quarter with the comps, but certainly improve significantly as we move into the second half of the year, which is why we.
We think we'll see mid single digit growth in <unk>.
Okay, but youre not seeing anything kind of a leak out of that backlog or order book that you kind of referenced on the fourth quarter.
No not materially.
We're encouraged by how that has held up and the predictability of it affords US. We obviously had some challenges last year with predicting some of that and that's helping as we move into 2023 alright.
Got it okay. Thank you.
Yes, Thanks Seth.
Thank you. The next question is from the line of Shlomo Rosenbaum with Stifel. You May proceed.
Hi, This is on our parents and entre Shlomo could increase use of AI potentially resulted in increased competition in the trademark as part of the business as it becomes more widely accessible.
Thanks, I'll go ahead and tackle that one we're feeling very good about our position when we look at.
The leverage of AI, but she is we'd love to use that ourselves per year as companies would be using it for years and as I highlighted my remarks, it's something we're leading into very heavily heavily but if.
It takes specifically our trademarks, we launched a product last year recall brand landscape analyzer, which is precisely about leveraging our enhanced proprietary content our knowledge in the marketplace. Our knowledge of the customer workflows and we're using advanced AI to generate that product and it's about creating new opportunities within our customer base.
So we actually see ourselves as an opportunity we're leveraging into ourselves and we'll continue to do so going forward.
Okay. Thank you.
Thank you.
The next question is from is a follow up from the line of George Tong with Goldman Sachs. You May proceed.
Alright, thanks to follow up on the comment you made earlier.
The first half organic revenue growth to be about 1% second half organic revenue growth to be about mid single digits.
Can you elaborate on the cadence of organic revenue growth should be in <unk> <unk>.
In other words should we see a significant jump going from <unk> to <unk> or should it be linear what are your expectations, there and what are the key drivers of improvement over the remainder of this year.
Yes, thanks for that George So, we'll give a little bit more color on that as we.
Report, our Q2 results, but in principle, we're going to expect a pretty significant step up sequentially from Q2 to Q3 comps in Q3, youre going to be pretty soft youll recall Q3 of last year was pretty soft, but we will give a little bit more color, but in principle, we will see a pretty meaningful sequential increase.
From the second to the third quarter, but more to come on that in a few months.
Got it thank you.
Thank you.
Again to ask a question dial star one.
The next question is from the line of Stephanie more with Jefferies. You May proceed.
Hi, good morning, Thank you.
Yes.
That's helpful.
Hey, there I think it was helpful. Your analyst day, where you kind of talked about some of the different areas of the progress as we thought through 2023 to 2024, I think academia and government had the most progress in 2023, I would love to get an update on kind of where that stands.
That's still on track in terms of kind of the renewal renewal cycle, particularly for web of science and then as you think.
Maybe the opportunity within life Sciences, and IP is there any opportunity with some of that some of those investments start to come to fruition a little bit earlier or are those still a 2024 I said that I would love to get your updated thoughts there. Thank you.
Sure ill go ahead and dive in there Stephanie So first if I go through the segments within AMG, the air area, which we had to get right to turn around within research and analytics, which is which is web of science as Jonathan mentioned I think in some earlier remarks, our big renewal period as in Q1, and so we have to get that right and the result.
<unk>, we saw in Q1 that identified both our renewal rate.
Proven that dramatically improve our new sales dramatically is to me the proof point, we have been both expecting but really it has to happen to say, okay. We feel very good about the trajectory there. So I've put a big check marked by AMG in terms of doing what we need to do I feel very good about that segment now on the next two within IP the piece we.
Have to get right is around patents and trademark intelligence that includes our durbin product, which the one we've highlighted over over years.
We're making great progress about that with our product new product leadership, we have there we actually had a review of that with our board last week. So I feel very good about the path. There we have the strategy in place we're executing against that plan do I expect that impact 'twenty three revenues I don't I don't so if that happens that would be a positive surprise, we don't require that to happen.
And we expect that to really impact in 2024, and life science and healthcare again, the key second we have to get Brian what's around commercialization I feel this is incredibly excited to have Henry onboard I'm looking forward to getting him in front of view, along with bar bar new head of AMG.
He is a great industry leader he is diavik diving in there we are execute against plans again, there too to create new product innovation, but similar to what we're seeing in IP I don't expect nor do we require to have a revenue impact in 2023.
To hit our 23 plants. So at this point do you expect that to be 24, and later if it happens earlier that'll be.
Nice surprise, we will call it surprised if that happens.
Okay.
Okay understood and just as a follow up can you talk a little bit about the pricing environment and if you've seen any maybe acceleration from historical level that kind of your expectations.
Pricing contributing to growth in the back half.
Thank you.
Yes, I would say our first quarter pricing was as expected. So we have generally indicated before that we were able to move our.
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Effective price increases across the board closer to about 4%.
And Thats generally where we see them in the near term, it's not a meaningful lever of the improvement from 2022 to 2023 as Jonathan highlighted that's really coming in the AMG category within research and analytics, so broadly pricing across the board is in line with expectations.
<unk> is pretty consistent with what we saw last year.
Okay.
Okay. Thank you so much.
Yes. Thank you.
Thank you.
There are no additional questions waiting at this time I would like to turn the call back over to Jonathan gear CEO for concluding remarks.
Okay, great Joe. Thanks, so much everyone. Thanks, so much for joining our call. This morning. This is obviously a very important quarter for us as it demonstrated the turning point in the first of our three segments, which had the terms with AMG. So we feel very good about the progress being made there and again this was a critical quarter for us we're delivering the year everybody. We look forward in future quarters are coming.
Back and sharing additional progress in the other areas so with that we'll wrap up and thanks. So much for everyone's time. This morning. Thank you.
Yeah.
That concludes today's conference call. Thank you for your participation you may now disconnect your lines.