Q1 2024 Clarivate PLC Earnings Call
Good morning, ladies and gentlemen, welcome to declare the first quarter 2024 earnings call.
Jaquita: Good morning, ladies and gentlemen. Welcome to the Clarivate First Quarter 2024 earnings call. My name is Jaquita.
Jaquita: Name is jacobina I will be your moderator for today's call all lines will be muted during the presentation portion of the call with the opportunity for questions and answers at the end. If you would like to ask a question. Please press star one on your telephone keypad I would now like to pass the conference over to your host Mark Donohue, Vice President of Investor Relations quick clarify Mark.
Jaquita: I will be your moderator for today's call. Our lines will be muted during the presentation portion of the call with the opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to your host, Mark Donohue, Vice President of Investor Relations at Clarivate. Mark, please go ahead. Good morning, everyone. Thank you for joining us for the Clarivate First Quarter 2024 Earnings Conference Call. As a reminder, this call is being recorded, webcast, and is the copyrighted property of Clarivate.
Jaquita: Please go ahead.
Mark J. Donohue: Good morning, everyone. Thank you for joining us for the first quarter 2024 earnings conference call.
Mark J. Donohue: During our call, we may make certain forward-looking statements within the meaning of the Affordable Securities Law; such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results. Transcribed by https://otter.ai, Performance Achievements or Developments Expressed or Implied by Such Forward Loading Information about the factors that can cause actual results to be materially different from anticipated results or performance can be found at Clarivate's FOMS, DSEC, and on the company's website.
Mark J. Donohue: Morning, everyone. Thank you for joining us for the Clarivate First Quarter 2024 Earnings Conference Call. As a reminder, this call is being recorded as a webcast and is the copyrighted property of Clarivate. Any rebroadcast of this information at all will require the consent of Clarivate, and the accompanying earnings call presentation is available on the investor relations section of the company's website, clarivate.com.
Mark J. Donohue: Our discussion will include non-GAAP measures or adjusted numbers. Clarivate believes non-GAAP results are useful in order to enhance an understanding of our ongoing operating performance. However, they are a supplement to and should not be considered as isolation from or as a substitute for GAAP financial measures.
Mark J. Donohue: As a reminder, this call is being recorded and webcast.
Mark J. Donohue: Alright.
Mark J. Donohue: Okay.
Mark J. Donohue: Rebroadcast of this information at all we're embarking on priority Santa Clara.
Mark J. Donohue: And accompanying earnings call presentation is available on the Investor Relations section of the company's website at <unk> Dot com.
Mark J. Donohue: During our call we may make certain forward looking statements within the meaning of the applicable.
Mark J. Donohue: All securities laws.
Mark J. Donohue: Such forward looking statements involve known and unknown.
Mark J. Donohue: Risks uncertainties and other factors that may cause the actual results.
Mark J. Donohue: Lawrence or achievements of the business or developments declare based industry to differ materially from the anticipated results.
Mark J. Donohue: <unk> achievements or developments expressed or implied by such forward looking statements.
Mark J. Donohue: Information about the factors that could cause actual results to differ materially from anticipated results or performance can be found in clair based bombs efficacy and on the company's website.
Mark J. Donohue: Our discussion will include non-GAAP measures or adjusted numbers Barry believes non-GAAP results are useful in order to enhance the understanding of our ongoing operating performance.
Mark J. Donohue: Sue and should not be considered in isolation from or as a substitute for GAAP financial measures reconciliation of these measures to GAAP measures are available in our earnings release supplemental presentation on our website.
Mark J. Donohue: Reconciliation of these measures to gap measures is available in our earnings release supplemental presentation on our website. With me today are Jonathan Gear, Chief Executive Officer, and Jonathan Collins, Chief Financial Officer. Both will do that.
Mark J. Donohue: With me today are Jonathan gear, Chief Executive Officer, Jonathan <unk>, Chief Financial Officer.
Speaker Change: Both will be that we'll take your questions.
Mark J. Donohue: Remarks.
Mark J. Donohue: We'll take your questions at the conclusion of the prepared remarks, after we're prepared. And with that, it's a pleasure to turn the call over to Jonathan.
Jonathan Gear: After our prepared and with that I'd like to turn the call over to John.
Jonathan Gear: Thank you, Mark. Good morning, everyone, and thanks for joining us today. On our last Hearings Call, I talked about how we set the foundation for growth in 2023 with significant operational changes. These changes were required so we could advance the next phase of our growth plan in 2024 and 2025, which is focused on investing and innovating to drive organic growth. Today I will update you on some of our accomplishments this year against our plan.
Jonathan: Great. Thank you Mark good morning, everyone and thanks for joining us today.
Jonathan Gear: On our last earnings call I talked about how we set the foundation for growth in 2023 with significant operational changes.
Jonathan Gear: These changes were required so we could advance the next phase of our growth plan in 2024, and 2025, which is focused on investing and innovating to drive organic growth.
Jonathan Gear: Today I will update you on some of our accomplishments this year against our plan.
Jonathan Gear: This includes progressing on key growth initiatives across the intellectual property and life sciences and healthcare segments. These two segments are important growth drivers in our pursuit to achieve market growth rates within the next few years. But first, turn to the quarter's financial performance. Our results were in line with our expectations. Organic revenue growth was slightly better than the more than 2% decline we had anticipated. But we still have work to do.
Jonathan Gear: This includes progressing on key growth initiatives across the intellectual property and life Sciences and healthcare segments.
Jonathan Gear: These two segments are important growth drivers in our pursuit to achieve market growth rates within the next few years.
Jonathan Gear: But first turning to the quarter's financial performance.
Jonathan Gear: Those were inline with our expectations for organic revenue growth was slightly better than the more than 2% decline we had anticipated, but we still have work to do we are encouraged to see improvements driven by the operational changes last year.
Jonathan Gear: We are encouraged to see improvements driven by the operational changes from last year, as well as investments in innovation to drive accelerated future growth. Subscription revenue continues to perform well, growing over 2% in the first quarter. As we progress through the investment phase of our growth plan, we are pleased that we continue to see steady renewal rates of 93% at the end of the first quarter. This is a testament to the value customers place on our products and services. Jonathan Collins will cover the first quarter results in more detail shortly.
Jonathan Gear: As well as investments in innovation to drive accelerated future year growth.
Jonathan Gear: Subscription revenue continues to perform well roll it over 2% in the first quarter.
Jonathan Gear: As we progressed through the investment phase of our growth plan. We are pleased that we continued to see steady renewal rates of 93% at the end of the first quarter.
Jonathan Gear: This is a testament to the value customers place on our products and services.
Jonathan Gear: Jonathan Collins will cover the first quarter results in more detail shortly.
Jonathan M. Collins: This past March we released a series of Webinars covering each of our three segments.
Jonathan Gear: This past March, we released a series of webinars covering each of our three sites. These presentations, led by our segment presidents, highlighted our product investments, including our Gen-AI strategy to reach our long-term growth potential. We hope everyone has had the opportunity to view the presentations and product demonstrations, which are available on the Clarivate website. Within the academia and government segment, we are leveraging our best in class content and technology to drive innovation while incorporating generative AI.
Jonathan Gear: These presentations led by our segment presidents highlighted our product investments.
Jonathan Gear: Our journey ice strategy to reach our long term growth potential.
Jonathan Gear: We hope everyone has had the opportunity to view the presentations and product demonstrations, which are available on <unk> website.
Jonathan Gear: Our strategy is to turn generic Gen-AI into academic-specific Gen-AI by leveraging our trusted industry-leading solutions and data to assist researchers in accelerating the pace of innovation and helping students learn more effectively every day. We are investing in research analytics, including delivering more actionable research insights through our new research intelligence solution. We are looking to further grow our content aggregation business by expanding our content marketplace and aggregation portfolio internationally with non-English content.
Jonathan Gear: Within the academia and government segment.
Jonathan Gear: Representing our best in class content and technology to drive innovation, while incorporating generative AI our strategy is to turn Dinesh.
Jonathan Gear: Generic jet AI into academic specific gen AI by leveraging our trusted industry, leading solutions and data to assist researchers and accelerating the pace of innovation and help students learn more effectively every day.
Jonathan Gear: Investing in research and analytics, including delivering more actionable research insights through our new features intelligence solutions.
Jonathan Gear: We're looking to further grow our content aggregation business by expanding our content marketplace and aggregation portfolio internationally with non English content.
Jonathan Gear: Lastly, our workflow software business continues to pursue a broader set of customer tiers and expand into new geographies. We are constantly expanding our Alma software capabilities so users can access more advanced decision analytics and maximize their library experience. I am pleased with the progress we are making, and we are currently on track to deliver approximately 4% growth for the A&G segment exiting 2026. It is deeply entrenched across the global IP ecosystem, supporting some of the most critical non-discretionary tasks in the IP process.
Jonathan Gear: Lastly, our workflow software business continues to pursue a broader set of customer tiers and expand into new geographies. We are constantly expanding our all of our software capabilities. So users can access more advanced decision analytics and maximize their library experience.
Jonathan Gear: I am pleased with the progress, we're making and we're currently on track to deliver approximately a 4% growth for the AG segment exiting 2026.
Jonathan Gear: Well everybody is deeply entrenched across the global IP ecosystem supporting some of the most critical non discretionary task and the IP process.
Jonathan Gear: We are working on several initiatives that are designed to realize our growth opportunity across the IP portfolio. We expect to reaccelerate growth within this segment and return to market growth rates of approximately 5% as we exit 2026. I'm very excited with the progress of our commercial book.
Jonathan Gear: We're working on several initiatives are designed to realize our growth opportunity across the IP portfolio.
Jonathan Gear: We expect to Reaccelerate growth within this segment and return to market growth rates of approximately 5% as we exit 2026.
Jonathan Gear: I'm very excited with the progress of our commercial focus under our new operating model, we are winning in the marketplace with our leading solutions, including IP polio.
Jonathan Gear: Under our new operating model, we are winning in the marketplace with our leading solutions, including IPfolio, Foundation IP Management Systems, and Unicom IPMS. The commercial and competitive success we have realized in the last few quarters will be a key contributor to growth as we onboard these customers over the remainder of the year. While AI has always been a part of our IT business, we now have a dedicated and concerted effort to develop AI-based solutions.
Jonathan Gear: Nation, IP management systems, and Unicom Ibms, the commercial and competitive success, we have realized the last few quarters will be a key contributor to growth as we onboard these customers over the remainder of the year.
Jonathan Gear: AI has always been a part of our IP business. We now have a dedicated and concerted effort to develop AI based solutions.
Jonathan Gear: We have integrated data science expertise into the IP business to be more agile and deliver use case-specific intelligence that is embedded in decision-making processes to help customers gain competitive advantage. We are expanding Patent and Trademark Management by creating a connected ecosystem of data, workflow solutions, and expertise. The IP Collaboration Hub will enable IP professionals to collaborate with external agents and service providers in a structured environment, which will improve productivity, simplify operations, and reduce cost and risk.
Jonathan Gear: Integrated data science expertise and to the IP business be more agile and deliver use case specific intelligence is embedded in decision, making processes to help customers gain competitive advantage.
Jonathan Gear: We are expanding patent and trademark management by creating a connected ecosystem of data workflow solutions and expertise.
Jonathan Gear: The IP collaboration hub will enable IP professionals to collaborate with external agents and service providers and a structured environment, which will improve productivity simplify operations and reduce cost and risk.
Jonathan Gear: We are also making great progress to further deepen our connections with our customers.
Jonathan Gear: We are also making great progress to further deepen the connections with our customers and strengthen our position as a trusted advisory partner. With leading patent and trademark maintenance solutions, we are well positioned to build an IT consultant practice to create a strong link between our customers' challenges and all that Clarivate has to offer. Turning to the life sciences and healthcare segment, we are pursuing growth through scalable platforms and AI-driven workflow solutions. Last year, we refined our operational focus and implemented innovative forward-thinking strategies designed to fuel organic growth acceleration towards the high single digits by 2026. To achieve this, we are pursuing three key strategies.
Jonathan Gear: And our position as a trusted advisor and partner.
Jonathan Gear: With leading patent and trademark maintenance solutions, we are well positioned to build an IP consulting practice to create a strong link between our customers' challenges and all the survey has to offer.
Jonathan Gear: Turning to the life Sciences, and healthcare segment, we are pursuing growth through scalable platforms, and AI driven workflow solutions.
Jonathan Gear: Last year, we were fine our operational focus and implemented innovative forward thinking strategy is designed to fuel organic growth acceleration towards the high single digits exiting 2026.
Jonathan Gear: To achieve this we're pursuing three key strategies first we are modernizing our intelligence platforms, which will enable us to translate our rich market data and analytics into predictive insights and a recommended actions.
Jonathan Gear: First, we are modernizing our intelligence platforms, which will enable us to translate our rich market data and analytics into predictive insights and recommended actions. We will focus on a core set of scalable platforms that leverage AI to deliver exceptional user experiences and advanced analytic capabilities. This will enable us to drive higher degrees of cross-product connectivity, such as linking Fortalis Drug Discovery Intelligence with OffX Drug Safety Intelligence to accelerate insights for users. Secondly, we are invigorating product innovation across the organization by leveraging our differentiated assets and broad capability to unlock and expand market voice. We are focusing on increasing our scale and attractor segments.
Jonathan Gear: We will focus on a core set of scalable platforms.
Jonathan Gear: Leverage AI to deliver exceptional user experiences and advanced analytics capabilities. This will enable us to drive higher degrees of cross product connectivity, such as linking where Telus drug discovery intelligence with Opex drug safety intelligence to celebrate insights for users.
Jonathan Gear: Secondly, we are invigorating product innovation across the organization by leveraging our differentiated assets and broad capabilities to unlock and expand market white space.
Jonathan Gear: We are focusing on increasing our scale in attractive segments.
Jonathan Gear: Developing new subscription-based products to reach new customers and expand our existing business. For example, Offex, Cortelic CNC, and Drug Safety Triager have achieved strong footholds in R&D, regulatory, and pharmacovigilance departments with plenty of room to grow. And lastly, we are building enriched, farmer-grade, subscription-based, real-world data solutions focusing on differentiated therapy areas and indications. We will deliver tailored solutions directly to our core customers across pharma, biotech, and medical technology. While a large component of our R&D span is targeted towards these key strategies, we recently acquired a couple of startup companies within the LS&A space to accelerate and enhance our internal investment and innovation. Motion Hall serves the life science industry with vertical artificial intelligence solutions. Global QMS is a provider of cloud-based solutions that enable life sciences clients to automate regulatory reporting and compliance management.
Jonathan Gear: And developing new subscription based products to reach new customers and expand our existing business.
Jonathan Gear: For example, all of that.
Jonathan Gear: Ex courthouse, CNC and prostate the triage or have achieved strong footholds in R&D regulatory and pharmacovigilance apartments with plenty of room to grow.
Jonathan Gear: And lastly, we are building enriched farmer grade subscription base real world data solutions, focusing on differentiated therapy areas and indications, we will deliver tailored solutions directly to our core customers across pharma biotech and medical technology.
Jonathan Gear: While a large component of our R&D spend to target towards these strategies. We recently acquired a couple of startup companies within the <unk> space to accelerate and enhance our internal investments and innovation.
Jonathan Gear: <unk> hall serious or life sciences industry with vertical artificial intelligence solutions.
Jonathan Gear: <unk> is a provider of cloud based solutions that enable life sciences clients.
Jonathan Gear: Automated regulatory reporting and compliance management.
Jonathan Gear: The combined expertise, data, and technologies of Clarivate and these companies will help to address customer needs for connected data to support complex analyses and evidence-based decisions in the life sciences ecosystem. I mentioned earlier that we have made great progress on reviving a few of our PAP intelligence and RWD products. We recently launched a beta version of Derwent Innovation Search Management, three lines that pass the search process.
Jonathan Gear: Bind expertise data and technologies survey and these companies will help to address customer needs for connected data to support complex analyses and evidence based decisions and the life Sciences ecosystem.
Jonathan Gear: I mentioned earlier that we have made great progress on reviving a few of our Pap intelligence and our WD products. We recently launched a beta version of Durbin Innovation service management, which streamlines the past the search process.
Jonathan Gear: This new feature, coupled with our strategic roadmap, has been positively received by our customers and is reflected in the 180-base point improvement in our product renewal rate year-over-year. We also recently released an alpha version of a new R&D collaboration tool, and later in the quarter, we'll release additional alpha releases in AI-driven search and patent monitoring. Collected with our leading path intelligence database, these new features will launch Clarivate as the leading solution in path intelligence and search in
Jonathan Gear: This new feature coupled with our strategic roadmap has been positively received by our customers.
Jonathan Gear: Reflected in the 180 basis point improvement.
Jonathan Gear: Product real rate year over year.
Jonathan Gear: We also recently released an alpha version of our new R&D collaboration tool and later in the quarter, we will release additional alpha releases, AI, driven search and patent monitoring cut.
Jonathan Gear: Coupled with our leading patent intelligence database. These new features will launch survey to the leading solution that patent intelligence and search in the industry.
Jonathan Gear: Earlier, I touched on our RWD strategy. We recently released a new data framework, which is positioned around higher quality, comprehensively mastered medical claims data. We are already seeing the benefits of our work as our team secures commercial success with two top ten global pharmaceutical customers. In closing, we are making the necessary operational and product progress to revitalize our business and set a clear path to achieve our plans. We are committed to successfully delivering on growth objectives and driving greater financial performance. Thank you for your time this morning. With that, let me turn the call over to the next speaker.
Jonathan Gear: Earlier I touched on of our WD strategy. We recently released a new dinner framework, which is positioned around higher quality comprehensively Master medical claims data we are already seeing the benefits of our work as our team secured commercial success with two top 10 global pharmaceutical customers.
Jonathan Gear: Closing, we are making the necessary operational and product progress to revitalize our business instead of clear path to achieve our plans. We are committed to successfully delivering on our growth objectives and driving greater financial performance. Thank you for your time. This morning with that let me turn the call over to Jonathan Collins will walk you through.
Speaker Change: For our financials.
Jonathan M. Collins: Thank you, Jonathan, and good morning, everyone. Slide 12 provides an overview of our first quarter financial results compared to the same period last year. Q1 revenue was $621 million, a decrease of $8 million compared to the prior year. The decline was largely organic and was partially offset by a small activity and Faber-Wolfhard.
Next speaker: Thank you Jonathan and good morning, everyone.
Jonathan M. Collins: Slide 12 provides an overview of our first quarter financial results as compared with the same period from the prior year.
Jonathan M. Collins: Q1 revenue was $621 million, a decrease of <unk> 8 million compared to the prior year.
Jonathan M. Collins: The decline was largely organic and was partially offset by a small acquisition and favorable foreign exchange.
Jonathan M. Collins: The first quarter net loss was $94 million, $119 million lower than last year's net income of $25 million. The decline was attributed to favorable legal and tax settlements recognized last year that did not recur. Adjusted diluted EPS, which excludes the impact of one-time items like these settlements, was 14 cents in Q1, a 4 cent reduction over the same period last year, due in roughly equal parts to lower adjusted EBITDA and higher depreciation and amortization expenses from our increased investments in product.
Jonathan M. Collins: The first quarter net loss was $94 million $119 million lower than last year's net income of 25.
Jonathan M. Collins: The decline was attributed to favorable legal and tax settlements recognized last year that did not recur.
Jonathan M. Collins: Adjusted diluted EPS, which excludes the impact of onetime items like the settlement was <unk> 14 in Q1, a four cent reduction over the same period last year due in roughly equal parts to lower adjusted EBITDA and higher depreciation and amortization expenses from our increased investments in product innovation.
Jonathan M. Collins: Operating cash flow was $176 million in the quarter, a decrease of $52 million over the first quarter last year, driven by timing differences in working cap.
Jonathan M. Collins: Operating cash flow was $176 million in the quarter, a decrease of $52 million over the first quarter last year, driven by timing differences and working capital. Please turn now to page 13 for a closer look at the drivers of the first quarter, and top and bottom line changes from the prior year. On our Q4 earnings call in late February, we indicated the business would decline organically by more than 2% in the first quarter. However, our results came in slightly above those expectations, at a negative 1.7.
Jonathan M. Collins: Please turn with me now to page 13 for a closer look at the drivers of the first quarter top and bottom line changes from the prior year.
Jonathan M. Collins: Our Q4 earnings call in late February we indicated the business would decline organically by more than 2% in the first quarter. However, our results came in slightly above those expectations at a negative one 7%.
Jonathan M. Collins: The first quarter changes to the top and bottom lines were driven by three key factors highlighted in this chart. First, revenue was down $10 million or while our subscription business grew more than 2%, our non-subscription products declined 8.5%. The adjusted EBITDA impact was $6 million more than the top line headwind as we continue to invest to drive growth. Second, we experienced a very small inorganic benefit to the top line associated with the acquisition. And finally, foreign exchange had a small impact on our top and bottom.
Jonathan M. Collins: The first quarter changes to the top and bottom line were driven by three key factors highlighted on this chart.
Jonathan M. Collins: <unk> revenue was down $10 million organic.
Jonathan M. Collins: While our subscription business grew more than 2% our non subscription products declined eight 5% as we expect.
Jonathan M. Collins: The adjusted EBITDA impact was $6 million more than the topline headwinds as we continue to invest to drive future.
Jonathan M. Collins: We experienced a very small inorganic benefit to the top line associated with the acquisition of functional.
Jonathan M. Collins: And finally foreign exchange had a small impact to our top and bottom lines.
Jonathan M. Collins: Please turn with me now to page 14 to step through the conversion from adjusted EBITDA to free cash flow at our normal rate in the mid-2020s. Free cash flow was $112 million, a decrease of $56 million over the same period the prior year, driven almost entirely by timing. One-time costs decreased by $14 million, nearly offsetting the adjusted EBITDA decline as the acquisition integrations are behind. Interest and taxes were generally in line.
Jonathan M. Collins: Please turn with me now to page 14 to step through the conversion from adjusted EBITDA to free cash flow at our normal rate in the mid Forty's.
Jonathan M. Collins: Free cash flow was $112 million in the first quarter, a decrease of 56 million over the same period. The prior year driven almost entirely by timing differences on working capital.
Jonathan M. Collins: One time costs decreased by $14 million nearly offsetting the adjusted EBITDA decline as the acquisition integrations are behind us interest and taxes were generally in line with last year.
Jonathan M. Collins: Working capital was essentially flat compared to a source of cash of more than $50 million in the prior year due to timing differences in both receipts and this. Capital expenditures increased by $5 million as we continue to invest in product. We use our free cash flow to service our preferred stock with a, prepay nearly $50 million of term debt and to pay fees associated with refinancing of our... Please move with me now to slide 15 for another look at our guidance for the full year, which remains entirely untrue.
Jonathan M. Collins: Capital was essentially flat compared to a source of cash of more than $50 million in the prior year due to timing differences in both receipts and disbursements.
Jonathan M. Collins: Capital expenditures increased by $5 million as we continue to invest in product innovation.
Jonathan M. Collins: We used our free cash flow to service, our preferred stock with a dividend to prepay nearly $50 million of term debt and to pay fees associated with refinancing of our term loan.
Jonathan M. Collins: Please move with me now to slide 15 for another look at our guidance for the full year.
Jonathan M. Collins: Which remains entirely unchanged.
Jonathan M. Collins: Today we are reaffirming the guidance we provided at our year-end earnings call. Beginning at the top of the page, we continue to expect organic growth of about 1% at the midpoint of our range. We now expect Q2 to be a decline of about 1%, representing a sequential improvement of about three quarters of a percent. 1% organic growth for the full year should yield revenue of about $2.62 billion at the mid-point. Moving down the page, we expect adjusted EBITDA in the range of $1,055,000,000 to $1,150,000,000.
Jonathan M. Collins: Today, we are reaffirming the guidance, we provided at our year end earnings call.
Jonathan M. Collins: Beginning at the top of the page, we continue to expect organic growth of about 1% at the midpoint of our range. We now expect Q2 to be a decline of about 1% representing a sequential improvement of about three quarters of a percent.
Jonathan M. Collins: 1% organic growth for the full year should yield revenue of about 262 billion at the midpoint of the range moves.
Jonathan M. Collins: Moving down the page, we expect adjusted EBITDA in the range of $1 $55 million to 1 billion in $115 million, resulting in a profit margin of about 41, 5% at the midpoint of the range. We continue to anticipate diluted adjusted EPS between 70, and 80 cents and finally at the <unk>.
Jonathan M. Collins: Resulting in a profit margin of about 41.5% at the midpoint of. We continue to anticipate diluted adjusted EPS between 70 and, And finally, at the bottom of the page, we anticipate free cash flow between $420 million and a half. Please turn with me now to page 16 for a closer look at the full year top and bottom line.
Jonathan M. Collins: Some of the page, we anticipate free cash flow between 420 million and a half of them. Please.
Jonathan M. Collins: Please turn with me now to page 16 for a closer look at the full year top and bottom line changes were expecting compared to last year.
Jonathan M. Collins: As with our first quarter results, the full year expected changes to revenue and adjusted EBITDA will be driven by three things... First, organic growth at the midpoint of our guidance range will add about $30 million to the top line but will have no impact on the bottom line, leading to a modestly lower profit margin as we remain committed to investing in product innovation that we believe will accelerate organic growth. Second, the inorganic impact from selling Valley Pat, which closed on April 1 As we discussed back in February, pruning the portfolio of small growth diluted products to improve execution is a priority to accelerating our organic growth, and this is a first step in that direction. And finally, we anticipate a $10 million foreign exchange translation headwind on the top line and a slightly higher headwind of $15 million on the bottom line, as last year's transaction gains are not expected.
Jonathan M. Collins: As with our first quarter results the full year expected changes to revenue and adjusted EBITDA will be driven by three key factors first organic growth at the midpoint of our guidance range will add about $30 million to the top line, but will have no impact on the bottom line, leading to a modestly lower profit margins as we remain committed to.
Jonathan M. Collins: <unk> and product innovation that we believe will accelerate organic growth in the coming years second the inorganic impact from selling valley pad, which closed on April 1st well did.
Jonathan M. Collins: Talked about $30 million of revenue and about $15 million of profit issue as we discussed back in February pruning the portfolio of small growth dilutive products to improve execution is our priority to accelerating our organic growth and this is the first step in this direction.
Jonathan M. Collins: And finally, we anticipate a $10 million foreign exchange translation headwind on the top line and a slightly higher headwind of $15 million on the bottom line as last year's transaction gains are not expected to recur.
Jonathan M. Collins: These changes to adjusted EBITA accounts for three quarters of the change in free cash flow compared to last year, but let's turn to page 17 to step through some of the other items.
Jonathan M. Collins: These changes to adjusted EBITDA account for three quarters of the change in free cash flow compared to last year, but let's turn to page 17 to step through some of the other items. One-time costs are expected to continue to decline this year to $40 million, an improvement of $20 million over last year as the ProQuest iteration is completely behind. We do expect cash interest to decrease by about $15 million as we continue to de-leverage and benefit from refinancing our Term Loan B in the first quarter. Taxes will increase by approximately $15 million due to the timing of payments. We expect the change in working capital this year will be negligible, similar to last year.
Jonathan M. Collins: One time cost are expected to continue to decline this year to $40 million, an improvement of $20 million over last year as the pro quest integration is completely behind us.
Jonathan M. Collins: We do expect cash interest to decrease by about $15 million as we continued to deleverage and benefit from refinancing our term loan b in the first quarter.
Jonathan M. Collins: Taxes will increase by approximately 15 million due to the timing of payments of jurisdiction.
Jonathan M. Collins: We expect the change in working capital this year will be negligible similar to last year.
Jonathan M. Collins: And we remain committed to investing in product innovation and plan to raise capital spending by about. The net impact of these changes is a free cash flow of $460,000. We intend to use most of this to prepay debt and close in on our long-term net leverage target of about. Please turn to page 18 for a look at how this year's Outlook continues our trajectory towards the financial objectives that we outlined last year.
Jonathan M. Collins: And we remain committed to investing in product innovation and plan to raise capital spending by about 20 million.
Jonathan M. Collins: The net impact of these changes is free cash flow of $460 million at the midpoint.
Jonathan M. Collins: We intend to use most of this to prepay debt and close in on our long term net leverage target of about returns. Please turn with me now to page 18 for a look at how this year's outlook continues our trajectory towards the financial objectives that we outlined last year.
Jonathan M. Collins: Our primary aim is to accelerate our organic, lifting us from last year's level of essentially flat to mid-single digit. In order to achieve this objective, we've increased capital spending to 10% of revenues in order to fund a new level of product development. Our second goal is to maintain durable profit margins as we make the investment to achieve our primary goal. We are committed to providing the resources to drive product innovation in all of our, While keeping our margins The third objective we outlined was to become an attractive free cash flow engine, which we've progressed by delivering a conversion on adjusted EBITDA well above, And finally, we remain committed to allocate our capital in a disciplined We're now operating at a leverage level of less than four terms, providing us the ability to execute bolt-on M&A to catalyze, As we did last month with the announcement of the Global Q Act, in our L.S.
Jonathan M. Collins: Our primary aim is to accelerate our organic growth lifting us from last year's level of essentially flat to mid single digit growth.
Jonathan M. Collins: In order to achieve this objective we've increased capital spending to 10% of revenues in order to fund a new level of product.
Jonathan M. Collins: Our second goal is to maintain durable profit margins as we make the investment to achieve our primary goal.
Jonathan M. Collins: We're committed to providing the resources to drive product innovation in all of our businesses, while keeping our margins in the low point.
Jonathan M. Collins: The third objective, we outlined was to become an attractive free cash flow engine, which we've progressed by delivering a conversion on adjusted EBITDA well above 40%.
Jonathan M. Collins: And finally, we remain committed to allocate our capital in a disciplined manner. We're now operating at a leverage level of less than four turns providing us the ability to execute bolt on M&A to catalyze growth as we did last month with the announcement of the global Q acquisition in our L. S in each sector.
Jonathan M. Collins: I want to thank all of you for listening in this morning. I'm now going to turn the call back over to Jaquita to take your questions. And, as a reminder, please limit yourself to one question and then return to the queue for any interchange.
Jonathan M. Collins: I want to thank all of you for listening in this morning, I'm now going to turn the call back over to chip we'd have to take your questions and as a reminder, please limit yourself to one question and then return to the queue for any industry.
Jaquita: Please go ahead.
Jonathan M. Collins: Okay.
Jaquita: We were more like an answer session. If you would like to ask a question.
Jaquita: Absolutely, to give the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. If for any reason you would like to remove that question, please press star 2. Again, to ask another question, press star 1. If you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause it briefly as your questions are registered. The first question comes from Toni Kaplan with Morgan Stanley. Your line is now open.
Toni Michele Kaplan: One on your telephone coupon.
Jaquita: And the reason we would like to remove that question. Please press star two.
Toni Michele Kaplan: Asked a question press star one.
Jaquita: Using a speaker phone please remember to pick up your handset before asking your question.
Jaquita: We will also briefly our questions already stared.
Toni Michele Kaplan: The first question comes from the line of Pony Kaplan with Morgan Stanley. Your line is now open.
Toni Michele Kaplan: Thank you so much.
Toni Michele Kaplan: Thank you so much. I was hoping we could talk about the environment and intellectual property. Are you seeing customers having tighter budgets or budgets being allocated differently than they were before? And just any secular changes happening in intellectual property, maybe particularly related to technology, or do you view what's going on in intellectual property as cyclical? Thanks.
Toni Michele Kaplan: I was hoping we could talk about the environment and IP are you seeing.
Toni Michele Kaplan: Customers, having tighter budgets or budgets being allocated differently than they were before and just any any secular changes happening in I P. Maybe particularly related to technology or do you view, what's going on in I P. S cyclical. Thanks.
Speaker Change: Sure Toni Thanks for the question up on and maybe give some thoughts and IP I'm feeling really great about the progress we're seeing make 19. The changes we've made there and what we're seeing I mean first to directly answer your question no I'm not seeing any nothing any to any structural change neither positive nor <unk>.
Jonathan Gear: Sure, Tony. Thanks for the question. I'll go ahead and give some thoughts on intellectual property. I feel really great about the progress we're seeing, making an IP, the changes we've made there, and what we're seeing. First, to directly answer your question, no, I'm not seeing any structural change, either positive or negative, in the IPM market. Slowly and cautiously returning is what I would say.
Jonathan Gear: In the end markets, maybe a little more positive uptake in the trademark business. Besides you know had been under pressure. The last couple of years, we have began to see some positive indications there that market is.
Jonathan Gear: Slowly and cautiously returning is what our what I would say.
Jonathan Gear: So it's a positive there in general. But the thing I really would call out is the market, of course. So what we're seeing with our own business is competition and our success. This was one area where a couple of years ago, so go back to 2021, 2022, when we flipped to a different operating model, this business was impacted. It was impacted by lost sales, it was impacted by lost competition, and there's kind of a long tail of revenue once that happens.
Jonathan Gear: Is there a general sense out of it.
Jonathan Gear: We didn't call out really is around the market of course, so what we're seeing with our own business. These will be competition and our success. This was one area where a couple of years ago. So go back to 2021 2022 when we flip to the different operating model. This business wasn't packing it was impacted.
Jonathan Gear: And lost sales as a packet loss to competition and it's kind of a long tail of revenue once that happens and we were fairly attached with that last year and even entering into this year under the new model and under Gordons leadership, and aligning and bringing back some of our experts expertise who knows our customers were not doing tremendously well.
Jonathan Gear: And we were fairly effective in that last year and even entering into this year. Under the new model and under Gordon's leadership and aligning and bringing back some of our experts and expertise who know our customers, we're now doing tremendously well competitively in the marketplace, particularly with our IP management software systems really globally. I think in Japan, I think we've won seven head-to-heads in late 23, entering into 24, obviously a very critical patent market.
Jonathan Gear: Competitively in the marketplace, but typically whether IP management software systems really globally I think in Japan, I think we've won seven had to ask.
Jonathan Gear: Late 'twenty three 'twenty four obviously very critical patent market. So we're feeling really good about our progress there. It is one which takes a while for this sales success there to convert to implementation of the systems, then defer it to on boarding of annuities, but again the early indicators indicators are really positive. Thank you.
Jonathan Gear: So we're feeling really good about our progress there. It takes a while for this sales success there to convert to implementation of the systems, then convert to onboarding of annuities. But again, the early indicators are extremely positive.
Toni Michele Kaplan: Thank you. Thank you. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you next question.
Heather Nicole Balsky: Thank you. The next question comes from a line called Heather Balsky with B of A. Your line is now open.
Heather Nicole Balsky: The next question comes from the line of Javier.
Heather Nicole Balsky: I'll start with Bofa. Your line is now open.
Heather Nicole Balsky: Okay.
Heather Nicole Balsky: Hey, good morning, it's <unk> on for Heather.
Heather Nicole Balsky: Just wanted to touch a little bit on your <unk> Guide can you just walk us through what you're seeing that's resulting in the decline year over year versus the return to growth.
Heather Nicole Balsky: Sure. Thanks for the question.
Jonathan M. Collins: Sure, thanks for the question. In the second quarter, what will be similar to the first quarter is that we expect the subscription business to continue to grow at a comparable rate. But we do expect the sequential improvement over Q1 will come from improvements in our non- So our reoccurring revenue type, which is our patent renewal business predominantly, will improve on better comps in Q2, and we'll pair that decline year over year. And the same is true with the transactional business as well.
Jonathan M. Collins: In the second quarter, what will be similar to the first quarter as we expect the subscription business to continue to grow at a comparable rate, but we do expect the sequential improvement over Q1 will come from improvements in our non subscription business. So our reoccurring revenue type, which is our patent renewal business predominantly.
Jonathan M. Collins: We will improve on better comps in Q2, and we'll pair that decline year over year and the same is true with the.
Jonathan M. Collins: The transactional business as well too. So we expect the declines that we saw in both of those areas, which were high single digits in Q1 to pare down to a smaller decline in Q2. So that is a trajectory we expect to continue through the balance of the year, but the sequential improvement will be in the door.
Jonathan M. Collins: So we expect the declines that we saw in both of those areas, which were high single digits, to pare down to a smaller decline. So that is a trajectory we expect to continue through the balance of the year, but the sequential improvement will be in the non-subscription order type.
Jonathan M. Collins: Subscription order Tonight, so to speak.
Jonathan M. Collins: You too.
Speaker Change: Thank you. Thank you next question please.
Speaker Change: Thank you.
Greg Tong: Thank you. Thank you. Thank you. The next question comes from the line of Greg Tong with Goldman Sachs. Your line is now open.
Jonathan M. Collins: The next question comes from a line of Greg <unk> with Goldman Sachs. Your line is now open.
Greg Tong: Alright, Thank it's George.
Jonathan M. Collins: I think.
Greg Tong: Oh Youre non subscription revenue was down 5% in the quarter. When do you expect a positive inflection in your reoccurring in transactional revenue streams and what are the key drivers.
Greg Tong: Sure George Thanks for the question, Yes, we expect that in the second half of the year.
Jonathan M. Collins: Sure, George, thanks for the question. Yeah, we expect that in the second half of the year. And the key drivers for that are going to be on the recurring side, the comps moving into next year, but also the fact that we will have fully onboarded that large win that we highlighted last year, that customer we started bringing their renewals on in the first half of the year. We'll get a full benefit in the second half.
Jonathan M. Collins: And the key drivers for that are going to be on the reoccurring side the comps moving into next year, but also the fact that we will have fully on boarded that large win that we highlighted last year that customer we started bringing their renewals on in the first half of the year, we'll get a.
Jonathan M. Collins: The full benefit in the second half of this year from a transactional side, we're going to lap the more challenging comps in the first half and as Jonathan indicated the trademark business has started to improve modestly and it'll improve off a pretty challenging comps from the first half of last year, They got better in the <unk>.
Jonathan M. Collins: From a transactional side, we're going to lap the more challenging comps in the first half. And as Jonathan indicated, the trademark business has started to improve modestly, and it'll improve on pretty challenging comps from the first half of last year. They got better in the second half, so those are going to be some of the big drivers that are particularly coming from the IP segment that will help return us to growth in the non-subscription business.
Jonathan M. Collins: Second half so those are going to be some of the big drivers that are particularly coming from the IP segment that will help return us to growth in the non subscription business in the second half.
Speaker Change: Got it very helpful. Thank you rich.
Surinder Singh Thind: Very helpful. Thank you. Thank you. The next question comes from the line of Sorenda Thind with Jeffrey Yerlanis.
Surinder Singh Thind: Thank you. The next question comes from the line of Sarinda Thind with Jeffrey's. Your line is now open.
Jonathan M. Collins: Thank you. The next question comes from the line of Surinder <unk> with Jefferies. Your line is now open.
Surinder Singh Thind: Yeah.
Surinder Singh Thind: Thank you.
Surinder Singh Thind: Just taking a step back as we think about the renewal rates you mentioned, 93%.
Surinder Singh Thind: Should we think about that conceptually in terms of historical.
Surinder Singh Thind: Do you think you'd like to be a sweep.
Surinder Singh Thind: Look forward in your book.
Surinder Singh Thind: Yeah.
Surinder Singh Thind: Yeah, so maybe.
Jonathan Gear: Yes, I'll maybe, I'll start off, and I'll let J.C. answer anything that I missed. I mean, it's improvement. We're seeing a general improvement in our drill rates. That's really on the back of everything we've been focused on, including working with our customers to make product innovations. And we're seeing that it's a critical, critical measure for us. We're very pleased to see that progression. If I kind of break it up across the businesses, I think we're feeling very good about where we are in A&G, and very good in IP.
Surinder Singh Thind: I'll start off and then gcs or anything that I missed I mean, it's improving.
Jonathan Gear: Seeing a general improvement of our drill rates, that's really on the back of everything we can focus on.
Jonathan Gear: <unk> realigned with our customers make the product innovations.
J.C.: And we're seeing that it has a critical measure for us and we're very pleased to see that progression if I kind of break it up across the businesses I think we're feeling very good about where we are today Angie very good IP. They are a bit more work to do in life science and health care and that bit more work really on the investments, we're making right now in Darwin and geography and called back to Pat.
Jonathan Gear: We have a bit more work to do in life science and health care, and that bit more work really is the investments we're making right now in Derwent, Innography, IncoPath, Patent Intelligence, a suite of products with those beta and alpha releases that I referred to in my script. So there's still opportunity to do better than 93% we're doing right now, but it's good to see that improvement.
Jonathan Gear: And intelligence suite of products with those are those paid enough leases that I referred to in my script. So there's still there's still opportunity to do to do better than 93% were doing right now, but it is good to see that improvement.
Jonathan Gear: Thanks.
Speaker Change: Thank you next question please.
Jonathan Gear: Yeah.
Speaker Change: Thank you.
Andrew Owen Nicholas: The next question comes from a line from Andrew Nicholas with William Blair. Your line is now open.
Jonathan Gear: The next question comes from the line of Andrew Nicholas with William Blair. Your line is now open.
Andrew Owen Nicholas: Hi, good morning, Thanks for taking my question.
Jonathan Gear: Hi, good morning. Thanks for taking my question. In the press release, you mentioned alongside your guidance reiteration that you expect some, I think, modestly improving market conditions. It doesn't sound like things are notably different in terms of the macro backdrop today versus when we last spoke to you. But if you could just kind of talk about what you're expecting and what's baked into that 1% organic growth midpoint on that front and how we get to that number if things get a little bit worse, that would be helpful.
Jonathan Gear: In the press release, you mentioned alongside your guidance Reiteration that you expect some I think modestly improving market conditions it doesn't sound like.
Jonathan Gear: Things are notably different in terms of the macro backdrop today versus when we last spoke to you, but if you could just kind of talk about what what you're expecting and what's baked into.
Jonathan Gear: That 1% organic growth.
Jonathan Gear: Midpoint on that front end.
Jonathan Gear: How do we get to that number if things get a little bit worse that would be helpful. Thank you.
Speaker Change: Sure maybe I'll come to the market conditions that Jonathan I'll have you kind of connect the dots on the number if you will I mean first in general.
Jonathan Gear: Sure, maybe I'll come to the market conditions, then Jonathan, I'll have you connect the dots on the number, if you will. I mean, in general, Andrew, you are correct because the market condition is kind of entering the year we thought as generally neutral. I think that's largely holding up. A&G is generally holding up. There is some weakness in our transactional business within A&G that we saw in Q4, a little bit weaker than we would have liked in Q1. So we would kind of expect that to continue until we see a turn. Subs is looking, no issue with subs, it's all there.
Jonathan Gear: Andrew you are correct that the market conditions kind of entering the year. We thought it is generally neutral I think that's largely holding up.
Jonathan Gear: Generally holding up some some weakness as we end in our transactional business.
Jonathan Gear: Angie that we saw in Q4 a.
Jonathan Gear: A little bit weaker than we would've liked in Q1. So we would kind of expect that to continue until until we see a turn.
Speaker Change: So no.
Jonathan Gear: No issue of subs at all there.
Jonathan Gear: IEP, as per the earlier question, is generally positive, with actually some more positive than we expected with trademarks. That's been, I would say, slightly better than we expected. And life sciences is kind of a push. Life sciences is really a market made up of the individual situations of individual department companies and kind of where they are. So I'd say neither good nor bad compared to our initial expectations. Now, Jonathan, would you like to kind of connect the dots on the guide? You got it.
Speaker Change: As per the earlier question.
Jonathan Gear: As generally positive at positive with actually some more positive than we expected with trademarks that's been.
Jonathan Gear: I would say slightly better than we expected and life sciences as kind of a place for life Sciences is really.
Jonathan Gear: Mark I made up of the individual situation of individual apartment companies and kind of where they are so I'd say, neither good nor bad compared to our incoming expectations Doug.
Jonathan Gear: Jonathan do you want to connect the dots on the one on the guide you got it and Andrew in the second half of the year. The items that we think will be a slight benefit or the last months JJ touched on a moment ago, which is we do think the trademark business will continue to do a bit better as we move through the year, we see good indicators there and then we also see it on.
Jonathan M. Collins: And Andrew, in the second half of the year, the items that we think will be a slight benefit are the last ones that JG touched on a moment ago, which is that we do think the trademark business will continue to do a bit better. As we move through the year, we see good indicators there, and then we also see it in our patent renewal book. So the volumes of patent renewals and some of the leading indicators there give us the sense that this will improve just modestly as we move through the balance of the year. But other than that, we think the market conditions are generally in line with what we expected. When we started the year and gave our
Jonathan M. Collins: Our patent renewal book sort of volumes of Pat renewals and some other leading indicators there.
Jonathan M. Collins: Give us a sense that that will improve just modestly as we move through the balance of the year, but other than that we think the market conditions are generally in line with what we expected when we started the year and gave our original guide just a couple of months ago.
Speaker Change: Thanks, Andrew.
Speaker Change: Thank you.
Speaker Change: Thank you.
Owen Lau: The next question comes from the line of Owen Lau with Oppenheimer. Your line is now open.
Jonathan M. Collins: The next question comes from the line of Owen Lau with Oppenheimer. Your line is now open.
Jonathan Gear: Good morning, and thank you for taking my question. You highlighted some success in the real-world data framework and signed, I think, two top 10 global pharmaceutical clients. It has been a drag on your transactional revenue because of your strategic shift, but could you please add more color on the progress there? Do you expect to sign more clients in the coming quarters? Thanks.
Owen Lau: Good morning, and thank you for taking my question. So you highlighted some subsets in the real World data framework inside I think two top 10 global pharmaceutical clients.
Jonathan Gear: Has been a drag to your transactional revenue because of the strategic shifts but could you. Please spend more color on the progress there do you expect to sign more clients in the coming quarters. Thanks.
Speaker Change: Sure Oh, yes, and I'm glad you noticed that we're really pleased with those two very important milestones.
Owen Lau: Sure, Owen, yeah, and I'm glad you noted that. We're really pleased with those two very important milestones. Because what that shows us, what we certainly expected with the investments we've been making into the data, is that we've now converted the underlying RWD database into pharma-ready data, and it really wasn't there a year ago. So the indications from those first two early wins from the, as you mentioned, top 10 pharma companies, it's a very important through point, a very important through point that we're looking for for the team. We were hoping to get two in the quarter, and we ended up getting kind of two entries in the quarter. So it's a good place to be.
Owen Lau: That shows to us what we certainly expected where the investments we've been making into the data is that we've now converted the underlying R. W. D database into pharma ready data and it really wasn't there a year ago. So the indications from those first two early wins from that.
Owen Lau: As he mentioned top 10 pharma.
Owen Lau: It's a very important proof point.
Owen Lau: We're looking for for the team we were hoping to get to in the corner and we've ended up getting kind of to entering the quarter. So it's a good place to be.
Shlomo Rosenbaum: We're certainly not at the top of the area, you might guess, Owen, and it's really two levels, is we do expect to make progress with other pharma companies. Hard to predict exact timing on that, but we are in discussions with others, kind of at the data level. And then the other element is Henry and the team are building analytical solutions on top of data to sell therapeutic solutions, as we discussed, which will help become another way to monetize that database going forward. So again, the way I would view it is a very critical and important market validation.
Owen Lau: We're certainly not stopping there as you might guess and it's really two levels. As we are we do expect to make progress with other pharma companies harder because the exact timing of that we are in discussions with others kind of the data level and then the other element is Henry and his team are building and.
Shlomo Rosenbaum: Analytical solutions on top of the data to sell therapeutic solutions as we discussed which will help we got another way to monetize that database going forward. So again the way I would view it is very critical and important important market affirmation of our progress with that product. Thank you.
Shlomo Rosenbaum: Thanks.
Shlomo Rosenbaum: Specialty.
Shlomo Rosenbaum: Right.
Shlomo Rosenbaum: Uh huh.
Shlomo Rosenbaum: From the front line of Shumla, Rosenbaum will get stifled. Your line is now open.
Shlomo Rosenbaum: Uh huh.
Shlomo Rosenbaum:
Shlomo Rosenbaum: Okay.
Speaker Change: Hi, Good morning, Thank you for taking my questions.
Shlomo Rosenbaum: Hi, good morning. Thank you for taking my question.
Speaker Change: Can you hear me.
Shlomo Rosenbaum: Okay, great. Thank you.
Shlomo Rosenbaum: Go ahead. Thank you.
Shlomo Rosenbaum: Okay, great. Okay. Thank you.
Speaker Change: Okay, great Okay.
Shlomo Rosenbaum: First, I have a question. Just academia and government growth is only about 1%. And this is one of the areas that we've been pointing to in terms of evidence of prior investments gaining traction. Can you talk about the context of the growth this quarter, vis-a-vis the investments and, you know, the 3% plus growth we'd seen before then? And then just a housekeeping kind of question. I saw deferred revenue down about 14 days year over year.
Speaker Change: Thank you.
Speaker Change: First I have a question just academia and government growth was only about 1% and this is one of the areas that we've been pointing to in terms of evidence of prior investments gaining traction can you talk about the.
Shlomo Rosenbaum: The context of the growth this quarter.
Shlomo Rosenbaum: These are the you know.
Shlomo Rosenbaum: What the investments in the 3% plus growth we'd seen before then and then just actually a housekeeping kind of question what sort of deferred revenue down about 14 days year over year.
Shlomo Rosenbaum: And, you know, with subscription growth 2%, I'm just wondering if you're changing the terms, contract terms at all, that you're not paying, you're paying more frequently in advance as opposed to maybe annually in advance? If you can just talk about those two items, I'd appreciate it. Sure. So Shlomo...
Speaker Change: With subscription.
Shlomo Rosenbaum: Growing 2% I'm just wondering are you changing the terms contracting terms at all that youre not paying you are paying more frequently in advance as opposed to maybe any way in advance. If you can just talk about those two items I appreciate it.
Shlomo Rosenbaum: Sure. So Shlomo I'll cover the first one on Amg's performance in Q1, we do continue to see traction in our subscription business in AG. So we had strong subscription growth improvement in web of science continues to come through and we're getting a nice return on investment as Jonathan highlighted we've seen our <unk>.
Jonathan M. Collins: Sure. So, Shlomo, I'll cover the first one on A&G's performance in Q1. We do continue to see traction in our subscription business for A&G, so we had strong subscription growth. The improvement in Web of Science continues to come through, and we're getting a nice return on investment.
Jonathan M. Collins: As Jonathan highlighted, we've seen our second quarter now where transactional sales have been a bit softer. It's on a smaller base, so Q1 is not a big transactional quarter for us in the A&G business. The second quarter, as we've highlighted before, is much larger as we get to the academic spending year-end for many of our customers in North America and Western Europe. So, that's really what's happening on the A&G side.
Jonathan M. Collins: Second quarter, now, where the transactional sales has been a bit softer, but it's on a smaller base. So Q1 is not a big transactional quarter for us in the AMG business.
Jonathan M. Collins: The second quarter as we've highlighted before is much larger as we get to the academic spending year end for many of our customers in North America and in Western Europe. So that's really what's happening on the A&D side nice subscription growth bit of a headwind on the transactional but the important quarter for AMG transaction or larger.
Jonathan M. Collins: Nice subscription growth, a bit of a headwind on the transactional, but the important quarter for A&G transactional, the larger quarter this year, will be the second. As it relates to deferred revenue, there's a little bit of your point on the contracting terms of multi-year deals, but we also see some of the business that was flowing through last year related to real-world data that was running through deferred revenue. And as we enter our new business model for selling real-world data and some of the declines we saw last year, we've seen a bit of a decline there.
Jonathan M. Collins: Quarter of this year will be the second.
Jonathan M. Collins: As it relates to deferred revenue, there's a little bit of your points on the contracting terms of multiyear deals, but we also see some of the business that was flowing through last year related to real world data that was running through deferred revenue and as we enter our new business model for selling real world data and some of the declines.
Jonathan M. Collins: We saw last year, we've seen a bit of a decline there. So it's really in those two areas that are driving deferred revenue, but we do believe our subscription growth this year will be stable at 2%.
Jonathan M. Collins: So it's really those two areas that are driving deferred revenue. But as Jonathan indicated previously, we do expect improvements in our renewal rate and in our subscription business as we move into next year. And we start to monetize some of the investments in the patent intelligence area within IP, and then the real-world data within lifecycle.
Jonathan M. Collins: And as Jonathan indicated previously we do expect improvements in our renewal rate in our subscription business as we move into next year and we start to monetize some of the investments on the patent intelligence area within IP and then the real world data within life Sciences, it's starting to get traction.
Speaker Change: Thank you thanks for the question.
Speaker Change: Thank you again, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad.
Ashish Sabadra: Thank you. Again, ladies and gentlemen, if you would like to ask a question, please first press one on your telephone keypad. The next question comes from Alina Asha Sabadra with RBC Capital Markets. Your line is now open.
Ashish Sabadra: [laughter].
Speaker Change: The next question comes from the line of asset separator with RBC capital markets. Your line is now open.
Speaker Change: Thanks for taking my question I wanted to focus on the ECB that moderated a bit and I was just wondering as we think about that one 8% ECB group in the quarter, how should we think about any implications for subscription growth going forward.
Speaker Change: Yes. Thank you Ashish, we did see a nearly 2% growth in ACD in Q1.
Jonathan M. Collins: Yeah, thank you, Ashish. We did see nearly 2% growth in ACV in Q1. You know, we think that's a pretty good indicator of being able to deliver subscription growth as we move through the year around 2%. The two key areas that we still need to see improvement in as we move through this year and into next year, the ones I just highlighted before, we continue to have higher attrition within patent intelligence as the new Derwin Search and Watch features are in market this year.
Jonathan M. Collins: We think that's a pretty good indicator of being able to deliver seats subscription growth as we move through the year around 2%. The two key areas that we still need to see improvement in as we move through this year and into next year. The ones I just highlighted before we continue to have higher attrition within patents intelligence as the new.
Jonathan M. Collins: They're one search and watch features are in market this year and as we bring the corporate and the R&D use cases to market. Later this year, we think that will help to bolster the ACB growth within IP, particularly in the patent intelligence area and then the investments that we're making this year and the early indicators Jonathan touched on those two seminal win.
Jonathan M. Collins: And as we bring the corporate and the R&D use cases to market later this year, we think that will help to bolster the ACV growth within IP, particularly in the patent intelligence area. And then the investments that we're making this year in the early indicators, Jonathan touched on those two seminal wins with large pharma companies. We think that projects well for the progress that we'll make in ACV within the life sciences. So we continue to focus on those areas to improve ACV and drive.
Jonathan M. Collins: <unk> with large pharma companies, we think that project as well as for the progress that we're making ACD within the life Sciences segment. So continued focus in those areas to improve the ACD and drive subscription growth over the next few years.
Jonathan M. Collins: Thank you for your question Thats, our final question I'm going to turn it over to Jonathan gear for closing remarks, okay, great. Thanks, Mark and everyone. Thank you so much for joining our call. This morning, we've enjoy being able to share our Q1 results and outlook for the rest of the year and I think most importantly, we're excited on the impact we're seeing now on investments in innovation.
Ashish Sabadra: Thank you for your question. That's our final question. I'm going to turn it over to Jonathan. Okay, great.
Jonathan Gear: Thanks, Mark. And everyone, first, thank you so much for joining our call this morning. We've enjoyed being able to share our Q1 results and outlook for the rest of the year. And, I think most importantly, we're excited about the impact we're seeing now on the investments in innovation, the proof points we're seeing from new products, and the commercial reaction in our three marketplaces to the investments which we've had to make. So, I look forward to updating all of you on future progress as we go forward. Thanks so much, and have a great day.
Jonathan Gear: The proof points, we're seeing from new products and the commercial reaction in our marketplaces to the investments, but if you had to may so look forward to updating all of you on future progress as we go forward. Thanks, so much and have a great day.
Speaker Change: That concludes today's conference call. Thank you for your participation you may now disconnect your lines.
Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.