Q3 2024 Clarivate PLC Earnings Call
Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to declare a VIII-4-254 earnings conference call. All lines have been placed on mute to prevent any background noise.
After the speakers remarks, there will be a question in the intercession. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad to withdraw your question, press star one again. I would now like to turn the conference over to the company to start the call. Please go ahead.
Speaker Change: Thank you and good morning everyone.
Speaker Change: Thank you for joining us with a climate third quarter 2024 of our New York Conference call.
Speaker Change: House of Reminder, Disconference Call is being recorded and webcasts and is the copyrighted property of Clareway. Any reproach has of this information in whole or in part, without the tire and consent to Clareway is prohibited.
Speaker Change: The accompanying earnings call presentation is available on the Investual Relations section of the company website
Speaker Change: During our call, we may make certain forward-looking statements within the meaning of the applicable security laws.
Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the business or developments in Clarivate's industry to differ materially from the anticipated results, performance, achievements, or developments expressed or implied by such forward-looking statements.
Speaker Change: Information about the factors that cause actual results to differ materially from anticipated results or performance can be found in Clarivate's filings with the SEC and on the company's website. Our discussion will include non-GAP measures or adjusted numbers.
Speaker Change: Clare Bate believes non-GAAP results are useful in order to enhance understanding of our ongoing operating performance, but they are a supplement to, and should not be considered in isolation from, or as a substitute for, GAAP financial measures.
Speaker Change: Reconciliations of these measures to the most directly comparable gap measures are available in our earnings release and supplemental presentation on our website.
Clare Bate: With me today are Matty Shentop, Chief Executive Officer, and Jonathan Collins, Chief Financial Officer. After our prepared remarks, we'll open the call up to your questions. And with that, it is a pleasure to turn the call over to Matt. Good morning, everyone, and thank you for joining us today.
Matty Shentop: Jonathan is going to cover our quarterly results in details in just a few moments. Our financial performance has been disappointing and not what we aimed to achieve at Clarabate.
Matty Shentop: But I would like you to take away from today's call is that while climate has a lot to do to improve performance, we also have a lot of value levels and opportunities in front of us.
Speaker Change: And with that comes the possibility of a significant upside.
Matty Shentop: I'm going to talk about how do we plan to reposition Clarivate to realize its potential.
Matty Shentop: First, I would like to share a bit about myself and what brought me to this leadership role. I have 19 years of experience as CEO, including 14 years at Exlibris and five years at Propos, now a meaningful part of CloudBase.
Matty Shentop: Under my tenure, Exwimis grew six times into a SAS Education Technology Leader.
Matty Shentop: During this period, we accelerated our focus on innovation, transforming the company from an on-premises technology to SaaS technology provider by introducing the ExLibris Alma cloud solution.
Matty Shentop: As CEO of ProQuest, I continue to focus on driving growth through operational discipline, product innovation, and strategic acquisitions. We introduced ProQuest One, bringing together our deep collection of academic content, e-books, videos into a single platform. We launched the Rialto Content Marketplace, the company's first homegrown solution in many years.
Matty Shentop: We have acquired and integrated five companies, including Air Radio Interface, a public library software leader.
Speaker Change: This led to the acquisition of ProQuest by Cloudbase in 2021 for more than $5 billion.
Matty Shentop: I take a lot of pride in bringing major product to market, and I have a tremendous passion for what we do. These experiences will serve me well in my new role and will benefit CloudBase and shareholders.
Speaker Change: Plan six.
Speaker Change: I've been in the private CEO seat for 90 days now, and I'm starting to form my view on current state of the businesses.
Speaker Change: First, I conducted detailed business reviews with over 100 leaders, including strategy, product management, sales, technology, and customer service.
Matty Shentop: I've spent time with our teams assessing our three segment operations and go-to-market strategy. I've engaged with 2,000 plus employees in Alargo, Kansas City, New York,
Matty Shentop: Philadelphia, Jerusalem, and London. I've also started to meet with our customers, including some of our largest around the world, to strengthen my insights and learning.
Matty Shentop: I've begun to better understand what we are doing well and where we need to improve.
Matty Shentop: My comprehensive review was helpful to identifying and validating key strategic priorities leading to the development of an initial value creation plan, which I will discuss in a few minutes.
Matty Shentop: As you see on slide 7, Climate has an exceptional foundation consisting of major critical solutions across the innovation value chain.
Matty Shentop: Our flagship solutions are underpinned.
Matty Shentop: by best-in-class data and workflow artists.
Matty Shentop: This includes ProQuestOne, Web of Science, Derwent, Compumark, Cortelis, Alma, IPfolio, just to name a few. We are recognized as a trusted provider in the market we serve, and we have an impressive low-chip customer base.
Matty Shentop: leading academic institutions, top pharma companies, top tier corporates, and leading law firms.
Matty Shentop: Most importantly, we have an experienced and talented team of global colleagues with strong expertise across segments and across disciplines. Our people know our markets, know our customers, and our solutions inside out.
Matty Shentop: A key learning for me is that Clyde's decision to reorganize into three segments was the right one.
Matty Shentop: It leverages our talent by aligning our people's deep-domain expertise to our customers. And as a result, we are better able to partner with our customers to develop products to meet their evolving needs.
Speaker Change: Unfortunately, the company has become destructive, destructive over the last few years.
Matty Shentop: We have grown through acquisitions, which is an important value creation tool, but this represents challenges in terms of integrating different solutions and people at the same time.
Matty Shentop: Additionally, it is easy to lose focus on product innovation and organic growth.
Matty Shentop: We have also taken on product initiatives that were overly dependent on transactional revenue, which can be under predictable and less profitable with weak cash flow conversion. This revenue is susceptible to micro headwinds.
Matty Shentop: Our third quarter results clearly reflect some of the challenges and inconsistencies from this unpredictable source of revenue.
Matty Shentop: Also, the phase model and ultimate execution has been suboptimal. We have combined a generalist account management motion with an extensive portfolio of products which undermines the ability to sell expert solutions.
Matty Shentop: We have also under-invested in customer success, leading to lower renewal rates in some segments.
Matty Shentop: In addition, we have suffered from product technology debt, which hinders the pace of product innovation, distracted focus away from new development.
Matty Shentop: Certain non-core legacy solutions have led to insufficient management of product lifecycle and aging products, requiring significant levels of investment to refresh.
Matty Shentop: While near-term challenges have impacted our ability to execute effectively and deliver results, we see meaningful opportunities to renew our focus and improve performance.
Speaker Change: I've been down this road before, I've experienced and progressed, I have a clear understanding on the steps and process required to accelerate growth, along with passion, strong passion to deliver and execute for success.
Matty Shentop: Slide nine.
Speaker Change: In keeping with that spirit, the executive team and I.
Speaker Change: developed an initial value creation plan focused on improving execution and accelerating revenue growth.
Speaker Change: I plan to go into more detail on each of these initiatives on our year-ending call in February, but thought it would be important to provide you with a preview of our plans.
Speaker Change: First, we must optimize our business model by focusing on core subscription and reoccurring revenue.
Speaker Change: To achieve that, we plan to rationalize certain transactional product lines that are declining and have low profit margin and cash characteristics. We will also continue to look for opportunities to convert transactional sales to subscription to building
Speaker Change: So, so business model innovation.
Matty Shentop: For example, we have an initial success converting our life-size PV landscape and focus reports from transactional to subscription revenue.
Matty Shentop: By focusing on subscription-first model across the business, we will improve revenue predictability and profitability, and be better positioned against market elements.
Matty Shentop: We must improve sales execution. We plan to achieve this by strengthening our sales organization, putting in place better torritory alignment, reviewing our incentive plans, and enhancing customer engagement.
Matty Shentop: We will invest further and put more focus on customer success to ensure improvement in revenue rate.
Matty Shentop: This will create more time for each exchange rate to focus on smaller number of products and better align their domain expertise with the customer's needs.
Matty Shentop: I believe this will increase our ability to grow the pipeline and sales and revenues.
Matty Shentop: From product perspective.
Matty Shentop: We will encourage a build-versus-buy mentality. We will work closely with our customers to validate interest in clear business use cases through more formalized development partnership methodology.
Matty Shentop: I've used this model successfully before, it will help ensure investing in the right places.
Matty Shentop: and being responsive to our customer need. This includes accelerating innovation and leveraging AI as key enabler. For example, our proven success
Matty Shentop: Introducing academic research assistant in both Web of Science and Primo is currently being replicated in additional ANG product like PQIS, PQIS, and BOOX.
Matty Shentop: We are also extending.
Matty Shentop: IP and labs site site sciences capabilities.
Matty Shentop: utilizing various AI technologies. Furthermore, our forthcoming Web of Science Research Intelligence Platform is a next-generation software solution powered by AI. This product will empower researchers,
Matty Shentop: to accelerate breakthroughs and research institutions to better measure and showcase the impact of their research.
Matty Shentop: and finally, we will seek to carefully rationalize our portfolio. This will likely involve investing in non-goal solution that decrease our probability of success. The company is taking steps.
Matty Shentop: To simplify the organization, as seen with the divestment of Scholar One and Valley Park this year.
Matty Shentop: My experience has taught me that a simplified and focused organization is the first step to creating exceptional, to creating operational excellence.
Matty Shentop: I also see great opportunity to drive future further cross-rationalization to fund more product innovation and protect and expand our market.
Matty Shentop: Going forward, our goal is simple. We plan to deploy both human and capital resources
Matty Shentop: to work towards our most attractive opportunities that will grow our subscription and reoccurring revenue. We are committed to implement this growth initiative as quickly as possible as we embark on a multi-year turnaround.
Matty Shentop: As we optimize the business,
Matty Shentop: advance our product offering and align our portfolio to co-product. We are setting the stage for predictable long-term organic growth.
Matty Shentop: That said, as I mentioned at the beginning of the call, we are disappointed with the surfwater top-line results, particularly the rapid decline in certain transactional products. As part of my transition,
Matty Shentop: and the strategic work we are currently focused on the value creation, we have decided to remove our full year and long-term and long-range guidelines.
Matty Shentop: Our entire focus needs to be planning and executing the value creation plan, which is expected to deliver shareholder value. In summary, I have reviewed the entire portfolio.
Matty Shentop: And I plan to reduce private exposure to more volatile transaction product lines that have been affecting our business.
Matty Shentop: When we complete the initiative that I have laid out, assuming nothing else changes, we expect that we will improve our organic growth, revenue growth.
Matty Shentop: I want to emphasize that I'm very confident in the initiatives underway. Our team is energized for this journey, and we are excited to see this effort come to life in quarters ahead. I look forward to sharing more details on our next annual event.
Speaker Change: And with that, I will turn it over to Jonathan.
Jonathan Collins: Thank you, Marty. Slide 11 is an overview of our third quarter and year-to-date financial results compared with the same periods from the prior year.
Jonathan Collins: Q3 revenue was $622 million, a decrease of $25 million compared to the prior year, bringing the year-to-date to $1.9 billion.
Matty Shentop: The third quarter decline was largely organic, but was also impacted by the Valley Path divestiture.
Matty Shentop: The third quarter net loss was $66 million, $59 million lower than last year.
Matty Shentop: Adjusted diluted EPS, which excludes the impact of one-time items and lengthy impairment, was $0.19 in Q3, a $0.02 decline over the same period last year due to lower adjusted EBITDA.
Matty Shentop: Operating cash flow was $203 million in the quarter, an increase of $40 million over the third quarter last year, taking the year to date to over a half a billion, which is down $48 million over the prior year.
Matty Shentop: The decline is almost entirely driven by lower-adjusted EBIDTA as higher working capital requirements were offset by lower work-time costs.
Matty Shentop: Please turn to page 12 for a closer look at the drivers of the third quarter top and bottom line changes from the priory.
Matty Shentop: We previously anticipated the business would return to slightly positive organic growth in Q3. However, our results came in below those expectations at a decline of 2.6%, lowering revenue by $17 million versus the third quarter of last year.
Matty Shentop: Our subscription business grew at just under 1%, which was slightly below our expectations, but in line with the prior quarter.
Matty Shentop: Some strength in AMG remains strong at 3% so far this year, but we continue to experience headwinds in our LS&H and IP segments as customer budget pressure is persistent ahead of our key product refreshes.
Matty Shentop: The vast majority of the shortfall of our expectations was in our transactional lines of business, which declined by 14 percent.
Matty Shentop: and was concentrated in our A&G and LS&H segments.
Matty Shentop: where we experienced more market headwinds than anticipated, causing a lower pipeline conversion.
Matty Shentop: In the case of A&G, transactional sales of books and digital collections are off to a slow start in the new fiscal year in North America, and research and analytics backed file sales were lower than expected in Asia.
Matty Shentop: Our LS&H project-driven sales and services that support drug commercialization were lower than expected as budget pressures persisted at our top pharma customers.
Matty Shentop: Operating expenses were reduced by $6 million to mitigate the revenue shortfall, resorting to an $11 million decline in adjusted EBITDA on the organic revenue change.
Matty Shentop: We experienced an inorganic decline of $9 million on the top line and a $6 million decline on the bottom line due to the devalued patent investiture, which was nominally affected by the acquisitions of Motion Hall, Global Q, and Rowan.
Matty Shentop: Foreign exchange had a negligible impact on the top and bottom line compared to the same period last year.
Matty Shentop: Page 13 provides an overview of the drivers of the year-to-date top and bottom line changes from the prior year.
Matty Shentop: Our third quarter results brought our year-to-date organic change to a negative one and a half percent, lowering revenue by $30 million.
Matty Shentop: Our subscription business growth was at just over 1%, which is in line with our organic ACV growth at the end of September.
Matty Shentop: Our transactional lines of business have declined 9%, and while the decline in our AMG to LS&H segments are at or slightly below this level, driven largely by market headwinds,
Matty Shentop: We did see growth in Q3 and IP, driven by a recovery in our trademark services, bringing a year-to-date decline in this segment in mid-September.
Matty Shentop: Operating expenses for the first nine months of the year were essentially flat with the same period in the prior year as cost inflation was largely offset by cost efficiencies.
Matty Shentop: The Valley Path divestiture, netted a small offset by the acquisitions of Motion Hall, Global Q, and Rowan, caused an inorganic decline of $17 million on the top line and a $10 million decline on the bottom line.
Matty Shentop: Similar to the third quarter, foreign exchange had a negligible impact on the top and bottom line compared to the same period last year.
Matty Shentop: Please turn with me now to page 14 to step through the conversion from adjusted EBITDA to free cash flow.
Matty Shentop: Free cash flow was $126 million in the third quarter, an increase of $24 million over the same period the prior year, driven largely by timing differences and working capital.
Matty Shentop: This brings year-to-date free cash flow to $298 million.
Matty Shentop: A conversion of 39% on adjusted EBITDA and a decrease of $77 million over the same period in the prior year on lower adjusted EBITDA due to the top line headwinds and elevated capital spending aimed at accelerating product innovation.
Matty Shentop: One-time costs, interest, and taxes per quarter were generally in line with Q3 of last year.
Matty Shentop: Working capital was essentially flattened Q3 versus a 64 million use in the same period last year, primarily due to time differences in receipts from customers and raised the year-to-date time impact to 23 million compared.
Matty Shentop: Capital expenditures were up $15 million as we continue to invest in product integration to drive organic subscription growth.
Matty Shentop: We use most of our free cash flow in Q3 to repurchase 15 million shares of common stock and to complete the roll-in acquisition.
Matty Shentop: As we move into the fourth quarter, we're working diligently to finalize our new value creation plan and are eager to share the more detailed roadmap and the impact it will have on our outlook for the business when we report our fourth quarter and full of year results in February.
Speaker Change: Thank you for listening in this morning. I'm now going to turn the call back over to Regina to take your questions. And as a reminder, please limit yourself to one question and then return to the queue for any addition.
Speaker Change: Regina, please go ahead at this time. I'd like to remind everyone in order to ask a question, press star, followed by the number 1 on your telephone keypad. Our 1st question will come from the line of Owen with Oppenheimer. Please go ahead.
Owen: Thank you for taking my question. Could you please talk about
Speaker Change: The actual okay, cool, cool.
Owen: I know we've been talking about this for a second.
Speaker Change: What's up?
Owen: Oh, and I'm sorry there. The connection was poor. I had, we had a hard time making out.
Owen: Yeah, let me try again.
Speaker Change: Could you please talk more about why the actual organic growth was so far off from the expectation? And I know you talk about transactional revenue and some weakness in all three key segments, but where was the disconnect and how do you plan to change it? Thanks.
Speaker Change: Sure, Roland. I'll start with a little more color on the quarter and then I suspect Madi will want to touch on how the value creation plan will help to address this. So, as I mentioned in the prepared remarks, the transactional performance compared to expectations in Q3 was largely concentrated in our A&G business and in our life sciences segments.
Speaker Change: IP was reasonably close to what we were expecting on transactional, on recovery, and on trade farm services business.
Speaker Change: Within AMG, you'll recall we have
Speaker Change: A few different lines of transactional services, we're providing digital content.
Speaker Change: and historical research and analytics information. In particularly in North America, we saw less spending on the digital content that is transactional in nature.
Speaker Change: The pipeline development and conversion was lower than is anticipated and would be normal for those lines of business.
Speaker Change: And then, additionally, in Asia, where we still see significant market opportunity for historical research and analytics content, sales were lower there, the pipeline conversion was particularly close.
Speaker Change: In addition to that, on the life sciences side of the business.
Speaker Change: as we touched on, where we support our large pharmaceutical customers in commercialization products and services, a number of those projects that were anticipated did not materialize or push.
Speaker Change: Unknown Speaker
Speaker Change: Director of Borders Volunteers.
Speaker Change: So those are the reasons I'll maybe let Mahi touch on the things we've focused on. No, this is a great segue to what we're actually doing as part of my, you know, three months journey talking to, you know,
Speaker Change: with the internal people, sales organization, product, and some of our customers' volatility and exposure to one-time revenues is...
Speaker Change: Also, we can see that during the last quarters and going forward, we are going to
Speaker Change: You know, to take away some of the volatility and rationalize some of the one-time transaction business. We're looking further into the one-time businesses, low margin.
Speaker Change: It's not profit, it's not growth.
Speaker Change: It's expensive. It's very hard to predict. And part of the value operation plan we are currently contemplating is taking away this volatility and making rooms to focus, to help us focus more on product innovation, subscription, reoccurring, predictable profits. That's where we're going.
Speaker Change: Thanks for the question.
Speaker Change: Thanks. Next question.
Speaker Change: Our next question comes from the line of Ashish Subhadra with RBC. Please go ahead.
Speaker Change: Hi, good morning. This is David Page on First Sheesh. Thanks for taking our question. I was wondering, maybe you could just parse out
David Page: some of the weakness that was driven by just general macro headwinds or you know I know in the initial value creation plan you have to improve
Speaker Change: Sales Execution and get more focused.
Speaker Change: Yeah, thanks for the question, David. So we certainly believe that it's a combination of both. We think a meaningful portion of what we experienced in the quarter were market headwinds being higher than we expected. But as Monty touched on in his remarks.
Speaker Change: We certainly acknowledge that there's significant opportunity to improve our sales execution. There are several factors which relate to sales execution I want to actually mention.
Speaker Change: It's a different segment, and I'm going to reiterate.
Speaker Change: But still, there are some work to be done on the specific sales organization of the different segments.
Speaker Change: And the concept of the SES generalist approach doesn't really work in some of the segments. So what we're actually going to do is actually introduce the SES, we're going to emphasize further on the SES specialist.
Speaker Change: And try to read the red line.
Speaker Change: The customer buying, the customer actually buying our product.
Speaker Change: with our sales expert. This is one of the drivers for the improvement on the sales organization. There are some other elements of the sales improvement that we are doing. The company somehow was under-invested in customer success.
Speaker Change: in some of the segments, making sure that people are actually using our product to the fullest and understand the new functions and features coming on. And we are identifying some shortage of stuff that we will
Speaker Change: Thanks for the question, Dina. Next question, please.
Speaker Change: Hi George, your line might be on mute.
Speaker Change: We'll take our next question from the line of Tony Kaplan with Morgan Stanley. Please go ahead.
Tony Kaplan: Thanks so much. And I appreciate the information on the value creation plan. I wanted to just ask, you know, I think, when you think about moving transactional to subscription, improving sales execution, accelerating product innovation,
Speaker Change: It makes total sense. But I think a lot of these were
Speaker Change: items that
Speaker Change: Prior management had tried to work on as well. And so just wanted to understand
Speaker Change: I guess what's going to be different this time and also should we expect a higher level of investment going forward? Does that mean...
Speaker Change: maybe we see a little bit of a hit to margins to try to drive some of the growth. Just wanted to understand those two aspects. Thank you.
Speaker Change: So maybe I'll start with the first question. So I'm not here to comment on the previous management. I actually reiterated already. I think that the previous management has done a good decision.
Speaker Change: to realign the company with having three segments. They also started the investment into product innovation.
Speaker Change: I'm simply different. I come from a different background. I have a strong passion for people.
Speaker Change: fraud up and said something.
Speaker Change: invest myself in making sure we have the right talent and we do have the right talent. We need to do some minor alignment with our talent and I got to focus a lot into product.
Speaker Change: I've been a product person since early in my career, so I'm going to put a much stronger effort and go deeper into the product innovation life cycle I've developed during my long career with Service and Progress, a methodology that will release our customers.
Speaker Change: to develop products and then making sure that we, you know, align.
Speaker Change: our product development with customers' needs and evolving needs. And lastly, the sales execution. I've been involved in sales ever during my career. I was focused a lot in sales execution and delivering the product. So I'll bring my three passions, people,
Speaker Change: and sales into the climate environment. And I'm sure this experience will work well for putting a company on an organic growth trajectory, great value for our customers and obviously great value for our shareholders as well.
Speaker Change: Thank you for your question, Tom.
Speaker Change: Our next question will come from the line of Andrew Nicholas with William Blair. Please go ahead.
Andrew Nicholas: Hi, good morning. Thank you for taking my question.
Andrew Nicholas: There's a lot of experience with turnarounds and people, product sales, just kind of curious and I'm not asking for specific guidance, I know you're going to talk a little bit more about.
Speaker Change: Next quarter, but based on your experience.
Speaker Change: How long do some of these different pieces tend to take? I'm just kind of curious.
Speaker Change: how quickly some of these go-to-market motions, for example, can be revitalized based on what you've seen within the business to this point.
Speaker Change: So, based on my experience, I've been around for 90 days. I don't want to jump ahead of myself.
Speaker Change: I've been investing my time meeting our people and meeting some of our customers and trying to see what's working, what can be further improved.
Speaker Change: I have some very clear ideas about the way forward.
Speaker Change: Some of the changes will be up and coming pretty quickly.
Speaker Change: would take more, more time and improve all the time. Obviously some changes in the.
Speaker Change: in the middle, but in different levels of.
Speaker Change: Office of Management and Product Innovation, it takes time to renew a product.
Speaker Change: So I would be expecting to give you more details in February, but it will evolve, like improvement will evolve over time. And one of the ideas that we have
Speaker Change: that we're actually going to give you some KPIs and some KPIs at some point that will allow you to track.
Speaker Change: our progress against the plan. This will come in February and beyond. We're not going to give a specific date before February, but we understand that you need to be able to track our progress, and we will address this in February.
Speaker Change: Great. Thank you for the question. Next question, please.
Speaker Change: Our next question comes from the line of Manav Butnaik with Barclays. Please go ahead.
Manav Butnaik: Thank you. Good morning. Maddy, you talked about, you know, all the time and effort you put into ProQuest to fix it and kind of turn it around. I think there you had the benefit of it being a private company and a lot of kind of time and cover, if you call it.
Manav Butnaik: So just curious, you know, your discussions there with the board, like, why isn't that something that's part of this, you know, effort that you're that you're going through right now?
Speaker Change: First of all, let's talk about whether these three businesses belong together or not. So all these three segments, you know, have some very similar characteristics, right? They all enrich data, provide analytic insights, deliver workflow solutions via SAS.
Speaker Change: to provide some expert services. This is one. There's also the three, I have the same
Speaker Change: You know, abilities and the same technology infrastructure and talk more content about technology and we're talking about share commercial channels to deliver fish to deliver efficiency and scale.
Speaker Change: And at the same time, I recognize what you're saying, and we have some.
Speaker Change: It's too early to comment on what you said, but there are no secret cows.
Speaker Change: Thank you for the question, Lyle.
Speaker Change: Next question, please.
Speaker Change: Our next question comes from the line of Shlomo Rosenbaum with Stiefel. Please go ahead.
Shlomo Rosenbaum: Hi, thank you for taking my question. Um, Monty, I just want to ask you between some of the stuff that you were talking about in terms of, you know, getting rid of products that are, you know, marginally profitable and, you know, simplifying the business and potentially looking at areas to, you know, get out of.
Speaker Change: Should we expect a substantial kind of shrink to grow strategy over here where the business has to actually be decently smaller than what it is today?
Speaker Change: particularly on that transactional side of the business or is that really you know it's not really a huge factor it's just kind of marginally making sure that the business is not so volatile and you're in a more a better position to sell the products. I'm just trying to think of you know strategically how we should be thinking about this in terms of trying to layer things into our thinking.
Speaker Change: So we have identified, thank you for the questions, we have actually identified, you know,
Speaker Change: Some potential businesses that we want to divest, wind down, maybe shrink in different ways.
Speaker Change: And we're still deliberating.
Speaker Change: On which what should we do and how do we go about this? Because if we invest the business.
Speaker Change: and we are staying in a certain segment. We want to protect our reputation, we want to protect our asset business as we said with that respective.
Speaker Change: respective segments. So there are currently, you know, different teams are working on the different ideas and opportunities, and they are for real. But you have to be, bear with me, you know, first 90 days,
Speaker Change: and you have to be patient till February. We'll lay it out in February. We have some good ideas. It will be much more concrete and specific in February.
Speaker Change: Thank you for the questions.
Speaker Change: Next question.
Speaker Change: Good morning. Thanks for the question. I think one of the original.
Speaker Change: full thesis on on Clarivate over the years has been driving
Speaker Change: Revenue synergies, either within segment by expanding the value chain presence along the value chain or across segments. Obviously, the company's done a decent job in driving cost synergies there.
Speaker Change: But just curious on your assessment on whether you think there are potentials for revenue synergies between the three various businesses and likewise within segments where the company has had capabilities. Thank you.
Speaker Change: So.
Speaker Change: I think we all know the history went one, like, the pendulum go one way, you know, with one cloud base, you brought it back to another, to the other five.
Speaker Change: I believe it's for my initial view that there is some revenue synergies between the three organizations.
Speaker Change: This is something I still need to check.
Speaker Change: a sound concept, execution, we can argue about the execution. There is some definitely there is cost synergies and this was taken to an extreme in our situation. There should be also some revenue synergies and there are some
Speaker Change: and so on and so forth.
Speaker Change: cross-selling between some customers. The different segments are buying from other segments as well. But I want to wait some more time before I give you some complete answers about revenue synergies between the different segments. It's definitely something to look at.
Speaker Change: Thank you for the question, Pete. Regina, let's go to our last, next and final question, please.
Regina: Our final question comes from the line of George Tong with Goldman Sachs. Please go ahead.
George Tong: In each of your segments, can you talk a little bit more about some of the end market trends that you've seen, what we need to improve externally to help support some of the internal initiatives you have to transform the business?
Speaker Change: First of all, it's a given, you know, we are operating in three different
Speaker Change: segments, the very good segments to be in.
Speaker Change: And I believe that, you know, the return growth of those segments, and I'm talking about, I'm being very careful.
Speaker Change: I'm talking about the segments themselves, I'm not talking about the company at the moment. I think those segments grow four, five, maybe even more on the life science side. That's our belief that those segments are growing. We have different...
Speaker Change: Thank you Jonathan and Kat Other citepe. Any other questions? Great! I would also like to mention that the third election, which ended repeatedly after election July 9th this year, 1.3% died from sugar chills. We also saw people dying from diabetes, etc. Depending on which data is used we can confirm you are dealing with diabetes. Great!
Speaker Change: We see less of an appetite to invest in capital expenses. That's why we see some softness on the digital collection front.
Speaker Change: This is why we're also talking, this is seen already in the, we keep talking about the softness of capital expenditure on the AMG side, which impact our one-time revenue that's on the AMG side.
Speaker Change: On the IP side, we've seen, again, it's a 4-5% growth on the market side itself. We do see some softness on the immunity side, not only from us.
Speaker Change: If you take the Dutch PTO as an example, you see from the Dutch PTO, because the indication that the entire industry is suffering on annuity, and we do expect this to come back. And thirdly, the life science.
Speaker Change: It seems to be the most promising in terms of growth, but we see headwinds.
Speaker Change: especially on the commercial side of the life science, where we see that R&D is still doing well on the commercial side of life science. We see some software at the moment, but as I said at the beginning, they are all good.
Speaker Change: segments to be in, 4-5% growers as an industry, Dynascience maybe even more.
Speaker Change: Got it. Thank you for that question.
Speaker Change: And, Regina, I think we have one final question, and then we'll go ahead.
Speaker Change: And that question will come from the line of Colton Feldman with Jefferies. Please go ahead.
Colin: Hey, this is Colin on First to Render. One quick question I just wanted to ask, you guys had mentioned
Colin: seeing some lower renewal rates in some areas of the business, just wanted to ask kind of what you're seeing there and kind of you know if there's any certain segments you're seeing higher churn or if you can generally just kind of talk about what you're seeing from kind of a churn perspective if it's quantitative or qualitative, just kind of generally. Thank you.
Speaker Change: Yeah, thanks for that, Colton. So, in our prepared remarks, we highlighted the fact that the subscription growth for A&G remains solid. So, renewals in A&G continue to be very strong. Where we saw renewal pressure in the third quarter that had
Speaker Change: A small impact or smaller impact was within the life science and the IT segment. So, as we touched on, we know there's pressure on spending even for.
Colin: recurring revenues within the life sciences space, particularly our large pharma customers.
Colin: And as Mahi touched on, we do continue to see some pressure on spending in IP on our recurring business, but also within subscriptions ahead of the new Derwent launch that's happening as we speak. So those are the two areas that we were on.
Speaker Change: a bit softer on in the third quarter. And obviously, the things that we discussed in the VCP, between sales execution, being closer to the customers, making sure that we're driving a strong usage of the product through training will help to alleviate that, in addition to the product innovation investments we've made.
Speaker Change: Thank you for that question, Colin.
Speaker Change: Regina, I think that's our last question. So I want to thank everyone for for joining in this morning.
Speaker Change: Ladies and gentlemen, that will conclude today's call. Thank you all for joining, and you may now disconnect.