Good morning and welcome to the Clarivate’s First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.I would now like to turn the conference over to, Mark Donohue, Vice President and of Investor Relations. Please go ahead.

Thank you, Andrew and good morning everyone. Thank you for joining us for the Clarivate first quarter 2020 earnings conference call. With me today are Jerre Stead, Executive Chairman and Chief Executive Officer; Richard Hanks, Chief Financial Officer; Mukhtar Ahmed, President of Science Group; and Jeff Roy, President of the IT Group. All will be available to take your questions at the conclusion of the prepared remarks. As a reminder, this conference call is being recorded and webcast and is copyrighted property of Clarivate Analytics. Any rebroadcast of this information in whole or in part without prior written consent of Clarivate is prohibited.This morning, Clarivate issued a press release announcing our financial results for the period ended March 31, 2020. The release as well as an accompanying supplemental presentation is available on the Investor Relations section of the company’s website, clarivate.com under Events and Presentations. During our call, we may make certain forward-looking statements within the meaning of the applicable securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the business or developments in Clarivate’s industry to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Information about the factors that could cause actual results to differ materially from anticipated results or performance can be found in Clarivate’s filings with the SEC and on the company’s website.Our discussion will include non-GAAP measures or adjusted numbers, including adjusted revenue and adjusted EBITDA. Clarivate believes non-GAAP results are useful in order to enhance an understanding of our ongoing operating performance, but they are a supplement to and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliations of these measures to GAAP measures are available in our earnings release and supplemental presentation on our website. Again after our prepared remarks, we’ll open the call up to your questions.And with that, it’s my pleasure to turn the call over to Jerre.

Thank you, Mark and thanks to all of you for joining us this morning. I sincerely hope you and your families are healthy. We look forward to returning to some semblance of normalcy and we'll really welcome the day that we'll be able to meet with all of you again in person.Despite the many distractions of COVID-19, we had a very solid first quarter. Adjusted revenue including the acquisitions of DRG for one month and Darts-ip and excluding the divested MarkMonitor businesses increased by 10.5% to $243 million at constant currency.In addition to recent acquisitions - in addition to recent acquisitions revenue growth was driven by new business and price increases. Subscription revenue excluding divestitures increased 8.4%, as a result of temporary work stream disruptions experienced by a few of our customers arising from the virus we did experience some delay in getting a few contracts renewed during the quarter. This prevented us from delivering even stronger subscription revenue growth. We expect these contracts to be renewed in Q2 and consider this a Q1, Q2 timing issue arising from the pandemic.Adjusted total company organic revenue growth at a constant currency was 2.2% and was affected by the timing of the contract renewals I just mentioned. Our efforts to improve our operational and financial performance are really delivering results, as demonstrated by the 32% increase in adjusted EBITDA to $78 million.This drove an almost 700 basis point improvement in our first quarter margin to 32.2% and we benefited from revenue growth, acquisitions, portfolio rationalization and cost savings initiatives. Richard will cover the financials in detail in a few moments.During the first quarter we continued to make enhancements to our product offerings across our portfolio. Within our Science Group, beyond the DRG integration work we launched Cortellis Drug Discovery Intelligence as the…

Thank you, Jerre. We delivered a very good first quarter to start the year, which is even more impressive given the present stay at home orders. We reported adjusted revenues of $243 million, an increase of $8 million or 4% at constant currency.The first quarter includes a one month contribution from the acquisition of DRG and a full quarter from Darts-ip, which together added 8% to revenue growth. This was offset by the divested products which were sold on January the 1st of this year and which reduced revenue by 6% compared to last year's first quarter.As a reminder, we divested these product lines because they were subscale for us, capital intensive and low margin. Excluding the domestic product lines, total revenue increased by 10.5% to constant currency in the first quarter.With a large percentage of our revenues being U.S. dollar denominated there was less than a 1% negative impact from foreign exchange due to dollar strength, as compared to last year's first quarter. The EBITDA impact from FX is minimal in the first quarter due to our company’s natural hedge.Ongoing business revenue, excluding acquisitions, divestitures and foreign exchange increased 2% as higher subscription revenue was partially offset by slightly lower transactional revenue. Total subscription revenue was $193 million and excluding the divested businesses increased 8% at constant currency.Ongoing business subscription revenue grew 3% for the first quarter, driven by new business and price increases within both the science and IP groups, consistent with the growth in the annualized contract value. As Jerre mentioned, subscription revenue growth was partly impacted by the timing of some renewals. This was due solely to the pandemic and these timing issues will result in some subscription revenue being pushed from Q1 into Q2 as we complete these renewals.On the reported basis, subscription revenue increased…

Thanks, Richard. Great job. Before we open the lines for questions, let me reiterate that we're very well positioned to manage through the current environment. We have a suite of health care science and IP products that are essential to our customers. This year we expect to generate over $200 million of free cash flow which will allow us to continue to invest internally, reduce our debt and invest in business development and M&A.Next week we'll celebrate our one year anniversary as a public company. I'm very proud of what we've accomplished over the past year. Beyond our operational financial growth, we'd been enhancing our corporate governance. Our Board is transition to an independent Board and independent committees with a lead independent director.This year we will continue to evolve by introducing a far-reaching program aimed at becoming an industry leader in sustainability, focused on our impact on the environment, our society, our customers, our ethics, our communities and our responsibilities.I want to thank my colleagues at Clarivate for their dedication, hard work and strong collaboration as we manage through this current global health crisis. I also want to thank our customers for their continued support.Lastly, due to the health crisis we've moved our 2020 Investor Day that was scheduled for May 19th. We're now planning to hold the event on September 22nd. Please mark your calendars and join us for our website. We will be sharing a thorough review of Clarivate in our profitable growth strategy.We're now ready to take your questions. As a reminder, please limit yourself to one question then return to the queue. Thank you. Operator?

[Operator Instructions] First question comes from Seth Weber of RBC Capital Markets. Please go ahead.

Hey, guys. Good morning. I hope everybody is doing well. I wanted to ask about the pricing environment, just given the - you know, the obvious challenges in the macro. Jerre you had previously talked about targeting, I think a little bit over 3% for 2020.Is that still a good number to think about and can you just give us any, you know, any additional color on the two vertical science versus IP on the pricing side. Thank you.

Sure. Great question, Seth. Yes, we said we would. You know, last year we did about - to 2019 about 2.1%, 2.2%. We said we were building in 3.2% or thereabouts for 2020. Just as a reminder for everybody, 50% of our annual subscription base has renewed in Q1, 20% in Q2. So 50% was the number for Q1.The only exception we've made and by the way our team with Mukhtar and Jeff's leadership and Richard and me supporting, who’s done a great job on renewing in this crazy world we're living in. And the only exception on pricing that has happened is that there are some countries where the dollar is much stronger, as much as 25% to 30% stronger than it was at this time last year. There we've obviously taken because 80% plus of our revenue and our renewal - renewals are in dollars. We've taken the currency issues into account.Otherwise I feel really good. We will get more input, which we’ll provide you at the end of Q2 and particularly from our Customer Delight surveys that start today. Great question and I'm really pleased with the work that's been done, particularly as our sales force learns to do an ever better job of selling value. Thanks, Seth. Next question.

The next question comes from Andrew Nicholas of William Blair. Please go ahead.

Hi, good morning.

Hi.

Can you – good morning. Can you speak to the health of your Web of Science customer base, specifically and the extent to which you'd expect budgetary pressures on university to affect those sales conversations, whether it be in terms of renewal rates or I guess you talked a bit about price increases. But I'm interested in particular over the next couple of years there. Thanks.

Yeah. Great question. I'll start, Mukhtar will pick up. Two or three things, we measure output every day on each of our products. The output in Web of Science is up actually significantly, which makes sense, if you think how many universities around the world are doing online education.Point One. Point two is reminder we're a very, very small piece, but a critical piece of the investments that the universities make and in fact we help them make decisions of what they should be spending the larger dollars on. But Mukhtar please pick up.

Sure. Thank you, Jerre. You know, I think the outlook is very good for us. You know, remember where, you know, the industry's leading benchmark for the evaluation of research, you know, within academia and across research and we very much expect that to continue.Certainly within academia, you know, the universities will probably have to look at some of their underlying business models and you know, for example by perhaps shifting to distance learning or maybe embracing other electronic means to engage with students and researchers.But that plays very well, you know, for the use of Web of Science and our data assets that lend well to those types of virtual communities, online collaboration and so forth. So you know, I think this certainly positions us in one of strength and necessity in future years.

Thanks, Mukhtar. I would add one thing, because it's a great question. We put in place a team that Richard is sharing along with Jeff and Mukhtar, some of our other team to review twice a week any request changes in terms, because if we were expecting to see any issues it would be biggest in Web of Science.They meet twice a week. Thus far I would tell you it's been minimal and we'll make sure and keep you posted on that too, but I'm very, very pleased. Thank you. Next question.

Thank you, sir. The next question comes from Ashwin Shirvaikar of Citi. Please go ahead.

Thank you. Hi, Jerre. Hi, Richard.

How are you?

Hope you’re all doing – hey, I'm good, thanks. Hope you're doing well in the current environment. So my question is on intermediate to longer term revenue opportunity. Based on your prepared remarks, I took away that the subscription revenue shortfall should catch up in Q2. The full year shortfall due to transaction revenues, things like Web of Science, backfile sales and so on. Can you talk to the client conversations you're having now, as it relates to the environment for these sales in the intermediate to longer term, as well as separately the longer term opportunity for things like epidemiology research?

Great question. I'll start then I'll have Mukhtar comment and then Jeff comment because as you would expect we pay a lot of attention to that right now. We thank and I actually said that on call, we're doing a weekly call by the way with all of our colleagues worldwide. We do Q&A, update them on what's going on. I said on that same question that we got from some of our colleagues a couple weeks ago, we actually see this as a medium, long-term significant upside for us and I reiterate that to them as I did to you all this morning, that we believe we’ll exit 2021 at 8% to 10% organic level with a significant part of that being on a double-digit growth in life science. But Mukhtar pick up on that and then let's get Jeff's comments because we've see the same thing in IP.

Yes. I mean, first and foremost, we've maintained full continuity of our operations and that's our sales operations, inside sales, customer engagement, and of course, our data operations. All of those we've maintained in absolute continuity with. Now what's out of our control is of course, certain - economies around the world, certain geographies and that's down to you know specific government legislation and policy in those countries, as those economies open up, we're poised to respond and adjust accordingly.We're in constant contact with our customers. In some cases, certainly in the world of services, we've for example shifted from onsite delivery of our services to remote delivery of our services. So I think you know it's very much continuity in that mode, certainly for the foreseeable future. Jeff?

Thanks, Mukhtar.

Yeah, sure. Thanks, Jerre. I'd say its couple of things on the IP side to pay attention to. I mean one is that these businesses have not fully benefited yet from all of the cross unit revenue synergies and we're starting over - hoping to see that really start to take effect within Q2 and that's principally built around assembling packages between the various business units, former business units that will help solve customer problems a little bit more effectively.I think longer term, we're definitely focused on adding more service and expertise into our product offerings. And then one of the things that you can never forget about the Clarivate IP assets is that these are phenomenal data assets. So we have an increased focus on separating our content from the platforms so that we can realize additional revenues through adjacent markets and other use cases. So we feel pretty good about long-term and intermediate and I don't think the current operating environment is really impacting our plans whatsoever.

Thanks, Jeff. Great question. Next question please.

Yes, sir. The next question comes from George Tong of Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. You've taken one of your revenue guidance slightly…

Good morning, George.

Morning, to reflect the impact of the coronavirus. Can you deconstruct the revenue guidance update to reflect how much of the update reflects changes in assumptions around pricing versus retention versus new sales and timing? And then talk about the expected impact between your science and IP product group?

I'll start, Richard will pick up, really thoughtful question George. A couple of things, we reduced it, as you saw, midpoint by a little less than 2.5%. A large part of that is because of a slowdown in the first quarter of one-off transactional businesses. There was softness in one-off on patent searches, which makes sense. A one-off on getting trademark searches. We expected that. Interestingly enough, it ended a bit stronger into Q1 than we were expecting.So the big piece of that would be coming up the $30 million if you go midpoint to midpoint would be coming off of a timing issue, meaning we won't see that probably come back in full in 2020, but we'll expect it in 2021. Richard, pick up from there.

Yeah. Thanks, George. I mean, when we look at the 2.5% improvement from the midpoint, approximately one quarter of that shift is subscription revenue where we're taking a more cautious view in terms of new business which is not surprising. The bulk of it 75% of that comes from transactional revenue streams and taking a more cautious view on professional services as well. So that's the - that's the approximate split between the two principal revenue drivers.

Very helpful. Thank you.

That's question. Let me just add two other things to that, because when we knew - when we knew because we had the early warning in China we did a review, I had Richard do with his team a standalone of what we thought could happen. Then we had Jeff and his team and Mukhtar and his team. If you look at all three of those, it was remarkably close. In fact, I was amazed.We then just looked at nine plus three year course and I felt very, very good because I think the assurance each month goes up on what we'll do. I think Richard's descriptions very accurate of a quote very modest change in annual subscription base. Some of that would be the comment I made earlier where we've got annual subscription-based business with - in countries that have suffered as much as 25% a reduction in currency local right now and like I said we're clearly taking that into account. And then the one-off transactions. But I could feel better about where we're at right now. So thanks, George. Next question.

Thank you. [Operator Instructions] The next question comes from Shlomo Rosenbaum of Stifel. Please go ahead.

Good morning. Thank you for taking my question. Hey, Jerre can you talk a…

You bet.

Could you talk a little bit about the impact from coronavirus on the acquisition, particularly DRG had a higher slug of consulting revenue. How is that performing now and how much of the impact the $30 million reduction in revenue is really just because we're going to have a temporary hit to the consulting revenue from DRG?

Great question. As I mentioned that the job that Mukhtar and the team have done on the integration is amazing to me. We have a weekly update meeting and it's as good as I've ever had in this crazy world we're living in of all stuck at home. So that feels really good.I think the question is so important, because we feel very good about where we're at with DRG right now. I have Richard and then Mukhtar pick up, though on the point of whether we will make up during the year any loss in that so-called consulting, again I'd stress that for DRG that's really helping our customers use their data and our data to make decisions. So I feel very good about that. Richard?

Yes. Good morning, Shlomo. Thanks for the question. Yeah, we've been - I mean, Mukhtar and I and the team have been really impressed with the robustness of the DRG business period. I think if there's one vertical that you want to be selling into currently, it's life sciences. And so you know, the business is holding up very well.To your point on consulting, they do have, DRG does have a very nice position in consulting. I would add that these are very long term deep, deep client relationships. We haven't seen that much disruption. So overall it's progressing very, very well. Mukhtar, anything you'd like to add.

Yeah. No, I think I think - yeah you've summarized it very well Richard here. The revenue and cost synergy plans are on track. The integration has gone very smoothly. DRGs held up very, very well within the current climate. Remember you know, the bulk of our revenue is reoccurring revenue with many of the customers. So these are long-term relationships as Richard just pointed out.And as I mentioned a little earlier on, in the case of consulting where we are unable to actually sit with customers on site we've moved to remote delivery of those services. So again, very good continuity.And in the context of the world today you know, we've also got an eye towards post-COVID where you know, clearly the data assets we have, the software and the expertise are going to be absolutely critical across that health sciences landscape, which is very important.

Thanks, Mukhtar. Great question. Next question please.

The next question comes from Zach Cummins of B. Riley FBR. Please go ahead.

Hi. Good morning, Jerre and Richard. Thanks for taking my question.

Hi, Zach.

Yeah. So it sounds like you definitely have some nice tailwinds in the life sciences portion of the business. But can you just remind us in terms of how do all the other portions of your business tend to operate in a more recessionary environment?

Great question. I'll start and then in this case I'll have both Mukhtar and Jeff make quick comments. If you go back to the last major economic downturn, which would have been late 2007, ‘08 and ’09, these businesses actually stayed flat or grew a bit. And in all due respect to where these businesses were then, we're 100 miles ahead today in 2020.So it's really important that everybody understand. We're building into the work streams, the workflows of our customers to help them make decisions in their critical time like this. They need our help even more perhaps than other times. So just feel very, very good about that. Mukhtar?

Yeah. I think history is a difficult one to go by way of as a gauge. But generally if I take our Web of Science business, it's survived pretty well over the years and I think in the context of where we are right now, certainly the bulk - you know, a fair bulk of our content is probably of even greater value to the scientific community, more so than you know perhaps you know previous years.So moving forward I think again in that sort of post-COVID scenario, I think that there's going to be a greater demand for the things that we have in Web of Science to for sure.

Thanks. Jeff?

Yeah. I would add that for the IP business, the pharma segment is still a critical segment for us and we do quite a bit of business there. I mean, I think it's fair to say as Jerre and Richard mentioned on the transactional front you do see some one-off trademark filings, it can be pulled back a little bit during a bad macro situation.But we've got a phenomenal and diverse product mix. We do a good job of offsetting that and frankly it's difficult to grow any business without investing in and protecting your IP. So our position and the mix of products that we have in the market really do help us weather any storm.

Great. Thank you, Zach. Next question.

The next question comes from Peter Christiansen of Citi. Please go ahead.

Thank you. Good morning, gentlemen.

Hi.

I was hoping you could talk- I was hoping you could talk about as you as you moved into April, if there are any noticeable changes in user engagement, whether it's log-ins or time spent on the platform. And to discuss that by the major product categories, I think that would be helpful. Thank you.

Let me make it really simple. Thank you. We measure by day, by every product the input which is critical for us obviously and the output. In every case it's up, flat or up. Input is actually up. As I mentioned in my script, for updates, I gave several examples. And output is the highest we've ever had.I think that one of the things that's interesting and I think we're all learning a lot about what's going on in this new world of work from home. People actually have more time and so they're looking at using our products, probably better than they ever have, as they do that we're all hopeful that they'll stick with that when and if they go back to their workplaces away from home. So that feels very good.And in fact that's the first thing we all look at. Every morning we get a full update from Singularity project which is making great progress and we're very thankful to have that, and then from our IT organization. So we feel very good about that. We measure that, like I said by product, by day and see really in total were up from where we were before this all happened. Thanks. Next question.

And our last question today will be a follow up from Seth Weber of RBC Capital Markets. Please go ahead.

Hi. Thanks for taking the follow up. It was kind of along the same lines with what you just addressed. I just kind of wanted to ask about you know, now that China is starting to stabilize and kind of come out of this, you know, is that a fair parallel to think about how you think the rest of the world will react?And you know, lessons learned in China relative to kind of how you see the rest of the business, I guess kind of coming out of this. You may have just addressed that, but if you have any additional thoughts there. Thanks.

No. Thanks, Seth, and it's a good one to wrap up on. We were fortunate in one standpoint. I happened to be with Jeff and Mukhtar and others in Bangkok on January 15th and 16th and that happened to be our Asia Pacific Sales kickoff. And we were hearing before the rest of the world really a lot of what was going on. So we started to prepare for that, literally on that day.I then flew from there to London to have a special board meeting, so we could get approval to do the DRG deal, which we did. I flew back. The teams were off and running, I couldn't be prouder of all the work that was done. We did pay a lot of attention to David Liu, our outstanding leader from - in Asia Pacific, of what they were seeing of what they were doing. We were having every other day calls.And we put in place an everyday call that's now gone on for seven, eight weeks to make it with worldwide teams from each of our locations and the location leader that we get updated on everything every day. And we've used a lot of what we learned in China, including all the game plans we have in place when we go - when our people return to our offices.As a rule of thumb by the way on that, we'll wait at least three weeks after a government makes a decision for return to office. The world will wait at least three weeks before we do that. And I must say it's been incredible for me. I've done this you all know a long time, never gone through one like this, nor never have I seen the team react and do better than what we did.If you think about us having about 6,200 people on different countries all over the world, all working from home and working well, it was an amazing accomplishment and one I'm very proud of. And as I said, as we move forward for the balance of 2020 and then 2021, I'm more enthused and excited than I think I've ever been about the position we're in, where we're going to be and how we're going to get there.

So I thank you all very, very much for the morning. Wish you all well, stay well, more to come. Thank you, operator.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.