Good morning, and welcome to the Clarivate Analytics Q2 2019 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Anthony Gerstein, Vice President and Head of Investor Relations for Clarivate. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us for the Clarivate Analytics Second Quarter Fiscal 2019 Earnings Conference Call. With me today are Jerre Stead, Executive Chairman and Chief Executive Officer; and Richard Hanks, Chief Financial Officer. As a reminder, this conference call is being recorded and webcast and is copyrighted by 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 its second quarter fiscal results for the period ended June 30, 2019. The release as well as an accompanying investor presentation is available in the Investor Relations section of the company's website, clarivate.com under the Events & 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 or on the company's website. Our discussion for the quarter will include non-GAAP measures or adjusted numbers, including adjusted revenues, adjusted subscription revenues, adjusted transaction revenues, adjusted EBITDA and free cash flow. We will also provide our required disclosure of a stand-alone 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. After our prepared remarks, we will open up the call to your questions. With that, it's my great pleasure to turn the call over to Jerre.

Thank you, Anthony, and good morning to everyone on our call. We very much appreciate you all joining us today. It's been about 2 months since I took the CEO position. We're moving very quickly to execute on initiatives that will accelerate revenue growth and margin expansion. I've said this before, Clarivate represents a unique and powerful set of assets. Our customers cannot operate effectively or efficiently without our products and solutions. We are a trusted, independent and indispensable partner to innovators everywhere, delivering critical data, information, workflow solutions and deep domain expertise. We have numerous opportunities to invest in the right initiatives, leveraging our assets. To help us realize this, we've engaged the Boston Consulting Group to provide us with their objective evaluation of the best structure for Clarivate as a new public company. This will help us to accelerate our path to long-term sustainable profitable growth, and this quarter is the beginning of that path. I'll provide an overview of our second quarter results, share some of the progress we've made on important initiatives, and then Richard will provide more detailed financial commentary. I'm very pleased with our results for this quarter, which were in line with our expectation. Adjusted revenue increased 2.5% on a constant-currency basis, and they were driven by solid adjusted subscription revenue growth of 5%. Annual contract value of subscription-based agreements increased 3.6% with revenue renewal rates approaching 92% for the 6-month period ending June 30. While we're pleased with 92%, we will always be striving for a higher renewal rate. Adjusted EBITDA increased 8.4% to $73.2 million in the second quarter and free cash flow of $18 million for the 6 months ending June 30, was inclusive of approximately $30 million of merger-related expenses. We've also had some outstanding commercial wins, 2 of…

Thank you, Jerre. As mentioned, our results for the second quarter were in line with our expectations. Reported revenues decreased by $1 million or 0.4% to $242.3 million in the second quarter of 2019 from $243.3 million in the prior year quarter. Recall, the prior year revenue includes the results of IPM of $5.8 million, which accounts the decline. IPM was sold in the fourth quarter of 2018. Adjusted revenues increased by $4 million or 1.7% to $242.4 million in the second quarter of 2019 from $238.4 million in last year's second quarter. As a reminder, this excludes revenue from IPM from prior quarter as well as the impact of purchase price accounting deferred revenue adjustments. Foreign exchange was approximately $2 million of headwind in this year's quarter, mainly arising from euro and sterling weakness. On a constant currency basis, adjusted revenues increased by 2.5% in the second quarter compared to the second quarter of 2018. Please note that approximately 83% of our revenues in the second quarter of 2019 were U.S. dollar-denominated. When looking at revenue by geography, we have a nice balance of revenue across the regions, with 46% of our revenues from North America, 25% from Europe, 22% from APAC and 7% from emerging markets. This geographical mix is similar year-on-year. Moving on to revenue by type. Adjusted subscription revenues adjusted for sale of IPM grew $9.6 million or approximately 5% at constant currency for the quarter. We realized subscription growth across our product lines in both our Science and IP groups. The large dollar increase in the quarter was within the Web of Science product line. The increase in subscription revenues is driven in part from the effect of price increases as well as new business. Adjusted subscription revenue accounted for 84% of total adjusted revenues…

Good job, Richard. Thanks. This wraps up our discussion of the second quarter. We look forward to sharing the many exciting opportunities ahead with you. Thank you for your time. We're now ready to take your questions. As a reminder, please limit yourself to 1 question and then return to the queue. Operator, let's open.

[Operator Instructions] The first question is from Tim McHugh of William Blair.

Just wonder if you can elaborate on the feedback from that first customer survey. I know you said the big conclusion was that, you realized you should make it easier to do business with Clarivate. Was that not known? And was it surprising, I guess? And as you got into the details, how was that perception different than people thought previously?

It's a great question, Tim. What wasn't known was by how highly valued our customers place with our products in all that we provide. That was, like I said, as high as we've seen. What I said in the script and it holds true, it was not a surprise to us that we were not perceived at all with being an easy-to-do business with the company. You may remember some of you that I actually, back in my IHS days, looked very hard at acquiring Clarivate and that was true then. And I would say the difference between 2012 and the end 2018, it was even more so. So we're -- I feel really good about it. We've got a dozen things that are undergoing. We'll fix that, that's 100% in our control. I think, the thing -- it's a great question because it's critical. I talked about how important culture is, I can tell you operating with a sense of urgency, being externally focused, looking outside in, making sure that we operate with a great sense of urgency and clarity and getting rid of bureaucracy every place we're at, will help us do that and we'll do it quickly. We've also done a lot of other things is internally because it's critical that we remember -- I think of the world as inside customers and outside customers, with line of sight to the outside customers. So I will tell you I look forward to the next survey. As you probably know, as consumers, it'll take a year probably to prove how good we can be, and will be with easy-to-do-business, but we'll see improvements and we'll cover those each quarter. So no surprises at all other than a good news surprise from how they value us. One last comment I'll make. We scored very high, in fact, I felt very good about it, with the value that our customers look at us. So as we fix, and we must crack the issues, including ease of use with our products, et cetera. As we fix those, it's clear that selling, as I said, one of our key strategies, value selling gives us a lot of room for the future.

The next question is from Zach Cummins of B. Riley FBR.

So just based on actually building of your little bit of commentary at the end. Can you talk about the switch from a product-based sale strategy to now a more value-based strategy for the sales team and what that really means and implications going forward?

Yes, great question. Just as a reminder for everybody, this was by managed just as 5 silos, actually reporting to different parts of Thomson Reuters over the years. Bringing these silos together and consolidating into 2 groups, our Science group and our IP group, is already a huge step underway to make sure that we start cross-selling, to make sure that we start bundling and to make sure that when you go forward, we don't sell a product, we sell a solution to customers. I'm very pleased with the work that is underway by our top execs to do that in both places. I mean you can -- I can give you an example after example, but for example, Annette and Mukhtar when they first started talking about bringing a Web of Science and Life Sciences together, they quickly identified about $5 million of potential cross-selling revenue we'd never touch. There is a lot more of that to come. And it includes -- your question so critical, it includes a lot of training for our sales force. That's underway. I've been speaking every other week since I've been here to the different training programs that are underway and their leadership. And I think it's important to note this is the first year that we've been organized for our businesses, and the 2 groups I was talking about, have sales force inside of their organization. To put it bluntly, there was a real disconnect historically. It's not a way to run a railroad, when you've got someone in charge of sales that's not inside of the business. So we'll see the progress of that to come. It’s a great question.

The next question is from Ashwin Shirvaikar of Citi.

Questions on the Science group. The growth seems to have stepped up. Now is that a function of sales capacity being added? You are already seeing some benefits from product improvements, if you could break it down a bit and what milestones should we now expect, say, in the next 12 months in that group?

Yes. It's a great question. I'll start, and have Richard pick up on it. Some of the programs that have been put in place since Annette and Mukhtar have been leading the 2 science businesses are kicking off and they are starting to pay off, and I feel very good about those. I'll be even more excited as we said a minute ago, as we merge the 2 in the years ahead. But Richard, give a little detail on that.

Yes. I mean the quarter was particularly strong in the Science group, the subscription growth. I think the work that Annette and Mukhtar have done on their product strategy and having end-to-end offerings for the communities they serve is really starting to pay dividends. And we also get attractive price yield as well from the Science group. So those are the principal drivers.

Great question, Ashwin. Thanks.

The next question is from Pete Christiansen of Citi.

Richard, I noticed that the projection for excess stand-alone costs went up this quarter by a bit, $23 million to $31 million. Can you just talk about some of the delta that you're seeing there? And should we think of the current estimate kind of staying steady for the remainder of this year?

Yes. No, great question. We reaffirm that guidance. Richard, give them the particulars on it.

Yes. So we did increase it given the fact that we've just come out of the first quarter where we completed all of the transformation and separation from TR. What we're now doing is, we're optimizing that cost base. We have Boston Consulting Group with us working across the business looking at structure and looking at our run rate costs and that exercise will result in our general costs coming down and also our stand-alone costs being optimized as well. So something we'll be working very aggressively on over the next 2 quarters.

With more to come at the end of this quarter -- at the end of Q3 on that subject. Thank you. Next question.

[Operator Instructions] There are no other questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Jerre Stead for closing remarks.

Thank you very much. We've got a lot going on, we're very eager to share it with you the last comments that were made by Richard and I will give you little foresight what you can expect in the Q3, which is, us giving you an update on the progress we've made with our leadership team on streamlining the business, becoming much more efficient, much more effective, and then that will be November -- I'd get it wrong...

November 5.

I always think 4th. November 5. And on November 12, we look forward to having all of you together to give us an opportunity to share with you for the first time the great products and solutions that we provide for our customers. So I'll wrap up by saying thank you all, very pleased with the progress, and we're just getting started. We're going to go, go, go for the future. Thank you all very much.

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