Clarivate Plc Aktie

Ladies and gentlemen, thank you for standing by, and welcome to the Clarivate Q1 2026 Earnings Conference Call. [Operator Instructions].

I will now hand today's call over to Mark Donohue to begin today's conference. Please go ahead, sir.

Thank you, and good morning, everyone. Thank you for joining us for the Clarivate First Quarter 2026 Earnings Conference Call. As a reminder, this conference call is being recorded and webcast and is copyrighted property of Clarivate. Any rebroadcast of this information in hold or in part without prior written consent of clarity is prohibited, and the accompanying earnings call presentation is available on the Investor Relations section of the company's website.

During our call, we'll 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 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. Clarivate 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 nicely from or as a substitute for GAAP financial measures. Reconciliations of these measures to GAAP measures are available in earnings release and supplemental presentation on our website.

With me today are Matti Shem Tov, Chief Executive Officer; and Jonathan Collins, Chief Financial Officer. After our prepared remarks, we'll open up the call to your questions. And with that, it's a pleasure to turn the call over to Matti.

Good morning, and thank you for joining us. Today, I will walk through our first quarter performance, progress against our value creation plan and how execution across the business is positioning Clarivate for improve organic revenue growth, margin expansion and stronger free cash flow generation. This is our fifth consecutive quarter of improved performance.

We are off to a solid start to the year, and I am pleased to report that our first quarter financial results have us on pace to achieve our full year guidance. Revenues were $586 million, supported by continued [ VCP ] progress and execution across the portfolio. From a growth perspective, the quality composition of our revenue continues to improve. Organic ACV growth was 1.6% with subscription organic revenue growth of 1.7% and reflecting increased adoption of subscription-based solution across Clarivate. We are encouraged by the underlying momentum we are seeing due to stronger alignment between commercial execution and product strategy.

Adjusted EBITDA was $241 million, representing a 41% margin, up almost 200 basis points year-over-year, highlighting the benefit of our subscription-first strategy and disciplined cost management.

Free cash flow generation was also solid at approximately $79 million which allowed us to retire $143 million of debt during the quarter.

Most important, the value creation plan is working. We are seeing positive execution across all pillars, demonstrated by accelerating product adoption, improving sales effectiveness and an expanding cadence of new product introductions. This quarter reinforces our confidence that the actions we put in place are beginning to translate into more predictable performance, expanding margin and strong free cash flow generation. As a reminder, we launched the value creation plan in early 2025 to sharpen focus, accelerate execution and unlock long-term shareholder value.

The plan is built around 4 core pillars: business model optimization, improved sales execution, accelerated AI innovation, utilizing our proprietary data assets and portfolio rationalization. You can see these pillars showing up clearly in the numbers through subscription mix, margin expansion and debt reduction.

Academia & Government continue to be a strong engine for recurring revenue growth. We are executing well across all 3 pillars of the value creation plan with clear evidence of progress. uses model optimization, we are accelerating the shift towards subscription-based offerings. Adoption of our progress subscription solution remains strong, with over 600 new subscriptions sold in the last 12 months, reinforcing the durability and predictability of our revenue base. Sales execution is also improving, driven by more effective cross-sell execution across content, research and analytics and software solutions.

During the quarter, we secured several key wins, including a multiproduct institutional deal with Fuyao University, a new research-oriented university in China. We are expanding our China footprint, and this demonstrates our ability to deliver integrated solutions and address broader customer needs. We are leveraging the power of AI, which is generating real measurable value for customers.

Clarivate Academic AI solutions are optimizing key library workflows resulting in 30% to 60% decrease in manual repetitive work and doubling or even quadrupling throughput. This demonstrates how combining AI with climate unique content and extensive domain knowledge leads to a significant operational improvement for customers.

Turning to Intellectual Property. Our attention remains firmly on execution and fundamentals. We are seeing encouraging signs that our increased focus on new subscription and renewal discipline is producing results. For the first quarter, renewal rates improved approximately 100 basis points, helping organic ACV trends improved to nearly flat. This represents a clear improvement versus prior trends and support our confidence that the IP business is moving forward and returning to sustainable recurring growth.

Sales execution continues to strengthen. For example, with national IP offices, including the U.S. PTO, where we secured major trademark analytics contracts and large-scale digitization programs. This wins or advancing patent and trademark operations globally and reinforce Clarivate's role as long-term strategic partner in IP ecosystem and analytics.

During the quarter, we released brand image search, adding advanced AI capabilities such as clustering and multilingual support. This enhancement are expanding our IT professionals uncover insights, assess risk and make faster, more confident decision at a global scale. Overall, the IP segment is operating with greater focus and discipline, and we believe this improvement positions the business to future growth.

In Life Science & Health we are seeing steady progress with the value creation plan. The shift from transactional sales to subscription is on track, supported by positive customer feedback and more consistent sales patterns. The successful changes we have made are reflected in an almost 1% rise in organic revenue during the first quarter.

Notably, we won a new top 20 global pharmaceutical customer for DRG Fusion, our new real-word data analytics platform. This reinforces the strength of our value proposition with large sophisticated customers. In addition, we secured 6-figure subscription wins with biotech company for OpEx, our platform for preclinical and clinical safety intelligence, demonstrated continued momentum across customer sizes and use cases.

On Innovation, we continue to expand access to our trusted regulatory and scientific intelligence through strategic partnerships. During the quarter, we integrated Cortellis regulatory intelligence with Anthropic Cloude Enterprise, combining Clarivate propriety data with advanced AI reasoning to deliver trusted insight directly within customer AI workflows. The collaboration underscores how Clarivate is extending the reach and relevance of this content across the broader AI ecosystem.

In February, we announced that we are actively pursuing the sales of the Life Science & Healthcare business as part of our broader portfolio rationalization efforts. This is consistent with our broader strategy to concentrate capital and management attention on areas where we see the highest returns. The process is ongoing. As always, there is no guarantee of the outcome, and we will provide updates as appropriate.

Our objective remains clear: maximizing value for shareholders while sharpening strategic focus on our remaining businesses. We have spoken over previous earnings calls about the investments we are making in product innovation. Today, I want to highlight how we are scaling AI enablement across Clarivate to drive efficiency and support acceleration of free cash flow. This is a core enabler of our value creation plan and a key lever for margin expansion as we return to healthier organic growth.

Let me provide some color and examples. Across go-to-market function, we are embedding AI within sales and customer care to accelerate revenue growth, streamline customer interaction, enhanced service quality and experience and increase retention. In technology, we are deploying AI throughout software engineering and content operation to accelerate innovation and shorten new product time to market.

Within corporate functions, we are leveraging AI across finance, human resources and legal functions to automate workflows and drive scalable efficiencies. We expect the deployment of digital agents will reduce manual effort, improve accuracy and create operating leverage. Taking together, this AI-enabled cost efficiencies reinforce our core messages. As organic growth improves, this AI efficiency give us confidence in sustained margin expansion and growing cash flow.

To close, the first quarter demonstrates that the action we put in place through the value creation plan are translating into stronger execution, improving fundamentals and clearer path forward. We are operating with greater focus, strengthening our business model, improving sales effectiveness and delivering innovation that matter to our customers, all while maintaining strong discipline around cost and cash generation. Thank you for your continued support, and we look forward to keeping you updated on our progress.

I will now turn the call over to Jonathan for a review of our financial results and outlook.

Thank you, Matti. Slide 14 is an overview of our first quarter results compared with the same period last year. Q1 revenue was $586 million, change over the prior year was due to the inorganic disposals, partially offset by organic growth and a favorable foreign exchange impact. First quarter net loss was $40 million. The $64 million improvement over the prior year was driven by a foreign exchange benefit as well as lower restructuring, income tax and interest expenses. .

Adjusted diluted EPS was up nearly 30% or $0.04 over the prior year to $0.18. The increase was attributed to adjusted EBITDA growth, lower interest expense, lower tax expense and a lower share count due to last year's repurchases, which each contributed about $0.01 to growth.

Operating cash flow was $135 million in the quarter. The change compared to last year was driven by higher working capital due to incentive compensation payments, partially offset by higher adjusted EBITDA.

Please turn with me now to Page 15 for a closer look at the drivers of the first quarter top and bottom line changes from the prior year. The changes over the prior year were driven by 3 primary factors: First, Organic revenues grew modestly as subscription growth of nearly 2% was partially offset by lower recurring and transactional revenues. We delivered a strong profit conversion on the growth as operating expenses were lower than the prior year despite the higher revenues as we achieved cost efficiencies across the business.

Second, the businesses we are disposing decreased revenue by $24 million, but was almost entirely offset by cost reductions due to the wind downs yielding a net $3 million reduction in adjusted EBITDA. And finally, the U.S. dollar remained relatively weaker against the basket of foreign currencies compared to the first quarter of last year, which caused a foreign exchange tailwind on the top line. The mid-teens profit conversion is due to transaction gains last year that did not recur this year. In total, disciplined cost management led to an adjusted EBITDA margin expansion of nearly 200 basis points, which is in line with our full year guidance.

Please turn with me now to Page 16 for a look at how the adjusted EBITDA converted to free cash flow and how we allocated the capital. Free cash flow was $79 million in the first quarter, which was $31 million lower than the prior year. The change was due to higher working capital as a result of incentive compensation payments, partially offset by the adjusted EBITDA growth. We used the free cash flow and excess cash on hand to redeem the remaining $100 million of bonds that were due later this year, repurchased $43 million of bonds due in '28 and '29 at a blended discount of about 10% and repurchased 7 million shares of stock to offset the dilutive impact of stock compensation investing.

Please turn with me now to Page 17 for a look at our full year financial guidance, which remains entirely unchanged from February. Today, we are reaffirming our full year financial guidance for all metrics. Beginning at the top of the page, we anticipate the acceleration of our organic annual contract value last year will continue in 2026 resulting in growth of between 2% and 3%, representing continued steady progress and an increase of about 0.75 percentage point at the midpoint of the range. We expect recurring organic growth of about 1.5% at the midpoint of our range, which is an improvement of nearly 1 percentage point over last year.

Due entirely to the wind down of the businesses we are disposing, we expect revenue to decline by about $100 million at the midpoint of the range to $2.36 billion and that our organic recurring revenue mix, which excludes the impact of the disposals will improve to between 88% and 90%.

Moving down the page, we expect adjusted EBITDA will grow modestly despite the lower revenue, increasing our profit margin to nearly 43% at the midpoint of the range. We anticipate adjusted diluted EPS will grow about 9% at the midpoint of the range to $0.75, largely due to the share repurchases we completed last year. Finally, free cash flow is expected to grow by about 10% to $400 million at the midpoint of the range.

Please turn with me now to Page 18 for a reminder of the full year top and bottom line changes we are expecting compared to last year. We expect adjusted EBITDA margin will expand by about 200 basis points at the midpoint of our ranges driven by a return to organic growth, continued cost discipline and completing the disposals.

We anticipate organic growth of about 1%, led by subscription revenue growth from continued ACV acceleration. We have plans in place to achieve cost efficiencies to fully offset inflation, resulting in a full flow-through of the approximately $25 million of revenue growth to profit. This will account for about 1/3 of the profit margin expansion. The inorganic disposals are expected to lower revenue this year by approximately $130 million, and we are reducing operating expenses by more than $100 million which yields a profit impact of about $25 million, delivering the remaining 2/3 of the profit margin expansion.

As a reminder, our financial guidance for this year assumes we will own the LS&H business for the entire year and if an agreement is reached to sell the business, a revision to our guidance for this potential divestiture may be necessary later this year. We continue to anticipate a modest foreign exchange translation benefit to the top and bottom lines of $10 million and $5 million, respectively, most of which we already experienced in the first quarter.

Please turn with me now to Page 19 to step through the expected seasonality of our revenues and profits this year, which we have refined based on our first quarter results. We continue to expect to make steady progress on the top and bottom lines as we move through the year. As we projected in February, we experienced a slight sequential pullback in our annual contract value organic growth in Q1 but anticipate steady acceleration through the balance of the year to arrive near the midpoint of our range.

Recurring organic revenue growth in Q1 of 1% was higher than we expected due largely to the timing of patent renewals. We do expect a slight pullback in Q2 as a result of this phasing, leading to accelerated growth in the second half of the year. We expect revenue will remain relatively stable over the next couple of quarters and then tick up in Q4 due to the normal seasonality of reoccurring and transactional revenues. We do anticipate profit margins will continue to expand as we move through the remainder of the year due to the organic growth and the impact of the disposals.

Please turn with me now to Page 20 to review how we expect the more than $1 billion of adjusted EBITDA will convert to about $400 million of free cash flow and how we plan to allocate this capital. At the midpoint of our range, we expect free cash flow to grow about $35 million or 10% over last year. Onetime costs are expected to abate primarily on lower restructuring costs. As noted a couple of pages ago, our guidance does not contemplate the sale of the LS&H segment. If we reach an agreement, this is an area we would update later this year. We expect cash interest to improve by about $20 million over the prior year as a result of the debt we prepaid last year and last quarter. Additional debt we plan to prepay the remainder of this year and some savings associated with the projected forward base rate curve.

Cash taxes are expected to be $5 million to $10 million higher than last year, due largely to the new corporate tax in Jersey. We anticipate the change in working capital this year will be a use of approximately $20 million primarily due to the incentive compensation payments in Q1. We're also expecting a $10 million benefit associated with lower impaired contractual costs. And while we remain committed to investing in product innovation, the disposals and cost efficiencies will improve capital spending by about $15 million. From a capital allocation perspective, we plan to use the free cash flow we generate in the remainder of the year for debt reduction.

Please turn with me now to Page 21 for more specifics on our deleveraging plan this year and beyond. The chart at the top of the page outlines our debt maturity profile. As you can see, we have a favorable runway with no near-term maturities. Over the past 3 years, '23 through '25, we generated $1.2 billion of cumulative free cash flow, just over $100 million per quarter on average. As I highlighted on the prior page, we expect to generate approximately $400 million this year at the midpoint of our range and we expect to generate at least this amount next year and the following. This outlook results in a similar average quarterly rate of about $100 million.

Given the current debt market conditions, we plan to use our free cash flow moving forward towards the early retirement of our bonds. Over the next 9 quarters, we expect to retire our secured notes in their entirety before their maturity in July of '28. Once those have been redeemed, we plan to use our quarterly free cash flow to begin to retire the '29 notes leaving only $0.5 billion of the $1.8 billion of mid-term maturities to be refinanced in the next few years.

It's worth noting that as with all of our forward-looking guidance, this outlook includes our LS&H business. If the potential sale does materialize, we expect it would eliminate the need for a future bond refinancing. We anticipate these debt reduction actions will lower our net leverage from 4 turns at the end of Q1 of this year to approximately 2.5 turns in a few years. We continue to be very encouraged by the improved results we are delivering as we implement the value creation plan and the durable cash flows we generate.

I'd like to finish by thanking all of you for listening in this morning. I'll now turn the call back over to the operator to take your questions. [Operator Instructions]

[Operator Instructions] Your first question is from the line of Toni Kaplan with Morgan Stanley.

Thank you you've talked about your new AI capabilities that you've launched and reducing some of the manual repetitive work through AI efficiencies. I was hoping you could talk about the traction of the new AI products, the reception from customers, how much growth you're getting from them at this point. And similarly, any ability to quantify the efficiency benefits that you can get from AI as well? That would be great. .

Thank you, Toni. I'll start and Jonathan will continue. So first of all, we are intensifying our investment in the last 15, 18 months, we invest more and more into AI. And it goes 2 ways. The first one that we started was a major product introduction and innovation around the 3 segments. And then now we are shifting or moving also to internal cost efficiencies is AI. So as with internal cost efficiencies, our opportunities in go-to-market customer support, sales operations, there are opportunities in technology to help us innovate and develop products faster with support of AI. There are also opportunities around the corporate to rationalize some of our corporate costs, whether it's going to be financed a general legal. So there's a lot of opportunities internally.

Externally, the product and this [indiscernible] patient, is delivering innovation to our customer what it really matter. So 3 buckets of product innovation that we have on AI. One is the first wave of product that we have improved or AI assistant. So product by product, many of our products, we have implemented -- we have implemented a research assistant. We have implemented in different products in ANG and then in life science, and we are doing the same with IP. That was Wave 1.

Wave 2 was agent. We are implementing AI agent capabilities across our product where it matters. And then just coming back from some of the feedback we get from some measurement that we've done in implementing agentic AI within our Alma Prime lab reporter. So basically, we have managed to reduce the manpower or to quadruple the throughput of some of our customers using agentic AI capability and it's just a start.

And the third wave is ecosystem implementation. Ecosystem implementation. We all know that this generation, especially student researchers, but also life science scientists and IT professionals are consuming AI through the major LLM providers. So we have started the journey. We announced about a month ago that we are collaborating with Anthropic to provide AI capabilities within Anthropic Enterprise Customers. Taking the CRI proprietary products that we have or CRI proprietary data that we have in collaboration with Anthropic, we are enabling the consumption of this data in Anthropic environment in a way, we are turning the LLM to our sales agent, meaning our customers where they are.

On top of this, we as -- yesterday, we have announced another product from the ANG called Nexus Connect, if you think about universities, they subscribe to a lot of different content. And again, students, researchers are consuming this content through different type of LLM and Nexus Connect is our new offering from ANG that brings the data into ChatGPT, copilot whatever you designated LLM using our technology will bring the content -- our content but also other people content very close to our customers.

So overall, a lot of energy going into and a lot of resources going into AI innovation. And you know that we've just been awarded from outside recognition that we are the fund leader in terms of AI innovation in the academic ecosystem. There's been a long answer for that, but I'll move it over to Jonathan to talk a little bit about the financials.

Yes. I appreciate the part of the question, Toni, with respect to the opportunity size in the AI efficiency internally. We outlined the areas that we're focusing on there. And at this point, we are confident that the opportunity set here gives us a really good opportunity to continue to expand our margins and grow our cash flows. I think we're likely going to look to further dimension this probably later this year. .

Your next question is from the line of Manav Patnaik with Barclays.

Matti, I was hoping you could just give us an update on how you see the competitive environment out there? Presumably they are using AI and enhancing their products as well -- and just curious if you've seen any change or way to compare your initiatives versus what you're seeing in the market? .

I think I've just mentioned that outside this recognize us as AI innovator, we see a great adoption for our AI product across the 3 different segments. We mentioned this. We have -- in ANG, we have more than institution using academic KI solution, I mentioned Nexus Connect, Lab Science over 10,000 researchers and users are using some of our -- some of our AI product innovation, including -- I mean, recently announced the Claude Anthropic collaboration. We're doing well with IT as well with the recent brand image that we have introduced. So we look -- we always look forward. We're trying to set the scene as opposed to look at our competition, but we feel good about our product innovation. We come from a background of products and engineering, many of us, and I say we see a lot of improvement and created from our customers across the different segments.

Your next question is from the line of Scott Wurtzel with Wolfe Research.

Matti, I think in your prepared remarks, you talked about sort of the China opportunity and expanding there. I'm wondering if you can maybe just talk about that China sort of ANG space more broadly in the port that presents to you guys?

Yes. China is a great contributor to our AI -- to our ANG capabilities and performance has been the -- we just came back from the meeting with some of our Chinese top sales executive. We have sold 15 new web science deals in China last year. So there's a lot of great momentum going for ANG in China, specifically in web science and more recently, also in [indiscernible] science research intelligence, some development and collaboration, we do. We feel very good about our ANG prospect in China, not only ANG also Life Science and IP. We have different ideas that we are currently contemplating, we see more than 1 we have, but we feel good about both the China market.

[Operator Instructions] Your next question is from the line of Ashish Sabadra with RBC Capital Markets.

This is Phil Chi on for Ashish Sabadra. Great to see kind of the continued sequential improvements on the organic sales metrics. I think IP kind of continues to execute in a bit of a more muted environment. I think you guys have noted in the past that there are some expectations for that to improve maybe in the back half of '26 into early '27 as some of those historical batch renewal cycles come back -- is that the general kind of trend that you expect for that segment? And you guys have had kind of great wins as well. How do you kind of combine all those together?

I'll start and then I'll ask Jonathan to add. So just a reminder that we are the market leader in IP. We tend to forget this. And we are the only company -- and this has been a lot of my focus and a lot of my discussion has been around. We are the only company that have all the 3 or 4 sub offering that we have in IP. We are very big in on OT. We have great IPMS products, and we have great intelligence products, both for the trademark and for the patent as well. We brought in a new management team [indiscernible] new manager, and we have an enhanced focused, very strong focus in 2 things. sales execution.

We've gone through some kind of changes or some changes into our sales organization, renewals, territory alignment and other things that we've done. -- in the self-execution is much stronger and much better focus and then AI innovation, very strong AI innovation momentum that we are building with the management of -- with the management team of IP, risk Mark, was one product we mentioned. We're now talking about brand image search, as I mentioned as well, we are confident in the return for IP back to future growth.

And Jonathan, if you can give some more color here?

Yes. As Matti highlighted, the continued investment in AI, we helped -- we expect to help accelerate growth in our subscription products there. So we noted that we've made some steady progress. We saw slight improvement in renewal rates in the first quarter, and we've got an organic ACV that it's getting pretty close to flat after a few years of decline. So steady progress based on the investments that we're making there.

The biggest part of the IP business, the reoccurring revenue stream, which is our patent renewal business, that's a business that 2 years ago, declined a few percent last year was flat. First half of this year due to the comps and some timing from the first half of last year will be down slightly. We do expect that business to return to growth in the second half of this year and a good trajectory heading into next year. Market conditions there, the patent stock growth has improved over the last few years, which is a good leading indicator.

And the team, as Matti said, has done a very good job on sales execution, improving our competitive position in that part of the market. So continued progress, and we look forward to a better performance from IP in the coming quarters and into next year. Thanks for the question, Will.

Your next question is from the line of George Tong with Goldman Sachs. .

Transactional revenues were down this quarter because of lower A&G activity. Can you talk a little bit more about what you're seeing there and what would need to happen for A&G activity to rebound?

Yes. Thanks for the question, George. Look, our transaction revenues were down a couple of percent in Q1. As you noted, ANG was the primary driver in the quarter. I will start by saying we do expect on a full year basis, our guidance does contemplate that the transactional business will be down slightly compared to the prior year. So it was as expected. In the quarter, some of that in AMG was due to the timing of software implementations. That can be a little lumpy quarter-to-quarter.

And then on a full year basis, as we continue to have success in Life Sciences, with the migrations to subscription, we will expect to see a little bit of a headwind there on the transactional side. But Q1's slight decline was in line with what we expected. -- and is in line with what we expect for the full year. As we move into next year, continue to build that sales pipeline -- on the software products, there's some opportunity to improve that heading into next year. But that was the primary driver in Q1.

Your next question is from the line of Andrew Nicholas with William Blair.

I was hoping to hone in a little bit more on AMG growth -- that's been a segment that's hung in there pretty well over the past handful of quarters. Within that 2% organic growth and the expectation for improvement in -- are there -- is research analytics and content aggregation kind of leading the way there? Or is it a software-led growth? Or are they all kind of around that 2% number? Just curious if there's an underlying kind of subsegment there, where you have more expectation for growth acceleration.

Yes. Thanks for the question, Andrew. I think the bright spot for us as of late in A&G from an organic growth contribution standpoint, has been the success in our research and analytics category, which is led by our flagship product, [indiscernible]. As Matti touched on in his comments around AI innovation. This is where we've seen a lot of the new innovation come into the product. So very encouraged by the adoption of the research assistant last year, some of the agents that we've deployed that we're getting great feedback on such as the literature review agent.

And then we're also very thrilled about this year's growth that will help to be driven from the web science research intelligence platform. So that's the new AI native multi-agent platform that helps to measure research success across the university ecosystem. So really encouraged by what we've seen there. The content business is held in that usually grows at or slightly below the average for AMG. And then the software business is doing well, very high renewal rates. We've got some new product innovation happening there that can help to catalyze further growth there. But those are the 3 main areas and really the strong performance has been in our research and analytics category. Thanks for the question, Andrew.

Our last question comes from the line of Adam Parrington with Stifel.

Calling on fish [indiscernible]. I apologize if I missed this, but in the slide deck, life sciences and health care, progressing ahead of schedule and the ship subscription -- what is the current subscription mix of the business? And how should this shift move organic move organic growth through the year? .

Yes, Adam, thanks for the question. This is our segment that has the highest proportion of transactional revenue. So just as a reminder, our consulting practice for commercialization, which sits in the Life Sciences business. is an important part of the go-to-market motion for this, but it creates a lower organic recurring revenue mix within Life Sciences.

What Matti touched on Slide 10 is that we have continued to invest in product innovation to migrate some of these solutions to a subscription. We started to see progress on that last year that continues into this year, and we expect to continue to make steady progress, making that business more predictable with a higher renewal base every year to help accelerate and return it to growth. So it's a combination of the commercial motion, where we're focused in the marketplace and the product innovation that's helping to lead that. So we expect to see continued traction there.

And as Matti touched on before, over time, we think we can see the recurring revenue mix get into the low 90s and life science will be a leader there. Thanks for the question, Adam.

Maybe just the last few words of wrap up, just as I mentioned over the call the BCP plan is working. This is the fifth quarter of improvement. Our subscription mix has gone to 89%. We have better execution on sales execution, and we are industry innovator in terms of. We're very pleased to be here today, and thank you for your time.

Thank you all for your time today. That concludes our call, and we look forward to speaking to you with any follow-up questions in the coming days. Thank you. .

This does conclude today's call. Thank you for joining. You may now disconnect your lines.

All right. Well, welcome, everyone. Good morning. Once again, I'm Scott Wurtzel. I cover info services here at Wolfe Research. Excited to be joined by Jonathan Collins, JC, the CFO of Clarivate for a fireside chat. So JC, thank you so much for joining us. I think there are some in the room who may be unfamiliar with the Clarivate story. So wondering if you could maybe start off by giving a quick overview of the business and the different segments that you operate in.

Absolutely. So thanks for having me, Scott, and good morning, everyone. Yes, just a quick overview of Clarivate. We are an indispensable partner for intelligence solutions, workflow solutions and tech-enabled services for institutions and companies that participate in innovation. So from a services offering, our intelligence offerings, we enrich data, we provide analytics and insights on that data and in many cases, industry-wide recognition around credentialing of the quality of the research in any given area. So that's our intelligence solutions that we provide. Those are over half of what we do from a services standpoint.

The second thing we do is provide workflow solutions. This is in the form of Software as a Service, where we're deeply embedded and entrenched in the workflows of our customers that are participating in the global innovation ecosystem. The final component is tech-enabled services. This is primarily within our intellectual property segment, and this is where we provide services to provide renewals of intellectual property around the world, leveraging our global agent network. And by agent there, I mean people that are on the ground all around the world. So those are really the 3 types of services that we provide.

We provide those to 3 distinct end markets. Our largest end market, which makes up about half of our business is academia and government. This is where virtually all or 99% of the world's top 400 institutions use our intelligence and workflow to manage the research process and the learning process within that end market. The second market is intellectual property. It's our second largest market, which makes up about 1/3 of our business. And the Intellectual Property segment is servicing both in-house legal departments as well as law firms that specialize in intellectual property, providing those solutions to them.

And then the third is the Life Science and Health Care. This is where we are providing all of the top 20 pharma companies around the world and all of the top 10 Medtech companies around the world, solutions that help to provide enabling the research and development process all the way through to the commercialization and protection of that innovation that's occurring within that segment. So those are the solutions we provide intelligence, workflow solutions, tech-enabled services, and we provide that across those 3 end markets: academia and government, life sciences and the intellectual property ecosystem.

Yes. That's a helpful overview. And if we go back to 4Q earnings a couple of weeks back, I mean, the company reported pretty solid results. You had better-than-expected results, I think, in the A&G segment and a guide that implies some organic revenue acceleration. And so just wondering if you can discuss some highlights of the quarter and also talk about your assumptions underpinning guidance for the year.

You got it. So when we look back at 2025, we really see this as an inflection point in the business. All of our KPIs started moving in the right direction. And I'll start with the one that we've really focused on as of late, which is our ACV or our annual contract value. This is the leading indicator of our subscription organic revenue growth that we would expect to see moving forward. That inflected from being at just below 1% growth in 2024 to approaching 2% growth in 2025. So we saw a nice inflection there. We saw an improvement in our renewal rates, which is a key measure of the stickiness of the solutions as we continue to invest in embedding AI tools, both assistance and agents within our products to help enhance the value proposition for our customers. So a nice inflection in ACV last year.

Just to touch on how we think that's going to play out this year, we're guiding to about 2% to 3% growth on that metric as we move into 2026. So we expect a nice improvement, about 0.75 percentage point over the prior year at the midpoint of our range. Maybe if we touch on the organic recurring revenue growth, we delivered about 0.5% of growth last year. We expect that to accelerate to between 1% and 2% as we look forward to this year as we see that ACV continue to improve. We expect modest improvement in our reoccurring revenue type. That's that agency business that we have within the IP segment, where we're renewing IP around the world.

We saw that part of our business improve from a decline in 2024 to being about flat in 2025, and we expect modest improvement on that as we move into this year. And then the other thing that we're pleased with is the profit trajectory of the business. So we delivered over $1 billion of adjusted EBITDA last year. We expect about 200 basis points of profit margin expansion as we move into 2026, really driven by 2 things. Number one, we have a few businesses that we disposed of that we started last year and we'll finish disposing of this year. Those are going to add over 100 basis points of margin expansion as we exit those lower profitable, less predictable parts of our portfolio.

And then the second part is a strong profit conversion on that organic growth. So we're anticipating about a total organic growth of about 1% this year. We anticipate that, that's going to flow through to our bottom line. We have really good cost efficiency measures in place as we move into this year to offset inflation and other things and let that profit growth drop right to the bottom line. The last thing I'd touch on is our cash flow. We generated $365 million of free cash flow last year, which was up slightly over the prior year. This year, we anticipate free cash flow will grow to about $400 million at the midpoint of our range. That's going to be based on lower onetime costs, lower interest expense and lower capital spending helping to move us towards that $400 million. So we think 2025 was a really good inflection point, and we're expecting a slight improvement in all of our metrics as we move into this year.

Got it. And then on earnings as well, you also announced that the company was kind of beginning the process of looking to sell the LS&H business. And obviously not asking for specific numbers or anything like that, but can you maybe just discuss the strategic rationale of looking to sell that specific business versus others that you have?

Sure, of course. So about a year ago, we announced that we were embarking on a strategic review. And for us, what that meant was evaluating each of the 3 parts of the business that we operate in from a solution standpoint as well as our end markets to identify if there was a business unit or a segment that would make sense to seek a divestiture of in order to accelerate value creation for shareholders.

In the first part of last year, we worked on a project, didn't talk about the specifics, but acknowledge that we moved on to another alternative in the second half of the year. And just at earnings a few weeks ago, we announced that we've done a lot of prep work with our Life Sciences business, and we are pursuing the sale of that segment. And we outlined the rationale for that on a couple of dimensions. So it's important to note in all of our disclosures that the majority of our profit contribution and as well as we've indicated, a significant majority of our cash flow contribution comes from our A&G and our IP segments.

We believe the potential sale of the Life Science business could help us to focus on both of those segments. We've acknowledged that we think the markets are growing a bit faster than where we are. So there's room for us to accelerate our organic growth. And we think that the sale of the Life Sciences business could help us to focus on both of those.

The second thing that it could do for us or a secondary benefit would be the ability for us to take those proceeds, repay some debt and accelerate our deleveraging. And that's a great opportunity for us, we believe, in the near term to help catalyze improving the quality and the strength of the balance sheet as we move through the balance of this year. So that's a little bit of the history on how we got to where we are. And as you indicated, I don't have any update -- a detailed update to provide on that other than what we said a couple of weeks ago. But as we get closer on that, we'll provide more color.

Yes, that makes sense. And this and I guess, some of the other capital actions that you've taken over the last year, as you said, has been a part of the strategic review the company has done as well as the value creation plan that you've set out to kind of look at and execute on in the last year. So can you maybe give a recap of some of the important milestones of like the strategic review or the VCP and how you believe Clarivate is emerging from this process in a better place than it was entering in?

Yes, it's a really fair point. So the strategic review is one of the 4 pillars of our value creation plan that we outlined over a year ago. And just to run through those again. The first element is what we refer to as business model optimization. So this is where we committed to focus more investments on our recurring businesses, and that's our subscription business and our reoccurring business with the deemphasizing of our transactional business. So the metric here that we are focused on is taking our business from about 80% recurring closer to 90%. We made great progress on that last year with initiating the disposal of our transactional book business in A&G. Our transactional digital collections business within A&G and then also where we were reselling real-world data within our Life Sciences business.

We identified each of those that we were going to wind down starting last year and then ultimately completing those at the end of last year and as we move through 2026. So business model optimization, we're making great progress on our organic recurring revenue mix moved from about 80% to 88% towards the end of last year, and we expect that to tick up another point or 2 as we move through 2026. The second element was enhancing our sales execution. So this is partially enabled by that first pillar. We are really focusing our field sales teams on the subscription business and the reoccurring revenues within the portfolio, deemphasizing that transactional business.

What we have left in transactional is our consulting business, implementation services, things that will enable the growth of our recurring revenue stream. So made really good progress there, and we measured that by accelerating our annual contract value, which I mentioned before, which went from just under 1% to just under 2% organic growth from 2024 to 2025. The third element is continuing to accelerate our innovation within our product. And this is really enabled by the cutting-edge AI technologies that are enabled. And just a few weeks ago, we put out a webinar before earnings that identified the ways that we're taking this technology and putting it into our products. And there are really 3 principal ways. The first is we are embedding research assistance in all of our intelligence solutions. You can think of this often as conversational discovery, but our customers are looking for authoritative answers to research questions, and we have the ability now rather than having the old structured search taxonomy where you put something into a search bar and get a list of results.

We're now engaging with all of our researchers on a conversational discovery basis. So that's an example of embedding the research assistance in the product. The second area is what we refer to as workflow agents. And this is where -- think of these as more complicated use of LLMs where it's multisteps and the ability to really provide efficiencies in our workflows. So we continue to invest in that. An example of this would be in our academic products where we have our literature review agent that has the ability to take a process that used to be done by a human. It can now leverage the citation database and the proprietary content that we have to provide a very high-quality literature review, and we have customers that are now using that in our products.

And then the third is in ecosystem access. So this is where we expose our content in whatever AI environment our customers are working at. And we actually announced this morning a pretty exciting new development here where we have made in our Life Sciences business, our Cortellis regulatory intelligence products for subscribers of that product. They can now use that in Anthropic's Claude LLM tool that's available. So for customers that are subscribing to both of those, they have the ability to take our proprietary data, embedded into that workflow combined with other data to accelerate efficiencies in regulatory.

So we have regulatory affairs groups. We have pharmacovigilance groups within our customers that are now able to use this tool inside of that ecosystem. We're meeting them where they're doing that research and where they're doing that work. So that's really that third pillar around accelerating product development, and we've made really good progress there. And then the final pillar was the strategic review, which we touched on, which has culminated in the pursuit of the Life Science and Healthcare segment sale.

Got it. Got it. And then you kind of led really well into sort of the next topic because it wouldn't be information services company fireside chat without an AI discussion. And so wondering if you can maybe just talk a little bit more about the opportunities associated with artificial intelligence, how you see it impacting the business over the near, medium, long term, whether you're looking at revenue growth or margins? Just any color would be great on that topic.

Yes. We continue to believe that the vast majority of the solutions that we provide are proprietary in nature and are essential or mission-critical for our customers in each of our segments. So in academia, just to talk a little bit about that business. Our flagship product there is the Web of Science, which is the premier credentialing tool for the quality of peer-reviewed academic research. So we're not a publisher. We are independent, and we have a very time-tested and true editorial review process to identify the quality of research. And our journal impact factor is the authoritative standard around the world for the quality of that content. That data is unique and proprietary to us. We have the ability to take the underlying citation content combined with the analytics that we provide and deliver that to our customers. This is an area where we're investing in AI.

So our first AI native platform that we're launching within the company sits in this area. So it's the Web of Science research intelligence. And what research intelligence is, is a multi-agent platform to aid our customers, universities in understanding the availability of funding and the investments that are made in research and the outputs that are demonstrated there, not only from an academic perspective, but also societal impact is being measured as well, too. So this is an example where we're taking new AI technology from the ground up, building an AI native platform to provide an analytics layer using Agentic AI capabilities that is really unparalleled with the content that we have. So that's an example within our academic business. Maybe another example within academia. We provide the world's leading solution for academic research libraries to manage their digital and physical collections that they deliver for their patrons. That product is referred to as Alma. A significant majority of the premier institutions in the world use that solution to manage their library collection.

We are rolling out Assistant and Agentic capabilities on that platform, and we're seeing really exciting advances in efficiency for our customers in that area. So this is embedding agentic capabilities within those workflow tools. There was an independent study done within the last couple of months that identified meaningful efficiency improvements based on the implementation of these assistants and agents that we've put in those platforms. And then within A&G, we have content and those content are -- we're an aggregator of high-quality content across journals, periodicals, newspapers for customers.

This is information that you can only access behind the paywall. And we're embedding these agents in these tools to be able to enhance that experience. And we've seen very encouraging signs simply since we've implemented these research assistants where we're getting higher recurrence. So the traffic that we see each month, we have more and more users coming back, more and more users engaging with the content because the assistance, the AI assistance help to uncover more information that was harder to find before as they embark on their research process. So really good implementation in our A&G products.

And then we talked about the AI assistance that we're putting in the Life Sciences segment. So our Cortellis R&D suite of products now have research assistance in those. And then we just talked about. I just mentioned the fact that we're now exposing that in multiple ecosystems for our customers. And then in the IP side of the business, we are using AI and our intelligence there within our products, Derwent Patent search and Derwent Patent Monitor. We have the most authoritative content around patent data in the world within the Derwent World Patent Index, and we're using new AI search capabilities and infringement monitoring capabilities to serve up to our customers for both patents and trademarks on the CompuMark side of the house as well, too. So these are areas where it demonstrates that by investing in this new technology in the application layer, we're surfacing really valuable content for our customers in each of these areas.

Yes, that makes sense. And then I think on earnings a couple of weeks ago, you disclosed that you guys believe that 97% of your revenue is derived from proprietary data sources and workflows. And just wondering if you can provide maybe some more detail on the different kind of pieces of that 97%.

Sure. So we do acknowledge there's a few percent that is easier to replicate, but the vast majority, we believe, is very difficult to replicate and is proprietary based on information that we have that others do not. So the biggest piece of that are our intelligence solutions. So I touched a little bit on the Web of Science as the flagship product within A&G. The key intelligence solutions within life sciences are the Cortellis platform, where we offer regulatory intelligence, drug discovery intelligence, competitive intelligence around which molecules are available in the marketplace as companies look to develop therapies. So a very robust set of solutions there in intelligence.

And then on the intellectual property side, we have, I think I mentioned both Derwent and CompuMark are the flagship products for patents and trademarks, respectively, where we have a rich set of enriched information so that when a customer needs to do a proper prior art search or needs to understand the freedom to operate as they innovate, they can be sure that they uncover all of the intellectual property that's been registered in each of those areas. So that's the intelligence part, which makes up over 50% of the solutions that we have.

The next is tech-enabled services. So we have the largest agent network in the world for intellectual property. The company -- the world's most the largest companies in the world and largest IP law firms trust us to ensure that the IP that's registered around the world is renewed in a timely fashion. We use a combination of technology with humans in the loop to help make that as efficient as possible. We can do it much more efficiently for our customers than they can do it for themselves. And that's all based on decades of proprietary workflows that enable that process and ensure that they can trust us to make sure that, that's done correctly and on time everywhere.

And then the final piece is workflow solutions. So this is the Software as a Service that makes up the last piece of this 97%. And I shared the example of Alma within our academia business. I think within IP, a good example here is our IPfolio product. So this is managing workflows for our customers as they -- all the way from an idea through to drafting and docketing and filing and then ultimately, the renewal of that intellectual property to protect it in the marketplace. So another workflow tool. And these are things that we've developed, understanding our customers' workflows at an intimate level, being able to apply the technology and now enabling that with Agentic capabilities to further enhance the value that, that provides for them. So that's a sense of what it is that we have in that 97%.

That makes a lot of sense. If we kind of move along here, I mean, you touched on this a little bit earlier, but talking about the shift from transaction-based revenue to more recurring revenue up to 88% now. I'm just wondering if you can discuss how this impacts the business model, the predictability of revenue growth going forward and how high can recurring get as a percent of total revenue over time here?

Yes. It's a really important point from a predictability perspective. So we identified that there are parts of our business that were exposed to funding within budgets that was a bit up and down year-to-year and also some of the economics of these transactional business, the unit economics were less attractive. So what we really did is pared down to focus on the core part of our business, increasing to almost 90% what is recurring in nature. And really, it's very important for our sales teams as well to be able to focus them on that part of the business where we believe we deliver the most value for customers and ultimately, for shareholders in focusing on that part of the business.

So -- it really enhances our predictability. It's going to help improve our margins. We were able to exit these businesses with a negligible impact to cash flow because both of them were a bit more capital intense. So this is an area where we think it makes us more predictable. It's going to help us grow faster, and it's going to put us in a position where we can generate a higher cash flow conversion on our profit and ultimately better margins as well.

Okay. Makes sense. And then I guess we move over to the A&G segment now specifically. On your recent earnings call, you talked about how you were seeing an improvement in some of the end markets that A&G serves. And so can you maybe just talk about, maybe start talking about maybe some of the headwinds that we saw over the last year? And then what could be improving about the market in 2026?

For sure. So about a year ago, there was quite a bit of concern around the potential of funding pullback, particularly here in the U.S. And we navigated through the end of the first half of last year was also the second half of the academic calendar year. And then when we turn the corner into the late summer and early fall here in the U.S., we begin to work with our customers and our belief proved out to be true, which is that our solutions that we provide are mission-critical in nature. So the research and analytics that we provide on the quality and value being derived from academic research, the software to help enable and manage the libraries collection and the content it serves up to the patrons as well as the software that we're embedding to help discover the content that we're delivering on that part of the business.

So we had an improvement in our renewal rates in A&G last year, and we saw a slight uptick in our annual contract value as we move through the year. So we were able to navigate some of that uncertainty here in the U.S. And we continue to see strong funding for academic research around the world, and we feel good about what that looks like as we move into 2026. So we -- 2025 turned out to be a solid year and demonstrated the mission-critical nature of our products.

Yes, makes sense. And one of the big questions we get from investors within the A&G segment is around the differentiation and the competition within the space. I think one of the potential competitors people cited is like a Google Scholar, right? And so just wondering if you can talk about within your sort of solution set of A&G, like how do you guys differentiate versus others in the market?

Yes. So for a very long period of time, there have been a series of highly curated and paid for solutions and then also some freely available solutions like you've referenced. Our differentiation within the Web of Science also rests heavily on the credentialing that we provide. So the journal impact factor is undoubtedly the gold standard in the market for the quality of academic research within publications. We're independent, which is also a benefit for us against some other competitors that offer credentials for research.

So we continue to see broad acceptance by the market that you look to our content not only for citation relevance, but also for the credentialing around the quality of the research. We also recognize that continuing to innovate here is a really important part of enhancing that value proposition. So we invested heavily in the Web of Science. That was one of our first projects to -- or products to have a research assistant, which we rolled out over a year ago. We followed that with Agentic capabilities. I think I mentioned the literature review service that we have that customers are now paying for to embed for their patrons or the researchers within the community.

And then we're also building our first AI native platform for multi-agent capabilities on top of the Web of Science data, and that's the Web of Science Research Intelligence. So continuing to innovate with the newest technology, combined with best-in-class data and that high credentialing gives us a very good position here. And this is a product that we acknowledged a few years ago. Its growth had stalled, but it's been reinvigorated and it's leading within the A&G segment from a growth perspective.

Got it. And then if we move over to the IP segment, just wondering if you can talk about sort of the main growth drivers within that business between new customer adds, volume increases. One of the things that we have been wondering is like if -- could this AI innovation cycle, is that something that if it is sustained over a long period of time, could that potentially be a benefit to the IP business and the growth there?

We think so, Scott. We certainly look to the overall patent in-force market as a leading indicator of where volumes will be largely for our renewals business, but it's also a help to the other components of our business. So as a reminder, we provide intelligence here, that's Derwent, Innography, incoPat and CompuMark. We also provide the platform for managing the workflows like IPfolio. And then we have our tech-enabled services business for renewing intellectual property around the world.

And it's on that last one where we do really think we're going to have some wind in our sales as we move through this year into next year. If you look at the global patent in-force data that's added each year over the last 5 years, excluding the domestic market for China, which has a different value proposition, we saw coming out of COVID, patents in force were essentially flat for a couple of years. In the last couple of years. Following that, we've seen it return to a healthy growth between 3% to 4%. We've had a couple of years of solid growth there. That tends to be a good indicator of where renewals will be a couple of years later.

And we think that's really going to put some wind in our sales in that business as we move over the course of the next couple of years. So I think our guide for this year has been a little bit cautious in that regard, but we expect some benefit there. And we certainly have acknowledged last year that the continued investment in innovation and AI across all industries, we believe, is going to lift patent filings around the world. We're starting to see that, and we think that's a trend that's going to continue for years to come.

Got it. And I think another thing you've talked about is sort of seeing maybe some steady improvement driven by improved commercial execution. So just wondering if you can elaborate on some of the changes you are making or have made to the go-to-market approach within IP and how that's potentially driving incremental sales within the business.

Yes, Matti, our CEO, has talked about this pretty extensively, and I would focus in on a few key areas. We've made some leadership changes in the last year in the sales group, brought in some high-quality talent and promoted some high-quality talent to help lead those groups. And then second, we've been tweaking our incentives to really focus our teams on annual contract value and that recurring revenue. So a combination of both of those, coupled with that significant investment in product technology to really have leading-edge technology capabilities within our stack as we take to our customers is a really important part to enable that as well, too. So a combination of those, we think, is what helped to accelerate our annual contract value and our recurring organic growth last year, and we expect that to continue into 2026.

Got it. And then if we move on to capital allocation, you talked about this a little bit at the beginning. You're guiding to free cash flow, I think, around $400 million this year, around 10% year-over-year increase at the midpoint. Can you just talk about sort of your top allocation priorities here, where you're looking to deploy that free cash flow and talk about -- I think you mentioned a little bit on how your potential LS&H sale could impact your capital allocation priorities going forward?

Sure. We indicated when we put our guide out at earnings that we're really going to skew more towards deleveraging in the near term. So we repaid $100 million or prepaid $100 million of debt in Q1. We indicated that we're going to generate, as you said, about $400 million of cash. You should expect us to use most of that, if not all, to continue to strengthen the quality of the balance sheet and pay down debt. We also acknowledged, and I mentioned one of the catalysts or rationale for pursuing the sale of the Life Sciences business is not only the execution focus that it provides, but the ability to take cash proceeds there -- potential cash proceeds there and put those towards deleveraging. So I think in the near term, that's really where you'll see our focus be.

Yes. Makes sense. And then I guess one more before we end here. If we were to be back sitting up here 12 months from now and discussing what a successful year it was for Clarivate. What would you point to maybe the top 3 things you would have achieved over the course of 2026 that would have made this year successful?

Yes. I certainly think it starts with the products and how it's enhancing value for our customers. So continuing to see improved engagement with our solutions as we roll out AI into those platforms is a key measure. We look at that on a usage basis, and we are seeing significant improvements in recurring usage in parts of our business that are adopting this technology as well as efficiency improvements from the workflow agents that we provide. I think the second aspect is the execution of our financial objectives for this year. So continuing to accelerate our organic ACV growth, our recurring revenue growth, the margin expansion and the delivery of the cash flow improvement. I think a combination of both of those would put us in a really good position a year from now.

Awesome. Well, JC, really appreciate the time, and thanks for being here.

Thanks for having me, Scott.

Appreciate it.

Thank you for standing by. My name is Carlie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Clarivate Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Mark Donohue, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining us for the Clarivate Fourth Quarter and Full Year 2025 Earnings Conference Call. As a reminder, this conference call is being recorded and webcast and is copyrighted property of clarity. Any rebroadcast of this information in whole or in part without prior written consent of Clarivate is prohibited and the accompanying earnings call presentation is available on the Investor Relations section of the company's website.

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, Clarivate 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. Reconciliation of these measures to GAAP measures are available in our earnings lease and supplemental presentation on our website.

With me today are Matti Shem Tov, Chief Executive Officer; and Jonathan Collins, Chief Financial Officer. After our prepared remarks, we'll open up the call to your questions. And with that, it's a pleasure to turn the call over to Matti.

Good morning, everyone, and thank you for joining us today. We are at a positive inflection point in the Clarivate journey. In 2025, we delivered on our initial full year financial guide for the first time since 2019. The value creation plan is working as evidenced by improved performance and forward outlook. We have accelerated organic ACV organic recurring revenue and enhanced our free cash flow conversion.

Looking ahead to 2026. Our guidance calls for 10% free cash flow growth and continued improvement in our KPIs. With strong cash generation, stable revenue retention rate of 93% and a business that generates 97% of its revenue from proprietary solutions enhanced by AI, we see tremendous opportunity in front of us.

Last February, we announced a strategic review of our business portfolio, which involves evaluating multiple options. After an in-depth analysis, we have launched a process to sell our Life Sciences & Health business which if the deal is concluded, could accelerate value creation for shareholders. We believe selling this segment will allow further emphasis on the A&G and IP markets and strengthen our balance sheet through reduced leverage.

We are currently engaged in active discussions with interested parties. There are no guarantees. We will reach an agreement. We will update the market when appropriate. While we understand the market's concern around AI disruption for software and information services companies in general, we believe our business is highly proprietary with significant moats.

A few weeks ago, we launched a webinar title Clarivate Intelligence Amplified in the Age of AI. If you're not viewed it yet, I encourage you to do so. For us, AI is not a disruption to our business model. It is an amplifier of what already sets us apart. Today, 97% of Clarivate revenue come from proprietary assets including intelligent solutions, workflow software and tech-enabled services. This reflects decades of strategic investment in proprietary content, expert enrichment and curation and the development of software products embedded across customer workflows. This strong and proven foundation provide us with a significant advantage in the age of AI. Our customers operate in high-stake environments such as research, intellectual property and highly regulated life science industry when provenance, accuracy and trust our essential and nonnegotiables.

Let me explain our AI strategy. We are leveraging AI to capitalize on our strengths. By combining our proprietary data and deep domain expertise with cutting-end technology, we are delivering what we call intelligence amplified. This shows up in three ways. First, AI research assistance provide a conversational contextual search and discovery, a front door to our trusted intelligence where customers can simply ask questions in natural language and get a precise answer backed by our proprietary data. Second, AI workflow agents are embedded directly into customer workflows, acting as digital analysts that enable execution at speed. [indiscernible] used to take hours or days to now happen in minutes. Imagine a patent analyst who has an AI engine can monitor thousands of patent identified relevant prior as and flag potential conflict automatically. That is the power we deliver. And third, through AI ecosystem access, we are expanding our gold standard intelligence across the broader AI ecosystem via secured integrations such as MCP service. By expanding our reach beyond cloud at boundaries, we are ensuring that our assets remain available to user as they develop new ways of working.

For example, we recently introduced Nexus, which exemplify our ecosystem access strategy. As students increasingly begins their research in general purpose AI tools Nexus meets them where they are embedding our gold starter curated content such as web of size directly into public -- tools. This is how we extend the value of our proprietary assets beyond our own platforms, turning AI adoption into a distribution opportunity rather than a displacement risk. We will continue to capitalize on the benefits of AI by enhancing and developing solutions that are trusted by more than 45,000 customers globally. We see this new technology as a legitimate accelerant to our organic growth.

Now let's turn to 2025 results. I am proud of the results we delivered in 2025 which lay a strong foundation for 2026. We delivered nearly 2% organic ACV growth at the high end of the range. We also improved the mix of organic recurring revenue to 88%, clear evidence of continued progress towards a more predictable subscription-based model. We delivered more than $1 billion of adjusted EBITDA and $365 million free cash flow. As Jonathan will cover in more detail, we expect approximately 10% free cash flow growth in 2026.

Our value creation plan has built strong momentum and better focus across the organization which has improved our operational and financial performance. We optimized the business model, which has led to an improvement in our recurring revenue mix. We improved our sales execution and as a result, delivered nearly 2% organic ACV growth, representing approximately 90 basis point improvement year-over-year. We drove innovation forward by introducing 12 major products and AI-powered fishers, strengthening our unique position in the market. Our strategic review has led to the initiation of a process to sell our Life Science business. If successful, this will focus our organization and strengthen our balance sheet. Let me take you through each of our business segments where we have made meaningful improvements starting with Academia & Government.

This segment delivered solid performance in 2025 achieving 2% organic ACV growth despite funding headwinds in the U.S. academic market. On the innovation front, we launched 10 AI assistance and AI-native agentic solutions, and these are being used by over 4,000 institutions today. And here is the foundation that makes this all possible. 97% of our A&G revenue is generated from proprietary solutions. Last year, we successfully transitioned the business model away from transactional revenues. This increased our organic recurring revenue mix to 93% with mid-90s retention rates. Looking ahead, we expect organic growth acceleration as our AI innovation continues to materialize, supported by improving market dynamics.

Now let us talk about the Intellectual Property business. It is powered by the industry's largest agent network and a comprehensive portfolio of solutions covering the full IP life cycle. This includes patent and trademark created proprietary data, decision intelligence, tech-enabled services, IP management software and the largest annuity book in the market. This gives us scale, reach and competitive advantage no one else can match with a new leadership team, including the President, CTO and the Head of Software and clearer priorities, we are confident in returning RFP to growth. On the innovation side, we launched 5 Gen AI and AI native products and enhancement last year. 2026 will bring additional AI product launches across the IP landscape. The changes we have implemented are starting to show up in the results. We delivered 270 basis points of year-over-year improvement in annuities revenue, reflecting stronger execution. The outlook for IP is increasingly positive. The fundamentals are there that [indiscernible] is aligned and the AI-led innovation and products are relating positively with our customers.

Turning to Life Science & Health. Life Science & Health is anchored in expert created highly enriched data, which is optimized for compliance critical workflows where accuracy provenance and trust are essential. We now have 11,000 global active users, leveraging our AI research assistance and workflow agents. That is incredible adoption in a market where accuracy and trust are nonnegotiable. And we are not slowing down. We are due to release more than 10 additional AI solutions this year. We have reached a clear inflection point. Cortellis, DRG and [indiscernible], our 3 major product lines are now moving in the right direction with consistent quarterly ACV growth. Based on this we closed last year and our current pipeline visibility, we expect a return to organic revenue growth in 2026.

Now let's talk about where we are headed and why we are confident in the outlook. For 2026, we are guiding to 2% to 3% organic annual contract value growth. That is a meaningful acceleration or where we were just 2 years ago. On recurring organic revenue, we are targeting 1% to 2% growth for 2026 an improvement of almost 100 basis points compared to last year in the middle of the range.

Finally, free cash flow is expected to grow to about $400 million, that is approximate 10% increase over last year. I am optimistic that we can achieve our target in 2026 because we have built the foundation. We have optimized the business model. We have strengthened sales execution. We are accelerating innovation, and we are rationalizing the portfolio.

In closing, 2025 was a turning point for Clarivate. In 2026, we expect to continue to improve our key financial metrics. Under my leadership, we have built a more focused accountable and performance-driven culture, and we will maximize shareholder value through portfolio simplification and disciplined capital allocation.

I will now turn the call over to Jonathan for a review of our financial results and outlook.

Thank you, Matti. Slide 17 is an overview of our fourth quarter and full year financial results compared with the same periods from the prior year. Q4 revenue was $617 million, bringing the full year to $2.455 billion. The change in the quarter and the year was entirely inorganic as we disposed of and divested businesses over the last year. Fourth quarter net income was $3 million. The $195 million improvement over Q4 of the prior year and the full year improvement of $436 million was driven by the noncash impairment charges recorded in the prior year that did not recur in 2025 as well as lower income tax and interest expense. Adjusted diluted EPS, which excludes items like impairment, was up $0.02 sequentially at $0.20. The changeover last year was entirely inorganic. Operating cash flow was $160 million in the quarter. The $19 million improvement compared to last year is driven primarily by working capital and lower interest and taxes.

Please turn with me now to Page 18 for a closer look at the drivers of the fourth quarter top and bottom line changes from the prior year. As expected, the changes over the prior year were driven by 4 primary factors: First, while organic subscription revenues continue to grow at 1% followed the continued acceleration in our ACV and Total organic revenue declined by about 1% as the subs growth was offset by reoccurring and transactional. Fourth quarter operating expenses were higher as we continue to invest in innovation and incurred higher incentive compensation expense as we delivered our full year guidance, resulting in a $16 million profit decline.

Second, during Q4, the businesses we are disposing decreased by $43 million over the prior year, but was largely offset by cost reductions in these businesses, yielding a net $10 million reduction in adjusted EBITDA. Third, as we have seen in the last couple of quarters, we experienced a modest inorganic impact from the Scholar 1 divestiture. And fourth, the U.S. dollar remained relatively weaker against the basket of foreign currencies, which caused a foreign exchange tailwind on the top line that was partially offset by fewer transaction gains than the prior year, resulting in a small profit impact. We exited 2025 with a Q4 profit margin run rate of just over 41%, which was about 50 bps higher than the full year results.

Please turn with me now to Page 19 to review how these same drivers impacted the top and bottom line changes on a full year basis compared to 2024. As Matti noted in his remarks, our full year revenue and profit results were above the high end of the original guidance ranges we provided a year ago. While recurring organic growth approached 1%, this was offset by organic transactional revenues, resulting in essentially flat organic revenue. Full year operating expenses were higher than the prior year as we continued to invest in growth and incurred higher incentive compensation expense as we delivered our full year guidance. The entire revenue change and the vast majority of the profit difference came from the combined impact of the disposals and divestitures which lowered revenue by about $116 million and adjusted EBITDA by about $44 million compared to the prior year. Both the top and bottom lines benefited from foreign exchange translation as the U.S. dollar weakened compared to a basket of foreign currencies.

Please turn with me now to Page 20 for a look at how the Q4 and full year adjusted EBITDA converted to free cash flow and how we allocated the capital. Free cash flow was $89 million in the fourth quarter, bringing the full year to $365 million towards the higher end of our guidance range, which is about 2% growth over the prior year has lower adjusted EBITDA and higher onetime costs were more than offset by lower working capital, capital spending, interest and taxes. We use the free cash flow we generated to buy back $225 million worth of stock and we called $100 million of the bonds that were due later this year and then called the remaining $100 million in January of 2026. This balanced deployment of capital allowed us to maintain net leverage at approximately 4 turns while retiring $56 million or 7% of our outstanding shares.

Please turn with me now to Page 21 for a look at our full year financial guidance ranges for this year. Beginning at the top of the page, we anticipate the acceleration of our organic annual contract value last year will continue in 2026, resulting in growth of between 2% and 3% and representing continued steady progress and an increase of about 0.75 percentage point at the midpoint of the range. We expect recurring organic growth of about 1.5% at the midpoint of our range, which is an improvement of nearly 1 percentage point over last year. Due entirely to the wind down of the businesses we are disposing, we expect revenue to decline by almost $100 million at the midpoint of the range to $2.36 billion and that our organic recurring revenue mix, which excludes the impact of the disposals, will improve to between 88% and 90%.

Moving down the page, we expect adjusted EBITDA will grow modestly despite the lower revenue, increasing our profit margin to nearly 43% at the midpoint of the range. We anticipate diluted adjusted EPS will grow about 9% at the midpoint of the range to $0.75, largely due to the share repurchases we completed last year. Finally, free cash flow is expected to grow by about 10% to $400 million at the midpoint of the range.

Please turn with me now to Page 22 for more details on the full year top and bottom line changes we are expecting compared to last year. We expect adjusted EBITDA margin will expand by about 200 basis points at the midpoint of the ranges, driven by a return to organic growth, continued aggressive cost management and completing the strategic disposals. We anticipate organic growth of about 1%, led by subscription revenue growth from continued ACV acceleration. We have plans in place to achieve cost efficiencies to fully offset inflation, resulting in a full flow-through of the approximately $25 million of revenue growth to profit. This will account for about 1/3 of the profit margin expansion. The strategic disposals are expected to lower revenue this year by approximately $130 million and we are reducing operating expenses by more than $100 million, which yields a profit impact of about $25 million, delivering the remaining 2/3 of the profit margin expansion.

As Matti highlighted, we are pursuing the sale of our LS&H segment. However, our financial guidance for this year assumes we will own this business for the entire year and if [indiscernible] reached a revision to our guidance for this potential divestiture may come later in the year. We continue to anticipate a modest foreign exchange translation benefit to the top and bottom lines of $10 million and $5 million, respectively, as the U.S. dollar is expected to remain slightly weaker against other foreign currencies compared to last year.

Please turn with me now to Page 23 to step through a high-level overview of the expected seasonality of our revenues and profits this year. Broadly speaking, we expect to make continued progress as we move through the year. However, it's worth highlighting some timing differences that will affect our trajectory. First, in our annual contract value, we often see timing differences with renewals in the first quarter and as a result, we anticipate a slight sequential pullback in Q1, but steady acceleration through the balance of the year. Second, last year, we saw mid-single-digit organic growth in our reoccurring revenues in Q1 due largely to patent renewal accelerations in the U.S. that will not recur this year and will unwind in the first half. The combination of these 2 factors should result in recurring organic revenue growth that is essentially flat in Q1 and will result in a profit margin that's similar to Q1 of last year with the margin expansion occurring in the balance of the year. Finally, it's worth noting that our transactional books revenue will cease this summer, resulting in a sequential step down from the first to second half. But as I noted on the prior page, this disposal will expand our profit margins.

Please turn with me now to Page 24 to step through our expected path to delivering approximately $400 million of free cash flow this year. At the midpoint of our range, we expect free cash flow will grow about $35 million or 10% over last year. Onetime costs are expected to abate primarily on lower restructuring costs. As noted a couple of pages ago, our guidance does not contemplate the sale of our LS&H segment. If we reach an agreement, this is an area we would update later this year. We expect cash interest to improve by about $20 million over the prior year as a result of the debt we prepaid last year and last month, additional debt we plan to prepay this year and some savings associated with the projected forward base rate curve. Cash taxes are expected to be $5 million to $10 million higher than last year due largely to new corporate tax in Jersey. We anticipate the change in working capital this year will be a use of approximately $20 million compared to last year's source of just over $10 million, primarily due to incentive compensation payments early this year.

We're also expecting a $10 million benefit associated with lower impaired contractual costs. And while we remain committed to investing in product innovation, the strategic disposals and cost efficiencies will improve capital spending by another $15 million following last year's savings of more than $25 million. From a capital allocation perspective, we plan to lean more towards deleveraging this year and started last month by retiring the final $100 million of bonds that were due later this year.

In closing, on Page 25, I want to draw attention to the consistent free cash flow we have generated over the past 4 years. Last year's free cash flow of $365 million resulted in a 4-year cumulative average growth rate of 6%, with expected accelerated growth this year of 10%. At the current stock price, our stock is yielding a free cash flow return of 30%. Over the past 4 years, we generated a combined $1.9 billion of free cash flow and asset sale proceeds which we used to repay $1.2 billion of debt, lowering our net leverage by more than 1 turn and to repurchase about $700 million of stock, lowering our share count by 13%, and we expect to generate another $400 million this year and may generate proceeds from the potential sale of our LS&H business to further strengthen our balance sheet. We continue to believe executing the value creation plan will lead to healthy, sustainable organic revenue growth, further accelerating our free cash flow growth in the coming years, delivering meaningful value for shareholders moving forward.

I want to thank everyone for listening in this morning. I'll now turn the call back over to the operator to take your questions.

[Operator Instructions] Your first question comes from Toni Kaplan with Morgan Stanley.

I was hoping you could talk about your monetization model for your subscriptions and for the new AI products. I think, historically, some of your subscriptions at least were based on seat licenses and which products were being used by clients as well. So is that still the model that is underlying the subscriptions? Or have you been changing that? And I guess, approximately what percentage of revenue is based on seat licenses.

So, thank you, Toni. This is Matti. We continue to use AI to our advantage with protecting and growing the base of our subscription revenue. We have an upsell opportunities upselling some of the AI innovation for existing products. And then we are constantly introducing new products, we are totally new revenues. In terms of the business model, we have quite a number of different products with different pricing models. We have rationalized some of our business model, for example, web of science, we have actually streamlined went to be more and more subscription-based product as opposed to onetime. I'm not sure we can share the numbers. Maybe Jonathan can add to this in terms of the breakdown.

Yes. Thanks, Toni. More broadly, for example, within the A&G segment, as Matti highlighted, the pricing of the subscriptions is based on the size of the institution, so not necessarily the exact amount of students or researchers. But the size of the institution certainly affects that model. As we think about the adoption of AI, we believe that as we bring those features and capabilities into the products, whether it's the researcher assistance, the workflow agents or access to our content via the broader AI ecosystem. There's an opportunity to continue to harden the renewal rates, demonstrate more value and drive better pricing and offer new AI-type solutions such as the researcher intelligence that we just featured in that market.

In our corporate markets and in the law firm markets, similar, it's based on the size of the company and based on the size of the law firm is effectively how the pricing grid works for the subscription products. We expect that to continue based on the the institution will be broadly how we price the subscription products.

Just for clarity, there are some products that are also based on the combination, combination of the size of institution and also the actual FTE that actually -- the actual end user actually using it just for clarity and full transparency here. I don't see this as a major concern at this point of time. I know where the question is coming from. We don't think this is concern. We have quite a good -- if we look at our renewal rates going up, usage is going up. If you look at -- maybe you can talk about -- slightly about where we are in Q1.

Yes, we continue to -- early in Q1, we continue to see progress across our key metrics. And when we're out with our Q1 results in just a couple of months, we think we'll continue to demonstrate that we're on the right path. We continue to remove in the right direction, and that's the best demonstration of the value we think we can capture the technology shift.

Your next question comes from Scott Wurtzel with Wolfe Research.

Just wondering if you can explain or give a little bit more detail on the 97% of revenue coming from proprietary data and specifically on how the tech-enabled and workflows kind of fits into that would be great.

Basically, these are two questions. There is the AI question and there is the workflow question, which is kind of different for us. Just to remind users 97% of our business derived from proprietary data -- about 60% is information services. We do have a component at about 20%, which come from enterprise software. I can address both of them. So let's talk about -- start with Information Services, our data is originated in 3 sources: public license and some which are exclusively and internally generated -- the value we deliver is regardless of the source of the data, almost entirely the value lies with our curation enhancement, harmonizing and embedding the data reach the right algorithm in the workflow ecosystem of end customers.

I want to give you just 2 examples. Some life example, we will make it a bit clearer. Let's take, for an example, Web of Science in Academia & Government. The curated harmonized data is then embedded directly into research and valuation, funding allocation publishing decision and National Science policy workflow. Transparency and auditability are very, very essential this. This is why Web of Science underpins decision such as well researchers publish, how government allocate funding and now universities assess performance. General purpose AI tool, which lacks the Providence government and governance cannot substitute this high stake workflow.

Let me give you another example. When pharmaceutical company use general purpose LLM to ask about drug safety profile, it returns publicly available information that is useful but incomplete and potentially outdated. When customers use Clarivate's Cortellis platform, to access 3 million safety and toxicity alerts that have been expertly created linked across Cortellis data sets and continuously update by our in-house scientists. This is not just better data. It is a different category of intelligence that directly impact billion-dollar decision in the drug and medical device development. At the high level, it's positioned us very, very well, 97% and this is why we are continuing to see an improvement in our renewal rate of 93%.

And I can also go and talk about the workflow element of the business. It's 20% of our business. Just remind ourselves, the IPMS business -- the IP business is driven also by strong recurring and growing IPMS software business. Within IP, we have also a major component of software within A&G and the Alma product, the Polaris product. And I can speak here from a vast experience I've been in the enterprise software space for almost 30 years. We hear out the issue of -- like AI sweating up by commoditizing the coding, but I do believe that we are in the best position here. It's not for AI to develop cost. I understand we actually use it ourselves accelerating our development process, but we have some inherent competitive advantage as enterprise software vendor, including the commercial channels that we have developed and supported over years. The switching and implementation dynamics, the workflow integration.

And I think the most important one is security and governance. That is why we believe the 93% of our business is proprietary, and we will continue to demonstrate this in quarters to come. Thank you for the question. Yes.

Your next question is from George Tong with Goldman Sachs.

What were the considerations that led you to initiate a sale process of Life sciences & Healthcare business. Why did you deem LS&H's nonstrategic and A&G and IP is.

So first, as we -- as I mentioned, when I joined the company, I think the first earnings call was late 2024. Our ultimate goal is to create shareholder value. We have initiated the value question plan with pillars. The fourth pillar was the strategic alternative one. We -- I think we've demonstrated the success of the value creation plan. We've gone from 80% recurring to 88% execution of the sales execution. We see tremendous momentum on the AI innovation. We do believe there is also shareholder value that we can pay it through the strategic alternative side. We've run a process. We look at our different alternatives, and we have concluded that Life Sciences segment is the one that we will -- that's the one that we have the opportunity to increase to sell, and then we will increase our focus and operational execution across A&G and IP segment to further strengthen our balance sheet.

It makes sense for us to keep IP and A&G together because we benefit tremendously from the share content assets, technology platform, commercial channel scales and strengthen our innovation. If any time in future, we feel better off separating them. We will definitely keep you keeper informed.

Your next question is from Manav Patnaik with Barclays.

I just want to follow up on that last comment, Matti, in terms of the, I guess, the strategic synergies between IP and academic and government, I guess. Could you just elaborate on what you said towards the end there? Like how do those two segments potentially you work with each other?

I think it makes sense to keep IP and A&G together because we benefit from shared content. We have some -- there is some content flowing between the two different segment. We're using technology platform. We see -- I mentioned already on the call that IPMS is software. Alma is software, we do have agenting capabilities that we are currently building in Alma, we're definitely going to take advantage of the advanced stage of the expertise around Alma and Polaris. And -- we are working together. We have a new -- I mentioned we have a new add of a new CTO and a new Head of Software in IPMS. So first, a collaboration between the software expertise that lies within A&G and the IPMS software arm of IP, which running behind the scenes is a major, major part of the business. So far, we haven't seen much of a collaboration between the two. Definitely an opportunity. There are commercial channels. We have some customers that buy both from IP and from -- and buy from both IP and Academia in last year, we've seen some major universities, tax transfer accounts. I can't mention the names, but we were actually taking over the annuity business.

So we expanded the market and sold the annuity services, some of the top universe in the U.S., definitely innovation. We see the academic AI capabilities of A&G definitely going to help accelerate AI innovation even further -- there are some common projects that will run on cost cut out that is in collaboration with the three segments going through some further opportunities. So there's a lot of opportunities. And at the same time, we can run the company as we can run the three segment independently. We are currently and we will continue to take the benefits of being together but we will maintain strategic flexibility to operate separately in the future just to create more value for shareholders.

Your next question is from Shlomo Rosenbaum with Stifel.

Can you talk a little bit about the IP segment and what it will take to really return that business from -- to organic revenue growth from the declines? And what's going on behind the scenes that's going to make that happen? And what's a realistic time frame for investors to expect that to happen? That's probably the biggest value driver from an operational standpoint for your company.

Yes. So let me start and then Jonathan can join later. So first of all, let's just remind ourselves, we are the biggest player in IP. We have the greatest assets. We have -- we are in a unique position, and I mentioned this on the call, we have the largest annuity book. We have IPMS technology behind the scene, and we keep winning new more and more IPMS customer. We have the patent search, and we have the trademark services. Yes, there are some -- in the recent years, we've noticed some weaknesses I think we are -- but we are coming from this from a position, from a very strong position. It's almost ahead of $800 million business. We have vast majority of -- we have an amazing customer base, and we have some tremendous assets. I think with Maron joining with the new CTO, the new Head of Software -- we just -- we need to be much more focused on innovation, execution, subscription, recurring -- and I have very confident. I believe we can turn this company this IP segment around was -- and we're starting to see the initiation of this turnaround. We've grown in 2025, 200 basis points year-over-year improvement in the annuity books -- we've done different surveys about the annuity book, the worldwide annuity book, the overall patent is growing. We will take -- we'll definitely take our share back and we have outlook of IP is increasingly positive fundamentals out there. The team is very aligned. And I think I'm very optimistic about this IP turnaround. It will take time. It's not going to be done overnight. Jonathan?

Yes, Shlomo, two things I emphasize that Matti touched on. The first is the commercialization and adoption of new product innovation is definitely going to be a driver for the intelligence offerings within IP. So we launched the new Derwent patent search last year. went live early in the market, darwin patent monitor came to market using Agentic-AI capabilities to look for potential infringements and help companies in the process of protecting their -- so the adoption of those tools and driving growth in the patent intelligence. We're really excited. Matti touched on it earlier in the script about the the new risk mark product on the trademark side, which leverages AI capabilities and native AI development to help companies protect their brands and their trademarks as well too. So certainly, product innovation is a big piece, as he said.

And I think the second piece is the continued market recovery. So as Matti touched on, this is a business -- annuity business that in 2024 declined by a few percent. It returned to about flat last year. in the leading indicators there, as we've said before, our growth in the overall patent in force around the world. And we've seen a couple of years in a row where that has returned to a more healthy growth level. Usually a 2- to 3-year lag on that before it really starts to affect the annuity business. but we feel good about the market recovery in global IP. And we touched on last year that the AI boom, we think, is also going to continue to drive more new patent filings around the globe and be a healthy win in our sales for that business. So it's definitely a combination of the things that we control and the market recovery.

Your next question comes from Ashish Sabara with RBC.

Solid free cash flow generation in the quarter and the guidance also reflects on robust free cash flow generation. My question was more focused on capital allocation priorities. You talked about leaning more towards deleveraging, but at the same time, talked about stock trading at 30% free cash flow. So I just wanted to better understand the rationale for deleveraging or buyback this year. And just if you could provide us incremental color on when is the debt due? My understanding is it's not due until 2028. So any color on those capital allocation priorities.

You got it, Ashish, this is Jonathan. Yes, I'll just touch on that second point. You're right. We have a patient capital structure. We don't have any maturities for the next couple of years. But our current judgment is that just based on the overall market environment, we will best serve all of our investors by focusing on deleveraging this year. So we noted in the materials that we've done a balance over the course of the last 4 years. Most of it's been deleveraging, but we've also lowered the share count in the business by 13%. And we do think that the stock is yielding a very attractive free cash flow return. But on balance, we think leaning more towards repaying debt. Over the next 2026 time frame makes the most sense. So we'll continue to look at conditions in the market, but our judgment right now is leaning towards deleveraging is the best way to to create value.

Your final question comes from Andrew Nicholas with William Blair.

Thanks for I just wanted to ask about price realization. Can you speak a little bit to the composition of both ACV and recurring revenue growth in '25. How much of that came from price and what your expectation is in terms of price realization going forward?

Yes. Thank you for the question, Andrew, it's Jonathan. Just a couple of points here. The headline is our price realization has been pretty consistent over the last couple of years, where we are seeing improvements in our ACV and in our recurring organic growth is really from volume. So we're seeing improvements in our renewal rate. We're seeing acceleration of new subscription sales. That's what's driving the improvement there. We continue to see opportunities to monetize investments that we make into the product through the price increases, but we do expect that it's that volume component of our subscription and reoccurring organic growth that's really going to help us to continue to accelerate through this year, monetizing the investments that we've made into the products with fewer cancellations in downgrade, more new subscription sales, and we think that's really what's going to help propel us to an improved outcome in 2026.

There are no further questions at this time. I'll now turn the call back over for closing remarks.

Yes. Thank you, everyone, for listening in this morning.

This concludes today's conference call. Thank you all for participating. You may now disconnect.

Sabadra, and I cover information services companies here at RBC. Matti -- we are excited to host Matti, CEO; and Jonathan CFO of Clarivate. Thanks for giving us this opportunity.

Yes. Thank you. Happy to be here.

We'll kick off with the #1 question that we are getting across our coverage universe. It's all about GenAI. GenAI, GenAI, GenAI. So GenAI first from the top line, how do you think about -- one of the concerns is disintermediation risk. So can you talk about how proprietary is your data? How deeply embedded are you in your client workflows? And if you can go through all your segments, like all 3 of them at a very high level, talk about why is -- how do you think about GenAI, but also from not only disintermediation risk but also monetization opportunity, how it's going to open up newer ways for you to monetize.

Yes. Sure. First of all, thank you for hosting us today here. Definitely, AI is not going to displace Clarivate. In fact, AI is a great opportunity for us because of the unique nature of our proprietary data and I'll talk about it in general and then I'll talk about segment by segment.

Our data is unique, and we are in a very unique position to strive in the era of AI because the foundation of the company is built on proprietary created trusted data assets that cannot be replicated by public AI.

While the generative AI and open LLMs offer very convenient. They lack the depth, they the lack accuracy and the governance that our customers, in fact, demand -- our customers such as research, intellectual property customers and life science.

Beyond the data, the unique data that we have, we have IP protected SaaS platforms. Our expert services embedded into the intelligence into a mission-critical processes, the combination of proprietary data and workflow solution that we own and expert services, AI will find it very difficult to displace.

In fact, as I mentioned, it's an opportunity of ours to go forward and to further strengthen the company. Let's take some example from the different 3 segments. On the A&G side, the vast majority of our organic revenue is protected by the proprietary data we have and workflow solutions that we have. These assets, just to give you some examples, include the biometric database, for example, Web of Science; it includes research and analytics, for example, the Impact Factor; enrich AI-enabled aggregation product that we license with partnership with other vendors, ProQuest offering; and proprietary library solutions that we have developed over many years, Alma and the like. These are all deeply embedded in a customer research environment and workflow.

All of this cannot be replicated. This data is not open for ChatGPT, LLM. They don't simply have the access for this proprietary data. This is on the A&G side.

Let's move to Life Science. The vast majority of the revenue from our Life Science segment come from proprietary data. I'll just give you some example. These assets include our own primary market research, licensed and semi-exclusive data of health care, journal content, data partnerships, proprietary predictive analytics and forecasting model and proprietary taxonomies metadata and created -- and creation policy applied to public and licensed data. It's unique, and we own the data.

And then the IP segment as well, we have a series of proprietary data. I'll just keep reminding us, Derwent World Patent Index; Darts-IP litigation intelligence; and Innography proprietary data, which control, which is covering over 190 jurisdiction. On top of this, we have our own internal tools in IP, the workflow solutions that takes advantage of the proprietary data, plus the proprietary workflow solution, and we definitely position us ahead of generic AI solution. That's on the proprietary of the data.

I can then go ahead and talk a little bit about what we've done, what are the type of innovation that we're actually doing with using and utilizing our proprietary data across the 3 segments, academic AI or in the academic and government landscape, we have empowered many of the A&G product with AI research assistant.

But not only that, we have empowered and we're actually deploying agentic AI across our solutions. We have literature review agentic AI in the Web of Science. We are now deploying agentic AI around the Alma workflow solutions. So there are a lot of AI innovations using our technology and our proprietary data, automate and we are monetizing these capabilities in A&G and other segments in different ways.

On the IP, we're also leveraging the AI capabilities. We introduced a number of new products, utilizing our products. Some of them we can mention RiskMark and other products that we have introduced over the years. Life Science as well, a lot of energy going to AI empowerment of our proprietary content, something that AI will find it difficult to do just by having an open data. So that's a long answer. We are encouraged by the opportunities that AI brings to the company. Sorry for the long answer.

No, this was very helpful. I think this was a very detailed response, and I appreciate you going through each segment and talking about the products and proprietariness of the data set. So that was very helpful. I think it was very clear the amount of AI investments that we've already made in the business to help position you very well for the future.

I was just wondering, as you think about going forward, any color that you can provide. Do you need to -- do you anticipate any material ramp-up in investments going forward?

Yes. Thanks for the question, Ashish. Our current perspective is the level of capital spending that we've ramped up to over the last couple of years is adequate for the level of investment that we need to continue to make. As a reminder, a lot of our capital investment is on the development of these solutions that Matti just highlighted. So more and more of our capital spending has been allocated or dedicated towards these types of efforts.

But I think for the foreseeable future, over the next couple of years, we think we'll probably remain at about that level. We do think longer term, there'll be some opportunities as we leverage AI internally to help drive some efficiencies, even on the investment that we're making. But we're encouraged by the results that we're seeing, and we want to continue to invest. We think that's a very big driver of the growth acceleration we've seen this year in 2025.

That's great color. And maybe if I can just drill down further on the efficiency part. Can you also talk about how do you think about efficiencies coming from AI? Can you give some anecdotal examples?

So, so far, we've been very focused on AI around innovation. So a lot of product innovations, lot of AI energy is going into -- and investments going into our product lines. At the same time, we've done some tactical moves around efficiencies using AI. We have -- we are deploying Copilot across organization. We are deploying Copilot in our software development process. We've also done some tactical moves around efficiencies in the content operation environment.

But we believe that we should go to a more comprehensive move and trying to have a robust plan, and we will be doing this in 2026, have a robust plan to deploy AI internally into the company to drive our margin to drive our margin up, specifically in the area of content operation and customer place and customer care, there is a room for us to do better deploying internal AI tools in order to improve our margin. That's our plan for 2026.

That's great. That's fantastic. I know we covered a lot about the proprietariness of the data and the new product suite that you're adding. I was just wondering if you can add any more color on terms of how do we think about AI contributing to ASV growth? Any other color that you would like to add on?

AI contributing to?

To the -- like your subscription growth or recurring revenue growth, if you have any incremental. Obviously, you talked a lot about the new products you're launching, but anything that you would like to add on top of it, the ACV growth, sorry, my bad.

No, definitely, AI is front and center in everything that we do. Like if you look back at our value creation plan, AI innovation is central to what we do. We believe AI is helping us in 3 ways. One is to improve our recurring -- our retention rate or renewal rate by us going into the customer -- into the existing product lines, empower them and enable AI-enabled existing products, increasing our competitive in the market and increasing our retention rate. We went from 92% to 93%, one.

Secondly, there is also an upside opportunities. So many of our -- a lot of our AI innovations is going within the existing fee that the customers are paying, but there's also an upside certain AI capabilities. It's coming at additional price. So AI innovation into the customer base, into the existing customer -- into the existing product with some upsell opportunities. And more important, we also have the notion of introducing -- using our existing data assets, introducing new completely new products and going after new money.

Two examples, RiskMark, which is a new offering from our IP segment is a product that we are charging. It's new money. Web of Science Research Intelligence, which is a new product, which is complement. It's analytics tools around Web of Science. It's a new product that we have currently introducing. We have 25 customers already subscribing to this product. That's a new opportunity for us with AI. So going into existing products, upselling existing products and new money coming from new products, which are native AI, that's an opportunity for us as well.

That's great color. Shifting gears here, value creation plan. That obviously has been a lot of investor focus on value creation plan. I think it's been in place for a year now. Can you just provide us an update on the progress?

So we are very pleased. So far, I'm very pleased with the product -- with the progress. We have announced a detailed plan in February 2025 definitely working. I've been in my job for 15 months. The value creation plan is working. We do have -- we do plan to do some minor adjustment for 2026. But obviously, this is going ahead, it's going well.

Subscription has gone from very strong focus on subscription. We went to 80% to 88%. We do have the ambitions to take the company from 80% to 90%. We are already 88% of our organic revenue is on subscription. We are moving more and more of our offering towards the subscription. And we are going to discontinue.

We have mentioned before that we will discontinue certain products at the end of '25, some products at the middle of '26 and some at the end. We are on plan to discontinue this product. And I think the smart way, if we can complement ourselves, the smart way that we did that, we are stopping the onetime, but we also came back with some alternative subscription back office -- subscription-based offering. I want to mention 2.

One is the ProQuest e-books notion, which we have about 100 customers already buying the subscription business. And the other one, which we are very, very pleased with is in Life Science, a product called DRG Fusion, which is replacing our data brokerage business. We're already pleased to announce that we have 6 customers that acquired subscribe for DRG Fusion, including 2 of the top 20 or 30 pharmaceutical. It's going well, the transition to subscription.

Sales execution, the second pillar of the value creation plan is going well. We have adjusted some of the sales organizations, putting more energy towards customer success. We've replaced some of our management team in sales execution. So most of the sales execution is already in effect.

And then lastly, product innovation. I think we've spoken a lot this afternoon about product innovation, but it's a strong, strong focus of us. And lastly, the solution rationalization. The strategic review is still going, and we will be in a position to -- in February to give -- to provide an update about the solution rationalization exercise.

Yes. That's great. Yes. No, I think the investors are definitely focused on the strategic review, and we look forward to that decision in Feb.

Just moving on to renewal rates. As you talked about renewal rates have improved 100 basis points. Maybe if you can point to what are some of the key customer initiatives that are contributing to that improvement in retention rates?

I have to twist a little bit the answer here. For me, the increased renewal rate is number one is product. But the fact that we go and invest in the product and we show AI and some of AI we give at the existing fee, it's working very, very well.

On top of it, I mentioned already, we have increased the number of our customer success team. We work with the customers periodical, depends on how strategic is the customers, more touch points, more accountability for the CSM for the Customer Success Management. It's a combination of putting more people, more attention and the right product investment.

No, that's great. And maybe the follow-up there would be like a lot of the things that you talked about on product innovation, a lot of the success on VCP that you talked about, but which inning are we in, in moving towards the -- back to the market growth rates? How do we think about Clarivate where we are in that process of moving towards the market growth rate by segment?

Yes. We're making really good progress. I think what's most encouraging about 2025 is the fact that the momentum is headed in the right direction. ACV is accelerating. We plan to end the year towards the upper end of the range that we indicated, approaching a 2% exit rate that bodes well now as Matti highlighted with 88% of our organic revenue coming from subscription and recurring products for the revenue growth acceleration moving into next year.

Just as a reminder, the perspective we take on the markets, we think A&G market that we operate in grows in the 3% to 4% range. We're currently growing at about 2%. We think that's the one where we are the closest to achieving the market growth rate. It's going to be a combination of continued improvements in retention with the investments that we made as well as some of the new products that we're bringing to market. We've talked about research intelligence, the exciting new AI native tool that's going to be available to support those research projects. Also new projects like Alma Specto that are coming to market. So encouraged by the contribution that those will make.

When we move into the life science business, this is a market that we think probably has the highest growth potential of any market we're in. It is our smallest business, but we think it grows mid-single digits. This is an area where our subscription business had declined over the last couple of years. We returned to a healthy level of growth at 2% as at the end of third quarter.

A lot of the investments that we've made in the Cortellis suite of products have driven that. So that one is progressing towards that mid-single-digit growth. And I think the one where we still have work to do is in the IP segment. This is a part of the business that has been essentially flat, slightly down as of late. And we think it's going to be a combination of the investments that we're making in products, combined with some market recovery will help that one to get to kind of that 4% range that we talked about for the IP segment over the course of the next couple of years. So that's the progress in each of those, and we think this is an effort that's going to happen over the next couple of few years.

Okay. That's very helpful color. And maybe I was going to drill down further on the last point you made on the IP side, you talked about some of the market forces. I was wondering if you could provide some more clarity on how is the IP or patent in-force end market shaping up? Any color there?

Sure. Some more encouraging signs are out. We've referenced before a third-party data source that the World Intellectual Property Organization published. They just published the data for 2024, which confirms some of our thoughts there that the market is recovering. So new patent filings were up 5% last year. It was very close to the number that we were expecting. That's the highest new patent filing year that we've seen since before COVID.

So we believe and we highlighted this at Q2 earnings -- the significant investment in AI is driving increased filings around the world. That number I cited excludes the domestic China market, which is higher. But without that, it's a better representation of the value of our business.

The patent in-force metric that we've talked about before was flat for a couple of years coming out of COVID. 2023, it grew about 4% for that same geographic distribution I just gave in 2020 -- just last year, it was about 3%. So we're in that 3% to 4% growth range, 2 years in a row, that bodes very well for volumes for our annuity business or our patent renewals. So we are seeing signs there that, that market is recovering and on a lag that's going to have a benefit to our business, particularly in the area of the annuities or the patent...

Makes sense. And then just sticking with IP. Obviously, Matti, you talked about a lot of product innovation, some of the new product launches that you have in there. But just as we think about the competitive environment, I was wondering if you could comment on, has there been any change in the competitive environment? And how with these new product launches, your competitive positioning has improved?

Definitely have a unique position in the market, the fact that we have a comprehensive suite of products, which I don't know that our competition have the same. So we are doing both patent and trademark. But not only patent trademark, we are doing -- we have a comprehensive portfolio. Obviously, our leading IPMS solution, IPfolio, the annuity and trademark renewal business.

And then we also have a risk -- the trademark business and also the Derwent business. So we are providing a comprehensive solution, something the competitors cannot do. And also the databases, again, the databases that we have, whether it's Derwent World Patent, whether it's Darts-IP, Innography Proprietary PatentStrength indicator, which also is all combined of this -- the fact that we're having a very comprehensive solutions, that's a major strength of us, which differentiates us from most of the competition we have.

That's helpful. And then, Jonathan, going back to your point around A&G, switching gear to A&G, you talked about like where you're further ahead in the transformation process. You've already achieved 2% growth there. How do we think about the drivers? And maybe, Matti, this goes back to the product questions that you -- or product innovations that you talked about. How do we catch up from 2% to the market growth of 3% to 4%?

I think it's constant influx of new product innovation, and we have a lot of new products that we already launched. We talked about -- Jonathan spoke about Alma Specto. We spoke Web of Science Research. Intelligence, we have another product, we don't talk about it enough, we call it Vega community engagement product. We have 70 or 100 -- 70 or 80 customers already. There is a constant influx. The A&G has a good trajectory of ongoing introduction of new products into the market. I believe we will go to market that A&G will be the first to reach the market growth rate out of the 3 segments.

That's very helpful. And one of the questions that we get a lot on A&G is particularly the sales pipeline, the state of the consumer -- customer budgets. But also, do you expect any implications from the shutdown or any of those things affecting any of the library budgets, any color on that one.

Yes, the shutdown impact for us was insignificant. We had a few delayed payments, but nothing material. I think from an overall library funding status, we started this year a bit cautious around North America and the impacts that, that would have. The renewal cycle at the beginning of the academic calendar year, late summer, early fall, was very encouraging. The business continued to grow at 2%. Renewal rates were very strong. So we feel quite good about that. Funding in other jurisdictions around the world continues to be solid. And as Matti said, this is a stable market and by continuing to invest in innovation, we feel really good about the ability to reach the market growth rate relatively soon.

That's very helpful color. As we think about geographies, are there any particular geographies which from a growth perspective that you would flag having more outsized or places where there's still more room for turnaround?

Not necessarily. We see it as a relatively mature market. We've had some nice growth in developing nations with new solutions, particularly on the research and analytics side. So we pointed to a deal earlier this year that we were quite encouraged about where we were cross-selling between a couple of segments. But I think what we're generally seeing in most major geographies is stable budgets and we're encouraged by the performance so far this year in North America.

Okay. That's great. That's great. Moving on to the next segment, Life Sciences and Healthcare, can you just talk about the underlying growth in the market there? Anything that you've seen from like underlying growth perspective?

Maybe I want to just start with reiterating the 2% growth we have in Life Science. It's been a while. We also see the renewal rates going up 300 basis points, which is great. There is a strong demand. We feel there is strong demand of digital and research advanced data analytics solution. And our pharma and biotech clients are increasingly focused on personalized medicine, genomics and integrating AI into the drug and discovery launches.

It give us an opportunity to demonstrate our capabilities and help our customers with our -- both R&D products and also commercialization product and that we see an ongoing improvement in the Life Science business, and we anticipate this to be something we will pursue further in years to come. And we are confident that the market is coming back at least for us, and it shows in our numbers.

That's great. And so maybe a follow-up question on Life Sciences would be just the transition, as you mentioned, from transaction to subscription revenue. And particularly, you obviously flagged the DRG Fusion and the success that you're having in signing up new customers. I was just wondering if you could drill down further on that transition.

Maybe just kind of reframe or talk a little bit about the Life Sciences segment. Life Science is basically 2 subsegments. One is the R&D Cortellis, which is powered by Cortellis. This business is 97% subscription business. It's an amazing business. It's 97% recurring.

And then there is also the DRG business, the commercialization business, which is less of a subscription base. But we believe that both combined -- this Cortellis and the DRG business or commercialization will grow to be a 90% subscription business. This is currently 85% recurring. And then there is also the consulting business, which is the third component, which is obviously one time, but the product side of the house of the Life Science business, 85% subscription going to notion and there is a strong emphasis within the company to move more and more of our business to subscription and reoccurring. Just like we did with A&G. And A&G, we are now at 93% recurring. We see the path for life science to become a 90% business and then we still have -- obviously, we will continue to have the consulting business as additional subsegment for life science.

That's great color. We spoke about the efficiencies that you're planning for next year. Some of the margins headwind, tailwind as we think about investment. But as we think about the midterm -- as we think about some of the other things as we go for margins, I was just wondering if you could, Jonathan, provide any more color on the margin front that we need to be cognizant of?

Yes. I think we've indicated a few times, we do see the opportunity for near-term margin expansion. As we turn to 2026, we will complete the business disposals that Matti mentioned as those business leave, those were subpar margin businesses that had a negligible cash flow contribution. So they've helped buoy our margins moving into next year. We expect some improvement there. In addition to that, that's helped on the CapEx front.

So our CapEx on a dollar basis has certainly come down this year. There's a little more opportunity there as we finish those disposals. So that's going to help. And we think that sets us up well for continuing to be able to improve our cash flow conversion as we step forward as well too.

That's great. And that was going to be a good segue into my next question around cash flow conversion, always had really robust free cash flow generation. How do we think about the cash flow conversion going forward but also allocation of capital, particularly with stock having pulled back so much. How do you think about buyback -- opportunistic buyback, but also deleveraging and balancing those?

Yes. I think the things I mentioned on the margin profile are going to help on the cash flow side. Below adjusted EBITDA, the opportunity to have our onetime cost abate as we get through some of the restructuring that the VCP brought along and we complete the strategic review.

There's certainly an opportunity there. We have some other costs that are running out related to those businesses that we've disposed of. We don't need a working capital investment as we return to growth given the nature of the business. So those drivers with some continued deleveraging can help to improve that conversion as we move forward.

On the capital allocation front, we've been -- continue to be pretty balanced so far this year. At the end of the third quarter, we had repurchased about $150 million worth of stock and it paid down $100 million of debt. You'll continue to see us be a reasonably balanced between those 2 as we move forward.

That's great color. With that, we'll keep it there. Thank you again. Thanks, everyone, for joining. And thank you, Matti.

Thank you, have a good rest of your day. Thank you.

Thanks for having us.

Thank you for standing by. At this time, I would like to welcome everyone to today's Clarivate Q3 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Mark Donohue, Head of Investor Relations. Mark?

Thank you, Greg. Good morning, everyone. Thank you for joining us for the Clarivate Third Quarter 2025 Earnings Conference Call. As a reminder, this conference call is being recorded and webcast and is copyrighted property of Clarivate. Any rebroadcast of this information in whole or in part without prior written consent of Clarivate is prohibited and the accompanying earnings call presentation is available on the Investor Relations section of the company's website.

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. Clarivate believes non GAAP results are useful in order to enhance understanding of our ongoing operating performance, but they are supplements to 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 on our earnings release and supplemental presentation on our website.

With me today are Matti Shem Tov, Chief Executive Officer; and Jonathan Collins, Chief Financial Officer. After our prepared remarks, we'll open the call to your questions. And with that, it's a pleasure to turn the call over to Matti.

Good morning, everyone. Thank you for joining us today as we review Clarivate's performance for the third quarter 2025. On Slide 6, I'm pleased to share that our results this quarter reflect continued progress in our value creation plan, improve operational and financial results and strong commitment to deliver value for our shareholders.

Our forward-looking metrics such as annual contract value continued to improve to 1.6%, making a 30 basis point sequential improvement, driven by 2% ACV growth across Academia & Government and Life Sciences & Health.

Our renewal rate of 93%, an important indicator was up 100 basis points year-over-year. Our free cash flow generation continue to support our balanced capital allocation, including $115 million of opportunistic share repurchases year-to-date as well as $100 million of debt pay down. These results are a testament to our team's dedication and the ongoing progress of our value creation plan.

Jonathan will cover the quarterly results in more detail shortly. Our VCP on the Slide 7, our VCP is driving improved focus, growth and innovation across the business. We are accelerating product and AI development by investing in proprietary assets and collaborating very closely with our customers. Over the past year, we have launched 12 products and AI-powered capabilities across our segments. We expect this R&D investment to result in higher organic growth and improved renewal rates in the future.

Our sales execution has improved, supported stronger customer engagement and revenue retention and helping us achieve our organic growth outlook through the first 9 months of 2025. We remain committed to optimizing our business model with a focus on increasing our core subscription and reoccurring mix to improve predictability as evidenced by the 8% improvement this year compared to last year and our portfolio rationalization is enhancing our execution focus and capital allocation, which is expected to unlock greater value.

Turning to A&G segment. Positive sales performance, including 2% ACV growth is contributed to predictable top line results driven by our transition from transactional sales of digital collection and books to subscription-based revenue streams. This transition has resulted in our A&G subscription mix now at 93% compared to 81% last year. I believe this was clearly the right decision and I want to acknowledge our teams for the great work in assisting our customers through this transition.

We are pleased with the progress to date as we have secured more than 100 contracts for our new content subscription framework, driven by the new offerings such as progress data collection and progress e-books. We continue to see strong renewal patterns with 90% of global A&G subscription for the full year successfully renewed through October 27.

We are also pleased to share with you that our complete -- we have completed a multimillion dollar renewals of Web of Science with the largest library consortium in the United States. Considering the increased constraint on high education research funding, especially in the U.S., these renewals underscore the continued value that our solutions deliver to major research institutions nationwide.

Our global reach is unmatched, as evidenced by just some of the large international deals, we have shared with you this year, including the British Library, Canadian Research Knowledge Network and CAPES in Brazil. Recently, we finalized an agreement with the University of Melbourne, Australia's premier university. The deployment includes library workflow solution, which provides comprehensive support for library management, resource discovery, resource sharing and reading list creation.

Moving to the Intellectual Property segment. For the first 9 months, the patent and trademark maintenance services reoccurring revenue was flat compared to the same period last year. We are encouraged by this as it represents 3% improvement in the organic growth rate relatively -- relative to the full year of 2024. While these results show improvement, we are committing to returning the segment to sustainable growth.

With Maroun Mourad as our new President of IP, we are confident we will drive continued progress across the business by increasing agility and streamlining processes as well as market recovery. We continue to invest in AI-based products and service innovation while maintaining a leadership position in the global IP ecosystem. For instance, IPfolio introduced an AI-powered product taxonomy that automate product patent mapping.

It enables companies to better identify which product correspond to their patent, a valuable tool for large patent holders making strategic portfolio decision. We continue to make improvement to the Derwent platform with cutting-edge AI innovation which is being integrated throughout the patent management workflow. An exciting addition in this -- an exciting addition is the Derwent patent monitor an AI threat rating feature, empowering clients to identify potentially high-risk competitor filings. This achievement allow users to proactively safeguard their intellectual property portfolio and help mitigate risks.

During the third quarter, we were chosen to supply China petrochemical cooperation, mainly China's largest oil and petrochemical supplier with intellectual property solution and the Web of Science platform. This cross-sell collaboration is a testament to our ability to leverage expertise and provide customers with solutions that meet all IP and research needs.

Moving to Life Science and Health segment. I am personally excited it has returned to 2% ACV growth this year. The business has demonstrated strong performance by introducing new products and advancing AI integration through improved offering and specialized expertise within our Life Science platform. We recently launched DRG Commercial Analytics 360, a data analytics tool aimed specifically at the medtech sector.

We were pleased to partner with Bioventus, a global auto biologics leader to leverage this new offering. This comprehensive analytics platform will assist Bioventus in making more informed decisions to enhance product adoption, improve patient outcomes and strengthen its position as a global leader.

In September, we introduced our AI-powered regulatory assistant in Cortellis Regulatory Intelligence to help professionals manage global requirements more efficiently, developed with customer feedback and tested by industry partner, it meets the needs of biopharma, medtech and clinical research organization. With new features such as conversational AI with referenced answers and multilingual capabilities, it allows users to search and interact in preferred languages.

We also embedded additional -- we are also embedding additional AI agents across key existing life science offering as well as launching new AI native products. We expect this offering to help us expand ACV going forward.

On the next slide, I am pleased with the significant progress we have made by executing our value creation plan across all 3 segments. We introduced AI-powered solutions, including Web of Science Research Intelligence, AI agent, trademark opposition assistant, RiskMark and search and regulatory functionality within Cortellis.

We have also driven internal cost efficiency, scaled our customer success teams and improved sales execution. This action have optimized our business model and accelerated innovation across our portfolio. As we look ahead to 2026, our focus remains on executing our robust value creation plan while driving innovation and operational excellence across Clarivate.

We will continue the rapid deployment of Agentic AI, embedding it across customer workflows and segments. Building on our momentum, we will release new AI native solutions and extending AI-powered capabilities across our flagship portfolio. Accelerating AI innovation at scale is a top priority as we're driving organic ACV and recurring revenue growth through focused sense execution.

We will aim to continue to boost sales productivity by focusing on our people, processes and tool, leveraging AI insight, engaging customer to support ongoing account growth and improving commercial execution. We believe operational efficiency and margin expansion will be achieved by utilizing Agentic AI and embedding organization-wide AI adoption for cost efficiencies.

Finally, we are streaming our business model and making focus -- and market focus by completing our exit from A&G transactional book sales and the life science real-world data resell market -- reselling market.

Strategic alternatives early this year, we have highlighted that we are actively progressing through a comprehensive review and assessment of strategic alternatives as we communicated to you in July, we are making good progress and expect to share more details with you when we report our fourth quarter results in February 2026.

In closing, our performance this year is starting to demonstrate clear and positive momentum across our core financial metrics. We remain on track to deliver our 2025 financial guidance. We have achieved sequential and year-over-year improvement in organic ACV to 1.6% and renewal rate to 93%. Recurring organic revenue growth has improved to 0.6% for the first 9 months of 2025 compared to 0.1% last year and organic revenue mix has risen to 88%, up from 80% in 2024.

These results reflect our commitment to driving sustainable growth and operational excellence -- as we look forward, we are confident that our strong foundation and ongoing momentum position and ongoing momentum position us well to create shareholder value. Thank you for your continued support and interest in Clarivate. We look forward to updating you on our progress in the quarters to come.

And I'd like to now to turn the call over to Jonathan for a review of our financial results. Thank you.

Thank you, Matti, and good morning, everyone. Slide 16 is an overview of our third quarter and year-to-date financial results compared with the same periods from the prior year.

Q3 revenue was $623 million, essentially flat over the same period in the prior year, bringing the year-to-date to $1.84 billion. The third quarter net loss was $28 million. The improvement over Q3 of the prior year is driven by higher foreign exchange gains and the noncash impairment charge recorded last year that did not recur this year.

Adjusted diluted EPS, which excludes items like the impairment, was flat sequentially at $0.18. The change over last year is entirely attributed to the divestiture of ScholarONE. Operating cash flow was $181 million in the quarter. The change compared to last year is driven by adjusted EBITDA and working capital.

Please turn with me now to Page 17 for a closer look at the drivers of the third quarter top and bottom line changes from the prior year. The top line was essentially flat in the third quarter, yet margins were lower as expected as we continue to invest for future growth and remain on track to deliver our full year guidance.

The changes were driven by 4 primary factors: First, while organic subscription revenues continued to grow at more than 1% following the continued acceleration in our ACV. Total organic revenue was essentially flat as the subs growth was offset by modest recurring and transactional declines.

Operating expenses were higher in the third quarter as we continue to invest to drive growth and incurred higher incentive compensation expense as we remain on track to deliver our full year guidance. Second, during Q3, the businesses we are disposing actually increased slightly over the prior year due to multiple large onetime yet low-margin e-book sales, which more than offset continued declines in the other products. This is a meaningful contributor to the raising of our full year guidance range on revenue, which I'll come to in just a few moments.

Third, as we've seen in the last couple of quarters, we continue to experience the inorganic impact of the ScholarOne divestiture. And fourth, the U.S. dollar remained relatively weaker against the basket of foreign currencies which caused a foreign exchange tailwind on the top and bottom lines.

Please turn with me now to Page 18 to review how these same drivers impacted the top and bottom line changes on a year-to-date basis compared to the same period in the prior year.

Year-to-date, revenues have declined by more than $50 million. However, margins are within 30 bps of the same period in the prior year. Let's step through the major drivers of this change. As Matti noted in his remarks, year-to-date organic growth has improved by 160 basis points over where we ended last year. This modest top line growth over last year is offset by higher operating costs as we continue to invest to grow the business while offsetting some of the cost inflation with efficiencies. The combined impact of the disposals and divestitures lowered revenue by nearly $70 million and adjusted EBITDA by just over $30 million compared to the same period last year.

Both the top and bottom lines benefited from foreign exchange translation so far this year as the U.S. dollar remains weaker than a basket of foreign currencies and the profit conversion on the change is high as a result of multiple transactional gains.

Please turn with me now to Page 19 for a look at how the Q3 and year-to-date adjusted EBITDA converted to free cash flow and how we allocated the capital. Free cash flow was $115 million in the third quarter, bringing the year-to-date to $276 million. The change so far this year over the prior year is driven entirely by the adjusted EBITDA impact outlined on the last 2 pages as higher onetime costs are offset by lower capital spending.

We incurred $13 million of onetime cost in Q3 and $55 million so far this year, largely driven by restructuring-related outflows associated with the implementation of the value creation plan. Capital spending was $11 million lower than last year in Q3 as we begin to recognize the savings associated with the disposals. We used a combination of free cash flow we generated in the third quarter and cash on hand to repurchase another 11.7 million shares, bringing the year-to-date buybacks to $150 million and we call the $100 million of the bonds that are due next year.

The balanced capital deployment this year has allowed us to maintain net leverage of about 4 turns while retiring nearly $35 million or about 5% of our outstanding shares. We also took the opportunity during the third quarter to extend our interest rate protection on our floating rate debt by 4 years by entering into $500 million of interest rate swaps through 2030.

Please turn with me now to Page 20 for a look at our full year financial guidance ranges for this year. Beginning at the top of the page, based on the continued acceleration of our organic annual contract value in the third quarter, we are raising the indication from the midpoint towards the higher end of our range as we expect continued acceleration in the fourth quarter.

We continue to anticipate recurring organic growth in the upper half of our range. As a result of the better-than-planned organic performance, combined with a weaker U.S. dollar and slower-than-anticipated attrition in the business disposals. We are raising our revenue guidance by $50 million from our last indication near the upper end of the previous range to $2.44 billion at the midpoint of our new range.

Due to the slower-than-expected decline in our revenue of the businesses we're disposing, we now anticipate recurring revenue mix will likely be towards the low end of the range. It's worth reiterating what Matti indicated earlier, our organic recurring revenue mix, which excludes the disposals, is already at 88% year-to-date, and we expect will remain at this level through the end of the year.

Moving down the page, we now expect adjusted EBITDA at the high end of the range and our profit margin at approximately 41% due to higher revenues from the disposals and FX, which have lower profit conversions. We continue to anticipate diluted adjusted EPS and free cash flow near the midpoint of the ranges.

Please turn with me now to Page 21 for more details on the full year top and bottom line changes we're expecting compared to last year. The full year guidance for the top and bottom lines is based on our expectation that Q4 revenue and adjusted EBITDA will be about $600 million and approach $250 million, respectively. The anticipated changes in revenue and to a large extent, adjusted EBITDA for the full year compared to last year are largely driven by the disposals targeted at optimizing our business model and the divestiture of noncore products and services.

We continue to expect organic growth will be essentially flat as the growth in recurring revenues will offset the originally anticipated decline in our remaining transactional business. This represents about a $10 million improvement over our initial indication at the midpoint of the original revenue guidance range. We continue to expect a profit headwind in this area of about $20 million as cost efficiencies will not fully offset inflation and higher incentive compensation expense.

The strategic disposals are now expected to lower revenue this year by approximately $90 million, and we are reducing operating expenses by $60 million, which yields a profit impact of about $30 million. We expect most of the remaining more than $100 million revenue reduction will take place next year. The divestitures of both Valipat and ScholarOne last year will lower revenue by about $40 million and profit by about $20 million.

We continue to anticipate a modest foreign exchange translation benefit to the top and bottom lines of $10 million and $5 million, respectively, as the U.S. dollar has remained slightly weaker against other foreign currencies compared to the prior year.

Please turn with now to Page 22 to step through the components that will lead to more than 1/3 of the adjusted EBITDA converting to free cash flow. As I mentioned, we continue to expect free cash flow near the midpoint of our range. Onetime costs are expected to be elevated over last year as we invest to execute the value creation plan. We expect cash interest to improve by about $10 million over the prior year as a result of the debt we prepaid last year.

Cash taxes are expected to be in line with 2024. We anticipate the change in working capital this year will be negligible, which will represent an improvement over last year of about $25 million. And while we remain committed to investing in product innovation, the strategic disposals and cost efficiencies will improve capital spending by about $30 million. The net impact of these changes is free cash flow of $340 million at the midpoint of the range and will result in the same conversion on adjusted EBITDA last year at about 34%.

From a capital allocation perspective, we continue to have the flexibility between share repurchases and deleveraging as we move into the fourth quarter.

In closing, on Page 23, I'd like to draw your attention to the consistent free cash flow we've generated over the past 4 years. Delivering free cash flow at the midpoint of this year's guidance range will result in a 4-year cumulative average growth rate of 4%. During the same period, our free cash flow conversion on adjusted EBITDA will be about 35%. At the end of Q3, our stock was yielding a double-digit free cash flow return of 13%.

By the end of the year, we'll have generated $1.5 billion of free cash flow over the past 4 years, which we've used to repay over $1 billion of debt, lowering our net leverage by a turn and to repurchase more than 0.5 billion of stock, lowering our share count by 10%. We believe that executing the value creation plan will lead to healthy sustainable organic revenue growth and further improve free cash flow, delivering meaningful value for shareholders moving forward.

I'd like to finish by thanking all of you for listening in this morning, and I'm now going to turn the call back over to Greg so that we can take your questions. Greg, please go ahead.

Great. Thanks, Jonathan. [Operator Instructions]

All right. It looks like our first question today comes from the line of Toni Kaplan with Morgan Stanley.

This is Greg Parrish on for Tony. I thought maybe we could dive into the patent renewal business there. Obviously, it's been under a little bit of pressure over the last couple of years due to market volume headwinds. Hoping you could provide some color on the competitive landscape and where your product stacks up with some other products in the market like an aqua and how you're positioned?

And then some of the more recent pressures, say, year-to-date, how would you characterize that in terms of market headwinds versus competitive headwinds?

Yes. Thank you for the question, Greg. I'll touch on the numbers a bit, and then Matti will probably want to add some color on the market positioning. So just as a highlight, the reoccurring order type for us is predominantly or almost entirely our patents and trademark renewal service that you highlight.

Last year, that part of our business declined by about 3%. And on a year-to-date basis, we're about flat. So the trajectory is headed in the right direction. And we believe, in the coming years under Maroun's leadership and with the rest of the team, we can return that business to a healthy organic growth.

And it's really a combination of 2 factors. It's the improvement of our competitive position. We continue to make meaningful investments in our workflow software that we deliver to the market, which is an important tool in driving this part of the business.

But in addition to that, we expect the market to continue to recover and move in the right direction. So I think the message for us is we're moving in the right direction. Improved year-over-year change compared to what we saw last year, but there's still room to improve here as we move into 2026.

Maybe coming back on the value creation plan. I mean we have the value creation plan in place for just about a year. We're making headways and progress on the A&G side and Life Science side. We are introducing also some changes into our IP segment with renewed sales structure and processes with some upcoming new products.

Products that we have launched already like trademark RiskMark, Derwent patent monitor, IPfolio. And we are very confident that in the same way we've improved performance with Life Science and A&G with Maroun coming on, Maroun Mourad coming on. I think we have all the confidence we will turn IP into a growing segment as well.

All right. Thanks, Greg. And our next question comes from the line of Scott Wurtzel with Wolfe Research.

Just on the value creation plan and some of the updates there. I noticed that you added a couple of new innovations, whether it's on the Specto or the AuthX AI Research Assistant. Just wondering if you can talk a little bit about those products that you've sort of added to your road map here and what you sort of see those kind of creating for the business as a whole?

Overall, I just refer to my background. I'm a product person by business. This is me. I am very, very upbeat about introducing product. So we have, when I joined, and part of a fundamental piece of our value creation plan is product innovation. So we went 2 ways in the 3 products. One is AI enablement of the existing product portfolio, both to protect the retention rate and to be more competitive in the market. This is evidenced by growing ACV and by a better retention rate.

At the same time, we are also implementing changes or introducing products, which were native for like AI-born -- native AI-born. One example is a RiskMark product from trademarks on the IP segment. And other product is the Web of Science Research Intelligence which is an up-and-coming product. We have already closed about 20 contracts and the product was only going to be launched in the first quarter 2026.

There's a lot of energy focus going into AI innovation, both existing and a new AI-native product. We are utilizing some of the processes that we have developed in the A&G being in my background being CEO of Ex Libris and ProQuest, a lot of collaboration with our customer base, which will help -- which are working well for us.

So there are a lot of different product innovation all over the segments, renewed energy around product. This is the way we will continue to do -- to conduct our business in years to come. Thank you for the question.

And our next question comes from the line of Shlomo Rosenbaum with Stifel.

I had one quick one for Jonathan. And then I want to ask you something Matti. Jonathan, it looks like there were some multiple large book transactions that occurred in advance of the company shutting down that area. Could you quantify for us the impact of those transactions versus what you were expecting, both for revenue and EBITDA?

And then after that, Matti, maybe after a year on the job over here, could you just give us an idea as to what you think the potential of this business is after working on it, trying to put in your new plan, making some -- a lot of strategic changes in it. What do you think the potential is versus when you joined over here? And if you could just give us some thoughts about how we should think about this business longer term?

Yes. Happy to take the first part, Shlomo. So in the quarter, we've had multiple larger e-book type transactions without those in the quarter, we would have seen disposals be down over $20 million. So the impact was material in the quarter. We didn't have anything like that in Q3 of the prior year.

We did have a pretty sizable deal in Q4 of last year that will lap, which is why when we indicated revenue in Q4 should be around $600 million. That will be down versus prior year.

So -- these are ones that from a top line standpoint are material. Margin is not very high on those given the nature of the transaction, but that's a little bit of color on that.

Thank you for the question, Shlomo. Again, I'm really enjoying the journey here. There's a lot to do, as you can imagine, this company has gone through a lot. And I think we've got it now all focused on the right direction. The more I learn about the company is the more I meet customers and know our people. We have some very great fundamentals, including the amazing assets we have in the different product line or the different segment, as well as great customer base, very supportive and great talent in-house.

As opposed to where we are taking the company, I believe -- over time, we can take the company back to growth rate, back to market growth rate. If you ask me, A&G 3%, 4% over time. This is the market growth that we believe is in IP, 4%, 5%. This is the growth rate. And I think we should be there. And in Life Science it's slightly higher. But definitely, I believe we will be taking the company over 3 years into market.

We have the people, we have the product and we have the customer base. So no reason why not to be -- to take the company to where it's belong in terms of growing the business over time. Any specifics we can...

[Operator Instructions]

Our next question comes from the line of Ashish Sabadra with RBC Capital Markets.

This is Will Qi on for Ashish Sabadra. When you guys think about the ACV acceleration to 4Q, could you give a little bit of context maybe on which segments you guys would call out as the primary drivers? And also maybe just any commentary around where you think that kind of largest room for improvement might be as well.

Yes. Thanks for the question, Will. I think the encouraging sign for us as we've progressed through this year, we started the year at ACV less than 1%. We're now up over 1.5%. We've seen improvement in all of our segments. So each segment has made a contribution. The most notable improvement has been with the Life Sciences business where we saw a nice improvement in retention as we moved into this year and traction on new sales as we invest in those products.

I think as we move into Q4, I think we think there's continued room there in Life Sciences and in the IP segment, which is where there's the most headroom. So we indicated we're growing at about 2% ACV in A&G and in Life Sciences, both at about that level, which means that our IP business is closer to flat. And we have made some meaningful investments over the past couple of years that we expect to start to benefit the IP business as we move forward.

We launched the Derwent patent search this year in general release with AI-powered search and new functionality on our very strong data base of the Derwent World Patent Index. We have the Derwent Patent Monitor tool that will be coming into market later this year. And as Matti mentioned in his comments, continued investment in our IPMS software and IPfolio, namely IPfolio loss.

So we think those investments in those products that are subscription products will help to drive ACV from about flat to being a growing business as we move forward.

Congrats on quarter.

And our next question comes from the line of George Tong with Goldman Sachs.

You mentioned you expect the IP market to recover and move in the right direction. Can you talk more about underlying trends you're seeing with new patents and trademarks and catalysts for a recovery in volumes?

Yes. Thanks for the question, George. Similar to what we had talked about last quarter, we believe that the overall patents in force in our core markets, continue to tick up for a few years coming out of COVID, they were essentially flat in '23, we started to see growth. We believe we saw growth last year as well, too. And it takes a couple of years for that patent in force growth to make its way into our renewal book because in some jurisdictions, your initial patent is good for a few years before it needs to be renewed.

So that's one leading indicator that we continue to watch, and we are seeing a little bit of help on the volume side. There's work that we've done in our own business from a competitive standpoint to see some modest improvement. So those things are moving in the right direction. And we also draw attention to the fact as we look out in the coming years, -- we do believe we are in a bit of an innovation upswing with the advent of AI, and we think that's going to help lift patents in force in the next couple of years and put some wind in our sales a few years out in our renewal business.

So we think the market trends are good. There can be some lumpiness quarter-to-quarter in our business depending on the customer base in the regions, but in principle, being flat this year compared to a 3% decline in that reoccurring renewal services business is a step in the right direction, and we're encouraged by that trajectory.

And our next question comes from the line of Manav Patnaik with Barclays.

I just had a question broadly on AI, I guess. I think most of your initiatives that you've talked about have been more on the workflow side of the equation, where I guess I think people have a view that there's going to be a lot more competition there. But my question was more on the content side. Can you help us by a division? Just help us appreciate the content you have behind those workflows and how much of that is actually proprietary?

No, I'm not sure -- thank you for the question. I think many -- a lot of our AI innovations go to our information services piece. I mean, the Web of Science, ProQuest One Academic, Primo, Derwent Innovation. So a lot of it is actually supporting the information services, the discovery piece of it.

And yes, we do have quite a lot of sort of proprietary data that we collect from different sources that we acquire or lease from a lot of different people, and we massage them. We put them together. We index them and we kind of put them in front of our customer base. A lot of our AI innovations go to this product. We do have some AI automation around workflow solution as well, indeed, but the majority goes to the informational services offering that we have.

And our final question today comes from the line of Surinder Thind with Jefferies.

This is Colton for Surinder. My question is kind of similar to Shlomo's earlier, just kind of around transactional revenues. And obviously, they were a bit better in the quarter. Just kind of a question around improvement it looks like in the guide from last quarter this quarter in terms of the inorganic disposals and not headwinds to the business broadly, like how that's kind of impacting results and the guide that you guys have for this year?

And then also, I think you talked about some of like a slower roll-off of those transactional disposals as well. So I just kind of wanted to get an update in terms of like time line expectations of like next year, how much of a headwind that might be if there was a bit of a benefit this quarter, how much of that headwind is for next year? That's all for me.

Yes, you got it, Colton. I'll just kind of refer back to Page 21 in the remarks there. So we have improved our top line outlook from our last indication to our current indication by about $50 million. The majority of that is the disposals at trading at a slower rate than we expected and those couple of large transactions in Q3 that I mentioned were a contributor to that. That business will go to 0 and now where I would have expected that of that $200 million going away, most of it would go away this year. It's going to be closer to balance.

So we've got about $90 million this year and then probably a little over $100 million next year that will go away. So just the timing of that business and how it's leaving is the primary impact there. The other factor I'll point to is just on the FX side. So we were a bit cautious on where the dollar had been. It's continued to stay a bit weaker compared to other currencies. So that's going to lift the top line a bit compared to what we were originally expecting. So the combination of those 2 are the primary drivers.

And then, of course, the organic -- recurring organic growth at the higher end of the range in the upper half compared to where we were at the midpoint is also helping to lift that revenue number. So a combination of all of those are or what's baked into our raised full year guidance.

Thank you very much. So that concludes our call for today. I want to thank you all for joining us, and we look forward to speaking to you soon.

Thank you.

And ladies and gentlemen, again, that concludes the call. You may now disconnect.

All right. Good morning, and welcome. I'm very pleased to be joined by Matti Shem Tov, CEO of Clarivate; as well as Jonathan Collins, CFO. Thank you both for being here.

Thank you.

Good morning.

All right. So I want to start with a high-level discussion of Clarivate's strategy and transformation, specifically the value creation plan. So this plan was announced about a year ago. It has 4 pillars. The first pillar is to phase out transactional sales and -- in favor of subscription models. Can you provide us with an update on transactional products that you phased out and the subscription products you're hoping to phase in to replace them and also what the revenue mix is right now of subscription versus transaction?

Yes. So thank you for the question. Yes, shifting the business from transactional, volatile, unpredictable, not as profitable from transaction to subscription is one of the key fundamental of our value creation plan. We've been -- we put a plan in place in February when we presented. We are on track for the plan. And we are basically doing changes in A&G and in Life Science.

In A&G, we are phasing out the print books and transactional e-books by June 2026. We are on track to complete it. We are also phasing out onetime digital collection sales. At the same time, we have introduced 2 new products, which are sold on transaction -- on a subscription basis. One is a focused e-books and the other one is digital collection. We are very proud of the fact that by now, after 6 months of this product being on the market, we sold already 70 new customers of this one, including some 2 recent wins in the U.K. market for top 2 prestigious universities in the U.K., which we cannot specifically name.

So good progress on the A&G side on moving away from transactional to subscription. We're doing a similar exercise in life science, exiting the real-world data brokering business on the DRG side. We have told the market and told our customers that we are phasing out of this business by the end of 2026. We are on track to comply with this plan. At the same time, we've introduced few new subscription-based offering on the life science, DRG side of Clarivate. DRG Fusion is a modular subscription-based data analytics platform, replacing real-world data offering.

Also on our MedTech business, we introduced Commercial Analytics 360. It's a first step towards transition -- MedTech from a transitional -- from a transactional reporting onetime business to a subscription base. It's taking off pretty well. It's progressing according to the plan. Other product that we've introduced in Life Science as well, it's a disease landscape and forecast reports, also transitioning this business from onetime to subscription, all in all, on plan. We are currently -- when we started the plan, we were 80% of the company was subscription -- was recurring. By now, if we exclude the disposal, we are talking about 88% of our business is on a subscription basis, and we aim to be at 90% over time.

That's a great update there. Now the second pillar of the value creation plan is to improve sales execution. Can you talk a little bit about what you're hoping to improve there and what steps remain to be done versus what you've already accomplished?

So sales execution is high on the agenda. It's important just to consistently meet our targets. We have implemented most of the changes we were planning around the sales execution. And you can tell by the numbers, the ACV number for H1 -- for Q1, Q2 and by us reaffirming the numbers for the rest of the year, the changes into our sales organization is impacting the business. We see greater momentum on our subscription base. We see a better retention rate.

We've implemented changes to the sales organization in the 3 different segments, mainly around talent, organization, customer engagement, and sales force incentives. I can go into some further details around in terms of talent. We brought in a few external reinforcement from the respective industry. We've hired a new Senior Vice President for Sales in Life Science coming from the industry and already making an impact, a lady by the name Dana Edwards. We've just introduced a new sales lead for A&G from -- to the North American organization and few other reinforcement of the management team of the sales organization in different positions. That's on the talent side.

Obviously, we have to take some people out when we introduce the new talent. We've also done some internal promotion with regard to the talent. So all in all, we are improving our talent base on the sales organization. We've done some reorganization, some organization changes, making sure that we are getting closer to our customers. We also improved our customer engagement. We are getting closer to our customers and increasing the number of the people are involved with sales success.

And lastly, we've done some changes to the sales incentive plan to make sure that it's in line with the company objective and also with our desire and strategy to go stronger into subscription reoccurring. That's for the sales organization. We are largely done, but there's always more to do.

Makes sense. Now the third pillar of your value creation plan involves product innovation. And there's been a lot of emphasis recently on GenAI and what you're infusing into your products. In fact, you recently launched some new agentic capabilities in your Web of Science and DRG product lines. Can you give us an update on your product road map? And how much of your revenue mix contains some sort of element of GenAI?

Yes. So I'm a product person by -- kind of my passion is product. So I'm very involved in product innovation. I was pleasantly surprised when I took over the role in Clarivate to see the fast-moving AI innovation in the A&G segment. They have created a center of excellence in A&G. And using this center of excellence has created some unique capabilities around AI innovation in academia and information and services.

And by this center of excellence, we -- it now serves more and more, is becoming the center of excellence for AI innovation in the entire company. Officially, it still sits within A&G, but we are using the methodologies, the technology. And the concept is, yes, we have a center of excellence in the company for AI innovation. And yes, we do also -- and we're going from just doing AI -- GenAI, we're going to Agentic AI in different products. I'm going to talk further about this one.

And this is -- the notion is to have a center of excellence, but also to build the team in all the different product area to be able to handle AI innovation themselves. And we're turning the entire R&D organization into 3 different segments to feel comfortable and to do AI innovation within the respective products with the support of the AI center of excellence.

I can talk a little bit about a few projects. So not only GenAI, more and more and Agentic AI in the 3 segments. Life Science, Cortellis systematically going through AI enablement of the different component of Cortellis. Derwent -- on the Derwent AI Research, AI enablement of the Derwent AI Search. We're talking about Web of Science. And basically, each and every product of ours is going through a process of AI enablement of the product.

And here, I want to give a little bit of some more details and a bit more flavor about the way we go about AI innovation and it's tying up to the revenue model as well. So we have 3 types, 3 categories of product. One and very important because we have a large book of renewals and existing products serve 80%, 90% of our business. The notion of AI enablement of existing products like Cortellis, like Web of Science, like Alma, like any other product on the company, systematically AI enablement, it helps us to on the retention side to retain the customers, and this is one. It also help us to go and acquire or to win new customers. This is one angle, going to the existing product lines and AI enablement and providing those as part of the ongoing subscription, no additional cost. This is one category.

The other category is where we go to existing products and we create an extension, which is chargeable of the product that we go to a customer. A good example is Web of Science Research Assistant. So you don't get this specific functionality because you're just paying the subscription fee. You get it when you pay some extra. So the monetization opportunities for existing product by the AI empowerment. So some product will decide case to case that we give -- we provide the customers with the AI capabilities as part of the ongoing payment -- subscription fee and some is coming from additional fees.

The third option is that we provide also products that are completely born AI. There were AI out of the gate. Two examples are MarkRisk (sic) [ RiskMark ]. MarkRisk (sic) [ RiskMark ] is a product we've introduced in the IP segment, which is completely born AI. It has some extended AI functionalities around the trademark. And a better example, and we'll hear more about this one is Web of Science research intelligence, which is completely brand-new product that we're introducing using AI.

For the record, we have 10,000 Web of Science customer. Web of Science is a monster product for us. Like we go to most of the prestigious universities worldwide, they will have Web of Science. And we are constantly selling more and more web of science to lower-tier institutions. And news here that with the introduction of Web of Science Research Intelligence, which is an AI-enabled GenAI interactive platform for researcher, we can go and monetize further and upsell into our existing customer base.

This product is now in development. We signed about 15 to 20 development partners -- chargeable development partner. And we'll see more -- we'll hear more and more about our capabilities around this Web of Science Research Intelligence. So that's what we have to say about our AI innovation and monetizing AI as well. There's a question that I constantly asked about the internal cost of AI. It is manageable. It's not an extreme cost. In fact, it's much cheaper. In terms of what we pay third-party AI vendors, it's very economical. We find a very economical way to deal with the AI -- the third-party calls for AI -- for the AI that we pay in terms of companies.

Yes. That's great. That's a very helpful update on products. So the last pillar of your value creation plan involves portfolio rationalization. And you've talked about conducting a strategic review of noncore assets and you're expecting to announce findings of your review in February of 2026. Can you talk a little bit about factors that you're considering as you conduct this portfolio rationalization, what you're looking for, what you -- what's really top of mind as you think about assets to keep or dispose off?

I think our top of mind in this process is to create shareholder value. We -- I said it all along right from the beginning, yes, we do subscription. We're going to go AI innovation. We can improve sales execution, but top of mind for us is to create shareholder value. And we've gone through some process, and we're still going through some process of creating value through potential divestiture of some of the assets.

The key factor for us is creating value to shareholders, either by -- by creating value for shareholders by making the right divestiture if we come across this divestiture, which creates value to the shareholder, either by divesting an inferior asset that will help us grow faster or by selling a certain asset in an accretive multiple to our existing multiple. So I cannot share more and we will be providing some further news by end of -- in our February call.

Got it. Now the ultimate goal of your value creation plan is to accelerate organic revenue growth. Can you talk about what goal you have for organic revenue growth and by when you hope to achieve your target?

So I'm being here for just about a year in my job. I believe we can run -- we can get the company to grow in market growth rate. And our understanding, the market growth is slightly different between the segment: A&G, 3%, 4%; IP, 4%, 5%; Life science, even further. I think we are on the right track, and we can get into the market growth rate in years to come. I don't know that I can give you a specific date, but we should -- I believe that we are well positioned and well on the way to get into the market growth rate.

Right. So hitting market growth, of course, a very good goal. Do you think there is opportunity to surpass market growth for any of the segments over the longer term as you gain share or perhaps penetrate...

I think we have to be a little bit modest and the company, we were kind of trading behind. Our ultimate goal, and I think -- I believe we are getting there to go into market growth rate. For now, once we get there, we'll have another separate discussion.

Okay. Yes, that's prudent. Let's dive into some of the individual segments. So within the academic and government segment, what would you say are the most significant product development initiatives that are currently underway that you think can really help drive a further acceleration in growth there?

So as we -- so we are currently -- you talk about A&G. In A&G, we are now running the A&G with 3 business units. One is the software business unit. This is where I come from, the Lab Automation, Alma, Polaris. This is the software business, there is a content business. That's a traditional ProQuest business. And then there is the Web of Science analytical division, all doing well, all strong, highly recurring business, and we are investing in all the 3 concurrently.

On the software side, we see -- we continuously update. We AI-enabled most of the product with constant innovation. In AMG as a whole, we have the notion of working very, very closely with the customer, customer collaboration is key. Maybe I can call out on the software side, 2 specific products that we don't talk about too much and they are up and coming. One is called the Vega platform. It's a new platform we introduced 2, 3 years ago. It's to do with the Libris community customer engagement. It's not a discovery product, but it's more like we do customer interaction or customer engagement with Libris platform using Vega. It's an up-and-coming product. We have about 100 customers, including the New York Public, and we are now taking this into the academic as well. That's one product innovation.

The other upcoming product around software is Alma Specto, which is further enhancement to provide some universities, some opportunities to shine and present their research work and also the different digital collection that they have. It's a product that -- again, it's being developed with -- as always, with some key development part of ours. So Vega, Community Engagement and Alma Specto, which is a digital collection management product. We will hear more about this.

This is in a way, business as usual. We develop the product, to upsell the existing customer and to help us sell the other basic product if it's Alma, Polaris is other software product into our customer base, and we are doing this is quite well. The other thing that we are doing on the content side -- this is the software piece. On the content side, constant innovation around content. I think the 2 products that we are now pushing strongly is the ProQuest e-Books offering since, I mentioned already, we were phasing out of the -- or we are phasing out of the onetime business, both on the data collection and on onetime e-Book sales. This is an opportunity for us to push those 2 products. I mentioned 70 customers signed already. So that's the new -- the up-and-coming product that we sell in the content side of A&G.

And lastly, Web of Science. Web of Science, I don't know that Web of Science has got enough attention in the press or in the investment committee. It's a mega -- it's a monster product of ours. We have 10,000 customers and many more to come. I'm here to talk today about the new addition or the new component or the new additional product in the Web of Science family, Web of Science Research Intelligence. This is the born AI product that I mentioned before.

It helps researchers do the research and it helps the research offices of the different universities to explore and to analyze their standing, provide direction, Web of Science Research Intelligence. I mentioned already 20 development partners paying development partners and we will come -- general availability is May 2026. It's a major development of ours, but it's a breaking news. We'll hear more about Web of Science Research Intelligence. That's on an A&G side.

That's helpful. You mentioned earlier that the Life Sciences and Healthcare business has the potential to grow faster than the other segments because the market is growing faster. Can you talk about what you're seeing in the health care market broadly that gives you confidence that the growth there can be faster than the other end markets and provide us an update on what you're seeing currently with the biotech or pharma subsegments?

I think we see -- I'll let Jonathan chime in, in a bit, but we see a growth -- we see a sustainable environment in the R&D side of the pharma, especially for us when we -- Cortellis is a leading product in this environment and for us doing better execution and AI enablement around Cortellis. I think the business is coming back. DRG, the commercial environment is a bit more challenged, but we continue the journey to introduce new products around DRG, and I think it's going to pay off when the commercial environment will come back. Jonathan?

Yes. Within Life Sciences, we see a strong and sustained demand for digital research and advanced data analytics. Our pharmaceutical customers and biotech customers in this space are dealing with personalized medicine, genomics, adopting AI into their drug discovery and launch process, and we see a great opportunity for the capabilities that we have to aid that. So that gives us a really good feeling about the growth potential in this market.

To touch a little bit more on what Matti highlighted, within the R&D space, we've made investments in the last year to incorporate the research assistant that was incubated in the A&G segment that we've brought to our Cortellis suite of products. We've got great feedback from R&D users across the stack there on the capabilities this brings. We saw a really nice improvement in our renewal rates in these products in the first half of the year. Almost all of the company's renewal rate improvement performance of about 1% that we saw was driven by improvement in the life sciences area.

So very encouraging to see early investments to bring AI technology into the products and solutions, already starting to generate returns and improvements in the marketplace. I think separately, there's continued pressure in the market to incorporate real-world evidence into the development and the regulatory compliance and then certainly in the commercialization and market aspect -- market access aspects of that market.

So we really believe this investment that Matti highlighted in DRG Fusion is an important way to do that, stepping away from selling large amounts of data and getting back to what DRG was really well known for, and that is a deep understanding of the markets, our disease landscape reporting, our epidemiology intelligence, these great products where we drive insights, and we think we have the capability to deliver much better patient insights through the Fusion platform, using that real-world data and evidence to provide more advanced analytics to help our customers get those treatments into the hands of the people that need them the most.

So those are a couple of areas where we've made investments. We're excited to see the progress that Fusion will make, particularly here in the second half of the year and as we go into next year. But that -- those are things that give us the confidence that it's an attractive growing market and that we can really partner with our customers and provide value with the things that we do particularly well.

Right. And then within the IP segment, can you talk a little bit about how GenAI could potentially change the competitive landscape, either make it easier or more difficult? And then talk about perhaps patent activity that you're seeing with respect to AI?

Yes. Matti gave a great example earlier with the launch of our RiskMark project, which is our product that is an AI-native solution that we develop to help manage the potential infringements and the room to create new brands and trademarks. So that's a great example. We think we're early to market with that solution, getting great early feedback from early development partners and customers.

I think about also not just in the trademark intelligence, but on the patent intelligence side. Over the last year or more, we've made meaningful investments in AI-powered search for our Derwent product that went into general release towards the end of last year, early this year. And as we mentioned earlier this year, we've seen a very nice uptake in searches within the key cohort that use that platform. So we've seen double-digit increases in search activity. It's the first time we've seen that in quite some time.

So that's an opportunity to take this unparalleled data set, the Derwent World Patent Index and provide analytics and intelligence for prior art searching, freedom to operate some of the key use cases for patent intelligence. We're also very excited, and you'll hear more about this in the coming months at our Ignite conference with respect to the launch of the Derwent patent watch product. So we have a group of key customers here where we're building infringement investigation, workflow capabilities with some AI native modules or enhancements in that platform that will help customers to manage the process of dealing with potential infringements and determining where to spend money to protect.

And this is a really exciting new product, and this is -- AI is enabling that. So those are a couple of examples on the intelligence side. When we think about our workflow software and our services business, undoubtedly in the coming years, building agentic capabilities into these solutions are going to help make our customers more efficient and more effective through these workflow processes. So we think there's some opportunities, not just on the intelligence front, but also on the software and services side of IP. And this is a market that we're starting to see some signs of recovery from an overall demand standpoint as well, which is encouraging.

Great. And stepping back and looking at all 3 segments, how would you think pricing could evolve as a potential contributor to growth? Where is it now? And how much additional pricing increases can you achieve in the coming years?

I think Matti touched on this a bit before. Our approach has been there are certain new products and capabilities where we will price discretely. Research or intelligence that we're building on the Web of Science platform is a great example of that. But there are other capabilities that we embed to enhance the user experience and deliver more value. And one of the ways of monetizing that is improve renewal rates, which we've talked about. But we do believe pricing is a part of the equation.

As we deliver more value and we provide greater capabilities when we come to that renewal discussion, there's a potential for us to monetize that through pricing. I think over the last few years, we've kept up with the rate of inflation. We certainly think there's an opportunity to do more as we've invested in capital spending to deliver some of these capabilities. So we'll be looking at that carefully across all of our markets and business units within the segments.

Let's talk a little bit about margins and profitability. So this year, you're guiding for EBITDA margins to contract around 50 bps to 41%, mainly because of disposals. Can you talk about where you think margins will evolve or how they're going to evolve after these disposals come to an end? And what are the key drivers you see for margin expansion going forward?

Yes, it's a great point. There are 2 things. You hit on a big one for this year that affect us. The other factor is with organic growth being relatively modest, we're going to be in a time where we believe it's important to continue to spend to bring these capabilities into the market. So that's pressuring our margins as well, too. As the disposals get behind us, that's actually going to help us.

So when we model pro forma what the business would look like without these disposals, they'll actually help to improve our margins. So we expect to see that come into the business as we get past those next year. And then this is the type of -- we operate the types of products where we build these products one time. We provide enhancements and maintenance, but we can sell them many times around the world. So the incremental margin profile for organic growth is very attractive.

So once we get back to that healthy market growth that Matti described, we're going to make steady continued progress on that over the next few years. We certainly think there's opportunity for profit margins to expand just based on that organic growth. And then the ability to reevaluate the level of capital spending as we move forward and optimize there to help to continue to improve our cash flow conversion.

Right. You talked about investing back into the business. Can you maybe speak to some examples of productivity or cost management initiatives where you're taking out costs to help drive margins?

Yes. I mean, certainly, as we brought each of these businesses together, we leveraged the great footprint that we have around the world and the talent and capabilities we have in many of our centers of excellence. We continue to optimize there to drive efficiencies in the business. Our teams are adopting AI-based tools for many of the processes we do, whether that's software development. More and more of our code is obviously being generated by AI, making our teams more efficient, the opportunity to have greater throughput in the development process.

Another big area for us is content ingestion. We continue to develop new tools to help our editorial enrichment and content ingestion teams bring that into our solutions in a much more effective way. So these are a couple of the key areas and new technology is helping us to improve and become more efficient there as well, too.

So you laid out a framework for where you hope organic revenue growth will improve to. How are you thinking about margins? So longer term, where do you think margins can expand to? And how much margin expansion per year do you think is reasonable over the medium to longer term?

Yes. I mean within the last few years, our margins were in the 42.5% range, about 150 basis points better than where we'll be this year. We outlined that we think we can get between 0.5 and a full percentage point of improvement through the disposals. And once we get back to organic growth -- we haven't laid out the exact algorithm for that, but once you get to approach 2% to 3%, there's certainly an opportunity to start expanding margins. So we haven't given a specific number, but have indicated that we think that there's room to grow here from where we are at about the 41% this year.

Makes sense. And then with respect to the balance sheet, your gross leverage right now is 4.3x. Can you talk about how you plan to balance debt paydown, share buybacks and M&A and what your broader capital allocation priorities are?

Yes, it's a fair point. We've built up a little bit of cash in the first half of the year. As you noted, we repurchased about 100 million share -- $100 million worth of shares in the first half of the year and we built up some cash. So on a net leverage basis, we're still at about 4 turns at the end of the second quarter.

When we think about the go forward, we'll continue to do a bit of both, some debt paydown and some buybacks. Last year, we were nearly balanced. We may skew from that just a little bit. But I think the important part is we have flexibility. We have a patient and very efficient debt stack. Over time, we've certainly indicated that we want to see that leverage come below 3 turns, and we'll continue to prosecute against that over the course of the next few years.

Great. Well, we're just about out of time. Thank you both, Matti and Jonathan, for the great discussion. Please join me in thanking them both.

All right. Our next section is with Clarivate. So first of all, thank you, everyone, for joining this session. For those of you who don't know me, my name is Owen Lau. I cover information services, exchanges and blockchain at Oppenheimer. Clarivate, it's a global information and workflow solutions company, serving customers in university, pharmaceutical and also legal area.

Today, we're excited to have CEO, Matti Shem Tov; and also CFO, Jonathan Collins joining us. Thank you, both of you for spending time with us today.

So let's get started with our first question. So this is the question we got a lot recently, which is about the divestiture. There was a news article that Clarivate is thinking about selling the IP business. Could you please give us an update on your plan like on this divestiture plan of this plan?

Thank you for attending the conference, and thank you for the question. At the end of the first quarter, we shared that we were evaluating multiple options to sell a segment or a business unit. We've made progress, and we have narrowed the option we are currently evaluating. We anticipate that we will complete the review and communicate the outcome with our year-end results in February.

We announced -- at the same time, we have announced that Maroun Mourad will join Clarivate as the President of IP segment effective September 8. He's joining us from Verisk Analytics, where he is the President of the Claims Solution division. We are pretty confident that with his leadership and ability to -- our business leadership and his abilities, experience, we will be further able to drive the IP business, and we are committed to fostering innovation and growth in the IP business like we do in all the 3 different segments we have. So I'm not going to give you any more here.

Jonathan, do you want to add anything here?

No, I think those are the key points that we have a lot of work to do, and we are working very hard to complete this in the coming months. We gave ourselves some time to be able to announce it by the end of the year as we pursue this option that we're currently evaluating. But rest assured, we're very eager to complete the work here and come to a conclusion as soon as possible.

Okay. Got it. Got it. That's good. And then maybe this is also part of your Value Creation Plan. There are some other things going on other than divestiture. So could you please give us an update on your overall Value Creation Plan? How does it fare so far compared to your initial expectations? Is it on track and where are the remaining works?

So first, overall, we are very pleased with the progress and with the plan. We have launched the plan in the fall of 2024. We are on track, and we are making some concrete, specific, measurable progress across all the key initiatives. We launched a major business optimization program to increase core subscription and reoccurring revenue, which is enhancing the scale, the sales predictability. As we announced at the end of the second quarter, we are making progress. ACV is going up, renewal rate is going up. The number of also the percentage, the mix is getting better. 88% is now subscription and reoccurring. So we are on track on the business optimization.

We also completed some major changes within our sales organization within the 3 segments, changing some setup, bringing in some new management team as well, improvement on customer engagement and retention. So we are on track, and we have completed most of the operational changes within the sales organization.

And we're also super proud of the fact that we have delivered 10 cutting-edge products AI-powered -- with AI-powered capabilities. I'm a product person. This is my roots, and I'm so pleased with the pace of the constant innovation, both going into the existing customer base or existing product base, AI enablement of existing product. At the same time, we are also been pretty aggressive introducing AI born new product across the 3 segments.

And as we talked also, we are making a progress on the strategic review. So we are very pleased with the progress of the VCP so far on track and continue to implement more and more products over the next year and obviously, for years to come as well. So that's the progress on the VCP.

Got it. Yes. Got it. And then, Matti, you just talked about the 88% organic revenue mix. In the first half of this year, it was up from 80% last year. But I think you only expect the full year to be, I think, 84%? Is that right? What is driving that?

Jonathan, can you take this one?

Sure. They're just 2 different metrics. So the organic recurring revenue mix excludes the disposals. So even though we still have revenue with those, if you take those out or assume they're already gone, we're at 88%. We -- as of right now, we still have some of those revenues, and they'll be bleeding off this year and into early next year. So if you still include those, we're at 84%. So once those get to 0, we'll be at 88%. And we just added that metric of organic recurring revenue mix to show what it looks like without the disposals.

Got it. So we shouldn't compare that 88% versus 84% number, right?

Yes, the 84% is heading to the 80%. And if you exclude those now today, it would be at 88%. So as Matti indicated, the real emphasis here is continuing to invest behind the products that are subscription or reoccurring in nature. We're referring to those as our recurring revenues. That's where we're getting a lot of the investment in the transactional business that will stay behind, the roughly 12%. That business are the types of services and products that help enable the growth of the recurring revenues.

So think some consulting services, implementation services of software, we feel like those are good business to be in going forward. But the emphasis is we're becoming more predictable and the revenue quality improves as that recurring revenue mix inches towards 90%.

Got it. Okay, 90%, okay. So that's a pretty good number. Thank you for that clarification. And then when I look at the other metrics, which is the recurring organic growth, I think it was 0.6%, 60 basis points in the first quarter, 80 basis points in the second quarter of this year. I think you guided to upper end of the guidance range, which some people interpret this as 0.5% or 50 basis points, but that means it is below what you had in the first half of this year. Does it mean this is a deceleration of recurring organic growth in the second half? Is that what you meant?

No, I don't think we intend to be that precise. What we were looking to illustrate on the page is that we expect to be in the upper half of the range and the upper -- the midpoint of the upper half of the range would be approximately 50 basis points.

But to the substance of your question, our aim from here on out is to continue to make progress every quarter. That's what we're really targeting. That's what we expect on the ACV as an example. We can have some timing issues quarter-to-quarter, so there may be some ups and downs as we go. But broadly speaking, the intent is to continue to accelerate the ACV, which will drive improved subscription revenue growth, and we were really encouraged by what we saw in the first half of the year. There was some lumpiness quarter-to-quarter, but our annuity business, our patent and trademark renewals that we do around the world for our customers returned to growth in the first half of the year. We believe that's largely driven by the market improvement.

Coming out of COVID, there were a couple of years where excluding domestic China patent filings, the rest of the world was relatively flat for a couple of years. So we really didn't see volume growth for the couple of years following that period. But we think we're in the early innings of starting to see a nice recovery in patent renewal volumes, and we would expect that to continue to help us in the second half of the year and beyond.

That's a business that historically has grown at a nice healthy rate in 3%, 4%, 5% range. So we've got some room to run before we're back to that level, but we saw a nice move in that direction in the first half of the year and are anticipating that continuing as we move into next year.

Got it. That's helpful. Maybe we should -- maybe we can dive into like each business one by one. So let's talk about A&G first. Matti and Jonathan, there has been a lot of focus on how university funding cut could impact A&G. I know you have been answering this question for quite some time, but could you please still give us an update on what you have seen so far this year on A&G contract discussion?

So we remain optimistic about the A&G for the rest of the year. Let's look -- dive in a little bit on the details. We've done a decision to dispose certain A&G transactional products. It was a wise decision. So now 93% of the A&G business is recurring and it has 96% renewal rate. This is one.

Second, I want to reiterate that we have 75% of the -- as of end of July, we have 75% of the A&G renewals already booked, very similar to what we had last year. So no changes. So no changes there.

And then let's talk a little bit about the product that we carry on A&G. Those products, specifically, let's talk about Web of Science. Web of Science is critical for the research in universities. This is also critical for faculty. We continue to sell new license for Web of Science, both on prime market and secondary market as well.

Alma is very -- is also very essential to run the library. People cannot do without an Alma. So these 2 products are big part of the A&G business is the Web of Science, must-have and Alma must-have product in any universities. We are market leader in both of them.

And then the third part of A&G is the content side of the house. And in fact, the introduction of some of our economic subscription-based product line like ProQuest e-Books and digital collections that are changing the way we used to sell on onetime basis, actually helping universities and faculty in this difficult time. So people find it much more attractive to buy relatively economic priced e-books subscription as opposed to buying the e-books by themselves.

So this gives us a lot of confidence that we will continue to see solid growth within A&G subscription business as we move forward through the remainder of the year. So we're pretty optimistic about the rest of the year for A&G.

Got it. And then I think A&G has just signed a multiyear partnership contract with Canadian Research Knowledge Network. Could you please talk about the opportunities for A&G outside the U.S.? How do you think about the TAM of these new overall opportunities?

So we do have opportunities both in North America, Europe and secondary market. So we have this phenomena that we're still selling. We're still selling our prime product into the main market. That's a good -- let's take a good example. We just closed over $1 million deal with The British Library selling Alma, okay? So we -- and we saw -- we're constantly selling Web of Science in North America as well.

On top of that, we have secondary markets like Asia, Latin America, some countries in Europe are still being -- still selling those prime products of us. On top of that, we are not standing still, and we have a constant influx of new products that we introduce, Web of Science Research Intelligence, whether it's Alma Specto, whether there's going to be new ProQuest e-Books. So there's a constant flow of new product as well, which we sell both in developed countries and in developing countries as well.

It's a mix. And they're all fueled by constant innovation, a lot of AI releases and changes to all of our A&G products. So constantly increasing that growing A&G is certainly something we will see in years going forward.

Yes, let's go to the next one, yes.

Yes. And then -- so when we combine all these together, how should investors think about the long-term growth algorithm for A&G? I know you had the math before, but can you still drive mid-single-digit organic growth longer term?

I believe A&G's market is growing 3% or 4%. And I believe we should get our fair share of this. It's few more years, but we are certainly going back to 3%, 4% growth rate on A&G, which is the market. We are not going to tell you when, but we are definitely -- the fact that we have eliminated a lot of the complexities with A&G, like the onetime business, the fact that we are constantly fueling the market with more and more products and protecting the existing product with AI innovation makes us believe that we can do the 3% or 4% A&G market growth in the coming years.

That's good, like 3% to 4%, it's a good number. But I guess the question is, I think maybe, Matti, you mentioned that -- you mentioned AI, I guess the question is still what does it take to take market share away from your competitors and sign new clients going forward, I think both locally and also internationally?

No, this is what we've been doing. As you know, I have been in A&G environment for over 20 years. We have a unique DNA, which is coming from Ex Libris side, ProQuest side and Clarivate side. We are innovative. We are disruptors. So we disrupted the market with Alma. We disrupted and we are now disrupting the market with AI innovation. We are recognized -- A&G was recognized as a leader with leader in agentic AI, what we have introduced the literature review functionality in Web of Science.

So it's a combination of constant innovation, pushing the envelope, thinking out of the box, maybe thinking like there is no box. It's all with paired with a lot of energy and sales execution. We are winning new customers even for the product who has been with us for many, many years, including Web of Science and Alma and then the new product offering as well saying. So it's all of the above that help us -- that makes us very confident we -- that we will continue to grow A&G to the 3% or 4% number.

Got it. Got it. I do want to touch on AI in specific maybe later after we cover all these individual business. So let's move on to the IP business. Can you please give us an update on that? It looks like some of the transactional revenue came back in the first quarter. I think Jonathan mentioned about China, but it reversed in the second quarter. So what are the drivers of that volatility? And also, what's the outlook for that?

Jonathan?

Yes. So this is in reference to our reoccurring revenue type, which is our patent and trademark annuity business where we renew patents and trademarks for our customers around the world. We're truly a global provider with a very high-quality service that can be relied upon in this area, pairs very importantly with our IPMS or our Intellectual Property Management Systems, where we help them manage that same workflow from taking an idea through to being patented and then continuing that protection through the renewal process.

So in the first half of this year, that revenue type, which we call out specifically and is entirely the IP business, had about 1.5% growth in the first half of the year. Owen, as you noted, it was around 5% in the first quarter, and it was negative 2% in Q2. The primary timing item there was just the lumpiness of renewing some of the patents in the U.S. given the price increases that came in Q1. So some of those were renewed in Q1 that were renewed in the second quarter of the prior year.

If you adjust for that, Q1 would have been a few percent of growth and Q2 would have been about flat in that we don't expect that the annual growth rate will be identical by quarter. There's a little bit of lumpiness between jurisdictions and customers quarter-to-quarter. But we think the first half growth between 1% to 2% is a good indication of where we started to see recovery in that market.

As I noted, in the past, under Clarivate's ownership, this part of the business has grown mid-single digits. Over the longer term, it's definitely somewhere in the 3%, 4%, 5% range very durably. And that's why we made the point at earnings that it's really encouraging to see the impact that AI is having on broader innovation. So not just how we're adopting AI in our products or in our middle and back office to become more efficient, but we see companies around the world innovating around AI, whether it's the models themselves or the computing that's required to operate these models. We see a lot of inventions that are now seeking protection.

So we're looking at that very closely, and Matti drew attention to this at earnings. This is a great secular growth trend, we believe, for our patent renewals business in the long run. If you look over the number of decades in the past, when you see a boom in innovation, whether it was the dot-com era, you see patent filings increase and the amount of patents available to renew goes up in the following decade. So we think this is a really good trend that we're keeping a close eye on.

So the upshot here is we're getting some good progress starting to see recovery in patent and trademark renewals. And we think the overall signals for the longer-term growth trend for this business are good. We think AI is going to be a nice contributor to that.

Yes. Can I dive into that point, Jonathan, because when we talk about AI, we always think, oh you add AI capabilities into your product. But what you just said is there's an AI adoption trend around the world that can support your IP business. Can you -- like you explained a little bit already. Can you maybe give us an example like why that can benefit your IP when we see like faster IP -- sorry, faster AI adoption?

Yes. I mean there are some great third-party sources for this data. One that we often look to is WIPO or the World Intellectual Property Organization that publishes patents in force. This is data that we look at. And we saw -- coming out of COVID, there was a period of time where in the primary markets we operate, those are relatively flat. In 2023, they returned to a healthy growth level. And a few years later, that will translate into growth in patent renewals. So that's the overall trend that we see that's encouraging.

But the other point is when we look out into the future and try to project what we think will happen with respect to patents enforced, we're encouraged by as of late in the last year or so, the number of IP discoveries, inventions that -- or AI inventions and discoveries where they're seeking protection via patent has gone up, and that is encouraging. We think that could be a nice growth trend for our IP business.

As you noted, the IP or -- the AI adoption is great for our A&G business, as an example. Matti talked about the researcher assistant that we've put on our platforms and now the agentic capabilities in the literature review that we've put onto the Web of Science platform, but a lot of companies are doing this, and that's good for patent protection, which is a big piece of what we do in our IP segment.

Got it. So more AI innovation, they need the protection. That's why they will need more of your product to get the patent or maybe do the renewal. Got it. And then another one for AI. I think you will also release some new AI features for Derwent, right, which is -- I think the name is Derwent AI Patent Watch Solution. And could you please talk more about the revenue model for these new products? Can you sell them separately or it mainly helps you from a price increase standpoint?

Yes, I'd be happy to. There are 2 things here. The first is we are leveraging AI capabilities to improve the core Derwent capabilities on the Derwent Innovation platform, which is search. So we launched AI-powered search late last year, and we've seen really good receptivity from the core users of that platform in the form of higher usage and more searches being conducted, which is a great indicator in reviving the value proposition of the platform.

We think that underlying Derwent World Patents Index data, which can be accessed via a number of sources is a great data set and with great tools on our search platform, Derwent Innovation, we expect that to help that product improve as we move into next year. And I think that generally falls into the bucket of AI innovation that will be a part of the overall value proposition of that tool.

Derwent Patent Watch is a new workflow service that helps our customers navigate the process of evaluating and investigating potential infringement. So when there's a flag that's raised, we've now built a tool that helps to automate the workflow to get that through to the right people in the organization to figure out if there's some type of enforcement action that might be required to protect the patent.

This falls in the bucket of a tool where we're leveraging AI where this will be a new offering. We will charge for it discretely. So we're really excited about that. We've got some more announcements that will come on that product at some trade events in the second half of this year. But those are 2 great examples of leveraging AI to enhance our value prop. One will help improve renewal rates, help shore up price increases because we're providing more value to customers. The second is an entirely new offering that solves a problem that's currently being done in e-mails and SharePoint sites that we can now automate on a platform.

Got it. That's very helpful. Then maybe we can move on to another segment, which is the Life Science and Healthcare segment. Could you please talk about your traction in LS&H. I think you just expanded a long-term multimillion dollar partnership with a top 15 global pharmaceutical company. How do you see the outlook for this segment in the second half of this year?

Yes, happy to touch on LS&H. So we did highlight one of our major customers that we're getting traction with. And what we've seen in Life Sciences, our view is stability in spending in R&D with our major customer base. So that's been pretty decent the last couple of years.

I think the pressure that we saw within R&D in our business was the demand from the market for more innovation. And that's why we're so encouraged that this part of our business has improved in the first half of this year. So we highlighted the fact that Q1 and Q2 earnings that our Cortellis suite of products have seen really nice improvements in their renewal rates in 2025. We're starting to get more upselling like this customer where we had an example of at earnings. And that's a sign of investments that we've made in the product. So we took those same researcher assistant capabilities that we developed and put into the products in A&G, and those have now come to the R&D segment within Life Sciences and Healthcare, and we're seeing better usage, more value, fewer cancellations and downgrades and an inflection in the new subscription sales. So really encouraged by what we're doing there. We think the market is good. We're making the right investments, and there's some good traction there.

I would say the other part of our Life Science business commercialization is okay. It hasn't been a good couple of years in our view. I think we may see some early signs that it's getting a bit better there. And we're making some of those same investments in innovation there. So we're really excited to start delivering some traction on our new Fusion platform in the second half of this year. So we stepped away from effectively brokering or reselling real-world data, and we're getting back to our roots in this part of the business where we take that data and we turn it into insights and analytics, and we're leveraging new AI capabilities to do that.

So the market there, we think, is okay. We see some potential signs of improvement, but we're really encouraged by early indications of how the new products and solutions. We also talked about our new Medtech360 offering that's coming into market, and we're starting to see some traction there for med device companies. So a couple of examples where that investment in the early days appears like it's headed in the right direction.

Got it. So let's go back to AI. Again, like you mentioned that you have launched some AI new product, and then you will also launch more AI product for the rest of this year. I think my first question is, what is the feedback so far? Like what have you heard from your customers? Are they ready for this product?

Yes, certainly. But with your permission, I want to mention something that one of the great surprises that I had coming back to Clarivate is this notion that A&G has built an AI innovation center of excellence. So we have a group of people who is helping us to deploy AI innovation across A&G. And what I've done coming in, I've looked at this and how well those guys are -- this team is actually implementing AI innovation, structured way, very smart way in each and every one of the A&G products. So we actually then we have implemented the same methodology, the same technology in Life Science as well, and we will be looking to implement some of these technologies in IP as well.

So there is quite a significant center of excellence within the company, implementing AI capabilities, adopting and implementing and pushing the envelope. And just take A&G for an example, we have -- as of today, we have almost 5,400 -- 8,400 academic institutions that use our AI solution. So this is an amazing number. It's -- we get -- people are very enthusiastic about it. And we have a history and a culture at Clarivate that we work with our customers to develop innovation and AI is no different. So we're working with our customers.

Obviously, we have some ongoing requests from companies and some of their pharma customers are -- we're working with the pharma customers and with some of the leading corporates to develop AI around the IP as well. So very well received, very well distributed, thousands of our customers are already using AI solution. And as I mentioned before, Outsell, a leading research and advisory firm in B2B technology, data and information services, recognized Clarivate as AI leadership among the major scholarly research organization, underscoring our position at the forefront of developing user-facing AI, but not just AI, agentic AI. So this is a huge recognition to what we're doing this, and this momentum is all over the segment.

And A&G is kind of leading it. Life Science and IP are also implementing it. So pretty satisfied how we turn over this 2 years ago, everybody thought this is a threat. In fact, this is a huge opportunity for us to continue to innovate and strengthen the base of our company. Thank you for your attention.

So I want to get your number, right? You said around 5,400 academic institutions? Is that the number?

4,800 sorry, 4,800.

4,800, got it.

At least 4,800 academic institutions that are currently using our AI-powered solution. I'm sure the number is even greater. This is our official number. And then we have a lot of customers on the innovation, some on Life Science as well. We are going to issue a press release soon about releasing [ CRI ] AI innovation as well. So there's a lot of momentum coming in the company, which is derived from this AI center of excellence within the company, and we're pretty upbeat and confident that we will see more and more AI in the forms of Gen AI, but more and more agentic AI feature.

And by the way, not only on the product side, also some internal processes. We're now looking at some opportunities to rationalize some of the internal costs with some AI capabilities. This is early days, no guarantees here, but this is another avenue that we will be pursuing.

You mentioned agentic AI a couple of times. I think people are still catching up the curve. Any quick example you can give us what agentic AI solutions or capabilities you have?

Jonathan can talk a bit about what we're doing in -- specifically on Web of Science. Jonathan?

Yes. I think the 2 examples that we cited that are in the market are the researcher Assistant, which now exists on multiple platforms within A&G. We started with the Web of Science, but this is that fundamental or basic capability that we've now all become accustomed to with GPT and other like tools where you can ask a question, you can get prompts, you can go deeper in an area. So it takes that initial discovery experience from putting in terms and going through links to a more conversational. And that's so important in our business as we're not a casual search business. These are serious scholarly researchers, people that are doing drug development and people that are protecting very valuable IP. So the adoption of this tool is important to do in a measured and careful way. And I think as Matti mentioned, the teams have done a really nice job in building those capabilities in.

I think the second example is the agentic capability that we just outlined on the platform, which is the researcher assistant, so the ability to do -- or excuse me, the literature review, the ability to now take information, synthesize, distill something that took humans hours and hours, the tools give us the ability to do it almost instantaneously. So that capability is now available on that platform. Some of the greatest scholarly researchers on the planet use our tool to evaluate where to go to get information around where they're researching and now they have ability to have these agents help accelerate the pace of research, which ultimately lead to innovation.

So really encouraged by both of those examples. And as Matti said, it's great to hear it from our customers. It's also nice to hear it from publications in the industry that compare these side by side, and we really think we've -- we're off to a really good start in adopting the technology in a value-enhancing and careful way.

Got it. So Clarivate generated a lot of cash. So could you please give us an update on your capital allocation strategy? How much cash will be allocated to debt repayment, probably M&A and also buyback. How should we think about that?

Yes. As you noted, we'll generate in the mid-300s of free cash flow that will be available to either repurchase stock, repay debt or if we wanted to do some M&A.

I think what we've highlighted is right now in the midst of the strategic review, we're really not focused on M&A. We've really been focused on putting our capital in other places. Last year, we were pretty equally balanced between share repurchases and reducing debt. So far this year, we've done a bit more on share repurchases.

We will continue to have the flexibility as we move through the second half of the year. We've acknowledged over time, we want to bring our leverage down. We're not -- there's nothing urgent or comfortable at these levels. But over time, we'd like to bring that down. And right now, we obviously think that our stock represents a very attractive value. So we did a bit more in buybacks in the first half of the year.

I would note, we've just got that flexibility. And as you noted, we've got an attractive cash flow, which puts us in a pretty attractive cash flow yield based on where the stock price is right now.

Got it. And then maybe longer term, my last question is like without getting any specific numbers, how should we think about the organic ASV growth and recurring organic growth longer term? Do you expect it can reaccelerate further from here to more like the industry growth rate?

Maybe I'll start and Jonathan can answer this. We believe, as I mentioned, A&G can grow 3%, 4%. This is the market, and we certainly can do this as well. We believe IP, it's growing -- the market is growing 4%, 5%. We believe we can get there as well. And life science is growing in even faster pace. And I believe we can just go there as well over time. I cannot give you exact date.

Jonathan, do you want to add?

No, I think that's right spot on. And I think as you noted in the question, Owen, it's really going to be driving that subscription growth to those levels as that now makes up a larger proportion of the business. And as we see our reoccurring revenue via the patent and trademark annuity business, the market recover on that, we think that's going to help as well, too, in the coming years.

So the combination of those things, which make up almost 90% of our business now are really going to help get us to a more healthy growth rate.

So as Matti noted, we don't have a commitment on the time frame yet, but we do believe that we're making the right steps to return to healthy organic growth. We think we're in healthy growth markets, and we'll continue on that path.

Got it. That's super helpful. I think we are about time. Thank you again, Matti and Jonathan, for your time. I really appreciate you participating in this conference.

Thank you for joining us.

Thanks a lot. All right. Have a good day. See you. Bye-bye.

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Clarivate Second Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Mark Donohue, Vice President of Investor Relations. Please go ahead.

Thank you, Jordan, and good morning, everyone. Thank you for joining us for the Clarivate Second Quarter 2025 Earnings Conference Call. As a reminder, this call is being recorded and webcast and is copyrighted property of Clarivate. Any rebroadcast of this information in whole or in part without prior written consnent of Clarivate is prohibited. And the accompanying earnings call presentation is available on the Investor Relation section of the company's website.

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 cause actual results to differ materially from the anticipated result or performance can be found on Clarivate's filings with the SEC and on the company's website.

Our discussion will include non-GAAP measures or adjusted numbers, Clarivate believes non-GAAP results are useful in order to enhance understanding of our ongoing operating performance, but they are supplement to and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliation of some these measures to GAAP measures are available in our earnings release and supplemental presentation on our website.

With me today are Matitiahu Shem Tov, Chief Executive Officer; and Jonathan Collins, our Chief Financial Officer. After prepared remarks, we'll open the call up to your questions. And with that, it's a pleasure to turn the call over to Matitiahu.

Good morning, everyone, and thank you for joining us. We reported solid second quarter financial performance and delivered growth in our key metrics. We also made progress on the value creation plan, including the AI-led product innovation improving sales execution and enhancing operational efficiency.

On Slide 6. In the second quarter, we demonstrated our strategic positioning within the market. Organic ACV grew 1.3% compared to the prior year period and improved 40 basis points from the end of last year. This was driven by an important improvement in the subscription book due to higher renewal rates and new business wins. Total organic revenue in the second quarter grew 50 basis points, and recurring organic revenue grew almost 1%. Adjusted EBITDA margin for the first half of the year increased 50 basis points to 41%, driven by internal cost [indiscernible]. Free cash flow continued to be strong as we generated $50 million in the second quarter and $161 million for the first 6 months of this year. I'd like to highlight that all of our segments shown improvement for the first half of the year.

Our A&G business delivered 2% organic ACV and subscription revenue growth. IP return to organic growth in patent Annuities and is well positioned to benefit from AI tailwind and Life Science & Health return to organic ACV growth. With a solid first half, we are reaffirming our full year 2025 outlook. Jonathan will cover the financial results in more detail shortly.

On Slide 7. Our Value Creation Plan was launched in the fall of 2024, and it is on track with measurable progress across all key initiatives and KPIs. We have launched all major business optimization program to increase core subscription and reoccurring revenue, which is enhancing sales ability. We have completed most of the major operating model changes within our sales organization to improve new business generation, customer engagement and retention. Since the launch of the VCP plan last October, we have delivered 10 cutting-edge product and AI-powered capabilities while focusing on developing AI-enabled world-class subscription-based solution in partnership with customers, and we are undertaking strategic review to assess alternatives across the business.

If you turn to Slide 8, I'll provide an update on the VCP starting with the A&G segment. Our proactive business model optimization, coupled with decades of experience in delivering data and analytics solution to our clients has strategically positioned us to anticipate and adapt to current market dynamics. We are on track to discontinue transactional sales of digital collections and books over the next year. This shift away from transactional sale is increasing recurring revenue growth by transitioning some of the business to the new progress e-Book product and other content solution subscription. We are pleased with the early adoption with over 70 wins to date and hundreds of customers currently evaluating this new model.

Following this A&G strategy, A&G subscription revenue now constitutes 93% of the total segment revenue, excluding disposals, up from 79% in the prior year period. In the first half of 2025, we have achieved a 96% renewal rate in A&G. This is impressive results considering the macro backdrop characterized by a reduction in the U.S. federal agency contracts, increased constraints on higher education research funding and potential additional university budget cuts. It is also noteworthy that as at the end of July, 75% of global A&G subscription for the full year has successfully renewed. This is in line with last year -- last year's renewal pace. We continue to successfully invest in innovation across the A&G product portfolio with a focus on AI. We are very pleased by our success so far in product launches and customer adoption. More than 4,800 institutions have already adopted our AI tools to strengthen research support, increase operational efficiency and enhance student engagement.

On Slide 9. Our partnership within A&G continued to grow, including recent multiyear agreement with the Canadian Research Knowledge Network that will provide 55 university greater access to Web of Science, fostering enhanced research collaboration, and impact. We are also accelerating progress with next-generation Agentic AI solution. AI agents can independently play and execute multistep processes by interacting with user with users, data sources and tools. The expansion of our Agentic AI platform marks a significant milestone as we implement responsible Agentic AI to accelerate research and learning workflow. Our initial launch of the literature review agent in Web of Science exemplify this pioneering approach. The agent converse with researchers to understand their research goals, then customize a specific literature review scope and define the proper output. This personal interactive experience keeps the researcher in the center, which closely make working with human assistant.

Finally, we are very pleased that Outsell, a leading research advisory firm in B2B technology, data and information services recognized Clarivate AI leadership among major scholarly research organization underscoring our position at the forefront of developing user-facing AI Agentic tool.

Moving to Intellectual Property segment on Slide 10. After a challenging few years, our patent renewal business returned to growth this year, with organic recurring revenue rising by about 1.5% in the first 6 months of 2025. The market-wise surge in AI innovation across industry is driving sustained growth in registered IT. We believe this trend will create favorable conditions for our patent renewal business. As an example, in the past year alone, but its' filing for AI invention has grown fivefold compared to pre-ChatGPT levels. In addition, AI has the potential to double innovation output and build more defensible IP portfolio for industry power by IP and scientific research. The takeaway is that this strong market tailwind driven by the proliferation of AI innovation and technology adoption are fueling our work with customers empower them to achieve higher levels of efficiency and IP creation. Our IP segment is well positioned to capture this growth as we continue to lead at the intersection of technology, innovation and IP.

Going to Slide 11. During the second quarter, IPfolio, our industry-leading cloud-based IP management platform designed for corporate intellectual property teams grew new clients and partnerships over 50% year-over-year across global markets, including South Korea and Japan. We're now broadening and accelerating our portfolio adoption across multiple industries, including the pharmaceutical and large law firms. Our expertise and comprehensive solutions have enabled clients such as wind band to enhance the IP management practices and gain meaningful insights into emerging trends in the IP management.

IP management transition. So this morning, we have announced that Maroun Mourad will join Clarivate as President of the IP segment, effective September 8, 2025. He joins us from Verisk Analytics, where he is the President for the Claims Solutions division. We are confident that his leadership abilities and expertise will further drive the IP business commitment to fostering innovation and growth. I would like to express my gratitude and appreciation to Gordon Samson for his dedication to the industry and his significant contribution to Clarivate success.

Turning into Life Science & Healthcare segment. In Life Science, we are encouraged that the VCP efforts have resulted in return to organic ACV growth during the first half of this year. We have been expanding our strategic reach fostering innovation through subscription-based platform designed to support Life Science and Health customers. Our commitment to develop robust partnership is demonstrated by the recent extension of a long-term multimillion dollar agreement with across 15 global pharmaceutical company. This achieved validates the importance of our Cortellis and DRG product and services to customers. Additionally, we continue to drive advancements in Medtech by introducing next-generation commercial analytics, the launch of DRG Commercial Analytics 360, a dedicated subscription platforms empower Medtech Organization to enhance their commercial strategy and execution capabilities. As commercial budget improve, we believe we will be best positioned to capitalize on an improving environment.

On Slide 14, Value Creation Plan I'm pleased that the VCP plan is on track. The first half of this year was marked by accelerated product innovation and significant number of new product launches and enhancements in the AI capabilities. We anticipate that the momentum of the product will continue throughout all 3 segments in the second half of the year by integrating high functionalities into our offering, including Web of Science research, Derwent and Cortellis, we aim to further improve outcomes and value for our users.

On Slide 15. Now that you've heard our VCP is driving results across each of our segments. The fourth pillar of our VCP is evaluating strategic alternatives. Earlier this year, we initiated a formal process to enhance execution focus, optimize capital allocation support future growth and increase operational effectiveness. We are making progress and have narrowed the scope of their review. We anticipate communication -- communicating the results when we will report our year-end financial performance in February 2026.

And lastly, Slide 16. In closing, we are pleased to see improvements improved revenue performance for the first 6 months 2025, driven by organic ACV growth in A&G and Life Sciences segment and the return of growth in the patent renewals -- in the patent renewed business. The mix of organic recurring revenue to total revenue for the first half of the year is now 88%, an improvement of 800 basis points compared to last year. Our annual renewal rate across our subscription base improved to 93% during the first half of this year compared to 92% for the same period last year. We are moving in the right direction and seeing early indication that our plan is driving improved performance -- it is encouraging to witness the initial sign of trust, which affirms the effectiveness of our strategies and the dedication of our teams. We remain focused on executing our plan to ensure sustained growth and value creation for all stakeholders.

And with that, I would like to turn over to Jonathan. Thank you.

Thank you, Matti. Slide 18 is an overview of our second quarter and first half financial results compared with the same periods from the prior year. Q2 revenue was $621 million, bringing the first half to $1.2 billion. Second quarter change from last year was entirely inorganic as a result of the ScholarOne divestiture and the A&G and LS&H business disposals, partially offset by organic growth in foreign exchange. The second quarter net loss was $72 million. The improvement over Q2 of the prior year is driven by the noncash impairment charge recorded last year that did not recur this year. Adjusted diluted EPS, which excludes items like the impairment, was $0.18. The change over last year is entirely attributed to the divestiture and disposals. Operating cash flow was $116 million in the quarter, the change compared to last year is entirely driven by adjusted EBITDA as an improvement in working capital was offset by higher payments of onetime costs associated with implementing the value creation plan.

Please turn with me now to Page 19 for a closer look at the drivers of the second quarter top and bottom line changes from the prior year. I'm pleased to share this morning that the business grew organically for the second quarter in a row and margins remained at approximately 42%. This was driven by 4 primary factors: First, our recurring organic growth increased 20 basis points sequentially in the second quarter to nearly 1% as our subscription business returned to growth following the inflection in our ACV in the first half of this year. Careful operating expense amplified the $3 million of total organic growth, which includes the transactional revenue type, resulting in a $6 million increase in adjusted EBITDA.

Second, during Q2, we continue to experience the inorganic impact of the businesses we are disposing as a part of the Value Creation Plan. The top and bottom line changes of $32 million and $17 million, respectively, impacted both the A&G and LS&H segments. Third, as we've seen in the last couple of quarters, we continue to experience the inorganic impact of the ScholarOne divestiture, lowering revenue by $9 million in adjusted EBITDA by [ $5 ] million. And fourth, the U.S. dollar weakened against the basket of foreign currencies, which caused a foreign exchange translation tailwind on the top and bottom lines.

Please turn with me now to Page 20 to review how these same drivers impacted the top and bottom line changes for the first half of this year. As Matti noted just a few moments ago, organic growth for H1 has improved by 100 basis points over where we ended last year. This modest growth compared to last year's decline yielded $5 million of total organic growth and $10 million of incremental adjusted EBITDA in the first half. The combined impact of the disposals and divestitures lowered revenue by $64 million and adjusted EBITDA by $30 million over the same period last year. Both the top and bottom lines benefited from foreign exchange in the first half as the U.S. dollar weakened towards the end of the first quarter. The net impact of these changes led to a 50 basis point margin [indiscernible] expansion for the year-to-date results compared to the same period last year.

Please turn with me now to Page 21 for a look at how the Q2 and H1 adjusted EBITDA converted to free cash flow and how we allocated the capital in a shareholder-friendly. Free cash flow was $50 million in the second quarter, bringing the first half to $161 million. The change in the quarter and the half are driven entirely by the adjusted EBITDA impact outlined on those 2 pages as lower working capital requirements were offset by higher onetime costs. We incurred $18 million of onetime cost in Q2 and $42 million in H1, both of which were largely restructuring-related outflows associated with the implementation of the Value Creation Plan. Cash interest was $92 million and was slightly lower than Q2 of last year as we continue to recognize the benefit associated with the $200 million of debt we repaid [indiscernible].

Working capital requirements improved by $15 million in the second quarter and a comparable amount for the first half, and we expect this trend to continue in the second half of the year as implied in our full year guidance. Cash taxes, capital spending and other operating outflows were essentially flat compared to the same periods last year. We used the $50 million of free cash flow we generated in the second quarter to repurchase another 11.5 million shares of common stock bringing the first half buybacks to $100 million, which is about 60% of the capital we had available to allocate. The remaining 40% increased our cash balance, lowering our net debt.

We also took the opportunity during the second quarter to extend a portion of our debt maturity by 5 years through refinancing $0.5 billion of our 2026 bonds with a new tranche on our existing Term Loan B facility, which matures in 2031. Shortly after we completed the refinancing, we swapped at 80% of the new tranche from dollars to euros and from a floating to a fixed interest rate. The net impact of the refinancing and swaps is an annual cash interest increase of about $7 million, a favorable outcome in this higher rate environment.

Please turn with me now to Page 22 for a reminder of our full year financial guidance ranges for this year, which remain entirely unchanged from the initial guidance we provided in February, and affirmed in April. Beginning at the top of the page, we continue to expect our organic annual contract value to accelerate by approximately 60 basis points to 1.5% at the midpoint of the range as we begin to recognize the benefits of our investments in product innovation. We've made good progress on this in the first half, where we've delivered more than half of the acceleration, about 40 basis points.

Based on our performance in the first half, recurring organic growth will likely be upper half of our range. The improved organic performance, combined with a weaker U.S. dollar and slower-than-anticipated attrition business disposals will likely yield revenue near the top end of the range. As a result of the strategic disposals, we expect our recurring revenue mix will improve by about 400 basis points from 80% to about 84% this year. It's worth reiterating what Matti indicated earlier in the call. Our organic recurring revenue mix, which excludes the disposals, is already at 88% in the first half of the year.

Moving down the page, we expect adjusted EBITDA slightly above the midpoint of the range and our profit margin at approximately 41% due to higher revenues from the disposals and FX, which have lower profit conversions. We continue to anticipate diluted adjusted EPS between $0.60 and $0.70 as the inorganic driven change in adjusted EBITDA, which I'll detail on the next page will be partially offset by lower interest expense as well as the benefit of a lower share count resulting from last year's and the first half's stock repurchases. And finally, at the bottom of the page, we anticipate free cash flow of about $340 million at the midpoint range as the adjusted EBITDA change will largely be offset by lower interest working capital and capital spending.

Please turn with me now to Page 23 for more details on the full year top and bottom line changes we're expecting compared to last year. The expected changes in revenue and to a large extent, adjusted EBITDA this year compared to last year are largely driven by the disposals targeted at optimizing our business model and the divestitures of noncore products and services. We now expect organic growth will be essentially flat as the growth in the recurring revenue types, both subscription and reoccurring will offset the originally anticipated decline in our remaining transactional business. This represents about $10 million improvement over our initial indication at the midpoint of the guidance range. We continue to expect a profit headwind in this area of about $20 million as cost efficiencies will not fully offset inflation and higher incentive compensation expense.

The strategic disposals are now expected to lower revenue this year by approximately $125 million, and we're implementing $85 million of operating cost actions, which yield a profit impact of about $40 million. We expect most of the remaining $75 million revenue reduction will take place next year and will have a small profit impact. The top line change for the disposals represents a $15 million improvement over our initial indication. The divestitures of both Valipat and ScholarOne last year will lower revenue by about $40 million and profit [indiscernible].

And finally, we now anticipate foreign exchange translation will have a negligible impact as the U.S. dollar has remained weak against other foreign currencies. This represents a $25 million improvement from our initial indication for full year revenue.

Please turn me now to Page 24 to step through the components that will lead to more than 1/3 of the adjusted EBITDA converting to free cash flow. Our outlook for free cash flow remains unchanged at the midpoint of our range. Onetime costs are expected to be slightly elevated over last year as we invest to execute the VCP. We expect cash interest to improve by about $10 million over last year as a result of the debt prepaid. Cash taxes are expected to remain in line with 2024. We anticipate the change in working capital this year will be negligible, which represents an improvement over last year of about $25 million.

And while we remain committed to investing in product innovation, the strategic disposal and cost efficiencies will improve capital spending by about $35 million. The net impact of these changes is free cash flow of $340 million at the midpoint of the range and will result in an improvement on the conversion of adjusted EBITDA of about 1 percentage point. From a capital allocation perspective, we continue to have the flexibility between share repurchases and deleveraging as we move through the second half of the year.

In closing, we believe our first half results indicate strong momentum as the value creation plan is taking hold as evidenced by a few key elements. First, Q2 represents the second quarter of sequential organic ACV and recurring revenue growth acceleration. Optimizing our business model by disposing of noncore transactional businesses is creating a laser focus on our core recurring products and services, and we now have tangible evidence of the upward trajectory. Second, each of our segments made meaningful progress in the first half of the year and have a solid outlook for the second half.

In A&G, both organic ACV and subscription revenue growth are stable at about 2%, and we have good line of sight to a stable second half despite funding pressure in the U.S. market. In IP, we've seen a clear rebound in the annuity market, our reoccurring revenue stream as it returned to growth in the first half after declines in the prior year. In LS&H, our subscription revenue-leading indicator, ACV returned to organic growth as the investments in Cortellis are paying off in the R&D market with higher retention and strong [indiscernible]. And third, we made significant progress on the strategic review in the first half by narrowing the focus to a core option and expect to complete this work in the second half and put a conclusion with our year-end results.

I'd like to finish by thanking all of you for listening in this morning. I'm now going to turn the call back over to Jordan to take your questions. [Operator Instructions] Jordan, please go ahead.

[Operator Instructions] Your first question comes from the line of Manav Patnaik from Barclays.

I had a question on the IP business. I know you talked about a rebound in the IP and a new market. I think you also talked about being excited about the AI opportunities there. So just a few parts to that, just the timing of that rebound how you can capitalize on that AI opportunity? And I think I read somewhere that a lot of the, at least GenAI and new patents, all that kind of activity seems to be more weighted towards China. So just wondering your exposure and capabilities there as well?

Sure, Manav. Thanks for the question. So in principle, as new filings and new patents are awarded, on average, it takes a couple or a few years to work its way into the renewals. It varies by jurisdictions but on average, it's a couple to a few years. So this is a trend that we've started to see over the last year or and think that it's something that could help put some wind into our sales as we move into next year and the following year. So certainly, there's a clear trend that more [indiscernible] are being filed related to AI. Overall, this is a good thing for our business. That's what we wanted to highlight and note.

To your point, the quantity of patents that have been filed related to AI are a bit disruption at our IP center for innovation research, noted that in some of its recent reportings and we've seen more of it in Asia and particularly in China, but we've certainly seen an uptick in most of the major regions. So we think we'll start to see that benefit around the globe over the course of the next few years.

Your next question comes from the line of Toni Kaplan from Morgan Stanley.

I think earlier this week, we saw a headline that the Department of Omeros is considering changes to the fee structure and filing patents in the U.S. And I know there's a lot of moving parts, and it's not totally settled yet, but I just wanted to understand maybe the potential impacts to your business from sort of the potential change in fee structure and how that plays out?

So specifically, we've seen this as well. It's very early days. And obviously, there's no definite decision and no definite view on our side. But let's just remind ourselves that we've been in the IP ecosystem for more than 2 or 3 decades. So we are an integral part of the ecosystem, including collaborating with patent offices worldwide, collaboration with law firm and with corporate. In a way, we are sitting in the intersection and supporting those institutions. So any change that we -- we are very well positioned to support this change and somehow even take advantage of this change yet. This market may be changing and maybe not changing, but we've been there for the last 20, 30 years and even more. And we are very well positioned to close to our customers. So we'll track it, we will continue to get involved, we will be collaborating with our customers and partners on this transition.

Next question comes from the line of Owen Lau from Oppenheimer.

So for university funding cuts, which is still a hot topic, I saw that 75% of your 2025 subscriptions have already been renewed in July, which is good. But could you please give us more color on your conversation with your clients about the current situation so far and the outlook for renewal in the second half and going into 2026.

I'll start and then Jonathan may continue. So we are looking good on A&G despite of all the concerns that we collectively have. So 93% of the [indiscernible], A&G revenue is now recurring. We have 96% renewal rate. As you mentioned, 75% of the book is already in-house. We don't have anything out of the ordinaries with our customers, but let's just remind ourselves a few things.

One, our A&G products are central and mission-critical to his organization. I cannot imagine a [indiscernible] today without Web of Science and some of the surrounding problem. Any university will need to have an Alma type solutions, so we're in a pretty good shape on the Web of Science and the ERP [indiscernible].

With regards to the content, as I mentioned in my discussion, we were forward looking, taking away the discretionary onetime expenditure, and this served us very, very well these days, and we see the uptake of customers who were initially complaining about taking away the onetime purchases we are now buying more and more of our subscription businesses, the PQ e-Book, the PQ Digital collection, which actually serves them very, very well in this in this kind economic climate. So we are pretty confident that going ahead, we will continue to see a good and decent renewal rates and uptake of the different A&G offering. Thank you.

Your next question comes from the line of Ashish Sabadra.

This is [ Bill Chi ] on for Ashish Sabadra. Congrats on the quarter. [indiscernible] you guys initiated a new sales incentive plan with a refocus on subscription and recurring revenue. It's been great to kind of see that progress with the real tick up. Curious if you could provide any updates on how that sales momentum has been continuing and any outlook from here?

I think we've taken away a lot of hassle from the sales organization. We are very, very focused this day, subscription, reoccurring renewal price, bringing back new business. So customer -- I've just attended a sales meeting last week in London, and people are very excited. They are very focused at just 2 subscription reoccurring as opposed to do subscription, onetime, onetime e-Books, it's just competitive. The focus we're taking -- we took away a lot of complexity out of the organization and focusing the sales organization. We have a great sales organization. We have done some changes we have spoken about. Very up about going forward for the rest of the year and for next year as well. So yes.

[Operator Instructions] Your next question comes from the line of George Tong from Goldman Sachs.

Your Life Science and Healthcare business saw organic revenue growth positively inflect. Can you give a little bit more color around the market dynamics that you're seeing and how conversations with pharma and biotech companies have evolved?

Yes. Thanks for the question, George. And to be clear, what we saw in the second quarter is the subscription business within Life Sciences and Healthcare, return to positive organic ACV growth, which is a really good leading indicator for where we would expect subscription revenue for that business to be in the second half of the year.

To your point, just a little color on the market. We primarily serve R&D and then the commercialization efforts of our life sciences customers. On the R&D side, that market continues to be stable. Spending on our types of solutions has been solid. We attribute the improvement largely to the investments that we have made, primarily in the Cortellis suite of products. So over the course of the last 6 to 12 months, we've made some really nice strides. Matti touched on a couple of those new capabilities that have gone into the products. We've embedded AI, made investments in the workflow capabilities of those solutions, and we've seen nice usage and nice retention improvements on those products, and we attribute that to the improvement that we've seen in this area. The commercialization part of that market continues to be relatively soft, and that's reflected in the results of our commercialization business. But certainly, stable in R&D. That's where we're really starting to see the traction based on the investments that we've made. So thanks for the question, George.

Your final question comes from the line of Shlomo Rosenbaum from Stifel.

This is Adam on for Shlomo. Why are disposals taking longer than expected? Is this a customer service focus, shift towards trying to sell some of the assets or something else?

It's pretty straightforward. I mean there is 1 of the 3 disposals. One is taking longer because we simply had some interaction with our customers and they ask us to extend because it's longer than we expected to get settled with alternative offering. So we just extended by 6 months and it reflects on the selling that specifically on the onetime e-Books, they ask for more time to get organized, and that's the reason. Nothing behind this.

Thank you very much. That concludes our call for today. If you have any follow-up questions, you can reach out to Investor Relations. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.