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…

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…

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.