Clarivate Q2 2025 Earnings Report

Clarivate EPS Results

• Actual EPS: $0.18
• Consensus EPS: $0.18
• Beat/Miss: Met Expectations
• One Year Ago EPS: $0.20

Clarivate Revenue Results

• Actual Revenue: $621.40 million
• Expected Revenue: $587.17 million
• Beat/Miss: Beat by +$34.23 million
• YoY Revenue Growth: -4.40%

Clarivate Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 9:00AM ET

Clarivate (NYSE:CLVT) operates as an information services provider in the Americas, the Middle East, Africa, Europe, and the Asia Pacific. It operates through three segments: Academia & Government, Life Sciences & Healthcare, and Intellectual Property. The company offers Web of Science and InCites, that analyzes and explores the academic research landscape and manages research information; ProQuest One and Ebook Central that provides comprehensive content collections to institutions in a cost-effective manner; and Alma and Polaris, that manages academic resources and services, connect users, and support research publications. It also provides Patent and Trademark Renewals, that supports paralegal and admin tasks throughout the patent and trademark protection and maintenance process; CompuMark and Derwent, that supports critical decisions around patent and trademark protection, risk, and value creation throughout the innovation and brand lifecycle; IPFolio and Foundation IP that creates a structured environment for the protection and management of global patent and trademark assets. In addition, the company offers Cortellis Competitive Intelligence and Cortellis Drug Discovery Intelligence, that supports the development of new drugs and medical devices from discovery to clinical trials; Cortellis Regulatory Intelligence and OFF-X to monitor drug safety issues and adhere to regulatory protocols; Real World Data and Optimize that inform commercial launch strategy and set pricing for optimal reimbursement. It serves corporations, universities, law firms, government agencies, public libraries, and other professional services organizations. The company was formerly known as Clarivate Analytics Plc and changed its name to Clarivate Plc in May 2020. Clarivate Plc was founded in 1864 and is headquartered in London, the United Kingdom.

Clarivate Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: In Q2, Clarivate achieved 1.3% organic ACV growth, 0.5% total organic revenue growth, a 41% adjusted EBITA margin (up 50 bps) and generated $50 million free cash flow.
• Positive Sentiment: The Value Creation Plan is on track with 10 new AI-led product innovations, sales model optimizations and ongoing cost efficiencies driving improved performance.
• Positive Sentiment: In the Academics & Government segment, 93% of revenue is now recurring, renewal rates reached 96%, and over 4,800 institutions have adopted Clarivate’s AI research tools.
• Positive Sentiment: The Intellectual Property segment returned to growth with 1.5% organic recurring revenue increase, benefited from a fivefold surge in AI patent filings, and saw iPfolio new client growth exceed 50% year-over-year.
• Positive Sentiment: Life Sciences & Healthcare posted positive organic ACV growth, extended a multimillion-dollar agreement with a top 15 pharma company, and launched the DRG Commercial Analytics 360 platform.

Presentation

[Operator]

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 twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

[Operator]

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

[Mark Donohue, VP - Investor Relations at Clarivate]

Thank you, Jordan, and good morning, everyone. Thank you for joining us for the Clarivate second quarter twenty twenty five 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 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.

[Mark Donohue, VP - Investor Relations at Clarivate]

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 Clarabate's filings with the SEC and on the company's website. Our discussion will include non GAAP measures or adjusted numbers. Clarabate 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 in our earnings release and supplemental presentation on our website.

[Mark Donohue, VP - Investor Relations at Clarivate]

With me today are Mavi Shintas, 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 Madhu.

[Matti Shem Tov, CEO & Director at Clarivate]

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

[Matti Shem Tov, CEO & Director at Clarivate]

This was driven by an important improvement in the subscription book due to higher renewal rate and new business wins. Total organic revenue in the second quarter grew 50 basis points and recurring organic revenue grew almost 1%. Adjusted EBITA margin for the first half of the year increased 50 basis points to 41% driven by internal cost efficiencies. Free cash flow continued to be strong as we generated $50,000,000 in the second quarter and $161,000,000 for the first six months of this year. I'd like to highlight that all of our segments showed improvement for the first half of the year.

[Matti Shem Tov, CEO & Director at Clarivate]

Our A and G business delivered 2% organic ACV and subscription revenue growth. IP returned to organic growth in patent annuities and is well positioned to benefit from AI tailwind and Life Science and 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 seven, our value creation plan was launched in the 2024 and it is on track with measurable progress across all key initiatives and KPIs.

[Matti Shem Tov, CEO & Director at Clarivate]

We have launched all major business optimization program to increase cost subscription and reoccurring revenue, which is enhancing sales predictability. 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 solutions in partnership with customers. And we are undertaking strategic review to assess alternatives across the business. If you turn to Slide eight, I'll provide an update on the VCP starting with the A and D segment.

[Matti Shem Tov, CEO & Director at Clarivate]

Our proactive business model optimization coupled with decades of experience in delivering data and analytics solution to our client 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 ProQuest e books 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.

[Matti Shem Tov, CEO & Director at Clarivate]

Following this change in strategy, A and G subscription revenue now constitutes 93% of the total segment revenue excluding disposals, up from 79% in the prior year period. In the 2025, we have achieved a 96% renewal rate in A and G. This is impressive results considering the macro backdrop characterized by 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 July, 75% of global A and D subscription for the full year has successfully renewed.

[Matti Shem Tov, CEO & Director at Clarivate]

This is in line with last year's renewal pace. We continue to successfully invest in innovation across the A and 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 nine, our partnership within A and G continued to grow, including recent multi year agreement with the Canadian research knowledge network that will provide 55 university greater access to Web of Science, fostering enhanced research collaboration and the impact. We are also accelerating progress with next generation Identik AI solution. AI agents can independently play and execute multistep processes by interacting with users, data sources and tools. The expansion of our AgenTiK AI platform marks a significant milestone as we implement responsible AgenTiK AI to accelerate research and learning workflow. Our initial launch of the literature review agent in Web of Science exemplify this pioneering approach.

[Matti Shem Tov, CEO & Director at Clarivate]

The agent converse with the researchers to understand the research goals, then customize the specific literature review scope and define the proper output. This personalized interactive experience keeps the researcher in the center, which closely mimic 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 and discovering our position at the forefront of developing user facing AI adjunctive 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 reoccurring revenue rising by about 1.5% in the first six months of twenty twenty five.

[Matti Shem Tov, CEO & Director at Clarivate]

The market wide surge in AI innovation across industry is driving sustained growth in registered IT. We believe this trend will create favorable condition for our patent renewal business. As an example, in the past year alone, patent filing for AI invention have grown fivefold compared to pre Jet GPT levels. In addition, AI has a potential to double innovation output and build more defensible IP portfolio for industry powered 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 level of efficiency and IP creation.

[Matti Shem Tov, CEO & Director at Clarivate]

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 customer new clients and partnership 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 WinBend to enhance their IP management practices and gain meaningful insights into emerging trends in the IP management. IP management transition.

[Matti Shem Tov, CEO & Director at Clarivate]

So this morning, we have announced that Maroon Murad will join Clarivate as President of the IP segment effective 09/08/2025. He'll join us from Verisk Analytics, where he is the President for the Claims Solution 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 Sampson for his dedication to the industry and his significant contribution to Clarivate success. Turning into Life Science and Healthcare segment.

[Matti Shem Tov, CEO & Director at Clarivate]

In Life Science, we are encouraged that the VCP effort 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 a top 15 global pharmaceutical company. This achievement validates the importance of our Copelis 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 three sixty, a dedicated subscription platforms empowers MedTech organization to enhance their commercial strategy and execution capabilities.

[Matti Shem Tov, CEO & Director at Clarivate]

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 BCP 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 release will continue throughout all three segments in the second half of the year by integrating AI functionalities into our offering, including Web of Science Research, Darewind and Cortellis, we aim to further improve outcome and value for our users. On Slide 15, now that you've heard our VCP is driving result across each of our segments, the fourth pillar of our VCP is evaluating strategic alternatives.

[Matti Shem Tov, CEO & Director at Clarivate]

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 the 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 to improve revenue performance for the first six months 2025, driven by organic HCV growth in A and G and Life Sciences segment and the return of growth in Renewal the the patent renewal business.

[Matti Shem Tov, CEO & Director at Clarivate]

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 the 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 success, 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 stakeholder.

[Matti Shem Tov, CEO & Director at Clarivate]

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

[Jonathan Collins, EVP & CFO at Clarivate]

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 $621,000,000 bringing the first half to $1,200,000,000 The second quarter change from last year was entirely inorganic as a result of the ScholarOne divestiture and the ANG and LS and H business disposals partially offset by organic growth in foreign exchange. The second quarter net loss was $72,000,000 The improvement over Q2 of the prior year is driven by the non cash impairment charge recorded last year that did not recur this year. Adjusted diluted EPS, which excludes items like the impairment, was $0.18 The changeover last year is entirely attributed to the divestiture and disposals. Operating cash flow was $116,000,000 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 one time 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.

[Jonathan Collins, EVP & CFO at Clarivate]

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 four 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 management amplified the $3,000,000 of total organic growth, which includes the transactional revenue type, resulting in a $6,000,000 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.

[Jonathan Collins, EVP & CFO at Clarivate]

The top and bottom line changes of $32,000,000 and $17,000,000 respectively, impacted both the A and G and LS and 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 $9,000,000 and adjusted EBITDA by $4,000,000 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 to page 20 to review how these same drivers impacted the top and bottom line changes for the first half of this year.

[Jonathan Collins, EVP & CFO at Clarivate]

As Moddy noted just a few moments ago, organic growth for H1 has improved by 180 basis points over where we ended last year. This modest growth compared to last year's decline yielded $5,000,000 of total organic growth and $10,000,000 of incremental adjusted EBITDA in the first half. The combined impact of the disposals and divestitures lowered revenue by 64,000,000 and adjusted EBITDA by $30,000,000 over the same period last year. Both the top and bottom lines benefited from foreign exchange in the first half as the U. S.

[Jonathan Collins, EVP & CFO at Clarivate]

Dollar weakened towards the end of the first quarter. The net impact of these changes led to a 50 basis point profit margin 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 manner. Free cash flow was $50,000,000 in the second quarter bringing the first half to $161,000,000 The change in the quarter and the half are driven entirely by the adjusted EBITDA impact outlined on the last two pages as lower working capital requirements were offset by higher one time costs. We incurred $18,000,000 of one time cost in Q2 and $42,000,000 in H1 both of which were largely restructuring related outflows associated with the implementation of the value creation plan.

[Jonathan Collins, EVP & CFO at Clarivate]

Cash interest was $92,000,000 and was slightly lower than Q2 of last year as we continue to recognize the benefit associated with the $200,000,000 of debt we repaid. Working capital requirements improved by $15,000,000 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 $50,000,000 of free cash flow we generated in the second quarter to repurchase another 11,500,000.0 shares of common stock bringing the first half buybacks to $100,000,000 which is about 60% of the capital we had available to allocate. The remaining 40% increased our cash balance, lowering our net debt.

[Jonathan Collins, EVP & CFO at Clarivate]

We also took the opportunity during the second quarter to extend a portion of our debt maturity by five years through refinancing $500,000,000 of our twenty twenty six bonds with a new tranche on our existing Term Loan B facility, which matures in 02/1931. Shortly after we completed the refinancing, we swapped about 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 $7,000,000 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.

[Jonathan Collins, EVP & CFO at Clarivate]

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 in the upper half of our range. The improved organic performance combined with a weaker U. S. Dollar and slower than anticipated attrition in the business disposals will likely yield revenue near the top end of the range.

[Jonathan Collins, EVP & CFO at Clarivate]

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 stock repurchases.

[Jonathan Collins, EVP & CFO at Clarivate]

And finally, at the bottom of the page, we anticipate free cash flow at about $340,000,000 at the midpoint of the 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 non core 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 $10,000,000 improvement over our initial indication at the midpoint of the guidance range.

[Jonathan Collins, EVP & CFO at Clarivate]

We continue to expect a profit headwind in this area of about $20,000,000 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 $125,000,000 and we're implementing $85,000,000 of operating cost actions, which yield a profit impact of about $40,000,000 We expect most of the remaining $75,000,000 revenue reduction will take place next year and will have a small profit impact. The top line change for the disposals represents a $15,000,000 improvement over our initial indication. The divestitures of both ValleyPat and ScholarOne last year will lower revenue by about $40,000,000 and profit by $20,000,000 And finally, we now anticipate foreign exchange translation will have a negligible impact as the U. S.

[Jonathan Collins, EVP & CFO at Clarivate]

Dollar has remained weak against other foreign currencies. This represents a $25,000,000 improvement from our initial indication for full year revenue. Please turn with me now to Page 24 to step through the components that will lead to more than a third of the adjusted EBITDA converting to free cash flow.

[Jonathan Collins, EVP & CFO at Clarivate]

Our outlook for free cash flow remains unchanged at the midpoint of our range. One time 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 $10,000,000 over last year as a result of the debt we 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 $25,000,000 And while we remain committed to investing in product innovation, the strategic disposals and cost efficiencies will improve capital spending by about $35,000,000 The net impact of these changes is free cash flow of $340,000,000 at the midpoint of the range and will result improvement on the conversion of adjusted EBITDA of about one percentage point.

[Jonathan Collins, EVP & CFO at Clarivate]

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 non core 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.

[Jonathan Collins, EVP & CFO at Clarivate]

In A and 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 and H, our subscription revenue leading indicator, ACV, returned to organic growth as the investments in Cortellis are paying off in the R and D market with higher retention and strong new subsets. 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 provide the 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 call to turn the call back over to Jordan to take your questions. And as a reminder, please limit yourself to a question and then return to the queue for any additional. Jordan, please go ahead.

[Operator]

Thank you. Ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q and A roster. Your first question comes from the line of Manav Patnaik from Barclays. Your line is live.

[Manav Patnaik, MD & Equity Research Analyst at Barclays Investment Bank]

I had a question on the IP business. I know you talked about the rebound in the IP annuity market. I think you also talked about being excited about the AI opportunities there. So just a few parts of that. Just the timing of that rebound, how you can capitalize on that AI opportunity.

[Manav Patnaik, MD & Equity Research Analyst at Barclays Investment Bank]

And I think I read somewhere that a lot of the at least Gen AI, new patents, all that kind of activity seems to be more weighted towards China. So just wondering your exposure and capabilities there as well.

[Jonathan Collins, EVP & CFO at Clarivate]

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 two, 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.

[Jonathan Collins, EVP & CFO at Clarivate]

So certainly there's a clear trend that more patents 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 disproportionate. 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.

[Jonathan Collins, EVP & CFO at Clarivate]

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.

[Mark Donohue, VP - Investor Relations at Clarivate]

Thanks Manav. Next question please Jordan.

[Operator]

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

[Toni Kaplan, Executive Director & Lead Analyst - Equity Research at Morgan Stanley]

Thank you so much. I think earlier this week, we saw a headline that the Department of Commerce 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 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? Thanks.

[Matti Shem Tov, CEO & Director at Clarivate]

So first of 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 two or three decades. So we are an integral part of the ecosystem, including collaborating with patent offices worldwide, collaboration with law firm and with corporate.

[Matti Shem Tov, CEO & Director at Clarivate]

In a way, we are sitting in the intersection and supporting those institutions. So any change it will be where we are very well positioned to support this change and somehow even take advantage of this change. Yes, this market may be changing and maybe not changing, but we've been there for the last twenty, thirty years and even more. And we are very well positioned and close to our customers. So we'll track it.

[Matti Shem Tov, CEO & Director at Clarivate]

We'll continue to as it continues to involve. And we will be collaborating with our customers and partners on this transition.

[Toni Kaplan, Executive Director & Lead Analyst - Equity Research at Morgan Stanley]

You.

[Matti Shem Tov, CEO & Director at Clarivate]

Thank you, Tony.

[Mark Donohue, VP - Investor Relations at Clarivate]

Question, Your

[Operator]

next question comes from the line of Owen Lau from Oppenheimer. Your line is live.

[Owen Lau, Executive Director at Oppenheimer & Co. Inc.]

Hi, good morning. Thank you for taking my question. So for university funding cut, which is still a hot topic, I saw that 75% of your twenty twenty five 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? Thanks a

[Matti Shem Tov, CEO & Director at Clarivate]

So I'll start and then Jonathan may continue. So we are looking good on AMG despite of all the concerns that we collectively have. So 93% of the thing is of the NG revenue is now recurring. We have 96% renewal rates. As you mentioned, 75% of the books is already in house.

[Matti Shem Tov, CEO & Director at Clarivate]

We don't have anything out of the ordinaries with our customers, but let's just remind ourselves of few things. One, our AMG products are central and mission critical to the organization. I cannot imagine a decent university today without Web of Science and some of the surrounding problem. Any university will need to have an Alma type solutions. So we are in a pretty good shape on the Web of Science and ERP Alma things. With regards to the content, as I mentioned in my discussion, we were forward looking taking away the discretionary one time expenditure and it's served us very, very well these days. And we see the uptake of customers who were initially complaining about taking away the one time purchases.

[Matti Shem Tov, CEO & Director at Clarivate]

We're now buying more and more of our subscription businesses, the PQ e books, the PQ digital collections, which actually serve them very, very well in this kind economic climate. So we are pretty confident that going ahead, we'll continue to see a good and decent renewal rates and uptake of the different A and G offering. Thank you.

[Mark Donohue, VP - Investor Relations at Clarivate]

Thank you, Gordon. Jordan, next question please.

[Operator]

Your next question comes from the line of Ashish Sabadra. Your line is live. Hi.

[William Qi, Equity Research Senior Associate at RBC Capital Markets]

Hey, good morning guys. This is Will Chi on for Ashish Sabadra. Congrats on the quarter and appreciate you guys taking our question. Last quarter, 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 renewals tick up.

[William Qi, Equity Research Senior Associate at RBC Capital Markets]

Curious if you could provide any updates how that sales momentum has been continuing and any outlook from here? Thank you.

[Matti Shem Tov, CEO & Director at Clarivate]

So I think we've taken away a lot of hassle from the sales organization. We are very, very focused these days, subscription, reoccurring, renewal, price, bringing back new business. Customer like the the the I've just attended a sales meeting last week in in London, and people are very excited. They are very focused. They just do subscription reoccurring as opposed to do subscription, onetime, onetime e books.

[Matti Shem Tov, CEO & Director at Clarivate]

It's just complicated. The focus we're taking away we took away a lot of complexity out of the organization, focusing the sales organization. We have a great sales organization. We've done some changes we just spoken about. But very upbeat about going forward for the rest of the year and for next year as well. So, yeah.

[William Qi, Equity Research Senior Associate at RBC Capital Markets]

Thank you.

[Operator]

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

[George Tong, Senior Research Analyst - Equity Research & Business Services at Goldman Sachs]

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

[Jonathan Collins, EVP & CFO at Clarivate]

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 and D and then the commercialization efforts of our life sciences customers.

[Jonathan Collins, EVP & CFO at Clarivate]

On the R and 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 six to twelve months, we've made some really nice strides. Matti touched on a couple of those new capabilities that have gone into the products.

[Jonathan Collins, EVP & CFO at Clarivate]

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 and 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.

[George Tong, Senior Research Analyst - Equity Research & Business Services at Goldman Sachs]

Very helpful. Thank you.

[Operator]

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

[Adam Parrington, AVP at Stifel Financial Corp]

Hi, 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? Thanks.

[Matti Shem Tov, CEO & Director at Clarivate]

It's pretty straightforward. I mean, there's one out of the three disposal. One is taking longer because we simply had some interaction with our customers and they ask us to expand because it took them longer than we expected to get settled with alternative offerings. So we just extended by six months and it reflects on the selling that specifically on the one time e books. They ask for more time to get organized and that's the reason. Nothing behind this.

[Mark Donohue, VP - Investor Relations at Clarivate]

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

[Matti Shem Tov, CEO & Director at Clarivate]

Thank you.

[Operator]

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

Participants

Executives

• Mark Donohue, VP - Investor Relations
• Matti Shem Tov, CEO & Director
• Jonathan Collins, EVP & CFO

Analysts

• Manav Patnaik, MD & Equity Research Analyst at Barclays Investment Bank
• Toni Kaplan, Executive Director & Lead Analyst - Equity Research at Morgan Stanley
• Owen Lau, Executive Director at Oppenheimer & Co. Inc.
• William Qi, Equity Research Senior Associate at RBC Capital Markets
• George Tong, Senior Research Analyst - Equity Research & Business Services at Goldman Sachs
• Adam Parrington, AVP at Stifel Financial Corp