Business Overview and History

Clarivate Plc (CLVT) is a leading global provider of transformative intelligence, offering enriched data, insights analytics, workflow solutions, and expert services to customers across the Academia Government, Intellectual Property, and Life Sciences Healthcare markets. With a rich history spanning decades, the company has established itself as a trusted partner in fueling innovation and powering discovery worldwide.

Clarivate was incorporated in 2019 with the goal of connecting people and organizations to the intelligence they can trust to transform their perspective, their work, and the world. The company's origins can be traced back to the Institute for Scientific Information (ISI), established in 1960, which pioneered the development of the Science Citation Index and other groundbreaking bibliometric tools. Over the years, Clarivate has expanded its capabilities through strategic acquisitions, including ProQuest in 2021, solidifying its position as a comprehensive provider of transformative intelligence.

Clarivate built a highly curated, proprietary suite of branded information and insights solutions, created through a rigorous process of sourcing, aggregation, verification, translation, classification, and standardization. This approach helped Clarivate provide a trusted foundation and quality user experience for its customers. The company serves a diverse global customer base, which includes over 45,000 universities, non-profits, libraries, corporations, and independent researchers.

Today, Clarivate operates three core business segments: Academia Government, Intellectual Property, and Life Sciences Healthcare. The Academia Government segment empowers institutions and libraries to drive research excellence and student outcomes, offering solutions such as Web of Science, ProQuest, and Ex Libris. The Intellectual Property segment helps companies, law firms, and organizations effectively manage and protect critical IP assets, with offerings like Derwent Innovation and CompuMark. The Life Sciences Healthcare segment provides intelligence platforms and consulting expertise to support the development and commercialization of safe, effective, and successful treatments and solutions for patients.

Financial Performance and Liquidity

Clarivate's financial performance has been marked by a mix of growth and challenges in recent years. In the fiscal year 2024, the company reported total revenue of $2.56 billion, a 3% decrease from the previous year's $2.63 billion. This decline was primarily driven by a 6.5% drop in transactional revenue, partially offset by a 0.9% increase in subscription and re-occurring revenue. The company's net loss for the year was $636.7 million, compared to a net loss of $911.2 million in 2023, a significant improvement year-over-year.

Despite the recent financial headwinds, Clarivate maintains a robust liquidity position. As of December 31, 2024, the company had $295.2 million in cash and cash equivalents, including $10.5 million in restricted cash. Additionally, the company had $692.3 million in available borrowing capacity under its revolving credit facility, providing ample financial flexibility to navigate the current market environment.

The company's debt-to-equity ratio stood at 0.90 as of December 31, 2024, while its current ratio and quick ratio were both 0.87. These figures indicate a relatively stable financial position, although the company may need to monitor its short-term liquidity closely.

In terms of cash flow, Clarivate generated $646.6 million in operating cash flow for the full year 2024, with free cash flow of $357.5 million. For the fourth quarter of 2024, operating cash flow was $141 million, and free cash flow was $59 million.

Clarivate's adjusted EBITDA, a key profitability metric, was $1.06 billion in 2024, representing an adjusted EBITDA margin of 41.5%. The company maintained a strong annual renewal rate of 92% across its subscription-based and re-occurring arrangements, which comprised around 80% of total revenue in 2024.

Geographically, Clarivate operates globally, with approximately 50% of revenues coming from the United States in 2024, 2023, and 2022. No other single country accounted for more than 10% of revenues during this period.

Strategic Transformation and Value Creation Plan

In 2024, Clarivate unveiled its comprehensive Value Creation Plan (VCP) to drive the company's strategic transformation and unlock shareholder value. The VCP is focused on four key pillars:

1. Business Model Optimization

Clarivate is transitioning from a transactional revenue model to a greater emphasis on subscription and re-occurring revenue streams, which currently account for 80% of the company's total revenue. This strategic shift is expected to improve the predictability and profitability of Clarivate's operations.

2. Improved Sales Execution

The company has taken steps to enhance its sales force, including aligning account management models, scaling customer success teams, and refocusing incentive structures to reward subscription and recurring revenue growth.

3. Accelerated Innovation

Clarivate continues to invest in developing proprietary assets and AI-powered solutions across its business segments, leveraging its expertise in areas such as academic AI, Cortellis R&D, and Derwent patent search.

4. Solutions Rationalization

As part of the VCP, Clarivate is evaluating its product and service portfolio, identifying opportunities to streamline and optimize its offerings to increase execution focus and capital allocation.

The implementation of the VCP is already underway, with the company taking several actions in 2024, including the divestiture of the ScholarOne and Valipat businesses, and the introduction of new subscription-based offerings in the Academia Government and Life Sciences Healthcare segments.

Competitive Landscape and Risks

Clarivate operates in a highly competitive industry, facing competition from both established players and smaller, specialized providers. The company's ability to maintain its competitive edge relies on its capacity to continuously innovate, enhance customer engagement, and deliver superior value to its diverse customer base.

Key risks facing Clarivate include its dependence on third-party data and information providers, the potential for increased accessibility to free or relatively inexpensive information sources, the ability to retain and attract top talent, and the potential for business disruptions or cybersecurity incidents. Additionally, the company's global operations expose it to various macroeconomic, geopolitical, and regulatory risks.

The markets Clarivate operates in are highly competitive and subject to rapid technological changes and evolving customer demands. The company estimates that the overall market opportunity across its three segments is growing at a CAGR of low-to-mid single digits.

Over time, Clarivate has faced challenges, including increasing competition from free or low-cost information sources, as well as the need to keep pace with rapidly changing technology and evolving industry standards. The company also experienced leadership changes, including the departure of its CEO in 2021. Despite these challenges, Clarivate maintained its focus on delivering high-quality products and services to its diverse global customer base.

Segment Overview

Clarivate's business is organized into three reportable segments based on the different products and services offered and the markets served:

Academia & Government (AG) Segment

The AG segment connects trusted content, responsible technology, and editorial expertise to fuel academic success and advance national outcomes. It offers solutions in scientific and academic research, information solutions, and library software. Key products include Web of Science collections, InCites Benchmarking Analytics, ProQuest One solutions, and library services platforms such as Alma, Polaris, and Vega.

Intellectual Property (IP) Segment

The IP segment provides intellectual property data, software, and expertise to help companies drive innovation, law firms achieve practice excellence, and organizations effectively manage and protect critical IP assets. Its solutions include IP management software like IPfolio and FoundationIP, patent services, patent intelligence through Derwent Innovation, and brand IP solutions including CompuMark trademark search. The IP segment serves over 40 patent offices globally and has more than 1,600 IP service professionals.

Life Sciences & Healthcare (LSH) Segment

The LSH segment empowers life sciences and healthcare organizations with the contextual intelligence needed to deliver safe, effective, and commercially successful treatments and solutions to patients faster. Its solutions span the entire drug development lifecycle, from assessing the market and analyzing competitors to regulatory compliance and drug safety, through products like the Cortellis suite.

Outlook and Conclusion

As Clarivate navigates the evolving market landscape, the company's strategic transformation under the VCP holds the potential to drive improved financial performance and create long-term shareholder value. By optimizing its business model, enhancing sales execution, accelerating innovation, and streamlining its solutions portfolio, Clarivate aims to return to healthy organic growth and strengthen its position as a leading provider of transformative intelligence.

For the fiscal year 2025, Clarivate has provided guidance that reflects its ongoing strategic initiatives. The company expects annual contract value (ACV) to accelerate by approximately 60 basis points to 1.5% growth at the midpoint of the range. Recurring organic growth is expected to remain flat at the midpoint of the range. Revenue is projected to be around $2.34 billion at the midpoint, impacted by strategic disposals, divestitures, and a stronger US dollar. The recurring revenue mix is expected to improve by about 500 basis points from 80% to 85%.

In terms of profitability, adjusted EBITDA is expected to be in the range of $940 million to $1 billion, with a profit margin around 41.5%. Adjusted diluted EPS is expected to be between $0.60 and $0.70, down $0.08 from the prior year at the midpoint. Free cash flow is projected to be around $340 million at the midpoint of the range.

While the company faces near-term headwinds, Clarivate's robust liquidity, diversified customer base, and commitment to innovation position it well to weather the challenges and capitalize on emerging opportunities in the global information services industry. As the company continues to execute on its strategic initiatives, investors will closely monitor Clarivate's progress in delivering sustainable growth and enhanced profitability in the evolving landscape of transformative intelligence and information services.