Clarivate PLC Q2 FY2020 Earnings Call

Good day, and welcome to the Clarivate Q2 2020 Earnings Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Mark Donohue, Head of Global Investor Relations. Please go ahead, sir.

Thank you, Sarah, and good morning, everyone. Thank you for joining us for the Clarivate second quarter 2020 earnings conference call. With me today are Jerre Stead, Executive Chairman and Chief Executive Officer; Richard Hanks, Chief Financial Officer; Mukhtar Ahmed, President, Science Group; and Jeff Roy, President, IP Group. All will be available to take your questions at the conclusion of the prepared remarks. 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. This morning, Clarivate issued a press release announcing our financial results for the period ended June 30, 2020. The release as well as an accompanying supplemental presentation is available in the Investor Relations section of the company’s website, clarivate.com, under events and presentations. During our call, we may make certain forward-looking statements within the meaning of the applicable securities laws. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the business or developments in Clarivate’s industry to differ materially from the anticipated results, performance, achievements, or developments expressed or implied by such forward-looking statements. Information about the factors that could cause actual results to differ materially from anticipated results or performance can be found in Clarivate’s filings with the SEC and on the company’s website. Our discussion will include non-GAAP measures or adjusted numbers, including adjusted revenue and adjusted EBITDA. Clarivate believes non-GAAP results are useful in order to enhance an understanding of our ongoing operating performance. But they are supplemental to and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliations of these measures to GAAP measures are available in our earnings release and supplemental presentation on our website. 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 Jerre.

Thank you, Mark, and thanks to all of you for joining us this morning. 2020 has been a very productive year for Clarivate, and we still have five months left to go. What the teams accomplished in seven months is simply incredible, including our announcement this morning of very solid second quarter results. Amazingly, we've been able to accomplish so much while close to 100% of our people are working from home. This is a great credit to all colleagues and their ongoing commitment to exceed productivity and service levels while continuing to execute on our strategic initiatives to drive profitable growth and long-term shareholder value. The improved results from our recent colleague engagement and Customer Delight Surveys validate the outstanding performance of our more than 5,300 colleagues who are doing great work every day. Yesterday, we took another big step forward in enhancing our product offerings with the announced proposed strategic combination with CPA Global, creating a world leader in intellectual property information and services. This transformative combination creates a full-service IP organization, which will provide customers with numerous products and services to meet their ever-increasing needs. Once the combination is completed, we will form a true end-to-end global solution covering the innovation and intellectual property life cycle. Earlier this year, we acquired DRG, creating one of the largest and most complete providers of life science information in the world with offerings across the entire life science value chain. The integration of DRG is well advanced. We are delivering on cost synergies and have initiated revenue synergy opportunities. The growth strategy we outlined at our Investor Day last November 12 is coming to life ahead of schedule, and we're just getting started. For the second quarter, we reported adjusted revenue of $277 million, an increase of 16% at constant currency. Excluding divested businesses, adjusted revenue increased 21%. In addition to recent acquisitions, sales growth was driven by a 4% increase in organic subscription revenue from new businesses and annual price increases. This more than offset a decline in transactional revenue due primarily to reduced demand resulting from the pandemic. I'm very pleased with the significant improvement in our profits this quarter, driven by the increase in sales and the cost efficiency initiatives that we are currently pursuing. Adjusted EBITDA increased 37% to $100 million for the second quarter, and our adjusted EBITDA margin improved to 36% for this quarter compared to 30% last year. These strong results pushed our adjusted earnings per share to $0.18, the highest level since we became a public company. On our first quarter call in early May, we highlighted our expectations for the first half and second half, considering the COVID pandemic. We continue to expect a gradual lifting of restrictions and a recovery starting in the fourth quarter. Our results for the first six months are exactly in line with our expectation. We expect the second half will show a significant improvement over the first. Richard will cover the details in just a few minutes. In May, we completed our first colleague engagement and Customer Delight Surveys for 2020. I'm very proud of our improved results. In a time of great uncertainty and disruption, the confidence in our company, from our colleagues and from our customers, has never been higher. Our success always begins with colleague engagement. We saw exceptional participation across Clarivate with a 91% participation rate, up 10% from last year. The engagement score increased a healthy 7 points to 76 from our 2019 score of 69. Our score came in above the benchmark average of 72. Importantly, our company response and communications around COVID-19 scored an exceptional 93% favorable. That was our highest score. The improvements we have made internally are also making a real difference externally. This was validated by the improved results from our Customer Delight Survey. In a time where we have limited virtual-only customer interaction, we received a decisive score on the Customer Delight Survey of 79. This represents an improvement from 76 we received in 2019. Best practice is 82. So while we still have some work to do, we are well on our way to reaching and eventually exceeding this target. Our improved score confirms the importance that our customers place on the work we're doing every day to help them be successful. We saw an increase in scores on key items, including information and insights and quality of products and services. Our biggest opportunity, which has not changed since last October, is our ability to be the easy company to do business with. While this is our lowest score question at 59%, we increased our performance by 4 points. This is a good improvement and reflects the focused effort we've made on delivering customer delight scoreboard actions. Our customers have given us a roadmap to world-class delight, and we will remain unrelenting in our pursuit of this goal. To help us get there in June, we acquired CustomersFirst Now, a company led by Kerri Nelson. Kerri worked for me back at IHS and has built a business that is instrumental in introducing the discipline of superior customer experiences through their work on Customer Delight Surveys and very importantly, customer journey mapping. She's working closely with the science and IP groups to improve customer experience while building a customer-centric operational model across all of Clarivate. We will continue improving customer engagement as we quickly move ahead, implementing the plans of our new global business centers. We are setting up three centers to drive improvements in productivity and customer delight and have made significant progress so far. London is up and running. Chandler, Arizona opens next week and Penang, Malaysia in December. Despite the global health pandemic, hiring is on track and we're seeing excellent quality candidates come forward. We're also looking into other parts of the business outside of inside sales and customer service that will benefit from these centers, including more solid cost savings to come. Now turning to our internal response to the epidemic. Most of our colleagues continue to work from home. Our COVID response task force is working through our return-to-office plan; a very thoughtful plan is now in place. We continue to manage expenses closely and extended hiring restrictions until November 1 as of now. We remain optimistic that we'll see a gradual lifting of restrictions with the recovery starting in October. Based on a solid first half of the year, we remain optimistic about the second half of 2020. We reaffirmed our outlook yesterday: adjusted revenue of $1.13 billion to $1.16 billion; adjusted EBITDA of $395 million to $420 million; adjusted EPS of $0.53 to $0.59; and adjusted free cash flow of $220 million to $240 million. This outlook does not reflect any impact from our planned combination with CPA.

Thank you, Jerre. Our second quarter results demonstrate that the actions we are taking to drive improved business performance are working. We reported adjusted revenues of $277 million, an increase of $35 million or 16% at constant currency. The quarter includes a full contribution from the acquisition of DRG and Darts-ip, which together added 20% to revenue growth. This was offset by the MarkMonitor brand protection divested products, which were sold on January 1 of this year and which reduced revenue by 6% compared to last year's second quarter. Excluding the divested product lines, total revenue increased 21% at constant currency in the second quarter. The foreign exchange impact in the second quarter was a negative drag of just under 1% due to dollar strength compared to last year's second quarter. Organic business revenue, excluding acquisitions, divestitures, and foreign exchange, increased 1% as higher subscription revenue was partially offset by lower transactional revenue. On a reported basis, total subscription revenue was $217 million, an increase of 8% at constant currency. Recent acquisitions added 11% of subscription revenue growth, which was partially offset by the divested product lines, which decreased revenues by 7%. Excluding the divested businesses, subscription revenue increased 15% at constant currency. Organic business subscription revenue growth was almost 4%, driven by new business, including several large contract renewals entered into during the quarter as well as annual price increases. Subscription revenue renewal rates increased to 93% for the first six months of 2020 compared to 92% for the prior year. This is an important metric as we are enjoying the benefits of the product renovations flowing through to even higher renewal rates. Transactional revenue increased to $60 million, up $21 million or 53% year-over-year on a constant currency basis, driven by the acquisitions. Recent acquisitions added 66% of transactional revenue growth, and the product line divestiture lowered transaction revenues by less than 1%. Organic transactional business revenues decreased by approximately 13% as higher services revenues within the Web of Science and life sciences were more than offset by lower Web of Science backfile sales and CompuMark search volumes due to the global pandemic. ACV growth was 9% for the second quarter, which includes the addition of DRG. Excluding acquisitions, ACV growth on an ongoing basis increased by almost 5% and was driven by organic growth and annual price increases. Looking now at the performance across our two product groups. For the Science Group, revenue increased $48 million or 37% to $184 million at constant currency, driven by the acquisition of DRG. Organic business revenue increased by 2%, led by higher subscription and services revenue within the life sciences product family as well as the Web of Science Group. For the Intellectual Property Group, revenue for the second quarter, excluding divestitures, increased 2% to $93 million at constant currency, driven by the Darts-ip acquisition. Organic business revenue for the IP Group decreased by less than 1% as subscription revenue growth was partly offset by lower CompuMark search volumes and IP services revenue. On a reported basis, IP Group revenue declined 12% due primarily to the divested products. Adjusted EBITDA in the second quarter increased $27 million or 37% to $100 million compared to the prior year period. This was driven by the increase in revenue and strong margin flow-through, contributions from acquisitions, portfolio rationalization, as well as the benefit of the cost-saving initiatives. Our adjusted EBITDA margin improved by almost 600 basis points to 36.2% as compared to 30.2% in last year's second quarter. Other operating income was $9 million in the second quarter, an increase of $2 million or 33% compared to last year's second quarter. The change was primarily related to a gain in foreign currency exchange this quarter compared to a loss in the prior year period. For the second quarter of 2020, we recorded a benefit to income tax expense of $5 million versus an expense of $4 million in last year's second quarter. The primary driver is the difference in the timing of the recognition of profits and losses at the company's mix of jurisdictions for the interim tax periods for the second quarters of 2019 and 2020. Cash taxes in the second quarter were $3 million compared to $7 million in the prior year period. The primary drivers of that decrease were that U.S. income tax payments were deferred until July 15 of this year due to the COVID pandemic, while last year's second quarter included foreign jurisdiction tax payments made for tax years 2017 and 2018. For the second quarter, adjusted net income was $70 million and adjusted diluted EPS was $0.18. This represents a significant sequential increase compared to adjusted net income of $26 million and adjusted EPS of $0.07 for this year's first quarter. The weighted average number of fully diluted shares outstanding used in the adjusted EPS calculation increased by 28 million shares to 395 million shares compared to this year's first quarter. The increase is mainly due to including the full share count versus weighted share count for the issuance of shares related to the acquisition of DRG in Q1 and the exercise of public warrants in exchange for ordinary shares in the first quarter. Capital expenditures were $33 million for the second quarter. The increase over last year is due primarily to an acceleration of product development with a significant cadence of new releases for renovated products, more time spent on application development as a result of COVID. Therefore, a higher proportion of time is capitalized, together with the addition of DRG. Cash and cash equivalents were $609 million as of June 30, an increase of $300 million from the March 31, 2020 period. The increase was primarily driven by $304 million of proceeds from the June ordinary share issuance. Adjusted free cash flow was $42 million for the quarter compared to a use of cash of $9 million in last year's second quarter. The year-over-year improvement of $51 million is due primarily to a $62 million increase in cash provided by operating activities. As of June 30, we had total gross debt of $1.95 billion. Net debt was $1.35 billion. Stand-alone adjusted EBITDA, which we are required to report on a trailing 12-month basis pursuant to the reporting covenants contained in our credit agreement and indenture, was $439 million. Refer to our earnings release or 10-Q for a reconciliation from net loss to adjusted EBITDA and from adjusted EBITDA to stand-alone adjusted EBITDA. With net debt of $1.35 billion, our net leverage ratio improved from 4.7x at the end of Q4 2019 to 3.1x at the end of Q2 2020, driven by the increase in cash and stand-alone adjusted EBITDA. We ended the quarter with significant liquidity. In addition to the $609 million of cash on hand, we have an untapped revolver of $250 million. In conjunction with closing the proposed transaction with CPA Global, we are planning to use $400 million in cash to retire part of our outstanding debt.

Thank you, Richard. Before we open the line for questions, let me reiterate how excited we are with the progress we're making towards our long-term profitable growth objective. The proposed combination with CPA Global will play a big role in getting us there even quicker. I want to thank all colleagues at Clarivate for continuing to go above and beyond in the face of the pandemic. Not only did we deliver solid results for the first half of the year, we continued to make significant progress on many of our strategic initiatives, including two transformative acquisitions, and we improved our colleague engagement and customer delight scores. Lastly, while we moved our Investor Day once this year due to the health crisis, we've decided to move it again to November, when we hope to have completed the proposed combination with CPA Global. This means that we'll be in a better position to further discuss the benefits of the combination, our integration plans, and provide a combined company outlook for 2020. We're now ready to take your questions. As a reminder, please limit yourself to one question, then return to the queue.

Our first question comes from Manav Patnaik with Barclays.

I think the results are fairly straightforward. I guess my question, Jerre, is more you've got all these moving pieces thanks to COVID. You've got DRG on the science side. You just added CPA Global to the IP side. My question is, working from home, how are you able to handle all this? Can you just give us a flavor of how the DRG acquisition has been going maybe as an example to your capacity to handle all this?

Yes. Great question, Manav. I'll start and have Mukhtar add. That's a great example. To put that in perspective, we announced the closing of that, as you'll remember, on February 29. And two weeks later, everybody was working from home. The integration is ahead of plan. I'm very proud of Mukhtar, his team, and the entire DRG team. Our cost savings are above target, and continue to be. The revenues, I just couldn't be happier with. And we've done it, I think, with a great integration team that Mukhtar will give you a couple of points on in just a minute. And then we stay really close on top of things as we are doing and we'll continue to. Our productivity is the highest that I've ever seen it. I could tell you why it is for me, but let's focus on what Mukhtar can say with the progress on DRG. Great question.

Sure. Thank you, Jerre. Yes, the integration went very smoothly. We had a very experienced team here managing that program. And as Jerre says, it's been very smooth. We've realized not only our cost synergies but also our revenue synergies. A fair amount of cross-selling has also occurred, and we've reaped benefits from the initiatives associated with that, including, obviously, bringing various products to market. Overall, it's gone very well. I think the unique aspect of what we do, which is providing information and data, has actually seen a greater demand here for digital engagement, online engagement, and data resources, especially with the COVID situation. So that has certainly helped us to stay on the course here.

Our next question comes from Seth Weber with RBC Capital Markets.

I appreciate the commentary about some of the new contract extensions and things we got here in the quarter. I was wondering if you could just give us some more color on what you're seeing from specifically on the universities and the government side. Because I think there's some concerns out there that those end markets could be relatively softer here just in the current dynamics.

Yes. No, great question. I'll start; Mukhtar will pick up, and Richard will close this one off. We're really pleased with where we are operating. For sure, there are pressures on universities and government from a cost standpoint. Our renewal rates are actually slightly improved over last year at this point in that part of the world. And just a reminder for everybody, about 70% of our annual subscription-based renewals occur in the first half. So we've got a pretty good view of that.

Sure. Thanks, Jerre. I mean, what we've seen in 2020, particularly from the academic sector here, is pretty much continuity primarily because a lot of the funding is already in place. Much of the academic sector, particularly the upper-tier universities and academic centers, have pretty sound funding structures and endowments. We have a view towards 2021. And on a case-by-case basis, as Jerre said, we're certainly looking at where we can potentially lend flexibility to certain universities in terms of adjusting to COVID and also the post-COVID potential scenarios where certainly more online engagement may occur.

Thanks, Mukhtar. Richard, just cover the term side, etc. Thanks.

Yes. Just a couple of other points on the university end markets. Firstly, to Mukhtar's point, we sell to the top 7,000 research-intensive universities around the world. We monitor usage, and usage has been very, very good during this pandemic period. Secondly, the dollars allocated to Clarivate products is a very small percentage of the overall university budgetary spend on information resources. So we are not a significant part of the overall university spend. Therefore, we are not expecting there to be disruption consequently. And with respect to payment terms that Jerre was referencing, we put a task force in place at the start of the pandemic, which was really essentially an enabler to allow sales to maintain the client relationship and any payment issues to be handled by a corporate team. I must say that the number of instances we've had to manage through that mechanism has been very low. Our front office sales organization has managed these relationships extremely well. So we've not seen, at this stage, disruption in that respect.

Our next question comes from Ashwin Shirvaikar with Citi.

Congratulations on the performance. Yes. I'm trying to primarily figure out how the environment changed through the quarter. So perhaps looking at it from two angles. One, you launched the Web of Science beta with the new UI. Have you had an opportunity to get some initial feedback throughout the quarter? Does the pricing for value come through as you proceed? Is it a separate process, or is it synchronous? And then when you talk about large contracts entered in June, is that because the environment has returned to a semblance of normalcy in June compared to April? Just trying to get some feel for how the quarter itself progressed?

Great question. I'll start. I'll ask Jeff to comment on the new product introductions and user interface, etc., and IP. Mukhtar, absolutely, because we introduced a tremendous amount of new products in life science in Q2. So we'll cover it. I would say two or three just as reminders for everybody. We said that we reduced our midpoint of our revenue guidance by $30 million. And just as a reminder, we said $1.130 billion to $1.150 billion. And I think it’s important that you remember we also said that we thought about 47%, 48% of our revenue would be in the first half versus 52% in the second half.

Yes, sure. Thanks, Jerre. I mean, to comment on the environment first. As Jerre said, we expected to see some softness, particularly in the transactional part of the IP business as a result of COVID. I would say the softness that we saw was right in line with our expectations, so no surprises there. We were really pleased in the first half with the underlying subscription strength. Therefore, we feel pretty confident that what we predicted at the end of the first quarter for the year is going to be exactly what's going to happen with the recovery starting in Q3 and hopefully accelerating beyond that. On the product side, I mean, with Q2, the work-from-home and the environment really hasn't slowed us down at all. We completed the Darts-ip integration with CompuMark right at the end of Q1. We completed the integration with Derwent at the end of Q2. We were able to make quite a bit of progress around adding data with the full text expansion into Derwent from 20 to 65 authorities. And of course, we also have added quite a bit of industrial design content to TM go. So we continue to focus on the user experience for our customers, and we'll continue to do that through the second half.

Yes. Very similar to Jeff. I think what we've enjoyed in Q2 is certainly an increase in end-user adoption right across our suite, particularly in Web of Science. Some of that, of course, is the move towards distance learning and a lot of the universities sending their students home. So that uptick was certainly noticeable for us. In line with our product releases, particularly in the Cortellis suite, we've seen an increase not only in adoption but also in subscription. Our retention has increased across the Cortellis suite in particular. We released a number of website improvements, including the UI. We had the 2020 version of the journal citation reports that we released. Naturally, those will take more time to adopt. So we're expecting, obviously, a response to those in Q3 and beyond as our customers can enjoy the benefits from those particular releases.

Thanks, Mukhtar. Thanks, Jeff. Ashwin, great question. I hope that helps clarify why we've got such confidence in delivering the second half.

Our next question comes from Andrew Nicholas with William Blair.

This is actually Trevor Romeo in for Andrew. Just wanted to ask one on the IT business in light of the acquisition you announced yesterday, CPA. That business is becoming a bigger piece of the total pie. So I was just wondering how you think about the market growth for the IP business broadly. I think you’ve talked about potentially double digits for life sciences over time. I’m just wondering what might be a comparable type of growth outlook for the IP segment?

Great question. I'll have Jeff comment on that. A couple of key statistics is the growth in patents and the growth in trademark inquiries. But the patent growth, Jeff, please comment on it because it's pretty remarkable.

Yes. So we like the underlying strength in the market. I mean you're seeing patents grow roughly 6% year-on-year. And you're seeing what I would call a democratization of innovation where you're seeing a much larger spread of companies filing patents. So it's not dominated by just the larger players in each particular market. We think that creates an incredible amount of opportunity for us in the IP market, particularly with the new mix of products that we expect to enjoy by the fourth quarter.

Our next question comes from George Tong with Goldman Sachs.

I wanted to dive deeper into the potential growth impact of the acquisition of CPA. Following this acquisition, Jerre, can you provide an update on what your aspirational organic revenue growth target is exiting 2021 and by 2023?

Great question. In November, we will provide really crisp guidance and look forward to that out into the future. Obviously, based on our expectation to close early fourth quarter or sooner with the addition of a great business, a couple of things. What we have said was that we expected — Richard and I just for a reminder for everybody, actually January 14, 2019, we said we expected to close 2020 between 4% to 6% organic revenue growth. We feel very good about that target. If anything, if you included the organic growth in DRG, which we won’t, but if you included that, it would be even higher at the top end of that. We also said then last year at our Investor Day that we expected to close a run rate of 6% to 8% organic growth as we exit 2021, and we’ll do that. I think what you should be thinking about is, as you heard us think, life sciences should be growing double digits. We have a high degree of confidence that, as do all of us, that, that will happen. We'll give you much clearer guidance on what we expect with the addition of CPA in November. And we’ll also lay out, to your question, George, a 2022 exit rate into 2023 on organic growth, free cash flow, and for sure, an exciting number of EBITDA margins.

Our next question comes from Zach Cummins with B. Riley FBR.

Just talking about the pricing. Even in a difficult environment, it sounds like you were still able to actually increase prices here. I was hoping you could just give a little more detail around the reception to the price increases and your ability to continue to see that move upward as the environment continues to improve from the tough conditions here in Q2?

Great question. I'll have Richard add color in just a second. We just had our first half report and annual report on pricing for the year and felt very good about that. We had said last year that we hope to be north of 3% with price realization. We're very much on track with that. We had a great meeting in the last week or two with Mukhtar, Jeff, Richard, myself, and others, and we’ll be loading, as we’ve said consistently, our renewal information somewhere north of 4% expected growth. I don't use the word price because I don't think of it that way. I use the word value increase. Just for openers, if you think of everything we provide for the annual subscription base, what you get at the beginning of the year versus what you continue to receive from us at the end of the year is a significant enhancement when we talk about all the new products, etc. I feel very good. One other quick comment and then to Richard for color. Our feedback from the customer delight scores is very consistent. It’s the highest scores I’ve ever seen in the value that our customers place in their work streams on our product offerings. So we want to continue to earn that kind of return and value recognition. We’ll continue to make sure that we demonstrate with our sales force to increase value with the new products and enhanced timeliness, etc.

Yes. I think Jerre has covered it. The items I would add is actually relating to currency, and that is that over 75% of our revenue streams are dollar denominated. Obviously, the dollar is relatively strong. Therefore, when it comes to price increases, where we are invoicing in particular in emerging markets, where there's been currency devaluation against the dollar, that’s the one area where we are ensuring that we’re obviously selling on value. But as we think ahead, that would be one area where we would be a little bit more cautious, and we’ve factored that into our estimates for price increases for next year. Looking at the — we’re expecting a yield of at least 4% in 2021. As we’ve said on previous calls, we expect equilibrium of price increases annually to be between 4% and 5%. But the one area that we, as I said, that we’re focused on is emerging markets because of dollar strength.

Our next question comes from Shlomo Rosenbaum with Stifel.

A couple of questions on DRG. First, could you tell us specifically how much revenue DRG contributed in the quarter? And then also, can you comment on the progress of continuing to transition the revenue to more of a subscription base than the kind of transactional base that they have had beforehand that was ongoing before you guys bought them?

That's a great question. Let me help on the first part, and then Mukhtar and Richard give our views on how that back and fourth quarter load will shift with time into more annual subscription base. Just take it this way. If we have them for a full year, they would have delivered between $210 million and $220 million of revenue. 60% of that is in the second half. A simple way to think about it is, make it easy, $130 million or thereabouts in the second half. Had they been with us all year, that means they would have been at $90 million in the first half. They weren't because we had them for four months, so you can do that math. But the big thing is 60% comes in the second half with a big curve on the fourth quarter.

Just a point of clarification here. I mean, we're talking about recurring revenue and not one-time transactional revenue. There is a difference between the two. Recurring revenue allows us to engage in long-term relationships with customers and offer significant size as well. As part of that shift, we started really taking a number of the assets, particularly the analytical tools and software products that customers use, and we're shifting those over to 100% cloud subscription. We’ll continue with that effort as we build out the products and productize those various use cases. Over time, we’ll see some of that recurring revenue shift to cloud subscription. But certainly in Q3 and Q4, we expect to continue with a real push here on bringing in a lot of the commitments around those recurring engagements.

Yes. So in terms of the contribution from DRG, in the press, you can see that we bifurcate the revenue growth between acquisitions, divestitures, and organic growth in FX. So you can see it in the supporting documentation in the Q.

Yes. I think the other thing I’d comment on the actual last year all-in for DRG was $207 million. The hypothetical I gave you is not a big growth. So there's room for that, too. But use the actuals, and you'll see how it plays out. That's why we have such huge confidence in the second half delivery as we've given you the annual guidance. I think we are done with the questions at this point. I suggest that we look forward to any one-on-ones as we go forward. We're very, very pleased with the results, and as we said yesterday, really excited about having the good fortune to add DRG and then we hope as quickly as we can with CPA. These are two amazing assets that put us as world leaders in two of the greatest businesses that there is, and the only one that tracks innovation from the beginning to the real result of reality with innovation. So very pleased, very excited. I'm very proud of our team and the amazing work they continue to do. And I thank you all for your interest and participation. Thanks, operator.

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