Clarivate PLC Q1 FY2023 Earnings Call

Good morning. Thank you for joining today's Clarivate Q1 2023 Earnings Conference Call. I would like to now hand it over to your host, Mark Donohue, VP of Investor Relations with Clarivate. Thank you. You may proceed.

Thank you, Joe and good morning, everyone. Thank you for joining us for the Clarivate 2023 earnings conference call. With me today are Jonathan Gear, Chief Executive Officer; and Jonathan Collins, Chief Financial Officer. Both 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. An accompanying earnings call presentation is available in the Investor Relations section of the company's website, clarivate.com. During our call, we may make certain forward-looking statements within the meaning of applicable securities laws and 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 on the company's website. Our discussion will include non-GAAP measures or adjusted numbers, including organic 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 a supplement to and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliation of these measures to GAAP measures are available in our earnings 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 Jonathan.

Great. Thank you, Mark. Good morning, everyone, and thanks for joining us. I'm going to start by briefly covering our first quarter results. Then I will provide an update on some key improvements and announcements as part of our commitment to accelerate our growth. As we discussed at our Investor Day in March, we are driving change and investing across our segments which will create a compounding cash generation machine for our shareholders. Turning to our financial results. The first quarter was in line with our expectations. And as a result, this morning, we reaffirmed our 2023 full year outlook. We continue to expect an improvement in our business throughout the year as we begin to realize the benefits of our growth initiatives and cost savings. While there has been much external discussion about global economic challenges, we have not seen any impact to our outlook for the year. As a reminder, our business has proven resilient during prior recessions due to the critical nature of our products and services. Revenue in the first quarter was $629 million, down from the prior year's first quarter because of the divestiture of the MarkMonitor business and the strengthening of the U.S. dollar. Organic revenue growth, as expected, was essentially flat in the first quarter. We did deliver 3% subs growth which was driven by the Academia & Government segment, including improved performance from Web of Science which I will cover in more detail shortly. The strength in our total subscription base helped to offset the difficult first quarter comparisons across recurring and transactional revenues compared to the prior year period. We delivered strong free cash flow of $168 million in the first quarter which was used to prepay debt while still reinvesting in product development to accelerate growth opportunities. We are seeing the initial benefits of this focus and investment in the Academia & Government segment, where we made the earliest investments in growth. I will spend the next few minutes diving deeper into the progress we are seeing in this segment. We are off to a great start with Web of Science which is starting to yield benefits from last year's investments. At the end of 2021, we completely overhauled the user interface of the platform to drive ease of use and customer engagement. We started to see positive development in 2022, with active usage up 78% versus the prior year. As we turned the calendar to 2023 and the heavy renewal period in the first quarter, we saw a 350 basis point improvement in the Web of Science renewal rate. We also delivered a 16% improvement in new subscription sales growth. These two improvements in our subs base for Web of Science bode well for continued improvement in financial results for the rest of the year. In addition, one of the value adds we delivered recently was the creation of the Preprint Citation Index. This utilizes information from pre-published content to accelerate discovery for academic research. This enhancement makes it even easier for researchers to include preprints in their existing research workflows. Thus, the Web of Science can be used as a single portal to search across journals, books, proceedings, data sets, and now preprints, streamlining the research process and helping to make important connections faster. That's driving more customer value into this critical platform. Following the ProQuest acquisition, our teams have been working on exciting new integrations between our products to enhance value. We have integrated holdings data from our flagship library software platform, Alma, into our leading research analytical tool, InCites, to generate custom collection management reports. This allows universities to obtain unique insights into how faculty interact with publications, based on published papers, citation activity and other key indicators. This also helps customers identify journals that their researchers cite and helps locate titles that cite their organization's research to help make purchasing decisions. This enhances value for both platforms. In Q1, we announced the expansion of our Journal Impact Factor into new content areas and journal coverage. This will increase appeal to parse the market that we currently under-serve. These improvements increase the combined value proposition and is an enabler of getting customers to add the product. Additionally, with an enhanced and improved product, there are opportunities to sell the Web of Science to corporations that are heavy investors in R&D. In the coming quarters, as we accelerate investments in the IP and Life Science & Healthcare segments, I look forward to sharing details of additional areas of progress with you. Our products and services are used by thousands of people daily to direct and guide the work. Put simply, we help people and organizations think forward. By bringing together enriched proprietary data across our three segments, we leverage the power of our insights and analytics to identify the world's top innovators and spot key future trends. For example, in Q1, we revealed our 2023 list of top 100 global innovators and our Drugs to Watch report. These are just two examples of our thought leadership programs and depth of expertise in our markets designed to create demand and build customer advocacy to support our growth initiatives. Another exciting development in Q1 has been our continued adoption of AI to enhance value propositions of our solutions. As I'm sure you're all aware, the output generated by AI is only as good as the input data. As you can see on the bottom left, at Clarivate, we have billions of proprietary best-in-class data assets which are expertly curated and interconnected. These proprietary assets feed our machine, deep learning and large language models to enrich our data and power our insights, our services, and our workflow solutions. I'd like to share a few examples of how we are currently leveraging AI across our solutions. In Academia & Government, we are using this technology to identify and remove questionable academic journals from our Journal Impact Factor. This is critical to enhancing Web of Science as a continued gold standard for academic research content. In Intellectual Property, we are leveraging large language models to instantly translate and summarize patents. We're also using image recognition and deep learning for faster and more accurate classification of trademarks. For example, Brand Landscape Analyzer combines AI with human expertise and Clarivate proprietary trademark and IP litigation content to assist clients in making informed trademark risk decisions. Specifically, the Darts-ip litigation data is utilized to develop an automatically generated risk score which can be used to identify which potential trademark oppositions are most likely to succeed. Finally, in Life Science & Healthcare, we are drawing upon our connected data lake to generate predictors of future success relating to clinical trials' progressions, regulatory approvals, and even valuations on M&A candidates. As these examples demonstrate, we are actively using AI, including large language models, to ensure we provide our customers with the highest-quality integrated public and proprietary content and insights. We strongly believe the use of generative AI represents a significant opportunity for our business to accelerate our expansion into predictive analytics, as we discussed at Investor Day, leveraging our proprietary and rich data and content. The team continues to develop ways to enhance our overall offerings with generative AI and engage with our customers to prioritize critical use cases. I look forward to sharing more examples with you in the future. Moving on to our organization. I announced at the end of the fourth quarter our new segment structure to drive agility, innovation, and accountability. I am very pleased that we have now completed the hiring and appointment of leaders for each of our segments. Bar Veinstein, who brings more than 25 years of leadership experience, is leading our Academia & Government segment. He previously spent 11 years with Ex Libris and ProQuest. He was initially responsible for the transformation of Ex Libris products and business to a cloud-based SaaS model with the release of Alma. And later, as President of Ex Libris, he led the organization toward a new era of growth with the launch of innovative products, such as Esploro and Rapido. Most recently, he was Chief Executive Officer at Taranis, an AI-powered agricultural intelligence provider, where he drove significant business growth and accelerated the company's AI strategy. With his vast experience in the industry, existing connections to customers, and in-depth knowledge of our products and drive for innovation, Bar is the ideal leader for our A&G segment. Gordon Samson, who most recently served as our Chief Product Officer, has been appointed President of the Intellectual Properties segment. Gordon has made many significant contributions to Clarivate since joining us through the acquisition of CPA Global in October of 2020. In the last three years, he has held a number of executive leadership roles around the company, including leading the transformation of our APAC region and successfully bringing together our entire product portfolio for the very first time as our Chief Product Officer. His experience and knowledge of both Clarivate and the IP industry is second to none. As we pivot our operating model to align with our core customers and end markets, he is perfectly placed to accelerate growth across the IP segment. Henry Levy, who I've appointed as President of the Life Sciences & Healthcare segment, is a well-respected life sciences expert and the author of multiple articles on drug development and technology trends. Henry has an excellent track record in the industry with more than 25 years of experience helping life science companies use data and technology to transform their business. He joined us from Veeva Systems, a global leader in cloud software, where he most recently served as President of Global R&D and Quality. Previously, he was Chief Commercial Officer for PPD, where he defined new models for biopharmaceutical companies to partner with contract research organizations to drive down costs and improve the speed of drug development. He also spent time as a consultant, leading Accenture's Life Sciences R&D practice. I also want to thank and acknowledge the leadership of Steen Lomholt-Thomsen, our Chief Revenue Officer, who will be leaving us in July. Steen was instrumental in elevating our commercial and go-to-market processes and culture across the business. I wish him all the success in his future endeavors. In addition to improving our leadership team, we recently enhanced our governance through changes to our Board of Directors. With the transition of our Board composition, our Board size is now 11 members compared to 14, which will help improve efficiency. On behalf of the Board and myself, I wish to thank Sheryl von Blucher, Kosti Gilis, Bala Iyer, and Roxane White, for their valuable service on our Board. They have been instrumental in helping to guide the company forward since its public offering a few years ago. We are very pleased to welcome Dr. Saraubh Saha to our Board. Dr. Saha is a physician-scientist, pharmaceutical executive, and biotech entrepreneur dedicated to discovering and developing novel life-changing medicines. He will bring a great deal of experience in the pharmaceutical and biotech industries and his guidance will provide valuable insights and perspective, especially as we continue to execute on our growth strategy in the Life Sciences & Healthcare segment. Before I turn the call over to Jonathan Collins, I want to update you on one of our near-term financial initiatives which we outlined at our Investor Day in March. We are generating strong cash flow and currently expect to deliver between $450 million and $550 million of cash this year. At our Investor Day, we discussed the importance of getting our leverage level to where it needs to be, under 4x net leverage this year with a path to under 3x by 2025. In the first quarter, we prepaid $125 million towards the Term Loan B which creates a clear path to achieve our 2023 net leverage objectives. Importantly, this will not impact our ability to invest in R&D to drive greater performance across our business. In closing, I want to thank my colleagues for their dedication, hard work, and strong collaboration as we continue to build Clarivate into a leading information services company. We are moving in the right direction and I look forward to sharing our progress with you. I will now turn the call over to Jonathan Collins.

Thank you, Jonathan, and good morning, everyone. Slide 14 presents an overview of our first quarter results compared to the same period last year. In Q1, our revenue was $629 million, which is a decrease of $33 million or 5% year-over-year, primarily due to the MarkMonitor divestiture and foreign exchange effects. However, organically, the business remained flat as we anticipated. Adjusted EBITDA margins improved by 60 basis points over the previous year to 40.2% in Q1, thanks to cost synergies from the ProQuest acquisition. Our net income for the first quarter was $25 million, down $26 million largely due to a $100 million mark-to-market gain on private warrants last year that did not recur this year, although this was somewhat offset by a favorable resolution of an international tax dispute worth $70 million. Adjusted diluted EPS, excluding the impacts of both items, was $0.18 in Q1, reflecting a $0.03 reduction from last year. Two cents of this decline was due to increased interest expenses from rising base rates, and one cent stemmed from the MarkMonitor divestiture. Operating cash flow for the quarter reached $228 million, an increase of $160 million, mainly due to last year's $141 million payment from the employee benefits trust for the CPA Global equity plan. This also accounted for the entire increase in free cash flow, as higher interest and capital expenditures were balanced by lower working capital needs. Now, let's turn to Page 15 for a closer examination of the factors influencing the changes in our top and bottom lines compared to last year. Our first quarter revenue met our expectations. The changes in our top and bottom lines were driven by four main factors. First, organic revenue was essentially flat. However, we made significant investments to boost organic growth through product innovation, resulting in nearly a $10 million increase in operating expenses and a corresponding decrease in profit. Second, the divestiture of the MarkMonitor business reduced revenue by $19 million and profit by $9 million. Third, cost synergies from our ProQuest acquisition added $13 million to our bottom line. Finally, the translation effects from subsidiaries operating in foreign currencies led to a $13 million decline in revenue, with the stronger U.S. dollar compared to last year contributing to a $3 million drop in profit, though this impact was lessened by some gains from transactions. Next, let’s look at Page 16 to discuss how we convert adjusted EBITDA to free cash flow and our plans for these funds to continue our deleveraging strategy, as Jonathan mentioned earlier. Free cash flow for the first quarter was $168 million, a substantial increase of $142 million from last year. The conversion from adjusted EBITDA improved by 56 percentage points to 66%. We incurred $33 million in one-time costs during Q1 to largely finalize the ProQuest integration, which will yield $100 million in annual cost synergies going forward. These costs were down $133 million compared to last year's payments related to the CPA Global equity plan. Interest payments in the quarter were $41 million, an increase of $13 million from last year, influenced by rising base rates and about 25% of our debt being floating. Cash taxes were minimal in the first quarter, consistent with last year, due to the seasonal nature of our payment cycle. Working capital provided a cash source of $51 million this quarter, significantly improved from being flat last year, driven primarily by the timing of payments in our patent renewal business within the IP segment. Capital expenditures amounted to $59 million in the quarter, an increase of $18 million from last year as we ramp up investments in product innovation and adjust to payment timing. We still anticipate increasing our full-year capital spending by $35 million to $40 million. We utilized the first quarter's free cash flow to continue servicing our preferred stock with a cash dividend of $19 million and to prepay $125 million of our Term Loan B, which lessens our leverage and mitigates interest rate risk. Now, let’s move to Slide 17 for our outlook for the remainder of this year. Our first quarter results set us firmly on course to achieve a full-year performance within our unchanged guidance. We expect organic growth to sequentially improve in 2023 to around 3.25% at the midpoint of our range. Assuming stable exchange rates, this would yield revenue of approximately $2.68 billion at the midpoint. Year-over-year organic revenue comparisons in the second quarter may be challenging, leading us to project first-half organic growth near 1% and second-half growth around 5%. Several factors influence this timing. First, we will compare against the revenue loss from halting operations in Russia, which affects our A&G segment in the first half. Second, our consultancy in the LS&H segment began improving late last year, but revenue will be lower than the first half of last year despite better utilization rates. Third, our IP segment experienced significant accelerations in renewal payments last March and June, resulting in an 8% organic growth in the first half, which we won't see this year, leading us to anticipate a decline in recurring revenue in the first half, though we expect full-year organic growth for recurring revenue to align with last year's results. Additionally, we noted a downturn in our cyclical trademark business last year, but we should lap those higher comparisons by late in the second quarter. We expect adjusted EBITDA and profit margins to range from $1.1 billion to $1.16 billion and 42% to 42.5% at the midpoint, respectively, leading to adjusted diluted EPS of $0.80 at the midpoint. Finally, we continue to target $0.5 billion in free cash flow at the midpoint. Let’s turn to Page 18 to discuss the primary factors contributing to our anticipated revenue and profit growth for the full year in comparison to last year. The expected full-year growth stems from accelerating organic growth, the impact of divesting the MarkMonitor business, the benefits of ProQuest cost synergies, and foreign exchange factors. Organic growth of 3.25% should contribute about $85 million to revenue and convert to an estimated profit of 30%, adding approximately $25 million. As previously stated, we aim for organic growth to reach 4% to 5% for margin expansion. We're committed to funding investments that foster product innovation to drive organic growth to these targets by next year, as discussed at our Investor Day in March. As Jonathan highlighted earlier, we've had a promising start in the research and analytics group within our A&G segment, bolstering our confidence in our annual outlook. Conversely, inorganic actions will pose challenges this year, following the completion of the MarkMonitor divestiture last quarter, which will create a $65 million revenue headwind and cause a $30 million decrease in adjusted EBITDA. We are concluding the integration of the ProQuest acquisition, allowing us to realize the remaining $40 million in cost synergies this year. We do not expect a significant foreign exchange impact on overall revenue year-round, but anticipate continued revenue challenges in the near term, which should balance out with tailwinds in the latter half. Additionally, we do not foresee a repeat of the transaction gains from last year, resulting in almost a $15 million profit headwind. Moving to Page 19, let's explore how we project the over $1.1 billion in adjusted EBITDA will translate to about $0.5 billion in free cash flow and our plans on capital allocation. Last year, we incurred over $200 million in cash outflows for one-time costs related to acquisitions, mainly from restricted cash tied to the CPA employee benefits trust funded at the time of the acquisition completion in 2020. This year, we plan to reduce one-time costs by about $165 million, incurring around $50 million largely for finalizing the ProQuest integration. Most improvements were recorded in Q1, so the remainder of the year will align more closely with last year's figures. We expect an increase in cash interest costs of approximately $20 million, given that base rates have significantly increased since last year. The majority of this rise was noted in Q1, and the rest of the year should align closer to last year’s figures. We anticipate working capital levels will stabilize this year, leading to a $65 million improvement, primarily observed in Q1, with modest gains expected for the rest of the year, factoring in seasonal variations. We plan to boost CapEx by $35 million to $40 million to enhance organic growth. These changes should result in nearly a $200 million rise in free cash flow, reaching $500 million at the midpoint of our range. As stated in March and reiterated today, our intention is to utilize a significant portion of this year’s free cash flow to continue prepaying debt on our Term Loan B, aiming to reduce leverage to below 4x by year-end. Now, let’s proceed to Page 20 to discuss how our near-term results position us for achieving our long-term financial goals. Our Q1 results represent progress towards the financial targets we set during our Investor Day in March. Importantly, our primary focus is on accelerating organic growth. The first area targeted for enhancement was the research and analytics subsegment within A&G. The top line metrics from Q1, including a 4 percentage point increase in renewal rates and double-digit growth in new subscription sales leading to 3% revenue growth, are promising for this segment's improvement in 2023. Our second goal was to uphold sustainable profit margins while investing in growth acceleration. We successfully achieved this in Q1, expanding margins by 60 basis points even as we raised operating and capital expenditures to boost product innovation. Our third objective was to significantly enhance our free cash flow, which we achieved in Q1 with a conversion rate of 66% on greatly reduced one-time costs. Lastly, we committed to disciplined capital allocation. In the short term, it is crucial for us to decrease our leverage to below 4x, a goal we are actively pursuing by prepaying $125 million of our term debt in Q1. The entire Clarivate team remains deeply focused on fostering product innovation that connects our clients to insights capable of transforming the world, which will enable us to meet these financial targets. Thank you all for joining us this morning. I will now hand the call back to Joel for your questions.

The first question is from George Tong with Goldman Sachs.

You mentioned that you're not seeing any currently macro impact to the business because of its resilience to recessions and the critical nature of its products. Historically, you've seen some macro sensitivity around trademarks and patent volumes. Has that dynamic changed? And if so, what's driven that change?

George, thanks for the question. So I mean, it's a couple of comments I would make. As we commented at Investor Day, we are extremely resilient, as you well know, to macroeconomic trends and downturns. I mean, certainly, when we built our outlook heading into this year, we expected there will be challenges. And so we've been able to say no, no surprises. On the biotech side specifically, there's been very little impact. As you know, the vast majority of our revenue comes from large biotech, large pharma which have not been impacted by funding. So really, we haven't seen any material impact.

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

This is Tom Roesch filling in for Andrew Nicholas. I wanted to get more insight into what occurred on the transactional side of the business during the quarter.

Yes. Just maybe a couple of things to highlight the changes last year. So the transactional and recurring order types, the non-subscription parts of the business, were down versus last year. The recurring order types were entirely due to the acceleration we saw in March of last year for patent renewal payments. So that was intentional and was supporting our customers by providing them the best value there. That did not recur this year. As I mentioned in the comments, we expect that to unwind in the second half of the year and that the full year results for recurring order type revenue growth organically will be pretty comparable to last year. On the transactional side, I'll point to a couple of areas by segment. I highlighted in some of the prepared remarks that we have the consultancy which is transactional within life sciences. Where that business was declining in the first half of last year, it started to improve late in the year. So the comps for Q1 are pretty challenging there. So that drove some of the decrease in the life sciences category. We had very strong real-world data sales towards the end of Q1 of last year and they were pretty decent this year but a little bit of a headwind there. And within our IP segment on the transactional side, as we just touched on a moment ago, the one part of our business that sees some impact related to the macro is our trademark business. That started to turn down late in the second quarter of last year, so we still had really tough comps on that part of business in the first quarter of this year. So when you package all of those, you get to a place where we had a headwind in Q1 on the non-subscription order types compared to last year.

The next question is from the line of Toni Kaplan with Morgan Stanley.

Jonathan, you mentioned the inflection in Web of Science this quarter. I know you talked about having the overhaul in late '21. So I wanted to understand, do you view this positive trend in Web of Science as sustainable? Or was there anything that we should know about? Like in terms of was it an easy comp or some other factor that led to positive growth this quarter? But like good trajectory but maybe not continuing? So just wanted to see your confidence there.

Sure. Thanks, Toni. We are very confident that this represents a turning point for Web of Science. I will outline some key points. Firstly, we are seeing an increase in subscriptions, which we initially noted through increased usage last year. As you know, increased usage indicates that we are adding value to the product. This was evident in the highlights I shared during my prepared remarks regarding both renewal rates and new sales within our subscription base. This subscription base will drive and elevate the product this year and into next year. We feel very positive about that. Last year, Russia impacted us, and we gained no benefit from that in the first quarter. As Jonathan Collins noted, this will be a challenge through the second quarter. However, we are optimistic about the turnaround we’re experiencing. The team has done an excellent job, and customers are responding positively with their spending in the subscription base. We believe this growth is sustainable and that we are indeed at the turning point we anticipated.

The next question is from the line of Peter Christiansen with Citi.

Was the 96% renewal rate specific to Web of Science or for total subscriptions? I'd like to explore that number further. In which areas or among which end users did you notice the most improvement in renewals?

Yes, you got it. So the 96% is for the research and analytics subsegment within A&G. The vast majority of that is the Web of Science product but it also includes products like InCites that Jonathan referenced, that's being integrated with Alma, our ERP for the library, if you will; and other small products, like EndNote as an example. But that category improved. So that 96% is calculated based on the ACV, so that's a great leading indicator for how the subscription revenue will play out for the balance of the year. We've said in the past that, in this category, a significant majority of the renewals occur early in the year and in particular, in the first quarter. So it bodes really well for how the revenue will play out in this area on a subscription basis for the balance of the year.

The next question is from the line of Seth Weber with Wells Fargo.

I wanted to go back to the transactional discussion for a second. I think on the fourth quarter call, you talked about having a bigger pipeline or a bigger backlog of transactional on data services, data sales and stuff like that. I guess my question is, has that changed at all? And when would you expect transactional comps to turn positive?

Yes. Great point, Seth. So the answer is yes, that is giving us. And the way we highlighted that in the commentary was, it increases our confidence in the stability of those sales. So we have better line of sight. So the fact that our first quarter results came in right where we expected was enabled or supported by the fact that we had a nice backlog for some of our transactional business. In terms of when the comps improve, I'll just go by area. In the consultancy, the comps get better in Q2. So we'll start to see some progress there in life sciences. Real-world data comps for Q2 are still going to be pretty challenging within life sciences. We had one of our best quarters ever at the time. It was our best quarter ever in that area, so they'll still be a little bit tough. So broadly, in life Sciences, they'll get a little bit better but still some pressure from real-world data. On the IP side, we start to see some of the pressure alleviate, particularly in the trademark business. So as we mentioned, that business started to see a downturn towards the end of Q2 of last year. So towards the end of the second quarter, we'll start to see a little bit of relief. However, on the recurring order type, we had high single-digit growth in Q2 of last year within the renewals servicing business in the IP segment, so that comp is still going to be really tough. So that's why we indicated that we think that first half organic growth is probably going to be approaching 1%, because we're still going to see some challenges in the second quarter with the comps. But certainly improve significantly as we move into the second half of the year which is why we think we'll see mid-single-digit growth in H2.

The next question is from the line of Shlomo Rosenbaum with Stifel.

This is Adam Parrington on for Shlomo. Could increased use in AI potentially result in increased competition in the trademarks part of the business as AI becomes more widely accessible?

Yes, I'll go ahead and tackle that one. We're feeling very good about our position. When we look at the leverage of AI which, as you know, we've been able to use that ourselves for years, companies have been using it for years. And as I highlighted in my remarks, it's something we're leaning into very heavily. But if you take specifically our trademarks, we launched a product last year called Brand Landscape Analyzer which is precisely about leveraging our enhanced proprietary content, our knowledge in the marketplace, our knowledge of the customer workflows. And we're using advanced AI to generate that product. And it's about creating new opportunities within our customer base. So we actually see it ourselves as an opportunity. We're leveraging it ourselves and we'll continue to do so going forward.

The next question is a follow-up from the line of George Tong with Goldman Sachs.

To follow up on the comment you made earlier. You expect the first half organic revenue growth to be about 1%, second half organic revenue growth to be about mid-single digits. Can you elaborate on the cadence of what organic revenue growth should be in 3Q, 4Q? In other words, should we see a significant jump going from 2Q to 3Q? Or should it be linear? What are your expectations there? And what are the key drivers of improvement over the remainder of this year?

Yes. Thanks for that, George. So we'll give a little bit more color on that as we report our Q2 results. But in principle, we're going to expect a pretty significant step up sequentially from Q2 to Q3. Comps in Q3 are going to be pretty soft. You'll recall, Q3 of last year was pretty soft. But we'll give a little bit more color. But in principle, we'll see a pretty meaningful sequential improvement from the second to the third quarter. But more to come on that in a few months.

Thank you. There are no additional questions waiting at this time. I would like to turn the call back over to Jonathan Gear, CEO, for concluding remarks.

Okay. Great, Joel, thank you very much. And everyone, thank you for joining our call this morning. This is an important quarter for us as it marks a turning point in the first of our three segments, which was A&G. We are very pleased with the progress being made there. This quarter was critical for us in terms of delivering results for the year. We look forward to future quarters to come back and share additional progress in the other areas. With that, we'll conclude. Thank you all for your time this morning.

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.