Clarivate to Report Second Quarter 2026 Results on July 29, 2026

free cash flow is now likely to be at the low end of the range as we have contemplated the full transaction cost to close the lsnh divestiture and have also incorporated additional restructuring costs to achieve incremental cost savings to recognize the full benefit next year please turn with me now to page 19 for reminder of the full year top and bottom line changes we're expecting compared to last year we continue to expect adjusted EBITDA margin will expand by about 200 basis points driven by a return to organic growth continued cost discipline and completion of the strategic disposals we anticipate organic growth of about one percent led by subscription revenue growth from continued acv acceleration we have plans in place to achieve cost efficiencies to fully offset inflation driving 25 million of profit growth this will account for about a third of the profit margin expansion the inorganic disposals are expected to lower revenue this year by approximately $125 million, and we are reducing operating expenses by about $100 million, which yields a profit impact of about $25 million, delivering the remaining two-thirds of the profit margin expansion. As a reminder, our guidance assumes we will own the Alice and H business until year-end, and if the transaction closes earlier, a revision to our guidance will be made at that time. We now anticipate foreign exchange will be essentially flat compared to last year, comprising the only change to our revenue and adjusted EBITDA indication within their respective ranges. Please turn with me now to page 20 to step through the expected seasonality of our revenue and profits this year, which we have refined based on our first half results. We continue to anticipate the business will accelerate organically in the second half of the year, led by improved retention and new business sales. The organic growth, further cost efficiencies, and the benefit of the strategic disposals should inflect profit margins as we move through the balance of the year. Revenue should be seasonally lower in Q3 and then higher in Q4 due to the normal cadence of patent and trademark renewals and transactional revenues. Please turn with me now to page 21 to review how we expect the more than $1 billion of adjusted EBITDA will convert to free cash flow and how we plan to allocate this capital alongside the proceeds from the LS&H divestiture to reduce our debt this year by about $900 million. Due to the transaction costs we will incur at the closing of the LS&H divestiture, we now expect free cash flow will be flat compared to last year, but the vast majority of the one-time cost of nearly $70 million will not recur next year. We continue to expect cash interest will improve by about $20 million over last year due to the debt we repaid last year and this year cash taxes are still expected to be five to ten million higher than last year due largely to the new corporate tax in jersey we anticipate the change in working capital this year will be a use of approximately 25 million primarily due to incentive compensation payments we're also expecting a 10 million benefit associated with lower impaired contractual cost reflected on the other row and while we remain committed to investing in product innovation the disposals and cost efficiencies will improve capital spending by about $20 million. From a capital allocation perspective, we plan to use the free cash flow we generate in the second half of the year and the proceeds from the LS&H divestiture to retire nodes due in the next few years. I will now turn the call back over to Mahdi for some closing remarks before Q&A.

Before we transition to Q&A, I want to touch on our other announcement today. Michael Easton has been appointed as our next Chief Financial Officer, effective August 8. Many of you already know Michael. He serves as our Chief Accounting Officer, and he's a member of our Senior Leadership Team. He is well regarded and brings more than 25 years of finance and leadership experience. Michael has a deep understanding of our business and has been key to strengthening financial discipline, governance, and operational execution across Clarivate. He will be focused on accelerating growth, improving profitability, strengthening free cash flow generation, and maintaining disciplined capital allocation. I want to thank Jonathan for his leadership. He has made many meaningful contributions to our company over the years. He oversaw the successful integration of the three acquisitions that today comprise Clarvage, setting up the segment operating structure we have today, and transforming the finance organization. Personally, in the last two years, he has been an important partner to me in advancing the VCP, working to improve profitability and strengthening our balance sheet. I wish Jonathan every success in the future. Operator, we will turn to Q&A now.

Thank you. We will begin the question and answer session now. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Scott Wurzel with Wolf Research. Your line is open. Please go ahead.

Good morning, and thank you for taking my questions. Just wanted to touch on, you guys cited some timing around renewals that may have impacted like ATV growth during the quarter. Is anything around that due to longer sales cycles and anything we should expect to persist at all in the second half of the year?

Hey, good morning, Scott. Thanks for the question. You know, we believe that our results for Q2 in the first half are in line with our original expectations. If I remind everyone, we pointed the equivalent of page 20 in Q1 indicated we expected to see a pullback in recurring organic growth in Q2. Subscriptions were a part of that. So ACV, we continue to make progress over the last six quarters. It's not always going to be linear, but we continue to see strong renewal rates and good opportunities for the new products to convert to sales. So the timing of renewals is something we see in the business from time to time, though we don't think it's an elongation of the renewal cycle. And the organic ATV growth of about a percent and a half in the end of June is generally in line with our first half organic growth versus subscription revenues at about 1.5%. 2%. So we're generally where we expected. And as we indicate also on page 20 in this quarter's tech, we expect the ACV and the organic recurring revenue to inflect in the second half of the year. We have good line of sight to that. At this point in the year, the A&G business as of the end of July as 75% of this year's business in the bag. Very similar to what we saw at this point last year, the fall is an important renewal cycle, but we're already well on our way and we have good line of sight for the second half of the year. Thanks for the question, Scott.

Your next question comes from the line of Tony Kaplan with Morgan Stanley. Your line is open.

Thank you. Thanks so much. I was hoping you could talk more about the MCP opportunity, where you think which client types are going to more gravitate towards utilizing your data over MCP, which segments, et cetera, and just how you're thinking about how it could contribute to growth and is it included in the subscription, or is there an upcharge for it? And also, just Jonathan, congratulations on your new opportunity. Thanks.

So, I'll take this one. Thank you. Thank you, Tony. Maybe take a broader view on the AI innovation we are doing. We are very much focused, and since I joined, since we started the VCP, we are delivering on 19 different initiatives regarding external and new product that we are delivering. We are very, very pleased with the progress so far, which is the AI enablement of our existing product. It is a source for revenue for new logos, new products, and improving retention. And I think also to allow us to have some AI-specific pricing for new products. So new revenue generation on new revenue screen, For example, Web of Science Research Intelligence, definitely a new revenue stream. Armaspector, a new revenue stream. IP1, and I've been talking about it and we are very excited about IP1, definitely a new revenue stream. Stamblecom, Nexus Connect, another product from AMG, which involves NCP. And we see the customers in the three segments, including the last times, They want to consume our data, our proprietary data, so either directly to us with our UX or our new AI-enabled product or using their own customers. There's a tendency in some bigger customers who would like us to embed our capabilities, the MCP capabilities, into their respective corporate AI product. and this is why you see more of our product, whether it's embedded into Anthropic, ChatGPT, and other generic LLMs. By and large, a bigger customer would like to be able to embed this through MCP. Smaller customers may want to use it in our environment, but this is just Early days. Overall, we are very pleased with the momentum that we're having introducing AI, either our own native or embedding our proprietary data into MCP environment of the customer designated corporate AI infrastructure.

Thank you.

Your next question comes from the line of Manav Patnek with Barclays. Your line is open. Please go ahead.

Thank you. Firstly, congratulations, Jonathan and Michael, both for your new roles. I just had a question on the expectation for acceleration of organic growth. I think you said sequentially 100 basis points. Can you flush that out a bit if it's different between academic and government and then the IT side as well? And, you know, I think just going into 27, I guess you maybe just, you know, is that 100 basis points for the full year as well in 27 or how we should think about that?

I think we are pretty positive on both segments. We have a line of size, a certain momentum is building up in IP as well. We are back to recurring, reoccurring flat in Q2. In Q2, we believe that we're going to improve reoccurring in the second half of the year for IP as well, with a great new momentum. And here's, you know, here to re-mention the introduction of all the rejoining of Simon to Climate. He's been in the industry for 20 years. He was kind enough to come back and support us. he will utilize all his IP laws and expertise and accelerating the progress on the IP turnaround. So we do believe IP will be turned around faster with Simon in place and with the great assets and unity software intelligence that we have. And with the AI innovation that I've mentioned, You know, I've mentioned Riskmark as a product that's one, three of us, and I'm also happy about IP1. IP1 is not just intelligence. IP1 is, in fact, an agentic environment in which IP professionals, basically, we're taking a different route. So we all know about the Derwent and the other one, which has been a little bit contracting. And basically, we are going to disrupt the markets using both our agentic capabilities and expertise and our proprietary data. That's on the IP side. On the A&G side, Momentum is also building with the new Web of Science Research Intelligence, with a new Alma Spector, with obviously Nexus Connect and some of the new innovation coming out from the A&G product hubs. So optimistic on both sides.

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

Please go ahead. Thank you. I wanted to dive more into transactional revenue performance. To what extent would you say the transaction revenue declines are due to industry factors versus idiosyncratic execution factors? And what gives you confidence that there's a path for transactional revenue performance to improve?

Let me start and I will hand it over to Jonathan. The idea that we are moving is part of my playbook or the playbook we've used in the VCP is to move away from transactions. So going into this VCP, there were certain businesses that we divested completely, like the one-time books, the one-time pals, the real world data. We divested this business completely. But the divestiture of life science, we're also giving away, you know, some of the life science was a little bit higher on transaction. There's still a portion of transactional business that will stay with us, and it's supporting the one-time business that we have. But still, within this transactional business, there are still business that we have the ambition to transform to subscription. Just one example is the spec files of Web of Science. This will gradually improve the hour subscription rates going even beyond 94, 92 percent. Now I'll hand over for Jonathan to prolong some more specifics about the quarter.

Yeah. Thanks, Moni. Just a little bit of a different additional color on the quarter, George. You know, the life sciences business is still in our organic results in Q2. We didn't reach the agreement until after the end of the quarter. but that business saw some headwinds in the quarter on transactional in particular as Monty said we are have been looking to migrate some of those things to subscription that's a piece in it but also we just saw some headwinds in life sciences and the other two businesses yeah the business can be lumpy quarter to quarter we knew we lapped a couple of things in Q2 and both of those businesses that were going to be a bit of a headwind but we do expect that to ameliorate in the second half of the year I think we have better line of sight into that our full year guide does contemplate that transactional will be down slightly year over year, but I think we'll see some improvement on that in a second. Thanks for the questions, George.

Thank you.

As a reminder, if you would like to ask a question, please press star one now to raise your hand and join the queue. Your next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is open. Please go ahead.

Hi, this is Adam on for Shilmo. Was there any client that might have impacted the lifetime of this business that drove the revenue climb in addition to the kind of transactional movement?

Yeah, thanks for the question. No, there's nothing discreet or specific, as I mentioned. Madi talked about the fact that we've had an emphasis over the last year or so of really providing good subscription alternatives to migrate some of the transactional business away from. So certainly that is an item, but nothing specific that we would highlight on an individual basis other than just some headwinds in that area on the transaction side.

And does the buyer of the life sciences division know the performance in the second quarter when they announce the deal? I just want to verify what potentially trigger like a MAC clause or anything like that.

No, certainly this is nothing to that level. And And, you know, that process is moving exactly as we would expect. We work through the process to reach an agreement and all of the approvals that are required or customary. And we expect those to occur in the coming months and we expect this to go before the end of the year.

Thank you.

We have reached the end of the Q&A session. I would now like to turn the call back to Mati for closing remarks. Please go ahead.

As we close, I want to just repeat the key takeaways today are very, very clear. We have a building block in place to accelerate organic growth and we will continue to deliver on our commitment to drive long-term shareholder value. And thank you for joining us.

This concludes today's call. Thank you for attending. You may now disconnect.