Earnings Call
Clarivate PLC (CLVT)
Earnings Call Transcript - CLVT Q3 2024
Operator, Operator
Hello, and thank you for standing by. My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to the Clarivate Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' presentation, there will be a question-and-answer session. I would now like to turn the conference over to the company to start the call. Please go ahead.
Operator, Operator
Thank you and good morning, everyone. Thank you for joining us for the Clarivate third quarter 2024 earnings conference call. 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 the prior written consent of Clarivate is prohibited. An accompanying earnings call presentation is available in the Investor Relations section of the company's website. During our call, we may make certain forward-looking statements within the meaning of the applicable securities laws. 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 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. 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. Reconciliation of these measures to the most directly comparable GAAP measures are available in our earnings release and supplemental presentation on our website. With me today are Matti Shem Tov, Chief Executive Officer; and Jonathan Collins, Chief Financial Officer. After our prepared remarks, we'll open up the call to your questions. And with that, it's a pleasure to turn the call over to Matti.
Matti Shem Tov, CEO
Good morning, everyone, and thank you for joining us today. Jonathan is going to cover our quarterly results in detail in just a few moments. Our financial performance has been disappointing, and not what we aim to achieve at Clarivate. But what I would like you to take away from today's call is that while Clarivate has a lot to do to improve performance, we also have a lot of valuable levels and opportunities in front of us. And with that comes the potential for significant upside. I'm going to talk about how we plan to reposition Clarivate to realize its potential. First, I would like to share a bit about myself and what brought me to this leadership role. I have 19 years of experience as CEO, including 14 years at Ex Libris and five years at ProQuest, now a meaningful part of Clarivate. Under my tenure, Ex Libris grew six times into a SaaS education technology leader. During this period, we accelerated our focus on innovation, transforming the company from an on-premises technology to a SaaS technology provider by introducing the Ex Libris Alma cloud solution. We expanded our offering beyond Libris and invested in strategic acquisitions to deliver more value to our customers. As CEO of ProQuest, I continued to focus on driving growth through operational discipline, product innovation, and strategic acquisitions. We introduced ProQuest to One, bringing together our deep connection of academic content, e-books, and videos into a single platform. We launched the Rialto Content Marketplace, the company's first onboarding solution in many years. We have acquired and integrated five companies, including an innovative interface and public cloud software leader. We delivered strong sustainable growth with revenue increasing from $1,750 million to over $900 million and substantially increasing our EBITDA. This led to the acquisition of ProQuest by Clarivate in 2021 for more than $5 billion. Ultimately, my passion lies with people and products. I enjoy learning from colleagues, customers, and partners. I see innovating and challenging the status quo as a key to our success. I take a lot of pride in bringing major products to market and I have a tremendous passion for what we do. These experiences will serve me well in my new role and will benefit Clarivate and our shareholders. I've been Clarivate's CEO for 90 days now, and I'm starting to form my view on the current state of the businesses. First, I conducted detailed business reviews with over 100 leaders, including strategy, product management, sales, technology, and customer service. I've spent time with our teams assessing our three segment operations and go-to-market strategy. I've engaged with over 2,000 employees in Ann Arbor, Kansas City, New York, Philadelphia, Jerusalem, and London. I've also started to meet with our customers, including some of our largest around the world, to strengthen my insights and learning. I've begun to better understand what we are doing well and where we need to improve. My comprehensive review was helpful in identifying and validating key strategic priorities, leading to the development of an initial value creation plan, which I will discuss in a few minutes. As you see on Slide 7, Clarivate has an exceptional foundation consisting of major critical solutions across the innovation value chain. Our flagship solutions are underpinned by best-in-class data and workflow assets. This includes ProQuest One, Web of Science, Derwent, CompuMark, Cortellis, Alma, and IPFolio, just to name a few. We are recognized as a trusted provider in the market we serve, and we have an impressive Blue Chip customer base, including leading academic institutions, top pharma companies, top-tier corporations, and leading law firms. Most importantly, we have an experienced and talented team of global colleagues with strong expertise across segments and disciplines. Our people know our markets, know our customers, and understand our solutions inside and out. A key learning for me is that Clarivate's decision to reorganize into three segments was the right one. It leverages our talented people by aligning their deep domain expertise with our customers and, as a result, we are better able to partner with our customers to develop products to meet their evolving needs. Unfortunately, the company has become disrupted over the last few years. We have grown through acquisitions, which is an important value creation tool, but this presents challenges in terms of integrating different solutions and people at the same time. Additionally, it is easy to lose focus on product innovation and organic growth. We have also undertaken product initiatives that were overly dependent on transactional revenue which can be unpredictable and less profitable with weak cash-flow conversion. This revenue is susceptible to macroeconomic headwinds. Our third quarter results clearly reflect some of the challenges and inconsistencies from this unpredictable source of revenue. Also, the sales model and ultimate execution has been suboptimal. We have generally combined account management with an extensive portfolio of products, which undermines our ability to sell expert solutions. Moreover, we have underinvested in customer success, leading to lower renewal rates in some segments. Additionally, we have suffered from product technology debt, which hinders the pace of product innovation and disrupts our focus away from new development. Certain non-core legacy solutions have led to insufficient management of product life cycles, and aging products require significant investment to refresh. While near-term challenges have affected our ability to execute effectively and deliver results, there are meaningful opportunities to renew our focus and improve performance. Put simply, we have the fundamental elements to significantly grow our business. We need to improve our execution. I have been down this road before at Ex Libris and ProQuest. I have a clear understanding of the steps and processes required to accelerate growth along with a strong passion to deliver and execute for success. In keeping with that spirit, the executive team and I developed an initial value-creation plan focused on improving execution and accelerating revenue growth. I plan to go into more detail on each of these initiatives on our year-end earnings call in February, but I thought it would be important to provide you with a preview of our plans. First, we must optimize our business model by focusing on core subscription and recurring revenue. To achieve that, we plan to rationalize certain transactional product lines that are declining and have low profit margins and cash characteristics. We will also continue to seek opportunities to convert transactional sales to subscriptions through business model innovation. For example, we have had initial success converting our Life Science disease landscape and focus reports from transactional to subscription revenue. By focusing on a subscription-first model across the business, we will improve revenue predictability and profitability and be better positioned against market headwinds. We must improve sales execution. We plan to achieve this by strengthening our sales organization, putting in place better territory alignment, reviewing our incentive plans, and enhancing customer engagement. We will invest further and put more focus on customer success to ensure improvements in renewal rates. This will create more time for each sales representative to focus on a smaller number of products, better aligning their domain expertise with the customers' needs. I believe this will increase our ability to grow the pipeline and sales revenues. I will be working closely with the sales leadership on this effort, and I'm confident we will see improved results. From a product perspective, we will encourage a build versus buy mentality. We will work closely with our customers to validate interest in clear business use cases through a more formalized development partnership methodology. I have used this model successfully before. It will help ensure investments are made in the right areas and that we are responsive to our customer needs. This includes accelerating innovation and leveraging AI as key enablers. For example, our proven success in introducing academic research assistance in both Web of Science and Primo is currently being replicated in additional A&G products like PQIS and books. We are also extending IP and life sciences capabilities utilizing various AI technologies. Furthermore, our forthcoming Web of Science research intelligence platform is a next-generation software solution powered by AI. This product will empower researchers to accelerate web search, and research institutions to better measure and showcase the impact of their research. Finally, we will seek to carefully rationalize our portfolio. This will likely involve divesting non-core solutions that decrease our probability of success. The company is taking steps to simplify the organization, as seen with the divestment of ScholarOne and Valipat this year. My experience has taught me that a simplified and focused organization is the first step towards creating operational excellence. I also see great opportunity to drive further cost rationalization to fund more product innovation and protect and expand our margin. Going forward, our goal is simple. We plan to deploy both human and capital resources toward our most attractive opportunities that will grow our subscription and recurring revenue. We are committed to implementing this growth initiative as quickly as possible as we embark on a multi-year turnaround. As we optimize the business, enhance sales execution, advance our product offering, and align our portfolio to core products, we are setting the stage for predictable long-term organic growth. That said, as I mentioned at the beginning of the call, we are disappointed with the third quarter top-line results, particularly the revenue decline in certain transactional products. As part of my transition and the strategic work we are currently focused on the value creation, we have decided to remove our full-year and long-term guidance. Our entire focus needs to be on planning and executing the value creation plan, which is expected to deliver shareholder value. In summary, I have reviewed the entire portfolio, and I plan to reduce Clarivate's exposure to more volatile transactional product lines that have been affecting our business. When we complete the initiatives that I have laid out, assuming nothing else changes, we expect that we will improve our organic revenue growth, have a revenue mix skewed even more toward subscription and recurring revenue, higher EBITDA margins, and better free cash flow conversion. I want to emphasize, I am very confident in the initiatives underway. Our team is energized for the journey and we are excited to see this effort come to life in the quarters ahead. I look forward to sharing more details on our next earnings call in February. And with that, I will turn it over to Jonathan.
Jonathan Collins, CFO
Thank you, Matti. Slide 11 is an overview of our third quarter and year-to-date financial results compared with the same periods from the prior year. Q3 revenue was $622 million, a decrease of $25 million compared to the prior year, bringing the year-to-date to $1.9 billion. The third quarter decline was largely organic but was also impacted by the Valipat divestiture. The third quarter net loss was $66 million, $59 million lower than last year, largely attributed to a $40 million increase in FX losses due to the weakening of the U.S. dollar, and a $14 million non-cash goodwill impairment charge recorded in the IP segment. Adjusted diluted EPS, which excludes the impact of one-time items like the impairment, was $0.19 in Q3, a $0.02 decline over the same period last year due to lower adjusted EBITDA. Operating cash flow was $203 million in the quarter, an increase of $40 million over the third quarter last year, taking the year-to-date to over $0.5 billion, which is down $48 million from the prior year. The decline is almost entirely driven by lower adjusted EBITDA, as higher working capital requirements were offset by lower one-time costs. Please turn now to Page 12 for a closer look at the drivers of the third quarter top and bottom-line changes from the prior year. We previously anticipated the business would return to slightly positive organic growth in Q3. However, our results came in below those expectations with a decline of 2.6%, lowering revenue by $17 million versus the third quarter of last year. Our subscription business grew at just under 1%, which was slightly below our expectations but in line with the prior quarter. Subscription growth in A&G remains strong at 3% so far this year, but we continue to experience headwinds in our LS&H and IT segments as customer budget pressures persist ahead of our new product refreshes. The vast majority of the shortfall of our expectations was in our transactional lines of business, which declined by 14% and was concentrated in our A&G and LS&H segments, where we experienced more market headwinds than anticipated, causing a lower pipeline conversion. In the case of A&G, transactional sales of books and digital collections are off to a slow start in the new fiscal year in North America, and research and analytics back files sales were lower than expected in Asia. Our LS&H project-driven sales and services that support drug commercialization were lower than expected as budget pressures persisted at our top pharma customers. Operating expenses were reduced by $6 million to mitigate the revenue shortfall, resulting in an $11 million decline in adjusted EBITDA on the organic revenue change. We experienced an inorganic decline of $9 million on the top line, and a $6 million decline on the bottom line due to the Valipat divestiture, which was nominally affected by the acquisitions of MotionHall, Global Q, and Rowan. Foreign exchange had a negligible impact on the top and bottom line compared to the same period last year. Page 13 provides an overview of the drivers of the year-to-date top and bottom-line changes from the prior year. Our third quarter results brought our year-to-date organic change to a negative 1.5%, lowering revenue by $30 million. Our subscription business growth was at just over 1%, which is in line with our organic ACV growth at the end of September. Our transactional lines of business have declined 9%, and while the declines in our A&G and LS&H segments are at or slightly below this level, driven largely by market headwinds, we did see growth in Q3 in IP, driven by a recovery in our trademark services, bringing a year-to-date decline in this segment to mid-single digits. Operating expenses for the first nine months of the year were essentially flat when compared to the same period in the prior year, as cost inflation was largely offset by cost efficiencies. The Valipat divestiture, net of a small offset by the acquisitions of MotionHall, Global Q, and Rowan, caused an inorganic decline of $17 million on the top line and a $10 million decline on the bottom line. Similar to the third quarter, foreign exchange had a negligible impact on the top and bottom line compared to the same period last year. Please turn to Page 14 to step through the conversion from adjusted EBITDA into free cash flow. Free cash flow was $126 million in the third quarter, an increase of $24 million over the same period in the prior year, driven largely by timing differences in working capital. This brings year-to-date free cash flow to $298 million, a conversion of 39% on adjusted EBITDA, and a decrease of $77 million over the same period in the prior year, on lower adjusted EBITDA due to the top-line headwinds and elevated capital spending aimed at accelerating product innovation. One-time costs, interest, and taxes for the quarter were generally in line with Q3 of last year. Working capital was essentially flat in Q3 versus a $64 million use in the same period last year, primarily due to timing differences in receipts from customers, bringing the year-to-date timing impact to $23 million in comparison. Capital expenditures were up $15 million as we continue to invest in product integration, to drive organic subscription growth. We used most of our free cash flow in Q3 to repurchase 15 million shares of common stock and to complete the Rowan acquisition. As we move into the fourth quarter, we are working diligently to finalize our new value creation plan and are eager to share the more detailed roadmap and the impact it will have on our outlook for the business when we report our fourth quarter and full year results in February. Thank you for listening in this morning. I'm now going to turn the call back over to Regina to take your questions. And as a reminder, please limit yourself to one question and then return to the queue for any additional.
Operator, Operator
Our first question will come from Owen Lau with Oppenheimer. Please go ahead.
Owen Lau, Analyst
Well, thanks for taking my question. Could you please talk about why the actual organic growth was so far off from your expectations? I know you talked about transactional revenue and some weakness in all three key segments, but where was the disconnect and how do you plan to change it? Thanks.
Jonathan Collins, CFO
Sure, Owen. I'll start with a little more color on the quarter, and then I suspect Matti will want to touch on how the value creation plan will help to address this. As I mentioned in the prepared remarks, the transactional performance compared to expectations in Q3 was largely concentrated in our A&G business and in our Life Sciences segments. IP was reasonably close to what we were expecting on transactional recovery and trademark services business. Within A&G, you'll recall we have a few different lines of transactional services we're providing digital content and historical research and analytics information. In particular, in North America, we saw less spending on the digital content that is transactional in nature. The pipeline development and conversion was lower than is anticipated, which would be normal for those lines of business. And then additionally in Asia, where we still see significant market opportunity for historical research and analytics content, sales were lower there and the pipeline conversion was particularly so. In addition to that on the Life Sciences side of the business, as we touched on, where we support our large pharmaceutical customers in commercialization products and services. A number of those product projects that were anticipated did not materialize or were pushed during the quarter as well. So those are the reasons.
Matti Shem Tov, CEO
Basically, this is a great segue to what we're actually doing. As part of my three-month journey talking to internal people, the sales organization, product, and some of our customers, volatility and exposure to one-time revenues is evident. During the last quarters, we are going to take away some of the volatility and rationalize some of the one-time transaction business. We're looking further into the one-time business as it is low-margin, low-profit, and low-growth. It's extensive. It's very hard to predict, and part of my impression is we are currently contemplating this and taking away this volatility to allow us to focus more on product innovation and subscription-based predictable revenue streams. That's where we're heading.
Operator, Operator
Thanks for the question, Owen. Next question.
David Paige, Analyst
Hi, good morning. This is David Paige on for Ashish. Thanks for taking our question. I was wondering if you could just parse out some of the weakness that was driven by general macro headwinds or - I know in the initial value-creation plan you have to improve sales execution and get more focused on product portfolio. But maybe you could just parse out what was a macro headwind versus what was an internal product portfolio that needs to be fixed? Thank you.
Jonathan Collins, CFO
Yes, thanks for the question, David. We certainly believe that it's a combination of both. We think a meaningful portion of what we experienced in the quarter were market headwinds being higher than we expected. But as Matti touched on in his remarks, we certainly acknowledge that there is significant opportunity to improve our sales execution.
Matti Shem Tov, CEO
There are several factors relating to sales reduction. I mentioned that we are all aware of the history of Clarivate One and its reversal. Some of it relates to existing sales setups within the different segments. I want to reiterate the smart and right decision by previous management to bring back the three-segment approach. Still, there is work to be done on the specific sales organization of the different segments. The concept of a sales generalist approach doesn't really work in some of the segments. So what we are going to do is emphasize the sales specialists and rely more on customer buying. The customer is actually buying our product with our sales experts. This is one of the drivers for the improvement in the sales organization. There are several other elements of sales improvement we are focusing on. The company somehow was underinvested in customer success in some segments, making sure that people use our products to the fullest and understand the new functions and features coming online. We have identified some shortages of staff, and we will maneuver from other areas of the organization to be closer to our customers to ensure our renewal rates are increasing.
Operator, Operator
Thanks for the question, David. Next question, please.
Toni Kaplan, Analyst
Thanks so much. I appreciate the information on the value creation plan. I wanted to ask, when you think about moving transactional to subscription, improving sales execution, and accelerating product innovation, that all makes total sense. However, these were items that prior management had tried to work on as well. I wanted to understand what will be different this time. Should we expect a higher level of investment going forward? Does that mean we might see a hit to margins to drive some of this growth? Just wanted to understand those two aspects. Thank you.
Matti Shem Tov, CEO
I'll start with the first question. I'm not here to comment on the previous management. I believe they made good decisions to realign the company with three segments and started investment into product innovation. I come from a different background; I have a strong passion for people, products, and sales. I will invest myself in making sure we have the right talent, and we do have the right talent. We need to align our talent effectively, and I will focus heavily on product. Some of you may look at my bio; I've been a product person since early in my career. I will put a strong effort into delving deeper into the product innovation lifecycle. In my long career with Ex Libris and ProQuest, I developed methodologies that worked with our customers to develop products, ensuring that our product development aligns with customer needs. Lastly, I have always been involved in sales execution and delivering the product. I will bring my three passions — people, products, and sales — into the Clarivate environment, and I'm confident this experience will effectively lead us back to an organic growth trajectory, creating value for our customers and, consequently, for our shareholders.
Operator, Operator
Thank you for the question, Toni. Next question.
Andrew Nicholas, Analyst
Hi, good morning. Thank you for taking my question. Thinking of your extensive experience with turnarounds and your focus on people, product, and sales, I am curious about the timeline. I'm not asking for specific guidance; I realize you're going to provide more detail on the plan next quarter. However, based on your experience, how long do some of these different pieces generally take? How quickly can some of these go-to-market motions be revitalized based on what you've observed in the business to this point?
Matti Shem Tov, CEO
Based on my experience, I’ve been around for 90 days. I don’t want to jump ahead of myself. I have been investing my time in meeting our people and some of our customers and trying to identify what is working and what can be further improved. I have some clear ideas about the way forward. Some changes will come quickly, while others will take more time to evolve. Obviously, changes related to cost management, product innovation, and the renewal of a product take time. I would expect to provide more details in February, but this will be an ongoing process. We recognize that you need to track our progress, and we will address this in the February earnings call.
Operator, Operator
Great. Thank you for the question, Andrew. Next question, please.
Manav Patnaik, Analyst
Thank you. Good morning. Matti, you talked about all the time and effort you put into ProQuest to fix it and turn it around. I understand you had the benefit of it being a private company with lots of time for cover. From what you're describing, it sounds like all three of these segments, which most of us think don't belong together, have issues as well. It probably makes sense to handle them privately versus publicly unless you're going to split them apart, which it sounds like you aren't. Therefore, I am curious about your discussions with the Board regarding that decision. Why isn’t that part of this effort you’re embarking on right now?
Matti Shem Tov, CEO
First of all, let’s discuss whether these three businesses belong together or not. All three segments have very similar characteristics. They enrich data, provide analytics insights, and deliver workflow solutions through our SaaS offerings to provide expert services. These businesses share technology infrastructure that spans content, technology, and commercial channels, delivering efficiencies and scale. I recognize what you’re saying about the potential for vulnerability; however, our current thinking is still in development, and it’s too early to comment on your concerns. There are no secret accounts.
Operator, Operator
Thank you for the question, Manav. Next question, please.
Shlomo Rosenbaum, Analyst
Hi, thank you for taking my question. I wanted to ask, regarding some of the elements you discussed about getting rid of products that are marginally profitable and simplifying the business, and potentially looking for areas to exit from. Should we expect a substantial shift to a shrink-to-grow strategy over here, where the business has to actually be notably smaller than it is today, especially on the transactional side of the business? Or is this really not a major factor? I'm just trying to understand strategically how we should think about this in terms of layering these changes in our expectations.
Matti Shem Tov, CEO
We have identified several businesses that we want to divest, wind down, or shrink in various ways. We are still deliberating on what actions to take. Should we decide to divest a business, we need to ensure we protect our reputation and our other businesses within respective segments. Various teams are currently working on these ideas and opportunities, which are significant. However, please bear with me as I have only been here for 90 days; I ask for your patience until February. We will have a more concrete and specific plan to share then.
Operator, Operator
Okay, thank you for the questions.
Peter Christiansen, Analyst
Good morning. Thanks for the question. Matti, one of the original theses on Clarivate over the years has been driving revenue synergies within segments by expanding the value chain presence along the value chain or across segments. The company has done a good job driving cost synergies, but I am curious about your assessment of the potential for revenue synergies between the three businesses and within segments where capabilities have been added. Thank you.
Matti Shem Tov, CEO
I think we all know the history where the pendulum swings one way with Clarivate One and then back. From my initial view, there is some revenue synergy potential between the three organizations. This is something I still need to investigate further and will provide more specific insights down the road. The potential is there; the concept of integrating the three segments is sound, although there have been execution challenges. There are definitely cost synergies, and we have taken that approach to an extreme. Additionally, there should also be revenue synergies, and there are opportunities for cross-selling between customers in different segments. However, I want a bit more time before I give a complete answer on this.
Operator, Operator
Thank you for the question, Peter. Regina, let's go to our next and final question, please.
George Tong, Analyst
Hi, thanks. Good morning, and sorry for the technical issues earlier. In each of your segments, can you talk a little more about some of the end-market trends you’re seeing? What would need to improve externally to help support some of the internal initiatives you have to transform the business?
Matti Shem Tov, CEO
First of all, it is a given that we operate in three different segments that are very good segments to be in. I believe that the mid-term growth of those segments – I’m being careful to say segments themselves – can reach 4, 5%, or maybe even more, particularly in the life science side. Those segments are indeed growing. We see different characteristics and situations within the three segments themselves. Starting with A&G, we currently see less appetite to invest in capital expenses, which is contributing to softness in the digital collections front. The lack of capital expenditure in universities has impacted our one-time revenue. This is reflected in our observation of the softness in capital expenditure on the A&G side. For the IP side, we expect 4 to 5% growth in the market itself, currently facing some softness on the annuity side. Similarly, we see softer spending in IP on our recurring business ahead of the new Derwent launch, which is being rolled out as we speak. Lastly, the life sciences side seems to show the most promise in terms of growth, but we are experiencing some headwinds, particularly on the commercial side, where we see softness, although R&D remains strong. Overall, these are still excellent segments with expected growth of 4% to 5% as an industry, and life sciences may be even stronger.
Operator, Operator
Thank you for that question. Regina, I think we have one final question. Go ahead.
Colton Feldmann, Analyst
Hi, this is Colton on for Surinder. One quick question I wanted to ask is I understand you mentioned seeing lower renewal rates in some areas of the business. Could you elaborate on that and if there are certain segments seeing higher churn, or could you generally discuss what you're observing from a churn perspective, either quantitatively or qualitatively? Thank you.
Jonathan Collins, CFO
Yes, thanks for that, Colton. In our prepared remarks, we highlighted that subscription growth for A&G remains solid. Renewals in A&G continue to be very strong, while we experienced renewal pressure in the third quarter. This had a smaller impact within our Life Sciences and IP segments. As we touched on, we know there's pressure on spending even for recurring revenues within the Life Sciences area, particularly from our large pharmaceutical customers. Also, regarding IP, there’s some pressure on spending in our recurring business ahead of the new Derwent launch that's happening now. Those are the main areas where we noticed a bit of softness in the third quarter. Addressing sales execution to improve customer engagement alongside product innovation will contribute to decreasing churn in the segments affected.
Operator, Operator
Regina, I think that's our last question. I want to thank everyone for joining us this morning.
Operator, Operator
Ladies and gentlemen, that will conclude today's call. Thank you all for joining, and you may now disconnect.