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CLARIVATE PLC (CLVT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $663.0M, down 3.0% year-over-year; adjusted diluted EPS was $0.21 (vs $0.23 in Q4 2023), and adjusted EBITDA was $285.3M with a 43.0% margin .
  • Management initiated a strategic review, including potential divestitures, and accelerated a pivot from low-margin transactional sales to subscription and re-occurring revenue; this is a notable stock catalyst given potential portfolio actions and improved predictability .
  • 2025 outlook guides revenues to $2.28B–$2.40B with adjusted EBITDA of $940M–$1.00B and adjusted EPS of $0.60–$0.70, maintaining ~41.5% margin despite expected revenue declines from strategic disposals; free cash flow guided to $300M–$380M .
  • Capital allocation was balanced in 2024: $200M share repurchases and $198M of term-loan prepayments; a new $500M repurchase program was authorized for 2025–2026 .
  • Street consensus from S&P Global for Q4 2024 was unavailable at the time of analysis; estimate comparisons could not be performed (Values typically sourced from S&P Global; unavailable due to API limits).

What Went Well and What Went Wrong

What Went Well

  • “We are focused on driving subscription and re-occurring revenue growth and plan to discontinue sales of certain low-margin transactional products…which will improve our revenue predictability.” — CEO Matti Shem Tov, highlighting the Value Creation Plan and pivot to subscriptions .
  • Academia & Government introduced ProQuest Ebooks (700K titles) and ProQuest Digital Collections as subscription offerings; Life Sciences launched DRG Fusion to shift RWD from transactional data brokering to subscription analytics .
  • Adjusted EBITDA margin held at 43.0% in Q4 despite revenue declines, supported by cost controls; full-year margin was 41.5% .

What Went Wrong

  • Q4 re-occurring revenues fell 6.0% (organic -5.4%) on lower IP patent renewal volume; subscription revenues were modestly down (-0.9%, organic +0.1%) and transactional revenues down (-6.4%) .
  • Free cash flow softened: Q4 $59.1M (vs $127.0M) and FY $357.5M (vs $501.7M), mainly due to lower operating results, higher working capital and increased capital spending .
  • Organic revenue for FY 2024 declined 1.4%, driven entirely by transactional weakness; FX and divestitures (Valipat, ScholarOne) added top-line and profit headwinds .

Financial Results

MetricQ4 2023Q3 2024Q4 2024Consensus (Q4 2024)
Revenue ($USD Millions)$683.7 $622.2 $663.0 N/A
Diluted EPS ($USD)-$1.30 -$0.09 -$0.27 N/A
Adjusted Diluted EPS ($USD)$0.23 $0.19 $0.21 N/A
Adjusted EBITDA ($USD Millions)$298.2 $264.4 $285.3 N/A
Adjusted EBITDA Margin (%)43.6% 42.5% 43.0% N/A
Net Income Margin (%)-123.4% -10.5% -28.9% N/A

Note: Street consensus via S&P Global was unavailable; comparisons to estimates could not be performed.

Revenue by type (Q4):

Revenue TypeQ4 2023Q4 2024YoY Change
Subscription ($USD Millions)$410.8 $407.0 -$3.8 (-0.9%)
Re-occurring ($USD Millions)$119.1 $112.0 -$7.1 (-6.0%)
Transactional ($USD Millions)$153.8 $144.0 -$9.8 (-6.4%)
Total Revenue ($USD Millions)$683.7 $663.0 -$20.7 (-3.0%)

Revenue by segment (Q4):

SegmentQ4 2023Q4 2024YoY Change
Academia & Government ($USD Millions)$339.4 $342.9 +$3.5 (+1.0%)
Intellectual Property ($USD Millions)$225.6 $209.1 -$16.5 (-7.3%)
Life Sciences & Healthcare ($USD Millions)$118.7 $111.0 -$7.7 (-6.5%)
Total ($USD Millions)$683.7 $663.0 -$20.7 (-3.0%)

KPIs and balance sheet (selected):

KPIQ4 2023 / FY 2023Q4 2024 / FY 2024Change
Free Cash Flow ($USD Millions)Q4: $127.0; FY: $501.7 Q4: $59.1; FY: $357.5 Q4: -$67.9; FY: -$144.2
Operating Cash Flow ($USD Millions)FY: $744.2 FY: $646.6 -$97.6
Cash & Equivalents ($USD Millions)$370.7 (Dec 31, 2023) $295.2 (Dec 31, 2024) -$75.5
Total Debt ($USD Millions)$4,721.1 (Dec 31, 2023) $4,518.7 long-term; $4,571.1 total outstanding ~-199.2 vs Dec 31, 2023
ACV Organic Growth (%)2024: +0.9% 2024: +0.9% Stable
Recurring Revenue Mix (%)FY 2024: ~80% FY 2025 guidance: ~85% midpoint +500 bps guided

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenues ($USD Billions)FY 2024$2.57–$2.67B (reaffirmed Aug) Guidance removed Nov; actual $2.5567B Withdrawn; delivered slightly below low end
Adjusted EBITDA ($USD Billions)FY 2024$1.055–$1.115B Guidance removed Nov; actual $1.0604B Withdrawn; delivered near low end
Adjusted EBITDA Margin (%)FY 202441%–42% Guidance removed Nov; actual 41.5% Withdrawn; mid-range delivered
Adjusted Diluted EPS ($USD)FY 2024$0.70–$0.80 Guidance removed Nov; actual $0.73 Withdrawn; mid-range delivered
Free Cash Flow ($USD Millions)FY 2024$420–$500M Guidance removed Nov; actual $357.5M Withdrawn; below range
Organic ACV Growth (%)FY 2025N/A1.0%–2.0% New
Recurring Organic Revenue Growth (%)FY 2025N/A-1.0% to +1.0% (midpoint flat) New
Revenues ($USD Billions)FY 2025N/A$2.28–$2.40B New
Adjusted EBITDA ($USD Billions)FY 2025N/A$0.94–$1.00B New
Adjusted EBITDA Margin (%)FY 2025N/A40.5%–42.5% (~41.5% midpoint) New
Adjusted Diluted EPS ($USD)FY 2025N/A$0.60–$0.70 New
Free Cash Flow ($USD Millions)FY 2025N/A$300–$380M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
AI/Technology initiativesQ2: Launched AI Search in Derwent; Trademark Watch Analyzer; Academic AI features; Cortellis enhancements . Q3: Continued AI product roadmap and stabilization in IP volumes .CEO: accelerating AI across A&G (Academic AI, agentic AI), LS&H (Cortellis AI assistants), IP (AI patent drafting/monitoring); ACV expected to improve with AI rollouts .Strengthening; broader deployment and customer collaboration .
Business model shift (Transactional→Subscription)Q2: Transactional revenue headwinds; reaffirmed 2024 guidance . Q3: Overdependency on transactional revenue; Value Creation Plan articulated; removed 2024 outlook .Bold pivot: ProQuest Ebooks/Digital Collections moved to subscription; DRG Fusion launched; plan to cease one-time sales and exit RWD direct licensing by end-2026 .Accelerating; subscription mix targeted to ~85% in 2025 .
Strategic alternativesLimited prior disclosure.Initiated strategic review, considering divestitures up to an entire segment; advisors engaged .New and potentially catalytic .
Segment performanceQ2/Q3: A&G subs growth >3% H1; IP stabilization; LS&H pressured by big pharma budgeting .Q4: A&G +1.0% yoy; IP -7.3%; LS&H -6.5%; re-occurring fell on patent renewal timing .Mixed; A&G resilient, IP/LS&H pressured .
Macro/FXQ2: FX headwinds on USD strength . Q3: FX and net FX impact on profit .Q4: FX headwind lowered bottom line; 2025 assumes ~-$25M top-line, ~-$10M profit FX headwind .Continuing headwind .
Government/Academic exposureNot highlighted in detail; A&G renewal >96% in H1 .CEO: US government exposure is small; academia growth expected low-to-mid single digit longer term .Stable exposure with cautious optimism .
Patent renewal timingQ3: IP trademark volumes stabilized .Q4: Re-occurring decline driven by lower patent renewal volumes; some timing shift into Q1 .Short-term timing impact .

Management Commentary

  • “We are focused on driving subscription and re-occurring revenue growth and plan to discontinue sales of certain low-margin transactional products in 2025 and 2026, which will improve our revenue predictability.” — CEO Matti Shem Tov .
  • “We expect the business will grow faster; will become more predictable; will have improved profit margins…and will have a negligible impact on our free cash flow.” — CFO Jonathan Collins, on strategic disposals and subscription pivot .
  • “We expect our annual contract value to accelerate by approximately 60 basis points to 1.5% at the midpoint…We anticipate revenue will approximate $2.34 billion…recurring revenue mix will improve by about 500 basis points from 80% to 85%.” — CFO on 2025 guidance .
  • “We have retained financial advisers to help us in evaluating strategic alternatives to unlock value. This may include divesting business units or an entire segment.” — CEO on portfolio actions .
  • “We are scaling and investing in dedicated customer success teams…refocusing incentive models…to drive subscription and reoccurring growth.” — CEO on sales execution .

Q&A Highlights

  • Government exposure: CEO characterized direct US government exposure as small and expressed long-term optimism for academia despite cycles; acknowledges exposure if federal funding decreases .
  • Sales incentives: Incentive model rebalanced to prioritize subscription and re-occurring revenue retention and new business across all segments .
  • IP re-occurring trends: Q4 decline driven by patent renewal timing; incentives and winding down transactional offerings are expected to rebuild recurring book (including renewals) .
  • Investment pace vs margins: CFO argues strategic disposals enable sustaining margins while focusing investments on core product innovation; CEO promotes a more focused, partner-led R&D approach leveraging Academic AI across segments .
  • Strategic review criteria: CFO aims to monetize undervalued assets; segments can operate standalone; portfolio actions target unlocking shareholder value .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 was unavailable at the time of analysis due to API limits; therefore, beat/miss analysis versus estimates could not be performed. Values typically retrieved from S&P Global.

Where estimates may need to adjust:

  • 2025 subscription-mix shift, revenue contraction from strategic disposals, and margin maintenance imply lower revenue but relatively stable profitability; Street models may need to reflect disposals’ ~$140M revenue reduction and ~$40M profit impact, FX headwinds, and improved FCF conversion from lower interest and capex .

Key Takeaways for Investors

  • Clarivate is executing a bold pivot from volatile transactional sales to subscription and re-occurring revenue, targeting recurring mix of ~85% in 2025 and margin stability, which should improve predictability and valuation quality .
  • The strategic review is a potential catalyst; divestitures (business units or segments) could crystallize value and simplify execution focus; advisors (Morgan Stanley, Moelis) engaged .
  • Near-term headwinds include IP re-occurring declines from patent renewal timing and FX translation; Q1 may benefit from timing shifts; watch the cadence of renewals and FX .
  • AI-enabled product launches (Derwent AI Search, Academic AI, Cortellis assistants) and the DRG Fusion subscription analytics platform are central to ACV acceleration and medium-term growth (2026+) .
  • Free cash flow conversion expected to improve slightly in 2025 (~35%) despite lower revenue; capex declines and interest savings support FCF resilience .
  • Balanced capital allocation persists: $200M buybacks in 2024, $198M debt prepayment, and a new $500M repurchase authorization for 2025–2026 may support per-share metrics and provide flexibility alongside deleveraging .
  • Without current Street estimates, monitor sell-side revisions post-guidance: revenues down on disposals, margins maintained, EPS lowered ($0.60–$0.70), and FCF guided to $300–$380M .