Clarivate's Q3 2025: Contradictions Emerge on IP Recovery, Subscription Shift, and A&A Segment Impact

Date of Call: October 29, 2025

Financials Results

• Revenue: $623M in Q3, essentially flat YOY (YTD $1.84B)
• EPS: $0.18 adjusted diluted EPS, flat sequentially; Q3 net loss $28M; change vs prior year attributed to ScholarONE divestiture
• Operating Margin: Profit/adjusted EBITDA margin expected ~41% (guidance: adjusted EBITDA at high end of range; margin ~41%)

Guidance:

• Raising full-year revenue midpoint by $50M to $2.44B.
• Q4 revenue expected ~ $600M and adjusted EBITDA ~ $250M.
• Expect adjusted EBITDA at the high end of the range and profit margin of ~41%.
• Diluted adjusted EPS and free cash flow expected near midpoints; FCF midpoint ~$340M.
• Strategic disposals to reduce revenue by ~ $90M this year and ~ >$100M next year.
• Recurring organic growth expected in the upper half of the prior range.

Business Commentary:

* Revenue Performance and Capital Allocation: - Clarivate's Q3 revenue was $623 million, essentially flat over the same period in the prior year. Adjusted diluted EPS was flat sequentially at $0.18. - Revenue growth was driven by subscription revenue growth, but offset by declines in recurring and transactional revenues. The company focused on capital allocation, including $115 million of share repurchases year-to-date and $100 million of debt pay down.

• ACV and Renewal Rate Improvement:
• Clarivate's annual contract value (ACV) improved by 1.6%, driven by 2% ACV growth in Academia & Government and Life Sciences & Health.
• The renewal rate increased to 93%, up 100 basis points year-over-year, indicating strong customer retention.

• The improvement in ACV and renewal rate was attributed to strategic product development and enhanced customer engagement.

• AI and Product Innovation:

• Clarivate launched 12 products and AI-powered capabilities across segments, aiming to drive organic growth and renewal rates.
• The company emphasized AI integration across workflows and segments, such as AI agent and trademark opposition assistant, and expects this to expand ACV.

• The focus on AI and product innovation is part of the company's value creation plan, enhancing competitiveness and customer retention.

• IP Segment Recovery and Strategic Focus:

• The IP segment's reoccurring revenue was flat, representing a 3% improvement in the organic growth rate compared to the full year of 2024.
• The company aims to return the IP segment to sustainable growth with new AI-driven products and increased market recovery.
• The strategic focus includes improving competitive positioning with AI-based products and increasing market recovery efforts, with new tools like AI-powered product taxonomy and patent mapping.

Sentiment Analysis:

Overall Tone: Positive

• Management: 'results this quarter reflect continued progress in our value creation plan' and 'we are raising our revenue guidance by $50 million ... to $2.44 billion at the midpoint.' CFO: 'we now expect adjusted EBITDA at the high end of the range and our profit margin at approximately 41%.'

Q&A:

• Question from Gregory Parrish (Morgan Stanley): This is Greg Parrish on for Tony. I thought maybe we could dive into the patent renewal business there. Obviously, it's been under a little bit of pressure over the last couple of years due to market volume headwinds. Hoping you could provide some color on the competitive landscape and where your product stacks up with some other products in the market like an aqua and how you're positioned? And then some of the more recent pressures, say, year-to-date, how would you characterize that in terms of market headwinds versus competitive headwinds?
  Response: Recurring patent/trademark renewals declined ~3% last year and are flat year-to-date; management expects recovery driven by investments in workflow software and new IP leadership (Maroun) to restore organic growth.

• Question from Scott Wurtzel (Wolfe Research): Just on the value creation plan and some of the updates there. I noticed that you added a couple of new innovations, whether it's on the Specto or the AuthX AI Research Assistant. Just wondering if you can talk a little bit about those products that you've sort of added to your road map here and what you sort of see those kind of creating for the business as a whole?
  Response: Company is pursuing both AI-enablement of existing products and AI-native solutions (e.g., RiskMark, Web of Science Research Intelligence) to boost retention, ACV and competitive positioning.

• Question from Shlomo Rosenbaum (Stifel): I had one quick one for Jonathan. And then I want to ask you something Matti. Jonathan, it looks like there were some multiple large book transactions that occurred in advance of the company shutting down that area. Could you quantify for us the impact of those transactions versus what you were expecting, both for revenue and EBITDA? And then after that, Matti, maybe after a year on the job over here, could you just give us an idea as to what you think the potential of this business is after working on it, trying to put in your new plan, making some -- a lot of strategic changes in it. What do you think the potential is versus when you joined over here? And if you could just give us some thoughts about how we should think about this business longer term?
  Response: Q3 included several large, low‑margin e‑book transactions that added over $20M to disposals (materially lifting Q3 revenue but with low margin); management expects to return the company to market growth rates over time (A&G ~3–4%, IP ~4–5%).

• Question from William Qi (RBC Capital Markets): This is Will Qi on for Ashish Sabadra. When you guys think about the ACV acceleration to 4Q, could you give a little bit of context maybe on which segments you guys would call out as the primary drivers? And also maybe just any commentary around where you think that kind of largest room for improvement might be as well.
  Response: ACV improvement is broad-based with Life Sciences showing the largest uplift; A&G and Life Sciences around ~2% ACV, IP closer to flat but expected to improve via investments (Derwent AI search, Patent Monitor, IPMS/IPfolio).

• Question from Keen Fai Tong (Goldman Sachs): You mentioned you expect the IP market to recover and move in the right direction. Can you talk more about underlying trends you're seeing with new patents and trademarks and catalysts for a recovery in volumes?
  Response: Management sees patents-in-force rising post-COVID (growth last year) which will flow into renewals with a lag; AI-driven innovation should further support filings and improve renewal volumes over coming years.

• Question from Manav Patnaik (Barclays): I just had a question broadly on AI, I guess. I think most of your initiatives that you've talked about have been more on the workflow side of the equation, where I guess I think people have a view that there's going to be a lot more competition there. But my question was more on the content side. Can you help us by a division? Just help us appreciate the content you have behind those workflows and how much of that is actually proprietary?
  Response: Clarivate has significant proprietary content across Web of Science, ProQuest, Derwent and others; most AI work leverages this indexed/licensed proprietary data for information/discovery services, with some AI automation applied to workflows.

• Question from Colton Feldmann (Jefferies): This is Colton for Surinder. My question is kind of similar to Shlomo's earlier, just kind of around transactional revenues. And obviously, they were a bit better in the quarter. Just kind of a question around improvement it looks like in the guide from last quarter this quarter in terms of the inorganic disposals and not headwinds to the business broadly, like how that's kind of impacting results and the guide that you guys have for this year? And then also, I think you talked about some of like a slower roll-off of those transactional disposals as well. So I just kind of wanted to get an update in terms of like time line expectations of like next year, how much of a headwind that might be if there was a bit of a benefit this quarter, how much of that headwind is for next year? That's all for me.
  Response: Revenue outlook raised ~ $50M mainly because disposals are declining slower than expected and Q3 one-offs; disposals now expected to reduce revenue by ~ $90M this year and just over $100M next year; FX tailwind and stronger organic recurring growth also lift guidance.

Contradiction Point 1

IP Segment Recovery and Market Conditions

It highlights differing views on the recovery and market conditions within the IP segment, which impacts business expectations and investor confidence.

Can you clarify how your product compares to competitors like Aqua and characterize recent pressures as market vs. competitive headwinds? - Gregory Parrish (Morgan Stanley)

2025Q3: The reoccurring order type is primarily patents and trademark renewal services. The business is moving in the right direction, with a flat year-to-date performance after last year's 3% decline. The improvement is due to a better competitive position and expected market recovery. - Jonathan Collins(CFO)

What is the expected timing for the rebound in the IP and annuity market and the AI opportunities there? What is Clarivate's exposure and capabilities in China related to these opportunities? - Manav Shiv Patnaik (Barclays)

2025Q2: The IP and annuity market has been a little bit challenging in the U.S. as well as in Europe. We do expect that to start recovering, but it does take a few years for those types of changes to translate into higher renewal rates. - Jonathan M. Collins(CFO)

Contradiction Point 2

Impact of Transactional Disposals

It involves differing perspectives on the impact of transactional disposals on financial performance, which affects investor understanding of the company's financial health.

What impact are transactional revenues having on results, and what are expectations for next year’s timeline? - Colton Feldmann (Jefferies)

2025Q3: The slower roll-off of transactional disposals and weaker U.S. dollar contributed to raised guidance. - Jonathan Collins(CFO)

Why are disposals delayed, and is it due to customer service priorities or asset sales? - Adam Parrington (Shlomo Rosenbaum)

2025Q2: We had expected the run rate for disposals to be about $150 million by the end of the second quarter. It was a little bit less than that because a number of customers extended their time frame to transition to our alternative offerings. - Matitiahu Shem Tov(CEO)

Contradiction Point 3

Transition to Subscription Revenue and Incentive Model Changes

It highlights differing understandings of the company's strategy to shift from transactional to subscription revenue and the impact on sales incentives, which are vital for business model transformation and sales performance.

Can you quantify the impact of large book transactions before the company shutdown? What is the business's future potential? - Shlomo Rosenbaum (Stifel)

2025Q3: The sales team is now incentivized to focus on recurring order types, including subscriptions and patent renewals, supported by strategic business changes. - Jonathan Collins(CFO)

How have your sales force incentive model changes evolved, and how do they impact execution and success? - Andrew Nicholas (William Blair)

2024Q4: Incentive models have been tailored over years to focus on both onetime and subscription sales. We are now adjusting to incentivize subscription and reoccurring revenue growth. - Matti Shem Tov(CEO)

Contradiction Point 4

IP Segment Growth Expectations

It involves differing expectations for the IP segment's growth, which is a critical area for the company's revenue and strategic focus.

Could you quantify the impact of large book transactions before the shutdown? What is the business’s potential moving forward? - Shlomo Rosenbaum (Stifel)

2025Q3: We have strong fundamentals and potential for growth, with targets of A&A and IP at 3-4% and Life Science slightly higher. A focused strategy will return the company to market growth rates over time. - Matti Shem Tov(CEO)

What drove the higher-than-expected renewal volumes in IP? - Unidentified Analyst (Oppenheimer)

2025Q1: The primary driver for mid-single-digit growth in IP was a return to healthy underlying volumes. There were some timing items that contributed, but the main improvement came from volume recovery, which was consistent with our expectations. - Jonathan Collins(CFO)

Contradiction Point 5

Impact of Government Actions on A&A Segment

It involves differing views on the impact of government actions on the A&A segment, which could affect revenue and customer retention.

How does your product compare to competitors like Aqua in the market? How do you characterize recent pressures as market vs. competitive headwinds? - Gregory Parrish (Morgan Stanley)

2025Q3: We enjoy a collaborative relationship with customers worldwide, and we've discussed market conditions with them. Our A&A business in Q1 was unaffected by government actions, with minimal impact so far. - Matti Shem Tov(CEO)

Can you discuss the impact of funding cuts on customer advisory groups and the associated pressures? Do you anticipate further deceleration in A&A? - Greg Parrish (Morgan Stanley)

2025Q1: A majority of A&A segment revenue is with higher education institutions, and less than half is U.S.-based. Meaningful portions of U.S. revenue have already renewed, and we're confident that remaining risks are contained within the guidance range. - Jonathan Collins(CFO)