Good day, and welcome to the Clarivate Third Quarter 2021 Earnings Release Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mark Donohue, Head of Investor Relations. Please go ahead..

Thank you, Beth, and good morning, everyone. Thank you for joining us for the Clarivate third quarter 2021 earnings conference call.

With me today are Jerre Stead, Executive Chairman and Chief Executive Officer; Richard Hanks, Chief Financial Officer; Mukhtar Ahmed, President, Science Group; Gordon Samson, President, IP Group; and Steen Lomholt-Thomsen, Chief Revenue Officer. All 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. This morning, Clarivate issued a press release announcing our financial results for the period ended September 30, 2021.

The release as well as an accompanying supplemental presentation is available on the Investor Relations section of the company's website, clarivate.com, under events and presentations. During our call, we may make certain forward-looking statements within the meaning of applicable securities laws.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors and 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 and on the company's website. Our discussion will include non-GAAP measures or adjusted numbers, including adjusted 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 supplement to and should not be considered in isolation from or as a substitute for GAAP financial measures.

Reconciliations of these measures to GAAP measures are available on our earnings release and supplemental presentation on our website. After prepared remarks, we'll open the call up to your questions. And with that, it's a pleasure to turn the call over to Jerre..

Thank you, Mark, and thanks to all of you for joining us. This morning, we reported improved third quarter results compared to last year. Adjusted revenue was up 54% to $442 million on a constant-currency basis, driven by the acquisition of CPA Global and a 3-plus percent increase in organic revenue.

For the first 9 months, adjusted organic revenue increased 5% with subscription increasing 4% and transactional up 9%. You've heard us highlight many times this year that we expect a strong fourth quarter with organic revenue growth between 6% and 8%.

We are realizing the many benefits from the transformative acquisitions of DRG and CPA Global and the many operational improvement initiatives that have been put in place, including our inside sales structure and field sales realignment.

With a strong fourth quarter, organic revenue growth for the full year of 2021 is currently expected to be in the 6% to 6.5% range. Over the past 2 years, we've made significant changes across many segments of the organization, including sales and reorganizing around our One Clarivate strategy.

These changes align us more closely with our customers in the markets they serve. We continue to invest heavily on improving our customer interface and experience and ensuring that we are providing the best products and services in the industry.

This year alone, we have introduced more than 60 product enhancements or new product launches that are expected to improve our revenues and profits in the quarters and years ahead.

We are benefiting from acquisitions, both financially and by offering our customers enhanced offerings, which has helped drive our growth in adjusted EBITDA and margin expansion. For the third quarter, adjusted EBITDA increased $82 million to $190 million from the prior year period.

The benefit of our actions also shows up in the significant improvement in our adjusted EBITDA margin, which was 43% in this year's third quarter compared to 38% in the prior year period. We continue to generate strong adjusted free cash flow, which was $70 million in the third quarter and $329 million for the first 9 months of this year.

Richard will cover our results in more detail soon. Since announcing the pending acquisition of ProQuest in May, we've been working with regulatory authorities to complete this transaction. We're very excited to get started on integration work and has spent time formulating plans so that we are ready to go on day 1.

We will announce once we receive regulatory approval and complete the transaction. We remain hopeful that we can complete the proposed acquisition by the end of this year. In early August, we announced a $250 million share repurchase program that was to run through the end of October 2021.

This morning, we announced that our Board approved the extension of this buyback through the end of January 2022. Due to the secondary ordinary share offering in September, we had to postpone the share repurchase program. Prior to then, we had purchased $65 million of our shares in the open market prior to the secondary offering.

Our Board is confident -- very confident in both our short- and long-term growth prospects and believes repurchasing our shares represent an attractive investment opportunity. We are generating strong cash flow which is providing us with the resources to repurchase shares as well as support organic growth, pursue value-creating M&A and fund our debt.

We've also announced this morning that the Board of Directors declared a cash dividend of $1.31 for Series A mandatory convertible preferred share, payable on December 1 to holders on record on November 15. Our strong cash flow also allows us to enhance our portfolio with tuck-in acquisitions.

In August, we announced that we acquired Bioinfogate, a leading provider of analytics solutions in life science and a producer of the OFF-X portal. This acquisition will further our strategy to become an essential provider of solutions for life science companies along the entire drug development life cycle.

In combination with Cortellis, we deepened the end-to-end value chain from R&D through commercialization and compensation. Beyond Cortellis, OFF-X will also strengthen other Clarivate products and services, including our Web of Science.

We have a deep pipeline of tuck-in acquisition candidates that we are exploring across both science and IP that can strengthen our product offerings as well as expand geographic reach. Our goal is to do 2 -- 4 to 5 tuck-in acquisitions per year, which we define as $25 million of revenue or less.

I'm very pleased with how efficiently our team has integrated CPA Global. We announced on our last earnings call in July that we had identified an additional $25 million of cost savings, bringing the total savings to $100 million.

We completed $99 million of that savings work through the end of third quarter, and we'll exit 2021 having captured all the savings several months ahead of our schedule. Our team has done an outstanding job of capturing cost savings and swiftly folding in acquisitions into our business structure.

This includes getting nonpublic companies like CPA Global and DRG aligned with public company internal controls, and now -- and they are now SOX compliant.

At our upcoming Investor Day in November, you'll hear us talk a lot about One Clarivate -- our One Clarivate initiative, our customer migration to inside sales and how the field sales force is now more closely aligned with our largest customers.

We've completed the migration of more than 24,000 customers to our centers of excellence, formerly known as our global business centers. With this now complete, our field sales account coverage was further streamlined from approximately 60 accounts per person down to 15 accounts for the 250 field account managers.

We are also deploying an additional 100 dedicated field sales specialists focused on accelerating new business sales. This transition provides many benefits, including enhanced focus on top accounts, which is expected to benefit retention, cross-sell and upsell opportunities. Last week, we launched our second colleague engagement survey for the year.

The results of this will be available at our upcoming Investor Day. We spent a lot of time enhancing our workplace communications and other benefits for more than 8,500 of our colleagues around the world.

We continue to closely monitor the impact of COVID and are now pleased to report that more than 40% of our colleagues can now access Clarivate or third-party shared site. This includes our center of excellence, which are critical to our success. We launched the second half of our annual Customer Delight Survey in early October.

First part was launched in May where we scored a 75. Our publicly announced goal for 2021 is 77. Putting the customer at the center of our strategy is critical to our success. This survey gives us direct access to the voice of customers, helping us identify immediate opportunities to improve and build on our business.

We'll update you on November 9 Investor Day on the recent colleague and customer survey results. This morning, we reaffirmed our 2021 outlook. Adjusted revenue guidance is $1.8 billion to $1.84 billion, adjusted EBITDA is $795 million to $825 million, adjusted EPS of $0.70 to $0.74.

And adjusted free cash flow will be between $450 million to $500 million. If you remember, we raised the low end of our revenue and adjusted EBITDA guidance twice this year after our first and second quarter results. In total, the low end of revenue was increased by $20 million and the low end of adjusted EBITDA was increased by $10 million.

With a strong fourth quarter, including organic revenue growth of 6% to 8%, we expect full year organic revenue growth to be in the 6% to 6.5% range. Please join us on November 8 for our virtual product demo day and November 9 for our virtual Investor Day.

We'll have more than a dozen presenters participating in the demo day, covering many of our new and existing products. At our Investor Day, I'll be joined by 6 members of our executive team, whereby we will update you on the many things we're working on, including our One Clarivate strategy and how we will grow our business.

If you need an invitation, please reach out to Mark in Investor Day. Now I'll turn the call over to Richard..

Thank you, Jerre. Adjusted revenues for the third quarter increased by 54% to 444 -- $442 million at constant currency compared to last year's third quarter, driven by the acquisition of CPA Global last October, partially offset by the divestiture of Techstreet, again, last November.

Organic revenue increased by 3% at constant currency, driven by increases in both subscription and transactional revenues. The foreign exchange impact on revenues which was favorable during the first 2 quarters of 2021 was less so in the third quarter at less than 1% as the U.S.

dollar has strengthened over the last few months compared to the first half of 2021. Subscription revenue was $247 million, an increase of 11% at constant currency, primarily driven by acquisitions and partially offset by divested products.

The third quarter 3% organic subscription revenue increase was primarily due to an increase in subscription revenues in life sciences, healthcare data solutions and CompuMark. Year-to-date through September, organic subscription revenue growth increased 4% at constant currency.

The subscription revenue renewal rate at the end of the first 9 months of 2021 was 91%, basically flat with the 91% for the same period last year. ACV growth at constant currency was 9% for the third quarter as compared to the same period prior year, which includes acquisitions. On an organic basis, ongoing ACV increased by 3% at constant currency.

Transactional revenue was $85 million, an increase of 33% year-over-year on a constant-currency basis, primarily driven by our acquisitions. Organic transactional revenues increased by 3% at constant currency, primarily due to higher trademark search volumes, though search volumes slowed during the quarter due to the summer period.

Year-to-date through September, organic transactional revenue growth has increased by 9% year-over-year at constant currency. Reoccurring revenue, which is derived from the CPA Global patent renewals business, was $110 million in the third quarter, with no figure for the comparative period as the CPA business was acquired in October 2020.

Starting with this year's fourth quarter, CPA Global will be included in our organic revenue reporting. Turning to the business segments.

Organic revenue growth within the Science Group for the third quarter increased by 4% or $8 million at constant currency, driven by higher life sciences, healthcare data solutions and back file and custom data sales.

The IP Group third quarter organic revenue increased by just over 1% or $1 million on a constant-currency basis, primarily due to an increase in transactional revenue from improved trademark search volumes.

The growth was partially offset by the lingering impacts of the cancellation by the government customer in Asia, which we called out during our second quarter earnings report. Geographically, organic revenue growth in the Americas for the third quarter was up 5%, Asia Pacific was up 2% and EMEA increased by 1%, all at constant currency.

For the first 9 months of 2021, Americas is up 7%, Asia Pac and EMEA up over 3% at constant currency. Adjusted EBITDA in the third quarter increased by $82 million to $190 million, driven by contributions from acquisitions, organic revenue growth, strong margin flow-through and the benefit of the cost-saving initiatives.

Adjusted EBITDA margin once again improved to 43% for the third quarter, up 420 basis points year-on-year. We have delivered sequential quarterly margin improvement this year, attributable to revenue growth plus the cost savings programs which is driving sequential operating expense decreases quarter-over-quarter.

We expect to deliver adjusted EBITDA margin expansion in the fourth quarter, driven by higher revenues and the continuing benefit of the cost-saving initiatives. Cash taxes in the third quarter were $10 million compared to $12 million in the prior year period. Adjusted net income increased by $55 million to $114 million in the third quarter.

Adjusted EPS was $0.16 per share compared to $0.14 per share in last year's third quarter. Our weighted average ordinary share count to calculate adjusted EPS increased by 72% to 700 million shares.

This is a result of the share issuance for the CPA Global acquisition in October 2020, the June 2021 ordinary share issuance and the issuance of the convertible preferred shares to fund a portion of the pending ProQuest acquisition. Capital expenditures in the third quarter were $24 million, a decrease of $2 million compared to the prior year period.

The decrease is primarily due to slightly higher prior year levels of product application development across the portfolio, higher content contracts as well as some timing impacts from accelerated spend on laptops in last year's third quarter related to the digital workplace initiative arising from the COVID pandemic.

We continued to generate strong free cash flow. Adjusted free cash flow was $57 million in the third quarter, an increase of $48 million for the period. And for the first 9 months of 2021, adjusted free cash flow was $316 million, an increase of $187 million over the prior year period.

In August, we launched a private exchange offer for 3 5/8 -- sorry, 3 7/8% senior secured notes due 2028 and the 4 7/8% senior unsecured notes due 2029, which were issued in June 2021 for total proceeds of $2 billion to fund a portion of the pending acquisition of ProQuest.

A total of more than $1.8 billion of these notes were tendered and accepted for exchange. We and the equity holders of ProQuest entered into an amendment extending the outside date for the completion of the acquisition to December 31, 2021, with an option to extend the new outside date to April 29, 2022.

We ended the September 30 period with $2.5 billion of unrestricted cash, an increase of $2.2 billion from December 31, 2020, primarily a result of the $2 billion equity offering in June to fund the pending acquisition of ProQuest.

We also have approximately $1.9 billion of restricted cash on the balance sheet, which represents the cash in escrow from the June debt offering associated with the ProQuest acquisition funding. Before turning it back to Jerre, I want to thank all the members of our accounting and finance team for all their hard work this year.

They've been extremely busy completing the integration of DRG, CPA Global and a few smaller acquisitions in record time. They have made great progress in improving our internal controls and enhancing our financial reporting since going public. On behalf of the executive team, we are very much appreciative of their efforts.

With that, I'll now turn the call back to Jerre..

Thank you, Richard. Before we take your questions, I also want to thank all of our colleagues around the world who continue to do great things every day. With 2 months remaining in the year, we are determined to finish the year strong and deliver a great fourth quarter and year for Clarivate. We're now ready to take your questions.

Operator, please?.

[Operator Instructions] And the first question comes from George Tong with Goldman Sachs..

On an organic constant-currency basis, transaction revenue growth moderated to 2.7% year-over-year in 3Q.

Can you elaborate on the factors other than seasonality that contributed to the deceleration in growth?.

Yes. Great question. Richard, you start, and then we'll have others pick it up..

Yes, George. The principal drivers were slightly lighter life sciences and DRG transactional revenues in the quarter. I'd add that we've got a good order book going into the fourth quarter.

And we also had, this is a seasonality point but I will cover it, CompuMark trademark search volumes slightly lower in Q3, principally seasonality, July and August being the summer months where we typically have slightly lower volumes..

I think that really covers it well. Thanks, George..

The next question comes from Manav Patnaik with Barclays..

I was just hoping -- obviously, fourth quarter, I think, seasonally is usually a big quarter. I was just hoping you could help us just bridge to get a little bit more comfortable with both the organic growth and kind of the EBITDA number..

Yes. Great question, Manav. Thanks. Let's just start looking at the base of $427 million that we delivered in Q3, which was very consistent with our expectations. And to think about the midpoint of the revenue that we've given, let's make it simple. It says we've got about $500 million of revenue to deliver in Q4.

So we're looking at a pickup of $73 million. Three big pieces. Our fourth quarter is always up significantly. Last year, it was up $42 million. So that's the base that we will operate with as we move forward. It's the first time that we'll include the CPA in our organic revenue, in -- all in.

And that will add -- that happens to be CPA's largest quarter for many reasons. I'm going to have Gordon comment on that in just a minute. And DRG, if you remember, 35% of their total revenue is a Q4 delivery. So that's the next big piece. A simple -- and Mukhtar will comment on that.

So that will put us right smack on, as we would expect to have, at the $500 million to go in Q4, which would be the midpoint of the range.

Gordon, please?.

Thanks, Jerre. Yes, Q4 for CPA is traditionally a strong quarter. We see a good performance to plan in recurring income.

We also see good performance and a strong performance indeed in our subscription business in legacy CPA, which, of course, is supported by real-time implementation, professional services that land in the quarter that these deals are struck in. So we expect to see an on-plan and good performance in Q4..

Thanks, Gordon.

Mukhtar?.

Yes. I mean, I think you've touched on this, Jerre. But typically, DRG, which, of course, now we refer to as healthcare data solutions, HDS, typically, Q4 is very strong in data analytics and also in consulting. We have a consulting backlog that we typically deliver in Q4.

And there's also typically a number of deals that are coming through that we convert in the quarter as well, and this is typical of the health care segment..

Thanks, Mukhtar. And Steen, this is a new voice for everybody, we're going to have you just make a comment because, as I mentioned during my part of the script, 24,000 of our customers are now in place, being operated at our 3 centers of excellence on inside sales.

Give a view, Steen, fresh eyes, if you will, of what we're doing as we go into Q4, where we're at and your thoughts on the pickup we'll get from inside sales..

Thank you very much, Jerre, and delighted to be on this call. So first of all, we have completed the transition of 24,000 accounts to inside sales, which really means that we can manage our inside sales execution and actually, through that, improve our retention rates in Q4.

And we are really seeing already optimistic signs that we will see that improve in Q4. This really also means that our field sellers, so the account managers working on our bigger accounts in our territories, will have more capacity and more time to make sure that we deliver a very, very strong performance in Q4.

So really pleased with the configuration that we now have in the business. And then last but not least, we continue to improve our operational rigor and control so that we can track our execution on a daily basis and make sure that we can take any corrective actions to drive the outcome we're looking for in Q4. So very pleased with that configuration.

The outlook for Q4 is, as Jerre said, within the range that he mentioned. Thanks, Jerre. Back to you..

Thank you. And I must tell you, as CEO of the company, having this great threesome of leaders, Gordon, Mukhtar and Steen, is a joy for me because I feel better about where -- all the work that everybody has done is amazing. Manav's question is a critical one.

You can believe that we look at it every week -- actually, every day to make sure we're on track with new sales, et cetera. What we've done -- I'd just step back for a minute. It's remarkable where we've arrived at.

We did say late last year, actually on November 10 last year when we did Investor Day, that we expected to exit 6% to 8% organic growth all in.

With the numbers that we've now presented, I feel really good about where we're at, the things we have going on and look forward to reporting in February of next year great results that we're going to get in Q4. Thanks, Manav..

The next question comes from Andrew Nicholas with William Blair..

First question -- or actually, I guess we're limited to one, is just on the ProQuest deal. You mentioned still being hopeful that, that will close by year-end.

Could you speak a bit further to where you are in that process, what the regulator's primary hangups are at this point? And maybe speak to the likelihood any portfolio changes are required in order to get this through..

Thanks. I'd like -- love to answer all of that. However, I'm going to just keep it really simple. We've done everything we need to, to comply with the request. As I said, we're very hopeful that we get it closed by year-end. And when we do, I'll answer all those questions with joy as we have it behind us. Thanks..

The next question comes from Toni Kaplan with Morgan Stanley..

I wanted to ask a question about the legacy business. When I think about the original thesis you had, Jerre, these are really high-quality assets, needed some investment put in because they had historically been under-invested in. You've been implementing some sales and organizational initiatives, and you continue to do so to drive the organic growth.

Just talk about the acceleration that you hope to see in the legacy business outside of -- obviously, you've bought some great assets that are fast growing.

But just talk about the sort of legacy strengths and if sort of we need a little bit more time to see that play out, if more investment's required or just your thoughts on the sort of overall there..

Great question, Toni. Thanks. I'll start with Mukhtar, then Gordon and Steen, each with different views on that. I said in my script that we've actually made -- we've probably not done as good a job as we should be on public reporting. But we've added 60 significant either new products or enhanced products during 2021.

That is the result of the investments we've been making. We're going to see a lot of that play out. But Mukhtar, you start, then Gordon and then Steen. Because Manav's question and yours, Toni, answer what everybody deserves to know, where are we and where we're going.

Mukhtar, please?.

Of course, Jerre. So you only have to look at our press releases over the last 12 months or so, and you'll see just all of the product that Jerre has just mentioned, over 60 releases. These are major versions or brand-new products. And so let me just pick out a couple as examples.

Because it does, of course, take time to release a new product and drive adoption as well as major versions, but we've made fantastic traction with those products. So, as an example, with Web of Science, we've got a brand-new version of Web of Science, next generation. The adoption of that is phenomenal.

We've already seen great traction here in a number of primary universities that have adopted it as a de facto standard. And so as 2022 unfolds, we expect that adoption certainly to continue. We also released what we call our MyRA or My Research Assistant application. So that's very much driving access to the power of Web of Science.

And we're putting it in the hands of the end user, the researcher. That mobile application, we released this year. So naturally, like mobile applications, we expect those to gain significant traction in the end-user community and to drive even more consumption and usage of our data. Another example is Cortellis.

If you take our generics product, we've just last quarter released the supply chain network product, which is designed really to create a marketplace with generics companies to come together and use the power of the data to really interact, drive supply chain decisions amongst, certainly, the API vendors.

And so the last example here is, in the real-world data space, we released a number of data assets, against it around Cortellis in the regulatory space. So these are all great examples of products we've released that we fully expect will really drive transformation for our customers. And ultimately, we expect significant adoption of them also..

Thanks, Mukhtar. Just as a reminder for everybody, Gordon took over IP in the last second quarter. Prior to that, he led and did an incredible job at CPA. So he's got fresh eyes on the existing products, to Toni's question, that we had when we took over the carve-out from Thomson.

Gordon?.

Gordon, are you there? We should go to Steen..

Let's jump to Steen and then back to Gordon..

Thank you, Jerre. So as we look forward and we think about the legacy businesses both at Clarivate, DRG and CPA, as we move to One Clarivate, this is really all about going as an integrated organization under the one brand of Clarivate.

And I'm actually convinced as we move to the One Clarivate that we're going to achieve a few important and strategic things from a growth perspective. So first of all, one of the facts we know is that only 30% of our installed base use more than one product from Clarivate.

So we have an incredible cross-sell opportunity across both the legacy business, the DRG business and also the CPA business. We also know that as we move to One Clarivate, we're going to move from being more product-driven to being more customer-centric in how we approach our clients and how we meet their end-to-end needs.

And through that, we believe that we will be able to accelerate and drive faster growth of our opportunities across the whole portfolio. So we have identified a significant number of opportunities that we're looking to drive next year.

And I think this is going to lift performance across all the different areas of our legacy businesses, and all this is going to do under the brand and the positioning of One Clarivate going forward. So a significant growth path has been laid out for next year.

And we are very convinced that under the One Clarivate, which we'll talk more about at the Investor Day, by the way, is going to help us drive the growth that we're looking for, including the legacy Clarivate business. And I think with that, I hand it over to you, Gordon..

Thanks..

Thank you, Steen. And apologies to you all. My network provider decided I couldn't use my phone for a moment there. Just picking up on Jerre's comments about relatively fresh eyes. I can tell you joining Clarivate was super exciting on the basis of what we could do together. But let me focus on the legacy product question.

I think the business has been very busy in the background doing 2 things, and the third one, I'll come to in a moment. First of all, it's making sure that the fundamentals of these leading products are sound and future-proof.

So that's doing those hard yards, investing in the sort of feature and function, making sure that the service provision that's offered by these household names like Derwent and CompuMark are actually not just current today but also future-proof. A lot of that is internal. You don't see that.

The second thing which you're beginning to see in the marketplace, and some of our success is driven by this now, is the investment in integration and making sure that we're using our data assets across our product suite.

And those data integrations bring greater insights and analysis for our customers, and that's definitely beginning to yield dividends. And the third thing I would say is that we have now got a very clear and established strategy for how we bring our products together, including our hybrid cloud journey.

And if you can attend or download the videos from Investor Day and the product demo day, I think you'll then see what we're beginning to do to now bring the next-generation evolution of these products to life that all the hard work has been about. So those are 3 things I would share, Jerre..

Thanks. Thanks to all 3 of you. I'd just add 2 more pieces to this. We said at the beginning that we needed to learn how to cross-sell because we had not at all and that we must increase our renewal rates. And I think I feel better today than any time I have in the last 2.5 years on both of those subjects.

Each of our leadership team just mentioned things that are going on inside of the One Clarivate that will make it no longer cross-selling, it will make it selling packaged solutions.

And you're going to hear from Gordon; Mukhtar; and others exactly -- and Stef, our Chief Technology Officer, exact actual examples of us moving from a very inside-out product basis to an outside-in solutions. And it's really exciting. You'll hear Steen talk about it with his view of where we are and what we've accomplished.

So I feel the best I felt about that, yes. Last comment is this is the first year that we've had the cross-selling rewards built into our commissions. As you remember, we started it in late 2020.

Now as we move, and I just couldn't feel better about it, to the One Clarivate system, going into 2022, we'll pick that -- both will gain significantly on renewals. And you'll get a pretty good view of that in Q4, and then we'll wrap that up. We're -- 70% of our total renewals come in Q4 and Q1.

So you're going to hear a lot about that, but I couldn't feel better. Great question, Toni. Thank you..

Your next question comes from Hamzah Mazari with Jefferies..

This is Mario Cortellacci filling in for Hamzah. I just wanted -- if you can give us a sense for how the sales force is executing right now. Obviously, you made a few tweaks over the past quarter, and that's to help kind of focus the efforts.

But could you also just remind us what the head count growth has looked like recently and what the expectations for growth are over the next 12 months? And then I guess just the last piece of that around execution. Maybe you could talk about how you're measuring sales force productivity going forward..

Great questions. And actually, Steen and Richard and I actually have the conversation about the additional resources in 2022 in the field sales force yesterday. But just to step back, Steen, great questions, fill him in..

Thank you, Jerre. So obviously, the sales force is extremely motivated. This is the end of the year. Many of them have a chance to deliver a very strong performance, and many of them have the chance to outperform in their targets. So there's really, really great momentum and motivation in the sales force as we are entering Q4.

And we've always seen and are seeing really, really great momentum in October. We're also putting out further incentives to the sales force to make sure that we maximize the performance and the revenue that we're looking for in Q4.

And then we are obviously very, very focused on the strategic transactions that's going to drive the revenue outcome that we're looking for as well.

And we have a very targeted list of those opportunities that both Gordon, Mukhtar and I are following with the sales force on a daily basis to make sure that we close the deals that's going to maximize revenue for Q4. So really, really great momentum, strong operational focus and rigor and a relentless focus on execution over the quarter of Q4.

And in terms of productivity, I think that's a really, really important topic. As we get into next year, I see a lot of areas where we can drive increased sales productivity. We can do that through learning.

We can -- we will definitely do that when we deploy the One Clarivate because that's going to give much clearer roles and responsibility for the sales force and for each of the account managers, but also, how they sell together with the presales, the customer success and also with the product sales organization as well.

So as we get into FY '22, we will look at sales productivity as a further key metric, and we will find ways to increase that within the sales force. And then last but not least, really, really blessed with amazing support from our Board and from our CEO to continue to invest in the sales force so that we can continue to expand.

And the investments we want to make next year in the sales force is really centered around having more sellers that is hunting and driving new business for the organization so that we can drive a higher organic growth in FY '22. And we'll do that through productivity, through better execution and through increasing the capacity of the sales force.

So those are some of the areas that we'll focus on to improve productivity for next year. And I think with that, back to you, Jerre..

And I just thank you, Steen. When you see Steen's presentation on November 9, you'll see what I call a pyramid very specifically lining out who's in inside sales, what that will be on the 3 global centers of excellence, the account execs, et cetera.

I mentioned today that we have 250 account managers, that's not including anybody in inside sales where we're north of about 120; and that we are now converting some of our salespeople to new-only sales, about 100 of them. So that will give you a good view.

And Steen will give you an exact view, very much actively supported by Gordon, Mukhtar, Richard and myself, of where we're going in 2022. Feels really good though. I think the thing that I thought a lot about, we've also worked really hard in the backroom to get rid of bureaucracies.

That -- I could tell you stories you wouldn't believe, but that's well gone. I'm very proud of what Gordon, Mukhtar and others have done there, making it simpler for our field salespeople to have the tools they deserve and working very hard, thanks to the Customer Delight Surveys, at things we have to do to get better.

Two quick questions on that -- comments, and then we'll go to the next question.

We have consistently said, and I think we'll see that same thing with these survey results, we get the highest scores I've ever been part of, 78 to 80 plus, in the view by customers -- thousands of customers of the quality of what our products do to help them in their work streams.

We get a low score, that is improving, which was -- it actually was at a base of 58, of easy to do business with. We are, have and will continue to streamline things upside down and backwards. Example only, I listen, and our whole leadership team does, to at least 10, if not more, calls for our customer care centers of what we're doing to help them.

It's amazing. If I had time, we'd let you listen to some of them. But there, we've increased productivity a lot. And the view by the customers when they call in is as high as anything I've ever seen. So we've made great progress there. However, I think that's the last thing that we get credit for. You've got to deliver. You got to make it simple.

And we'll see that -- and by the way, there's a direct correlation to renewals and organic growth, direct to that easy to do business with. So we'll see an improvement in 2021 over 2020, significant improvement in 2022. But that's thanks to everybody's great and hard work. Thank you..

The next question comes from Ashish Sabadra with RBC Capital Markets..

Just wanted to pick up on the comment, Jerre, you just made on the strong momentum going into '22.

So my question there was, as we exit this year at north of 6% to 8% range, how do we think about the organic growth momentum going into '22? Are there any onetime things in fourth quarter or that strong momentum in the fourth quarter should sustain us going into the '22?.

I'll comment and then Steen, too, because it's a great question. I am obviously eager to give guidance on behalf of everybody for 2022. We got to -- get close to giving you that guidance, and we'll do it subject to final approval by the Federal Trade Commission.

And we'll put all the appropriate caveats in place, but we will give you that guidance for 2022. It's a great question though because there's -- I'll use my words, but Steen, you pick up. What we're doing in Q4 is consistent with where we work to get to be and where we will go into 2022.

There's nothing peculiar about Q4 other than the fact that our -- 2 of our big businesses, it's their biggest quarter and it will continue to be. We said at the beginning of the year, you should think about 49 -- 48% of our total revenue being in first half, 52% in the second half, and that's where we're going to end up plus a bit.

Steen?.

Thanks, Jerre. So just continuing on your point. So clearly, Q1 is a very big renewal quarter for us, and we're already, right now, very focused on all those big renewals. Customer conversations are taking place as we speak, and we are setting up the renewal process already now.

So as we get into Q1, we can make sure that we can have a satisfactory execution of the renewal base in Q1. We will also have a very specific focus on new business in Q1.

And we'll put very, very dedicated and compelling incentive out to the sales force to ensure that we can have a very fast start to FY '22 and make sure that, one, we achieve our new targets; and two, that we drive the new business that we're looking for.

We've also accelerated our hiring, as already mentioned, for inside sales and for our product sales organization so that we can begin to see some of them, hopefully, have an impact at the end of Q1 and coming into second quarter as well.

So we're running an accelerated hiring program to add the sales capacity we need to be successful in FY '22 as well. And then last but not least, as we move to the One Clarivate model by January 1, we're actually convinced that, that will give us improved business performance as we get closer to our customers.

And we will be able to much better match their end-to-end needs with our best-in-class solutions, which I am convinced will drive, one, bigger deals; and obviously, make sure that we can drive a higher volume of deals as well as we get into FY '22 as well.

So I think with all that momentum we have in Q4, which actually we had in -- partly in Q3 as well, that will continue into FY '22. And with move into One Clarivate, I'm actually convinced that, that will help us continue to improve our organic growth outlook and performance.

And with the further investment in the sales force, we should be able to have more capacity to drive more business, especially on the new business side. So that is the current game plan and outlook for -- coming into FY '22. I think back to you, Jerre..

Thanks, Steen..

The next question is from Shlomo Rosenbaum with Stifel..

I want to continue the line of questioning in terms of the sales force and the changes you've made.

Could you talk a little bit about timing-wise? Did the move to inside sales and everything work out on the time frame that you guys expected in terms of how it should come together? How long is it going to take for the sales force and the changes -- both moving to inside sales and then giving the people that are field sales force the ability to focus much great -- in a much greater detail, how long should that take until everyone really hits their stride? In other words, at what point in time should we think about, hey, the sales force is really starting to click? Or is this really just an ongoing evolution and this is just the kind of the first piece that we need to look towards? I'm just trying to -- the question is really trying to map towards what everyone else is trying to do, saying, hey, how do I put the pieces together to get 4Q numbers and then again 2022, the confidence that you guys will be able to deliver what you're talking about in terms of improved sales growth next year..

Great question. I'll start. Steen will pick up and Gordon and Mukhtar, too, because we've been -- prior to Steen, of course, we were very busy for the last 7 quarters getting the 3 centers of excellence set up, inside sales, et cetera. I couldn't feel better.

As I said, we've transferred over 24,000 customers to inside sales, massive job, out of about 28,500 customers, so a huge job, including cleaning up customer data, et cetera. So feel very good about that progress. Steen, you start on your view, and I'll have Mukhtar and Gordon.

And then I'll wrap up on it of where we are at, with -- where is the steam, where are we going..

Jerre, I think you should see it as a continuous evolution. So Jerre mentioned inside sales, and that is completed. So they now have their account -- they're a stand-alone business. And they would do well on the execution side, and that will definitely drive improvement in retention.

You have to remember, inside sales was a young organization with lots of young talent that we have brought in. They have now built their skills. They have increased their learning about our customers, our solutions. And we have improved operationally how we execute inside sales. So that, by default, will improve retention push first year.

On the field side, where we have our 2,000 biggest accounts, we've been through an evolution, and I want to recognize, Mukhtar, for that transition. Already in APAC, we have moved to a customer-centric model. So we already today go to market in our APAC region aligned around our customer segments and having account management for our biggest accounts.

We've also done a lot of that changes within the IP business. So we've also driven account consolidation within the IP business as well.

So we're really taking those 2 elements and then really integrating that and scaling that across the whole business as we drive the last transformation to being customer-centric, outside-in and really becoming far more strategic with our accounts to build deeper relationships and obviously, to drive the organic growth that we all aspire to and want to drive.

My personal view is that we will complete this as we get into early 2022. But you should not see this as a significant transformation. As I said, this is an evolution of building blocks that we have done over the last 12 to 18 months. So I think we come out of Q1 a strong [Technical Difficulty] business that we're looking for.

I think you will then see the business as we get into second half really begin to perform to expectations that we're all looking for. So, that would be my outlook. So, I [Technical Difficulty] in the second half..

Thanks. Mukhtar, please comment on professional services because that's such an important part of all the changes we've made. That was not in place 2 years ago, so it's really important to add to that. And then, Gordon, you wrap up. But great question..

Yes, I will do. I mean we started to embrace the industry segments, the 5 segments that, of course, we've communicated a number of times. We started that transformation at the beginning of the year. And one of the key reasons we did so was so that we could very much help our customers with solutions that span across the enterprise.

And when we talk about solutions, it's important to remember that this encompasses, of course, our world-class subscription and analytical products. It includes our data. And as Jerre just mentioned, it also includes our expert consulting services.

And this is really where we help our customers using all of our know-how in data science and analytics but also deep domain expertise. We help those customers really adapt and leverage the data. So it's a very important part of our solutions offering here and value to our customers.

And as Jerre said, this is something that we put in place just over 2 years ago or so.

And it's an important part of our strategy moving forward, especially with some of the larger customers that we have, where it's extremely important to work with them to -- so that they can obviously leverage our data and our solutions across their respective enterprises.

Just briefly on inside sales in particular because this is of great strategic importance to us. And as Steen said, it is a continued evolution. And we fully expect to go deeper in, certainly, the mid-market accounts, and those are the accounts that, of course, we've transitioned over very successfully.

What it also creates is an opportunity for us to really go after the global SME market. And that's a big driver for us for new logos. So think about med device, biotech, colleges, universities, other SME parts of those 5 segments. That's the vehicle for us to very much leverage and be successful in that sort of customer segment as well..

Thanks. And Gordon, in the interest of time, I'll give you a quick pass on this and we'll come back. You'll hit that hard anyway on where we're at for -- on November 9..

The next question comes from David Chu with Bank of America..

So of the 60 new products and enhancements so far this year, how should we think about revenue contribution? Is this more a pricing retention tool? Or do you actually see a decent amount of new logos associated with these launches? And then also in terms of pricing, how much more is the new Web of Science on average?.

So let's do this. Richard, you start out with that on the pricing question. Steen and Mukhtar will wrap up on the second part of the question. Thank you..

Sure. So collectively, we will enjoy 3% price increases across the portfolio in 2021, and we have absolute conviction to deliver 4%, north thereof for 2022.

And we consider annual price realization at equilibrium to be approximately between 4% and 5% per annum year in, year out, driven by all the products and solution improvements that you just referenced. So that's where things stand from a price realization for this year and next year..

Thanks, Richard. And Mukhtar, just a quick comment on the Web of Science..

Sure. I mean with the new version of Web of Science and the fact that we're catering for additional personas, then clearly, we're creating additional value.

So very much incremental revenue by going deeper with existing customers because, of course, there's greater value, but we're also servicing new personas and needs so that's expanding the user and product base.

And then, of course, we're looking at new logos, especially with some of the innovations not just around Web of Science and EndNote but in the other industry verticals. So it's a combination of those..

Thanks. And we'll make sure and add to this on Investor Day because Connect, which is a very critical part of new customers and additions at CPA, you'll get a great view of that on November 8. And you're going to hear about the examples of what a great difference it makes..

The last question today comes from Toni Kaplan with Morgan Stanley..

This will be really quick. And just mathematically, I think it's important that DRG does very well in the fourth quarter just given that it is sort of weighted towards back half and especially fourth quarter.

So I guess can you talk about how -- DRG growth, what it was in the third quarter, how it's trended this year? Just to give us some increased confidence in the fourth quarter performance..

Toni, great question, great one to wrap up on. I think most important is we get a view every week of what we got to go to hit the number that will deliver the kind of results we expect in Q4. And as Mukhtar said, that's now part of -- DRG, a very significant part of the business.

But just give them that view of where we are to wrap up a great Q4, Mukhtar, and then we'll be done..

Yes, of course. We have direct insight into the backlog, and going into Q4, that backlog is pretty strong; as well as line of sight to key deals that upon conversion, we plan to then subsequently convert to revenue.

So that cadence, that focus, the controls, those are all in place, and that's the reason why we have confidence in our HDS business in Q4..

Thanks, everybody. I'd just wrap up by thanking you for great questions. I feel the best I felt in the last 2.5 years about where we're at and where we're going to go. And we'll keep you posted on everything between now and November 9. Thanks all. Have a great day. Bye, bye..

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