Hello and welcome to today's Clarivate First Quarter 2022 Earnings Conference Call. My name is Bailey and I will be your moderator for today's call. All lines will be muted during the presentation portion with an opportunity for questions-and-answers at the end.

[Operator Instructions] I would now like to pass the conference over to Mark Donohue, Head of Investor Relations. Mark please go ahead..

Thank you, Bailey and good morning everyone. Thank you for joining us for the Clarivate first quarter 2022 earnings conference call. With me today are Jerre Stead, Executive Chair and Chief Executive Officer; Jonathan Collins, Chief Financial Officer; Gordon Samson, Chief Product Officer; and Steen Lomholt-Thomsen, Chief Revenue Officer.

All will be available to take your questions at the conclusion of 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.

And accompanying earnings presentation is available in 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 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 could cause actual results to differ materially from anticipated results or performance can be found in Clarivate filings with the SEC and the company's website. Our discussion will include non-GAAP measures or adjusted numbers, including adjusted revenue, adjusted EBITDA.

Clarivate believes non-GAAP results are useful in order to enhance our 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 presentation on our website. And after our prepared remarks, we'll open the call 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 today. I'm very pleased to report that we're off to a good start in 2022. We delivered improved first quarter performance as a result of the operational improvements we have put in place.

We also benefited from acquisitions as we offer our customers a wider portfolio of products to meet their ever-growing needs. Our move to One Clarivate, our strategy to be more customer centric and outside-in focused is starting to deliver some early cross-sell wins.

For the first quarter revenue of $662 million increased 58% at the constant currency and was up 4.4% on an organic basis. We delivered a very strong profit conversion of 73% as we continue to benefit from cost synergies and operational improvements.

And the power of our business model is generating strong cash flow with adjusted free cash flow of $191 million for the first quarter. Jonathan will cover the results in more detail soon. Our business represents a very compelling investment, even more so in the concurrent economic environment.

Almost 80% of our revenue is subscription and recurring-based with a renewal rate of more than 92%. We have the ability to raise prices to offset inflation, which in an inflationary environment helps to offset cost increases. And we have little or no exposure to rising raw material costs.

These are just a few of the many reasons I'm very excited about the growth potential of Clarivate. For over a year our, team has been working very hard on constructing the One Clarivate strategy.

One Clarivate presents significant opportunities for us to sell more solutions to existing customers, while improving our renewal rates and generating more new business. With the total addressable market of over $100 billion there is significant space for us to grow average customer spend and to add new names to our customer list.

I'm very pleased with what my colleagues have accomplished in developing the strategy. It took a tremendous effort for this organization to build out the four customer verticals. Our team identified gaps within our workflows and prioritized hiring to ensure we have the appropriate team in place.

They also streamline workflows to support the new organization structure and the go-to-market realignment. This has resulted in improved pipeline management and information and performance reporting. We officially deployed this go-to-market strategy, in the first quarter and are now starting to enjoy the benefits.

One of the many benefits of the One Clarivate strategy, is focusing on cross-selling products into new customer verticals. As we exited the first quarter, we saw signs that our strategy is beginning to work with deeper penetration of more than one product within the account base and a higher average spend as we sell bigger deal sizes.

We delivered some early cross-sell wins in the first quarter.

For example, our Web of Science Platform, which has historically been sold within academia and government space was purchased by several companies including Fortune 1000 organizations across the other three verticals, which are life sciences and health care, consumer manufacturing and technology and professional services.

We saw similar results across other verticals, including health care data, sold outside of life sciences into professional service companies and universities. We are just getting started with our One Clarivate strategy and very much look forward to updating you on our progress.

Our portfolio includes many leading information service products across our customer verticals. At our Annual Investor Day, last November, I highlighted the high scores we received from customers, for quality of products and services and information and insights in our semiannual Customer Delight Survey.

We will survey our customers starting tomorrow May 10, in our first Customer Delight Survey of the year including those customers from all of our acquired companies. We look forward to sharing the results with you at the next quarterly earnings call.

To ensure we stay as a leader in our products and markets, a significant amount of our annual capital spend, is for new product development, product enhancements and improved technology. In 2021, we launched more than 90 new products and enhancements, which will contribute to our growth this year.

In 2022, we expect to spend approximately $185 million on CapEx with about 75% of this on R&D projects. In addition, to internal R&D one of the many benefits of acquisitions is the ability to enhance and create new product offerings.

Recently, we launched a new offering which combined the power of Clarivate, life science data and DRG health care data to deliver unmatched deep insights, into market opportunity for new and existing drugs.

This is just one example, of how we're creating enhanced offerings for our customers and capitalizing on revenue synergy opportunities from acquisitions. Turning to the integration of ProQuest. We are quickly integrating and capturing cost synergies.

If you recall, we completed the integration of DRG and CPA Global several months ahead of our original schedule, with additional cost savings. We are accelerating now, the integration of ProQuest in a similar manner.

Within the next four months since -- with the first four months since closing, we have removed $33 million of the more than $100 million in targeted savings which we expect to realize by the time, we exit the second quarter of 2023. Our team has been working with colleagues at ProQuest to swiftly integrate systems and workflows.

We completed several product integrations, to provide more value to our customers with cross-product, interoperability and enhanced data capabilities for the leading products in our combined portfolio.

For example, universities can better manage and assess their research and ProQuest Esploro, with the integration of Web of Science data and metrics for smart harvesting via an application protocol interface very exciting.

This is expected to improve usage and value of the Web of Science data for research management, which will increase Web of Science retention and price realization. It will also increase value proposition and demand for Esploro, which should help to accelerate new sales from university research offices.

We also indexed, the entire Web of Science backfile data into the ProQuest Summon and Primo library discovery services, which benefit customers of these products. This significantly increases the value of both of those products to the scholarly researchers, with Web of Science indexing and links.

This is expected to improve renewal and price realization of all three of the products. This acquisition has proven timely considering the tight labor market by providing us with experienced colleagues to fill open roles.

Our sales organization has been aligning to identify opportunities to leverage our offerings across the four customer verticals and to provide greater value and resources to our customers. I look forward to sharing revenue synergy opportunities with you as we detail our combined portfolio across the global customer base.

Sustainability is at the foundation of everything we do at Clarivate. It is woven throughout every aspect of our business strategy.

By adhering to the highest social environmental and ethical standards and embracing the power of human ingenuity, we will improve the future of our global community, while bringing financial rewards to our colleagues and to our shareholders.

We recently mapped the breadth and depth of Clarivate solutions across all 17 United Nations' sustainability development goals. We then identified those that are most relevant in terms of customer impact based on our current SDG alignment and our potential increase of SDG alignment.

This process provided us a clear view of our current state and we identified four key focus areas where our solutions have the biggest impact. We also uncovered opportunities where we can continue to embed sustainability into our business strategy to broaden our impact worldwide.

The analysis showed that our products and solutions have a very, very high positive impact. For example 46% of our revenues are aligned with the SDGs and 51% of the companies in the Dow Jones Sustainability World Index work in partnership with us.

More than 26000 public and academic libraries rely on our solutions and 47 of the top 50 global R&D organizations work with us to accelerate progress. Within the next couple of weeks, we will publish our second annual sustainability report which will be available on our website.

We encourage you to read the entire report to see how we are making a difference as we strive to be one of the leading ESG companies in the world. In closing, as I said upfront, we're off to a good solid start. I feel great about where we are today.

We now have the leadership team in place to deliver ever-improving performance as we achieve the targets we set for this year and for our midrange financial objectives. This, of course, would not be possible without the everyday contribution from the more than 11,500 colleagues we have around the world.

I want to express to them how grateful I am for their continued dedication and delighting our customers. I'll now turn the call over to Jonathan. .

Thank you, Jerre. Good morning everyone. Slide 12 is an overview of our 2022 first quarter results compared with the same period in 2021.

First quarter revenue reached $662 million, an increase of $234 million compared to the same period last year, driven primarily by inorganic growth from the ProQuest acquisition as well as 4.4% organic growth, which was slightly better than the 4% indication we provided in March.

Adjusted EBITDA for the quarter was $262 million, an increase of nearly $100 million compared to Q1 of 2021 for a profit margin that approached 40% and represented 140 basis points of margin expansion over the same period in the prior year.

Net income attributed to ordinary shares was $51 million in the quarter for a growth of $107 million over the same period last year on higher income from operations. Adjusted diluted EPS for Q1 was $0.21, a $0.07 increase over Q1 of last year. Operating cash flow was $67 million in the quarter down $107 million over the same period last year.

The decline is entirely attributed to $150 million of payments out of restricted cash for the CPA phantom share plan. This item, as well, as one-time costs associated with the integration of acquisitions, are excluded from adjusted free cash flow which grew by 17% over the first quarter of last year.

Please turn with me now to page 13 for a closer look at the adjusted revenue and adjusted EBITDA growth in the quarter. First quarter top and bottom line growth over the same period last year was driven by four key factors.

First, organic growth of 4.4% added $19 million to the top line and $11 million to the bottom line for a profit conversion of 58%.

As you can see from the table on the lower left of the page, the organic growth rate is in line with the 2021 full year growth rate has improved pricing in our subscription and reoccurring business and early traction in cross-selling were offset by continued softness in transactional sales.

It's worth noting that renewal rates were in line with last year as retention improvements for smaller customers stemming from our investment in the inside sales force were offset by the adverse effect of suspending our operations in Russia, which restrained the growth rate expansion by nearly 40 basis points.

Despite this headwind, organic ACV growth was in line with the organic growth rate in the first quarter. Second, inorganic growth contributed $228 million to the top line and $69 million to the bottom line for a profit conversion of 30% before the impact of cost synergies. This growth is primarily attributed to the ProQuest acquisition.

Third, cost synergies net of certain operating expenses required to achieve them, contributed $26 million of incremental profit bolstered by carryover savings completed last year associated with the CPA acquisition and a strong start to the ProQuest cost actions.

This early traction bodes well for outperforming the $50 million commitment implied in our full year guidance. And finally, the translation impact of subsidiaries denominated in foreign currencies deducted $13 million of revenue and $8 million of profit as the dollar strengthened compared to a basket of other currencies.

Please turn with me now to page 14 to understand how the $262 million of profit converted to cash flow. Adjusted free cash, flow which excludes the impact of onetime costs was $191 million in the first quarter, an increase of $28 million over the same period last year.

Growth in adjusted EBITDA was partially offset by higher working capital requirements compared to the prior year that were primarily associated with the timing of patent renewal payments in the servicing portion of the CPA business and the normal seasonality of working capital in the ProQuest business.

The increase in onetime costs which are the cause of the year-over-year declines in operating and free cash flow, are entirely attributed to payments from the Employee Benefit Trust to administer the CPA phantom share plan payout.

And finally, as we indicated in March, we initiated our share repurchase program, shortly after we announced earnings and over the course of the past two months, deployed $175 million of capital to reacquire nearly 11 million shares of stock at an average price of just over $16 per share.

We continue to see this as the most attractive use of our capital in the near term, given the current stock price. Please move with me now to slide 15 for a closer look at our full year guidance for this year.

Given our strong start to the year is evident in our first quarter performance, our full year guidance remains unchanged from what we provided in March.

We're carefully monitoring the macroeconomic climate, as well as the geopolitical conflict in Eastern Europe, yet we remain sanguine on the prospects for accelerating growth as we move through the remainder of the year.

As a result, we continue to expect revenue to grow nearly $1 billion to $2.84 billion at the midpoint of the range, fueled by the ProQuest acquisition and organic growth of about 6.5%. We anticipate adjusted EBITDA will approach $1.2 billion towards the midpoint of the range for a profit margin in the range of 41% to 42%.

Adjusted free cash flow is expected to reach $700 million at the midpoint of the range for a conversion approaching 60%. Adjusted diluted earnings are expected at $0.90 per share at the midpoint of the range, as a result of higher earnings and will benefit from the share repurchases we initiated in March.

Please turn with me now to page 16 for the major drivers of the expected revenue and profit growth for this year compared to last year. As with the comparisons provided for the first quarter top and bottom line growth, we expect the full year will be driven by the same four factors.

First, organic growth is expected to accelerate by 200 basis points to 6.5% and deliver approximately $120 million of revenue growth and about $70 million of profit growth for a profit conversion of more than 55%.

As you can see in the table on the lower left of the page, we expect this growth rate expansion to be driven in nearly equal parts by four items. One, improved pricing; two higher renewal rates; three significant cross-selling of all our products across the four customer verticals; and four improved transactional sales.

As Jerre highlighted just a few moments ago, the One Clarivate go-to-market strategy is up and running and will deliver these improvements as we move through the remainder of the year.

Second, inorganic growth is expected to contribute an additional $870 million of sales and $285 million of profit growth for a profit conversion of just over 30%, as a result of the ProQuest acquisition on a pre-cost synergy basis.

Third, cost synergies associated with the CPA and ProQuest transactions, net of certain operating expenses required to achieve them, are expected to add $50 million to profit. And finally, we expect a strong dollar trend to continue into this year, resulting in about a $30 million headwind to revenue and a $50 million flow-through to profit.

Slide 17 illustrates the expected seasonality of our revenues for this year, which remains relatively consistent with last year's pro forma results and is essentially unchanged with the phasing we shared in March, given the first quarter was in line with our expectations.

As a reminder, the stack bars on the chart represent our actual reported and pro forma revenues for last year. As you can see they, improved sequentially from Q1 to Q2, then modestly abated in Q3, before improving again sequentially in Q4.

The combination of these bars represents the normal seasonality of our business after the full effect of all the recent acquisitions.

The solid line on the top of the chart represents our expectation for this year's revenue phasing, which is generally in line with what we experienced last year on a pro forma basis, as we expect our growth to accelerate as we move through the year.

Specifically, in the second quarter, we expect the organic growth rate to increase sequentially between 100 to 150 basis points to approximately 5.5% to 6%, delivering sales of about $700 million that could be as low as $690 million, if the dollar maintains its current momentum against other major foreign currencies.

Please turn with me now to page 18 for more detail on how we expect the full year adjusted EBITDA of nearly $1.2 billion will convert to cash flows. Our full year outlook for adjusted free cash flow remains at $700 million at the midpoint of the range and represents an increase of nearly $0.25 billion compared to last year.

We anticipate the profit growth of nearly $400 million will be partially offset by higher interest to servicing debt used to fund the acquisitions, higher cash taxes on the profit growth and modestly higher capital requirements, as increased capital spending will be ameliorated by lower working capital needs.

This outlook anticipates a nearly 200 basis point expansion of the cash flow conversion and nearly $0.60 of every dollar of incremental profit is expected to convert to adjusted cash flow.

Please turn with me now to page 19, where I'll outline how our solid performance in the first quarter and our affirmed full year guidance for the full year positions us to achieve the midterm financial targets we outlined late last year.

In the upper left of the page, you will see that with two consecutive years of organic growth in the 6% to 7% range, we will reach $3 billion of revenue, which represents a more than tripling of revenue over a five-year period.

As our top line reaches that level, you can see in the upper right, we expect profit margins to expand meaningfully on the profit conversion from the organic growth and the realization of the ProQuest cost synergies, implying an increase in profit margins of more than 12% in the five-year term.

The profit growth and the anticipated impact of the share repurchase program will lead to continued growth in adjusted diluted earnings per share, as illustrated in the lower left. We continue to see repurchasing our own stock as the most attractive use of our capital in the near term and plan to continue our repurchase program in the second quarter.

And finally, in the lower right, we expect adjusted free cash flow to grow by more than $100 million next year, leading to a cumulative generation of more than $1.5 billion between this year and next.

Please turn with me now to page 20 for a reminder of why this business is so remarkable, particularly in the context of uncertain geopolitical and macroeconomic environments.

Our leading brands of products provide mission-critical information and insight to a massive and global customer base, located throughout the world and represent a small fraction of the total expansive addressable market estimated at well over $100 billion.

And the resiliency of the business, which is particularly valuable in the current environment, is remarkable, as about 80% of our revenue comes from subscription and reoccurring sales.

What's even more impressive and demonstrates the critical nature of our products, is the fact that our subscribers renew at greater than 90% each year, positioning us as a compounder with the ability to offset inflation, as we have virtually no exposure to rising raw material costs.

All of the products and services we provide, deliver significant operating leverage, as manifested in our high profit margins, as we utilize the build it once sell it many times approach in our product development.

And as evident in the new product launch examples Jerre shared earlier, we continue to invest to provide enhanced value for our customers.

Not only does this model deliver excellent profit margins but our free cash flow generation is poised to lead our category as we integrate the ProQuest acquisition and execute our plan to deliver more than $1.5 billion between this year and next.

Finally, we now have the accomplished leadership team in place to execute the One Clarivate plan and deliver improved organic growth leading to enhanced returns for all our stakeholders. I'd like to thank all of you for listening in this morning. I will now turn the call back over to Bailey to take your questions.

And as a reminder, please limit yourself to one question and then return to the queue for any additional. Bailey, let's go ahead..

Thank you. [Operator Instructions] Our first question today comes from Toni Kaplan from Morgan Stanley. Toni, please go ahead. Your line is now open..

Thanks so much. I really like the new breakdown of the organic growth drivers on the slides and I wanted to ask about that. So, in first quarter, pricing hit the mark, the other three didn't. You mentioned, Russia being an offset for the improvement on the small customers.

It makes sense, but I'm imagining that probably does continue through the rest of the year. So, just maybe talk about how the other three drivers start to accelerate to the 50 basis points for the full year and what you see as the biggest risk to hitting the full year organic growth target. Thank you..

Great question, Toni. Happy to start, because we'll keep that current each quarter.

Jonathan, do you want to pick it up?.

Sure. So -- and to the point you made, were it not for the cancellation or moving out of Russia, we would have been nearly there on renewal rates. That is something that we see as being weighted towards the beginning of the year and is going to improve as we move through the balance of the year.

So, we're still quite confident we can get there on renewal rates given the line of sight we have into the next three, four months in particular. Cross-sell was never intended to be at that level of growth early in the year. So Steen and the rest of the sales team have done a remarkable job in pivoting the organization to the four customer verticals.

A tremendous amount of work took place remapping all of the territories, developing quotas for all the new reps and in particular, training them on the solution selling for their respective submarkets to help drive that cost selling.

So, we were really excited by the examples that we saw really in the month of March that Jerre shared and we think that one will really start to accelerate in the second quarter and beyond. And then transactional, that's coming off of a tough comp. This is -- we're still seeing some softness there.

But as we repivot the sales force to the four customer verticals and we get additional resources brought into the field and in particular, have some exciting new data coming online in our HDS suite of products, we expect that to accelerate into the second and third quarter..

I'd just add one thing to it. It's a great question. If you just step back in 2019 and 2020, we grew just under 2% organic, last year 2021, 4.5%. So the 200 basis points that we've split up, is what we'll report each quarter to everybody, so they can see our progress.

And I would say our entire team felt really good about where we were at in the Q1 with much more to go. Thank you, Toni. Next question..

Thank you..

The next question today comes from George Tong from Goldman Sachs. George, please go ahead. Your line is now open..

Hi. Thanks. Good morning. Subscription organic revenue growth of 2.8% was somewhat muted in the quarter and decelerated from 4.5% in 4Q.

You mentioned, Russia is certainly a factor, but can you describe some of the trends with subscription revenues that you're seeing both positive and negative and factors that may weigh on subscription revenue performance?.

Yeah. No, good question, George. Go ahead Jonathan, pick up on it..

Yeah. It's helpful to remember, Q1 for us is a big renewal quarter. So, it's a period where we're obviously focused on bringing in those renewals getting them in on time. It's typical that our new subscription sales will start to accelerate as we move through the year.

So, there's the seasonality impact, that's really just driving that sequential comparison. When you go back and you look at the things that are going well for us, obviously, very encouraged on what we're seeing on pricing in our subscription file, but also in our reoccurring business we're getting really good yield there as well too.

So we see that as a positive. And then as Jerre highlighted, we're really encouraged by the new sales we're seeing of products into different customer categories that we really saw towards the end of the quarter, and we really think it's going to be a driver moving into the balance of the year.

So, look for that area, subscriptions to continue, to accelerate as we move through the year based on those factors..

And we could have both Gordon and Steen add to it. But this is really now Q2 George. It is the first real quarter, we've had with all the reorganization, we went through et cetera. And I would say, remember last year, we had an anomaly in first quarter, second quarter.

So I think you see particularly with the range Jonathan provided you for Q2, I think you'll see the exact improvement that over Q2 last year that Jonathan talked about. Thank you. Next question..

The next question today comes from Andrew Nicholas from William Blair. Andrew, please go ahead. Your line is now open..

Thank you, and good morning. I just wanted to ask a question on ProQuest. Obviously, it's been about six months, I believe since you closed that deal. Wondering, if you could kind of speak to the major learnings. And then maybe, if you could provide a number on that growth in the quarter.

And maybe anything else you could say in terms of the seasonality of that revenue? I apologize. I realize that's a multi-parter, but I think ProQuest is obviously a part of the business –.

Well, done. We'll have Jonathan start. As a reminder to everybody, Jonathan six and half years ago was with ProQuest for four years prior to them. So he can give you a good view of that. And then we'll have Gordon and Steen both pick up because it's a great question..

Yeah. We're really off to a great start with the ProQuest integration as Jerre mentioned. We highlighted the cost actions where we're about a-third of the way there which certainly we benefited from having quite a bit of planning in advance.

But I think the examples that Jerre shared in the prepared remarks on the product integration are the most exciting.

So a big part of the value proposition here is enhancing, the value for our customers and being able to integrate not only, the index for our discovery layers with Web of Science, but also starting to create some integrated feature functionality both of those platforms is going to be very exciting.

So, great encouragement on the integration side and getting the cost synergies, really pleased with where we are from a product perspective. And ProQuest results came in generally in line with what we expected in the first quarter. So, great work. .

Thanks, Jonathan. Gordon please pick up, because you've been living with it..

Yeah. Thanks Jerre. It's Gordon here. The two examples that Jerre and Jonathan commented on around the integration that drive research and higher value in research and in discovery products, are really important in combination with the Web of Science family or portfolio. I would add, a couple of comments on progress integration.

One is the leadership integration has gone extremely well. We are combined as a team. So our portfolio is now seen across, the entire business, and it's focused on the four verticals that Steen is driving into the marketplace.

So, what you'll see us coming out with even more so going forward are solution sets that drive value for customers that are specific to their vertical and solve their needs. So really pleased with the progress on that, and I expect us to continue that progress on plan for the rest of the year..

Thanks, Gordon. Let's go to the next question..

The next question today comes from Ashish Sabadra from RBC Capital Markets. Please go ahead. Your line is now open..

Thanks for taking my question. I just wanted to drill down further on the revenue growth acceleration – the organic revenue growth acceleration from first quarter to second quarter.

I was wondering, you might have already touched on this, but I was wondering, if you could provide some more clarity around how should we think about the subscription reoccurring and transaction pieces of the business improving from first to second quarter? Thanks..

Just one quick thing, and then we'll have Jonathan pick up on that.

What I said in my written remarks this morning is, we'll approach as we go out of 2022 into 2023, closer than ever to 80% being organic growth and total growth in both subscription base, and repetitive if you will, and 20% in transactions of which another larger part will be with the selling solutions. So pick up from there..

Absolutely. So pricing the improvement, I expect to be generally in line with the improvement we saw in Q1. Renewal rates will get much closer to that 50 bp improvement as we lap some of these episodic items in Q1.

Cross-sell will inch up by 20 or 30 basis points is what we expect in Q2 as we start to see continued progress and get the benefit of a full quarter of work. And I would expect transactional to start to reach parity with last year in Q2 and then in the second half of the year turn positive to drive that full year improvement.

So, in particular, I'll just emphasize continued improvement in pricing or consistency with what we saw and then a ratcheting up of renewal rates and cross-selling with transactional starting to get relatively flat with the growth we saw last year..

Thank you. Next question..

Thank you. The next question today comes from Hamzah Mazari from Jefferies. Please go ahead. Your line is now open..

Good morning and thank you. My question is just on capital allocation. You mentioned favoring the buyback in the near term and you talked about how much stock you bought back.

But looking at the balance of this year, how much can you buy back out of your free cash flow? And then just on M&A, how much M&A do you need to hit your long-term financial targets? So just kind of two parts on capital allocation. Thank you..

Happy to.

Jonathan?.

Yes. Just as a reminder of how we intend to spend the overall $1.5 billion of cash we generate this year and next, we'll continue to service the preferred mandatory converts with cash.

We'll use a portion of that adjusted free cash flow to integrate the acquisitions and we will leave ourselves a little bit of capacity to do some other things that are strategic. But then for all intents and purposes we'll have about $1 billion available of that for share buybacks between this year and next.

With our improved or upsized cash flow revolver, which we did in the first quarter, we can manage some of the seasonality within the year of cash flow to address and take advantage of the stock price where it is today. So we could do up to half of the overall program this year.

And we'll be looking at that carefully as we move over the course of the next few months then we'll give you an update on where we progress that when we're together again in July or August. .

Thank you. Next question please..

Thank you. [Operator Instructions] The next question today comes from Shlomo Rosenbaum from Stifel. Shlomo, please go ahead. Your line is now open..

Hi. Thank you. Good morning. Just a question a little bit about just the….

Good morning..

Just the geographic kind of challenges between Russia and some of the stuff we're seeing in China with lockdowns.

Could you talk about why the Russia impact will dissipate or decline after the first quarter and whether the Russia impact will be excluded from organic revenue growth as you calculate it? And then given the lockdowns in China can you just talk about how much revenue is coming out of China for Clarivate and whether you're seeing any impact from the lockdowns over there?.

So, Jonathan you start. Gordon and Steen you may want to pick up on China if you would please. But you start please Jonathan. .

Yes. So just on the Russia side, obviously, moving out of there in Q1, we're going to see a disproportionate impact on not just the subscription but any transactional sales that we were doing in the region occur earlier in the year. We also had some other cancellations early last year that will start to lap off.

So that's the reason why we expect the subscription and renewal performance to improve as we move throughout the balance of the year. To your -- we are not going to make any adjustments for that in organic growth.

So just to be crystal clear that will just be a headwind for us and we see a path to being able to offset that through the balance of the year. So, no change to the full year guide on the 6.5%. As it relates to the region of Asia, China is quite small for us. I'm not sure we put an exact number on it, but not a very large market for us.

It's -- we're being very thoughtful and careful about what's happening and developing there with our teams on the ground. But yes, I'll let Gordon add some commentary..

And just as a refresher, thanks Jonathan for everybody. Gordon right now a year ago was starting to implement in the Asia region the One Clarivate. That's where we did all the test-drive. So Gordon please. .

Yeah, sure. Thanks, Jerre. Thanks, Jonathan. A couple of things on China. First and foremost, we're not seeing any immediate impact from the various city or partial city lockdowns. And in fact that's not a new thing. So although it's continuing, it has been that way for quite some time.

We're not reliant on physical footfall presence in the same way that ourselves and many other organizations were before. So we don't anticipate that will have any certainly near-term impact. So we see the same continuing in terms of our ability to perform in China.

And final comment would be what we are focused on in China is making sure that our colleagues are -- subject to these very sudden lockdowns are looked after. So our priority actually is that given that there is minimal business impact..

And Steen, anything to add?.

Yeah. The only thing I would like to add is we do see some interesting growth opportunities in China in medium term, as we look at the ProQuest portfolio and how we bring that together with the legacy Clarivate portfolio. We think there is a very interesting growth opportunity to accelerate the ProQuest presence in China.

And that's something we're working through right now to hopefully be able to accelerate that in 2023 and beyond..

Thanks, Steen. Next question..

Thank you. The next question today comes from Pete Christiansen from Citi. Please go ahead. Your line is now open..

Thank you. Good morning. Jerre..

Good morning..

Good morning. I know last quarter you talked about improving sales productivity within the quarter, not allowing so much to occur in late in the quarter. Just any progress on that? Maybe that was just a fourth quarter kind of phenomenon. And then, if there was -- was there any slippage from 4Q into 1Q that benefited growth this quarter? Thank you..

Yeah. I'll pick up the last part of that Pete and then Steen will be happy to pick up the first part. Yeah, about $3 million flowed through out of Q4 into Q1 more still in the pipeline. We said that when we announced Q4, we didn't lose any of those opportunities and they continue to flow through. Great question.

Steen, please pick up on productivity your favorite subject..

Absolutely. And a very relevant subject these days. So a couple of comments. As we prove how we run and how we execute the business under One Clarivate, we're getting a very different level of insight and discipline around our pipeline and how we look at our business, not only in current quarter, but also in future quarters.

So we are able to predict the business much better as we continue to progress in 2022. We're also able to navigate around the key clients and key opportunities in our business as well so that we can really allocate the resources for where we can get the greatest return within our business as well.

And then lastly, we're also adding sales capacity, so we are not only looking at sales productivity by our teams and individual contributors.

Actually our number one priority right now is to add sales capacity into the business, so we can further scale the business and further grow the business and that is the number one priority that we have right now in the business. So very focused on productivity, but even more focused on increasing sales capacity right now..

Thanks, Steen. Next question..

Great. Very helpful..

You bet. Happy too. Next question, Steen. Sorry, next question. Thanks, Steen..

Thank you. Our next question is a follow-up question from Shlomo Rosenbaum. Please go ahead. Your line is open..

Jerre, I was just testing if you're going to let me back in. I'm just kidding with you..

Any time you've got a question then we've got time for you..

Okay. Just a couple of just like -- a little bit of a housekeeping stuff. Just -- the transactional on Slide 13, the bottom left has transactional revenue down seven -- 0.7%. In the press release, we're talking about transactional revenue, up 2.8%. Is there a comparability item in other words over 2021 versus 1Q 2021? Maybe you could explain that.

And then also, I don't see anywhere the organic growth rate of ACV in the quarter.

I think we used to get that quarterly?.

That should have been out. .

It's consistent with the organic growth rate for the quarter..

Yeah..

It'll be around 4.4%..

4.5% to be precise. Yeah.

Jonathan?.

Yeah. To your question on transactional, so the lower left-hand corner of the page there is comparing how we're tracking to the acceleration of the growth rate. So, transactional sales did grow over the prior year. But if we compare that just under 3% to the growth rate that we saw for the full year last year it decelerated by about 70 basis points.

So in order for us to get to that 6.5% on a full year basis that's got to swing positive and contribute equally to the 200 basis points of organic growth expansion or get to a positive 50%. So we're just highlighting there that transactional is still softer earlier in the year.

And we expect that momentum to pickup in the balance of the year as we get further into the go-to-market implementation..

Thanks Shlomo..

Okay. Thank you..

You're welcome..

Next question?.

There are no additional questions waiting at this time. So I'd like to pass the conference over to Jerre Stead, for closing remarks..

Thank you. And thank you for joining us today. As I said at the beginning, I feel very good about where we're at with the progress. I'm very thankful for what everybody has accomplished. I would ask each of you to focus on page 19 that we talked about today.

And one thing to remember, each of the big acquisitions we made, we said that we would be accretive, on adjusted EPS all in at least 10% in year one and midpoints in year two. And we're spot on including all three of those.

I couldn't be happier with that, because it's the only way to really measure when you use shares to make -- to pay a portion or all of the acquisition value. It's the only way to measure it. So that's on point.

And as we said today -- and I'd lived through 2008, 2009 and 2010 back in my IHS days and we did really well, because of the kind of product offerings we have as we run into the headwinds that we're seeing worldwide right now.

This company is blessed with the best total business model I've ever had, even way back when Clarivate was part of Thomson in 2008 and 2009 they were flat or marginally up. So everything we have done puts us on point, to deliver what we said, we'd do.

The thing I must say I'm most proud of is the, $283 million of adjusted EBITDA in 2019 and the midpoint guidance of $1.2 billion to make it easy for 2022, with huge upside as we continue.

And I would say today with all the work that's gone on with our sales organization and our product organization, I feel better today than I've ever felt about our ability to hit what we said we would hit and how we do it in 2022 and 2023. So I'm very proud of our team and very thankful. Thank you all..

That concludes the Clarivate First Quarter 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines..