Executive Summary / Key Takeaways

• Clarivate is undergoing a significant multi-year turnaround, driven by its Value Creation Plan (VCP), which focuses on optimizing its business model towards a subscription-first approach, accelerating AI-powered product innovation, and rationalizing its portfolio.
• The VCP is showing early positive results, with organic Annualized Contract Value (ACV) growing 1.3% in Q2 2025 and recurring organic revenue increasing by nearly 1%, signaling a potential inflection point after prior declines.
• The company is strategically shedding volatile transactional revenue streams, aiming to increase its recurring revenue mix from 80% to 84-85% in 2025, which is expected to enhance predictability and improve profit margins.
• Clarivate is leveraging its proprietary data and AI capabilities across its Academia & Government (A&G), Intellectual Property (IP), and Life Sciences & Healthcare (LSH) segments to drive competitive differentiation and unlock new growth opportunities, particularly in the burgeoning AI innovation landscape.
• While near-term revenue will be impacted by strategic disposals, management reaffirms its 2025 outlook, projecting improved Adjusted EBITDA margins and robust free cash flow, providing capital allocation flexibility for deleveraging and share repurchases.

The Genesis of Transformation: Clarivate's Strategic Pivot

Clarivate Plc, a venerable institution founded in 1864, has long served as a global provider of transformative intelligence, connecting organizations to trusted data and analytics across the innovation lifecycle. A pivotal moment in its recent history was the 2021 acquisition of ProQuest for over $5 billion, which significantly bolstered its Academia & Government (A&G) segment with key products like ProQuest One and Alma. This acquisition, while strategic, contributed to a period of disruption, marked by integration challenges, a diluted focus on organic growth, and an over-reliance on unpredictable transactional revenue streams.

These challenges culminated in disappointing financial performance, prompting the appointment of Matti Shem Tov as CEO in Q3 2024. Under his leadership, Clarivate swiftly launched a comprehensive Value Creation Plan (VCP), a multi-year turnaround strategy designed to reposition the company for sustainable organic growth and enhanced shareholder value. This strategic shift is critical in an information services industry where scale, data integrity, and technological agility are paramount. The global Life Science Analytics Market, for instance, is projected to grow at an impressive 11.4% CAGR to reach $68.81 billion by 2030, driven by data standardization and emerging technologies like AI, underscoring the imperative for Clarivate to sharpen its focus and capabilities.

Technological Edge and AI-Powered Innovation

At the heart of Clarivate's strategic rebirth lies its commitment to technological differentiation, particularly through advanced AI integration. The company's core strength resides in its proprietary, curated data collections and the sophisticated platforms that leverage them. For instance, its Web of Science platform, a cornerstone of academic research, is being enhanced with "Agentic AI" solutions. These AI agents are designed to independently plan and execute multi-step processes, such as literature reviews, by interacting with users, data sources, and tools. This personal, interactive experience closely mimics working with a human assistant, offering researchers a qualitatively superior and more efficient workflow. Over 4,800 institutions have already adopted Clarivate's AI tools to strengthen research support and increase operational efficiency.

In the Intellectual Property (IP) segment, Clarivate is at the forefront of AI-driven innovation. The Derwent Invention Platform, with its AI-powered search capabilities, has already demonstrated strong user adoption, driving a double-digit increase in search volume for its alpha cohort. This is particularly significant given the market-wide surge in AI innovation, with patent filings for AI inventions growing fivefold compared to pre-ChatGPT levels in the past year alone. Clarivate believes AI has the potential to double innovation output and build more defensible IP portfolios, a strong tailwind for its patent renewal business. Future developments include enhanced AI patent drafting and a new AI patent monitoring product, all trained on Derwent's unique proprietary data.

The Life Sciences & Healthcare (LSH) segment is also benefiting from this technological push. The Cortellis R&D platform is being rapidly enhanced through the integration of scientific AI research assistance, with plans to implement Cortellis regulatory intelligence conversational search. This focus on AI-driven insights aims to accelerate drug discovery, optimize clinical trials, and improve research accuracy, directly addressing the needs of a market segment that is increasingly reliant on advanced data analysis. These technological advancements are not merely incremental improvements; they are foundational to Clarivate's competitive moat, enabling higher value propositions, strengthening customer stickiness, and opening up premium upsell opportunities, which are critical for long-term revenue and margin expansion.

Strategic Transformation: The Value Creation Plan in Action

The VCP is structured around four key pillars: business model optimization, improved sales execution, accelerated product innovation, and portfolio rationalization. Each pillar is designed to address historical inefficiencies and capitalize on Clarivate's core strengths.

Business Model Optimization

A central tenet of the VCP is the aggressive shift away from volatile, low-margin transactional revenue towards a subscription-first model. In the A&G segment, Clarivate is phasing out one-time transactional sales of ProQuest ebooks and digital collections by the end of 2025. This strategic move is expected to increase the segment's subscription revenue to 90% of its total, up from 79% previously. Early adoption of the new subscription model for ProQuest e-Books has been positive, with over 70 new wins and hundreds of customers evaluating the transition. This proactive optimization is positioning Clarivate to better anticipate and adapt to market dynamics, such as the observed softness in capital expenditure from universities.

Similarly, in LSH, the company launched DRG Fusion, a new modular subscription-based real-world data analytics product. This initiative aims to transition away from transactional data brokering, with plans to exit direct real-world data licenses by Q4 2026. This shift is projected to reduce volatile transactional revenue by approximately $200 million, accelerate organic growth, and improve the company's overall recurring revenue mix from 80% to 87% (potentially higher), leading to an estimated 150 basis point improvement in profit margin with minimal impact on free cash flow.

Sales Execution and Customer Engagement

Recognizing past suboptimal sales execution, Clarivate is overhauling its sales organization. This includes upgrading leadership across all three segments, optimizing reporting structures to enhance accountability, and realigning account management models around specialty solutions. A significant investment is also being made in a dedicated customer success team to improve customer engagement and coverage, directly aiming to strengthen and grow retention rates. Incentive models across the company have been refocused to reward subscription and recurring revenue growth, aligning sales efforts with the company's strategic priorities. This renewed focus is already yielding results, with the annual renewal rate across the subscription base improving to 93% in H1 2025, up from 92% in H1 2024.

Portfolio Rationalization

As part of the VCP, Clarivate is actively rationalizing its portfolio to increase execution focus and unlock value. This has already seen the divestiture of non-core product lines such as ScholarOne (November 2024) and Valipat (April 2024). The company is also engaged in a formal strategic review with financial advisors to assess alternatives, including the potential divestiture of entire business units or a segment, with results anticipated to be communicated in February 2026. This disciplined approach to portfolio management is expected to simplify the organization, drive further cost rationalization, and protect and expand margins.

Segment Performance and Strategic Momentum

Each of Clarivate's segments is demonstrating meaningful progress under the VCP.

Academia & Government (AG)

Despite macro headwinds like reductions in U.S. federal agency contracts and constraints on higher education research funding, the A&G business delivered 2% organic ACV and subscription revenue growth in H1 2025. The segment achieved an impressive 96% renewal rate in H1 2025, with 75% of global A&G subscriptions for the full year 2025 successfully renewed by the end of July. This resilience is attributed to the mission-critical nature of Clarivate's products, such as Web of Science and Alma, which are indispensable for academic institutions. Key wins include a multi-year agreement with the Canadian Research Knowledge Network and a significant expansion with CAPES, a Brazilian foundation for higher education, which also represents a cross-segment win.

Intellectual Property (IP)

After a challenging period, the IP patent renewal business returned to growth in H1 2025, with organic recurring revenue rising by approximately 1.5%. This rebound is strongly supported by the market-wide surge in AI innovation, which is driving sustained growth in registered IP. IPfolio, Clarivate's cloud-based IP management platform, saw new clients and partnerships grow over 50% year-over-year across global markets, including South Korea and Japan, demonstrating strong adoption across diverse industries. The segment is further bolstered by the appointment of Maroun Mourad as its new President, effective September 8, 2025.

Life Sciences & Healthcare (LSH)

The LSH segment returned to organic ACV growth in H1 2025, a direct result of VCP efforts. Subscription renewal rates improved to 90% in Q4 2024, a 6 percentage point increase over the prior year. While the commercialization part of the market remains soft, the R&D market is stable, and Clarivate's investments in the Cortellis suite of products are yielding positive results in usage and retention. The company has extended a long-term multimillion-dollar agreement with 15 global pharmaceutical companies, validating the importance of its Cortellis and DRG services. The launch of DRG Commercial Analytics 360 further empowers MedTech organizations, positioning Clarivate to capitalize on an improving commercial environment.

Financial Performance and Outlook

Clarivate's recent financial performance reflects the initial impact of its strategic shifts and the underlying strength of its recurring revenue model. For Q2 2025, total revenues were $621.4 million, a decrease from $650.3 million in Q2 2024, primarily due to inorganic divestitures and disposals. However, the net loss significantly improved to $72.0 million from a $304.3 million loss in Q2 2024, largely due to the absence of a substantial goodwill impairment charge recorded in the prior year. For the first half of 2025, total revenues were $1,215.1 million, down from $1,271.5 million in H1 2024, but Adjusted EBITDA margin expanded by 50 basis points to 41%, driven by internal cost efficiencies.

The company's focus on recurring revenue is evident in its improved organic recurring revenue mix, which reached 88% in H1 2025, an 800 basis point improvement compared to 2024. Free cash flow remained strong, generating $50 million in Q2 2025 and $161 million for H1 2025, despite $42 million in restructuring-related outflows associated with the VCP implementation. Clarivate's liquidity position is solid, with $362.6 million in cash and cash equivalents and $693.5 million in available borrowing capacity as of June 30, 2025. The company proactively refinanced $500 million of its 2026 Senior Secured Notes with new term loans maturing in 2031, strategically swapping 80% of the new tranche to Euros and a fixed interest rate, resulting in a favorable $7 million annual cash interest increase in the current higher rate environment. Clarivate also demonstrated its commitment to shareholder returns, repurchasing $99.5 million of ordinary shares in H1 2025, with $400.5 million remaining under its current program.

For the full year 2025, Clarivate reaffirms its outlook, anticipating organic ACV to accelerate by approximately 60 basis points to 1.5% at the midpoint. Recurring organic growth is expected to be in the upper half of its range, and total revenue is projected to be near the top end of the range, around $2.34 billion. Adjusted EBITDA is forecast to be slightly above the midpoint of its $940 million to $1 billion range, maintaining a profit margin of approximately 41%. Diluted Adjusted EPS is expected to be between $0.60 and $0.70, and free cash flow is projected at about $340 million at the midpoint. These projections are underpinned by assumptions of approximately $125 million in revenue reduction from strategic disposals (a $15 million improvement from initial estimates), offset by $85 million in operating cost actions, and a negligible foreign exchange impact.

Competitive Positioning and Risks

Clarivate operates in a competitive landscape alongside major players like RELX Plc (RELX), Thomson Reuters Corp. (TRI), S&P Global Inc. (SPGI), and FactSet Research Systems Inc. (FDS). While Clarivate holds a mid-tier position (estimated 5-7% market share) in the $50 billion information services industry, its current revenue growth (6% trajectory) lags behind some peers like RELX (8%) and TRI (9%). Clarivate's TTM operating profit margin of -2.18% also trails significantly behind competitors such as RELX (30%), TRI (29%), SPGI (39%), and FDS (32%), indicating higher operating costs and less efficient operations.

However, Clarivate differentiates itself through its specialized offerings and proprietary data. In IP, its Derwent platform provides qualitatively superior novelty evaluations for innovations compared to broader legal tech platforms like Thomson Reuters' Westlaw. In life sciences, Cortellis offers notably deeper market intelligence for drug development, giving it a unique edge in commercialization analytics. The company's strong brand and customer loyalty, particularly in academia, also provide a durable competitive advantage. The VCP's focus on cost rationalization and shifting to recurring revenue is a direct response to these competitive pressures, aiming to improve profitability and predictability.

Key risks include the inherent volatility of transactional revenue streams, which have historically impacted performance. While the company is actively reducing its exposure to these, the transition period carries execution risk. Macroeconomic headwinds, such as U.S. government funding constraints on higher education, could also impact the A&G segment, though management believes this risk is currently contained due to the mission-critical nature of its products and high renewal rates. Furthermore, legal proceedings, including securities class action complaints, introduce uncertainty, though Clarivate is vigorously defending against them. The company also acknowledges past challenges with product technology debt and aging legacy solutions, which the accelerated product innovation pillar of the VCP aims to address.

Conclusion

Clarivate Plc is in the midst of a profound strategic transformation, shedding legacy challenges to emerge as a more focused, predictable, and technologically advanced information services provider. The Value Creation Plan, under new leadership, is not merely a cost-cutting exercise but a fundamental reorientation towards a subscription-first model, fueled by aggressive AI-powered innovation. Early indicators, such as accelerating organic ACV growth and improving recurring revenue mix, validate the initial success of this multi-year turnaround.

While the near-term financial outlook reflects the impact of strategic disposals, the underlying improvements in operational efficiency, enhanced sales execution, and a robust technological roadmap position Clarivate for a return to healthy organic growth in the coming years. The company's ability to leverage its proprietary data and AI capabilities, particularly in the burgeoning IP and life sciences markets, will be critical in expanding its competitive moat and driving long-term shareholder value. Investors should closely monitor the continued execution of the VCP, particularly the progress in AI integration and the outcomes of the strategic portfolio review, as Clarivate strives to unlock the full potential of its specialized intelligence assets.