Clarivate Plc (CLVT) Earnings Call Transcript & Summary

All right. Good morning, everybody. Thank you for joining us again. For those of you who don't know me, my name is Manav Patnaik, I'm Barclays' information services analyst. Thank you for being here. But more importantly, thank you for the Clarivate executive team for being here. I'm going to try and like get this right. We got Jonathan Gear, CEO; and then we got Jonathan Collins, CFO. So I don't know how I'm going to do the Jons, but we'll do it. But to start with, they're just going to run through a few quick slides, and then we'll jump right into Q&A. And along the way if you guys have any questions, obviously, just raise your hands as well. So I don't know which one of you want to kick it off.

Sure. I'll go and kick it off. So Jonathan Collins, why don't you advance it. This is going to take us maybe 2 or 3 minutes to give a quick overview for the Clarivate story in case you're not familiar with it. And so starting on this slide right here, this is how we look at the business, and I'll start on the very left-hand side and you'll see a slight change in how we described the business in the past. In the past, we talked about 2 major segments, our Science and our IP segment. Just as -- myself, I'm fairly new to the company. I joined on July 11 and moved to the CEO role on September 1. So you're seeing me in kind of week 2 of my CEO's tenure-ship, if you will. And as I look at the business, particularly on the Science side, there are really 2 different sub businesses as part of it. One is academic, Academia & Government. And to the right-hand side, you see the types of products we have around there. So it's our ProQuest One system; our Web of Science, which is one of our flagship systems. And all of this is serving the academic and government market, particularly around libraries, library science, research and the like. And that segment or subsegment, if you will, represents a little under half of our business. The next subsegment is our Life Sciences & Healthcare business. That includes Cortellis, our health data science business and other pieces around that. A little under 20% of our business, growing at a slightly faster rate, great end markets there. And as I call out these 2 segments, in the second half of the year, you're going to be able to see us report this way. This is kind of a precursor of what's to come. Then our third segment is no change, that's our IP segment, and that's serving the ecosystem around the management of intellectual property, both patents and brand. And we do serve -- really, we're one of the leaders in serving that entire community, manage the workflow all the way from search to management of IP property for our clients. So 3 key offerings in terms of how we look at the business. In terms of our regional presence, a little over half of our business is located in the Americas, about 1/4 in EMEA, 20% in Asia Pacific. And on the very bottom right-hand side, you'll see how we look at the types of solutions that we offer, very similar for those of you who are familiar to information services businesses. So it starts with core enriched data, critical data, which we aggregate, we pull into our ecosystem, we enrich, we make it unique. We build out the value chains to analytics and insights. We take that data, put tools on top of it, software tools, and kind of unlock it for our clients then workflow software solutions as we help our clients manage that content through their systems through critical workflows. And finally, on top of that, a small segment of managed services to help our clients address specific kind of issues or unique situations that they may have. If you go on to the next slide, thanks, Jonathan. So one announcement we did make this morning we wanted to highlight was we announced the divestiture of our MarkMonitor business. This is a domain management solution, kind of great digital business. When I talk about what we have before and we described our 4 core types of services, didn't really strategically fit within that offering. About $300 million of cash proceeds we expect to get from this sale. And as we look at this as an example of maybe small divestitures if we look at, again, good business, I think it will be great with the new owners. But in terms of us, not really core to our offerings, an ability for us to then take investments we would otherwise have had to make in this segment and really focus those investments into our core offerings going forward. In terms of the proceeds from that business, I'm sure we'll get questions on this, we do plan to use the proceeds to reduce our net debt over the near term. Moving to the next slide, let me pass on to Jonathan Collins just to talk about what our '22 guidance looks like.

Sure. On Slide 5 of the presentation, we've highlighted our guidance ranges that we provided at Q2 earnings a little over a month ago. We continue to expect full year results within these ranges. I just want to draw 2 things to everyone's attention. The first is we have continued to see the dollar strengthen in the third quarter compared to the pound and to the euro. So for us, we do expect about a $10 million headwind in the quarter. And if the dollar stays where it is, I would expect a similar headwind in the fourth quarter as well, too, at about the same amount. So we now anticipate that third quarter revenue will be in the range of $640 million to $650 million. So $645 million at the midpoint, essentially flat on a constant currency basis with what we indicated previously. I do anticipate that organic growth is going to be about 3% in the quarter. I expect that our patent renewal business, which is a little bit lumpy, has performed really strong in the first half of the year, is going to be softer in the third quarter. We've been indicating that, that we'll have a soft quarter, it looks like Q3 will be a bit softer. The ProQuest business, I think, is going to continue to perform well keeping us at about that $645 million, give or take, in the third quarter, but implying an organic growth of about 3%. So that's our view. And with that, we can take your questions.

Great. Okay. I guess let's just start with today's announcements before we go into bigger picture questions. So maybe, Jonathan Gear, first question for you. The active portfolio review, was that something that began before you came? Or is this more kind of your initiative in looking at the businesses?

It had begun before I arrived, Manav. So the process was in place certainly when I arrived even in July. But I think this is just an example of what we'll do. And when I came into this role, I believe very strongly in the strategy that's been laid out for Clarivate, the One Clarivate strategy. But the focus now is around execution and focus. That's what we need to do extremely well. And this portfolio review and its decision to move forward with this, I think, is just one example of how we're going to focus.

Got it. And maybe just the first impressions in your short time already at Clarivate, but -- not to put you on the spot, but Jerre, before you, said it was the best asset he's come across. More than IHS, more than IHS Markit, which you were at, too. But just your initial thoughts on the portfolio that you have in the context of the review that you're doing.

Okay. Great. Well, it is a tremendous set of assets. I won't compare it to my previous company, in fact, Doug Peterson was just on the stage with you, who was my boss for 1 month as we closed out that transition. But it is a great set of assets. And I come back to those 3 key types of assets in terms of how I look at the business, you start with IP. And IP is critical. Our clients need it. They have to have it. It's core to their business. It's core to the protection of their business, and we're critical in managing that workflow for our clients. You look at then health care and the health care data around that. It's one of our faster-growing end markets. And we see -- and right now, it's 20% of our business, Manav. And I look forward to the future, I think you'll see disproportionate growth in that business going forward just given the opportunities out there, and the types of solutions that we have, again, is critical. And then third, our academic and government solutions, including the flagship Web of Science products, our ProQuest One products. It's just absolutely mission-critical to our clients. And maybe one way to compare and contrast is, I mean, you've been on the ride in my previous company, Manav, and there is always excitement when energy markets went crashing or things like that or the automotive market went crashing. When I look at these 3 core markets and look at what's happened when there's been previous recessions or economic disturbances, '08-'09 crisis, even before our ownership, they performed well. They're extremely stable, must-have end -- products in very, very stable end markets. So in the sense of stability, they're just much more stable and they're great assets.

Got it. And individually, I think, as you described each of the segments, are great assets, stable, et cetera. Can you just give us a sense of how you envision or how we should consider Clarivate? Like what are the synergies between the 3? Are there potentially going to be new verticals in there? Or how do we think of that strategy?

So first, I think we have plenty of verticals as we are right now. So we don't need more. You're not going to hear a lot of talk in the near term from me about M&A. I told my team don't bring me anything. We're focused on execution right now of doing well with what we have. And I think you raised a really great question about the synergies. And we've talked about the One Clarivate story has been critical as you bring -- knit together these businesses and 1 plus 1 plus 1 equals 5 or 6, not 3. And there are nuances around this thing. And we're going to be having an Investor Day in November. And hopefully, Manav, you and all of you will be there and we'll talk more about the story. But there's so much about the One Clarivate strategy story that tends to be a little focused on the cross-sell between the businesses, which is extremely important, and we certainly see it, for instance, where the Web of Science and ProQuest come together, serving the same end market, great examples of where we can do cross-sell. But there's also more we can do in terms of One Clarivate with driving efficiency and best practice, for instance, around insight sales. I'm sure we'll talk about that. There's also what we can do in terms of driving analytics. And again, this business model that I see here at Clarivate is just so familiar to me from what I have seen in my previous company. You start with that enriched core data, but you have to move up the value chain. That's how you drive long-term innovative growth and that's going to be part of our synergy story going forward.

Got it. And maybe Jonathan Collins, if I can just ask you a few questions around the same. To the point on stability, predictability of the business, I mean, there's been -- over the last couple of years at least, been a lot more volatility in the guidance than that statement would imply. So what is your visibility into the business? And what are some of the changes you're doing having stepped in as CFO to kind of improve that cadence there?

Sure. I mean one advantage that we do have is about 80% of the business is subscription or subscription-like, reoccurring. That business is highly predictable and stable. The volatility we've seen, particularly at the fourth quarter of last year, was in the transactional business. I give Steen and our new sales leadership team a tremendous amount of credit for the discipline that they've put in place over the past few quarters of qualifying the pipeline, having a better understanding. It's just providing us with better insight. So in Q1, we expected organic growth of about 4%. We came in at 4.4%. Second quarter, we were a couple of million light on organic, but ProQuest overperformed. We were within a couple of million dollars on a constant currency basis. And as we get further into the third quarter and get good insight, we're hoping to refine our outlook for the third quarter. But that process of a disciplined pipeline and management, particularly on the transactional business, is what's helping us to refine that outlook.

Got it. And maybe just on the third quarter, to clarify, the guidance revision today, was that purely FX? Or the 3% organic growth, it sounded like it was a little light, too, right? So what's the mix between the revision on the guidance?

You got it. So the change in the range and the midpoint is entirely FX. So on a constant currency basis, will be about $10 million light, which is entirely FX. I think there's going to be a little bit of a mix issue in the quarter between legacy Clarivate and ProQuest, a couple of million dollars, similar to what we saw. So that's why we're indicating the organic growth will be at about 3%. Most of that coming from the IP renewal business, which we think will be relatively flat or almost flat in the quarter, and that's been growing at about 8% in the first half of the year. So that's the primary difference in the organic growth profile from half 1 to Q3. And I think ProQuest is going to be a couple of million dollars better, so we'll be at about $645 million.

Got it. And so that, again, then implies fourth quarter is, again, one of your biggest quarters in the ramp-up. And -- but -- so to that point of the transactional business, and maybe Jonathan Gear, you can jump in, too, like is there a way to maybe make that a little bit more recurring? Or is it just the nature of the business that you just have to stick with it fourth quarter loaded?

Do you want to go first and I'll follow?

Yes, I'll touch on it. So to Jonathan's point before, Life Sciences & Healthcare is one of our -- is our fastest-growing segment in the 3 that he outlined. The Life Science & Healthcare business tends to be weighted towards the end of the year, so yes, I think we'll have a stronger fourth quarter than we've seen in the first 3 quarters of the year largely based on that. We did have a really good second quarter in that business as well, too. But undoubtedly, the opportunities we see in that business are really twofold. And the first, we'll talk more about it at our Investor Day and that is us making an investment in the platform and creating an ecosystem for our customers to use the data with them so that they're making recurring purchases within our environment. So we think that will help to do them. The second thing is setting up data deals that are longer term in nature, and we started to bring those in this year where we will sign a deal earlier in the year and in coming quarters we will deliver data and recognize revenue on that when that data's available. So both of those motions will help that business to become a bit more predictable and stable, similar to the rest of our business.

And I'll just briefly add, I mean, Jonathan's spot on with everything that he said. I mean an 80-20 split between recurring, nonrecurring is actually a great split. It's a very predictable split. And right now, if you see some slight movements on the edges, it's just given the size of the business, particularly the size of the organic business. I mean if you look in quarter, $1 million swing in our revenue base related to Clarivate is 25 bps on organic. So there's a pretty significant swing. Once we get to next year and we have the totality of the business, I think you'll see a lot less variability into your forecast.

Got it. And maybe, Jonathan Gear, going back to the different businesses, stable, great markets, great business models. What do you think is the right kind of growth framework or outlook we should be thinking about? Because I think Jerre was always very excited by the opportunities and always talked that it should be very high-growth businesses. But what is your take on that?

Sure. So a couple of thoughts, and I'm excited too, Manav. I'm excited, too. But if I look at the business right now, so first, come Investor Day, which is going to be in November, I'll have a chance to come back and really give my view of the timing of when I see the pace of improvement. But if I look at this year as an example, so with the guide we gave after our Q2 call in July, we talked about an organic rate of 4.5% for this year. Now in that 4.5%, we've been hit by 2 very specific events, about 50 bps caused by pulling out of Russia and 50 bps caused by various -- specific impact of a slowing economy on our brand and trademark business. So you kind of normalize for that, we're kind of a 5, 5-ish plus organic grower is kind of how I look at it in terms of the legacy Clarivate business. And I view this as we will build from this. Because one thing that has really struck me as I've come into this business, and I've spent the last 2 months of my job just going around, meeting with our colleagues around the world, is we're growing at this kind of roughly mid-single digit at a time of enormous internal change in the company. And this company has tripled in size over the last 3 years, from $1 billion to $3 billion, brought on 3 very large acquisitions, all in the middle of COVID, where we couldn't get together, we couldn't physically get together and drive the integration. So part of me said this has been actually pretty remarkable results given that. And as we lift those handcuffs, we're able to travel, able to really focus on execution and knitting this company together, that mid-single digit becomes kind of a floor from which we'll build on. Now in terms of the timing and pace, I'm going to ask you to give me a couple of months to come back to you and the community on that.

Fair enough. The 50 bps that you talked about from the brand management weakness, was that the MarkMonitor asset that caused the weakness? Or is that something else?

It's a mix of that and CompuMark. So we'll still continue to see that over the course of the second half of the year.

Got it. And maybe just to follow up, Jonathan Collins, the MarkMonitor business, like what was that growing at? I mean you gave us the margin profile, but will it be -- was it dilutive to growth? Was that part of the thinking behind divesting the business?

Yes, it's slightly below the overall average, but it's a relatively small business. So the impact on the overall growth rate will be relatively insignificant.

And as you both are going through this review, is it the growth profile that matters more in terms of whether you decide to divest a business? Or how do you balance, I guess, whether it's a good strategic fit but just a slow grower?

On the lens I look at it is, first, the strategic fit. Does it fit the strategy of the end markets we're focused on, the product leverage or solutions leverage between the different assets we have? To me, it always starts with that. And that's both divesting and acquiring, how does it fit in that strategic fit? Then beyond that, you, of course, look at the growth profile. And in particular, if there's going to be a significant investment required in the asset where maybe that investment dollars are better served in other part of the business. But the first lens is always strategy.

Got it. If you can touch on each of the business lines briefly a bit, maybe, Jonathan Collins, I'll start with you on the Academia & Government business and the reason being you were CFO of ProQuest before. So just to help us understand the mix in that business between ProQuest, Web of Science and whatever else might be in there and how those just talk to each other.

Yes. So as Jonathan indicated, that business will be almost half of our overall business. And it really has 3 primary components. The first is the research and analytics, and that's the Web of Science product and some of the additional analytical products like insights that sit on top of that platform. And there, we provide incredibly valuable information for the academic community and the value of published content and where the best research is happening. We've also announced some pretty exciting innovations on that product line with the expansion of the factor -- the Journal Impact Factor within that market to cover a broader range of topics and discipline. So very excited about the growth profile of that business as we've continued to invest in that over the past couple of years. The second major bucket is the content aggregation. So this is -- Jonathan touched on ProQuest One or our eBook Central platform, and these are the places where we provide a combination of journals, newspapers, reference books as well as videos and documentaries to be able to pull all of that together for researchers to be able to find effectively in one place. And that business has been performing well. We see great opportunities there to cross-reference and link content between Web of Science and those platforms going forward. Those are some of the early integration investments that we've made. The final category is really the workflow software. So we have the leading integrated library system for the global academic market in Alma. This is a faster-growing product that is taking older systems that were designed around a print collection and updating those to a SaaS offering that is primarily geared towards digital content, which is now how the libraries are largely procuring. So those 3 altogether really provide our academic and government business serving the library market, as Jonathan touched on.

Got it. And when we go back to the ProQuest acquisition, I mean, obviously, the FTC took their time in approving it. It sounded like that was more procedural, but what are the synergies between ProQuest and Web of Science? Like why did they fit so well together?

Yes. From a market-facing perspective, there is a really great opportunity to improve the customer experience between the products so customers can get easier access to content. One of the great examples is taking the Web of Science index and making it available in our web-scale discovery solutions like Summon and Primo that are out in the market. So providing better access to content within the libraries. From a cost perspective, one of the big advantages there is that these are content businesses. So the content ingestion, editorial operations, Clarivate had made some great investments in developing technology to make that more efficient. ProQuest can benefit from that as well, too. So just a combination of top and bottom line benefits that we see in bringing those businesses together.

Got it. And Jonathan Gear, just on this business as well, like do you -- how do you look at the strength of this portfolio? And are there other assets that you need to -- I know you just said you don't want to see any more M&A here, but just thinking longer term, are there white spaces that you need to fill out?

So I mean, first is what I love about the set of solutions we have is just how core and integrated we are within our clients. And if you go into the largest -- the largest libraries of this world, be they national or academic or local, we're just core. We run the ERP systems of this library. And for those of you who have been in the ERP businesses or know them, they're incredibly sticky. You get in, you're sticky then you find ways to expand, look at different workloads, find out how to use the content that you kind of moved on that system. So we start with a great position of strength given the assets that Jonathan just mentioned. In terms of white space, I think there's always areas where we'll be moving. I'm going to, again, hold out until Investor Day on the specifics. In terms of M&A, nothing specific I would highlight at this point. But I would just call back, it starts with a great position of strength, those ERP-like systems and then the Web of Science, which is the bible, if you will, around research citations.

Got it. And in terms of the new segmentation, I mean, I understand some of it is just for simplicity, but Academia & Government, are they 2 separate kind of line items internally when you guys look at it? Or are they co-mingled with each other?

They're fairly co-mingled. As we talk about government, we announced a deal with the government of Singapore with their large library system. It's still around primarily around libraries and bibliographic information.

Got it. And so then maybe, Jonathan Gear, if you want to touch on Life Sciences & Healthcare. I think that's probably one area where maybe most investors don't fully understand exactly what's in there, what does it do. So maybe if you could just give us a quick primer from your own perspective on how we should think about exactly what you're targeting there.

Sure. So around our Life Science & Healthcare business, again, roughly around 20% of our total revenues and market growing at a faster clip as we provide tools and data to help drug companies and life science companies identify opportunities with their solutions, with their IP and help them determine how to best realize that information. So one thing I would call out is our health care data assets. And with this, in the United States, we collect autonomized health care information for what's called real-world data. And the way I'd encourage you all to think about this is when there's data coming from drug testing, you have clinical or lab information and that's where scientists get together. They work in a lab and they test something and see what the potential results are. That's kind of bucket number one. The second bucket, real-world, is what actually is happening? How are drugs being consumed? And what's the impact on diseases in the real world? And it's incredibly powerful set of solutions there. We collect the data from health care systems in the U.S. We pull that in, been doing this for years and we have built up this system of being able to collect that data, enrich it and then work with our health care and life science customers to identify where is this drug, was maybe designed for this, but is seeing other equal opportunities in this and applying different diseases over here. So incredibly powerful, incredibly useful for our drug customers.

Got it. And maybe asked differently, like what is the competitive landscape there? Like how much of this is unique to Clarivate because that's been your faster-growth segment. And can that continue?

It's interesting. The -- I'll speak about this one specifically. The content that we collect, we're not the only ones that have it. Other people can potentially collect it. But it's similar to other businesses in the information services market where we build up the enriched data and that becomes very unique. And so over the years and years and years we have been doing this, we built up the ability to be able to collect this information, bring our data science and connect dots in ways that are not created to become proprietary at that point. So we're one of a couple -- I would say, probably 3 or 4 major players in the market that do this. Everyone comes at different angles on how to do it best. But it's really what we do with that data after we collect it is what makes it unique and proprietary.

Got it. Maybe just to move on then to the IP business. If both of you just want to touch on, again, how we should understand what all those brands in there are and what they do.

Sure. So I'll go first, you can step in, Jonathan, you can correct me. How is that? But so if you think about IP, and it's around patents and trademarks, those are the 2 key things, very heavily focused on patents. And I'll maybe just take a step back and think about the patent management process. Let's say, Manav, you have a great new idea and you want to patent it. You go to a lawyer and say, I have this idea. That lawyer first has to search and see, is that idea patentable? Is there a patent already out there? Is it protectable? Those types of things. We help in that process of the search -- upfront search around that. And that's both for law firms as well as for large intellectual property-type companies, think high-tech, pharma and things like that. They had built it in-house. You might go to a lawyer to have it done for you. Then once you get that patent in place, it has to be managed. And that patent has to be registered in multiple countries around the world. Has to be renewed every single year through multiple countries, multiple payment systems. And the process of managing that patent renewal is incredibly important because if you drop a patent, the impact to a company or individual can be massive. So then we manage that patent process, that life cycle of that patent. We are the leader in the space. And again, it's incredibly sticky because as an IP-intensive company, you have to have it and it has to be done right. And we're viewed as the ones that do stand behind the process to make sure patents are managed correctly.

Got it. And it sounds like IP and Academia & Government have probably similar growth profiles. Life Science is faster. Jonathan Collins, maybe can you talk about the margin profile? Is there any difference between the 3 businesses?

Yes. The margin profile in our existing 2 segments, Science and IP, is relatively comparable. We don't expect a meaningful difference in the margin profile when we break it out going forward. But as you noted, probably the most significant difference is the growth trajectory. The academic and government market we've indicated generally grows in the 3% to 5% range. IP is generally to the higher end of that range. And as Jonathan touched on, Life Sciences & Healthcare is certainly higher than both of those. But from a margin perspective, I'd expect them to be relatively similar, but more to come on that when we provide the margin look in the second half.

Got it. Okay. That makes sense. And Jonathan Gear, you talked about 80-20 being a good mix from subscription transaction. How about in terms of the segments? Like this 47-18-35 that you have, does that sound about right to you other than just the growth rates should stay the same?

Well, I think the growth rates will lead to a change in that proportion over time. So that, I think, is a key driver. Again, I would expect Life Science & Healthcare in the future to be a larger portion than 20% that it is right now. So that's probably the change that you'll see.

Got it. And then if you shift to geographic mix there, can you just talk about the opportunities in those regions? And maybe more specifically, Jerre sure talked a lot about APAC being a huge opportunity in your businesses. How do you look at that?

It's true. I mean if you look at our key segments that we sell into, all 3 of those segments, Asia is an important growth market for us. Interestingly enough, for those who didn't know, Australia is the leader in library science. I bet you didn't know that, Manav.

No, I didn't know that.

You can tell your wife tonight. So it is growth. And today -- APAC today is about 19%. If I look at the business like for instance coming out of China, which I think, Jonathan, you've indicated, a little less than 10% of our total business, we see lots of growth opportunities there also. So you'll see, and I think it's true for most parts of the -- of our peer group, disproportionate growth from Asia Pacific.

Got it. And in the context, your geographies, your businesses, you kind of called out some of the items, if you want to repeat those as well, in the last quarter. But just what are some of the macro impacts you're starting to see in your business? And how would you distinguish macro impacts versus like you said, maybe some execution improvement that needs to be required?

Sure. So I'll start and then Jonathan, please, again, go ahead and add. So in our Q2 call, we did take down our guidance for the year from 6.5% to 4.5% organic growth. And we called out really about $40 million is the total impact in year. And we called out 4 very -- well, I would say, 3 very distinct pieces in that. First, the impact of Russia, about $10 million as I mentioned before, that's for 50 bps. We talked about the early impact we're seeing of the slowing economy on our trademark business, again, about $10 million or 50 bps. And just a quick commentary on that. As you look at CompuMark as people registering trademarks, things like that, very much tied towards new product launches, new business activity. If you launch new products, you're going to go ahead and invest and launch and protect in the IP around that product name. So when the economies are slowing, people are investing more, we did see less of that activity. It's one piece of our business, which is probably most sensitive to what's happening in the economy and why we had a view that the recession was coming on and seeing that. And then the remaining bucket, about $20 million, was a fancy, a gut feel that Jonathan and I had entering the second half of the year given the risk of a slowing economy. And just my experience in this industry, Manav, is when economies -- when the industry slows, CFOs like Jonathan Collins around the world say, cut discretionary spending or postpone it or slow it down. And that typically impacts transactional revenue around consulting and one-off sales. So that's what we suspect that we would see. I think we are seeing that play out now kind of as we expected. So no surprise, but we're seeing that play out.

Got it. Anything to add?

From a geographic perspective, the only thing I'd highlight is we certainly have a headwind in the EMEA region where we roll up Russia. So ceasing our operations there put a little bit of pressure on that growth rate in the first half of the year. And then as Jonathan indicated, going forward, we do believe not just in the intellectual property market where there's a good growth opportunity in China, the IncoPat acquisition is a great example of where we made an investment to participate in that secular trend. But in addition, in Academia & Government, so we've got a great installed base of Web of Science in that region, great opportunity to bring the ProQuest products further and penetrate with the presence that we have there. So those are a couple of areas that I think we'll see some differences in the growth.

Got it. And so Jonathan Gear, just on this topic of guidance, it sounds like you were very involved in this next guidance. So would you characterize it more as trying to be conservative or prudent? Or how would you characterize it since you did kind of help participate in taking these numbers down?

Sure. And then going back to the July numbers that we gave in July. And I wouldn't call it conservative, I would call it as being realistic. And again, coming into this business, seeing a couple of headwinds, which were very visible to us, and again, just based on my experience on what could happen given a slowing economy and given that one of those headwinds was related to a slowing economy, feeling pretty sure that risk could be out there. So that was kind of -- I would say it's our view, Jonathan and I worked on that together, our view when we gave the second half guidance.

Got it. Okay. We have a few minutes left here. If anybody has a question in the audience, just raise your hand. Go ahead, I'll repeat it.

Today, you -- I think you spent close to $140 million [indiscernible] product portfolio [indiscernible]

So the question is around investing in the product portfolio, how much have you done so far. And what the cadence should look like.

Yes. I think the number you're referencing is about 3/4 of our annual CapEx expenditures we've indicated is on enhancing, developing and bringing new features and new products to market. This is something that we're going to touch on at the Investor Day here in a couple of months. So we're going to be a bit more specific about some of the areas that we see opportunities to accelerate investment. Certainly, with the pruning of the portfolio, we're demonstrating areas where we're likely to invest less. As Jonathan touched on, we want to allocate those resources to the areas that we think have the most strategic benefit and help -- can help drive higher growth across the entire portfolio.

Anything else? Okay. Sorry, go ahead.

When you talk about some of the series of mergers and acquisitions, so far, we've talked about the front-office applications, it sounds like Web of Science and a few others. Can you talk about investments in back-office applications that are going to have to be made to kind of keep up with the rationalization and synergies?

Sure. I'll jump into this, and again, you can add. I get really excited to talk about back office stuff. And the reason I do is I look across the set of assets we brought together. And again, a set of assets that today is normalized growing kind of mid-single digits today yet we still have so much to do. And there's so much to do. We have 6 different CRM systems. We have over 20 ERP systems, multiple order management systems and the like. And I view this in a way that this is not -- this is work we have to do, and we'll do it over time. It's a multiyear process. I went through it in my last job. At the last job, we had over 40 ERP systems. This is only 20. So it's half as easy. But it is a lift to get it done. There's going to be an investment to get that done, but what it's going to unlock when we get it done is going to be incredible, both in terms of our efficiency, in terms of the effectiveness. When I think about the sales force, right now, we have sales reps who are selling multiple historical products into a single customer. They have to log into different CRM systems to record it, different workflow solutions as they manage that process, but still growing mid-single digit. So as we fix this and as we move down the path of optimizing those back offices, it's going to unleash just the activity in our commercial teams. And it's also going to save money. Right now, that sales rep has 4 different licenses for CRMs, will go to one. So this is to me like money in the bank is how I think about it that we're going to unlock both in terms of growth and efficiency.

Okay. I guess let's just end quickly, I want to touch on capital allocation. Jonathan, you clearly said no more M&A. We just spoke about a lot of organic investments. So Jonathan Collins, maybe you can just remind us of the current leverage level. It sounds like this $300 million probably goes to deleveraging, if that's fair. And then what we should expect around that. And then in the context of your $1 billion buyback authorization that you have, and maybe, Jonathan Gear, you can step in on how you think about that as well.

Sure. So we started the year with a view that the best use of our capital is going to be to buy back the stock. And quite candidly, that remains a very attractive use. We do believe that the business is trading at a significant discount and there's tremendous opportunity as we execute in the coming quarters to improve the value. However, we are cognizant of the fact that coming out of the ProQuest acquisition, leverage levels are elevated to about 4.5% or slightly higher through the first half of the year. As that acquisition comes in and we use more of our cash flow in the second half of the year to do some deleveraging, I think we'll likely get our leverage to about 4 turns by the end of this year, including the proceeds from the MarkMonitor divestiture. And we think that's going to be an important milestone for investors in an environment where we're going to see softer economic growth in our view. The business is very resilient. We don't have any issues operating at the levels we're at, but we see an opportunity to lower that. So I think you'll see us put more of our capital there in the second half of the year compared to the original expectation of utilizing more of the share buyback. I do still believe we will execute under that authorization in time. It will probably just take us more like 3 years rather than the 2 that we initially started with.

Got it. And any closing comments? I know we're looking forward to Investor Day to get all the details there, but any just last thoughts before we wrap this up?

Maybe -- well, first, thanks for the opportunity, Manav, to come up and be with you today. It's always great to be on the stage and be with you and the Barclays team. I think maybe just to wrap up and it's a couple of closing thoughts. First, it is a great set of businesses, which are performing. We obviously relish today kind of mid-organic -- mid-single digits with a lot of upside potential. And that potential is I get extremely excited about. We, as a management team, are going to be focused on execution. That's what we need to do. That's why my comment on M&A and I told my team, don't even whisper M&A to me. We have plenty to do right now. But as we begin to execute against all the different aspects of continuing to knit these businesses together, it will unlock both future growth and efficiencies, which we'll talk about in detail at Investor Day.

Perfect. All right. Well, let's wrap it up there. Thank you, both Jonathans, and thank you, everyone, for being here as well.