Clarivate Plc (CLVT) Earnings Call Transcript & Summary

Good morning. This is Heather Balsky, BofA's business and information services analyst. I want to welcome you all to our fireside chat with Clarivate's CFO, Jonathan Collins. Jonathan, it's a pleasure to have you at our conference. Before we start, and for you guys in the audience, just in case, we will offer Q&A. If you happen to have a question, I'll pause at the 15-minute mark, and someone will have a mic. But I also have plenty of questions. So we'll get started.

So Jonathan, I wanted to start off with some context for anyone who might be new to the story. Can you give us a brief overview? I know that might be tough, but a brief overview of Clarivate and its value proposition.

Sure. You got it. Let me start by saying thank you for having me, Heather. Looking forward to it. What we do at Clarivate is we help provide intelligence that will transform the world. And the way that we think about this is we're providing a broad range of services across the entire innovation life cycle. That's all the way on in the early stages where there is knowledge and learning that's occurring. It moves through to the process of doing research and discovery around innovation. And then it ultimately moves into the process where that innovation needs to be protected, so that in its final stage, they can be commercialized or monetized. So we think about the products and services that we provide to all of our end markets as serving the broader innovation life cycle. That innovation life cycle is really what knits our 3 segments of our business together. And last week, we outlined very specifically at our Capital Markets Day how we're going to operate the business moving forward in these 3 areas, and I'll just touch on those for a second. The first is Academia & Government, heavily focused on the early stages of the life cycle and knowledge and learning and research and discovery and the development of innovation. We also serve the Life Sciences & Healthcare segment, which really spans a broader range of the full life cycle. And then finally, our Intellectual Property segment helps to protect that intelligence very specifically within the life cycle. So that's what really knits all 3 of our businesses together. And then when I think about ultimately, what the products and solutions are that we provide, we have a couple of key areas. The first is enriched data. And this is really the bedrock for all 3 of our segments. So we have editorial processes where we curate a tremendous amount of content to make it highly relevant for a number of use cases. And we build on that to provide analytics and insights. And we do this at varying levels across all 3 of our segments, but many of these are predictive but also descriptive in nature and providing high value for our customers there. The third thing we do is provide workflow solutions. So this is typically the SaaS offerings, and we help our customers become more efficient throughout different stages of the innovation life cycle. And then finally, in many cases, we go beyond all 3 of those to provide expert services to help solve some of the most complex situations at our customers with some great folks who have deep expertise in all of these areas. So that's generally the elevator story or the elevator pitch for the Clarivate business.

That's helpful. And as you mentioned, you just hosted a Capital Markets Day last week, so thank you for being here on the back of that. We've had a lot of investor days of late. It's nice to kind of be back in-person and back into that routine. A big area of focus is accelerating organic sales 6% by 2025, which is the rate your addressable market is growing. I wanted to start off with, what is your addressable market and what's been driving that 6% growth?

So we have bifurcated our broader addressable market into 2 categories. We historically talked about our total addressable market, which is well over $100 billion and we think grows at double digits. But in our analysis, particularly over the past few quarters, we've really honed in and focused in on our serviceable market. So we define that as the 4 areas that I just described within the innovation life cycle and the types of solutions that we offer that we have a product today that meets those needs. And we estimate that serviceable market, about 1/4 of the overall addressable market, so about $25 billion. And we think that segment of the market is growing at about 6%, as you noted. Over the course of the past few years, we've been growing at about 3%, pretty durably. It's bounced around a little bit, but even through the pandemic, we delivered about 3% growth. We do see an opportunity to invest in a few key areas to accelerate that growth from the 3% to the 6% over the course of the next few years.

Yes. So -- and I'm going to ask you about that a little more. But honing in on Clarivate, you talked about the 3% growth. What's your diagnosis? Why do you think you guys have been growing slower than the market?

Yes. And it's something unique in each of the segments, but the positive news is we broke down for all of our investors and external stakeholders at various levels last week that we have about 3 key areas in each of our business. And there's 1 area in each of our segments that is underperforming the market. And I think the term we've used is we had some gold standard excellent products that we let get a little bit dusty. So the innovation internally on those products lagged a little bit. And as a result, some additional offerings were brought to the market, and we've lagged a little bit in the past few years. So in each of those areas, we see a very clear path to improve. For example, in our A&G segment, it's really our research and analytics business that's lagged the market a little bit. Our flagship product here is the Web of Science. This is the largest and most prestigious bibliometric database in the world for academic research. It provides the JIF, as we call it, or the Journal Impact Factor, which is renowned around the world as the greatest way to evaluate the quality of academic research in a journal. And that product just needs some investments in its user interface and also expanding the content and the coverage. So last week, we talked about the fact that we've made a pretty meaningful investment, about a year ago, to completely reskin and provide an entirely new user interface with expanded feature functionality. We got great reception from the market. In our business, usage is the primary currency of value. Usage was up almost 80% on a monthly active basis in 2022 versus 2021. We attribute much of that to the improvements that we made in the product. So that bodes really well for the renewal cycle in 2023 and the discussions we have with customers and capturing some of that value in the form of price increases. So really encouraged what we've done there, and that's the area within A&G that we've really got to focus on. And I would say that's the one that will get the earliest traction in because the investment started a bit earlier. I think the second area within the Life Sciences business that we honed in on was the commercialization part of our business. This is where, through a combination of products and services, we help life science customers bring drugs to market and ensure that there's reimbursement and help to drive attractive economics for them. We pointed to that area that needed to be addressed. And really, there are 2 things that we need to do there. We have a great service offering via our consultancy in this category. And in order for us to grow that and improve that, we had to rebuild some capacity last year. So we acknowledged towards the end of 2021, I've called it, an own goal. We just made a mistake in integrating the business. We lost some really valuable resources there that we had to rehire last year and bring back up to speed to improve that practice. So made great progress in bringing new people on board last year in that part of the business. We think they're going to do really good things in 2023. And then the other aspect of that business is helping to integrate the solutions from our legacy products to reach a broad range of personas within commercialization. So that's taking content from Cortellis and content from our DRG reporting businesses is bringing them together to augment that offering. And then the final area that's lagged the market within IP is our patent and trademark intelligence category. So we have the best data in this part of the market. Derwent is synonymous with comprehensive coverage of the intellectual property universe, making sure that if you're going to spend money in an area, you'll be able to protect that technology. Prior art is a great example of a use case there. And just what happened is that database and its user interface got a little bit stale, and some others came in with some great applications targeted at specific users within an organization. We see a great opportunity to invest in that platform layer, to deliver some really attractive analytics or apps, if you will, for those groups to help lift that. So it's really one area within each of the 3 segments that need some additional investment that will help us get from that 3% to 6% over the course of the next few years.

I wanted to follow up on the Web of Science piece of it because something you mentioned at the Investor Day was that you're adding in another -- I think it was 9,000 journals that you're integrating into your systems. How does that enable you to target the sort of -- I don't know if it's -- sort of less research-intensive universities. I mean that's...

It's a great way to say it.

There we go. What's going on there? How does that help your strategy?

Yes, it's a great point. So Web of Science is ubiquitous at the very high end of the market. So virtually all of the top 400 research institutions in the world subscribe to the product. To your point, the growth opportunity we see is at those next 1,000 or 2,000 institutions. So one of the things that we've done here is in 2023 or this summer, the Journal Citation Reports will include an additional 9,000 journals. This really helps that conversation with those universities when we're looking to sell the product because they're going to start to see many more of their researchers being published in journals that now receive an impact factor. We're going to maintain that high quality and rigorous criteria to receive one, but there's a lot of great research that's happening at the next tier of institutions around the world. So that will really help to improve the ability to sell that product at a broader addressable market once we have the ability to expand that coverage.

And I want to talk about the midterm, but you did mention that sort of you're furthest along with the Academia & Government side. Kind of when you think about the phasing of 2023 sales, how should we think about it? What are the key drivers? And in particular, sort of how does sort of the efforts in A&G kind of help that?

Yes. So when we think throughout this calendar year, certainly, most of the improvement we expect to see within A&G. So as a reminder, A&G needs to get over the course of the next few years from 2% to 4%. The Life Sciences & Healthcare space needs to get from about 6% to 10%. And then the IP space needs to get from about 3% to 6% over that period. And most traction in 2023 will be in the A&G space because of the early investments that we made in Web of Science. When we think specifically through this calendar year, it's important to note we had some pretty tough comps in the first half of the year. I'll touch on a few things there, if you don't mind. We indicated at our earnings just a couple of weeks ago that in Q1, we really didn't expect a sequential improvement from Q4 so we had slightly positive organic growth in Q4. I actually expect us in Q1 to be about flat, maybe slightly negative. And that's a result of a couple of things, and I'll just touch on each of the segments, and then we'll give more color on the second, third and fourth quarter as we move through the year. But within the A&G segment, we don't wrap -- or we don't lap Russia being taken out of our numbers or ceasing that business until early in Q2. So that's still a bit of a headwind for us in Q1 that will keep A&G held back just a little bit. When we move to the Life Sciences space, consulting hadn't really bottomed out until we moved later in the year so we've still got headwinds on a year-over-year basis in our consulting practice. We also had a spectacular Q1 from a Real World Data sales last year. I think we're going to be more average when we look at this year's first quarter, so that will be a little bit of a headwind there. And then within the IP segment, there are really a couple of things. We really had strong trademark transactional sales in the first half of last year as we started to see some softening in the economy midway through the year. That's one part of our business that's affected by the overall economy. So those are going to be some tough comps within IP. But more importantly for the IP segment, they're actually going to see a year-over-year decline in Q1, undoubtedly, as a result of the phasing of our reoccurring order type. So this is where we had high single-digit growth on a year-over-year basis early last year because we had some timing issues and when patents were renewed. So one of the value propositions we have for our customers there is renewing patents at a time that's economically advantageous for them. So there are some pretty significant price increases coming in midway through the year that we pulled ahead some of those renewals for them. So on a full year basis, it will still deliver pretty comparable growth to what we saw last year. But early on in the year, there'll be some headwinds with higher growth in the second half. So that's kind of what I'm seeing early in the year, and then we'll give a little bit more color. There'll still be some headwinds in Q2, but certainly, we lap a lot of the tougher comps. Moving into the summer and the second half of the year, we should see higher growth.

Okay. And I guess how -- in terms of the phasing of the different turnaround efforts you guys have, you had a color-coded slide in your investor deck. That was very helpful. But I guess, first starting with A&G, just sort of -- it sounds like you expect to start to see some benefits in the back half. Is -- that's all the investments you've made? And just kind of I guess can you talk about the traction you're seeing there that gives you confidence, that gets you to that guide?

Yes, absolutely. So for us, the subscriptions are a big piece of the A&G business. So through those renewal conversations that we're having early in the year, we're encouraged by the receptivity of the investments that we've made into the products. We announced a pretty exciting software win in Asia within the workflow solutions part of the business. So we're providing the backbone of the library system in the country of Singapore. That's going to be moving through implementation this year. There'll be some meaningful professional services revenues that we'll recognize that will roll into the subscription base later in the year. So we have pretty good line of sight into that part of the business, improving as we move through the year, and again, as we lap the comparison with Russia early in the year, as that works out on a year-over-year basis, that will help as well too. We've indicated though in the other 2 segments that a lot of the investments that we've made and the improvements are going to take a bit more time. They're product focused. So when we think about the investments that we're making in product innovation within Life Sciences & Healthcare, the building of the platform for our Real World Data offering and those analytics is happening now. We talked about the fact that we're going to launch the first prepackaged analytics that sell on that platform. Later this year, I really expect that to drive revenue improvement into 2024 and then as we launch more next year into 2025. Within the IP segment, it's pretty similar to that with what we're seeing on the patent intelligence or both, patent and trademark intelligence. We're going to make some pretty significant investments in Derwent this year and building out that platform layer. Expect us to start being able to sell that product late this year, early next year, and start to see some traction into 2024 and into '25. But certainly, some of the improvement is going to be front-loaded for A&G due to the timing of the investments. But we'll start to see more traction in the other 2 segments as we move into next year.

That's helpful. There's also an opportunity -- the company did a couple of M&A transactions in the past few years, and you talked about opportunities start to realize M&A synergies. What are the opportunities you're excited about when you talk about that?

Yes, absolutely. So just as a reminder of how the company was built up. We highlighted this last week as well, too. The company started through the acquisition of effectively what was Thomson Scientific. So this gave us those key marquee products within all 3 of the segments that we now serve as Web of Science, was the bedrock for A&G. It was Cortellis for Life Sciences & Healthcare, and then it was a combination of Derwent and CompuMark that served both patents and trademarks for the IP space. And then on that, we did an acquisition in each of those areas to build scale and end-to-end capabilities. The first of those was DRG, which gave us that broader capability across all aspects of the life cycle in Life Sciences. The next was CPA Global, which brought us not only software but also services capabilities in supporting IP. And then the final one closed a little over a year ago, it was ProQuest on the A&G side. In terms of synergies over that period, we've taken about $300 million of cost out of the business. So that lifted margins from about 30% up to the low 40s where we are today, so 1,200 basis points of margin expansion. So great job bringing together that similar areas that we serve to help improve the margin profile of the business. I would say going forward, the cost synergies are largely behind us. We'll get the last $40-plus million this year that will roll through the P&L on a comparative basis. But it's really the top line things that we're doing. I'll give a couple of examples from A&G that we're particularly excited about. One of them we talked about last week on Web of Science is taking the entire content of Web of Science and including it in our web-scale discovery index. So this takes all that great information on linking of research, all the analytics, and helps make that discoverable in the virtual front door to the library that researchers use to start their process. So that's an integration that we can do now that we didn't have available to us prior to the acquisition. A second one that's going to come in later this year is where we take our great collection of dissertations and theses. So we have the world's largest database for that unique content that we deliver in the marketplace and embedding that in Web of Science. So when you're researching on a topic, looking for what's out there, you can go to some of the seminal work for many of these authors when they published their dissertation or their theses depending on where they were in the world. So another great example of integrating that content to create a better experience for the user or for the researcher in there. A great example of those in Life Sciences & Healthcare. We talked last week a bit about the opportunity to take content from Cortellis and DRG, bring those together around a subject matter area that's specific for work that's being done in those companies throughout the innovation life cycle. So a couple of examples like that, that we're pretty excited about.

That's helpful. I wanted to touch on the transactional side of your business because it was volatile in 2022. And you talked earlier about the consulting side and building that back up. But I was hoping you could kind of -- well, let's take a step back. What are your bigger businesses or kind of revenue flows that are included in transactional sales?

Yes. Maybe I'll run through it through each of the segments. So within the Academic business, a lot of what is sold as a transaction would be discrete collections. So as a library is building out their digital collection, we provide a lot of great content to help build out collections. The second piece would be the individual title sales of monograph. So where we're distributing the front file of electronic books and, to a much lesser extent, print books. That's what you would see in that transaction type. Within the Life Sciences & Healthcare space, you hit on one of the large ones, which is our consulting practice that's treated as transactional revenue. But in addition to that, a lot of our direct data sales, so the Real World Data that we sell, today, is largely sold as a transactional revenue. And it makes up a larger proportion of the Life Sciences business because those are 2 pretty important types. And then there are reports that we provide on a transactional basis, and there's some reporting we do that's recurring in nature. Within the IP space, there are a couple of things there. A lot of the -- so we have our reoccurring order type for our patent renewals. But we also have the transactional type search and watch services that we do and specific services projects that we'll provide for customers. So that's really what makes each of those up within the segments. That tends to be a part of our business that is a bit more volatile. Last year, we really saw it in 3 areas. And it was mostly in Life Sciences and IP. So within Life Sciences, as we touched on, the consulting was softer. Certainly, some of that was on us and then we certainly saw a little bit of softening in the market in the back half of last year. And then the data sales tend to be a bit lumpy. So we did really well in the first half of the year, Q1 and Q2 were exceptional. The third and fourth quarters were decent, but you saw some volatility quarter-to-quarter. On the IP side, really what drove the transactional difference last year was our trademark business. So I highlighted that a lot of the search and watch services and filing services that we have there were softer in the second half of the year as companies tended to pull back a little bit on investment with the uncertainty around the macro environment.

And your -- you know what, actually before I ask you about 2023, I'm going to ask you another question because I thought this was really helpful when we've talked previously, which is Real World Data that came up, it's one of your -- what is that? How do you define that?

It's a great point. We use the term, we probably should define it more often. So this is very specific information around electronic patient records and claims data that's pulled together, it's editorially enriched and created in a way that it can provide real-world evidence. So it goes beyond the traditional clinical information and says, this is how therapeutics are affecting outcomes in the real world. So great growing area. We've got over 300 million unique records in this category that we're delivering up. And this is the part of the business that we're making a pretty meaningful investment and to create an attractive platform that our customers in the space and their data science teams can use prepackaged analytics so they don't have to start from scratch every time. And we'll build out a couple of these specific examples in the coming quarters that we'll launch that will help make that a more recurring basis. So people will be able to subscribe to the platform and be inside of that and buy the data they need to provide the analytics that they're looking for, for whatever use case they may have in a specific area.

But even without your goal or sort of how you guided over the next few years, you expect transactional sales to kind of remain fairly steady as a percentage of your...

Yes, we think the mix will be pretty close. We're at almost 80-20 on a reoccurring and purely transactional type. I still think it will be pretty close to that in a couple of years, but there are a handful of areas where we're going to start to really lay the foundation for creating more sticky and recurring revenue types as we make the investments in these platforms.

Got it. And so then that brings me to this coming year. I think your guidance kind of assumes transactional sales growth in 2023, well, that grows. And so what's supporting that improvement?

Yes. As we touched on last year, the headwinds, so transactional sales declined slightly. The factors were the consultancy within Life Sciences & Healthcare, the trademark business within the IP side were 2 of the leading areas. We do expect that both of those areas will do better this year. So the consultancy is not going to get back to where it was in 2021 per se, but we expect to start to make some progress. I think there's a little bit of caution on our part about the overall macro and some of the discretion on those services. The trademark side, we'll have some tough comps in the first half of the year. But as we lap those, typically, the impact we see in that business is it's soft, anywhere between 4 to 5 quarters. So we expect to see a little bit of improvement towards the end of this year. But those are a couple of the areas that give us confidence that moving into this year, we'll do a bit better on the transactional side. And then, of course, we're encouraged by the strong subscription growth we saw last year. We think we have some room for improvement in subscriptions, particularly in A&G, given the investments that we've made in Web of Science, improvements in the renewal rate, some acceleration of new subscription sales as we reach those research institutions that are not the top 400, being able to have a higher penetration there.

Got it. Got it. We're at the point where I wanted to just check to see if any of you guys had any questions. Otherwise, I'll keep going on my list. Okay. If you change your mind, raise your hand. We've got mics. So at the Investor Day, you talked about making changes to the sales organization over the last 12 to 18 months. Can you elaborate what were these changes? Because there's been a fair number of change over the last longer time period last few years. And how do you think they better position you for sales growth?

Yes, this definitely came up last week, and it's one of the areas that we feel really good about the momentum that we've brought into this year. So we made a meaningful investment in a couple of areas. One that's most notable and that started first is our inside sales team. So in our business, we have a long list of customers. And if you have a field territory, let's say, that has 80 to 100 customers in it, what tends to happen is the rep covering that territory is going to focus on the top 10 to 15 customers that make up the vast majority of sales there. And we see most of our cancellations and customer attrition in that longer tail, that next 70 to 80 customers. Bringing in an inside sales force creates a personal connection with many of those customers, which really helps us at the renewal time, great opportunity to package and upsell through the renewal cycle. So we made that investment late in 2021. We saw some improvement in the smaller tier or smaller customers, the lowest tier, and we expect to see further improvements in 2023 from that. So really encouraged by all of Clarivate's customers starting to get a touch from the go-to-market organization. We expect that to continue to help renewals and help some upselling on new subscriptions and even some transactional products. The second area is really our focus on bringing the integration of the acquisition so that our account managers that are calling on a customer can bring to bear the full relevant portfolio of products from Clarivate to that customer. So we shared a great example last week of a top 5 pharma company that's buying from all 3 of our segments now. That's seen double-digit growth over the course of the last couple of years as we've introduced products like Web of Science in the academic market that are highly relevant for the research groups within the organization, all the way through to the traditional Cortellis and DRG products and consulting for that market. But then also the IP product, so the software and the services that we offer to help them protect their innovation that they've -- that they're bringing to the market. So a great example there of what that new account management model does. And there's a lot of work that the team did and we made great progress last year on team selling. So having that account manager lead the account but bringing in those relevant product specialists for the more complicated products to deliver those sales. So that motion is going very well. We're really pleased with the progress there. And both the inside sales and the account management model are going to help drive better execution throughout 2023.

That's helpful. And so moving along the P&L, you also guided to your 50-ish basis points of annual margin expansion. You're also reinvesting back into the business. And this year, you've got margins. There's a lot of benefits coming from the ProQuest synergies, you talked about those. When you think about 2024 and 2025, what's driving that margin expansion?

I think we've tried to point to a bit of a construct where when organic growth is sub-4% when you're already at 40% margins, it's tough to expand margins. So we generally set the expectations that until we accelerate growth kind of in the 4% to 5% range, we're not going to drive margin expansions from organic growth. As you noted, what's unique about this year is we have the follow-on of the second year of the ProQuest cost synergies that are really helping to drive this year's margin expansion. As we look to next year, we expect to kind of be in that 4% to 5% range for organic growth, so you'll start to see some margin expansion. I think for our type of business, you typically expect it to be more than 50 basis points. But as you note, we're very committed to making investments over the course of the next couple of years to make sure that we drive the innovation required to accelerate growth in some of these key product areas. So as we look to next year and beyond, including this year, we think we're probably going to spend between about $100 million to $150 million of incremental operating and capital expenditures over that 3-year period to help accelerate the growth from where we are today. And it's really going to be focused on those 3 areas that I highlighted earlier, but also some interesting white space that we want to move into outside of our current serviceable market. And we touched on a few of those last week. We've got a great opportunity to expand our content sets in academia for non-English-speaking first countries around the world. So that's a great opportunity for us within A&G. Workflow solutions within the Life Sciences space is a really interesting spot for us. So we are very much a scaled player in SaaS within Academia and within IP. We have Alma, it is our flagship product in Academia. We have products like IPfolio, which provide that broad workflow capability in IP. We have a couple of early solutions in Life Sciences that we plan to bring to market in the coming years. ClaRITA, which helps with regulatory compliance. And then we also have Drug Safety Triager, which is a product that helps to manage the workflow for pharmacovigilance, that process of making sure that any adverse impact that a drug may have in the market is reported in a very timely fashion. So that's a really exciting area for us in that space. And then finally, we touched on a little bit of white space growth opportunity in an area we can invest in IP through our Connect solution, and this is where we bring together and help to connect, name of the product, the broader ecosystem and ultimately get to the point where we can help to process payments in this category. So great opportunity to expand our capabilities. So those are the types of things that we'll be investing in, in the next few years. And that's going to keep our margins kind of at the about 50 bps on average of expansion. But we did indicate that beyond that, once we get past the next few years and we get that organic growth engine moving in the right direction and get into the mid-single digits, we can do better than 50 bps. But we'll look to that -- to give some guidance on that over the next few years.

And the spend you guys are planning, the investment, about $80 million or so, is in OpEx, the rest is CapEx?

Yes. We didn't give the breakdown. We did indicate that most of the increase that we're seeing in CapEx over the period is going to be to drive innovations. You can kind of back into a bit of a split there. But there will be a balance, and we'll use some -- we'll have some flexibility there. But a lot of the things that we'll do in the product will be manifested in product development that can be capitalized and will show up there, but there'll be a balance.

Got it. Got it. And then I want to kind of just kind of finish off with free cash flow on the balance sheet. So the company is poised for meaningful cash flow improvement after 2022 because you had all the integration cost around ProQuest. What are your priorities when it comes to allocating that cash?

Yes. You touched on a really key point for the Clarivate story. Over the past few years, the majority of our cash flow has gone to integrate these acquisitions and deliver that $300 million of cost synergies. We think it generated great returns. We spent almost [ $0.5 billion ] on the acquisition and integration, onetime cost over that period, and it generated about $300 million a year in cost savings that lifted our margins. As we move forward, we're going to take most of our investment focus and move it towards product innovation, hence that $100 million to $150 million number we provided. But that means this year, we expect to generate about $0.5 billion of free cash flow. So we have our preferred stock that we'll pay a dividend on, but the balance of that, over $400 million, will be used to delever this year is what we expect. So in the near term, we want to bring our leverage down below 4 turns, approaching kind of the mid-3s. And then as we look to next year and the following, it gives us an opportunity to reenter M&A where it makes sense, where we can find accretive transactions that can help to improve our competitive position, in some cases, maybe accelerate some of the initiatives that we're looking to drive organic growth. That could be a great opportunity. And of course, being able to buy back stock will be available to us. We've got a large authorization that we will be able to use, and that's something that we'll have the option for. So in the near term, heavily focused on delevering. And then as we move to next year and beyond, we'll be able to be a bit more balanced, the combination of delevering and then potentially some buybacks and M&A as well.

So if you think M&A -- and I realize it focuses on debt, but when you think M&A and the potential for a tuck-in, where are you guys focused? Like what are your priorities? What's appealing to you?

Yes. I mean we are -- we definitely have built great scale in A&G and IP. So for the first time last week, we highlighted what the serviceable market was for each of our segments. So you can infer from that, that we're a pretty significant scaled player in both of those. Lots of players in life sciences and we have a smaller position in our largest market. So that's certainly an area where we could look to continue to build scale and capability. But I think we're going to be very thoughtful about the specific types of M&A transactions. And this will, of course, be next year. We're not going to spend any time on it this year. But next year, looking for things that will help accelerate some of these areas that we want to grow in and give us a better competitive position. So it will be smaller tuck-in, bolt-on type things that we'll likely start looking towards next year. But that's the lens through which we'll view it.

Got it. All right. Well, great. Thank you so much for your time. We appreciate having you.

So we're done?

Yes.