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Good morning, and welcome to Clarivate Q2 2021 Earnings Release Conference Call. [Operator Instructions] Please note, this event is being recorded. I would like to turn the conference over to Mark Donohue, Vice President and Investor Relations. Please go ahead.
Thank you, and good morning, everyone. Thank you for joining us for the Clarivate Second Quarter 2021 Earnings Conference Call. With me today are Jerre Stead, Executive Chairman and Chief Executive Officer; Richard Hanks, Chief Financial Officer; Mukhtar Ahmed, President, Science Group; and Gordon Samson, President, IP Group. All will be available to take your questions on conclusion of the prepared remarks. As a reminder, this conference call is being recorded and webcast and is a copyrighted property of Clarivate. Any rebroadcast of this information in whole or in part without prior written consent of Clarivate is prohibited. This morning, Clarivate issued a press release announcing our financial results for the period ended June 30, 2021. The release as well as an accompanying supplemental presentation is available in the Investor Relations section of the company's website, clarivate.com, under Events and Presentations. During our call, we may make certain forward-looking statements within the meaning of applicable securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the business or developments in Clarivate's industry to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Information about the factors that could cause our actual results to differ materially from anticipated results or performance can be found in Clarivate's filings with the SEC and on the company's website. Our discussion will include non-GAAP measures or adjusted numbers, including adjusted revenue and adjusted EBITDA. Clarivate believes non-GAAP results are useful in order to enhance an understanding of our ongoing operating performance, but they are supplement to and should not be considered in isolation from or as a substitute for GAAP financial measures. Reconciliation of these measures to GAAP measures are available in our earnings release and supplemental presentation on our website. After our prepared remarks, we'll open the call up to your questions. With that, it's my pleasure to turn the call over to Jerre.
Thank you, Mark, and thanks to all of you for joining us this morning. We had a very busy, eventful and exciting first half of the year. I am very proud of what our team has accomplished. In addition to the positive financial results, we are well ahead of schedule on the integration of CPA Global. We've identified an additional $25 million in cost synergies, taking the CPA program to $100 million, which we will deliver. Our track record of success with quickly integrating acquisitions gives us the confidence and bandwidth to do more M&A. This certainly includes the proposed acquisition of ProQuest, an acquisition we are very excited about. We've also made excellent progress in our customer account transition to inside sales and the global business centers. And we launched several new and enhanced product offerings, including a new Web of Science platform. We also completed our first colleague engagement and customer delight surveys for 2021 and issued our first-ever annual sustainability report. My colleagues continue to be highly energized in our pursuit to be the best information service companies and one of the very best places to work in the world. Turning now to our second quarter results. Adjusted revenue for the second quarter was up 57% to $447 million on a constant currency basis, driven by the acquisition of CPA Global and organic revenue growth of 5%. Organic transactional revenue increased 16%, and organic subscription revenue increased 1.5% in constant currency. As we have consistently said, we expected subscription growth to be lighter in this year's second quarter after a strong first quarter. Our first quarter increased 6% due to the timing benefits that were realized in this year's first quarter. For the first 6 months, adjusted organic revenue increased 6%, which is a better reflection on our performance and normalizes COVID-related events in 2020. As a result of the favorable first half, we've tightened the range of our 2021 outlook. We currently expect to exit the fourth quarter with organic revenue growth towards the upper end of our 6% to 8% organic growth target. For the second quarter, adjusted EBITDA was $189 million, up $89 million from the prior period. Our adjusted EBITDA margin continues to improve at 42% compared to the 36% in last year's second quarter. We also delivered strong adjusted free cash flow in the second quarter of $95 million and $259 million for the first half of this year, both up more than 100% over last year's periods. Richard will cover our results in more detail soon. In May, we were pleased to announce our proposed acquisition of ProQuest, which we continue to be very excited about. The combination will enrich our value chain across research life cycle with solutions across content, analytics and workflows. With our highly complementary products, we will be in an even better position to serve the evolving needs of researchers, learners and innovators in academia, governments, corporations, schools and libraries around the world. This proposed acquisition will strengthen Clarivate's revenue and EBITDA growth, and we anticipate it will further enhance our subscription and reoccurring revenue base. Additionally, we expect this transaction to result in double-digit accretion to Clarivate's earnings. Late yesterday, we received a second request from the FTC in order to help them analyze this transaction. We are cooperating with them fully. We remain confident that after conclusion of this process, antitrust concern should not interfere with our acquisition of ProQuest in any significant way. We're hopeful we can complete the proposed acquisition in the second half of this year. Since acquiring CPA Global 10 months ago, our team has swiftly brought our 2 organizations together. We are more than 4 months ahead of schedule and have identified, as I mentioned earlier, an additional $25 million of cost synergies. Therefore, we will deliver $100 million of savings compared to our original estimate of $75 million. The majority of the additional savings is coming from facilities' rationalization and our digital workforce transformation project. As I said before, we've made great progress in our customer accounts transition into inside sales and global business centers. We're nearing completion of the first phase with 80% of accounts, 20% of our revenue being served by these centers, including DRG and CPA Global customers. Our plan is to continue to expand this capability, leading to higher sales and leading to client retention rates improvement. In April, we launched One Clarivate, a critical shift of our strategy. We're transforming from being a collection of distinct market-leading products and services to becoming a key partner to our customers by delivering their critical data, insights and workflow solutions, coupled with very deep domain expertise that our customers need to drive their innovations and their businesses with confidence. With our customer-focused -- facing activities focused on 5 industries or customer segment, we're now training our colleagues and sales on these segments. For example, understanding the industry dynamics, the subsegments and key organizations. We're teaching our sales folks to gain better understanding of the roles and responsibility of our users, our customers and their customers, helping us to build further credibility as a trusted adviser. Importantly, the combination of the move to inside sales and our One Clarivate strategy is expected to help push our retention rates higher. To lead our transition to One Clarivate across all sales, we welcome our Chief Revenue Officer, Steen Lomholt-Thomsen, who will join Clarivate starting August 2. In his new role at our company, Steen will be responsible for driving global revenue and customer engagement. He will align our sales teams under his leadership, ensuring that we pursue a One Clarivate approach for new business and with our existing customers. In May, we completed our first of 2 colleague engagement and customer delight surveys this year -- for this year. We're in pursuit of becoming and being recognized as one of the best places to work in the world. To get there, it is essential that we regularly listen to and act on our colleagues' feedback. One of our core values is we value every voice. We had terrific survey participation of 88% and more than 6,000 writing comments. I personally read, as our leadership team has, every comment, and they're very helpful for us. As you can see, we have a highly engaged workplace, for which I'm very thankful of. This past year has taken a toll on each of us in dealing with the pandemic in both our personal and professional lives. Julie Wilson, our new Chief People Officer, joined us in April, is working with her team and many leaders across our organization in developing new options and ideas to promote and enhance our colleagues' well-being and work-life balance. I look forward to sharing our progress with you. Our Customer Delight score in the recent survey came in at 75 as compared to our score of 76 for 2020. But last year brought many unique challenges, such as the global pandemic, along with economic fluctuations and societal unrest to name just a few. Comparing our score across other industries, we saw a 1- to 3-point decrease worldwide, which means our results are at the very top of the global trends. We did see a number of positive developments, including a higher proportion of positive writing comments versus opportunity areas. We also received strong scores for quality of products and services and information and insights. Additionally, we're very pleased to see DRG's delight score improved 5 points under our ownership. We will run a second colleague and customer survey in the fall, and we'll share those results with you at our November 9 virtual Investor Day. Turning to our 2021 outlook. We are tightening our revenue and adjusted EBITDA guidance because of the strong first half. Let me give you a bit of color to frame how we see the second half of this year. Organic revenue in the first half was up almost 6%. We currently expect to deliver 6.5% to 7% plus in the second half of this year, with a big pickup in fourth quarter compared to the second and third quarters. What's driving the increase? As an important reminder, 60% of DRG's business comes in the second half of the year, with 60% of this in the fourth quarter. We will also benefit from a full quarter of organic growth from CPA Global in the fourth quarter and realize the benefits of the cost synergies that will drive significant margin expansion in the fourth quarter. Additionally, transactional revenue is seasonally strongest in the fourth quarter. These items together will drive our organic growth rate into the upper end of our 6% to 8% target rate exiting 2021. Taking all of this into account, adjusted revenue guidance is now $1.8 billion to $1.84 billion. Adjusted EBITDA is now $795 million through the top at $825 million. Adjusted EPS is now expected to be $0.70 to $0.74. This is due to a higher fully diluted weighted average score count for 2021 as a result of our June primary and convertible share offerings with proceeds, which are intended to be used to fund the proposed acquisition of ProQuest. There is no change to our adjusted free cash flow of $450 million to $500 million. I'll now turn the call over to Richard.
Thank you, Jerre. Our adjusted revenues for the second quarter were $447 million, an increase of $170 million or 57% at constant currency compared to last year's same period. The increase was primarily driven by the acquisition of CPA Global last October and a 5% increase in organic revenue at constant currency. The gain was partially offset by the Techstreet disposal last November. For the second quarter, the foreign exchange impact on revenues was a very favorable 4.3% due to the continued weakness of the U.S. dollar as compared to last year's second quarter. Subscription revenue was $244 million, an increase of 8% at constant currency, primarily driven by acquisitions and partially offset by divested products. Second quarter organic subscription revenue growth was about 1.5% at constant currency. Organic subscription growth in the second quarter was primarily impacted by timing, which we benefited from in this year's first quarter when we delivered an increase in organic subscription revenues of 6%. For the first 6 months of 2021, organic subscription growth increased 4% at constant currency. The subscription revenue renewal rate at the end of the second quarter was 91%, down less than 2% from last year's second quarter. Approximately half of the decline can be attributed to an IP customer cancellation. We're obviously disappointed any time a customer cancels, but we are optimistic that we'll be able to serve this particular client through other channels, including on a transactional and services basis. ACV growth at constant currency was 8% for the second quarter as compared to the same period prior year, which includes acquisitions. On an organic basis, ongoing ACV increased just over 2% at constant currency. Transactional revenue was $90 million, an increase of 49% year-on-year on a constant currency basis, primarily driven by our acquisitions but also organic growth. Organic transactional revenues increased by $10 million or 16% at constant currency due to strength in our professional services business, which increased 11%, including a strong performance from HDS, our Healthcare and Data Solutions unit, previously known as DRG; and an increase in trademark search volumes in CompuMark. We continue to see a nice recovery in this segment of our business with transactional revenues increasing 13% on a constant currency basis for the first 6 months of 2021. We're seeing a subtle shift in the growth profile of transactional business compared to subscriptions, with transactional revenue growing at a faster rate, and we believe this is sustainable. The increase is primarily across health data services and the life sciences segment. We serve many of the largest customers within the health care space, including the top 50 life sciences companies. We have established senior relationships and transact on a repeat basis with this marquee client base. Reoccurring revenue, which is derived from the CPA Global patent renewals business, was $114 million in the second quarter, with no figure for the comparative period as the CPA business was acquired in October 2020. Subscription plus reoccurring revenue accounted for 80% of adjusted revenues in the second quarter, demonstrating our highly predictable and reliable revenue model. Turning to the business segments. Organic revenue growth within the science group for the second quarter increased by 5% or $10 million, driven by strong transactional revenue growth due to strength in professional services and backfile and customer -- custom data sales. The IP group second quarter organic revenue increased by 3% or $3 million on a constant currency basis, primarily due to an increase in transactional revenue from improved trademark search volumes. Geographically, organic revenue growth in the Americas for the second quarter was almost 9% at constant currency, primarily driven by the strength in transactional revenue. For both EMEA and Asia Pacific regions, organic revenue growth in the second quarter grew less than 1%, with these regions favorably impacted by the timing benefit of a 7% increase in each region in this year's first quarter. The customer cancellation in the IP group also impacted the lower growth rate for Asia in the second quarter. Adjusted EBITDA in the second quarter increased by $89 million to $189 million, driven by contributions from acquisitions, organic revenue growth and strong margin flow-through and the benefit of the cost-saving initiatives. Adjusted EBITDA margin once again improved up to 42% for the second quarter, up 610 basis points versus prior year. Cash taxes in the second quarter were $10 million compared to $3 million in the prior year period. The increase in cash taxes this quarter was due to the addition of CPA Global and lower tax payments in last year's second quarter as a result of the COVID pandemic, whereby U.S. Federal estimated tax payments were deferred until July 15. Adjusted net income increased by $41 million to $110 million for the second quarter while adjusted EPS declined by $0.01 to $0.17 compared to the prior year period. The decline is due to the significant increase in weighted average ordinary shares, which increased by 247 million shares, primarily related to the ordinary share issuance for the CPA Global acquisition in October 2020. Capital expenditures in the second quarter were $29 million, a decrease of $4 million compared to the prior year period, primarily due to additional COVID-related IT equipment spend in last year's second quarter as compared to this year's quarter. Adjusted free cash flow was $95 million in the second quarter, an increase of $54 million compared to the prior year period, driven by the strong operating results and an improvement in working capital. For the first 6 months of 2021, adjusted free cash flow was very strong at $259 million, an increase of $139 million over the prior year period. We ended the June 30, 2021, period with $2.6 billion of cash in hand, an increase of $2.3 billion from the prior year period. This is primarily a result of the $2 billion equity offering in June to fund the proposed acquisition of ProQuest. Additionally, we added $2 billion of restricted cash in the second quarter. This represents the cash in escrow from the June debt offering of $2 billion, with proceeds also targeted for the acquisition of ProQuest. The recent debt offering is shown as a current liability on our balance sheet until we close the proposed acquisition. With that, I'll now turn the call back to Jerre.
Thank you, Richard. In conclusion, the first half was a really great start for us this year, and we're eager to deliver even better results and achievements in the second half. Again, I want to thank all of our colleagues from around the world, who continue to do great things every day. We're now ready to take your questions. [Operator Instructions] Operator, please.
[Operator Instructions] The first question is from Toni Kaplan with Morgan Stanley.
Just wanted to delve a little bit more into the science organic growth. You grew 5% this quarter there. And embedded in that, you have DRG, which is growth-accretive. So is that implying the legacy business is growing roughly around, let's say, 4% and, mostly, all from pricing? Just wanted to understand the different pieces going on within science.
A great question, Toni. Richard will start, and Mukhtar will pick up on it. Good question. Thanks.
We acquired in February 2020 the DRG business, which we've now renamed HDS. As you can see from the 10-Q that we filed premarket, HDS grew 18% in the second quarter. It is a faster-growing asset in that very attractive life sciences space. In the second quarter, the other elements of web of -- the other elements of the science group, being Web of Science, in particular, didn't have the same level of growth that we generated in the first quarter, principally due to timing, because we obviously renewed our subscription base on a more timely basis in Q1 as compared to prior year. So there was a lag effect into the second quarter. But all in, we're very satisfied with the Science Product Group performance. And as you said, 5% growth for the quarter, impressive results. And most importantly, the pipeline for the life sciences business is looking particularly strong for the second half of the year.
Once we get Mukhtar off of mute, we'll have him comment, too. But let's go ahead to the next question. Toni, thanks so much.
The next question comes from George Tong with Goldman Sachs.
You touched on progress with transitioning to inside sales and new product launches made in the quarter such as the new Web of Science platform. Can you elaborate on these areas and other initiatives that you're working on that should help accelerate organic constant currency revenue growth over the remainder of this year and to the high single-digit range over the long term?
Yes, great question. And Richard, pick it up. We were talking about it just before the call this morning.
So I think that structurally, the transition to One Clarivate and the focus on the 5 industry segments or customer segments that Jerre referenced earlier will ensure that our sales organization is really attuned to supporting our clients in those particular verticals and being a truly value-added solutions provider, number one. Number two, as we focus on price realization as we look into 2022, Jerre, Mukhtar, Gordon and myself have reviewed our pricing algorithms for next year. And we're very confident that we will realize plus 4% across the portfolio next year. The transition to inside sales, structurally very important. We are moving approximately -- we've moved approximately 25,000 client accounts into inside sales in our 3 global business centers: Chandler, Arizona; London/Belgrade for EMEA; and then Penang, Malaysia. That will generate a stronger interface with our clients, particularly in the long tail, which will drive improved retention rates. So those final pieces would then include professional services, particularly in the life sciences space. We also see some really attractive opportunities in IP. So I think professional services, which we've spoken on previous calls, not just being important transactional growth for us but also giving a vehicle for us to sell subscription products in -- behind it is a really important interaction we have with our clients. So those would be some of the elements that we have that support second half growth, but also our expectations with respect to organic growth in 2022.
Which we'll talk more about at our November 9 virtual conference. Mukhtar, go back and pick up, if you would, Toni's question and anything you'd like to add to George's, too.
Sure, happy to do so. I mean, I think, Richard just touched on most of the important elements here. But the key thing here is we continue to invest in our products. We continue to invest in our world-class data assets. And we've released a number of new versions of our products, particularly the new Web of Science platform, which really enhances the personalized experience here for both researchers and research practitioners. And I think this in combination to some of the investments that we're making in the life sciences, discovery, in preclinical and pre-approval stage, I think all of those will pay dividend here is -- as we roll those out and drive adoption in our long-standing customer bases. So we would expect -- we expect to see some good growth there in the remainder of the year, and certainly, going into next year.
Thanks, Mukhtar. Gordon, just pick up, if you would, on the efforts that are underway with you and Mukhtar of the consulting, if you will, professional services, as we bring that into IP.
Sure. Thanks, Jerre. Mukhtar and I are looking across the organization to see where we have both strength and depth and capability, looking to see where we can look at those market verticals where we deeply understand the client requirements, and pull together both the consulting and professional services group that's focused on client solutions. I think to quote Mukhtar from the past, professional services sells products, and that's absolutely true. And I think we have a much greater opportunity across the IP and science business by acting as one in that space in both consulting and in professional services. So I'm pretty excited about that, Jerre.
Thanks, Gordon. Just one other quick comment, we'll go to the next question, please. We talked about the 5 global markets that we're going head -- forced with, that steam will be already off and running. It's $102 billion total market potential for us through those 5. Two of the largest are where we're strong today at $26 billion and $33 billion, faster-growing. So that makes it a very exciting step forward. Great question, George. Thank you.
The next question is from Manav Patnaik with Barclays.
I was just hoping you could just refresh us with the cadence of growth that we've seen at DRG and CPA versus last year, because I know they both were impacted, obviously, by COVID. And obviously, the acceleration is the reason for your kind of fourth quarter optimism as well. So I was just hoping that 18% you talked about for DRG, I guess, how has that changed? And then maybe something similar for CPA.
That's a great question. I'll have Gordon comment on CPA in a minute. We're delighted with him leading IP with his years of experience from CPA. But Mukhtar gets the joy of sharing the great progress that we've made with DRG and where we're at and where we'll go in the second half. Mukhtar?
Sure. I mean, last year, of course, we were in the throes of the pandemic. And I think we also -- many of the economies kind of slowed down and shut down. Their decision-making was deferred to a large extent. So with DRG, what we saw was low single-digit growth last year. And this year, our growth has been certainly in line to the industry, a lot of demand certainly in the post-approval space. And as a consequence of that, our real-world solutions, particularly in that health care space, have performed extremely well, and we expect those to continue to do so. And then the other area is really in the medical technology space. That market is certainly quite buoyant. So we've had really good success there. And again, the growth there is in line to what we're seeing by way of market dynamics, and also in response to just customer demand here. And as I said earlier, this also revolves around the investments that we've made in terms of enriching the analytics, the experience, the data and, ultimately, the value that we're creating through our assets for our customers.
So great start, much more to come. Please, Gordon, on CPA.
Thanks, Jerre. Thanks, Mukhtar. So on CPA, a similar story during the COVID-intensive period, where there were impacts on some of the transactional business, which, of course, is the smaller part of the legacy CPA business, and some impact by pruning our portfolio, so reducing some portfolio numbers in the core annuities business. Those factors have changed as we've been emerging from COVID. We've seen a very strong performance so far this year. We expect CPA coming towards the end of this year to be in the historic growth range that you've seen before, in the 5%, 6% range. And the other thing which is making that feel good is we're focusing on integrations between products. So not just with CPA, but with Clarivate and CPA, where the combination of our products gives us a much greater opportunity to penetrate new parts of the market. So those 2 dynamics together make you feel good about legacy CPA performance, but more importantly, positive about the IP group performance in H2.
Thank you. Thanks, Manav. Just I'd add one thing to that because what we've tried to point out is that fourth quarter is the way this model plays out, our strongest quarter will be. That's why we've got the high confidence in ending -- exiting 2021 at the upper end of the 6% to 8% organic. We're tracking that by the day, and confidence increases each day. And then the other thing I'd just add is that as we leave 2021 into 2022, the changes that we are making, particularly when you think about the inside sales and all the efforts there, we'll see that reflected in Q1 and Q2 as a large percentage of our renewals, particularly on the very long tail that we have of smaller customers comes up. That's where the weakness has been historically. And that's why we're so pleased with the progress on inside sales. Thanks, Manav.
The next question is from Shlomo Rosenbaum with Stifel.
I noticed there's a change in kind of the 1 half, 2 half fallout of the EBITDA. It was supposed to be at 42-58. It is now moving to 44-56. Is there something changing operationally in the business that's making it that you're having more of the EBITDA in the first half of the year than expected? Or is there just some kind of timing issues that are happening? I'm trying to understand, because like the strong EBITDA in the quarter, it implies a little bit on the forward basis that maybe things would go down a little bit. I'm trying to understand if there's a pull forward or a shift or just what the dynamics are there.
No, great question. Just as a refresher, in my script, I said you should think about it. This is as close in my 42 -- soon to be 42 years leading public companies I've ever gotten to giving quarterly guidance. And we need to do that with everything that's going on. What you should have heard from my comments was Q3 will be pretty close to where we are -- with where we were with Q2. And Q4 will be very strong as we exit. And actually part of it, Shlomo, is timing only from the standpoint of all of the cost savings that we've got. Remember, we increased another $25 million with CPA, et cetera. Great question. Well, pick it up, Richard.
Yes. So on the revenue profile, we are held to the 48-52 H1-H2 split, which we explained in the first quarter results. You're right that we did say 42-58 on EBITDA. We're now at 44-56. We're slightly ahead of where we were expecting to be, which is a positive feature of our results for the year. And as Jerre said, we've executed flawlessly on the integration of CPA Global into the portfolio. As Jerre referred to in his script, we've increased our run rate cost savings target for that business from our commitment of $75 million exiting this year to $100 million exiting this year. And we will, as we have done in the second quarter, you will continue to see sequential quarterly margin EBITDA improvement in Q3, and then, obviously, peak margin in Q4, where we get the superior revenue results flowing through to improved margins. So we see it as a positive feature of our results.
And thanks for asking because that shift in place is one that will really reflect in Q4. You're going to see what this business model can do when we get the kind of top line growth that we expect to get. And you'll see very significant improvement with the margins as we exit 2021. Then we're going to continue basically with that same effort first half, second half, as you'll see as we go into 2022. But we'll clear that up with guidance that we'll give on November 9. Thanks, Shlomo, great question.
[Operator Instructions] The next question is from Hamzah Mazari with Jefferies.
This is Mario Cortellacci filling in for Hamzah. Could you just talk about how your contract renewals work? And specifically, how you think about annual contracts switching to multiyear, and maybe the pricing that's associated with that? Correct me if I'm wrong, but I think that maybe 70% of your contracts are annual today. And just maybe you can give us an update on that figure if there's any change.
Yes. Great question. Thanks. Pick it up, Richard. You're spot on, on the 70%.
Yes, your profile is correct. I'd also add that with respect to multiyear contract renewals, we are much more disciplined now in ensuring that we have annual price increases baked into those multiyear contracts and what we've done with our -- historically, what we, as a team, have done collectively in our different experiences is also give a commission bonus to a sales colleague that delivers a multiyear contract with an annual price increase baked into it, and that is expected to be -- that is essentially our policy. So as you know, studies done on the book we used in the first half of the year, we said we got 30% of the book still to renew in H2. But what you will see in the second half of the year is a real focus on driving net installations into H2 and driving that entry rate going into the first quarter of 2022 to drive that year-on-year growth. But yes, it's a good question. Annual contract is about 70% of the book and a very, very strong focus on delivering price increases into our multiyear agreements.
I'd just add one thing. Thanks, Richard. What he said is, in general, we're much, much more disciplined on everything we do from a selling standpoint today than we were, including particularly what Richard just touched on. I'm very pleased with the progress. And with the addition of Steen to partner with Richard, Gordon, Mukhtar, myself, the rest of the team, we'll continue to see that discipline improving everything that we do from an organic standpoint for years to come. Thanks.
Your next question is from Andrew Nicholas with William Blair.
I was hoping you could just spend a bit more time on -- or provide a bit more color on the client loss impacting renewal rates. Just curious kind of what the driver of that decision was, the nature of that relationship? And maybe how we should think about that revenue impact on a net basis? Because if I heard you correctly, I think you said that you expect some of that hit to come back in the form of transactional revenue. So any additional color on what happened there would be great.
Yes. No, it's a good learning lesson for sure. Richard will start, and Gordon will close it up. Good question, thanks.
Yes. Thanks, Andrew. So it was a relationship in Asia, April 1 renewal. There was a change in scope of the client. And so we will be working with them going forward in terms of what additional data and services we can provide to meet their needs. We do have an ongoing transactional relationship with them that we need to, in fact, frankly build upon. But it was essentially the change in scope and -- that we obviously need to now respond to. But Gordon can provide some more color.
And just as a refresher for everybody, Gordon has done a great job for us leading Asia Pac for the first 6 months. That's the first place we set up the One Clarivate. He's got a great job. Now he continues to have that. And of course, very pleased that he's got IP. Gordon, please.
You're on mute.
Gordon, you're on mute.
So I failed the intelligence test completely there. Thank you for the summary, Richard, which is spot on. A couple of things I would add to that. We do indeed have an ongoing relationship. So this is a long-standing client and remain a long-standing client. The change of scope and process within their operation is what principally drove our inability together to find a way to make our existing product and service in that part of our relationship work for them. We are actively servicing them elsewhere. And indeed, we are participating in a couple of RFPs, which are in the market for them. So a very active relationship. We have opportunity to regrow business there. It may not be in the same product line, but there is substantial opportunity within that client and some of their subsidiary organizations. So we're very focused on that in H2 as we enter 2022.
And the last thing I'd add to that -- thanks for the question, we've built in any loss of revenue from that annual, biannual actually, subscription base into the numbers that we're talking about today. Thank you. Great question.
The last question is a follow-up from Shlomo Rosenbaum with Stifel.
Jerre, I'm the last guy in here, are you still going to hold me to just one?
I've -- never have held you successfully. So let's try.
All right. I just wanted to start a little bit with -- just on the ProQuest, a couple of different questions there. Number one, it looks like regulatory-wise, this is slipping a little bit. It seems like that's what's happening just in general. Are there any significant concerns about achieving the regulatory approvals to actually get this deal done? And then just as a second thing, just on the regulatory-wise outside the U.S., there's been a big China crackdown on all kinds of verticals. And a big point from ProQuest is your ability to take ProQuest into the clients that you have here in China. Are you anticipating any issue from what's going on in China in terms of potentially impeding the cross-sell on that side?
Yes. No, great question. I'll just start with the first part of -- your part A, Shlomo. The -- I think to say I'm just going to reread because I want to stick to the script with it. We received the second request from the FTC yesterday to help them analyze this transaction further. We're cooperating with them. We're very well prepared for that. We remain very confident that after conclusion of the process, antitrust concern should not interfere with our acquisition of ProQuest in any significant way. And as I said, we're hopeful we can complete the proposed acquisition in the second half of this year. So I think we're in great shape. We'll cooperate with them in every way we can, and look forward to getting that really exciting addition to our company done. Good question. I'm going to start, and then I'm going to have Mukhtar and Gordon, both comment on China. I was delighted, by the way, if you've not read, you should, at the new ambassador from China, who was appointed and appeared yesterday for the first time. Read what he said, it's interesting. It's first thing I've seen really positive in the last couple of months, very conciliatory. So that's always welcome to see. But Mukhtar, you start, and then Gordon, you close it up, because it's an important question for us.
Sure. Happy to do so. Shlomo, listen, I think the way to look at this is that there will be no change to how we do business in China. We have fabulous relationships there, long-standing customers. We're very strong in academia. We're strong in life sciences and across the corporate sectors. And we value those relationships. Now in terms of how we operate, we have strong governance in place. We've got strong business and corporate controls. And we abide by a set of values in terms of how we operate as a business. And we will continue to operate against those, and we'll continue to work in China or in that part of the world. So we, at this stage, don't foresee any issues in terms of how we act, behave and operate in that part of the world.
Thanks, Mukhtar. Gordon, wrap it up.
Mukhtar has all the right tones, all the right notes. I would just add a couple of things. I think our approach to monitoring both locally as well as how we manage, monitor and govern regulations all over the world, china, obviously, is the topic of the question, is very strong. And I think our local team are very well connected to the marketplace. And as Mukhtar said, no change in our approach to doing business, which we feel is well placed. In fact, very excited by the ProQuest acquisition, which we feel fits very well with our approach in the Chinese market.
Thanks, guys. And I'm going to close just thanking you all. Just 2 quick comments. I'm feeling really good about our progress. We've done so much, made so many changes, all of which are now starting to bloom or are blooming. So as we exit 2021, and I think back to when we went public on May 14, 2019, progress is huge. We'll continue to make that. We'll deliver the kind of numbers that you, as sell-side investors, deserve, and we expect to see that to come for years to come. But I'm just so pleased with the progress. Thank you all very much.
And that concludes our call. Thank you very much.
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