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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
November 7, 2023
Date of Report (date of earliest event reported)
CLARIVATE PLC
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | | | | |
Jersey, Channel Islands |
| (State or other jurisdiction of incorporation or organization) |
| 001-38911 |
| (Commission File Number) |
| N/A |
| (I.R.S. Employer Identification No.) |
| | | | | |
70 St. Mary Axe |
| London | EC3A 8BE |
United Kingdom |
(Address of Principal Executive Offices) |
(44) 207-433-4000
Registrant's telephone number, including area code
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Ordinary Shares, no par value | CLVT | New York Stock Exchange |
| 5.25% Series A Mandatory Convertible Preferred Shares, no par value | CLVT PR A | New York Stock Exchange |
| | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 2.02. Results of Operations and Financial Condition.
On November 7, 2023, Clarivate Plc (the “Company”) issued a press release announcing earnings for the third quarter ended September 30, 2023. The press release has been furnished with this Form 8-K as Exhibit 99.1 and is posted on the investor relations section of the Company’s website (http://ir.clarivate.com/).
The information in this Item 2.02, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be incorporated by reference into any filing pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as otherwise expressly stated in such filing.
Item 7.01. Regulation FD Disclosure.
On November 7, 2023, the Company posted to its website supplemental information related to revenue, earnings and guidance. The supplemental information has been furnished with this Current Report on Form 8-K as Exhibit 99.2 and is posted on the investor relations section of the Company’s website (http://ir.clarivate.com/).
The information in this Item 7.01, including Exhibit 99.2 furnished herewith, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section and shall not be incorporated by reference into any filing pursuant to the Securities Act or the Exchange Act, except as otherwise expressly stated in such filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
| | | | | |
| No. | Description |
| 99.1 | |
| 99.2 | |
| 104 | The cover page from the Company's Current Report on Form 8-K dated November 7, 2023, formatted in Inline XBRL |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | |
| | CLARIVATE PLC |
| | |
Date: November 7, 2023 | By: /s/ Jonathan M. Collins |
| | Name: Jonathan M. Collins |
| | Executive Vice President & Chief Financial Officer |
Clarivate Reports Third Quarter 2023 Results
— Reaffirms 2023 Outlook —
London, UK -- November 7, 2023 Clarivate Plc - (NYSE: CLVT) (the “Company” or “Clarivate”), a global leader in connecting people and organizations to intelligence they can trust to transform their world, today reported results for the third quarter.
Third Quarter 2023 Financial Highlights
•Revenues of $647.2 million increased 1.8%, and decreased 1.3% at constant currency(2)
•Organic revenues increased 1.7% driven by an increase in transactional and other revenues of 3.5%, subscription revenues of 1.3% and re-occurring revenues of 0.5%
•Net loss attributable to ordinary shares of $6.6 million; Net loss per diluted share of $0.01
•Adjusted Net Income(1) of $152.6 million increased 6.2%; Adjusted Income per diluted share(1) of $0.21 increased 5.0% or $0.01
•Adjusted EBITDA(1) of $281.4 million increased 3.6% driven by cost savings from integration programs; Adjusted EBITDA Margin(1) of 43.5% increased 80 basis points
•Net cash provided by operating activities decreased $44.4 million to $163.4 million; Free cash flow(1) decreased $38.7 million to $101.7 million, driven by timing-related, in quarter working capital requirements
Nine Months Ended September 30, 2023 Financial Highlights
•Revenues of $1,945.1 million decreased 2.0%, and 2.6% at constant currency(2), driven primarily by the divestiture of MarkMonitor in October 2022, for which there were no comparable amounts in the current year period
•Organic revenues increased 0.3% as an increase in subscription revenues of 2.3% was offset by a decline in re-occurring revenues of 1.0% and transactional and other revenues of 4.3%
•Net loss attributable to ordinary shares of $123.6 million; Net loss per diluted share of $0.18
•Adjusted Net Income(1) of $435.7 million decreased 6.1%; Adjusted Income per diluted share(1) of $0.59 decreased 6.3% or $0.04
•Adjusted EBITDA(1) of $819.0 million increased 1.3% driven by cost savings from integration programs; Adjusted EBITDA Margin(1) of 42.1% increased 140 basis points
•Net cash provided by operating activities increased $180.9 million to $553.3 million; Free cash flow(1) increased $158.8 million to $374.7 million
“Our improved third quarter performance was driven by organic growth from our Academia & Government and Life Sciences & Healthcare (LS&H) segments, each delivering their highest quarterly revenue growth rate over the past year,” said Jonathan Gear, Chief Executive Officer. “During the quarter, we secured new customer wins across all three of our segments and launched new product offerings including an AI-powered tool to simplify IP budgets and forecasts and an enhanced search platform within LS&H powered by generative artificial intelligence. We continue to drive operational improvements and innovation, which will benefit both our customers and Clarivate in the future.”
Selected Financial Information
The prior year results include MarkMonitor, which was divested on October 31, 2022, for which there are no comparable amounts in the current year periods.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| (in millions, except percentages and per share data), (unaudited) | 2023 | | 2022 | | $ | | % | | 2023 | | 2022 | | $ | | % |
| Revenues, net | $ | 647.2 | | | $ | 635.7 | | | $ | 11.5 | | | 1.8 | % | | $ | 1,945.1 | | | $ | 1,984.5 | | | $ | (39.4) | | | (2.0) | % |
| | | | | | | | | | | | | | | |
| Net loss attributable to ordinary shares | $ | (6.6) | | | $ | (4,434.4) | | | $ | 4,427.8 | | | N/M | | $ | (123.6) | | | $ | (4,339.9) | | | $ | 4,216.3 | | | N/M |
| Net loss per share, diluted | $ | (0.01) | | | $ | (6.64) | | | $ | 6.63 | | | N/M | | $ | (0.18) | | | $ | (6.66) | | | $ | 6.48 | | | N/M |
| Weighted-average ordinary shares (diluted) | 670.9 | | | 675.2 | | | — | | | (0.6) | % | | 673.9 | | | 680.6 | | | — | | | (1.0) | % |
Adjusted EBITDA(1) | $ | 281.4 | | | $ | 271.6 | | | $ | 9.8 | | | 3.6 | % | | $ | 819.0 | | | $ | 808.3 | | | $ | 10.7 | | | 1.3 | % |
| | | | | | | | | | | | | | | |
Adjusted net income(1) | $ | 152.6 | | | $ | 143.7 | | | $ | 8.9 | | | 6.2 | % | | $ | 435.7 | | | $ | 464.0 | | | $ | (28.3) | | | (6.1) | % |
Adjusted diluted EPS(1)(3) | $ | 0.21 | | | $ | 0.20 | | | $ | 0.01 | | | 5.0 | % | | $ | 0.59 | | | $ | 0.63 | | | $ | (0.04) | | | (6.3) | % |
Adjusted weighted-average ordinary shares (diluted)(1) | 731.4 | | | 732.9 | | | — | | | (0.2) | % | | 733.6 | | | 739.0 | | | — | | | (0.7) | % |
| Net cash provided by operating activities | $ | 163.4 | | | $ | 207.8 | | | $ | (44.4) | | | (21.3) | % | | $ | 553.3 | | | $ | 372.4 | | | $ | 180.9 | | | 48.6 | % |
Free cash flow(1) | $ | 101.7 | | | $ | 140.4 | | | $ | (38.7) | | | (27.5) | % | | $ | 374.7 | | | $ | 215.9 | | | $ | 158.8 | | | 73.6 | % |
|
Third Quarter 2023 Commentary
Subscription revenues for the third quarter decreased $0.2 million, or 0.0%, to $408.1 million, and decreased 3.2% on a constant currency basis(2), due to the divestiture of MarkMonitor. Organic subscription revenues increased 1.3%, primarily due to price increases and the benefit of net installations.
Re-occurring revenues for the third quarter increased $4.1 million, or 4.0% to $106.8 million, and increased 0.5% on a constant currency basis(2). Organic re-occurring revenues increased 0.5%, due to increased patent renewal volumes.
Transactional and other revenues for the third quarter increased $7.3 million, or 5.8%, to $132.3 million, and increased 3.1% on a constant currency basis(2). Organic transactional and other revenues increased 3.5%, due to higher transactional sales in the Academia & Government and Life Sciences & Healthcare segments.
Balance Sheet and Cash Flow
As of September 30, 2023, cash and cash equivalents of $398.9 million increased $50.1 million compared to December 31, 2022 due to lower one-time costs as ProQuest cost synergies have been completed.
The Company's total debt outstanding as of September 30, 2023 was $4,920.5 million, a decrease of $150.8 million compared to December 31, 2022 due to $150.0 million accelerated debt prepayments on our term loan.
Net cash provided by operating activities of $553.3 million for the nine months ended September 30, 2023 increased $180.9 million compared to $372.4 million for the prior year, primarily due to the prior year employee payroll payments related to the CPA Global Equity Plan and working capital improvements. Free cash flow(1) for the nine months ended September 30, 2023, was $374.7 million, an increase of $158.8 million compared to the prior year period.
Reaffirmed Outlook for 2023 (forward-looking statement)
“We reaffirmed our 2023 outlook as our third quarter results were in-line with our expectations,” said Jonathan Collins, Executive Vice President and Chief Financial Officer. “We continue to execute a disciplined allocation of our capital by repurchasing $100 million of ordinary shares in the third quarter and anticipate utilizing about $150 million of cash to prepay debt in the fourth quarter.”
The full year outlook presented below assumes no further acquisitions, divestitures, or unanticipated events.
| | | | | |
| 2023 Outlook |
| Revenues | $2.60B to $2.67B |
| Organic Revenue Growth | 0.00% to 2.00% |
Adjusted EBITDA(1) | $1.09B to $1.14B |
Adjusted EBITDA Margin(1) | 42% to 42.5% |
Adjusted Diluted EPS(1)(3) | $0.77 to $0.83 |
Free Cash Flow(1) | $450M to $500M |
Notes to press release
(1) Non-GAAP measure. Please see “Reconciliations to Certain Non-GAAP Measures” in this earnings release for important disclosures and reconciliations of these financial measures to the most directly comparable GAAP measure. These terms are defined elsewhere in this earnings release.
(2) We calculate constant currency by converting the non-U.S. dollar income statement balances for the most current year to U.S. dollars by applying the average exchange rates of the preceding year.
(3) Adjusted Diluted EPS for 2023 is calculated based on approximately 734 million fully diluted weighted average ordinary shares outstanding.
N/M - Represents a change approximately equal or in excess of 100% or not meaningful.
Conference Call and Webcast
Clarivate will host a conference call and webcast today to review the results for the third quarter at 9:00 a.m. Eastern Time. The conference call will be simultaneously webcast on the Investor Relations section of the Company’s website.
Interested parties may access the live audio broadcast by dialing +1 404-975-4839 or toll-free +1 833-470-1428 (in North America) and 44 208 068 2558 or toll free 44 808 189 6484 (internationally). The conference ID number is 677201. To join the webcast please visit https://events.q4inc.com/attendee/182614049. A replay will also be available on https://ir.clarivate.com.
Use of Non-GAAP Financial Measures
Non-GAAP results are not presentations made in accordance with U.S. generally accepted accounting principles ("GAAP") and are presented only as a supplement to our financial statements based on GAAP. Non-GAAP financial information is provided to enhance the reader’s understanding of our financial performance, but none of these non-GAAP financial measures are recognized terms under GAAP. They are not measures of financial condition or liquidity, and should not be considered as an alternative to profit or loss for the period determined in accordance with GAAP or operating cash flows determined in accordance with GAAP. As a result, you should not consider such measures in isolation from, or as a substitute for, financial measures or results of operations calculated or determined in accordance with GAAP.
We use non-GAAP measures in our operational and financial decision-making. We believe that such measures allow us to focus on what we deem to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations, and we also believe that investors may find these non-GAAP financial measures useful for the same reasons. Non-GAAP measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies comparable to us, many of which present non-GAAP measures when reporting their results. These measures can be useful in evaluating our performance against our peer companies because we believe the measures provide users with valuable insight into key components of GAAP financial disclosures. However, non-GAAP measures have limitations as analytical tools and because not all companies use identical calculations, our presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.
Definitions and reconciliations of non-GAAP measures, such as Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, Free Cash Flow and Standalone Adjusted EBITDA to the most directly comparable GAAP measures are provided within the schedules attached to this release. Our presentation of non-GAAP measures should not be construed as an inference that our future results will be unaffected by any of the adjusted items, or that any projections and estimates will be realized in their entirety or at all.
Forward-Looking Statements
This communication contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management’s current views concerning future business, events, trends, contingencies, financial performance, or financial condition, appear at various places in this communication and may use words like “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “see,” “seek,” “should,” “strategy,” “strive,” “target,” “will,” and “would” and similar expressions, and variations or negatives of these words. Examples of forward-looking statements include, among others, statements we make regarding: guidance outlook and predictions relating to expected operating results, such as revenue growth and earnings; strategic actions such as acquisitions, joint ventures, and dispositions, including the anticipated benefits therefrom, and our success in integrating acquired businesses; anticipated levels of capital expenditures in future periods; our ability to successfully realize cost savings initiatives and transition services expenses; our belief that we have sufficient liquidity to fund our ongoing business operations; expectations of the effect on our financial condition of claims, litigation, environmental costs, the impact of inflation, the impact of foreign currency fluctuations, the COVID-19 pandemic and governmental responses thereto, international hostilities, contingent liabilities, and governmental and regulatory investigations and proceedings; and our strategy for customer retention, growth, product development, market position, financial results, and reserves. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on management’s current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are difficult to predict and many of which are outside of our control. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include those factors discussed under the caption “Risk Factors” in our annual report on Form 10-K/A, along with our other filings with the U.S. Securities and Exchange Commission (“SEC”). However, those factors should not be considered to be a complete statement of all potential risks and uncertainties. Additional risks and uncertainties not known to us or that we currently deem immaterial may also impair our business operations. Forward-looking statements are based only on information currently available to our management and speak only as of the date of this communication. We do not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. Please consult our public filings with the SEC or on our website at www.clarivate.com.
About Clarivate
Clarivate™ is a leading global information services provider. We connect people and organizations to intelligence they can trust to transform their perspective, their work and our world. Our subscription and technology-based solutions are coupled with deep domain expertise and cover the areas of Academia & Government, Intellectual Property and Life Sciences & Healthcare. For more information, please visit clarivate.com.
Condensed Consolidated Balance Sheets
(In millions)
(unaudited) | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 398.9 | | | $ | 348.8 | |
| Restricted cash | 8.3 | | | 8.0 | |
| Accounts receivable, net | 766.9 | | | 872.1 | |
| Prepaid expenses | 100.0 | | | 89.4 | |
| Other current assets | 75.1 | | | 76.9 | |
| Assets held for sale | 25.5 | | | — | |
| Total current assets | 1,374.7 | | | 1,395.2 | |
| Property and equipment, net | 49.7 | | | 54.5 | |
| Other intangible assets, net | 8,955.3 | | | 9,437.7 | |
| Goodwill | 2,865.2 | | | 2,876.5 | |
| Other non-current assets | 89.8 | | | 97.9 | |
| Deferred income taxes | 26.4 | | | 24.2 | |
| Operating lease right-of-use assets | 56.9 | | | 58.9 | |
| Total Assets | $ | 13,418.0 | | | $ | 13,944.9 | |
| | | |
| Liabilities and Shareholders’ Equity | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 99.2 | | | $ | 101.4 | |
| Accrued compensation | 102.5 | | | 132.1 | |
| Accrued expenses and other current liabilities | 346.7 | | | 352.1 | |
| Current portion of deferred revenues | 889.2 | | | 947.5 | |
| Current portion of operating lease liability | 23.5 | | | 25.7 | |
| Current portion of long-term debt | 1.1 | | | 1.0 | |
| Liabilities held for sale | 6.4 | | | — | |
| Total current liabilities | 1,468.6 | | | 1,559.8 | |
| Long-term debt | 4,866.4 | | | 5,005.0 | |
| | | |
| Non-current portion of deferred revenues | 36.5 | | | 38.5 | |
| Other non-current liabilities | 41.3 | | | 140.1 | |
| Deferred income taxes | 255.6 | | | 316.1 | |
| Operating lease liabilities | 67.5 | | | 72.9 | |
| Total liabilities | 6,735.9 | | | 7,132.4 | |
| Commitments and contingencies | | | |
| | | |
| Shareholders’ equity: | | | |
| Preferred Shares, no par value; 14.4 shares authorized; 5.25% Mandatory Convertible Preferred Shares, Series A, 14.4 shares issued and outstanding as of both September 30, 2023 and December 31, 2022 | 1,392.6 | | | 1,392.6 | |
| Ordinary Shares, no par value; unlimited shares authorized; 663.9 and 674.4 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | 11,729.8 | | | 11,744.7 | |
| Accumulated other comprehensive loss | (657.8) | | | (665.9) | |
| Accumulated deficit | (5,782.5) | | | (5,658.9) | |
| Total shareholders’ equity | 6,682.1 | | | 6,812.5 | |
| Total Liabilities and Shareholders’ Equity | $ | 13,418.0 | | | $ | 13,944.9 | |
| | | | | | | | | | | |
| Condensed Consolidated Statement of Operations |
| (In millions) |
| (unaudited) |
| Three Months Ended September 30, |
| 2023 | | 2022 |
| Revenues, net | $ | 647.2 | | | $ | 635.7 | |
| Operating expenses: | | | |
| Cost of revenues | 220.6 | | | 223.7 | |
| Selling, general and administrative costs | 171.9 | | | 169.5 | |
| Depreciation and amortization | 176.8 | | | 169.7 | |
| Restructuring and lease impairments | 3.7 | | | 26.0 | |
| Goodwill and intangible asset impairments | — | | | 4,448.6 | |
| Other operating income, net | (13.0) | | | (26.6) | |
| Total operating expenses | 560.0 | | | 5,010.9 | |
| Income (loss) from operations | 87.2 | | | (4,375.2) | |
| Mark to market gain on financial instruments | (12.6) | | | (53.3) | |
| Interest expense and amortization of debt discount, net | 71.9 | | | 71.5 | |
| Income (loss) before income taxes | 27.9 | | | (4,393.4) | |
| Provision for income taxes | 15.6 | | | 22.1 | |
| Net income (loss) | 12.3 | | | (4,415.5) | |
| Dividends on preferred shares | 18.9 | | | 18.9 | |
| Net loss attributable to ordinary shares | $ | (6.6) | | | $ | (4,434.4) | |
| | | |
| Per share: | | | |
| Basic | $ | (0.01) | | | $ | (6.58) | |
| Diluted | $ | (0.01) | | | $ | (6.64) | |
| | | |
| Weighted average shares used to compute earnings per share: | | | |
| Basic | 670.9 | | | 673.6 | |
| Diluted | 670.9 | | | 675.2 | |
Condensed Consolidated Statement of Operations
(In millions)
(unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| Revenues, net | $ | 1,945.1 | | | $ | 1,984.5 | |
| Operating expenses: | | | |
| Cost of revenues | 674.8 | | | 717.0 | |
| Selling, general and administrative costs | 559.3 | | | 549.3 | |
| Depreciation and amortization | 527.5 | | | 521.7 | |
| Restructuring and lease impairments | 25.3 | | | 56.9 | |
| Goodwill and intangible asset impairments | 135.2 | | | 4,448.6 | |
| Other operating income, net | (30.5) | | | (64.9) | |
| Total operating expenses | 1,891.6 | | | 6,228.6 | |
| Income (loss) from operations | 53.5 | | | (4,244.1) | |
| Mark to market gain on financial instruments | (14.4) | | | (202.7) | |
| Interest expense and amortization of debt discount, net | 218.5 | | | 193.3 | |
| Loss before income taxes | (150.6) | | | (4,234.7) | |
| (Benefit) provision for income taxes | (83.3) | | | 48.9 | |
| Net loss | (67.3) | | | (4,283.6) | |
| Dividends on preferred shares | 56.3 | | | 56.3 | |
| Net loss attributable to ordinary shares | $ | (123.6) | | | $ | (4,339.9) | |
| | | |
| Per share: | | | |
| Basic | $ | (0.18) | | | $ | (6.41) | |
| Diluted | $ | (0.18) | | | $ | (6.66) | |
| | | |
| Weighted average shares used to compute earnings per share: | | | |
| Basic | 673.9 | | | 676.7 | |
| Diluted | 673.9 | | | 680.6 | |
Condensed Consolidated Statements of Cash Flows
(In millions)
(unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| Cash Flows From Operating Activities | | | |
| Net loss | $ | (67.3) | | | $ | (4,283.6) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
| Depreciation and amortization | 527.5 | | | 521.7 | |
| | | |
| Share-based compensation | 97.1 | | | 66.5 | |
| Restructuring and impairments, including goodwill | 138.9 | | | 4,469.9 | |
| Mark to market gain on financial instruments | (14.4) | | | (202.7) | |
| | | |
| Amortization of debt issuance costs | 12.9 | | | 11.4 | |
| Gain on legal settlement | (49.4) | | | — | |
| Deferred income taxes | (51.3) | | | (3.3) | |
| Other operating activities | 16.8 | | | (48.9) | |
| Changes in operating assets and liabilities: | | | |
| Accounts receivable | 110.3 | | | 76.9 | |
| Prepaid expenses | (10.6) | | | (29.4) | |
| Other assets | 19.5 | | | (57.5) | |
| Accounts payable | (2.4) | | | (15.8) | |
| Accrued expenses and other current liabilities | (33.8) | | | (54.0) | |
| Deferred revenues | (56.9) | | | (68.2) | |
| Operating leases, net | (6.2) | | | (5.2) | |
| Other liabilities | (77.4) | | | (5.4) | |
| Net cash provided by operating activities | $ | 553.3 | | | $ | 372.4 | |
| | | |
| Cash Flows From Investing Activities | | | |
| Capital expenditures | (178.6) | | | (156.5) | |
| Payments for acquisitions and cost method investments, net of cash acquired | (2.3) | | | (14.3) | |
| Proceeds from divestitures, net of cash and restricted cash | 10.5 | | | — | |
| Net cash used in investing activities | $ | (170.4) | | | $ | (170.8) | |
| | | |
| Cash Flows From Financing Activities | | | |
| | | |
| | | |
| | | |
| Principal payments on term loan | (150.0) | | | (21.5) | |
| | | |
| Payment of debt issuance costs and discounts | 0.1 | | | (2.1) | |
| | | |
| | | |
| Proceeds from issuance of treasury shares | — | | | 2.2 | |
| Repurchases of ordinary shares | (100.0) | | | (175.0) | |
| Cash dividends on preferred shares | (56.7) | | | (56.6) | |
| Proceeds from stock options exercised | — | | | 0.8 | |
| Payments related to finance lease | (0.8) | | | (1.5) | |
| Payments related to tax withholding for stock-based compensation | (14.8) | | | (13.8) | |
| Net cash used in financing activities | $ | (322.2) | | | $ | (267.5) | |
| Effects of exchange rates | (10.3) | | | (64.5) | |
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| Net increase in cash and cash equivalents | 50.1 | | | 17.7 | |
| Net increase (decrease) in restricted cash | 0.3 | | | (148.1) | |
| Net increase (decrease) in cash and cash equivalents, and restricted cash | $ | 50.4 | | | $ | (130.4) | |
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| Beginning of period: | | | |
| Cash and cash equivalents | 348.8 | | | 430.9 | |
| Restricted cash | 8.0 | | | 156.7 | |
| Total cash and cash equivalents, and restricted cash, beginning of period | $ | 356.8 | | | $ | 587.6 | |
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| End of period: | | | |
| Cash and cash equivalents | 398.9 | | | 448.6 | |
| Restricted cash | 8.3 | | | 8.6 | |
| Total cash and cash equivalents, and restricted cash, end of period | $ | 407.2 | | | $ | 457.2 | |
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| Supplemental Cash Flow Information: | | | |
| Cash paid for interest | $ | 176.8 | | | $ | 152.2 | |
| Cash paid for income tax | $ | 29.1 | | | $ | 44.2 | |
| Capital expenditures included in accounts payable | $ | 15.2 | | | $ | 4.8 | |
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Supplemental Revenues Information
(Amounts in tables may not sum due to rounding)
Annualized Contract Value (“ACV”) represents the annualized value for the next 12 months of subscription-based client license agreements, assuming that all expiring license agreements during that period are renewed at their current price level. We calculate ACV on a constant currency basis to exclude the effect of foreign currency fluctuations. The following table presents our Annualized Contract Value (“ACV”) as of the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, | | Change(1) | | | | |
| (in millions, except percentages); (unaudited) | 2023 | | 2022 | | $ | | % | | | | |
| Annualized Contract Value | $ | 1,579.2 | | | $ | 1,647.1 | | | $ | (67.9) | | | (4.1) | % | | |
(1) The change in ACV is primarily due to the divestiture of MarkMonitor in October 2022 and changes in foreign exchange rates, partially offset by organic ACV growth of 2.6% largely attributed to the impact of price increases. |
The following table presents the amounts of our subscription, re-occurring and transactional and other revenues, including as a percentage of our total revenues, for the periods indicated, as well as the drivers of the variances between periods.
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| Three Months Ended September 30, | | Change | Percentage of Change |
| (in millions, except percentages); (unaudited) | 2023 | | 2022 | | $ | % | Acquisitions | Disposals(1) | FX Impact | Organic |
| Subscription revenues | $ | 408.1 | | | $ | 408.3 | | | $ | (0.2) | | — | % | — | % | (4.4) | % | 3.1 | % | 1.3 | % |
| Re-occurring revenues | 106.8 | | | 102.7 | | | 4.1 | | 4.0 | % | — | % | — | % | 3.5 | % | 0.5 | % |
| Transactional and other revenues | 132.3 | | | 125.0 | | | 7.3 | | 5.8 | % | — | % | (0.4) | % | 2.7 | % | 3.5 | % |
| Deferred revenues adjustment | — | | | (0.3) | | | 0.3 | | 100.0 | % | 100.0 | % | — | % | — | % | — | % |
| Revenues, net | $ | 647.2 | | | $ | 635.7 | | | $ | 11.5 | | 1.8 | % | — | % | (3.0) | % | 3.1 | % | 1.7 | % |
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(1) Represents revenues from the MarkMonitor divestiture completed in October 2022 and from the assets held-for-sale disposal group. |
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| Nine Months Ended September 30, | | Change | Percentage of Change |
| (in millions, except percentages); (unaudited) | 2023 | | 2022 | | $ | % | Acquisitions | Disposals(1) | FX Impact | Organic |
| Subscription revenues | $ | 1,207.3 | | | $ | 1,220.7 | | | $ | (13.4) | | (1.1) | % | — | % | (4.4) | % | 1.0 | % | 2.3 | % |
| Re-occurring revenues | 325.5 | | | 329.2 | | | (3.7) | | (1.1) | % | — | % | — | % | (0.1) | % | (1.0) | % |
| Transactional and other revenues | 412.3 | | | 435.5 | | | (23.2) | | (5.3) | % | — | % | (1.2) | % | 0.2 | % | (4.3) | % |
| Deferred revenues adjustment | — | | | (0.9) | | | 0.9 | | 100.0 | % | 100.0 | % | — | % | — | % | — | % |
| Revenues, net | $ | 1,945.1 | | | $ | 1,984.5 | | | $ | (39.4) | | (2.0) | % | — | % | (3.0) | % | 0.7 | % | 0.3 | % |
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(1) Represents revenues from the MarkMonitor divestiture completed in October 2022 and from the assets held-for-sale disposal group. |
The following table presents our revenues by segment for the periods indicated, as well as the drivers of the variances between periods, including as a percentage of such revenues.
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| Three Months Ended September 30, | | Change | Percentage of Change |
| (in millions, except percentages); (unaudited) | 2023 | | 2022 | | $ | % | Acquisitions | Disposals(1) | FX Impact | Organic |
| Academia & Government | $ | 327.2 | | | $ | 307.1 | | | $ | 20.1 | | 6.5 | % | — | % | — | % | 3.1 | % | 3.4 | % |
| Intellectual Property | 211.7 | | | 225.3 | | | (13.6) | | (6.0) | % | — | % | (8.3) | % | 3.2 | % | (0.9) | % |
| Life Sciences & Healthcare | 108.3 | | | 103.6 | | | 4.7 | | 4.5 | % | — | % | — | % | 2.8 | % | 1.7 | % |
| Deferred revenues adjustment | — | | | (0.3) | | | 0.3 | | 100.0 | % | 100.0 | % | — | % | — | % | — | % |
| Revenues, net | $ | 647.2 | | | $ | 635.7 | | | $ | 11.5 | | 1.8 | % | — | % | (3.0) | % | 3.1 | % | 1.7 | % |
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(1) Represents revenues from the MarkMonitor divestiture completed in October 2022 and from the assets held-for-sale disposal group. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Change | Percentage of Change |
| (in millions, except percentages); (unaudited) | 2023 | | 2022 | | $ | % | Acquisitions | Disposals(1) | FX Impact | Organic |
| Academia & Government | $ | 983.9 | | | $ | 951.6 | | | $ | 32.3 | | 3.4 | % | — | % | — | % | 1.0 | % | 2.4 | % |
| Intellectual Property | 637.1 | | | 480.8 | | | (69.0) | | (9.8) | % | — | % | (8.4) | % | 0.1 | % | (1.5) | % |
| Life Sciences & Healthcare | 324.1 | | | 327.7 | | | (3.6) | | (1.1) | % | — | % | — | % | 0.9 | % | (2.0) | % |
| Deferred revenues adjustment | — | | | (0.9) | | | 0.9 | | 100.0 | % | 100.0 | % | — | % | — | % | — | % |
| Revenues, net | $ | 1,945.1 | | | $ | 1,984.5 | | | $ | (39.4) | | (2.0) | % | — | % | (3.0) | % | 0.7 | % | 0.3 | % |
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(1) Represents revenues from the MarkMonitor divestiture completed in October 2022 and from the assets held-for-sale disposal group. |
Reconciliations to Certain Non-GAAP Measures
(Amounts in tables may not sum due to rounding)
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA represents Net income (loss) before the provision for income taxes, depreciation and amortization, and interest expense adjusted to exclude acquisition and disposal-related transaction costs, losses on extinguishment of debt, share-based compensation, unrealized foreign currency remeasurement, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues prior to the adoption of FASB ASU No. 2021-08 in 2021, non-operating income or expense, the impact of certain non-cash mark-to-market adjustments on financial instruments, legal settlements, impairments, and other items that are included in net income (loss) for the period that the Company does not consider indicative of its ongoing operating performance and certain unusual items impacting results in a particular period. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by Revenues, net plus the impact of the deferred revenue purchase accounting adjustments relating to acquisitions prior to 2021.
The following table presents our calculation of Adjusted EBITDA and Adjusted EBITDA Margin for the three and nine months ended September 30, 2023 and 2022 and reconciles these measures to our Net income (loss) for the same periods:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions, except percentages); (unaudited) | 2023 | | 2022 | | 2023 | | 2022 |
| Net loss attributable to ordinary shares | $ | (6.6) | | $ | (4,434.4) | | | $ | (123.6) | | | $ | (4,339.9) | |
| Dividends on preferred shares | 18.9 | | 18.9 | | | 56.3 | | | 56.3 | |
Net income (loss) | $ | 12.3 | | $ | (4,415.5) | | | $ | (67.3) | | | $ | (4,283.6) | |
Provision (benefit) for income taxes | 15.6 | | 22.1 | | | (83.3) | | | 48.9 | |
| Depreciation and amortization | 176.8 | | 169.7 | | | 527.5 | | | 521.7 | |
| Interest expense and amortization of debt discount, net | 71.9 | | 71.5 | | | 218.5 | | | 193.3 | |
| Deferred revenues adjustment | — | | 0.3 | | | — | | | 0.9 | |
Transaction related costs(1) | 2.7 | | (3.7) | | | 5.1 | | | 8.1 | |
| Share-based compensation expense | 25.4 | | 20.8 | | | 97.1 | | | 79.9 | |
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Restructuring and lease impairments(2) | 3.7 | | 26.0 | | | 25.3 | | | 56.9 | |
Goodwill and intangible asset impairments(3) | — | | 4,448.6 | | | 135.2 | | | 4,448.6 | |
Mark to market gain on financial instruments(4) | (12.6) | | (53.3) | | | (14.4) | | | (202.7) | |
Other(5) | (14.4) | | (14.9) | | | (24.7) | | | (63.7) | |
| Adjusted EBITDA | $ | 281.4 | | | $ | 271.6 | | | $ | 819.0 | | | $ | 808.3 | |
| Adjusted EBITDA Margin | 43.5 | % | | 42.7 | % | | 42.1 | % | | 40.7 | % |
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(1) Includes costs incurred to complete business combination transactions, including acquisitions, dispositions, and capital market activities and include advisory, legal, and other professional and consulting costs. |
(2) Primarily reflects severance and related benefit costs related to approved restructuring programs. |
(3) During the nine months ended September 30, 2023, the Company recorded an impairment charge of $132.2 in connection with intangible assets classified as assets held-for-sale and a $3.0 goodwill impairment charge associated with the disposal group's allocated portion of the IP segment reporting unit's goodwill balance. During the three months ended September 30, 2022, a quantitative goodwill impairment assessment was performed over the Company's reporting units, resulting in goodwill impairment of $4,448.6 for the three and nine months ended September 30, 2022. |
(4) Reflects mark-to-market adjustments on financial instruments under ASC 815, Derivatives and Hedging. |
(5) The current and prior year periods include the unrealized net gain or loss on foreign exchange re-measurement and other individually insignificant items that do not reflect our ongoing operating performance. The current year-to-date period also includes a $49.4 gain on legal settlement. |
Adjusted Net Income and Adjusted Diluted EPS
Adjusted Net Income is calculated using Net income (loss), adjusted to exclude acquisition or disposal-related transaction costs (such costs include net income from continuing operations before the provision for income taxes, depreciation and amortization, and interest income and expense from the divested business), amortization related to acquired intangible assets, share-based compensation, mandatory convertible preferred share dividend expense, unrealized foreign currency remeasurement, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues prior to the adoption of FASB ASU No. 2021-08 in 2021, the impact of certain non-cash mark-to-market adjustments on financial instruments, legal settlements, impairments, and other items that are included in net income (loss) for the period that the Company does not consider indicative of its ongoing operating performance and certain unusual items impacting results in a particular period, and the income tax impact of any adjustments.
We calculate Adjusted Diluted EPS by using Adjusted Net Income divided by Adjusted diluted weighted average shares for the period. The Adjusted diluted weighted average shares assumes that all instruments in the calculation are dilutive.
The following table presents our calculation of Adjusted Net Income and Adjusted Diluted EPS for the three and nine months ended September 30, 2023 and 2022 and reconciles these measures to our Net income (loss) and EPS for the same periods:
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| Three Months Ended September 30, |
| 2023 | | 2022 |
| (in millions, except per share amounts); (unaudited) | Amount | | Per Share | | Amount | | Per Share |
| Net loss attributable to ordinary shares, diluted | $ | (6.6) | | | $ | (0.01) | | | $ | (4,483.4) | | | $ | (6.64) | |
| Change in fair value of private placement warrants | — | | | — | | | 49.0 | | | 0.07 | |
| Net loss attributable to ordinary shares | $ | (6.6) | | | $ | (0.01) | | | $ | (4,434.4) | | | $ | (6.58) | |
| Dividends on preferred shares | 18.9 | | | 0.03 | | | 18.9 | | | 0.03 | |
Net income (loss) | $ | 12.3 | | | $ | 0.02 | | | $ | (4,415.5) | | | $ | (6.54) | |
| Deferred revenues adjustment | — | | | — | | | 0.3 | | | — | |
Transaction related costs(1) | 2.7 | | | — | | | (3.7) | | | (0.01) | |
| Share-based compensation expense | 25.4 | | | 0.04 | | | 20.8 | | | 0.03 | |
| Amortization related to acquired intangible assets | 141.9 | | | 0.21 | | | 141.2 | | | 0.21 | |
Restructuring and lease impairments(2) | 3.7 | | | 0.01 | | | 26.0 | | | 0.04 | |
Goodwill and intangible asset impairments(3) | — | | | — | | | 4,448.6 | | | 6.59 | |
Mark to market gain on financial instruments(4) | (12.6) | | | (0.02) | | | (53.3) | | | (0.08) | |
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Other(5) | (14.4) | | | (0.04) | | | (14.9) | | | (0.03) | |
| Income tax impact of related adjustments | (6.4) | | | (0.01) | | | (5.8) | | | (0.01) | |
| Adjusted net income and Adjusted diluted EPS | $ | 152.6 | | | $ | 0.21 | | | $ | 143.7 | | | $ | 0.20 | |
| Adjusted weighted-average ordinary shares (Diluted) | 731.4 | | 732.9 |
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(1-5) Refer to associated line item descriptions provided for the Adjusted EBITDA reconciliation table above. |
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| Nine Months Ended September 30, |
| 2023 | | 2022 |
| (in millions, except per share amounts); (unaudited) | Amount | | Per Share | | Amount | | Per Share |
| Net loss attributable to ordinary shares, diluted | $ | (123.6) | | | $ | (0.18) | | | $ | (4,530.6) | | | $ | (6.66) | |
| Change in fair value of private placement warrants | — | | | — | | | 190.7 | | | 0.28 | |
| Net loss attributable to ordinary shares | $ | (123.6) | | | $ | (0.18) | | | $ | (4,339.9) | | | $ | (6.38) | |
| Dividends on preferred shares | 56.3 | | | 0.08 | | | 56.3 | | | 0.08 | |
| Net loss | $ | (67.3) | | | $ | (0.10) | | | $ | (4,283.6) | | | $ | (6.29) | |
| Deferred revenues adjustment | — | | | — | | | 0.9 | | | — | |
Transaction related costs(1) | 5.1 | | | 0.01 | | | 8.1 | | | 0.01 | |
| Share-based compensation expense | 97.1 | | | 0.14 | | | 79.9 | | | 0.12 | |
| Amortization related to acquired intangible assets | 429.8 | | | 0.64 | | | 437.1 | | | 0.64 | |
Restructuring and lease impairments(2) | 25.3 | | | 0.04 | | | 56.9 | | | 0.08 | |
Goodwill and intangible asset impairments(3) | 135.2 | | | 0.20 | | | 4,448.6 | | | 6.54 | |
Mark to market gain on financial instruments(4) | (14.4) | | | (0.02) | | | (202.7) | | | (0.30) | |
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Other(5) | (24.7) | | | (0.10) | | | (63.7) | | | (0.14) | |
| Income tax impact of related adjustments | (150.4) | | | (0.22) | | | (17.5) | | | (0.03) | |
| Adjusted net income and Adjusted diluted EPS | $ | 435.7 | | | $ | 0.59 | | | $ | 464.0 | | | $ | 0.63 | |
| Adjusted weighted-average ordinary shares (Diluted) | 733.6 | | 739.0 |
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(1-5) Refer to associated line item descriptions provided for the Adjusted EBITDA reconciliation table above. |
Free Cash Flow
Free cash flow is calculated using net cash provided by operating activities less capital expenditures. The following table reconciles our non-GAAP free cash flow measure to Net cash provided by operating activities:
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions); (unaudited) | 2023 | | 2022 | | 2023 | | 2022 |
| Net cash provided by operating activities | $ | 163.4 | | | $ | 207.8 | | | $ | 553.3 | | | $ | 372.4 | |
| Capital expenditures | (61.7) | | | (67.4) | | | (178.6) | | | (156.5) | |
| Free cash flow | $ | 101.7 | | | $ | 140.4 | | | $ | 374.7 | | | $ | 215.9 | |
Required Reported Data
Standalone Adjusted EBITDA
We are required to report Standalone Adjusted EBITDA, which is identical to Consolidated EBITDA and EBITDA as such terms are defined under our credit facilities, dated as of October 31, 2019, and the indentures governing our secured notes due 2026 issued by Camelot Finance S.A. and guaranteed by certain of our subsidiaries, and the indentures governing the secured and unsecured notes issued by Clarivate Science Holdings Corporation in August 2021, respectively. In addition, the credit facilities and the indentures contain certain restrictive covenants that govern debt incurrence and the making of restricted payments, among other matters. These restrictive covenants utilize Standalone Adjusted EBITDA as a primary component of the compliance metric governing our ability to undertake certain actions otherwise proscribed by such covenants. Standalone Adjusted EBITDA reflects further adjustments to Adjusted EBITDA for cost savings already implemented.
Because Standalone Adjusted EBITDA is required pursuant to the terms of the reporting covenants under the credit facilities and the indentures and because this metric is relevant to lenders and noteholders, management considers Standalone Adjusted EBITDA to be relevant to the operation of its business.
Standalone Adjusted EBITDA is calculated under the credit facilities and the indentures by using our Consolidated Net income (loss) for the trailing 12-month period (defined in the credit facilities and the indentures as our U.S. GAAP net income adjusted for certain items specified in the credit facilities and the indentures) adjusted for items including: taxes, interest expense, depreciation and amortization, non-cash charges, including impairments, expenses related to capital markets transactions, acquisitions and dispositions, restructuring and business optimization charges and expenses, consulting and advisory fees, run-rate cost savings to be realized as a result of actions taken or to be taken in connection with an acquisition, disposition, restructuring or cost savings or similar initiatives, “run rate” expected cost savings, operating expense reductions, restructuring charges and expenses and synergies related to the transition projected by us, costs related to any management or equity stock plan, other adjustments that were presented in the offering memorandum used in connection with the issuance of the secured notes due in 2026, and earnout obligations incurred in connection with an acquisition or investment.
The following table bridges Net loss to Adjusted EBITDA to Standalone Adjusted EBITDA, as Adjusted EBITDA reflects a substantial portion of the adjustments that comprise Standalone Adjusted EBITDA for the period presented:
| | | | | |
| (in millions); (unaudited) | Twelve months ended September 30, 2023 |
Net income attributable to ordinary shares | $ | 180.7 | |
| Dividends on preferred shares | 75.4 | |
Net income | $ | 256.1 | |
(Benefit) provision for income taxes | (161.1) | |
| Depreciation and amortization | 716.3 | |
| Interest expense and amortization of debt discount, net | 295.5 | |
| Deferred revenues adjustment | 0.1 | |
| Transaction related costs | 11.2 | |
| Share-based compensation expense | 119.4 | |
Gain on sale from divestitures(1) | (278.5) | |
Restructuring and lease impairments(2) | 35.1 | |
Goodwill and intangible asset impairments(3) | 135.7 | |
Mark-to-market gain on financial instruments(4) | (18.5) | |
| Other | 12.1 | |
| Adjusted EBITDA | $ | 1,123.4 | |
| Realized foreign exchange gain | (16.1) | |
Cost savings(5) | 1.6 | |
| Standalone Adjusted EBITDA | $ | 1,108.9 | |
| |
(1) Represents the net gain from the sale of the MarkMonitor Domain Management business during the three months ended December 31, 2022. |
(2) Primarily reflects severance and related benefit costs related to approved restructuring programs. |
(3) Primarily includes the intangible assets impairment recorded during the three months ended June 30, 2023 related to Assets Held for Sale and Divested Operations. |
(4) Reflects mark-to-market adjustments on financial instruments under ASC 815, Derivatives and Hedging. |
(5) Reflects the estimated annualized run-rate cost savings, net of actual cost savings realized, related to restructuring and other cost savings initiatives undertaken during the period (exclusive of any cost reductions in our estimated standalone operating costs), including synergies related to acquisitions. |
The foregoing adjustment (5) is an estimate and is not intended to represent a pro forma adjustment presented within the guidance of Article 11 of Regulation S-X. Although we believe the estimate is reasonable, actual results may differ from the estimate, and any difference may be material. See “Forward-Looking Statements.”
The following table presents our calculation of Adjusted EBITDA and Adjusted EBITDA Margin for the 2023 outlook and reconciles these measures to our Net loss for the same period:
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| Year Ending December 31, 2023
(Forecasted) |
| (in millions, except percentages) | Low | | High |
| Net loss attributable to ordinary shares | $ | (182) | | | $ | (132) | |
Dividends on preferred shares(1) | 75 | | | 75 | |
| Net loss | $ | (107) | | | $ | (57) | |
| (Benefit) provision for income taxes | (63) | | | (63) | |
| Depreciation and amortization | 707 | | | 707 | |
| Interest expense and amortization of debt discount, net | 292 | | | 292 | |
Restructuring and lease impairments(2) | 30 | | | 30 | |
Goodwill and intangible asset impairments(3) | 135 | | | 135 | |
| Transaction related costs | 5 | | | 5 | |
| Mark to market adjustment on financial instruments | (14) | | | (14) | |
| Share-based compensation expense | 130 | | | 130 | |
Other(4) | (25) | | | (25) | |
| Adjusted EBITDA | $ | 1,090 | | | $ | 1,140 | |
| Adjusted EBITDA margin | 42.0 | % | | 42.5 | % |
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(1) Dividends on our mandatory convertible preferred shares (“MCPS”) are payable quarterly at an annual rate of 5.25% of the liquidation preference of $100 per share. For the purposes of calculating net loss attributable to Clarivate, we have excluded the accrued and anticipated MCPS dividends. |
(2) Reflects restructuring costs expected to be incurred in 2023 associated with the ProQuest acquisition and Segment Optimization restructuring programs. |
(3) Primarily includes the intangible assets impairment recorded during the three months ended June 30, 2023 related to Assets Held for Sale and Divested Operations |
(4) Primarily includes the gain on legal settlement partially offset by a net loss on foreign exchange re-measurement. |
The following table presents our calculation of Adjusted Diluted EPS for the 2023 outlook and reconciles this measure to our Net loss per share for the same period:
| | | | | | | | | | | |
| Year Ending December 31, 2023
(Forecasted) |
| (in millions) | Low | | High |
| Net loss attributable to ordinary shares | $ | (0.25) | | | $ | (0.18) | |
Dividends on preferred shares(1) | 0.10 | | | 0.10 | |
| Net loss | $ | (0.15) | | | $ | (0.08) | |
Restructuring and lease impairments(2) | 0.04 | | | 0.04 | |
Goodwill and intangible asset impairments(3) | 0.18 | | | 0.18 | |
| Share-based compensation expense | 0.18 | | | 0.18 | |
| Amortization related to acquired intangible assets | 0.78 | | | 0.78 | |
Other(4) | (0.04) | | | (0.05) | |
| Income tax impact of related adjustments | (0.22) | | | (0.22) | |
| Adjusted Diluted EPS | $ | 0.77 | | | $ | 0.83 | |
Adjusted weighted-average ordinary shares (Diluted)(5) | 734 million |
| | | |
(1-4) Refer to associated line item descriptions provided for the Adjusted EBITDA outlook reconciliation table above. |
(5) For the purposes of calculating adjusted earnings per share, the Company has excluded the accrued and anticipated MCPS dividends and assumed the “if-converted” method of share dilution. |
The following table presents our calculation of Free cash flow for the 2023 outlook and reconciles this measure to our Net cash provided by operating activities for the same period:
| | | | | | | | | | | |
| Year Ending December 31, 2023
(Forecasted) |
| (in millions) | Low | | High |
| Net cash provided by operating activities | $ | 695 | | | $ | 745 | |
| Capital expenditures | (245) | | | (245) | |
| Free cash flow | $ | 450 | | | $ | 500 | |
Media Contact:
Amy Bourke-Waite, Senior Director, Corporate Communications
newsroom@clarivate.com
Investor Relations Contact:
Mark Donohue, Vice President, Investor Relations
investor.relations@clarivate.com
215-243-2202
Q3 2023 Earnings Call November 7, 2023
Mark Donohue VP Investor Relations 1. Introduction
Forward-Looking Statements This communication contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management’s current views concerning future business, events, trends, contingencies, financial performance, or financial condition, appear at various places in this communication and may use words like “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “see,” “seek,” “should,” “strategy,” “strive,” “target,” “will,” and “would” and similar expressions, and variations or negatives of these words. Examples of forward-looking statements include, among others, statements we make regarding: guidance outlook and predictions relating to expected operating results, such as revenue growth and earnings; strategic actions such as acquisitions, joint ventures, and dispositions, including the anticipated benefits therefrom, and our success in integrating acquired businesses; anticipated levels of capital expenditures in future periods; our ability to successfully realize cost savings initiatives and transition services expenses; our belief that we have sufficient liquidity to fund our ongoing business operations; expectations of the effect on our financial condition of claims, litigation, environmental costs, the impact of inflation, the impact of foreign currency fluctuations, the COVID-19 pandemic and governmental responses thereto, international hostilities, contingent liabilities, and governmental and regulatory investigations and proceedings; and our strategy for customer retention, growth, product development, market position, financial results, and reserves. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on management’s current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are difficult to predict and many of which are outside of our control. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include those factors discussed under the caption “Risk Factors” in our annual report on Form 10-K/A, along with our other filings with the U.S. Securities and Exchange Commission (“SEC”). However, those factors should not be considered to be a complete statement of all potential risks and uncertainties. Additional risks and uncertainties not known to us or that we currently deem immaterial may also impair our business operations. Forward-looking statements are based only on information currently available to our management and speak only as of the date of this communication. We do not assume any obligation to publicly provide revisions or updates to any forward- looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. Please consult our public filings with the SEC or on our website at www.clarivate.com. Non-GAAP Financial Measures This presentation contains financial measures which have not been calculated in accordance with United States generally accepted accounting principles (“GAAP”), including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow because they are a basis upon which our management assesses our performance, and we believe they reflect the underlying trends and indicators of our business. Although we believe these measures may be useful for investors for the same reasons, these financial measures should not be considered as an alternative to GAAP financial measures as a measure of the Company’s financial condition, profitability, performance and liquidity. In addition, these financial measures may not be comparable to similar measures used by other companies. At the Appendix to this presentation, we provide further descriptions of these non-GAAP measures and reconciliations of these non-GAAP measures to the corresponding most closely related GAAP measures. Industry and Market Data In this presentation, we refer to certain information and statistics from third-party sources. Although we believe that these sources are reliable, we have not independently verified the accuracy or completeness of such third-party sources and disclaim any liability with respect to the data therein that have been included in this presentation and cannot guarantee their accuracy or completeness. Safe Harbor Statement and Non-GAAP Financial Measures 3
Agenda 1. Introduction 2. Business Review 3. Financial Review 4. Q&A Mark Donohue Vice President Investor Relations Jonathan Gear Chief Executive Officer Jonathan Collins Executive Vice President and Chief Financial Officer All 4
Jonathan Gear Chief Executive Officer 2. Business Review
Q3 2023 highlights 6 2% organic growth 43.5% margin1 +80bps YoY 74% YoY YTD +1₵ YoY Revenues Adj. EBITDA¹ Free Cash Flow1 Adj. EPS1 $647M $281M $102M 21₵ 1See the Appendix for a reconciliation of GAAP to Non-GAAP measures. Academia & Government Organic growth 3% Alma wins at Yale and OhioLINK Intellectual Property Organic growth (1%) Launched AI-powered IP forecast tool Life Sciences & Healthcare Organic growth 2% Launched AI-powered enhanced search
A&G organic growth accelerated to 3% 7 A&G Segment Highlights • Yale University selects Clarivate to provide their next library services and discovery platforms using Alma and Primo • OhioLINK (entire state of Ohio), academic library consortium, selected Clarivate to provide a new cloud-based platform, enhancing library user experiences, across 117 libraries • Established Academia & Government Innovation Incubator to accelerate growth strategy to advance knowledge through research and education • Acquired Alethea, an AI Student Engagement Solution, the Incubator’s first program focused on realizing better learning outcomes and student success A&G Business Performance • Strongest revenue growth across last five quarters • Solid growth momentum across Content Aggregation transactional sales in Q3 • Library workflow software wins across major universities will continue to propel momentum in Q4 and early 2024
IP pressure due to economic and budget headwinds 8 IP Segment Highlights • Launched AI-powered tool to simplify IP budgets and forecasts enabling customers to confidently and efficiently optimize IP portfolios and strategy • Secured multi-year deal with a large Indian telecommunication provider to deliver patent services • Held inaugural Clarivate Patent Intelligence User Conference discussing future product roadmaps (Derwent) and innovation in patent intelligence IP Business Performance • Economic / budget pressures and the ongoing US Actors strike continues to impact the Trademark (CompuMark) and Patent transactional search business lines • Notification of delay in USPTO new contract to 2024 will reduce Q4 revenue expectations • IP software continues to deliver strong high single-digit growth
LS&H improved performance with 2% organic growth 9 LS&H Segment Highlights • Launched enhanced search powered by Generative Artificial Intelligence; enabling clinical, regulatory affairs and strategy teams to interact with complex datasets using natural language to obtain immediate and in-depth insights • Enhanced Real World Data business with additional German hospital prescribing data, reinforcing position as a leading provider of real-world data solutions in Europe Published emerging AI drug discovery companies report assessing the changing AI/ML landscape based on our proprietary data LS&H Business Performance • Improved performance in our consulting business, secured a large engagement with a global Top 20 Pharma¹ to extend our partnership in Epidemiology analytics supporting market access and clinical trials • Signed strategic agreement with a leading US biotech to accelerate commercial and market strategy for the lead drug candidate • Negative subscription revenue growth due to lower TTM real-world data sales as well as the impact of mid-term cancellations and timing of renewals 1Top 20 Pharma Companies by 2022 Revenue (FiercePharma)
Jonathan Collins Chief Financial Officer 3. Financial Review
Q3 and YTD 2023 Financial Results 11 Changes from Prior Year $m except per share data Q3 ‘23 Q3 ‘22 Change YTD ’23 YTD ‘22 Change Revenues, net $647 $636 $11 $1,945 $1,985 $(40) Income / (Loss) from Operations 87 (4,375) 4,462 54 (4,244) 4,298 M-t-M Gain on private warrants (13) (53) 40 (14) (203) 189 Interest Expense, Net 72 72 0 219 193 26 Income Tax Expense (Benefit) 16 22 (6) (83) 49 (132) Net Loss to ordinary shares $(7) $(4,434) $4,427 $(124) $(4,340) $4,216 Net Loss Per Share, basic $(0.01) $(6.58) $6.57 $(0.18) $(6.41) $6.23 Adjusted EBITDA1 281 272 9 819 808 11 Adjusted EBITDA Margin1 43.5% 42.7% 80 bps 42.1% 40.7% 140 bps Adjusted Diluted EPS1 $0.21 $0.20 $0.01 $0.59 $0.63 $(0.04) Operating Cash Flow $163 $208 $(44) $553 $372 $181 Capital Spending 62 67 5 179 157 (22) Free Cash Flow1 102 140 (39) 375 216 159 Revenues • Q3 revenues higher due to organic growth and favorable FX YoY, partially offset by divestiture of MarkMonitor Domains business in Q4 2022 Net Income • Prior year $4.4 billion impairment of goodwill related to the CPA Global and ProQuest acquisitions Operating Cash Flow • Operating cash flow decrease due to working capital requirements; year-to-date up $181 million versus prior year 1See the Appendix for a reconciliation of GAAP to Non-GAAP measures. Amounts in table may not sum due to rounding
Changes from Prior Year Q3 2023 Revenues and Adj. EBITDA1 12 Organic Growth • Organic growth at 2% • Higher profit conversion due to operating expense efficiencies Inorganic Impact • Divestiture of MarkMonitor business in Q4 2022 Cost Synergies • Carryover savings from PQ acquisition integration now complete, net of certain costs to achieve Foreign Exchange • Favorable translation impact on weaker USD • Lower profit conversion due to transactional FX gains in prior year not repeated in Q3 2023 1See the Appendix for a reconciliation of GAAP to Non-GAAP measures. Q3 2022A Organic Inorganic Cost Synergies FX Q3 2023A $636 $11 ($19) $20 $647 $272 42.7% $281 43.5% $10 ($11) $10 $1 Revenues Adj. EBITDA1 Year + Better - Worse $ millions Amounts in table may not sum due to rounding
Q3 and YTD 2023 Cash Flow 13 Changes from Prior Year Free Cash Flow • Lower one-time costs as ProQuest cost synergies are complete • Lower cash taxes due to effective tax planning • Higher working capital due to partial unwinding of H1 favorable variance, due to timing Capital Allocation • Repurchased $100 million of ordinary shares in Q3 • Net leverage remained at 4x in Q3 1See the Appendix for a reconciliation of GAAP to Non-GAAP measures. $m Q3 ‘23 Q3 ‘22 Change YTD ’23 YTD ‘22 Change Adj. EBITDA1 $281 $272 $9 $819 $808 11 One-Time Costs (7) (16) 9 (54) (199) 145 Interest (40) (39) (1) (177) (152) (25) Taxes (7) (21) 14 (29) (44) 15 Working Capital / Other (64) 12 (76) (6) (41) 35 Operating Cash Flow 163 208 (44) 553 372 181 Capital Spending (62) (67) 5 (179) (157) (22) Free Cash Flow1 $102 $140 $(39) $375 $216 $159 Conversion 36% 52% -16%pts 46% 27% 19%pts Preferred Dividend (19) (19) - (57) (57) - Share Repurchase (100) - (100) (100) (175) 75 Debt Repayment - (7) 7 (150) (22) (128) Other (20) (25) 5 (18) 56 (74) Cash Flow $(37) $89 $(126) $50 $18 $32 Amounts in table may not sum due to rounding
Reaffirming FY 2023 Outlook 14 Reaffirmed Full Year Guidance Ranges Organic Growth • Expect Q4 approaching 1% largely due to USPTO contract delay and the impact of challenging macro on trademark volumes and commercialization budgets in Life Sciences and Healthcare Revenues • Current indication remains at mid- point as organic reduction is offset by timing of small IP divestiture (October to December ‘23) and favorable FX rates Profit Margin, EPS and FCF • Current indication remains at mid- point of ranges 1See the Appendix for a reconciliation of GAAP to Non-GAAP measures. Current IndicationGuidance Range Organic Growth 0.0% 2.0% ~0.5% Free Cash Flow1 $450m $500m Profit Margin1 42.0% 42.5% ~42.25% Adj. Diluted EPS1 ~80₵ Revenues $2,600m ~$2,635m $2,670m Adj. EBITDA1 $1,090m ~$1,115m $1,140m 83₵77₵ ~$475m
FY 2023 Revenues and Adj. EBITDA1 Outlook 15 Organic Growth • Driven by A&G segment and partially offset by decline in LS&H; IP expected to be flat Inorganic Impact • MarkMonitor divestment in Q4 2022 Cost Synergies • Carry over savings from PQ acquisition integration, net of certain costs to achieve Foreign Exchange • Favorable translation impact on weaker USD • Profit headwind despite revenue benefit as transactional FX gains in ‘22 will not repeat in ’23 1See the Appendix for a reconciliation of GAAP to Non-GAAP measures. 2022A Organic Inorganic Cost Synergies FX 2023T $2,660 ~$15 ~($65) ~$25 ~$2,635 $1,113 41.8% ~$1,115 ~42.3% ~$0 ~($30) ~$40 ~($5) Changes from Prior Year Revenues Adj. EBITDA1 Year + Better - Worse $ millions Amounts in table may not sum due to rounding
FY 2023 Cash Flow Outlook 16 Changes from Prior Year Free Cash Flow • One-time costs better than prior year due to materially lower acquisition integration costs • Interest cost increase due to higher interest rates partially offset by deleveraging • Lower working capital requirements offsetting increased capital spending to drive product innovation Capital Allocation • Plan to utilize Q4 cashflow to prepay term loan • Anticipate achieving net leverage target of ~4x by year end 1See the Appendix for a reconciliation of GAAP to Non-GAAP measures. 2 2022 actuals includes costs related to acquisitions and divestitures and change in restricted cash relating to the CPA Global employee benefits payment. $m 2023 Outlook 2022 Actuals Change Adj. EBITDA1 ~$1,115 $1,113 ~$0 One-Time Costs ~(60) (215) ~155 Interest ~(275) (252) ~(25) Taxes ~(50) (64) ~15 Working Capital / Other ~(10) (73) ~65 Operating Cash Flow ~720 509 ~210 Capital Spending ~(245) (203) ~(40) Free Cash Flow1 ~$475 $306 ~$170 Conversion ~43% 28% ~15% Preferred Dividend ~(75) (75) ~0 Share Repurchase (100) (175) 75 Debt Repayment (300) (500) 200 Other2 ~0 362 ~(360) Cash Flow ~$0 $(82) ~$80
Financial Objectives 17 Q3 KPIs... 2% Organic Growth 80bps Profit Margin Expansion 74% YTD Free Cash Flow Growth $100M Share Repurchase Accelerate organic growth to market levels 1 Durable margins through the investment cycle 2 Attractive cash flow engine 3 Disciplined capital allocation 4 In Line / Exceeding Expectations Below Expectations
4. Q&A Session
© 2023 Clarivate Clarivate and its logo, as well as all other trademarks used herein are trademarks of their respective owners and used under license. About Clarivate Clarivate is the leading global information services provider. We connect people and organizations to intelligence they can trust to transform their perspective, their work and our world. Our subscription and technology-based solutions are coupled with deep domain expertise and cover the areas of Academia & Government, Life Sciences & Healthcare and Intellectual Property. For more information, please visit clarivate.com
Appendix
This presentation contains financial measures which have not been calculated in accordance with generally accepted accounting principles in the United States of America (“US GAAP“), including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS and Free Cash Flow because they are a basis upon which our management assesses our performance, and we believe they reflect the underlining trends and indicators of our business. Adjusted EBITDA Adjusted EBITDA represents Net income (loss) before the provision for income taxes, depreciation and amortization, interest income and expense adjusted to exclude acquisition and disposal-related transaction costs (such costs include net income from continuing operations before provision for income taxes, depreciation and amortization and interest income and expense from divestitures), share-based compensation, mandatory convertible preferred share dividend expense, unrealized foreign currency remeasurement, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues prior to the adoption of FASB ASU No. 2021-08 in 2021, non-operating income or expense, the impact of certain non-cash mark-to-market adjustments on financial instruments, legal settlements, impairments, and other items that are included in net income (loss) for the period that the Company does not consider indicative of its ongoing operating performance and certain unusual items impacting results in a particular period. In evaluating Adjusted EBITDA, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the included adjustments. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company’s future results will be unaffected by any of the adjusted items, or that the Company’s projections and estimates will be realized in their entirety or at all. © 2023 Clarivate Plc. All rights reserved. 21 Presentation of Certain Non-GAAP Financial Measures 21
Adjusted EBITDA The use of Adjusted EBITDA instead of US GAAP has limitations as an analytical tool, and you should not consider Adjusted EBITDA in isolation, or as a substitute for analysis of the Company’s results of operations and operating cash flows as reported under US GAAP. For example, Adjusted EBITDA does not reflect: – the Company’s cash expenditures or future requirements for capital expenditures – changes in, or cash requirements for, the Company’s working capital needs – interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’s debt – any cash income taxes that the Company may be required to pay – any cash requirements for replacements of assets that are depreciated or amortized over their estimated useful lives and may have to be replaced in the future – all non-cash income or expense items that are reflected in the Company’s statements of cash flows The Company’s definition of and method of calculating Adjusted EBITDA may vary from the definitions and methods used by other companies when calculating Adjusted EBITDA, which may limit their usefulness as comparative measures. The Company prepared the information included in this presentation based upon available information and assumptions and estimates that it believes are reasonable. The Company cannot assure you that its estimates and assumptions will prove to be accurate. Adjusted EBITDA Margin Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Revenues, net plus the impact of the deferred revenue purchase accounting adjustments relating to acquisitions prior to 2021. © 2023 Clarivate Plc. All rights reserved. 22 Presentation of Certain Non-GAAP Financial Measures 22
Adjusted Net Income and Adjusted Diluted EPS We use Adjusted Net Income and Adjusted Diluted Earnings Per Share ("Adjusted Diluted EPS") in our analysis of the financial performance of the Company. We believe Adjusted Net Income and Adjusted Diluted EPS are meaningful measures of the performance of the Company because they adjust for items that do not directly affect our ongoing operating performance in the period. Adjusted Net Income is calculated using Net income (loss), adjusted to exclude acquisition or disposal-related transaction costs (such costs include net income from continuing operations before the provision for income taxes, depreciation and amortization and interest income and expense from the divested business), amortization related to acquired intangible assets, share- based compensation, mandatory convertible preferred share dividend expense, unrealized foreign currency remeasurement, transformational and restructuring expenses, acquisition- related adjustments to deferred revenues, the impact of certain non-cash mark-to-market adjustments on financial instruments, legal settlements, impairments, and other items that are included in net income (loss) for the period that the Company does not consider indicative of its ongoing operating performance and certain unusual items impacting results in a particular period, and the income tax impact of any adjustments. We calculate Adjusted Diluted EPS by using Adjusted Net Income divided by Adjusted diluted weighted average shares for the period. The Adjusted diluted weighted average shares assumes that all instruments in the calculation are dilutive. Free Cash Flow We use Free Cash Flow in our operational and financial decision-making and believe Free Cash Flow is useful to investors because similar measures are frequently used by securities analysts, investors, ratings agencies and other interested parties to evaluate the ability of companies to service their debt. Free Cash Flow is calculated using net cash provided by operating activities, less capital expenditures. © 2023 Clarivate Plc. All rights reserved. 23 Presentation of Certain Non-GAAP Financial Measures 23
Net Income (Loss) to Adjusted EBITDA © 2023 Clarivate Plc. All rights reserved. 24 Three Months Ended September 30, Nine Months Ended September 30, (in millions); (unaudited) 2023 2022 2023 2022 Net loss attributable to ordinary shares $ (6.6) $ (4,434.4) $ (123.6) $ (4,339.9) Dividends on preferred shares 18.9 18.9 56.3 56.3 Net income (loss) 12.3 (4,415.5) (67.3) (4,283.6) Provision (benefit) for income taxes 15.6 22.1 (83.3) 48.9 Depreciation and amortization 176.8 169.7 527.5 521.7 Interest expense and amortization of debt discount, net 71.9 71.5 218.5 193.3 Deferred revenues adjustment — 0.3 — 0.9 Transaction related costs(1) 2.7 (3.7) 5.1 8.1 Share-based compensation expense 25.4 20.8 97.1 79.9 Restructuring and lease impairments(2) 3.7 26.0 25.3 56.9 Goodwill and intangible asset impairments(3) — 4,448.6 135.2 4,448.6 Mark to market gain on financial instruments(4) (12.6) (53.3) (14.4) (202.7) Other(5) (14.4) (14.9) (24.7) (63.7) Adjusted EBITDA $ 281.4 $ 271.6 $ 819.0 $ 808.3 Adjusted EBITDA Margin 43.5 % 42.7% 42.1% 40.7% Descriptions Adjusted EBITDA adjustments 1. Includes costs incurred to complete business combination transactions, including acquisitions, dispositions and capital market activities and include advisory, legal, and other professional and consulting costs. 2. Primarily reflects severance and related benefit costs related to approved restructuring programs. 3. During the nine months ended September 30, 2023, the Company recorded an impairment charge of $132.2 in connection with intangible assets classified as assets held-for-sale and a $3.0 goodwill impairment charge associated with the disposal group's allocated portion of the IP segment reporting unit's goodwill balance. During the three months ended September 30, 2022, a quantitative goodwill impairment assessment was performed over the Company's reporting units, resulting in goodwill impairment of $4,448.6 for the three and nine months ended September 30, 2022. 4. Reflects mark-to-market adjustments on the Private Placement Warrants under ASC 815, Derivatives and Hedging. 5. The current and prior year periods include the unrealized net gain or loss on foreign exchange re-measurement and other individually insignificant items that do not reflect our ongoing operating performance. The current year-to- date period also includes a $49.4 gain on legal settlement Reconciliation of Non-GAAP Financial Measures 24
FY 2022 Net Loss to Adjusted EBITDA © 2023 Clarivate Plc. All rights reserved. 25 Descriptions Adjusted EBITDA adjustments 1. Reflects the deferred revenues adjustment made as a result of purchase accounting prior to the adoption of ASU No. 2021-08, "Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". This guidance was applied retrospectively to all business combinations for which the acquisition date occurs during or subsequent to 2021. 2. Includes costs incurred to complete business combination transactions, including acquisitions, dispositions and capital market activities and include advisory, legal, and other professional and consulting costs. 3. Represents the net gain from the sale of the MarkMonitor Domain Management business. 4. Primarily reflects costs related to restructuring and impairment associated with the One Clarivate and ProQuest restructuring programs. 5. Reflects mark-to-market adjustments on the Private Placement Warrants under ASC 815, Derivatives and Hedging. 6. Primarily reflects the net impact of foreign exchange gains and losses related to the re- measurement of balances and other items that do not reflect our ongoing operating performance. Year Ended December 31, (in millions); (unaudited) 2022 Net loss attributable to ordinary shares $ (4,035.6) Dividends on preferred shares 75.4 Net loss (3,960.2) (Benefit) provision for income taxes (28.9) Depreciation and amortization 710.5 Interest expense and amortization of debt discount, net 270.3 Deferred revenues adjustment(1) 1.0 Transaction related costs(2) 14.2 Share-based compensation expense 102.2 Gain on sale of divestitures(3) (278.5) Restructuring and impairment(4) 66.7 Goodwill impairment 4,449.1 Mark to market gain on financial instruments(5) (206.8) Other(6) (26.9) Adjusted EBITDA $ 1,112.7 Adjusted EBITDA Margin 41.8 % Reconciliation of Non-GAAP Financial Measures 25
© 2023 Clarivate Plc. All rights reserved. 26 Descriptions Adjusted Net Income and Adjusted Diluted EPS adjustments 1. Includes costs incurred to complete business combination transactions, including acquisitions, dispositions and capital market activities and include advisory, legal, and other professional and consulting costs. 2. Primarily reflects severance and related benefit costs related to approved restructuring programs. 3. During the three months ended September 30, 2022, a quantitative goodwill impairment assessment was performed over the Company's reporting units, resulting in goodwill impairment of $4,448.6 for the three and nine months ended September 30, 2022. 4. Reflects mark-to-market adjustments on the Private Placement Warrants under ASC 815, Derivatives and Hedging. 5. The current and prior year periods include the unrealized net gain or loss on foreign exchange re-measurement and other individually insignificant items that do not reflect our ongoing operating performance. Three Months Ended September 30, 2023 2022 (in millions, except per share amounts); (unaudited) Amount Per Share Amount Per Share Net loss attributable to ordinary shares, diluted $ (6.6) $ (0.01) $ (4,483.4) $ (6.64) Change in fair value of private placement warrants — — 49.0 0.07 Net loss attributable to ordinary shares (6.6) (0.01) (4,434,4) (6.58) Dividends on preferred shares 18.9 0.03 18.9 0.03 Net income (loss) 12.3 0.02 (4,415.5) (6.54) Deferred revenues adjustment — — 0.3 — Transaction related costs(1) 2.7 — (3.7) (0.01) Share-based compensation expense 25.4 0.04 20.8 0.03 Amortization related to acquired intangible assets 141.9 0.21 141.2 0.21 Restructuring and lease impairments(2) 3.7 0.01 26.0 0.04 Goodwill and intangible asset impairments(3) — — 4,448.6 6.59 Mark to market gain on financial instruments(4) (12.6) (0.02) (53.3) (0.08) Other(5) (14.4) (0.04) (14.9) (0.03) Income tax impact of related adjustments (6.4) (0.01) (5.8) (0.01) Adjusted Net Income and Adjusted Diluted EPS $ 152.6 $ 0.21 $ 143.7 $ 0.20 Adjusted weighted average ordinary shares (Diluted) 731.4 732.9 Reconciliation of Non-GAAP Financial Measures (QTD) 26 Net Loss and Net Loss Per Share to Adjusted Net Income and Adjusted Diluted EPS
© 2023 Clarivate Plc. All rights reserved. 27 Descriptions Adjusted Net Income and Adjusted Diluted EPS adjustments 1. Includes costs incurred to complete business combination transactions, including acquisitions, dispositions and capital market activities and include advisory, legal, and other professional and consulting costs. 2. Primarily reflects severance and related benefit costs related to approved restructuring programs. 3. During the nine months ended September 30, 2023, the Company recorded an impairment charge of $132.2 in connection with intangible assets classified as assets held-for-sale and a $3.0 goodwill impairment charge associated with the disposal group's allocated portion of the IP segment reporting unit's goodwill balance. 4. Reflects mark-to-market adjustments on the Private Placement Warrants under ASC 815, Derivatives and Hedging. 5. The current and prior year periods include the unrealized net gain or loss on foreign exchange re-measurement and other individually insignificant items that do not reflect our ongoing operating performance. The current year-to- date period also includes a $49.4 gain on legal settlement. Nine Months Ended September 30, 2023 2022 (in millions, except per share amounts); (unaudited) Amount Per Share Amount Per Share Net loss attributable to ordinary shares, diluted $ (123.6) $ (0.18) $ (4,530.6) $ (6.66) Change in fair value of private placement warrants — — 190.7 0.28 Net loss attributable to ordinary shares (123.6) (0.18) (4,339.9) (6.38) Dividends on preferred shares 56.3 0.08 56.3 0.08 Net loss (67.3) (0.10) (4,283.6) (6.29) Deferred revenues adjustment — — 0.9 — Transaction related costs(1) 5.1 0.01 8.1 0.01 Share-based compensation expense 97.1 0.14 79.9 0.12 Amortization related to acquired intangible assets 429.8 0.64 437.1 0.64 Restructuring and lease impairments(2) 25.3 0.04 56.9 0.08 Goodwill and intangible asset impairments(3) 135.2 0.20 4,448.6 6.54 Mark-to-market gain on financial instruments(4) (14.4) (0.02) (202.7) (0.30) Other(5) (24.7) (0.10) (63.7) (0.14) Income tax impact of related adjustments (150.4) (0.22) (17.5) (0.03) Adjusted net income and Adjusted Diluted EPS $ 435.7 $ 0.59 $ 464.0 $ 0.63 Adjusted weighted average ordinary shares (Diluted) 733.6 739.0 Reconciliation of Non-GAAP Financial Measures (YTD) 27 Net Loss and Net Loss Per Share to Adjusted Net Income and Adjusted Diluted EPS
© 2023 Clarivate Plc. All rights reserved. 28 Three Months Ended September 30, Nine Months Ended September 30, (in millions); (unaudited) 2023 2022 2023 2022 Net cash provided by operating activities $ 163.4 $ 207.8 $ 553.3 $ 372.4 Capital expenditures (61.7) (67.4) (178.6) (156.5) Free cash flow $ 101.7 $ 140.4 $ 374.7 $ 215.9 (in millions); (unaudited) Year ended December 31, 2022 Net cash provided by operating activities $ 509.3 Capital expenditures (202.9) Free cash flow $ 306.4 Reconciliation of Non-GAAP Financial Measures 28 Net Cash Provided By Operating Activities to Free Cash Flow
© 2023 Clarivate Plc. All rights reserved. 29 Year Ending December 31, 2023 (Forecasted) (in millions) Low High Net loss attributable to ordinary shares $ (182) $ (132) Dividends on preferred shares(1) 75 75 Net loss (107) (57) (Benefit) provision for income taxes (63) (63) Depreciation and amortization 707 707 Interest expense and amortization of debt discount, net 292 292 Restructuring and lease impairments(2) 30 30 Goodwill and intangible asset impairments(3) 135 135 Transaction related costs 5 5 Mark to market adjustment on financial instruments (14) (14) Share-based compensation expense 130 130 Other(4) (25) (25) Adjusted EBITDA $ 1,090 $ 1,140 Adjusted EBITDA margin 42.0 % 42.5 % Descriptions 1. Dividends on our mandatory convertible preferred shares (“MCPS”) are payable quarterly at an annual rate of 5.25% of the liquidation preference of $100 per share. For the purposes of calculating net loss attributable to Clarivate, we have excluded the accrued and anticipated MCPS dividends. 2. Reflects restructuring costs expected to be incurred in 2023 associated with the ProQuest acquisition and Segment Optimization restructuring programs. 3. Primarily includes the intangible assets impairment recorded during the three months ended June 30, 2023 related to Assets Held for Sale and Divested Operations 4. Primarily includes the gain on legal settlement partially offset by a net loss on foreign exchange re-measurement. Adjusted EBITDA The following table presents our calculation of Adjusted EBITDA for the FY2023 outlook and reconciles this measure to our Net income (loss) for the same period: Reconciliation of Non-GAAP Financial Measures 29
© 2023 Clarivate Plc. All rights reserved. 30 Year Ending December 31, 2023 (Forecasted) Low High Net loss attributable to ordinary shares $ (0.25) $ (0.18) Dividends on preferred shares(1) 0.10 0.10 Net loss (0.15) (0.08) Restructuring and impairments(2) 0.04 0.04 Goodwill and intangible asset impairments(3) 0.18 0.18 Share-based compensation expense 0.18 0.18 Amortization related to acquired intangible assets 0.78 0.78 Other(4) (0.04) (0.05) Income tax impact of related adjustments (0.22) (0.22) Adjusted Diluted EPS $ 0.77 $ 0.83 Weighted average ordinary shares (Diluted)(5) 734 million Descriptions Adjusted Diluted EPS Adjustments 1. Dividends on our mandatory convertible preferred shares (“MCPS”) are payable quarterly at an annual rate of 5.25% of the liquidation preference of $100 per share. For the purposes of calculating net loss attributable to Clarivate, we have excluded the accrued and anticipated MCPS dividends. 2. Primarily reflects restructuring costs expected to be incurred in 2023 associated with the ProQuest acquisition and Segment Optimization restructuring programs. 3. Primarily includes the intangible assets impairment recorded in connection with a disposal group held-for-sale as of June 30, 2023 4. Primarily includes the gain on legal settlement offset by a net loss on foreign exchange re-measurement. 5. For the purposes of calculating adjusted earnings per share, the Company has excluded the accrued and anticipated MCPS dividends and assumed the “if-converted” method of share dilution. The following table presents our calculation of Adjusted Diluted EPS for the FY2023 outlook and reconciles this measure to our Net income (loss) per share for the same period: Reconciliation of Non-GAAP Financial Measures 30 Net Income (Loss) Per Fully Diluted Weighted Shares Outstanding to Adjusted Diluted EPS
© 2023 Clarivate Plc. All rights reserved. 31 Year Ending December 31, 2023 (Forecasted) (in millions) Low High Net cash provided by operating activities $ 695 $ 745 Capital expenditures (245) (245) Free cash flow $ 450 $ 500 Reconciliation of Non-GAAP Financial Measures 31 Net Cash Provided by Operating Activities to Free Cash Flow The following table presents our calculation of Free cash flow for the FY2023 outlook and reconciles this measure to our Net cash provided by operating activities for the same period:
v3.23.3
Document and Entity Information Document
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Nov. 07, 2023 |
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Nov. 07, 2023
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CLARIVATE PLC
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001-38911
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70 St. Mary Axe
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London
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EC3A 8BE
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GB
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44
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London
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EC3A 8BE
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GB
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Y9
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5.25% Series A Mandatory Convertible Preferred Shares, no par value
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