— Provides Updated 2020 Outlook —
London, UK — October 29, 2020 – Clarivate Plc (NYSE: CCC) (the “Company” or “Clarivate”), a global leader in providing trusted information and insights to accelerate the pace of innovation, today reported results for the third quarter ended September 30, 2020.
Third Quarter 2020 Financial Highlights
- Revenues of $284.4 million increased 17.0% on a reported basis and up 15.2% at constant currency(1)
- Adjusted revenues(1) of $286.5 million increased 17.9% on a reported basis and excluding divested businesses increased 21.6% at constant currency(1)
- Net loss of $37.2 million or $(0.10) per diluted share and adjusted net income(1) of $58.5 million or $0.14 per diluted share
- Adjusted EBITDA(1) of $108.2 million increased 40.5%
- Total cash and cash equivalents of $601.1 million increased $524.9 million
Selected Financial Information
The results for the three and nine months ended September 30, 2020 includes contribution from the acquisition of Decision Resources Group (“DRG”), which was completed at the end of February 2020, and Darts-ip, which was completed in November 2019, for which there were no comparable amounts in the prior year period. The current year periods exclude the results of the MarkMonitor Brand Protection, Antipiracy, and Antifraud products, which were divested on January 1, 2020.
(Amounts in tables may not sum due to rounding)
- Non-GAAP measure. Please see “Reconciliation 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 press release.
- Calculated assuming a net income position compared to a net loss position on the statement of operations for calculating Adjusted net income and Adjusted diluted EPS.
“I am pleased with our improved third quarter results including organic subscription revenue growth as demand for our products remains strong,” said Jerre Stead, Executive Chairman and CEO of Clarivate. “With the acquisition of CPA Global now completed, we have swiftly shifted to integration activities and will begin to realize the many strategic and financial benefits of this transaction. My colleagues have done an exceptional job working through the current global pandemic and we look forward to updating you at our upcoming Virtual Investor Day on November 10th.”
Third Quarter 2020 Operating Results
Revenues, net, for the third quarter of 2020 increased $41.4 million, or 17.0%, to $284.4 million, compared to the prior-year period. Adjusted revenues, net, which excludes the impact of deferred revenues resulting from purchase accounting adjustments primarily related to acquisitions, increased $43.4 million or 17.9%, to $286.5 million, compared to the third quarter of 2019.
Subscription revenues for the third quarter of 2020 increased $21.3 million, or 10.6%, to $222.1 million, compared to the prior-year period, primarily driven by the acquisitions of Darts-ip and DRG in February 2020, partially offset by the MarkMonitor divested products. Excluding the impact of acquisitions and divestitures, organic subscription revenues increased $7.1 million, or 3.5% on a constant currency basis, compared to the third quarter of 2019, primarily due to new business and price increases.
Transactional revenues for the third quarter of 2020 increased $22.1 million, or 52.4%, to $64.4 million, compared to the prior-year period, primarily driven by acquisitions. Excluding the impact of acquisitions and divestitures, organic transactional revenues decreased $6.8 million, or 16.2% on a constant currency basis, compared to the third quarter of 2019, due to an overall decrease in demand primarily driven by economic conditions resulting from the COVID-19 pandemic.
Net loss for the third quarter of 2020 was $37.2 million, or ($0.10) per share, compared to Net Income of $10.8 million, or $0.04 per share, in the prior-year period. The year-over-year decline is primarily due to higher amortization and transaction related expenses as a result of acquisitions in the current year period. Additionally, the third quarter of 2019 included proceeds of $39.4 million from a legal settlement, for which there was no comparable amount in the current year period.
Adjusted EBITDA for the third quarter of 2020 increased by 40.5% to $108.2 million, compared to the prior-year period, driven by higher revenues and ongoing cost savings initiatives.
Adjusted net income for the third quarter of 2020 increased by 23.2% to $58.5 million, compared to the prior year period, driven by higher revenues and ongoing cost savings initiatives. Adjusted diluted earnings per share was $0.14 for the third quarter of 2020, compared to $0.14 in the prior-year period. The third quarter of 2020 diluted earnings per share was negatively impacted by an increase of 78.7 million or 23.9%, in the diluted weighted average ordinary shares outstanding, primarily due to the issuance of ordinary shares in conjunction with the acquisition of DRG and the exercise of public warrants during the first quarter of 2020.
Balance Sheet and Cash Flow
At September 30, 2020 cash and cash equivalents of $601.1 million increased $524.9 million, compared to December 31, 2019. The increase was primarily due to proceeds of $304.0 million from the sale of ordinary shares of Clarivate in June 2020 and $277.5 million received from the voluntary exercise of 24.1 million warrants in exchange for ordinary shares of Clarivate during the first quarter of 2020, as well as contributions from operational cash flows.
The Company’s total debt outstanding at September 30, 2020 was $1,950.6 million, an increase of $285.6 million compared to December 31, 2019 due to a term loan of $360.0 million incurred during the first quarter of 2020 with net proceeds used to fund a portion of the DRG acquisition, offset by a $65.0 million repayment of the revolver in full. Net debt, or debt minus unrestricted cash and cash equivalents, at September 30, 2020 was $1,349.5 million, compared to $1,588.9 million as of December 31, 2019.
Net cash provided by operating activities was $128.0 million for the nine months ended September 30, 2020, compared to net cash provided by operating activities of $112.5 million for the prior year period. Adjusted free cash flow for the nine months ended September 30, 2020 was $128.5 million, an increase of $61.6 million, compared to the prior year period, as a result of growth in revenues and operational efficiencies, partially offset by higher capital expenditures resulting from an acceleration of product development and the addition of DRG. Additionally, the third quarter of 2019 included the adjustment for proceeds of $45.3 million from a legal settlement, for which there was no comparable amount in the current year period.
Updated Outlook for 2020 (forward-looking statement)
The full year 2020 outlook presented below includes the fourth quarter of 2020 outlook for the acquisition of CPA Global, which was completed on October 1, 2020, and assumes no further currency movements, acquisitions, divestitures, or unanticipated events. Clarivate will provide its full year 2021 outlook reflecting the acquisition of CPA Global at its Investor Day, which will be held on November 10, 2020.
The below outlook includes Non-GAAP measures. Please see “Reconciliation to Certain Non-GAAP measures” presented below for important disclosure and reconciliations of these financial measures to the most directly comparable GAAP measure. These terms are defined elsewhere in this earnings press release.
Adjusted diluted EPS for 2020 is calculated based on approximately 453.3 million fully diluted weighted average shares outstanding. In connection with the closing of the CPA Global transaction, former CPA Global shareholders received approximately 218 million Clarivate ordinary shares on October 1. The 453.3 million fully diluted weighted average shares outstanding includes the fourth quarter weighted average of the approximately 218 million shares issued in the full year share calculation.
Conference Call and Webcast
Clarivate will host a conference call and webcast today to review the results for the second quarter at 8:00 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 1-888-317-6003 in the United States, 1-412-317-6061 for international, and 1-866-284-3684 in Canada. The conference ID number is 9584356. An audio replay will be available approximately two hours after the completion of the call at 1-877-344-7529 in the United States, 1-412-317-0088 for international, and 1-855-669-9658 in Canada. The Replay Conference ID number is 10139889. The recording will be available for replay through November 10, 2020. The webcast can be accessed at https://services.choruscall.com/links/ccc201105.html and will be available for replay.
Investor Day Conference on November 10, 2020
Clarivate will host a Virtual Investor Day Conference on Tuesday, November 10, 2020. Management will provide an update on the business, with presentations starting at 10:00 AM Eastern Time and concluding at approximately 1:00 PM Eastern Time.
All are invited to listen to the event and view the presentation via webcast on the Clarivate Investor Relations website at http://ir.clarivate.com/. To join the webcast please visit http://bit.ly/ClarivateInvestorDay2020. A replay will also be available as a webcast on the investor relations section of the Company’s website.
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 Revenues, EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Free Cash Flow, Adjusted Free Cash Flow, and Standalone Adjusted EBITDA and net debt 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.
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 our acquisition of CPA Global, 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 sufficiently liquidity to fund our ongoing business operations; expectations of the effect on our financial condition of claims, litigation, environmental costs, the COVID-19 pandemic and governmental responses thereto, 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 are more fully discussed under the caption “Risk Factors” in our 2019 Annual Report on Form 10-K, in Part II, Item 1A of our quarterly reports on Form 10-Q for the periods ended March 31, 2020 and June 30, 2020, and in our current report on Form 8-K filed on June 19, 2020, 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.
Clarivate™ is a global leader in providing solutions to accelerate the lifecycle of innovation. Our bold mission is to help customers solve some of the world’s most complex problems by providing actionable information and insights that reduce the time from new ideas to life-changing inventions. Covering scientific and academic research, pharmaceutical, biotech and healthcare intelligence and intellectual property services, we help customers discover, protect and commercialize their inventions using our trusted subscription and technology-based solutions coupled with deep domain expertise. For more information, please visit clarivate.com.