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Clarivate Analytics Reports Third Quarter 2019 Results

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Reaffirms Outlook for 2019

- Revenues $243.0 million, consistent on reported basis and up 0.4% at constant currency

- Adjusted Revenues* $243.1 million, up 3.2% on reported basis and up 3.6% at constant currency

- Net income $10.8 million compared to net loss of $54.7 million

- Net cash from operating activities $112.4 million compared to $25 million in the prior year period

- Free cash flow* $68.7 million compared to use of $11.2 million in the prior year period

- Adjusted EBITDA* $77.0 million, up 16.1% on reported basis

- Annual Contract Value (ACV) of Subscription – based agreements, 3.9% at constant currency

* 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. In addition, we are required to report Standalone Adjusted EBITDA pursuant to the terms of our credit agreement and indenture. These terms are defined elsewhere in this earnings release.

LONDON and PHILADELPHIA, Nov. 5, 2019 /PRNewswire/ -- Clarivate Analytics Plc (NYSE:CCC, CCC.WS)) (the "Company" or "Clarivate"), a global leader in providing trusted insights and analytics to accelerate the pace of innovation, today reported results for the third quarter ended September 30, 2019.

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"We accomplished a tremendous amount this quarter and also delivered strong financial results," said Jerre Stead, Executive Chairman and CEO of Clarivate. "We continue to make progress on our strategic initiatives to drive revenue growth and improve profitability, and are executing on the changes that make us more efficient and effective. In terms of performance, increases in subscription and transactional revenues, as well as continued growth in Annual Contract Value (ACV), combined with steady revenue renewal rates all contributed to the growth this quarter. I am very grateful for the team's hard work and look forward to updating you at our upcoming Investor Day in New York on November 12th."

Third Quarter 2019 Operating Results

Revenues, net remained consistent, $243.0 million for the three months ended September 30, 2019, increasing by $0.1 million, or 0.0%, from $242.9 million for the three months ended September 30, 2018. On a constant currency basis, revenues, net increased $1.0 million, or 0.4% for the three months ended September 30, 2019.

Adjusted Revenues, which exclude the impact of the deferred revenues adjustment and revenues from the IPM Product Line prior to its date of divestiture, increased $7.5 million, 3.2%, to $243.1 million in the third quarter of 2019 from $235.6 million in the third quarter of 2018. On a constant currency basis, Adjusted Revenues increased $8.4 million, or 3.6% in the third quarter of 2019.

Subscription revenues decreased by $3.5 million, or 1.7% for the three months ended September 30, 2019 and on a constant currency basis, decreased by $2.8 million, or 1.4%. Adjusted subscription revenues, which exclude the impact of the deferred revenues adjustment and revenues from the IPM Product Line prior to its date of divestiture, increased by 1.7% for the three months ended September 30, 2019 and on a constant currency basis, increased by 2.0%. The increase in adjusted subscription revenues is primarily due to price increases and new business within both the Science Product Group and IP Product Group.

Transactional revenues increased by $3.2 million, or 8.2% for the third quarter and, on a constant currency basis, increased by $3.4 million or 8.6%. Adjusted transactional revenues, which exclude the impact of the deferred revenues adjustment and revenues from the IPM Product Line prior to its date of divestiture, increased by 11.0% for the three months ended September 30, 2019 and on a constant currency basis, increased by 11.6%. The increase reflects our timing and our strategy, driven by increased backfile sales in both our Science and IP Product Groups, along with the sales of the biannually published BPVC standards.

Net income of $10.8 million, or $0.04 per share, for the third quarter 2019, compared with net loss of $54.7 million, or $(0.25) per share, in the prior-year period.

Adjusted EBITDA increased by 16.1% to $77.0 million for the three months ended September 30, 2019.

Adjusted net income of $47.5 million, or $0.14 per share, for the third quarter 2019, compared with $26.5 million, or $0.12 per share, in the prior-year period.

Nine Months Ended September 30, 2019 Operating Results

Revenues, net decreased by $3.9 million, or 0.5%, to $719.3 million for the nine months ended September 30, 2019 from $723.2 million for the nine months ended September 30, 2018 . On a constant currency basis, Revenues, net increased $1.7 million, or 0.2% for the nine months ended September 30, 2019.

Adjusted Revenues increased $13.9 million, or 2.0%, to $719.7 million for the nine months ended September 30, 2019, from $705.8 million for prior-year period. On a constant currency basis, Adjusted Revenues increased $19.5 million, or 2.8% for the nine months ended September 30, 2019.

Subscription revenues declined slightly by 0.1% for the nine months ended September 30, 2019 and on a constant currency basis increased 0.7%. Adjusted subscription revenues, which exclude the impact of the deferred revenues adjustment and revenues from the IPM Product Line prior to its date of divestiture, increased by 3.0% for the nine months ended September 30, 2019 and, on a constant currency basis, increased by 3.7%. Adjusted subscription revenues from ongoing business increased primarily due to price increases and new business within the Science Product Group and IP Product Group.

Transactional revenues decreased by 4.7% for the nine months ended September 30, 2019, and on a constant currency basis decreased by 3.7%. Adjusted transactional revenues, which exclude the impact of the deferred revenues adjustment and revenues from the IPM Product Line prior to its date of divestiture, decreased by 2.6% for the nine months ended September 30, 2019. On a constant currency basis, adjusted transactional revenues decreased by 1.6%. The decrease in adjusted transactional revenues reflect timing and the conversion of Patent Search services contracts to subscriptions.

Net loss of $126.2 million, or $(0.48) per share for the nine months ended September 30, 2019, compared with a net loss of $198.7 million, or $(0.91), in the prior-year period.

Adjusted EBITDA increased 6.3%, to $209.6 million for the nine months ended September 30, 2019.

Adjusted net income of $100.6 million, or $0.37 per share for the nine months ended September 30, 2019, compared with adjusted net income of $94.3 million, or $0.43 per share in the prior-year period.

Balance Sheet and Cash Flow

At September 30, 2019 cash and cash equivalents were $88.8 million and total debt outstanding was $1,342.5 million, resulting in net debt of $1,253.7 million. Net cash provided by operating activities was $112.4 million for the nine months ended September 30, 2019, compared to $25.0 million for the prior year period. The increase in net cash provided by operating activities was driven principally by a lower operating loss, which included the impact of a $39.4 million gain on a legal settlement and a decrease in transition, integration and other related expenses of $41.5 million. Net cash used in investing activities was $46.3 million for the nine months ended September 30, 2019, compared to $39.7 million for the prior year period. Net cash used in financing activities was $4.1 million for the nine months ended September 30, 2019, compared to $7.5 million for the prior year period. Free cash flow was $68.7 million for the nine months ended September 30, 2019, compared to $(11.2) million for the prior-year period. The increase in free cash flow was primarily due to higher net cash provided by operating activities. The current period also includes $31.0 million of merger-related expenses recognized in the second-quarter and a further $1.2 million of expenses related to the Secondary Offering in the third quarter.

Reaffirm Outlook for 2019 (forward-looking statement)

For the year ending December 31, 2019, Clarivate expects:

  • Adjusted Revenues in a range of $962 million to $995 million
  • Adjusted EBITDA in a range of $290 million to $310 million
  • Adjusted EBITDA margins of approximately 30%

We expect that annualized run-rate cost savings, net of actual cost savings realized, related to restructuring and other cost savings initiatives undertaken during 2019 (exclusive of any cost reductions in our estimated standalone operating costs) will approximate $12 million.

Additionally, we expect the difference between our actual standalone company infrastructure costs, and our estimated steady state standalone operating costs for 2019 to approximate $31 million.

The above outlook assumes no further currency movements, acquisitions, divestitures, or unanticipated events. See discussion of non-GAAP financial measures at the end of this release.

Financing Transactions

On October 31, 2019, the Company closed its previously announced private offering of $700 million in aggregate principal amount of 4.50% Senior Secured Notes due 2026 (the "Notes") and its new $1.15 billion senior secured credit facility (the "Credit Facility"). The Credit Facility consists of a $900 million term loan, fully drawn at closing, and a $250 million revolving credit facility, which was undrawn at closing.  Clarivate used the net proceeds from the offering of Notes, together with proceeds from the Credit Facility, to refinance all amounts outstanding under its existing credit facility, to redeem its 7.875% Senior Notes due 2024, and pay fees and expenses related to the foregoing.  In addition, the Company intends to fully fund its $200 million payment obligations under the agreement terminating its tax receivable agreement, as previously announced on August 22, 2019.  Any remaining proceeds will be used for general corporate purposes.

Conference Call and Webcast

Clarivate will host a conference call and webcast to review the results for the third quarter on Tuesday, November 5th 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 6154877. 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 10135649. The recording will be available for replay through November 19, 2019.

The webcast can be accessed at https://services.choruscall.com/links/ccc191105.html and will be available for replay.

Investor Day Conference on November 12, 2019

Clarivate will host an Investor Day Conference in New York City on Tuesday, November 12, 2019. Management will provide an update on the business, with presentations starting at 1:00 PM Eastern Time and concluding at approximately 4:00 PM Eastern Time. Registration is required to attend the event.

All are invited to listen to the event and view the presentation via webcast on the Clarivate Analytics Investor Relations website at http://ir.clarivate.com/. To join the webcast please visit https://services.choruscall.com/links/ccc191112.html. 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 presented only as a supplement to our financial statements based on U.S. generally accepted accounting principles ("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 and should not be considered in isolation from, or as a substitute for, financial measures calculated in accordance with GAAP.

Definitions and reconciliations of the non-GAAP measures, such as adjusted revenues, EBITDA, adjusted EBITDA and free cash flow to the most directly comparable GAAP measures are provided within the schedules attached to this release. This communication also includes certain forward-looking non-GAAP financial measures. Clarivate Analytics is unable to present a reconciliation of this forward-looking non-GAAP financial information because management cannot reliably predict all of the necessary components of such measures. Accordingly, investors are cautioned not to place undue reliance on this information.

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," "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 and predictions relating to expected operating results, such as revenue growth and earnings; strategic actions such as acquisitions, joint ventures, and dispositions, 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, 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 Registration Statement on F-1, 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 speaks 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 Analytics

Clarivate Analytics™ is a global leader in providing trusted insights and analytics to accelerate the pace of innovation. We have built some of the most trusted brands across the innovation lifecycle, including Web of Science™, Cortellis™, Derwent™, CompuMark™, MarkMonitor™ and Techstreet™. Today, Clarivate Analytics is on a bold entrepreneurial mission to help our clients reduce the time from new ideas to life-changing innovations. For more information, please visit clarivate.com.

 

Interim Condensed Consolidated Balance Sheets (Unaudited)
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