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LONDON, Oct. 28, 2021 /PRNewswire/ -- Clarivate Plc (NYSE: CLVT) (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, 2021.
Third Quarter 2021 Financial Highlights
Nine Months Ended September 30, 2021 Financial Highlights
"Clarivate delivered improved year over year results in the third quarter and we remain on track for a strong fourth quarter including organic revenue growth towards the upper-end of our 6% to 8% target with Adjusted EBITDA margins increasing to more than 50%," said Jerre Stead, Executive Chairman and CEO. "We continue to work with regulators on our pending acquisition of ProQuest and remain hopeful that we can close the transaction by the end of 2021."
The Company also announced that its Board of Directors approved the extension of its $250 million ordinary share repurchase program through January 31, 2022. The program was set to expire on October 31, 2021.
(1) | Represents a 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. |
Selected Financial Information
The results for the three and nine months ended September 30, 2021 include contributions from the following acquisitions: 1) CPA Global, which was completed in October 2020; 2) Beijing Incopat Co., Ltd ("IncoPat"), which was completed in October 2020; 3) Hanlim IPS Co., Ltd ("Hanlim"), which was completed in November 2020; and 4) Bioinfogate, which was completed in August 2021, for which there were no comparable amounts in the three and nine months ended September 30, 2020. The results for the three and nine months ended September 30, 2021 exclude the results of Techstreet, which was divested in November 2020.
Three MonthsEnded September30, | Change | Nine Months EndedSeptember 30, | Change | ||||||||||||||||||||||||||
(in millions, except percentages and per share data) | 2021 | 2020 | $ | % | 2021 | 2020 | $ | % | |||||||||||||||||||||
Revenues, net | $ | 442.1 | $ | 284.4 | $ | 157.8 | 55.5 | % | $ | 1,316.2 | $ | 798.5 | $ | 517.7 | 64.8 | % | |||||||||||||
Adjusted revenues, net(1) | $ | 442.2 | $ | 286.5 | $ | 155.7 | 54.4 | % | $ | 1,320.7 | $ | 805.9 | $ | 514.8 | 63.9 | % | |||||||||||||
Annualized Contract Value (ACV) | $ | 936.7 | $ | 860.9 | $ | 75.8 | 8.8 | % | $ | 936.7 | $ | 860.9 | $ | 75.8 | 8.8 | % | |||||||||||||
Net income (loss) | $ | 0.9 | $ | (182.0) | $ | 182.9 | 100.5 | % | $ | (105.3) | $ | (336.9) | $ | 231.6 | 68.7 | % | |||||||||||||
Net income (loss) per share | $ | 0.00 | $ | (0.47) | $ | 0.47 | 100.0 | % | $ | (0.17) | $ | (0.91) | $ | 0.74 | 81.3 | % | |||||||||||||
Weighted-average shares outstanding (diluted) | 645.9 | 387.8 | — | 66.6 | % | 622.5 | 369.0 | — | 68.7 | % | |||||||||||||||||||
Adjusted EBITDA(1) | $ | 190.0 | $ | 108.2 | $ | 81.8 | 75.6 | % | $ | 543.8 | $ | 286.6 | $ | 257.2 | 89.7 | % | |||||||||||||
Adjusted net income (loss)(1) | $ | 113.6 | $ | 58.5 | $ | 55.1 | 94.2 | % | $ | 312.0 | $ | 153.5 | $ | 158.5 | 103.3 | % | |||||||||||||
Adjusted diluted EPS(1) | $ | 0.16 | $ | 0.14 | $ | 0.02 | 14.3 | % | $ | 0.48 | $ | 0.39 | $ | 0.09 | 23.1 | % | |||||||||||||
Weighted average ordinary shares (diluted)(2) | 699.8 | 407.6 | — | 71.7 | % | 647.5 | 390.5 | — | 65.8 | % | |||||||||||||||||||
Net cash provided by operating activities | $ | 43.8 | $ | 20.5 | $ | 23.3 | 113.7 | % | $ | 305.5 | $ | 128.0 | $ | 177.5 | 138.7 | % | |||||||||||||
Free cash flow(1) | $ | 19.7 | $ | (5.5) | $ | 25.2 | 458.2 | % | $ | 219.3 | $ | 49.4 | $ | 169.9 | 343.9 | % | |||||||||||||
Adjusted free cash flow(1) | $ | 57.1 | $ | 8.9 | $ | 48.2 | 541.6 | % | $ | 315.6 | $ | 128.5 | $ | 187.1 | 145.6 | % | |||||||||||||
(Amounts in tables may not sum due to rounding) | |
(1) | 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. |
(2) | 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. |
Revenues, net, for the third quarter of 2021 increased $157.8 million, or 55.5%, to $442.1 million, compared to the prior-year period. On a constant currency basis, revenues, net, increased 54.6% for the third quarter of 2021. Adjusted revenues, net, which excludes the impact of deferred revenues resulting from purchase accounting adjustments primarily related to acquisitions, increased $155.7 million or 54.4%, to $442.2 million, compared to the third quarter of 2020. On a constant currency basis, Adjusted revenues, net, increased 53.5% for the third quarter of 2021.
Organic revenues(1), which exclude the impact of acquisitions and divestitures, increased 3.1% on a constant currency basis for the third quarter of 2021 compared to the prior year period, due to higher subscription and transactional revenues. For the nine months ended September 30, 2021, organic revenues, net, increased 4.8% at constant currency, compared to the prior year period.
Subscription revenues for the third quarter of 2021 increased $24.4 million, or 11.0%, to $246.5 million, compared to the prior-year period, primarily driven by the acquisition of CPA Global, partially offset by the Techstreet divestiture. On a constant currency basis, subscription revenues increased 10.0% for the third quarter of 2021. Organic subscription revenues(1) increased 3.2% on a constant currency basis for the third quarter of 2021 compared to the prior year period, due to higher life sciences, healthcare data solutions, and CompuMark revenues. For the nine months ended September 30, 2021, organic subscription revenues increased 3.5% at constant currency, compared to the prior year period.
Re-occurring revenues for the third quarter of 2021 were $110.4 million (no prior year comparable amount), primarily from the patent renewals business acquired in the CPA Global acquisition.
Transactional revenues for the third quarter of 2021 increased $21.0 million, or 32.5%, to $85.4 million, compared to the prior-year period. On a constant currency basis, transactional revenues increased 32.1% for the third quarter of 2021, primarily due to the acquisition of CPA Global, partially offset by the Techstreet divestiture. Organic transactional revenues(1) increased 2.7% on a constant currency basis, compared to the third quarter of 2020, due to higher trademark search volumes, stronger back file and custom data sales. For the nine months ended September 30, 2021, organic transactional revenues increased 9.4% at constant currency, compared to the prior year period.
Net income for the third quarter of 2021 was $0.9 million, or $0.00 per share, compared to Net loss of $(182.0) million, or $(0.47) per share, in the prior-year period, primarily driven by improved income from operations and mark to market adjustments on financial instruments, partially offset by higher interest expense.
Adjusted EBITDA for the third quarter 2021 was $190.0 million, an increase of $81.8 million or 75.6%, compared to the prior-year period, driven by the earnings contribution from acquisitions, organic growth and cost savings from integration programs.
Adjusted net income for the third quarter of 2021 was $113.6 million, an increase of $55.1 million or 94.2%, compared to the prior year period, driven by higher revenues and ongoing cost savings initiatives.
Adjusted diluted earnings per share was $0.16 for the third quarter of 2021, compared to $0.14 in the prior-year period, as strong growth in Adjusted net income was offset by a 71.7% increase in weighted average ordinary shares outstanding primarily driven by the acquisition of CPA Global and the June 2021 ordinary share and mandatory convertible preferred share offering to finance a portion of the purchase price for the pending acquisition of ProQuest.
Balance Sheet and Cash Flow
At September 30, 2021, cash and cash equivalents of $2.5 billion increased $2.2 billion, compared to December 31, 2020, primarily driven by the June 2021 equity offering of $1.4 billion in net proceeds of 5.25% Series A mandatory convertible preferred shares and $728.1 million in net proceeds of ordinary shares after deducting underwriting discounts and estimated offering expenses payable. Restricted cash was $1.9 billion at September 30, 2021, which primarily represents the proceeds from the debt offering in June 2021 and the subsequent exchange offering in August 2021, which is being held in escrow until the completion of the pending acquisition of ProQuest. The Company intends to use the proceeds to finance a portion of the purchase price for its pending acquisition of ProQuest.
The Company's total debt outstanding at September 30, 2021 was $5.4 billion, an increase of $1.8 billion compared to December 31, 2020, primarily due to the June 2021 debt offering of 3.875% senior secured notes due 2028 and 4.875% senior notes due 2029 and the subsequent exchange offering in August 2021. The Company intends to use the proceeds to finance a portion of the purchase price for its pending acquisition of ProQuest.
Net cash provided by operating activities was $305.5 million for the nine months ended September 30, 2021, compared to net cash provided by operating activities of $128.0 million for the prior year period. Adjusted free cash flow for the nine months ended September 30, 2021, was $315.6 million, an increase of $187.1 million, compared to the prior year period, as a result of growth in revenues and Adjusted EBITDA.
Reaffirmed Outlook for 2021 (forward-looking statement)
The full year outlook presented below assumes no further currency movements, acquisitions, divestitures, or unanticipated events. Additionally, the outlook excludes any contribution from the pending acquisition of ProQuest.
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.
Outlook | |
Adjusted Revenues | $1.80B to $1.84B |
Adjusted EBITDA | $795M to $825M |
Adjusted EBITDA margin | 44% to 45% |
Adjusted Diluted EPS(1) | $0.70 to $0.74 |
Adjusted Free Cash Flow | $450M to $500M |
(1) | Adjusted Diluted EPS for 2021 is calculated based on approximately 668.4 million fully diluted weighted average shares outstanding. |
Conference Call and Webcast
Clarivate will host a conference call and webcast today to review the results for the third 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 3877359. 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 10153163. The recording will be available for replay through November 11, 2021. The webcast can be accessed at https://services.choruscall.com/links/clvt211028.html and will be available for replay.
Investor Day Conference on November 9, 2021
Clarivate will host a Virtual Investor Day Conference on Tuesday, November 9, 2021. 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 https://clarivateir.virtualevent.page/stream-public/. 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, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, Free Cash Flow, Adjusted Free Cash Flow, Standalone Adjusted EBITDA, and organic revenue 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; our expectations around our ability to consummate our pending acquisition of ProQuest, which is subject to customary closing conditions including receipt of approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; 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 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 include those factors discussed under the caption "Risk Factors" in our 2020 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 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 in the areas of science and intellectual property. 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.
Condensed Consolidated Balance Sheets (Unaudited) | |||||||
(In thousands, except share data) | |||||||
September 30,2021 | December 31,2020 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 2,479,880 | $ | 257,730 | |||
Restricted cash | 1,854,257 | 11,278 | |||||
Accounts receivable, net of allowance of $8,642 and $8,745 at September 30, 2021 and December 31, 2020, respectively | 610,755 | 737,733 | |||||
Prepaid expenses | 58,056 | 58,273 | |||||
Other current assets | 186,298 | 262,494 | |||||
Total current assets | 5,189,246 | 1,327,508 | |||||
Property and equipment, net | 27,948 | 36,267 | |||||
Other intangible assets, net | 6,964,081 | 7,370,350 | |||||
Goodwill | 6,198,701 | 6,252,636 | |||||
Other non-current assets | 41,808 | 47,944 | |||||
Deferred income taxes | 30,110 | 29,786 | |||||
Operating lease right-of-use assets | 45,880 | 132,356 | |||||
Total Assets | $ | 18,497,774 | $ | 15,196,847 | |||
Liabilities and Shareholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 94,494 | $ | 82,038 | |||
Accrued expenses and other current liabilities | 592,721 | 716,356 | |||||
Current portion of deferred revenues | 579,935 | 707,318 | |||||
Current portion of operating lease liability | 28,459 | 35,455 | |||||
Current portion of long-term debt | 1,865,627 | 28,600 | |||||
Total current liabilities | 3,161,236 | 1,569,767 | |||||
Long-term debt | 3,443,578 | 3,457,900 | |||||
Warrant liabilities | 195,952 | 312,751 | |||||
Non-current portion of deferred revenues | 44,934 | 41,399 | |||||
Other non-current liabilities | 58,332 | 67,722 | |||||
Deferred income taxes | 324,959 | 362,261 | |||||
Operating lease liabilities | 58,443 | 104,324 | |||||
Total liabilities | 7,287,434 | 5,916,124 | |||||
Commitments and contingencies | |||||||
Shareholders' equity: | |||||||
Preferred Shares, no par value; 14,375,000 shares authorized; 5.25% Mandatory Convertible Preferred Shares, Series A, 14,375,000 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 1,392,671 | — | |||||
Ordinary Shares, no par value; unlimited shares authorized at September 30, 2021 and December 31, 2020; 639,750,620 and 606,329,598 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 10,810,130 | 9,989,284 | |||||
Accumulated other comprehensive income | 324,904 | 503,521 | |||||
Accumulated deficit | (1,317,365) | (1,212,082) | |||||
Total shareholders' equity | 11,210,340 | 9,280,723 | |||||
Total Liabilities and Shareholders' Equity | $ | 18,497,774 | $ | 15,196,847 | |||
Condensed Consolidated Statement of Operations (Unaudited) | |||||||
(In thousands, except share and per share data) | |||||||
Three Months Ended September 30, | |||||||
2021 | 2020(As Restated) | ||||||
Revenues, net | $ | 442,117 | $ | 284,360 | |||
Operating expenses: | |||||||
Cost of revenues | (141,111) | (93,554) | |||||
Selling, general and administrative costs | (141,219) | (131,526) | |||||
Depreciation | (2,657) | (2,918) | |||||
Amortization | (128,026) | (65,696) | |||||
Restructuring and impairment | (15,621) | (3,192) | |||||
Other operating expense, net | (4,411) | (138) | |||||
Total operating expenses | (433,045) | (297,024) | |||||
Income (loss) from operations | 9,072 | (12,664) | |||||
Mark to market adjustment on financial instruments | 83,013 | (144,753) | |||||
Income (loss) before interest expense and income tax | 92,085 | (157,417) | |||||
Interest expense and amortization of debt discount, net | (65,194) | (20,244) | |||||
Income (loss) before income tax | 26,891 | (177,661) | |||||
Provision for income taxes | (3,579) | (4,325) | |||||
Net income (loss) | 23,312 | (181,986) | |||||
Dividends on preferred shares | (22,431) | — | |||||
Net income (loss) attributable to ordinary shares | $ | 881 | $ | (181,986) | |||
Per share: | |||||||
Basic | $ | 0.00 | $ | (0.47) | |||
Diluted | $ | 0.00 | $ | (0.47) | |||
Weighted average shares used to compute earnings per share: | |||||||
Basic | 640,834,827 | 387,845,438 | |||||
Diluted | 645,933,513 | 387,845,438 | |||||
Condensed Consolidated Statement of Operations (Unaudited) | |||||||
(In thousands, except share and per share data) | |||||||
Nine Months Ended September 30, | |||||||
2021 | 2020(As Restated) | ||||||
Revenues, net | $ | 1,316,192 | $ | 798,452 | |||
Operating expenses: | |||||||
Cost of revenues | (416,459) | (268,614) | |||||
Selling, general and administrative costs | (402,378) | (368,247) | |||||
Depreciation | (9,243) | (8,151) | |||||
Amortization | (383,270) | (168,049) | |||||
Restructuring and impairment | (121,988) | (26,792) | |||||
Other operating (expense) income, net | (19,741) | 14,675 | |||||
Total operating expenses | (1,353,079) | (825,178) | |||||
Loss from operations | (36,887) | (26,726) | |||||
Mark to market adjustment on financial instruments | 113,207 | (224,175) | |||||
Income (loss) before interest expense and income tax | 76,320 | (250,901) | |||||
Interest expense and amortization of debt discount, net | (141,156) | (72,306) | |||||
Loss before income tax | (64,836) | (323,207) | |||||
Provision for income taxes | (18,016) | (13,693) | |||||
Net loss | (82,852) | (336,900) | |||||
Dividends on preferred shares | (22,431) | — | |||||
Net loss attributable to ordinary shares | $ | (105,283) | $ | (336,900) | |||
Per share: | |||||||
Basic | $ | (0.17) | $ | (0.91) | |||
Diluted | $ | (0.17) | $ | (0.91) | |||
Weighted average shares used to compute earnings per share: | |||||||
Basic | 622,460,931 | 369,019,802 | |||||
Diluted | 622,460,931 | 369,019,802 | |||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||
(In thousands) | |||||||
Nine Months Ended September 30, | |||||||
2021 | 2020(As Restated) | ||||||
Cash Flows From Operating Activities | |||||||
Net loss | $ | (82,852) | $ | (336,900) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 392,513 | 176,200 | |||||
Bad debt expense | 6,832 | 1,830 | |||||
Deferred income tax benefit | (11,084) | (7,420) | |||||
Share-based compensation | 36,944 | 26,344 | |||||
Restructuring and impairment | 60,232 | 4,880 | |||||
Loss (gain) on foreign currency forward contracts | 4,026 | (2,903) | |||||
Mark to market adjustment on contingent and phantom shares | (34,503) | 30,839 | |||||
Mark to market adjustment on financial instruments | (113,207) | 224,175 | |||||
Gain on disposal of business | — | (1,052) | |||||
Deferred finance charges | 9,050 | 3,140 | |||||
Other operating activities | 3,565 | (3,902) | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 114,038 | 129,398 | |||||
Prepaid expenses | (887) | (13,335) | |||||
Other assets | 60,749 | 62,818 | |||||
Accounts payable | 13,550 | (8,394) | |||||
Accrued expenses and other current liabilities | (14,208) | (65,062) | |||||
Deferred revenues | (116,312) | (93,926) | |||||
Operating lease right of use assets | 16,838 | 5,826 | |||||
Operating lease liabilities | (37,362) | (6,611) | |||||
Other liabilities | (2,407) | 2,077 | |||||
Net cash provided by operating activities | 305,515 | 128,022 | |||||
Cash Flows From Investing Activities | |||||||
Capital expenditures | (86,197) | (78,597) | |||||
Acquisitions, net of cash acquired | (14,314) | (885,323) | |||||
Acquisition of intangible assets | — | (5,982) | |||||
Proceeds from sale of product line, net of restricted cash | — | 3,751 | |||||
Net cash used in investing activities | (100,511) | (966,151) | |||||
Cash Flows From Financing Activities | |||||||
Proceeds from issuance of debt | 2,000,000 | 360,000 | |||||
Redemption of Notes not exchanged | (157,424) | — | |||||
Principal payments on term loan | (21,450) | (9,450) | |||||
Repayments of revolving credit facility | — | (65,000) | |||||
Payment of debt issuance costs | (7,471) | (5,267) | |||||
Contingent purchase price payment | — | (4,115) | |||||
Proceeds from issuance of preferred shares | 1,392,671 | — | |||||
Proceeds from issuance of ordinary shares | 728,080 | 843,752 | |||||
Repurchases of ordinary shares | (65,215) | — | |||||
Cash dividends on preferred shares | (1) | ||||||
Proceeds from warrant exercises | — | 277,526 | |||||
Proceeds from stock options exercised | 17,250 | 1,307 | |||||
Payments related to tax withholding for stock-based compensation | (21,455) | (28,674) | |||||
Net cash provided by financing activities | 3,864,985 | 1,370,079 | |||||
Effects of exchange rates | (4,860) | (6,447) | |||||
Net increase in cash and cash equivalents, and restricted cash | 4,065,129 | 525,503 | |||||
Beginning of period: | |||||||
Cash and cash equivalents | 257,730 | 76,130 | |||||
Restricted cash | 11,278 | 9 | |||||
Total cash and cash equivalents, and restricted cash, beginning of period | 269,008 | 76,139 | |||||
Cash and cash equivalents, and restricted cash, end of period | 4,334,137 | 601,642 | |||||
End of period: | |||||||
Cash and cash equivalents | 2,479,880 | 601,075 | |||||
Restricted cash | 1,854,257 | 567 | |||||
Total cash and cash equivalents, and restricted cash, end of period | $ | 4,334,137 | $ | 601,642 | |||
Supplemental Cash Flow Information | |||||||
Cash paid for interest | 97,401 | 61,796 | |||||
Cash paid for income tax | 22,387 | 20,147 | |||||
Capital expenditures included in accounts payable | 6,612 | 922 | |||||
Nine Months Ended September 30, | |||||||
2021 | 2020 | ||||||
Non-Cash Financing Activities: | |||||||
Shares issued to Capri Acquisition Topco Limited | $ | 5,052,165 | $ | — | |||
Retirement of treasury shares | (5,117,380) | — | |||||
Shares issued as contingent stock consideration associated with the DRG acquisition | 61,619 | — | |||||
Shares issued as contingent stock consideration associated with the CPA Global acquisition | 43,890 | — | |||||
Shares issued as dividends on our 5.25% Series A Mandatory Convertible Preferred Shares | 16,141 | — | |||||
Dividends accrued on our 5.25% Series A Mandatory Convertible Preferred Shares | 6,289 | — | |||||
Total Non-Cash Financing Activities | $ | 62,724 | $ | — | |||
Reconciliation to Certain Non-GAAP Measures | ||||||||||||||
(Amounts in tables may not sum due to rounding) | ||||||||||||||
Adjusted Revenues | ||||||||||||||
Adjusted Revenues excludes the impact of the deferred revenues purchase accounting adjustment (primarily recorded in connection with recent acquisitions). | ||||||||||||||
The following table presents our calculation of Adjusted Revenues for the three and nine months ended September 30, 2021 and 2020 and a reconciliation of this measure to our Revenues, net for the same periods: | ||||||||||||||
Three Months Ended September 30, | Variance | |||||||||||||
(in millions, except percentages) | 2021 | 2020 | $ | % | ||||||||||
Revenues, net | $ | 442.1 | $ | 284.4 | $ | 157.8 | 55.5 | % | ||||||
Deferred revenues adjustment(1) | 0.1 | 2.1 | (2.0) | (96.6) | % | |||||||||
Adjusted revenues, net | $ | 442.2 | $ | 286.5 | $ | 155.7 | 54.4 | % | ||||||
(1) Reflects the deferred revenues adjustment made as a result of purchase accounting. | ||||||||||||||
Nine Months Ended September 30, | Variance | |||||||||||||
(in millions, except percentages) | 2021 | 2020 | $ | % | ||||||||||
Revenues, net | $ | 1,316.2 | $ | 798.5 | $ | 517.7 | 64.8 | % | ||||||
Deferred revenues adjustment(1) | 4.5 | 7.4 | (3.0) | (39.8) | % | |||||||||
Adjusted revenues, net | $ | 1,320.7 | $ | 805.9 | $ | 514.8 | 63.9 | % | ||||||
(1) | Reflects the deferred revenues adjustment made as a result of purchase accounting. |
Adjusted EBITDA
Adjusted EBITDA represents net income (loss) before provision for income taxes, depreciation and amortization, interest income and expense adjusted to exclude acquisition or 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 gains/(losses), costs associated with the transition services agreement with Thomson Reuters, which we entered into in connection with our separation from Thomson Reuters in 2016, separation and integration costs, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues, costs related to our merger with Churchill Capital Corp in 2019, non-operating income or expense, the impact of certain non-cash, mark to market adjustments on financial instruments and other items that are included in net income 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. Per Clarivate's Non-GAAP policy effective January 1, 2021, we have ceased use of adjustments for costs in connection with our separation from Thomson Reuters including costs related to the transition services agreement and separation, integration, and transformational expenses, as well as costs related to our merger with Churchill Capital Corp in 2019.
The following table presents our calculation of Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020 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) | 2021 | 2020 | 2021 | 2020 | |||||||||||
Net income (loss) attributable to ordinary shares | $ | 0.9 | $ | (182.0) | $ | (105.3) | $ | (336.9) | |||||||
Dividends on preferred shares | 22.4 | — | 22.4 | — | |||||||||||
Net income (loss) | 23.3 | (182.0) | (82.9) | (336.9) | |||||||||||
Provision (benefit) for income taxes | 3.6 | 4.3 | 18.0 | 13.7 | |||||||||||
Depreciation and amortization | 130.7 | 68.6 | 392.5 | 176.2 | |||||||||||
Interest expense and amortization of debt discount, net | 65.2 | 20.2 | 141.2 | 72.3 | |||||||||||
Deferred revenues adjustment(1) | 0.1 | 2.1 | 4.5 | 7.4 | |||||||||||
Transaction related costs(2) | 11.9 | 34.9 | (1.6) | 70.2 | |||||||||||
Share-based compensation expense | 12.0 | 6.8 | 38.5 | 31.1 | |||||||||||
Restructuring and impairment(3) | 15.6 | 3.2 | 122.0 | 26.8 | |||||||||||
Mark to market adjustment on financial instruments(4) | (83.0) | 144.8 | (113.2) | 224.2 | |||||||||||
Other (5) | 10.7 | 5.2 | 24.8 | 1.6 | |||||||||||
Adjusted EBITDA | $ | 190.0 | $ | 108.2 | $ | 543.8 | $ | 286.6 | |||||||
Adjusted EBITDA Margin | 43.0 | % | 37.8 | % | 41.2 | % | 35.6 | % | |||||||
(1) | Reflects the deferred revenues adjustment as a result of purchase accounting associated with businesses that were acquired. |
(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. This also includes the mark to market adjustments on the contingent stock consideration associated with the CPA Global and DRG acquisitions, as well as the mark to market adjustment associated with the CPA phantom share liability plan. |
(3) | Reflects costs primarily related to restructuring and impairment associated with the acquisition of DRG and CPA Global in 2020, as well as the approved One Clarivate restructuring program in 2021. This also includes costs incurred in connection with the initiative, following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two segments. Additionally, during the three and nine months ended September 30, 2021, we incurred impairment charges taken on right-of-use assets of $757 and $60,232, respectively, relating the exit and ceased use of leased properties. |
(4) | Reflects mark to market adjustments on our private placement warrant financial instruments. In periods after issuance, changes in the estimated fair value of the liabilities are reported through earnings. |
(5) | Includes primarily 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. The 2020 detail also includes costs related to a transition services agreement and offset by the reverse transition services agreement from the sale of MarkMonitor and costs incurred in connection with and after our separation from Thomson Reuters in 2016 relating to the implementation of our standalone company infrastructure and related cost-savings initiatives. These costs were largely wound down by the end of December 31, 2020. |
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 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 gains/(losses), costs associated with the transition services agreement with Thomson Reuters, which we entered into in connection with our separation from Thomson Reuters in 2016, separation and integration costs, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues, costs related to our merger with Churchill Capital Corp in 2019, non-operating income or expense, the impact of certain non-cash, mark to market adjustments on financial instruments, interest on debt held in escrow, and other items that are included in net income 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. Per Clarivate's Non-GAAP policy effective January 1, 2021, we have ceased use of adjustments for costs in connection with our separation from Thomson Reuters including costs related to the transition services agreement and separation, integration, and transformational expenses, as well as costs related to our merger with Churchill Capital Corp in 2019. We calculate Adjusted Diluted EPS by using Adjusted Net Income divided by diluted weighted average shares for the period.
The following table presents our calculation of Adjusted Net Income and Adjusted Diluted EPS for the three and nine months ended September 30, 2021 and 2020 and reconciles these measures to our Net income (loss) and EPS for the same periods:
Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||
2021 | 2020 | ||||||||||||||
(in millions, except per share amounts) | Amount | Per Share | Amount | Per Share | |||||||||||
Net income (loss) attributable to ordinary shares | $ | 0.9 | $ | — | $ | (182.0) | $ | (0.47) | |||||||
Dividends on preferred shares | 22.4 | 0.06 | — | — | |||||||||||
Net income (loss) | 23.3 | 0.06 | (182.0) | (0.47) | |||||||||||
Deferred revenues adjustment(1) | 0.1 | — | 2.1 | 0.01 | |||||||||||
Transaction related costs(2) | 11.9 | 0.02 | 34.9 | 0.09 | |||||||||||
Share-based compensation expense | 12.0 | 0.02 | 6.8 | 0.02 | |||||||||||
Amortization related to acquired intangible assets | 110.9 | 0.16 | 49.0 | 0.12 | |||||||||||
Restructuring and impairment(3) | 15.6 | 0.02 | 3.2 | 0.01 | |||||||||||
Mark to market adjustment on financial instruments(4) | (83.0) | (0.12) | 144.8 | 0.36 | |||||||||||
Interest on new debt held in escrow(5) | 27.7 | 0.04 | — | — | |||||||||||
Other(6) | 10.7 | 0.02 | 5.2 | 0.01 | |||||||||||
Income tax impact of related adjustments | (15.5) | (0.02) | (5.5) | (0.01) | |||||||||||
Adjusted net income and Adjusted Diluted EPS | $ | 113.6 | $ | 0.16 | $ | 58.5 | $ | 0.14 | |||||||
Weighted average ordinary shares (Diluted) | 699,822,054 | 407,577,327 | |||||||||||||
Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2021 | 2020 | ||||||||||||||
(in millions, except per share amounts) | Amount | Per Share | Amount | Per Share | |||||||||||
Net loss attributable to ordinary shares | $ | (105.3) | $ | (0.17) | $ | (336.9) | $ | (0.91) | |||||||
Dividends on preferred shares | 22.4 | 0.03 | — | — | |||||||||||
Net loss | (82.9) | (0.13) | (336.9) | (0.91) | |||||||||||
Deferred revenues adjustment(1) | 4.5 | 0.01 | 7.4 | 0.02 | |||||||||||
Transaction related costs(2) | (1.6) | — | 70.2 | 0.18 | |||||||||||
Share-based compensation expense | 38.5 | 0.06 | 31.1 | 0.08 | |||||||||||
Amortization related to acquired intangible assets | 333.1 | 0.51 | 136.7 | 0.35 | |||||||||||
Restructuring and impairment(3) | 122.0 | 0.19 | 26.8 | 0.07 | |||||||||||
Mark to market adjustment on financial instruments(4) | (113.2) | (0.17) | 224.2 | 0.57 | |||||||||||
Interest on debt held in escrow(5) | 29.1 | 0.04 | — | — | |||||||||||
Debt extinguishment costs and refinancing related costs | — | — | 8.6 | 0.02 | |||||||||||
Other(6) | 24.8 | 0.04 | 1.6 | — | |||||||||||
Income tax impact of related adjustments | (42.3) | (0.07) | (16.2) | (0.04) | |||||||||||
Adjusted net income and Adjusted Diluted EPS | $ | 312.0 | $ | 0.48 | $ | 153.5 | $ | 0.39 | |||||||
Weighted average ordinary shares (Diluted) | 647,508,021 | 390,533,995 | |||||||||||||
(1) | Reflects the deferred revenues adjustment as a result of purchase accounting associated with businesses that were acquired. |
(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. This also includes the mark to market adjustments on the contingent stock consideration associated with the CPA Global and DRG acquisitions, as well as the mark to market adjustment associated with the CPA phantom share liability plan. |
(3) | Reflects costs primarily related to restructuring and impairment associated with the acquisition of primarily DRG and CPA Global in 2020, as well as the approved One Clarivate restructuring program in 2021. This also includes costs incurred in connection with the initiative, following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two segments. |
(4) | Reflects mark to market adjustments on our private placement warrant financial instruments. In periods after issuance, changes in the estimated fair value of the liabilities are reported through earnings. |
(5) | Reflects interest expense incurred on the principal related to the 2021 debt offering, currently held in escrow until the completion of the pending acquisition of ProQuest. Clarivate intends to use the net proceeds to finance a portion of the purchase price and therefore, considered as part of the transaction costs associated with the pending acquisition. |
(6) | Includes primarily 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. The 2020 detail also includes costs related to a transition services agreement and offset by the reverse transition services agreement from the sale of MarkMonitor and costs incurred in connection with and after our separation from Thomson Reuters in 2016 relating to the implementation of our standalone company infrastructure and related cost-savings initiatives. These costs were largely wound down by the end of December 31, 2020. |
Free Cash Flow and Adjusted Free Cash Flow
Free cash flow is calculated using net cash provided by operating activities less capital expenditures. Adjusted free cash flow is calculated as free cash flow, less cash paid for restructuring and lease-exit activities, transition services agreement, transition, transformation and integration expenses, transaction related costs, interest on debt held in escrow, and debt issuance costs offset by cash received for hedge accounting transactions. Per Clarivate's Non-GAAP policy effective January 1, 2021, we have ceased use of adjustments for costs in connection with our separation from Thomson Reuters including costs related to the transition services agreement and separation, integration, and transformational expenses, as well as costs related to our merger with Churchill Capital Corp in 2019.
The following table reconciles our non-GAAP free cash flow and Adjusted free cash flow measure to net cash provided by operating activities:
Nine Months Ended September 30, | |||||||
(in millions) | 2021 | 2020 | |||||
Net cash provided by operating activities | $ | 305.5 | $ | 128.0 | |||
Capital expenditures | (86.2) | (78.6) | |||||
Free cash flow | 219.3 | 49.4 | |||||
Cash paid for restructuring costs(1) | 65.8 | 18.9 | |||||
Cash paid for transaction related costs(2) | 21.2 | 39.4 | |||||
Cash paid for transition, integration and other costs(3) | 1.5 | 17.0 | |||||
Cash paid for transition services agreement(4) | — | (2.2) | |||||
Cash paid for debt issuance costs | 7.8 | 7.7 | |||||
Cash received for hedge accounting transactions | — | (1.7) | |||||
Adjusted free cash flow | $ | 315.6 | $ | 128.5 | |||
(1) | Reflects cash payments for costs primarily related to restructuring and lease-exit activities associated with the acquisition of DRG and CPA Global in 2020. This also includes cash paid for costs incurred in connection with the initiative, following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two segments. |
(2) | Includes cash paid for 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) | Includes cash paid for costs incurred in 2020 and 2019 in connection with and after our separation from Thomson Reuters in 2016 relating to the implementation of our standalone company infrastructure and related cost-savings initiatives, costs for which were largely wound down by December 31, 2020, as well as other costs that do not reflect our ongoing operating performance. |
(4) | In 2020, includes cash payments to Thomson Reuters under the Transition Services Agreement. |
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 and excess standalone costs.
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. It is also utilized by management and the compensation committee of the Board as an input for determining incentive payments to employees.
Excess standalone costs are the difference between our actual standalone company infrastructure costs, and our estimated steady state standalone infrastructure costs. We make an adjustment for the difference because we have had to incur costs under the transition services agreement, with Thomson Reuters after we had implemented the infrastructure to replace the services provided pursuant to the transition services agreement, thereby incurring dual running costs. Furthermore, there has been a ramp up period for establishing and optimizing the necessary standalone infrastructure. Since our separation from Thomson Reuters, we have had to transition quickly to replace services provided under the transition services agreement, with optimization of the relevant standalone functions typically following thereafter. Cost savings reflect the annualized "run rate" expected cost savings, net of actual cost savings realized, related to restructuring and other cost savings initiatives undertaken during the relevant period. These costs wound down at the end of December 31, 2020.
Standalone Adjusted EBITDA is calculated under the credit facilities and the indentures by using our Consolidated Net 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, 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 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 periods presented:
Twelve Months Ended September 30, | |||
(in millions) | 2021 | ||
Net loss attributable to ordinary shares | $ | (80.3) | |
Dividends on preferred shares | 22.4 | ||
Net loss | (57.8) | ||
Provision for income taxes | 2.0 | ||
Depreciation and amortization | 519.5 | ||
Interest, net | 180.8 | ||
Deferred revenues adjustment(1) | 20.1 | ||
Transaction related costs(2) | 25.7 | ||
Share-based compensation expense | 49.0 | ||
Gain on sale of Techstreet | (28.1) | ||
Restructuring and impairment(3) | 142.8 | ||
Mark to market adjustment on financial instruments(4) | (132.3) | ||
Other(5) | 22.2 | ||
Adjusted EBITDA | $ | 743.9 | |
Realized foreign exchange gain | 4.6 | ||
Bioinfogate Adjusted EBITDA impact(6) | 0.3 | ||
Cost savings(7) | 59.0 | ||
Standalone Adjusted EBITDA | $ | 807.8 | |
(1) | Reflects the deferred revenues adjustments recorded as a result of purchase accounting for acquired businesses. |
(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) | Reflects costs related to restructuring and impairment of right of use assets associated with the acquisition of DRG and CPA Global in 2020, and related lease optimization plans, as well as the approved One Clarivate restructuring program in 2021. This also includes costs incurred in connection with the initiative, following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two segments. |
(4) | Reflects mark to market adjustments on our private placement warrant financial instruments. In periods after issuance, changes in the estimated fair value of the liabilities are reported through earnings. |
(5) | Includes primarily 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. The 2020 detail also includes costs related to a transition services agreement and offset by the reverse transition services agreement from the sale of MarkMonitor and costs incurred in connection with and after our separation from Thomson Reuters in 2016 relating to the implementation of our standalone company infrastructure and related cost-savings initiatives. These costs were largely wound down by the end of December 31, 2020. |
(6) | Represents the acquisition Adjusted EBITDA for the period beginning October 1, 2020 through the respective acquisition date of August 3, 2021 for Bioinfogate to reflect the company's Standalone Adjusted EBITDA as though acquisitions occurred at the beginning of the presented period. |
(7) | 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 adjustments (6) and (7) are estimates and are not intended to represent pro forma adjustments presented within the guidance of Article 11 of Regulation S-X. Although we believe these estimates are reasonable, actual results may differ from these estimates, and any difference may be material. See "Cautionary Note Regarding Forward-Looking Statements" in the annual report.
The following tables present the amounts of our subscription, transactional and re-occurring revenues, including as a percentage of our total revenues, for the periods indicated, as well the drivers of the variances between periods.
Variance Increase/(Decrease) | Percentage of Factors Increase/(Decrease) | ||||||||||||||||||||
Three Months Ended September 30, | Total Variance(Dollars) | Total Variance(Percentage) | Acquisitive | Disposal | FX Impact | Organic | |||||||||||||||
(in millions, except percentages) | 2021 | 2020 | |||||||||||||||||||
Subscription revenues | $ | 246.5 | $ | 222.1 | $ | 24.4 | 11.0 | % | 11.2 | % | (4.4) | % | 1.0 | % | 3.2 | % | |||||
Re-occurring revenues | 110.4 | — | 110.4 | 100.0 | % | 100.0 | % | — | % | — | % | — | % | ||||||||
Transactional revenues | 85.4 | 64.4 | 21.0 | 32.5 | % | 37.3 | % | (7.9) | % | 0.4 | % | 2.7 | % | ||||||||
Deferred revenues adjustment(1) | (0.1) | (2.1) | 2.0 | 96.6 | % | (2.4) | % | — | % | — | % | 99.0 | % | ||||||||
Revenues, net | $ | 442.1 | $ | 284.4 | $ | 157.8 | 55.5 | % | 56.0 | % | (5.2) | % | 0.8 | % | 3.9 | % | |||||
Deferred revenues adjustment(1) | 0.1 | 2.1 | (2.0) | (96.6) | % | 2.4 | % | — | % | — | % | (99.0) | % | ||||||||
Adjusted revenues, net | $ | 442.2 | $ | 286.5 | $ | 155.7 | 54.4 | % | 55.6 | % | (5.2) | % | 0.8 | % | 3.1 | % | |||||
(1) | Reflects the deferred revenues adjustment made as a result of purchase accounting. |
Variance Increase/(Decrease) | Percentage of Factors Increase/(Decrease) | ||||||||||||||||||||
Nine Months Ended September 30, | Total Variance(Dollars) | Total Variance(Percentage) | Acquisitive | Disposal | FX Impact | Organic | |||||||||||||||
(in millions, except percentages) | 2021 | 2020 | |||||||||||||||||||
Subscription revenues | $ | 725.1 | $ | 631.9 | $ | 93.2 | 14.8 | % | 12.7 | % | (4.4) | % | 3.0 | % | 3.5 | % | |||||
Re-occurring revenues | 336.2 | — | 336.2 | 100.0 | % | 100.0 | % | — | % | — | % | — | % | ||||||||
Transactional revenues | 259.3 | 174.0 | 85.3 | 49.0 | % | 46.6 | % | (9.0) | % | 2.1 | % | 9.4 | % | ||||||||
Deferred revenues adjustment(1) | (4.5) | (7.4) | 3.0 | 39.8 | % | (59.3) | % | — | % | — | % | 99.1 | % | ||||||||
Revenues, net | $ | 1,316.2 | $ | 798.5 | $ | 517.7 | 64.8 | % | 61.7 | % | (5.4) | % | 2.8 | % | 5.7 | % | |||||
Deferred revenues adjustment(1) | 4.5 | 7.4 | (3.0) | (39.8) | % | 59.3 | % | — | % | — | % | (99.1) | % | ||||||||
Adjusted revenues, net | $ | 1,320.7 | $ | 805.9 | $ | 514.8 | 63.9 | % | 61.7 | % | (5.4) | % | 2.8 | % | 4.8 | % | |||||
(1) | Reflects the deferred revenues adjustment made as a result of purchase accounting. |
The following tables and the discussion that follows presents our revenues by Product Segment for the periods indicated, as well as the drivers of the variances between periods, including as a percentage of such revenues.
Variance Increase/(Decrease) | Percentage of Factors Increase/(Decrease) | ||||||||||||||||||||
Revenues by Product Segment | Three Months Ended September 30, | Total Variance(Dollars) | Total Variance(Percentage) | Acquisitive |
Disposal | FX Impact | Organic | ||||||||||||||
(in millions, except percentages) | 2021 | 2020 | |||||||||||||||||||
Science Product Segment | $ | 200.8 | $ | 190.7 | $ | 10.1 | 5.3 | % | 0.3 | % | — | % | 1.0 | % | 4.1 | % | |||||
IP Product Segment | 241.3 | 95.7 | 145.6 | 152.1 | % | 165.9 | % | (15.6) | % | 0.6 | % | 1.2 | % | ||||||||
Deferred revenues adjustment (1) | (0.1) | (2.1) | 2.0 | 96.6 | % | (2.4) | % | — | % | — | % | 99.0 | % | ||||||||
Revenues, net | $ | 442.1 | $ | 284.4 | $ | 157.8 | 55.5 | % | 56.0 | % | (5.2) | % | 0.8 | % | 3.9 | % | |||||
Deferred revenues adjustment (1) | 0.1 | 2.1 | (2.0) | (96.6) | % | 2.4 | % | — | % | — | % | (99.0) | % | ||||||||
Adjusted revenues, net | $ | 442.2 | $ | 286.5 | $ | 155.7 | 54.4 | % | 55.6 | % | (5.2) | % | 0.8 | % | 3.1 | % | |||||
(1) | Reflects the deferred revenues adjustment made as a result of purchase accounting. |
Variance Increase/(Decrease) | Percentage of Factors Increase/(Decrease) | ||||||||||||||||||||
Revenues by Product Segment | Nine Months Ended September 30, | Total Variance(Dollars) | Total Variance(Percentage) | Acquisitive | Disposal | FX Impact | Organic | ||||||||||||||
(in millions, except percentages) | 2021 | 2020 | |||||||||||||||||||
Science Product Segment | $ | 594.4 | $ | 521.6 | $ | 72.8 | 14.0 | % | 4.6 | % | — | % | 3.1 | % | 6.2 | % | |||||
IP Product Segment | 726.2 | 284.2 | 442.0 | 155.5 | % | 166.5 | % | (15.2) | % | 2.1 | % | 2.1 | % | ||||||||
Deferred revenues adjustment (1) | (4.5) | (7.4) | 3.0 | 39.8 | % | (59.3) | % | — | % | — | % | 99.1 | % | ||||||||
Revenues, net | $ | 1,316.2 | $ | 798.5 | $ | 517.7 | 64.8 | % | 61.7 | % | (5.4) | % | 2.8 | % | 5.7 | % | |||||
Deferred revenues adjustment (1) | 4.5 | 7.4 | (3.0) | (39.8) | % | 59.3 | % | — | % | — | % | (99.1) | % | ||||||||
Adjusted revenues, net | $ | 1,320.7 | $ | 805.9 | $ | 514.8 | 63.9 | % | 61.7 | % | (5.4) | % | 2.8 | % | 4.8 | % | |||||
(1) | Reflects the deferred revenues adjustment made as a result of purchase accounting. |
The following table presents our calculation of Adjusted Revenues for the Outlook for 2021 and reconciles this measure to our Revenues, net for the same period:
Year Ending December 31, 2021 (Forecasted) | |||||||
Low | High | ||||||
Revenues, net | $ | 1,796.1 | $ | 1,836.1 | |||
Deferred revenues adjustment(1) | 3.9 | 3.9 | |||||
Adjusted revenues, net | $ | 1,800.0 | $ | 1,840.0 | |||
(1) | Reflects the deferred revenues adjustment as a result of purchase accounting associated with businesses that were acquired. |
The following table presents our calculation of Adjusted EBITDA for the Outlook for 2021 and reconciles this measure to our Net loss for the same period:
Year Ending December 31, 2021 (Forecasted) | |||||||
(in millions) | Low | High | |||||
Net loss attributable to ordinary shares | $ | (102.8) | $ | (72.8) | |||
Dividends on preferred shares(1) | 41.3 | 41.3 | |||||
Net loss | $ | (61.5) | $ | (31.5) | |||
Provision for income taxes | 40.0 | 40.0 | |||||
Depreciation and amortization | 517.0 | 517.0 | |||||
Interest expense and amortization of debt discount, net | 199.5 | 199.5 | |||||
Deferred revenue adjustment(2) | 3.9 | 3.9 | |||||
Restructuring and impairment(3) | 126.5 | 126.5 | |||||
Transaction related costs(4) | 1.6 | 1.6 | |||||
Mark to market adjustment on financial instruments(5) | (113.2) | (113.2) | |||||
Share-based compensation expense | 56.4 | 56.4 | |||||
Other(6) | 24.8 | 24.8 | |||||
Adjusted EBITDA | $ | 795.0 | $ | 825.0 | |||
Adjusted EBITDA margin | 44 | % | 45 | % | |||
(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 stock dividends. |
(2) | Reflects the deferred revenues adjustment made as a result of purchase accounting. |
(3) | Reflects costs primarily related to restructuring and impairment of right of use assets associated with the acquisition of DRG and CPA Global in 2020, and related lease optimization plans, as well as the approved One Clarivate restructuring program in 2021. |
(4) | 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. This also includes the mark to market adjustments on the contingent stock consideration associated with the CPA Global and DRG acquisitions, as well as the mark to market adjustment associated with the CPA phantom share liability plan. |
(5) | Reflects mark to market adjustments on our private placement warrant financial instruments. In periods after issuance, changes in the estimated fair value of the liabilities are reported through earnings. |
(6) | Includes primarily the net impact of foreign exchange gains and losses related to the re-measurement of balances and other items incurred that do not reflect our ongoing operating performance. |
The following table presents our calculation of Adjusted Diluted EPS for the Outlook for 2021 and reconciles these measures to our Net loss for the same period:
Year Ending December 31, 2021 (Forecasted) | |||||||
Low | High | ||||||
Per Share | Per Share | ||||||
Net loss attributable to ordinary shares | $ | (0.15) | $ | (0.09) | |||
Dividends on preferred shares(1) | 0.06 | 0.06 | |||||
Net loss | $ | (0.09) | $ | (0.03) | |||
Restructuring and impairment(2) | 0.19 | 0.19 | |||||
Transaction related costs(3) | — | — | |||||
Share-based compensation expense | 0.08 | 0.08 | |||||
Amortization related to acquired intangible assets | 0.65 | 0.65 | |||||
Mark to market adjustment on financial instruments(4) | (0.17) | (0.17) | |||||
Interest on debt held in escrow(5) | 0.07 | 0.07 | |||||
Other(6) | 0.04 | 0.04 | |||||
Income tax impact of related adjustments | (0.09) | (0.09) | |||||
Adjusted Diluted EPS | $ | 0.70 | $ | 0.74 | |||
Weighted average ordinary shares (Diluted)(7) | 668,402,150 | ||||||
(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 stock dividends. |
(2) | Reflects costs primarily related to restructuring and impairment of right of use assets associated with the acquisition of DRG and CPA Global in 2020, and related lease optimization plans, as well as the approved One Clarivate restructuring program in 2021. |
(3) | 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. This also includes the mark to market adjustments on the contingent stock consideration associated with the CPA Global and DRG acquisitions, as well as the mark to market adjustment associated with the CPA phantom share liability plan. |
(4) | Reflects mark to market adjustments on our private placement warrant financial instruments. In periods after issuance, changes in the estimated fair value of the liabilities are reported through earnings.. |
(5) | Reflects interest expense incurred on the principal related to the 2021 debt offering, currently held in escrow until the completion of the pending acquisition of ProQuest. Clarivate intends to use the net proceeds to finance a portion of the purchase price and therefore, considered as part of the transaction costs associated with the pending acquisition. |
(6) | Includes primarily the net impact of foreign exchange gains and losses related to the re-measurement of balances and other items incurred that do not reflect our ongoing operating performance. |
(7) | For the purposes of calculating adjusted earnings per share, the Company has excluded the accrued and anticipated MCPS stock dividends and assumed the "if-converted" method of share dilution. |
The following table presents our calculation of Free Cash Flow and Adjusted Free Cash Flow for the Outlook for 2021 and reconciles this measure to our Net cash provided by operating activities for the same period:
Year Ending December 31, 2021 (Forecasted) | |||||||
(in millions) | Low | High | |||||
Net cash provided by operating activities | $ | 403.2 | $ | 453.2 | |||
Capital expenditures | (123.0) | (123.0) | |||||
Free Cash Flow | 280.2 | 330.2 | |||||
Cash paid for restructuring costs(1) | 81.6 | 81.6 | |||||
Cash paid for transaction related costs(2) | 38.6 | 38.6 | |||||
Cash paid for other costs(3) | 1.5 | 1.5 | |||||
Cash paid for interest on debt held in escrow(4) | 48.1 | 48.1 | |||||
Adjusted Free Cash Flow | $ | 450.0 | $ | 500.0 | |||
(1) | Reflects cash payments for costs related to restructuring and lease-exit activities associated with the acquisition of primarily DRG and CPA Global in 2020. This also includes cash paid for costs incurred in connection with the initiative, following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two segments. |
(2) | Includes cash paid for 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) | Reflects cash paid for other costs that do not reflect our ongoing operating performance. |
(4) | Reflects cash payments for the interest expense incurred on the principal related to the 2021 debt offering, currently held in escrow until the completion of the pending acquisition of ProQuest. Clarivate intends to use the net proceeds to finance a portion of the purchase price and therefore, considered as part of the transaction costs associated with the pending acquisition. |
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SOURCE Clarivate Plc
