Clarivate PLC 6-K, filed Feb 27, 2020
Clarivate PLC (CLVT)
About this 6-K
Clarivate PLC filed this 6-K on February 27, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT
TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of February, 2020
Commission file number: 001-38911
CLARIVATE ANALYTICS PLC
(Exact name of registrant as specified in its charter)
Friars House
160 Blackfriars Road
London SE1 8EZ United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Announcement of Fourth Quarter and Full Year 2019 Results
On February 27, 2020, Clarivate Analytics Plc (the “Company”) issued a news release announcing earnings for the fourth quarter and full year ended December 31, 2019. In addition, the Company posted to its website supplemental information related to revenue, earnings and guidance. The news release and supplemental information have been furnished as exhibits to this Report on Form 6-K and are posted on the investor relations section of the Company’s website (http://ir.clarivate.com/).
No Incorporation by Reference
Exhibits 99.1 and 99.2 to this Report on Form 6-K shall not be deemed to be incorporated by reference into the Company’s registration statement on Form S-8 (Registration No. 333-231405).
Exhibits
Furnished as Exhibits 99.1 and 99.2 to this Report on Form 6-K is information regarding the Company’s financial results for the fourth quarter and full year ended December 31, 2019.
| Exhibit No. | Document Description | |
| 99.1 | News release issued by Clarivate Analytics Plc dated February 27, 2020 | |
| 99.2 | Supplemental Information dated February 27, 2020 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CLARIVATE ANALYTICS PLC | ||
| Date: February 27, 2020 | By: | /s/ Richard Hanks |
| Richard Hanks | ||
| Chief Financial Officer | ||
Exhibit 99.1
Clarivate Analytics Reports Fourth Quarter and Full Year 2019 Results
— Updates 2020 Outlook for Acquisition of Decision Resources Group —
London, UK and Philadelphia, US -- February 27, 2020 - 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 fourth quarter and full year ended December 31, 2019.
Financial Highlights
| • | Fourth quarter 2019 revenues of $255.0 million increased 4% on a reported basis and up 4.2% at constant currency* for the quarter |
| • | Fourth quarter 2019 net loss of $84.8 million compared to a net loss of $43.5 million in the prior year quarter; adjusted net income* of $41.9 million increased 31.3% for the quarter |
| • | Fourth quarter 2019 adjusted EBITDA* of $84.6 million increased 11.6% for the quarter |
| • | Net cash from operating activities increased to $117.6 million in 2019 compared to a use of cash of $26.1 million in the prior year |
| • | Free cash flow* increased $119.3 million to $47.8 million in 2019 compared to a use of cash of $71.5 million in the prior year |
“Clarivate had an outstanding year in 2019, achieving numerous strategic and financial initiatives, which positions us for continued growth," said Jerre Stead, Executive Chairman and CEO of Clarivate. "We closed out 2019 with strong financial performance in the fourth quarter with total revenue growth of 4% including subscription revenue growth of 6% and Annual Contract Value of subscription-based agreements increasing 3.5%. We also delivered double-digit adjusted EBITDA growth of more than 11%. Our positive momentum is continuing in 2020 with the acquisition of Decision Resources Group, which, when consummated, will more than double the size of our life sciences business and sets us up to be the leading data and analytics provider in that industry."
Selected Financial Information
| Three Months Ended December 31, | Change | Year Ended December 31, | Change | |||||||||||||||||||||||||||||
| (in millions, except percentages and per share data) | 2019 | 2018 | $ | % | 2019 | 2018 | $ | % | ||||||||||||||||||||||||
| Revenues, net | 255.0 | 245.2 | 9.8 | 4.0 | % | 974.3 | 968.5 | 5.9 | 0.6 | % | ||||||||||||||||||||||
| Adjusted revenues* | 255.1 | 245.4 | 9.7 | 4.0 | % | 974.8 | 951.2 | 23.6 | 2.5 | % | ||||||||||||||||||||||
| Annual Contract Value (ACV) | 793.7 | 767.0 | 26.7 | 3.5 | % | 793.7 | 767.0 | 26.7 | 3.5 | % | ||||||||||||||||||||||
| Net loss | (84.8 | ) | (43.5 | ) | (41.3 | ) | (94.9 | )% | (211.0 | ) | (242.2 | ) | 31.2 | 12.9 | % | |||||||||||||||||
| Adjusted net income* | 41.9 | 31.9 | 10.0 | 31.3 | % | 152.1 | 125.2 | 26.9 | 21.5 | % | ||||||||||||||||||||||
| Adjusted EBITDA* | 84.6 | 75.8 | 8.8 | 11.6 | % | 294.0 | 272.8 | 21.2 | 7.7 | % | ||||||||||||||||||||||
| Net cash provided by (used in) operating activities | 5.2 | (51.1 | ) | 56.3 | 110.2 | % | 117.6 | (26.1 | ) | 143.7 | 550.6 | % | ||||||||||||||||||||
| Free cash flow* | (20.9 | ) | (60.3 | ) | 39.4 | 65.3 | % | 47.8 | (71.5 | ) | 119.3 | 166.9 | % | |||||||||||||||||||
(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 release.
Fourth Quarter 2019 Operating Results
Revenues, net, for the fourth quarter of 2019 increased $9.8 million, or 4%, to $255.0 million, compared to the prior-year period.
Subscription revenues for the fourth quarter of 2019 increased $11.9 million, or 6%, to $209.5 million, compared to the prior-year period, primarily due to price increases and new business within both the Science Product Group and IP Product Group.
Transactional revenues for the fourth quarter of 2019 decreased $2.2 million, or 4.6%, to $45.6 million, compared to the prior-year period, primarily due to a decrease in backfile sales, lower CompuMarkTM search volumes and IP services offset by an increase from the Techstreet products.
Net loss for the fourth quarter of 2019 was $84.8 million, or ($0.28) per share, compared to a net loss of $43.5 million, or $(0.20) per share, in the prior-year period. The decline in the fourth quarter of 2019 is primarily due to the impact of debt refinancing charges, restructuring charges and an impairment on assets held for sale resulting from the MarkMonitor asset divestitures.
Adjusted EBITDA for the fourth quarter of 2019 increased by 11.6% to $84.6 million, compared to the prior-year period, driven by higher revenues and ongoing cost savings initiatives.
Adjusted net income for the fourth quarter of 2019 increased 31.3% to $41.9 million, or $0.13 per diluted share, compared to $31.9 million, or $0.15 per diluted share, in the prior-year period. The fourth quarter of 2019 adjusted earnings per diluted share was lower compared to the prior-year period due to a 51% or 110.7 million increase in the weighted average common shares outstanding as a result of the merger with Churchill Capital Corp in May 2019.
Full Year Operating Results
Revenues, net, for the full year 2019 increased by $5.9 million, or 0.6%, to $974.3 million, compared to the prior year.
Adjusted Revenues for the full year 2019, which exclude the impact of the deferred revenues adjustment and revenues from the IPM Product Line divested in October 2018, increased $23.6 million, or 2.5%, to $974.8 million, compared to the prior year. On a constant currency basis, Adjusted Revenues increased $29.5 million, or 3.1%, for the full year 2019.
Subscription revenues for the full year 2019 increased 1.4% to $805.5 million, compared to the prior year. Adjusted subscription revenues for the full year 2019, which exclude the impact of the deferred revenues adjustment and revenues from the IPM Product Line as noted above, increased 3.7%, and on a constant currency basis increased 4.3%, compared to the prior year primarily due to price increases and new business within the Science Product Group and IP Product Group.
Transactional revenues for the full year 2019 decreased 4.7% to $169.3 million, compared to the prior year. Adjusted transactional revenues for the full year 2019, which exclude the impact of the deferred revenues adjustment and revenues from the IPM Product Line as noted above, decreased 3.1% on a reported basis, and decreased 2.3% on a constant currency basis, compared to the prior year, due to demand for patent services in the period, and reflected timing and product offerings within the Science and IP Product Group.
Net loss for the full year 2019 was $211.0 million, or $(0.77) per share, compared with a net loss of $242.2 million, or $(1.11), for the full year 2018.
Adjusted EBITDA for the full year 2019 increased 7.7%, to $294.0 million, compared to the prior year, driven by higher revenues and ongoing cost savings initiatives.
Adjusted net income for the full year 2019 increased 21.5% to $152.1 million, or $0.53 per diluted share, compared with adjusted net income of $125.2 million, or $0.58 per diluted share for the full year 2018. Adjusted earnings per diluted share for the full year 2019 was lower compared to 2018 primarily due to a 32% or 70.4 million increase in the weighted average common shares outstanding as a result of the merger with Churchill Capital Corp in May 2019.
Balance Sheet and Cash Flow
At December 31, 2019 cash and cash equivalents increased $50.6 million to $76.1 million, compared to December 31, 2018.
The Company's total debt outstanding at December 31, 2019 was $1,665.0 million, a decrease of $364.0 million compared to December 31, 2018, due primarily to proceeds received from the 2019 merger with Churchill Capital Corp, which were used to reduce the Company's outstanding debt.
Net cash provided by operating activities was $117.6 million for the twelve months ended December 31, 2019, compared to a use of cash of $26.1 million for the prior year. 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 $47.0 million.
Free cash flow was $47.8 million for the twelve months ended December 31, 2019, an increase of $119.3 million, compared to $(71.5) million for the prior-year period, primarily due to higher net cash provided by operating activities. Adjusted free cash flow increased to $100.5 million for the full year 2019, compared to $77.0 million for the prior year, primarily due to higher net cash provided by operating activities, lower Transition Services Agreement costs and lower transition, inegration and other related expenses.
Updated Outlook for 2020 (forward-looking statement)
For the year ending December 31, 2020, Clarivate expects:
| • | Adjusted Revenues in a range of $1.16 billion to $1.19 billion (previously $950 million to $970 million) |
| • | Adjusted EBITDA in a range of $395 million to $420 million (previously $330 million to $350 million) |
| • | Adjusted EBITDA margins in a range of 34% to 35% (previously 35% to 36%) |
| • | Adjusted diluted EPS in a range of $0.53 to $0.59 (previously not provided) |
| • | Adjusted Free Cash Flow in a range of $220 million to $240 million (previously $195 million to $210 million) |
The updated outlook includes 10 months of financial results for the acquisition of Decision Resources Group, which the Company expects to close within the next few days.
Adjusted diluted EPS for 2020 is calculated based on approximately 381.9 million fully diluted weighted average shares outstanding, an increase of approximately 52.1 million shares or 16%, compared to 329.8 million shares outstanding at the end of December 31, 2019. The increase in shares is primarily driven by the February 2020 offering of 27.6 million shares, with proceeds used to fund a portion of the cash consideration for the acquisition of Decision Resources Group, and the issuance of approximately 24 million ordinary shares upon exercise of outstanding warrants.
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.
Conference Call and Webcast
Clarivate will host a conference call and webcast to review the results for the fourth quarter on Thursday, February 27th 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 3291626. 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 10138014. The recording will be available for replay through March 12, 2020.
The webcast can be accessed at https://services.choruscall.com/links/ccc200227.html and will be available for replay.
Investor Day Conference on May 19, 2020
Clarivate will host an Investor Day Conference in New York City on Tuesday, May 19, 2020. Management will provide an update on the business, with presentations starting at 1:00 P.M. eastern time and concluding at 4:00 P.M. eastern time. Registration is required to attend the event. The event will be simultaneously webcast on the Investor Relations section of the company's website. If you wish to be considered for attendance to the Investor Day Conference, please contact investor.relations@clarivate.com.
Use of Non-GAAP Financial Measures
We currently qualify as a foreign private issuer (“FPI”) under SEC rules. We will retain FPI status until at least December 31, 2020. Even though we qualify as an FPI, we report our financial results in accordance with GAAP and, beginning with our 2019 annual report, we have elected to file our periodic and current reports on Forms 10-K, 10-Q and 8-K.
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.
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 Annual Report on Form 10-K, 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.
Consolidated Balance Sheets
(in thousands)
| As of December 31, | ||||||||
| 2019 | 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 76,130 | $ | 25,575 | ||||
| Restricted cash | 9 | 9 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $16,511 and $14,076 at December 31, 2019 and December 31, 2018, respectively | 333,858 | 331,295 | ||||||
| Prepaid expenses | 35,243 | 31,021 | ||||||
| Other current assets | 11,750 | 20,712 | ||||||
| Assets held for sale | 30,619 | — | ||||||
| Total current assets | 487,609 | 408,612 | ||||||
| Computer hardware and other property, net | 18,042 | 20,641 | ||||||
| Other intangible assets, net | 1,828,640 | 1,958,520 | ||||||
| Goodwill | 1,328,045 | 1,282,919 | ||||||
| Other non-current assets | 18,632 | 26,556 | ||||||
| Deferred income taxes | 19,488 | 12,426 | ||||||
| Operating lease right-of-use assets | 85,448 | — | ||||||
| Total Assets | $ | 3,785,904 | $ | 3,709,674 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 26,458 | $ | 38,418 | ||||
| Accrued expenses and other current liabilities | 153,750 | 153,849 | ||||||
| Current portion of deferred revenues | 407,325 | 391,102 | ||||||
| Current portion of operating lease liabilities | 22,130 | — | ||||||
| Current portion of long-term debt | 9,000 | 60,345 | ||||||
| Liabilities held for sale | 26,868 | — | ||||||
| Total current liabilities | 645,531 | 643,714 | ||||||
| Long-term debt | 1,628,611 | 1,930,177 | ||||||
| Non-current portion of deferred revenues | 19,723 | 17,112 | ||||||
| Other non-current liabilities | 18,891 | 24,838 | ||||||
| Deferred income taxes | 48,547 | 43,226 | ||||||
| Operating lease liabilities | 64,189 | — | ||||||
| Total liabilities | 2,425,492 | 2,659,067 | ||||||
| Commitments and Contingencies (Note 16) | ||||||||
| Shareholders’ equity: | ||||||||
| Ordinary Shares, no par value; unlimited shares authorized at December 31, 2019 and December 31, 2018; 306,874,115 and 217,526,425 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively; | 2,208,529 | 1,677,510 | ||||||
| Accumulated other comprehensive income (loss) | (4,879 | ) | 5,358 | |||||
| Accumulated deficit | (843,238 | ) | (632,261 | ) | ||||
| Total shareholders’ equity | 1,360,412 | 1,050,607 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 3,785,904 | $ | 3,709,674 | ||||
Consolidated Statement of Operations (unaudited)
(in thousands)
| Three Months Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Revenues, net | $ | 255,013 | $ | 245,247 | ||||
| Operating costs and expenses: | ||||||||
| Cost of revenues, excluding depreciation and amortization | (82,490 | ) | (95,294 | ) | ||||
| Selling, general and administrative costs, excluding depreciation and amortization | (87,909 | ) | (88,785 | ) | ||||
| Share-based compensation expense | (4,708 | ) | (3,033 | ) | ||||
| Depreciation | (2,718 | ) | (1,481 | ) | ||||
| Amortization | (52,667 | ) | (55,945 | ) | ||||
| Impairment on assets held for sale | (18,431 | ) | 0 | |||||
| Transaction expenses | (4,141 | ) | (1,846 | ) | ||||
| Transition, integration and other related expenses | (4,489 | ) | (10,014 | ) | ||||
| Restructuring | (15,670 | ) | — | |||||
| Legal settlement | — | — | ||||||
| Other operating income, net | 1,779 | 4,696 | ||||||
| Total operating expenses | (271,444 | ) | (251,702 | ) | ||||
| Income (loss) from operations | (16,431 | ) | (6,455 | ) | ||||
| Interest expense | (63,751 | ) | (34,951 | ) | ||||
| Income (loss) before income tax | (80,182 | ) | (41,406 | ) | ||||
| Provision for income taxes | (4,605 | ) | (2,048 | ) | ||||
| Net income (loss) | $ | (84,787 | ) | $ | (43,454 | ) | ||
| Per Share | ||||||||
| Basic | $ | (0.28 | ) | $ | (0.20 | ) | ||
| Diluted | $ | (0.28 | ) | $ | (0.20 | ) | ||
| Weighted-average shares outstanding | ||||||||
| Basic | 306,484,116 | 217,519,554 | ||||||
| Diluted | 306,484,116 | 217,519,554 | ||||||
Consolidated Statement of Operations
(in thousands)
| Twelve Months Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Revenues, net | $ | 974,345 | $ | 968,468 | ||||
| Operating costs and expenses: | ||||||||
| Cost of revenues, excluding depreciation and amortization | (346,503 | ) | (396,499 | ) | ||||
| Selling, general and administrative costs, excluding depreciation and amortization | (368,675 | ) | (369,377 | ) | ||||
| Share-based compensation expense | (51,383 | ) | (13,715 | ) | ||||
| Depreciation | (9,181 | ) | (9,422 | ) | ||||
| Amortization | (191,361 | ) | (227,803 | ) | ||||
| Impairment on assets held for sale | (18,431 | ) | — | |||||
| Transaction expenses | (46,214 | ) | (2,457 | ) | ||||
| Transition, integration and other related expenses | (14,239 | ) | (61,282 | ) | ||||
| Restructuring | (15,670 | ) | — | |||||
| Legal settlement | 39,399 | — | ||||||
| Other operating income, net | 4,826 | 6,379 | ||||||
| Total operating expenses | (1,017,432 | ) | (1,074,176 | ) | ||||
| Loss from operations | (43,087 | ) | (105,708 | ) | ||||
| Interest expense | (157,689 | ) | (130,805 | ) | ||||
| Loss before income tax | (200,776 | ) | (236,513 | ) | ||||
| Provision for income taxes | (10,201 | ) | (5,649 | ) | ||||
| Net loss | $ | (210,977 | ) | $ | (242,162 | ) | ||
| Per Share: | ||||||||
| Basic | $ | (0.77 | ) | $ | (1.11 | ) | ||
| Diluted | $ | (0.77 | ) | $ | (1.11 | ) | ||
| Weighted-average shares outstanding | ||||||||
| Basic | 273,883,342 | 217,472,870 | ||||||
| Diluted | 273,883,342 | 217,472,870 | ||||||
Consolidated Statements of Cash Flows
(in thousands)
| Twelve Months Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (210,977 | ) | $ | (242,162 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 200,542 | 237,225 | ||||||
| Bad debt expense | 1,331 | 6,507 | ||||||
| Deferred income tax benefit | 357 | (14,103 | ) | |||||
| Share-based compensation | 51,383 | 13,715 | ||||||
| Loss on extinguishment of debt | 50,676 | — | ||||||
| Gain on sale of line of business | — | (39,104 | ) | |||||
| Impairment on assets held for sale | 18,431 | — | ||||||
| Deferred finance charges | 2,496 | 9,182 | ||||||
| Tax indemnity write-off | — | 33,819 | ||||||
| Other operating activities | (374 | ) | (3,979 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (593 | ) | (50,906 | ) | ||||
| Prepaid expenses | (4,757 | ) | (2,936 | ) | ||||
| Other assets | (975 | ) | 578 | |||||
| Accounts payable | (13,838 | ) | (18,091 | ) | ||||
| Accrued expenses and other current liabilities | (4,372 | ) | 9,842 | |||||
| Deferred revenue | 33,480 | 33,539 | ||||||
| Operating lease right of use assets | 11,365 | — | ||||||
| Operating lease liabilities | (11,251 | ) | — | |||||
| Other liabilities | (5,344 | ) | 774 | |||||
| Net cash (used in) provided by operating activities | 117,580 | (26,100 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (69,836 | ) | (45,410 | ) | ||||
| Acquisitions, net of cash acquired | (68,424 | ) | (23,539 | ) | ||||
| Acquisition of intangible assets | (2,625 | ) | — | |||||
| Proceeds from sale of product line, net of restricted cash | — | 80,883 | ||||||
| Net cash (used in) provided by investing activities | (140,885 | ) | 11,934 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from revolving credit facility | 70,000 | 45,000 | ||||||
| Principal payments on term loan | (641,509 | ) | (46,709 | ) | ||||
| Repayments of revolving credit facility | (50,000 | ) | (30,000 | ) | ||||
| Payment of debt issuance costs | (41,923 | ) | — | |||||
| Contingent purchase price payment | (2,371 | ) | (2,470 | ) | ||||
| Proceeds from reverse recapitalization | 682,087 | — | ||||||
| Proceeds from issuance of debt | 1,600,000 | — | ||||||
| Extinguishment of debt | (1,342,651 | ) | — | |||||
| Tax receivable agreement payout | (200,000 | ) | — | |||||
| Proceeds from the exercise of warrants and employee share options | 1,582 | 1,574 | ||||||
| Net cash (used in) provided by financing activities | 75,215 | (32,605 | ) | |||||
| Effects of exchange rates | (971 | ) | (5,193 | ) | ||||
| Net increase (decrease) in cash and cash equivalents, and restricted cash | 50,939 | (51,964 | ) | |||||
| Beginning of period: | ||||||||
| Cash and cash equivalents | 25,575 | 53,186 | ||||||
| Restricted cash | 9 | 24,362 | ||||||
| Total cash and cash equivalents, and restricted cash, beginning of period | 25,584 | 77,548 | ||||||
| Less: Cash included in assets held for sale, end of period | (384 | ) | — | |||||
| Cash and cash equivalents, and restricted cash, end of period | 76,139 | 25,584 | ||||||
| End of period: | ||||||||
| Cash and cash equivalents | 76,130 | 25,575 | ||||||
| Restricted cash | 9 | 9 | ||||||
| Total cash and cash equivalents, and restricted cash, end of period | $ | 76,139 | $ | 25,584 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | 101,164 | $ | 121,916 | ||||
| Cash paid for income tax | $ | 29,204 | $ | 13,210 | ||||
| Capital expenditures included in accounts payable | $ | 8,762 | $ | 5,166 | ||||
| Assets received as reverse recapitalization capital | $ | 1,877 | $ | — | ||||
| Liabilities assumed as reduction of reverse recapitalization capital | $ | 5,910 | $ | — | ||||
Reconciliation to Certain Non-GAAP Measures
(Amounts in tables may not sum due to rounding)
Adjusted Revenues, Adjusted Subscription Revenues and Adjusted Transactional Revenues
We present Adjusted Revenues, which excludes the impact of the deferred revenues purchase accounting adjustment (recorded in connection with the 2016 Transaction) and the revenues from the IPM Product Line prior to its divestiture. We also present Adjusted Subscription and Adjusted Transactional Revenues, which excludes the revenues from the IPM Product Line prior to its divestiture. We present these measures because we believe they are useful to readers' understanding of the underlying trends in our operations.
Our presentation of Adjusted Revenues, Adjusted Subscription Revenues and Adjusted Transactional Revenues is presented for informational purposes only and are not necessarily indicative of our future results. You should compensate for these limitations by relying primarily on our U.S. GAAP results and only using non-GAAP measures for supplementary analysis.
The following table presents our calculation of Adjusted Revenues for the three and twelve months ended December 31, 2019 and 2018 and a reconciliation of this measure to our Revenues, net for the same periods:
| Three Months Ended December 31, | Variance | |||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | $ | % | ||||||||||||
| Revenues, net | $ | 255.0 | $ | 245.2 | $ | 9.8 | 4.0 | % | ||||||||
| Deferred revenues purchase accounting adjustment | 0.1 | 0.2 | (0.1 | ) | (69.2 | )% | ||||||||||
| Revenue attributable to IPM Product Line | — | — | — | — | % | |||||||||||
| Adjusted revenues | $ | 255.1 | $ | 245.4 | $ | 9.7 | 4.0 | % | ||||||||
| Twelve Months Ended December 31, | Variance | |||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | $ | % | ||||||||||||
| Revenues, net | $ | 974.3 | $ | 968.5 | $ | 5.9 | 0.6 | % | ||||||||
| Deferred revenues purchase accounting adjustment | 0.4 | 3.2 | (2.8 | ) | (86.1 | )% | ||||||||||
| Revenue attributable to IPM Product Line | — | (20.5 | ) | 20.5 | 100.0 | % | ||||||||||
| Adjusted revenues | $ | 974.8 | $ | 951.2 | $ | 23.6 | 2.5 | % | ||||||||
The following table presents our calculation of Adjusted Subscription Revenues and Adjusted Transactional Revenues for the three and twelve months ended December 31, 2019 and 2018 and a reconciliation of this measure to Note 15 – "Revenue Recognition" in our annual statements, net for the same periods:
| Three Months Ended December 31, | Variance | |||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | $ | % | ||||||||||||
| Subscription revenues | $ | 209.5 | $ | 197.6 | $ | 11.9 | 6.0 | % | ||||||||
| Revenue attributable to IPM Product Line | — | — | — | — | % | |||||||||||
| Adjusted subscription revenues | $ | 209.5 | $ | 197.6 | $ | 11.9 | 6.0 | % | ||||||||
| Three Months Ended December 31, | Variance | |||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | $ | % | ||||||||||||
| Transactional revenues | $ | 45.6 | $ | 47.8 | $ | (2.2 | ) | (4.6 | )% | |||||||
| Revenue attributable to IPM Product Line | — | — | — | — | % | |||||||||||
| Adjusted transactional revenues | $ | 45.6 | $ | 47.8 | $ | (2.2 | ) | (4.6 | )% | |||||||
| Twelve Months Ended December 31, | Variance | |||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | $ | % | ||||||||||||
| Subscription revenues | $ | 805.5 | $ | 794.2 | $ | 11.3 | 1.4 | % | ||||||||
| Revenue attributable to IPM Product Line | — | (17.8 | ) | 17.8 | 100.0 | % | ||||||||||
| Adjusted subscription revenues | $ | 805.5 | $ | 776.4 | $ | 29.1 | 3.7 | % | ||||||||
| Twelve Months Ended December 31, | Variance | |||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | $ | % | ||||||||||||
| Transactional revenues | $ | 169.3 | $ | 177.5 | $ | (8.2 | ) | (4.7 | )% | |||||||
| Revenue attributable to IPM Product Line | — | (2.7 | ) | 2.7 | 100.0 | % | ||||||||||
| Adjusted transactional revenues | $ | 169.3 | $ | 174.8 | $ | (5.5 | ) | (3.1 | )% | |||||||
Adjusted EBITDA
We believe Adjusted EBITDA is useful to investors because similar measures are frequently used by securities analysts, investors, ratings agencies and other interested parties to evaluate our competitors and to measure the ability of companies to service their debt. Our definition of and method of calculating Adjusted EBITDA may vary from the definitions and methods used by other companies, which may limit their usefulness as comparative measures. We calculate Adjusted EBITDA by using net (loss) income before provision for income taxes, depreciation and amortization and 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 the IPM Product Line which was divested in October 2018), losses on extinguishment of debt, stock-based compensation, unrealized foreign currency gains/(losses), transition services agreement costs entered into with Thomson Reuters in 2016 ("Transition Services Agreement"), separation and integration costs, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues, non-cash income/(loss) on equity and cost method investments, non-operating income or expense, the impact of certain non-cash 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.
Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by any of the adjusted items, or that our projections and estimates will be realized in their entirety or at all. In addition, because of these limitations, Adjusted EBITDA should not be considered as a measure of liquidity or discretionary cash available to us to fund our cash needs, including investing in the growth of our business and meeting our obligations. You should compensate for these limitations by relying primarily on our U.S. GAAP results and only use Adjusted EBITDA for supplementary analysis.
The following table presents our calculation of Adjusted EBITDA for the three and twelve months ended December 31, 2019 and 2018 and reconciles these measures to our Net loss for the same periods:
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| (in millions) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net loss | $ | (84.8 | ) | $ | (43.5 | ) | $ | (211.0 | ) | $ | (242.2 | ) | ||||
| Provision for income taxes | 4.6 | 2.0 | 10.2 | 5.6 | ||||||||||||
| Depreciation and amortization | 55.4 | 57.4 | 200.5 | 237.2 | ||||||||||||
| Interest, net | 63.8 | 35.0 | 157.7 | 130.8 | ||||||||||||
| Transition services agreement costs(1) | — | 7.6 | 10.5 | 55.8 | ||||||||||||
| Transition, transformation and integration expense(2) | (0.9 | ) | 13.6 | 24.4 | 69.2 | |||||||||||
| Deferred revenues adjustment(3) | 0.1 | 0.2 | 0.4 | 3.2 | ||||||||||||
| Transaction related costs(4) | 4.1 | 1.8 | 46.2 | 2.5 | ||||||||||||
| Share-based compensation expense | 4.7 | 3.0 | 51.4 | 13.7 | ||||||||||||
| Gain on sale of IPM Product Line | — | (36.1 | ) | — | (36.1 | ) | ||||||||||
| Tax indemnity asset(5) | — | 33.8 | — | 33.8 | ||||||||||||
| IPM adjusted operating margin(6) | — | — | — | (5.9 | ) | |||||||||||
| Restructuring(7) | 15.7 | — | 15.7 | — | ||||||||||||
| Legal settlement | — | — | (39.4 | ) | — | |||||||||||
| Impairment on assets held for sale | 18.4 | — | 18.4 | — | ||||||||||||
| Other (8) | 3.5 | 1.0 | 9.0 | 5.2 | ||||||||||||
| Adjusted EBITDA | $ | 84.6 | $ | 75.8 | $ | 294.0 | $ | 272.8 | ||||||||
| (1) | Includes accruals for payments to Thomson Reuters under the transition services agreement. These costs have decreased substantially in 2019, as we are in the final stages of implementing our standalone company infrastructure. |
| (2) | Includes 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 include mainly transition consulting, technology infrastructure, personnel and severance expenses relating to our standalone company infrastructure, which are recorded in Transition, integration, and other line-item of our income statement, as well as expenses related to the restructuring and transformation of our business following our separation from Thomson Reuters in 2016 mainly related to the integration of separate business units into one functional organization and enhancements in our technology. |
| (3) | Reflects deferred revenues fair value accounting adjustment arising from purchase price allocation in connection with our separation from Thomson Reuters in 2016 See “—Factors Affecting the Comparability of Our Results of Operations — Separation and Transition to Operations as a Standalone Business — Purchase Accounting Impact of our separation from Thomson Reuters in 2016” within the annual report. |
| (4) | Includes consulting and accounting costs associated with acquisitions and the sale of the IPM Product Line and sale of MarkMonitor business |
| (5) | Reflects the write down of a tax indemnity asset. |
| (6) | Reflects the IPM Product Line’s operating margin, excluding amortization and depreciation, prior to its divestiture in October 2018. |
| (7) | Reflects 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 product groups. |
| (8) | 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. |
Adjusted Net Income and Adjusted Diluted EPS
We have begun to use Adjusted Net Income and Adjusted Diluted Earnings Per Share defined below in our analysis of the financial performance of the Company. We believe Adjusted Net Income and Adjusted Diluted EPS are meaningful measures of the performance of the Company because they adjust for items that do not directly affect our ongoing operating performance in the period. Our definition of and method of calculating Adjusted Net Income and Adjusted Diluted EPS may vary from the definitions and methods used by other companies, which may limit their usefulness as comparative measures. We calculate Adjusted Net Income by 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, losses on extinguishment of debt, stock-based compensation, unrealized foreign currency gains/(losses), Transition Services Agreement costs, separation and integration costs, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues, non-cash income (loss) on equity and cost method investments, non-operating income or expense, the impact of certain non-cash and other items that are included in net income for the period that the Company does not consider indicative of its ongoing operating performance, certain unusual items impacting results in a particular period, and the income tax impact of any adjustments. We calculate Adjusted Diluted EPS by using Adjusted Net Income divided by diluted weighted average shares for the period.
Our presentation of Adjusted Net Income and Adjusted Diluted EPS should not be construed as an inference that our future results will be unaffected by any of the adjusted items, or that our projections and estimates will be realized in their entirety or at all. In addition, because of these limitations, Adjusted Net Income and Adjusted Diluted EPS should not be considered as measures of liquidity or discretionary cash available to us to fund our cash needs, including investing in the growth of our business and meeting our obligations. You should compensate for these limitations by relying primarily on our U.S. GAAP results and only use Adjusted Net Income and Adjusted Diluted EPS for supplementary analysis.
The following table presents our calculation of Adjusted Diluted EPS for the three and twelve months ended December 31, 2019 and 2018 and reconciles these measures to our Net loss for the same periods:
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||
| (in millions, except per share amounts) | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | ||||||||||||||||||||||||
| Net loss | $ | (84.8 | ) | (0.28 | ) | $ | (43.5 | ) | (0.20 | ) | $ | (211.0 | ) | (0.77 | ) | $ | (242.2 | ) | (1.11 | ) | ||||||||||||
| Dilutive impact of potential common shares | — | 0.02 | — | — | — | 0.04 | — | — | ||||||||||||||||||||||||
| Net loss | (84.8 | ) | (0.26 | ) | (43.5 | ) | (0.20 | ) | (211.0 | ) | (0.73 | ) | (242.2 | ) | (1.11 | ) | ||||||||||||||||
| Transition services agreement costs(1) | — | — | 7.6 | 0.03 | 10.5 | 0.04 | 55.8 | 0.26 | ||||||||||||||||||||||||
| Transition, transformation and integration expense(2) | (0.9 | ) | — | 13.6 | 0.06 | 24.4 | 0.08 | 69.2 | 0.32 | |||||||||||||||||||||||
| Deferred revenues adjustment(3) | 0.1 | — | 0.2 | — | 0.4 | — | 3.2 | 0.01 | ||||||||||||||||||||||||
| Transaction related costs(4) | 4.1 | 0.01 | 1.8 | 0.01 | 46.2 | 0.16 | 2.5 | 0.01 | ||||||||||||||||||||||||
| Share-based compensation expense | 4.7 | 0.01 | 3.0 | 0.01 | 51.4 | 0.18 | 13.7 | 0.06 | ||||||||||||||||||||||||
| Amortization related to acquired intangible assets | 39.9 | 0.12 | 53.5 | 0.25 | 169.0 | 0.59 | 217.5 | 1.00 | ||||||||||||||||||||||||
| Restructuring(5) | 15.7 | 0.05 | — | — | 15.7 | 0.05 | — | — | ||||||||||||||||||||||||
| Debt extinguishment costs and refinancing related costs(6) | 42.2 | 0.13 | — | — | 51.3 | 0.18 | — | — | ||||||||||||||||||||||||
| Impairment on assets held for sale | 18.4 | 0.06 | — | — | 18.4 | 0.06 | — | — | ||||||||||||||||||||||||
| Legal settlement | — | — | — | — | (39.4 | ) | (0.14 | ) | — | — | ||||||||||||||||||||||
| Gain on Sale of IPM Product Line | — | — | (36.1 | ) | (0.16 | ) | — | (36.1 | ) | (0.17 | ) | |||||||||||||||||||||
| IPM adjusted operating margin(7) | — | — | — | — | — | — | (5.9 | ) | (0.03 | ) | ||||||||||||||||||||||
Tax indemnity asset(8) | — | — | 33.8 | 0.16 | — | — | 33.8 | 0.16 | ||||||||||||||||||||||||
| Other(9) | 3.5 | 0.01 | 0.8 | — | 9.0 | 0.04 | 5.2 | 0.03 | ||||||||||||||||||||||||
| Income tax impact of related adjustments | (1.0 | ) | — | (2.8 | ) | (0.01 | ) | 6.2 | 0.02 | 8.5 | 0.04 | |||||||||||||||||||||
| Adjusted Net income and Adjusted Diluted EPS | $ | 41.9 | 0.13 | $ | 31.9 | 0.15 | $ | 152.1 | 0.53 | $ | 125.2 | 0.58 | ||||||||||||||||||||
| Weighted average common shares (Diluted) | 329,824,753 | 219,078,420 | 287,871,870 | 217,472,872 | ||||||||||||||||||||||||||||
| (1) | Includes accruals for payments to Thomson Reuters under the transition services agreement. These costs have decreased substantially in 2019, as we are in the final stages of implementing our standalone company infrastructure. |
| (2) | Includes 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 include mainly transition consulting, technology infrastructure, personnel and severance expenses relating to our standalone company infrastructure, which are recorded in Transition, integration, and other line-item of our income statement, as well as expenses related to the restructuring and transformation of our business following our separation from Thomson Reuters in 2016 mainly related to the integration of separate business units into one functional organization and enhancements in our technology. |
| (3) | Reflects the deferred revenues fair value accounting adjustment arising from the purchase price allocation in connection with the 2016 Transaction. |
| (4) | Includes consulting and accounting costs associated with acquisitions and the sale of the IPM Product Line and sale of MarkMonitor business |
| (5) | Reflects 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 product groups. |
| (6) | Reflects costs incurred for the early extinguishment of debt and refinancing costs related to new debt. The twelve months ended December 31, 2019 includes a charge of $9.1 million recorded in the second quarter of 2019 relating to refinancing costs. |
| (7) | Reflects the IPM Product Line's operating margin, excluding amortization and depreciation, prior to its divestiture in October 2018. |
| (8) | Reflects the write down of a tax indemnity asset. |
| (9) | 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. |
Free Cash Flow
We use free cash flow in our operational and financial decision-making and believe free cash flow is useful to investors because similar measures are frequently used by securities analysts, investors, ratings agencies and other interested parties to evaluate our competitors and to measure the ability of companies to service their debt.
Our presentation of free cash flow should not be construed as a measure of liquidity or discretionary cash available to us to fund our cash needs, including investing in the growth of our business and meeting our obligations. You should compensate for these limitations by relying primarily on our U.S. GAAP results.
We define free cash flow as net cash provided by operating activities less capital expenditures. The following table reconciles our non-GAAP free cash flow measure to net cash provided by operating activities:
| Twelve Months Ended December 31, | ||||||||
| (in millions) | 2019 | 2018 | ||||||
| Net cash provided by (used in) operating activities | $ | 117.6 | $ | (26.1 | ) | |||
| Capital expenditures | (69.8 | ) | (45.4 | ) | ||||
| Free cash flow | 47.8 | (71.5 | ) | |||||
| Cash paid for transition services agreement(1) | 12.0 | 72.7 | ||||||
| Cash paid for transition, transformation and integration expense(2) | 40.9 | 73.6 | ||||||
| Cash paid for transaction related costs(3) | 45.1 | 2.2 | ||||||
| Cash received for Legal Settlement | (45.3 | ) | — | |||||
| Adjusted free cash flow | $ | 100.5 | $ | 77.0 | ||||
| (1) | Includes cash payments to Thomson Reuters under the Transition Services Agreement. These costs have decreased substantially in 2019, as we are in the final stages of implementing our standalone company infrastructure. In 2019, the Transition Services Agreement cash paid is offset by cash receipts from the IPM Product Line divestiture. |
| (2) | Includes cash payments 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 cash payments include mainly transition consulting, technology infrastructure, personnel and severance expenses relating to our standalone company infrastructure, which are recorded in Transition, integration, and other line-item of our income statement, as well as cash payments related to the restructuring and transformation of our business following our separation from Thomson Reuters in 2016 mainly related to the integration of separate business units into one functional organization and enhancements in our technology. This also includes cash payments following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two product groups. |
| (3) | Includes consulting and accounting costs associated with acquisitions and the sale of the IPM Product Line and sale of MarkMonitor business. |
Required Reported Data
Standalone Adjusted EBITDA
We are required to report Standalone Adjusted EBITDA pursuant to the reporting covenants contained in the Credit Agreement and the Indenture. Standalone Adjusted EBITDA is substantially similar to Consolidated EBITDA and EBITDA as such terms are defined under the Credit Agreement and the Indenture, respectively. In addition, the Credit Agreement and the Indenture 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 Agreement and the Indenture 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 after we had implemented the infrastructure to replace the services provided pursuant to the Transition Services Agreement, 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.
Standalone Adjusted EBITDA is calculated under the Credit Agreement and the Indenture by using our Net Income for the trailing twelve month period (defined in the Credit Agreement and the Indenture as our GAAP net income adjusted for certain items specified in the Credit Agreement and the Indenture) 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 following the separation of the Company’s business from Thomson Reuters (the “2016 Transaction”) 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 Notes and earnout obligations incurred in connection with an acquisition or investment.
The following table bridges Adjusted EBITDA to Standalone Adjusted EBITDA, as Adjusted EBITDA reflects all but three of the adjustments that comprise Standalone Adjusted EBITDA for the periods presented:
| Twelve Months Ended December 31, | ||||||||
| (in millions) | 2019 | 2018 | ||||||
| Net loss | $ | (211.0 | ) | $ | (242.2 | ) | ||
| (Benefit) provision for income taxes | 10.2 | 5.6 | ||||||
| Depreciation and amortization | 200.5 | 237.2 | ||||||
| Interest, net | 157.7 | 130.8 | ||||||
| Transition Services Agreement costs(1) | 10.5 | 55.8 | ||||||
| Transition, transformation and integration expense(2) | 24.4 | 69.2 | ||||||
| Deferred revenues adjustment(3) | 0.4 | 3.2 | ||||||
| Transaction related costs(4) | 46.2 | 2.5 | ||||||
| Gain on sale of IPM Product Line | — | (36.1 | ) | |||||
| Share-based compensation expense | 51.4 | 13.7 | ||||||
| Tax indemnity asset (5) | — | 33.8 | ||||||
| IPM adjusted operating margin (6) | — | (5.9 | ) | |||||
| Restructuring(7) | 15.7 | — | ||||||
| Legal settlement | (39.4 | ) | — | |||||
| Impairment on assets held for sale | 18.4 | — | ||||||
| Other(8) | 9.0 | 5.2 | ||||||
| Adjusted EBITDA | 294.0 | 272.8 | ||||||
| Realized foreign exchange gain | (3.5 | ) | — | |||||
| Cost savings(9) | 15.5 | 12.7 | ||||||
| Excess standalone costs(10) | 30.0 | 25.4 | ||||||
| Standalone Adjusted EBITDA | 336.0 | 310.9 | ||||||
| (1) | Includes accruals for payments to Thomson Reuters under the Transition Services Agreement. These costs are expected to decrease substantially in 2019, as we are in the final stages of implementing our standalone company infrastructure. |
| (2) | Includes costs incurred in connection with and after the 2016 Transaction relating to the implementation of our standalone company infrastructure and related cost-savings initiatives. These costs include mainly transition consulting, technology infrastructure, personnel and severance expenses relating to our standalone company infrastructure, which are recorded in Transition, integration, and other line-item of our income statement, as well as expenses related to the restructuring and transformation of our business following the 2016 Transaction, mainly related to the integration of separate business units into one functional organization and enhancements in our technology. Amounts incurred for the twelve months ended December 31, 2019 also relate to the Company's transition expenses incurred following the Transactions. |
| (3) | Reflects deferred revenues fair value accounting adjustment arising from purchase price allocation in connection with the 2016 Transaction. |
| (4) | Includes consulting and accounting costs associated with the Transactions in 2019, the sale of the IPM Product Line and tuck-in acquisitions. |
| (5) | Reflects the write down of a tax indemnity asset. |
| (6) | Reflects the IPM Product Line's operating margin, excluding amortization and depreciation, prior to its divestiture in October 2018. |
| (7) | Reflects 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 product groups. |
| (8) | Includes primarily the net impact of foreign exchange gains and losses related to the re-measurement of balances and other one-time adjustments. |
| (9) | 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). |
| (10) | Reflects the difference between our actual standalone company infrastructure costs, and our estimated steady state standalone operating costs, which were as follows: |
| Twelve Months Ended December 31, | ||||||||
| (in millions) | 2019 | 2018 | ||||||
| Actual standalone company infrastructure costs | 162.0 | 153.6 | ||||||
| Steady state standalone cost estimate | (132.0 | ) | (128.2 | ) | ||||
| Excess standalone costs | 30.0 | 25.4 | ||||||
The foregoing adjustments (9) and (10) 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 and transactional 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 December 31, | Total (Dollars)
| Total (Percentage)
| Divested IPM Product Line | FX Impact | Ongoing Business | |||||||||||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | ||||||||||||||||||||||||||
| Subscription revenues | $ | 209.5 | $ | 197.6 | $ | 11.9 | 6.0 | % | — | % | (0.1 | )% | 6.1 | % | ||||||||||||||
| Transactional revenues | 45.6 | 47.8 | (2.2 | ) | (4.6 | )% | — | % | (0.2 | )% | (4.4 | )% | ||||||||||||||||
| Deferred revenues adjustment(1) | (0.1 | ) | (0.2 | ) | 0.1 | (69.2 | )% | — | % | — | % | — | % | |||||||||||||||
| Revenues, net | $ | 255.0 | $ | 245.2 | $ | 9.8 | 4.0 | % | — | % | (0.2 | )% | 4.2 | % | ||||||||||||||
| (1) | Reflects the deferred revenues adjustment made as a result of purchase accounting related to the 2016 Transaction. |
| Variance Increase/(Decrease) | Percentage of Factors Increase/(Decrease) | |||||||||||||||||||||||||||
| Twelve
Months Ended December 31, | Total Variance (Dollars) | Total Variance (Percentage) | Divested IPM Product Line | FX Impact | Ongoing Business | |||||||||||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | ||||||||||||||||||||||||||
| Subscription revenues | $ | 805.5 | $ | 794.2 | $ | 11.3 | 1.4 | % | (2.2 | )% | (0.6 | )% | 4.2 | % | ||||||||||||||
| Transactional revenues | 169.3 | 177.5 | (8.2 | ) | (4.7 | )% | (1.6 | )% | (0.8 | )% | (2.3 | )% | ||||||||||||||||
| Deferred revenues adjustment(1) | (0.4 | ) | (3.2 | ) | 2.8 | (86.1 | )% | — | % | — | % | — | % | |||||||||||||||
| Revenues, net | $ | 974.3 | $ | 968.5 | $ | 5.9 | 0.6 | % | (2.1 | )% | (0.6 | )% | 3.1 | % | ||||||||||||||
| (1) | Reflects the deferred revenues adjustment made as a result of purchase accounting related to the 2016 Transaction. |
The tables below reflect the impact of the revenue generated by the IPM Product Line, including as a percentage of our total revenues, for the periods indicated, as well the drivers of the variances between periods. We sold the IPM Product Line in October 2018.
| Variance Increase/(Decrease) | Percentage
of Factors Increase/(Decrease) | |||||||||||||||||||||||
| Three
Months Ended December 31, | Total Variance (Dollars) | Total Variance (Percentage) | FX Impact | Ongoing Business | ||||||||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | ||||||||||||||||||||||
| Adjusted subscription revenues | $ | 209.5 | $ | 197.6 | $ | 11.9 | 6.0 | % | (0.1 | )% | 6.1 | % | ||||||||||||
| Adjusted transactional revenues | 45.6 | 47.8 | (2.2 | ) | (4.6 | )% | (0.2 | )% | (4.4 | )% | ||||||||||||||
| Deferred revenues adjustment (1) | (0.1 | ) | (0.2 | ) | $ | 0.1 | (69.2 | )% | 0.0 | % | 0.0 | % | ||||||||||||
| IPM Product Line (2) | — | — | 0.0 | 0.0 | % | 0.0 | % | 0.0 | % | |||||||||||||||
| Revenues, net | $ | 255.0 | $ | 245.2 | $ | 9.8 | 4.0 | % | (0.2 | )% | 4.2 | % | ||||||||||||
| (1) | Reflects the deferred revenues adjustment made as a result of purchase accounting related to the 2016 Transaction. |
| (2) | Reflects the revenue generated by the IPM Product Line for the year ended December 31, 2018. We sold the IPM Product Line in October 2018. |
| Variance Increase/(Decrease) | Percentage
of Factors Increase/(Decrease) | |||||||||||||||||||||||
| Twelve
Months Ended December 31, | Total Variance (Dollars) | Total Variance (Percentage) | FX Impact | Ongoing Business | ||||||||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | ||||||||||||||||||||||
| Adjusted subscription revenues | $ | 805.5 | $ | 776.4 | $ | 29.1 | 3.7 | % | (0.6 | )% | 4.3 | % | ||||||||||||
| Adjusted transactional revenues | 169.3 | 174.8 | (5.5 | ) | (3.1 | )% | (0.8 | )% | (2.3 | )% | ||||||||||||||
| Deferred revenues adjustment (1) | (0.4 | ) | (3.2 | ) | 2.8 | (86.1 | )% | 0.0 | % | 0.0 | % | |||||||||||||
| IPM Product Line (2) | — | 20.5 | (20.5 | ) | (100.0 | )% | 0.0 | % | 0.0 | % | ||||||||||||||
| Revenues, net | $ | 974.3 | $ | 968.5 | $ | 5.9 | 0.6 | % | (0.6 | )% | 3.1 | % | ||||||||||||
| (1) | Reflects the deferred revenues adjustment made as a result of purchase accounting related to the 2016 Transaction. |
| (2) | Reflects the revenue generated by the IPM Product Line for the year ended December 31, 2018. We sold the IPM Product Line in October 2018. |
The following tables, and the discussion that follows, presents our revenues by Group for the periods indicated, as well 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 Group | Three
Months Ended December 31, | Total Variance (Dollars) | Total Variance (Percentage) | FX Impact | Ongoing Business | |||||||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | ||||||||||||||||||||||
| Science Product Group | $ | 146.5 | $ | 137.7 | $ | 8.8 | 6.4 | % | (0.1 | )% | 6.5 | % | ||||||||||||
| IP Product Group | 108.6 | 107.7 | 0.9 | 0.7 | % | (0.2 | )% | 0.9 | % | |||||||||||||||
| Deferred revenues adjustment (1) | (0.1 | ) | (0.2 | ) | 0.1 | (69.2 | )% | — | % | — | % | |||||||||||||
| IPM Product Line (2) | — | 0.0 | 0.0 | 0.0 | % | — | % | — | % | |||||||||||||||
| Revenues, net | $ | 255.0 | $ | 245.2 | $ | 9.8 | 4.0 | % | (0.2 | )% | 4.2 | % | ||||||||||||
| (1) | Reflects the deferred revenues adjustment made as a result of purchase accounting related to the 2016 Transaction. |
| (2) | Reflects the revenue generated by the IPM Product Line for the year ended December 31, 2018. We sold the IPM Product Line in October 2018. |
| Variance Increase/(Decrease) | Percentage
of Factors Increase/(Decrease) | |||||||||||||||||||||||
| Revenues by Product Group | Twelve
Months Ended December 31, | Total Variance (Dollars) | Total Variance (Percentage) | FX Impact | Ongoing Business | |||||||||||||||||||
| (in millions, except percentages) | 2019 | 2018 | ||||||||||||||||||||||
| Science Product Group | $ | 547.5 | $ | 527.9 | 19.6 | 3.7 | % | (0.4 | )% | 4.1 | % | |||||||||||||
| IP Product Group | 427.2 | 423.3 | 4.0 | 0.9 | % | (0.9 | )% | 1.8 | % | |||||||||||||||
| Deferred revenues adjustment (1) | (0.4 | ) | (3.2 | ) | (2.8 | ) | (86.1 | )% | — | % | — | % | ||||||||||||
| IPM Product Line (2) | — | 20.5 | (20.5 | ) | (100.0 | )% | — | % | — | % | ||||||||||||||
| Revenues, net | $ | 974.3 | $ | 968.5 | $ | 5.9 | 0.6 | % | (0.6 | )% | 3.1 | % | ||||||||||||
| (1) | Reflects the deferred revenues adjustment made as a result of purchase accounting related to the 2016 Transaction. |
| (2) | Reflects the revenue generated by the IPM Product Line for the year ended December 31, 2018. We sold the IPM Product Line in October 2018. |
The following table presents our calculation of Adjusted Revenues for the Outlook for 2020 and a reconciliation of this measure to our Revenues, net for the same period:
| Year Ending December 31, 2020 (Forecasted) | ||||||||
| Low | High | |||||||
| (in millions) | ||||||||
| Revenues, net | $ | 1,160.0 | $ | 1,190.0 | ||||
| Adjusted revenues, net(1) | $ | 1,160.0 | $ | 1,190.0 | ||||
| (1) | The Company is evaluating the purchase accounting impact, including the deferred revenue adjustment, related to the DRG acquisition. |
The following table presents our calculation of Adjusted EBITDA for the Outlook for 2020 and reconciles these measures to our Net loss for the same period:
| Year Ending December 31, 2020 (Forecasted) | ||||||||
| Low | High | |||||||
| (in millions) | ||||||||
| Net loss | $ | (70.6 | ) | $ | (45.6 | ) | ||
| Provision for income taxes | 7.8 | 7.8 | ||||||
| Depreciation and amortization | 236.9 | 236.9 | ||||||
| Interest, net | 93.0 | 93.0 | ||||||
| Transition, transition services agreement, and integration expense(1) | 46.4 | 46.4 | ||||||
| Transaction related costs(2) | 50.0 | 50.0 | ||||||
| Share-based compensation expense | 30.6 | 30.6 | ||||||
| Other | 0.9 | 0.9 | ||||||
| Adjusted EBITDA | 395.0 | 420.0 | ||||||
| Adjusted EBITDA margin | 34 | % | 35 | % | ||||
| (1) | Includes restructuring costs, other cost optimization activities, and payments and receipts under transition service agreements. |
| (2) | Includes cost associated with merger and acquisition related activities. |
The following table presents our calculation of Adjusted Diluted EPS for the Outlook for 2020 and reconciles these measures to our Net loss for the same period:
| Year Ending December 31, 2020 (Forecasted) | ||||||||
| Low | High | |||||||
| (in millions, except per share amounts) | Per Share | Per Share | ||||||
| Net loss | $ | (0.18 | ) | $ | (0.12 | ) | ||
| Transition, transition services agreement, and integration expense(1) | 0.12 | 0.12 | ||||||
| Transaction related costs(2) | 0.13 | 0.13 | ||||||
| Share-based compensation expense | 0.08 | 0.08 | ||||||
| Amortization related to acquired intangible assets | 0.41 | 0.41 | ||||||
| Other | — | — | ||||||
| Income tax impact of related adjustments | (0.03 | ) | (0.03 | ) | ||||
| Adjusted Diluted EPS | $ | 0.53 | $ | 0.59 | ||||
| Weighted average common shares (Diluted) | 381,921,495 | |||||||
| (1) | Includes restructuring costs, other cost optimization activities, and payments and receipts under transition service agreements. |
| (2) | Includes cost associated with merger and acquisition related activities. |
The following table presents our calculation of Adjusted Free Cash Flow for the Outlook for 2020 and reconciles these measures to our Net cash provided by operating activities for the same period:
| Year Ending December 31, 2020 (Forecasted) | ||||||||
| Low | High | |||||||
| (in millions) | ||||||||
| Net cash provided by operating activities | $ | 201.8 | $ | 217.4 | ||||
| Capital expenditures | (68.8 | ) | (72.4 | ) | ||||
| Free Cash Flow | 133.0 | 145.0 | ||||||
| Transition, transition services agreement, and integration expense(1) | 38.0 | 45.0 | ||||||
| Transaction related costs(2) | 49.0 | 50.0 | ||||||
| Adjusted Free Cash Flow | $ | 220.0 | $ | 240.0 | ||||
| (1) | Includes cash payments related to restructuring and other cost optimization activities. |
| (2) | Includes cash payments related to merger and acquisition related activities. |
Media Contact:
Tabita Seagrave, Head of External Communications
tabita.seagrave@clarivate.com
Investor Relations Contact:
Mark Donohue, Head of Investor Relations
mark.donohue@clarivate.com
Exhibit 99.2
Q4 and Full Year 2019 Earnings Supplemental Materials February 27, 2020
2 Forward - Looking Statements This presentation contains “forward - looking statements” as defined in the Private Securities Litigation Reform Act of 1995 . These statements, which express management’s current views concerning the future of our business, future plans and strategies, projections, outlook, anticipated cost savings, anticipated synergies, other anticipated events and trends, the economy and other future conditions, appear throughout this presentation . 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 . Because forward - looking statements relate to the future, they are difficult to predict and many are largely or partially outside of our control . Important factors that could cause our actual results and financial condition to differ materially from those indicated in forward - looking statements include those discussed under the caption “Risk Factors” in the prospectus we filed with the U . S . Securities and Exchange Commission (“SEC”) on February 7 , 2020 , those discussed under the caption “Item 1 A . Risk Factors” in our Annual Report on Form 10 - K for the year ended December 31 , 2019 that we will file with the SEC, and similar factors discussed in our other filings with the SEC . However, those factors should not be considered to be a complete statement of all potential risks and uncertainties . Forward - looking statements are based only on information currently available to our management and speak only as of the date of this presentation . 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 and our website at www . clarivate . com . Non - GAAP Financial Measures This presentation contains financial measures which have not been calculated in accordance with United States generally accepted accounting principles (“GAAP”), including Adjusted Revenues, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, Free Cash Flow, Adjusted Free Cash Flow and Standalone Adjusted EBITDA, because they are a basis upon which our management assesses our performance and we believe they reflect the underlying trends and indicators of our business . Although we believe these measures may be useful for investors for the same reasons, these financial measures should not be considered as an alternative to GAAP financial measures as a measure of the Company’s financial condition, profitability and performance or liquidity . In addition, these financial measures may not be comparable to similar measures used by other companies . At the Appendix to this presentation, we provide further descriptions of these non - GAAP measures and reconciliations of these non - GAAP measures to the corresponding most closely related GAAP measures . Required Reported Data We are required to report Standalone Adjusted EBITDA, which is identical to Consolidated EBITDA and EBITDA as such terms are defined under our credit agreement, and the indenture governing our senior secured notes due 2026 , respectively, pursuant to the reporting covenants contained in such agreements . In addition, management of the Company uses Standalone Adjusted EBITDA to assess compliance with various incurrence - based covenants in these agreements .
Significant Operational and Strategic Accomplishments in 2019 3 • Completed the refinancing of debt capital structure: – Significantly improved weighted average cost of debt and extended maturity profile – Lowered interest expense by approximately $18 million per year • Completed secondary offerings in September and December totaling 89.4 million ordinary shares (1) held by private equity, together with other shareholders – Increased public float to 158 million shares, 52% of shares outstanding – Reduced private equity’s ownership to 42% from 71% (1) Includes underwriters option to purchase additional ordinary shares Optimized Portfolio Improved Margins & Cash Flow Enhanced Capital Structure • Streamlined and simplified into two product groups: Science and IP • Completed acquisition of Darts - ip , a leading provider of case law data for IP professionals • Completed acquisition of SequenceBase , strengthening patent offering and search technology to the fast growing biotech, pharmaceutical and chemical industries • Completed divestiture of MarkMonitor brand protection, anti piracy and anti fraud business • Announced reorganization and operational efficiency program – Expect to achieve $70 - $75 million of annual run - rate cost cash savings exiting 2020, with over 60% targeted in 2020, and the remainder in 2021 • Completed buyout of tax receivable agreement for $200 million
Not Slowing Down in 2020…Announced Acquisition of DRG in January 4 Decision Resources Group (“DRG”) Definitive Agreement Terms Financing / Capital Structure Synergies Approximate Timing • A premier provider of high - value data, analytics and insights solutions to the Life Sciences (LS) industry, serving pharmaceutical, biotech and medical device companies as well as healthcare payers and providers • World class customer base helping more than 1,200 global customers including all of the top 50 life sciences companies, 19 of the top 20 medical devices companies, and 8 of the top 10 U.S. payers and top health systems • $950 million transaction value – $900 million cash consideration – Approximately $50 million Clarivate stock, to be issued following first anniversary of closing and subject to adjustment • $540 million net proceeds from the issuance of 27.6 million shares of Clarivate stock at $20.25 • $360 million senior secured term loan B due 2026 • $30 million identified cost savings to be realized over 18 months – Combination of headcount, facilities, procurement and other G&A – No material changes to DRG’s client - facing, go - to market mechanisms • Subject to customary conditions and regulatory approvals • Expected to close by early March 2020 Transformative Life Sciences Acquisition Delivers Significant Strategic and Financial Benefits for Clarivate
DRG - Strategic Highlights 5 • Combines Clarivate’s leading pre - clinical solutions with DRG’s commercialization solutions to deliver a complete data - driven solution across the entire Life Sciences, drug, device and medical technology value chain • Creates a leading Life Sciences data and analytics provider of differentiated scale and capabilities, and more than doubles size of Clarivate’s Life Sciences business • Combination elevates Clarivate’s position in the $19 billion Life Sciences analytics market, currently expected to grow over the next 3 years at 12% (1) • DRG’s and Clarivate’s complementary solutions will better position Clarivate going forward in a market that favors tech - enabled players with end - to - end capabilities and broad and proprietary datasets • Sales opportunities in high - growth international markets leveraging Clarivate’s global footprint Complementary Fit with Clarivate Life Sciences (1) Source: Markets and Markets Life Science Analytics Market Forecast to 2024.
DRG - Financial Highlights 6 • In 2019, DRG generated $207 million in revenue, with 9% organic growth and $47 million of Adjusted EBITDA (1) • DRG’s 2019 revenue composition is 42% subscription, 27% re - occurring and 31% value - add analytical and consultative services • Approximately $30 million in identified cost savings will be realized over 18 months, implying ~12x LTM Adjusted EBITDA multiple • Adjusted EBITDA margin and cash flow margin accretive, including run - rate cost savings • Adjusted EPS accretive in 2020, including impact of equity offering • Revenue growth acceleration from sales into shared client base and new products that leverage complementary datasets and expertise • Leverage Clarivate’s extensive go to market platform in EMEA and Asia PAC Compelling Financial Merits Note: DRG’s financial results are preliminary and unaudited. (1) DRG Adjusted EBITDA is a non - GAAP financial measure; see Appendix for reconciliation.
7 Q4 2019 Financial results
Q4 2019 Financial Highlights 8 • Revenues up 4% actual; 4.2% on constant currency basis • Subscription revenue increased 6%; Annual Contract Value (ACV) of subscription - based agreements increased 3.5% at constant currency • Net loss of $84.8 million compared to Q4 2018 net loss of $43.5 million • Adjusted net income (1) $41.9 million, up 31.3% • GAAP diluted EPS loss of $0.28 compared to net loss per share of $0.20 • Adjusted diluted EPS (1) of $0.13 compared to $0.15 – Current period impacted by 51% increase in fully diluted weighted average ordinary shares • Adjusted EBITDA (1) $84.6 million, up 11.6% • Net cash from operating activities of $5.2 million, an increase of $56.3 million, compared to a use of $51.1 million • Free cash flow (1) use of $20.9 million, improved $39.4 million compared to use of $60.3 million (1) See the Appendix for a reconciliation of Non - GAAP measures.
30.9% 33.2% Q4'18 Q4'19 $245.2 $255.0 Q4'18 Q4'19 Q4 Results 9 (1) See the Appendix for a reconciliation of Net Loss to Adjusted EBITDA. (2) Adjusted EBITDA Margin equals Adjusted EBITDA divided by Adjusted Revenue. See the Appendix for a reconciliation of Revenue t o A djusted Revenue and Net Loss to Adjusted EBITDA. (3) In November 2019, Clarivate announced an agreement to sell the MarkMonitor brand protection, antipiracy and antifraud businesses, and completed such divestiture on January 1, 2020. Clarivate retained the MarkMonitor Domain Management business. Revenue Adjusted EBITDA Margin (2) ($ in millions, actual f/x) Adjusted EBITDA (1) +11.6% actual f/x + 4.0% actual f/x +4.2% constant f/x $75.8 $84.6 Q4'18 Q4'19 +230bps Excluding MarkMonitor TM Divested Businesses at Actual F/X (3) $230.6 $241.9 $74.7 $85.1 32.4% 35.2% % Change actual f/x +4.9% +13.9% % Change constant f/x +5.1%
10 Full year 2019 financial results
2019 Financial Highlights 11 • Revenues up 1.2% at constant currency; adjusted revenues (1) up 3.1% on constant currency basis • Adjusted Subscription (1) revenue increased 4.3% at constant currency; Annual Contract Value (ACV) of subscription - based agreements increased 3.5% at constant currency (ex - MarkMonitor 4.5%) • Net loss of $211.0 million compares to net loss of $242.2 million • GAAP diluted EPS loss of $0.77 compares to net loss per share of $1.11 • Adjusted net income (1) $152.1 million, up 21.5% • Adjusted diluted EPS (1) of $0.53 compared to $0.58 – Current period impacted by 32% increase in fully diluted weighted average ordinary shares • Adjusted EBITDA (1) $294.0 million, up 7.7% • Net cash from operating activities of $117.6 million, an increase of $143.7 million, compared to a use of $26.1 million • Free cash flow (1) of $47.8 million, improved $119.3 million compared to use of $71.5 million • Adjusted free cash flow (1) increased $24 million to $101 million (1) See the Appendix for a reconciliation of Non - GAAP measures.
$272.8 $294.0 2018 2019 $968.5 $974.4 2018 2019 Full Year Results 12 + 0.6% actual f/x + 1.2% constant f/x Revenue Adjusted Revenue (1) Adjusted EBITDA (2) + 7.7% actual f/x ($ in millions, actual f/x) + 2.5% actual f/x + 3.1% constant f/x $951.2 $974.8 2018 2019 Adjusted EBITDA Margin (3) (1) Adjusted Revenue excludes the divested IPM business revenues for all years, and adds back $0.4 million of deferred revenue pu rch ase accounting adjustment for the full year 2019 and $3.2 million for the full year 2018 excluding IPM. Deferred revenue adjustment was fully recognized by Q4’19. (2) See the Appendix for a reconciliation of Net Income (loss) to Adjusted EBITDA. (3) Adjusted EBITDA Margin equals Adjusted EBITDA divided by Adjusted Revenue. See the Appendix for a reconciliation of Revenue t o A djusted Revenue and Net Loss to Adjusted EBITDA. (4) In November 2019, Clarivate announced an agreement to sell the MarkMonitor ™ brand protection, antipiracy and antifraud businesses, and completed such divestiture on January 1, 2020. Clarivate retained the MarkMonitor Domain Management business. 28.7% 30.2% Excluding MarkMonitor TM Divested Businesses at Actual F/X (4) $910.6 $918.9 $893.3 $919.3 $268.8 $291.9 % Change actual f/x +0.9% +2.9% +8.6% % Change constant f/x +1.5% +3.5% Adjusted EBITDA Margin 30.1% 31.8%
Quarterly Improvement in Revenue Growth Rate $232 $238 $236 $245 $234 $242 $243 $255 Q1 Q2 Q3 Q4 Adjusted Revenue (1) ($M) 2018 2019 2.1% 2.5% 3.6% 4.2% Growth constant FX (1) Adjusted Revenue refers to a non - GAAP measure. See the Appendix for a reconciliation of Revenue to Adjusted Revenue. increase increase increase increase 13
Revenue Growth and Operational Improvements Driving Margin Expansion $63 $68 $66 $76 $59 $73 $77 $85 Q1 Q2 Q3 Q4 Adjusted EBITDA (1) ($M) and Adjusted Margin (2) 2018 2019 Adjusted margins (2) 27.3% 25.3% 28.3% 30.2% 28.1% 31.7% 30. 9% 33.2% (1) Adjusted EBITDA refers to a non - GAAP measure. See the Appendix for a reconciliation of Net Income to Adjusted EBITDA. (2) Adjusted EBITDA margin equals Adjusted EBITDA divided by Adjusted Revenue. See the Appendix for a reconciliation of Revenue t o A djusted Revenue and Net Loss to Adjusted EBITDA. decline increase increase increase 14
Selected Balance Sheet Items 15 ($ in millions) December 31, 2019 December 31, 2018 Cash & cash equivalents $76.1 $25.6 Total debt outstanding $1,665 . 0 $2,029.0 Net debt $1,588.9 $2,003.4 Gross leverage ratio (1) 5.0x 6.5x Net leverage ratio (1) 4.7x 6 . 4x (1) Calculated using LTM Standalone Adjusted EBITDA. See the A ppendix for a reconciliation of Net Loss to Adjusted EBITDA.
$731 $755 $759 $767 $764 $783 $789 $794 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Historical Annualized Contract Value (ACV) (1) 16 + $27 mm YoY + 3.5% constant f/x ($ in millions) (1) Annualized Contract Value refers to the annualized value for a 12 - month period following a given date of all subscription - based client license agreements, assuming that all license agreements that come up for renewal during that period are renewed. Excluding MarkMonitorTM Divested Businesses at Actual F/X $683 $706 $710 $718 $716 $736 $744 $750 + $32 mm YoY + 4.5% constant f/x
Updated 2020 Outlook (1) ($ in millions, except per share information) 2019 Actuals Low High Adjusted Revenue $975 $1,160 $1,190 Adjusted EBITDA $294 $395 $420 Adjusted EBITDA margin % 30.2% 34% 35% Adjusted Diluted EPS (2) $0.53 $0.53 $0.59 Adjusted Free Cash Flow $101 $220 $240 17 (1) The updated outlook includes 10 - months of financial results for the acquisition of Decision Resources Group, which is expected t o close in early March 2020 . (2) Adjusted diluted EPS for 2020 is calculated based on approximately 381.9 million fully diluted weighted average shares outsta ndi ng, an increase of approximately 52.1 million shares or 16%, compared to 329.8 million shares outstanding at the end of December 31, 2019. The increase in shares is primarily dri ven by the February 2020 offering of 27.6 million shares, with proceeds used to fund a portion of the cash consideration for the acquisition of Decision Resources Group, and the issua nce of approximately 24 million ordinary shares upon exercise of outstanding warrants. 2020 Outlook Our target is to exit 2021 with 6% - 8% organic revenue growth and adjusted EBITDA margin of 37% - 40%
18 Appendix
Presentation of Certain Non - GAAP Financial Measures This presentation contains financial measures which have not been calculated in accordance with GAAP, including Adjusted Revenues and Adjusted EBITDA, because they are a basis upon which our management assesses our performance and we believe they reflect the underlining trends and indicators of our business . Adjusted Revenues We present Adjusted Revenues, which excludes the impact of the deferred revenues purchase accounting adjustment (recorded in connection with the separation of the Company’s business from Thomson Reuters (the “ 2016 Transaction”)) and the revenues from the IPM Product Line prior to its divestiture, because we believe it is useful to readers to better understand the underlying trends in our operations . Our presentation of Adjusted Revenues is presented for informational purposes only and is not necessarily indicative of our future results . You should compensate for these limitations by relying primarily on our GAAP results and only using Adjusted Revenues for supplementary analysis . Adjusted EBITDA Adjusted EBITDA represents net (loss) income before provision for income taxes, depreciation and amortization and 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 the IPM Product Line which was divested in October 2018 ), losses on extinguishment of debt, stock - based compensation, unrealized foreign currency gains/(losses), costs pursuant to the transition services agreement (the “Transition Services Agreement”) entered into with Thomson Reuters in connection with the 2016 Transaction and related transition to a standalone company, separation and integration costs, transformational and restructuring expenses, acquisition - related adjustments to deferred revenues, non - cash income/(loss) on equity and cost method investments, non - operating income or expense, the impact of certain non - cash 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 . The adjustments reflected in the Company’s Adjusted EBITDA have not been prepared with a view towards complying with Article 11 of Regulation S - X . Adjusted EBITDA is intended to provide additional information on a more comparable basis than would be provided without such adjustments . In future periods, the Company will need to make additional capital expenditures in order to replicate capital expenditures associated with previously shared services on a stand - alone basis . You are encouraged to evaluate these adjustments and the reasons the Company considers them appropriate for supplemental analysis . These measures are not measurements of the Company’s financial performance under GAAP and should not be considered in isolation or as alternatives to net income, net cash flows provided by operating activities, total net cash flows or any other performance measures derived in accordance with GAAP or as alternatives to net cash flows from operating activities or total net cash flows as measures of the Company’s liquidity . Reduction of ongoing standalone and Transition Services Agreement costs have been, and are expected to continue to be, a component of the Company’s strategy as it finalizes its transition to a standalone company following the 2016 Transaction . Certain of the adjustments included to arrive at Adjusted EBITDA are related to the Company’s transition to an independent company . In evaluating Adjusted EBITDA you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the included adjustments . The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company’s future results will be unaffected by any of the adjusted items, or that the Company’s projections and estimates will be realized in their entirety or at all . 19
Presentation of Certain Non - GAAP Financial Measures The use of Adjusted EBITDA instead of GAAP measures has limitations as an analytical tool, and you should not consider Adjusted EBITDA in isolation, or as a substitute for analysis of the Company’s results of operations and operating cash flows as reported under GAAP . For example, Adjusted EBITDA does not reflect : – the Company’s cash expenditures or future requirements for capital expenditures – changes in, or cash requirements for, the Company’s working capital needs – interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’s debt – any cash income taxes that the Company may be required to pay – any cash requirements for replacements of assets that are depreciated or amortized over their estimated useful lives and may have to be replaced in the future – all non - cash income or expense items that are reflected in the Company’s statements of cash flows The Company’s definition of and method of calculating Adjusted EBITDA may vary from the definitions and methods used by other companies when calculating adjusted EBITDA, which may limit their usefulness as comparative measures . The Company prepared the information included in this presentation based upon available information and assumptions and estimates that it believes are reasonable . The Company cannot assure you that its estimates and assumptions will prove to be accurate . Because the Company incurred transaction, transition, integration, transformation, restructuring, and Transition Services Agreement costs in connection with the 2016 Transaction and the transition, borrowed money in order to finance its operations, and used capital and intangible assets in its business, and because the payment of income taxes is necessary if the Company generates taxable income after the utilization of its net operating loss carryforwards, any measure that excludes these items has material limitations . As a result of these limitations, these measures should not be considered as a measure of discretionary cash available to the Company to invest in the growth of its business or as a measure of its liquidity . Adjusted EBITDA Margin Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Adjusted Revenues . 20
Presentation of Certain Non - GAAP Financial Measures Adjusted Net Income and Adjusted Diluted EPS We have begun to use Adjusted Net Income and Adjusted Diluted Earnings Per Share ("Adjusted Diluted EPS") in our analysis of the financial performance of the Company . We believe Adjusted Net Income and Adjusted Diluted EPS are meaningful measures of the performance of the Company because they adjust for items that do not directly affect our ongoing operating performance in the period . Our definition of and method of calculating Adjusted Net Income and Adjusted Diluted EPS may vary from the definitions and methods used by other companies, which may limit their usefulness as comparative measures . We calculate Adjusted Net Income by 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, losses on extinguishment of debt, stock - based compensation, unrealized foreign currency gains/(losses), Transition Services Agreement costs, separation and integration costs, transformational and restructuring expenses, acquisition - related adjustments to deferred revenues, non - cash income (loss) on equity and cost method investments, non - operating income or expense, the impact of certain non - cash and other items that are included in net income for the period that the Company does not consider indicative of its ongoing operating performance, certain unusual items impacting results in a particular period, and the income tax impact of any adjustments . We calculate Adjusted Diluted EPS by using Adjusted net income divided by diluted weighted average shares . Our presentation of Adjusted Net Income and Adjusted Diluted EPS should not be construed as an inference that our future results will be unaffected by any of the adjusted items, or that our projections and estimates will be realized in their entirety or at all . In addition, because of these limitations, Adjusted Net Income and Adjusted Diluted EPS should not be considered as a measure of liquidity or discretionary cash available to us to fund our cash needs, including investing in the growth of our business and meeting our obligations . You should compensate for these limitations by relying primarily on our GAAP results and only use Adjusted Net Income and Adjusted Diluted EPS for supplementary analysis . Standalone Adjusted EBITDA We are required to report Standalone Adjusted EBITDA pursuant to the reporting covenants contained in the Company’s Credit Agreement and Indenture . We are required to report Standalone Adjusted EBITDA in our quarterly and annual reports filed with the SEC pursuant to these agreements . Standalone Adjusted EBITDA is identical to Consolidated EBITDA and EBITDA as such terms are defined under the Credit Agreement and the Indenture, respectively . In addition, the Credit Agreement and the Indenture 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 presented above 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 Agreement and the Indenture 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 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 . Standalone Adjusted EBITDA is calculated under the Credit Agreement and the Indenture by using our Consolidated Net Income (defined in the Credit Agreement and the Indenture as our GAAP net income adjusted for certain items specified in the Credit Agreement and the Indenture) 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 Notes and earnout obligations incurred in connection with an acquisition or investment . 21
Presentation of Certain Non - GAAP Financial Measures Free Cash Flow and Adjusted Free Cash Flow We use free cash flow and adjusted free cash flow in our operational and financial decision - making and believe free cash flow and adjusted free cash is useful to investors because similar measures are frequently used by securities analysts, investors, ratings agencies and other interested parties to evaluate our competitors and to measure the ability of companies to service their debt . Our presentation of free cash flow and adjusted free cash flow should not be construed as a measure of liquidity or discretionary cash available to us to fund our cash needs, including investing in the growth of our business and meeting our obligations . You should compensate for these limitations by relying primarily on our GAAP results . We define free cash flow as net cash provided by operating activities less capital expenditures . 22
Reconciliation of Non - GAAP Financial Measures and Required Reported Data Reconciliation ($ in millions) December 31 QTD 2019 QTD 2018 Revenue, Net $ 255.0 $ 245.2 (+) Deferred revenue adjustment 0.1 0.2 Adjusted revenue $ 255.1 $ 245.4 Net (loss) $ (84.8) $ (43.5) ( - ) Provision for income taxes 4.6 2.0 (+) Depreciation and amortization 55.4 57.4 (+) Interest expense, net 63.8 35.0 (+) Transition, Services Agreement costs - 7.6 (+) Transition, transformation and I integration expenses (0.9) 13.6 (+) Deferred revenue adjustment 0.1 0.2 (+) Transaction related costs 4.1 1.8 (+) Stock - based compensation expense 4.7 3.0 ( - ) Gain on Sale of IPM Product Line - (36.1) (+) Tax indemnity asset - 33.8 (+) Restructuring 15.7 - ( - ) Legal Settlement - - (+) Impairment on assets held for sale 18.4 - (+) Other 3.5 1.0 Adjusted EBITDA $ 84.6 $ 75.8 23 Descriptions Adjusted Revenue and Adjusted EBITDA adjustments 1. Deferred revenue fair value accounting adjustment arising from purchase price allocation in connection with the 2016 Transaction 2. Payments made to the former parent as part of the Transition Services Agreement; these payments have decreased substantially in 2019 and were completed in Q3 2019 3. Transition costs incurred to separate Clarivate from the former parent to enable operation on a standalone basis; these costs include transition consulting, technology infrastructure, full - time employee compensation and severance payments to former employees as part of reorganizing the business and the ongoing cost savings initiative 4. Consulting and accounting costs associated with tuck - in acquisitions and the sale of Clarivate’s non - core IPM product line; expenses include merger related costs 5. Reflects the write down of tax indemnity asset. 6. Reflects 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 product groups 7. Primarily includes the net impact of foreign exchange gains and losses related to the re - measurement of monetary balances and other one - time adjustments 1 2 3 4 7 1 5 6
Reconciliation of Non - GAAP Financial Measures and Required Reported Data Reconciliation ($ in millions) December 31 Full Year 2019 Full Year 2018 Revenue, Net $ 974.4 $ 968.5 (+) Deferred revenue adjustment 0.4 3.2 ( - ) IPM Divested revenue - (20.5) Adjusted revenue $ 974.8 $ 951.2 Net (loss) $ (211.0) $ (242.2) ( - ) Provision for income taxes 10.2 5.6 (+) Depreciation and amortization 200.5 237.2 (+) Interest expense, net 157.7 130.8 (+) Transition Services Agreement costs 10.5 55.8 (+) Transition, transformation and integration expenses 24.4 69.2 (+) Deferred revenue adjustment 0.4 3.2 (+) Transaction related costs 46.2 2.5 (+) Stock - based compensation expense 51.4 13.7 ( - ) Gain on Sale of IPM - (36.1) (+) Tax indemnity asset - 33.8 (+) Restructuring 15.7 - ( - ) Legal Settlement (39.4) - (+) Impairment on assets held for sale 18.4 - ( - ) IPM divested adj. operating margin - (5.9) (+) Other 9.0 5.2 Adjusted EBITDA $ 294.0 $ 272.8 Required reported data Adjusted EBITDA $ 294.0 $272.8 (+) Excess standalone costs 30.0 25.4 (+) Pro forma cost savings 15.5 12.7 (+) Realized foreign exchange gain (3.5) - Standalone adjusted EBITDA $ 336.0 $310.9 24 Descriptions Adjusted revenue and Adjusted EBITDA adjustments 1. Deferred revenue fair value accounting adjustment arising from purchase price allocation in connection with the 2016 Transaction 2. Clarivate divested its non - core IPM product line in Oct. ’18 3. Payments made to the former parent as part of the Transition Services Agreement; these payments have decreased substantially in 2019 and were completed in Q3 2019 4. Transition costs incurred to separate Clarivate from the former parent to enable operation on a standalone basis; these costs include transition consulting, technology infrastructure, full - time employee compensation and severance payments to former employees as part of reorganizing the business and the ongoing cost savings initiative 5. Consulting and accounting costs associated with tuck - in acquisitions and the sale of Clarivate’s non - core IPM product line; expenses include merger related costs 6. Reflects the write down of tax indemnity asset 7. Reflects costs incurred in connection with the initiative, following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two product groups 8. Primarily includes the net impact of foreign exchange gains and losses related to the re - measurement of monetary balances and other one - time adjustments Standalone Adjusted EBITDA Adjustments 9. Reflects the difference in Clarivate’s actual standalone costs incurred relative to the steady state standalone cost estimate that the company expects to achieve by 2021 after completing the carve - out and optimizing standalone functions 10. Cost savings reflect the difference between annualized run - rate savings and savings realized during that same twelve - month period 1 2 3 4 5 1 6 9 2 8 7 10 2
Reconciliation of Non - GAAP Financial Measures and Required Reported Data Reconciliation ($ in millions, except per share amounts) December 31 QTD 2019 QTD 2018 Amount Per Share Amount Per Share Revenue, Net $ 255.0 $ 245.2 (+) Deferred revenue adjustment 0.1 0.2 Adjusted revenue $ 255.1 $ 245.4 Net income (loss) $ (84.8) $ (0.28) $ (43.5) $ (0.20) Dilutive impact of potential common shares - 0.02 - - Net income (loss) (84.8) (0.26) (43.5) (0.20) (+) Transition Services Agreement costs - - 7.6 0.03 (+) Transition and integration expenses (0.9) - 13.6 0.06 (+) Deferred revenue adjustment 0.1 - 0.2 - (+) Transaction related costs 4.1 0.01 1.8 0.01 (+) Stock - based compensation expense 4.7 0.01 3.0 0.01 (+) Amortization related to acquired intangible assets 39.9 0.12 53.5 0.25 (+) Restructuring 15.7 0.05 - - (+) Debt extinguishment costs and refinancing related costs 42.2 0.13 - - (+) Impairment on assets held for sale 18.4 0.06 - - ( - ) Gain on Sale of IPM Product Line - - (36.1) (0.16) (+) Tax indemnity asset adjustment - - 33.8 0.16 (+) Other 3.5 0.01 0.8 - ( - ) Income tax impact of related adjustments (1.0) - (2.8) (0.01) Adjusted Net income and Adjusted Diluted EPS $ 41.9 $ 0.13 $ 31.9 $ 0.15 Weighted average common shares (Diluted) 329,824,753 219,078,420 25 Descriptions Adjusted revenue, Adjusted Net Income and Adjusted Diluted EPS adjustments 1. Deferred revenue fair value accounting adjustment arising from purchase price allocation in connection with the carve - out 2. Clarivate divested its non - core IPM product line in Oct. ’18 3. Payments made to the former parent as part of the Transition Services Agreement; these payments have decreased substantially in 2019 and were completed in Q3 2019 4. Transition costs incurred to separate Clarivate from the former parent to enable operation on a standalone basis; these costs include transition consulting, technology infrastructure, full - time employee compensation and severance payments to former employees as part of reorganizing the business and the ongoing cost savings initiative 5. Consulting and accounting costs associated with tuck - in acquisitions and the sale of Clarivate’s non - core IPM product line; expenses include merger related costs 6. Reflects 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 product groups 7. Reflects the write down of tax indemnity asset 8. Primarily includes the net impact of foreign exchange gains and losses related to the re - measurement of monetary balances and other one - time adjustments 1 3 4 1 8 5 2 7 6
Reconciliation ($ in millions, except per share amounts) December 31 Full Year 2019 Full Year 2018 Amount Per Share Amount Per Share Revenue, Net $ 974.4 $ 968.5 (+) Deferred revenue adjustment 0.4 3.2 ( - ) IPM Divested revenue - (20.5) Adjusted revenue $ 974.8 $ 951.2 Net loss $ (211.0) $(0.77) $ (242.2) (1.11) Dilutive impact of potential common shares - 0.04 - - Net loss (211.0) (0.73) - - (+) Transition Services Agreement costs 10.5 0.04 55.8 0.26 (+) Transition and integration expenses 24.4 0.08 69.2 0.32 (+) Deferred revenue adjustment 0.4 - 3.2 0.01 (+) Transaction related costs 46.2 0.16 2.5 0.01 (+) Stock - based compensation expense 51.4 0.18 13.7 0.06 (+) Amortization related to acquired intangible assets 169.0 0.59 217.5 1.00 (+) Restructuring 15.7 0.05 - - (+) Debt extinguishment costs and refinancing related costs 51.3 0.18 - - (+) Impairment on assets held for sale 18.4 0.06 - - ( - ) Legal Settlement (39.4) (0.14) - - ( - ) Gain on Sale of IPM Product Line - - (36.1) (0.17) (+) Tax indemnity asset adjustment - - 33.8 0.16 ( - ) IPM divested adj. operating margin - - (5.9) (0.03) (+) Other 9.0 0.04 5.2 0.03 ( - ) Income tax impact of related adjustments 6.2 0.02 8.5 0.04 Adjusted Net income and Adjusted Diluted EPS $ 152.1 $ 0.53 $ 125.2 $ 0.58 Weighted average common shares (Diluted) 287,871,870 217,472,872 Reconciliation of Non - GAAP Financial Measures and Required Reported Data 26 Descriptions Adjusted revenue, Adjusted Net Income and Adjusted Diluted EPS adjustments 1. Deferred revenue fair value accounting adjustment arising from purchase price allocation in connection with the 2016 Transaction 2. Clarivate divested its non - core IPM product line in Oct. ’18 3. Payments made to the former parent as part of the Transition Services Agreement; these payments have decreased substantially in 2019 and were completed in Q3 2019 4. Transition costs incurred to separate Clarivate from the former parent to enable operation on a standalone basis; these costs include transition consulting, technology infrastructure, full - time employee compensation and severance payments to former employees as part of reorganizing the business and the ongoing cost savings initiative 5. Consulting and accounting costs associated with tuck - in acquisitions and the sale of Clarivate’s non - core IPM product line; expenses include merger related costs 6. Reflects 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 product groups 7. Reflects the write down of tax indemnity asset 8. Primarily includes the net impact of foreign exchange gains and losses related to the re - measurement of monetary balances and other one - time adjustments 1 2 3 4 1 8 5 2 6 7
27 Insert footer Reconciliation of Non - GAAP Financial Measures and Required Reported Data DRG Adjusted EBITDA for the Years Ended December 31, 2019 and 2018 (unaudited) Descriptions Adjusted EBITDA adjustments 1. Includes costs incurred related to various restructuring efforts as a result of changes in leadership and the integration of acquisitions. Costs include mainly severance expense for terminated personnel from acquired businesses and exit cost obligations related to exiting certain facilities. 2. Reflects costs related to completed and uncompleted acquisitions, primarily related to third party professional fees. 3. Costs in 2019 relate primarily to retention bonuses paid to certain employees and incremental executive salaries paid in contemplation of the sale of the Company, as well as management fees paid to a related party. Costs in 2018 primarily relate to retention bonuses paid to employees of acquired companies, severance paid to certain executives and management fees paid to a related party. 4. Reflects primarily a one - time payment received in 2019 related to a failed sale of one of the Company's businesses and other one - time adjustments. Reconciliation ($ in millions) Year Ended December 31, 2019 2018 (unaudited) (unaudited) Net (loss) $ (21.7) $ (32.5) (+) Benefit for income taxes 1.4 0.7 (+) Depreciation and amortization 30.4 32.7 (+) Interest, net 24.6 25.2 (+) Loss on extinguishment of debt 0.0 1.9 (+) Restructuring 7.2 0.4 (+) Transaction related costs 0.1 0.8 (+) Transition, transformation, and integration 5.3 2.9 (+) Impairment Intangible Assets 0.1 0.0 (+) Deferred revenues adjustment 0.0 0.1 (+) Share - based compensation 0.9 0.0 (+) Litigation - related costs 1.3 0.0 (+) Loss on sale of assets 0.4 0.0 ( - ) Other (2.4) (0.4) Adjusted EBITDA $ 47.6 $ 31.8 1 2 3 4
Non GAAP Reconciliation – Net Cash Provided By (Used In) Operating Activities to Free Cash Flow and Adjusted Free Cash Flow 28 Reconciliation ($ in million) Twelve Months Ended December 31, 2019 2018 Net cash provided by (used in) operating activities $117.6 $(26.1) Capital expenditures (69.8) (45.4) Free cash flow 47.8 (71.5) Cash paid for transition services agreement 12.0 72.7 Cash paid for transition, transformation and integration expense 40.9 73.6 Cash paid for transaction related costs 45.1 2.2 Cash received for Legal Settlement (45.3) — Adjusted free cash flow $100.5 $77.0 Descriptions Adjusted Free Cash Flow Adjustments 1. Includes cash payments to Thomson Reuters under the Transition Services Agreement. These costs have decreased substantially in 2019, as we are in the final stages of implementing our standalone company infrastructure. In 2019, the Transition Services Agreement cash paid is offset by cash receipts from the IPM Product Line divestiture. 2. Includes cash payments in connection with and after our separation from Thomson Reuters in 2016 relating to the implementation of our standalone company infrastructure and related cost - savings initiatives. These cash payments include mainly transition consulting, technology infrastructure, personnel and severance expenses relating to our standalone company infrastructure, which are recorded in Transition, integration, and other line - item of our income statement, as well as cash payments related to the restructuring and transformation of our business following our separation from Thomson Reuters in 2016 mainly related to the integration of separate business units into one functional organization and enhancements in our technology. This also includes cash payments following our merger with Churchill Capital Corp in 2019, to streamline our operations by simplifying our organization and focusing on two product groups. 3. Includes consulting and accounting costs associated with acquisitions and the sale of the IPM Product Line and sale of MarkMonitor business. 1 2 3
Non GAAP Reconciliation – Revenues, Net to Adjusted Revenues 29 Reconciliation Year Ending December 31, 2020 (Forecasted) ($ in millions) Low High Revenues, net $ 1,160.0 $ 1,190.0 Reconciliation Year Ending December 31, 2020 (Forecasted) Low High ($ in millions) Net (loss) income $(70.6) $(45.6) Benefit for income taxes 7.8 7.8 Depreciation and amortization 236.9 236.9 Interest, net 93.0 93.0 Transition, TSA and integration expenses 46.4 46.4 Transaction related costs 50.0 50.0 Share - based compensation expense 30.6 30.6 Other 0.9 0.9 Adjusted EBITDA $395.0 $420.0 Non GAAP Reconciliation – Net Income to Adjusted EBITDA Reconciliation Year Ending December 31, 2020 (Forecasted) ($ in millions) Low High Revenues, net $1,160.0 $1,190.0 Adjusted EBITDA $395.0 $420.0 Adjusted EBITDA Margin 34% 35% 1 1 1. The Company is evaluating the purchase accounting impact, including the deferred revenue adjustment, related to the DRG acqui sit ion. Non GAAP Reconciliation – Adjusted EBITDA Margin
Non GAAP Reconciliation – Net Loss Per Fully Diluted Weighted Shares Outstanding to Adjusted Diluted EPS 30 Reconciliation Year Ending December 31, 2020 (Forecasted) Low High (in millions) Net cash provided by operating activities $ 201.8 $ 217.4 Capital expenditures $ (68.8) $ (72.4) Free Cash Flow $ 133.0 $ 145.0 Transition, transformation and integration expense $ 38.0 $ 45.0 Transaction related costs $ 49.0 $ 50.0 Adjusted Free Cash Flow $ 220.0 $ 240.0 Descriptions Adjusted Free Cash Flow Adjustments 1. Includes cash payments related to restructuring and other cost optimization activities. 2. Includes cash payments related to merger and acquisition related activities. 1 2 Non GAAP Reconciliation – Adjusted Free Cash Flow Reconciliation Year Ending December 31, 2020 (Forecasted) (in millions, except per share amounts) Low High Per Share Per Share Net Income / (Loss) $(0.18) $(0.12) Transition, TSA and integration expenses 0.12 0.12 Transaction related costs 0.13 0.13 Share - based compensation 0.08 0.08 Amortization related to acquired intangible assets 0.41 0.41 Other 0.00 0.00 Income tax impact of related adjustments (0.03) (0.03) Adjusted Net Income and Adjusted Diluted EPS $0.53 $0.59 Weighted average common shares (diluted) 381,921,495
Quarterly Financial Summary 31 1. Adjusted Revenue excludes the divested IPM business revenues for the period, and adds back the deferred revenue purchase acco unt ing adjustment. 2. See the Appendix for a reconciliation of Net Loss to Adjusted EBITDA. ($ in millions) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Revenues, net $237.0 $243.3 $242.9 $245.2 $234.0 $242.3 $243.0 $255.0 Deferred revenue adjustment $1 . 5 $0.9 $0.5 $0.2 $0.2 $0 . 1 $0.1 $0.1 IPM Product Line ($6.7) ($5.8) ($7.8) $ - $ - $ - $ - $ - Adjusted Revenue (1) $231.8 $238.4 $235.6 $245.5 $234.2 $242.4 $243.1 $255.1 Subscription revenues $192.6 $199.5 $204.3 $197.6 $192.5 $202.7 $200.8 $209.5 IPM Product Line ($5.9) ($4.8) ($6.8) $ - $ - $ - $ - $ - Adjusted Subscription Revenue (1) $186.7 $194.7 $197.5 $197.6 $192.5 $202.7 $200.8 $209.5 Transactional revenues $45.9 $44.7 $39.1 $47.8 $41.7 $39.7 $42.3 $45.6 IPM Product Line ($0.8) ($1.0) ($1.0) $ - $ - $ - $ - $ - Adjusted Transactional Revenue (1) $45.1 $43.7 $38.1 $47.8 $41.7 $39.7 $42.3 $45.6 Adjusted EBITDA (2) $63.3 $67.5 $66.3 $75.8 $59.3 $73.2 $77.0 $84.6 Adjusted EBITDA margin % 27.3% 28.3% 28.1% 30.9% 25.3% 30.2% 31.7% 33.2%
32 Diluted Share Count Comments Note: the analysis is not intended to replace the Treasury Stock Method as required under ASC 260, Earnings per Share 1. Inconsistent with the requirements of ASC 260, but for illustrative purposes, this analysis uses hypothetical shares prices and not the actual average share price for the period as required under US GAAP. 2. Includes the impact of the Merger Shares subsequent to the lifting of the performance vesting conditions as described in the Company's F - 1 filed 2/3/20. 3. Debt and cash amounts reflect 12/31/19 balances, adjusted for the impact of the proposed DRG acquisition, as well as the 2020 actual public warrant exercises. 4. Per the requirements of the Treasury Stock Method this excludes all management options that are antidilutive at the assumed share prices in this analysis and includes consideration of unrecognized compensation cost on unvested options. 5. All public warrants have been redeemed or are forecasted to be redeemed in 2020. 6. Consists of actual 2019 and forecasted 2020 RSUs and their related activity. This includes 0.3M issued RSUs for the year ended December 31, 2019, as well as forecasted issuances of 2.5M RSUs in 2020. 7. Consists of forecasted 2020 PSUs and their related activity. This includes forecasted issuances of 0.5M PSUs in 2020. 8. The analysis assumes no share buy backs by the company during the period. 2 1 3 3 4 5 6 7 4 4 Enterprise Value Build @$20 @$21 @$22 @$23 @$24 @$25 Share Price Ticker Current Share (Live) 20.00$ 21.00$ 22.00$ 23.00$ 24.00$ 25.00$ Enterprise Value Build Basic Shares Outstanding 365,796,917 365,796,917 365,796,917 365,796,917 365,796,917 365,796,917 (+) Stock Dilution 15,081,143 16,124,578 17,073,470 17,943,308 18,746,211 19,489,253 Forecasted Fully Diluted Shares Outsanding 380,878,061 381,921,495 382,870,387 383,740,225 384,543,129 385,286,170 (x) Share Price 20.00$ 21.00$ 22.00$ 23.00$ 24.00$ 25.00$ Equity Value ($ in millions) 7,617.6 8,020.4 8,423.1 8,826.0 9,229.0 9,632.2 (+) Debt ($ in millions) 1,960.0 1,960.0 1,960.0 1,960.0 1,960.0 1,960.0 (-) Cash ($ in millions) 241.0 241.0 241.0 241.0 241.0 241.0 Enterprise Value ($ in millions) 9,336.6 9,739.4 10,142.1 10,545.0 10,948.0 11,351.2 Stock Options Shares Contributing to Dilution 13,302,181 13,302,181 13,404,980 13,454,530 13,631,169 13,631,169 Weighted-average Exercise Price Various Various Various Various Various Various Options Dilution 4,735,496 5,143,434 5,514,602 5,856,952 6,176,325 6,474,519 Public Warrants Outstanding - - - - - - Warrants Contributing to Dilution 4,888,022 4,888,022 4,888,022 4,888,022 4,888,022 4,888,022 Weighted-average Exercise Price 11.50$ 11.50$ 11.50$ 11.50$ 11.50$ 11.50$ Public Warrants Dilution 2,077,409 2,211,248 2,332,919 2,444,011 2,545,845 2,639,532 Private Warrants Outstanding 18,300,000 18,300,000 18,300,000 18,300,000 18,300,000 18,300,000 Exercisable as of December 31, 2020 18,300,000 18,300,000 18,300,000 18,300,000 18,300,000 18,300,000 Weighted-average Exercise Price 11.50$ 11.50$ 11.50$ 11.50$ 11.50$ 11.50$ Private Warrants Dilution 7,777,500 8,278,571 8,734,091 9,150,000 9,531,250 9,882,000 RSUs Outstanding - 2019 Issued and 2020 Forecast 1,584,376 1,584,376 1,584,376 1,584,376 1,584,376 1,584,376 Weighted-average Exercise Price - - - - - - RSU Dilution 439,046 439,633 440,166 440,653 441,100 441,510 PSUs - 2020 Forecast 412,782 412,782 412,782 412,782 412,782 412,782 Weighted-average Exercise Price - - - - - - PSU Dilution 51,692 51,692 51,692 51,692 51,692 51,692 Total Stock Dilution 15,081,143 16,124,578 17,073,470 17,943,308 18,746,211 19,489,253 (Forecasted as of and for the year ended December 31, 2020, $ in millions except for per share values) 8
Thank You 33