London, UK -- November 8, 2022. Clarivate Plc. (NYSE: CLVT) (the "Company" or "Clarivate"), a global leader in providing trusted information and insights to accelerate the pace of innovation, today reported results for the third quarter ended September 30, 2022.
Third Quarter 2022 Financial Highlights
- Revenues of $635.7 million increased 8%, and 50.9% at constant currency driven primarily by the acquisition of ProQuest
- Organic revenues(1) increased 2% as increases in subscription revenues of 4.3% and re-occurring revenues of 2.4% were partially offset by a decline in transactional revenues of 9.4%
- Net loss attributable to ordinary shares was $4,434.4 million compared to net income attributable to ordinary shares of $6.0 million in the prior year quarter due to the $4,448.6 million non-cash impairment of goodwill; Net loss per diluted share of $6.64 increased by $6.52 due to the non-cash impairment of goodwill
- Adjusted Net Income(1) of $143.7 million increased 5%; Adjusted Income per diluted share(1) of $0.20 increased 25.0% or $0.04
- Adjusted EBITDA(1) of $271.6 million increased 9% driven by earnings contributions from acquisitions, organic growth and cost savings from integration programs; Adjusted EBITDA Margin(1) of 42.7% decreased 30 basis points
Nine Months Ended September 30, 2022 Financial Highlights
- Revenues of $1,984.5 million increased 8%, and 56.1% at constant currency driven primarily by the acquisition of ProQuest
- Organic revenues(1) increased 4% as increases in subscription revenues of 3.8% and re-occurring revenues of 6.1% were partially offset by a decline in transactional revenues of 1.1%
- Net loss attributable to ordinary shares of $4,339.9 million increased $4,158.4 million due to the $4,448.6 million non-cash impairment of goodwill; Net loss per diluted share of $6.66 increased by $6.19
- Adjusted Net Income(1) of $464.0 million increased 7%; Adjusted Income per diluted share(1) of $0.63 increased 28.6% or $0.14
- Adjusted EBITDA(1) of $808.3 million increased 6% and Adjusted EBITDA Margin(1) of 40.7% decreased 50 basis points
- Cash Flows from Operations increased $66.9 million to $372.4 million; Adjusted Free Cash Flow(1) increased $99.1 million to $414.7 million
"Our third quarter results reflect improved performance across many key financial metrics including organic subscription and re-occurring revenue during a challenging economic period. However, our transactional revenues, specifically across Life Sciences and Healthcare, came in lighter than expected as a result of a few deals not closing by quarter-end," said Jonathan Gear, Chief Executive Officer. "We continue to make progress driving focused product improvements and go-to-market strategies, which will help us navigate through the recent quarterly transactional revenue fluctuations."
Selected Financial Information
The results for the three and nine months ended September 30, 2022 include contributions from the following 2021 acquisitions: 1) Bioinfogate, which was completed in August 2021, 2) Patient Connect, which was completed in December 2021, and 3) ProQuest, which was completed in December 2021 for which there were no comparable amounts in the nine months ended September 30, 2021.
|Three Months Ended September 30,||Change||Nine Months Ended September 30,||Change|
|(in millions, except percentages and per share data), (unaudited)||2022||2021||$||%||2022||2021||$||%|
|Revenues, net||$635.7||$442.1||$193.6||43.8%||$ 1,984.5||$ 1,316.2||$ 668.3||50.8%|
|Annualized Contract Value (ACV)||$ 1,647.1||$ 936.7||$710.4||75.8%||$1,647.1||$936.7||$710.4||75.8%|
|Net income (loss) attributable to ordinary shares||$ (4,434.4)||$6.0||$ (4,440.4)||N/M||$ (4,339.9)||$ (181.5)||$ (4,158.4)||N/M|
|Net income (loss) per share, diluted||$(6.64)||$(0.12)||$(6.52)||N/M||$(6.66)||$(0.47)||$(6.19)||N/M|
|Weighted-average shares outstanding (diluted)||675.2||643.9||— 4.9%||680.6||626.2||—||8.7%|
|Adjusted EBITDA(1)||$ 271.6||$190.0||$81.6||42.9 %||$ 808.3||$ 543.||$ 264.5||48.6 %|
|Adjusted net income (loss)(1)||$143.7||$ 113.6||$30.1||26.5%||$ 464.0||$312.0||$ 152.0||48.7%|
|Adjusted diluted EPS(1)||$ 0.20||$0.16||$0.04||25.0%||$ 0.63||$0.49||$ 0.14||28.6%|
|Weighted-average ordinary shares (diluted)(2)||732.9||699.8||—||4.7%||739.0||647.5||—||14.1%|
|Net cash provided by operating activities||$ 207.8||$ 43.8||$ 164.0||374.4 %||$ 372.4||$305.5||$ 66.9||21.9%|
|Free cash flow(1)||$140.4||$19.6||$120.8||616.3%||$215.9||$ 219.3||$(3.4)||(1.6)%|
|Adjusted free cash flow(1)||$156.6||$57.1||$99.5||174.3%||$414.7||$ 315.6||$99.1||31.4%|
(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.
- Calculated assuming a net income position compared to a net loss position on the statement of operations for calculating Adjusted diluted EPS.
Third Quarter 2022 Operating Results
Revenues, net, for the third quarter increased $193.6 million, or 43.8%, to $635.7 million, and increased 50.9% on a constant currency basis. The significant strengthening of the U.S. dollar had a negative foreign exchange impact on revenue of 7.1% for the third quarter of 2022. Organic revenues(1) increased $5.2 million or 1.2%, which was partially offset by our decision to cease commercial operations in Russia in March.
Subscription revenues for the third quarter increased $161.8 million, or 65.6%, to $408.3 million, and increased 72.6% on a constant currency basis, primarily driven by the acquisition of ProQuest. Organic subscription revenues(1) increased 4.3%, primarily due to price increases and the benefit of net installations.
Re-occurring revenues for the third quarter decreased $7.7 million, or 7.0% to $102.7 million, and increased 2.4% on a constant currency basis. Organic re-occurring revenues(1) increased 2.4%, primarily due to increases in patent renewal volumes and improvements in yield per case.
Transactional and other revenues for the third quarter increased $39.7 million, or 46.5%, to $125.0 million, and increased 51.1% on a constant currency basis, primarily due to the acquisition of ProQuest. Organic transactional and other revenues(1) decreased 9.4%, due to lower custom data sales and consulting services revenue.
Balance Sheet and Cash Flow
As of September 30, 2022, cash and cash equivalents of $446.0 million increased $15.1 million compared to December 31, 2021, driven by growth in revenues and profits, partially offset by the repurchases of ordinary shares, cash dividends on preferred shares and higher capital expenditures. Restricted cash decreased $148.1 million to $8.6 million, compared to December 31, 2021 primarily due to 2022 first quarter employee payroll payments related to the CPA Global Equity Plan. The payments were funded by the December 2021 sale of shares held in the Employee Benefit Trust established for the CPA Global Equity Plan.
The Company's total debt outstanding as of September 30, 2022 was $5,544.3 million, a decrease of $22.9 million compared to December 31, 2021.
Net cash provided by operating activities of $372.4 million for the nine months ended September 30, 2022 increased $66.9 million compared to $305.5 million for the prior year period, primarily due to higher earnings excluding the non-cash goodwill impairment charge, as well as working capital timing, offset by payments in the first quarter of 2022 related to the CPA Global Equity Plan. Adjusted free cash flow(1) for the nine months ended September 30, 2022, was $414.7 million, an increase of $99.1 million compared to the prior year period.
Updated Outlook for 2022 (forward-looking statement)
"Our updated outlook assumes further strengthening of the US dollar, lower organic growth primarily across transactional revenues, and includes the recent disposal of the MarkMonitor business," said Jonathan Collins, Executive Vice President and Chief Financial Officer. "With the completion of the sale of MarkMonitor in October, we used the proceeds to reduce our floating rate debt and lower our leverage."
The full year outlook presented below assumes no further acquisitions, divestitures, or unanticipated events.
|Updated 2022 Outlook||Prior 2022 Outlook|
|Revenues||$2.60B to $2.66B||$2.70B to $2.76B|
|Adjusted EBITDA||$1.05B to $1.10B||$1.12B to $1.16B|
|Adjusted EBITDA margin||40.5% to 41.5%||41.0% to 42.0%|
|Adjusted Diluted EPS(3)||$0.75 to $0.85||$0.80 to $0.90|
|Adjusted Free Cash Flow||$500M to $550M||$600M to $650M|
- Adjusted Diluted EPS for 2022 is calculated based on approximately 740 million fully diluted weighted average shares outstanding.
The outlook includes Non-GAAP measures. Please see "Reconciliation to Certain Non-GAAP measures" presented below for important disclosure and reconciliations of these financial measures to the most directly comparable GAAP measures. These terms are defined elsewhere in this earnings press release.
Conference Call and Webcast
Clarivate will host a conference call and webcast today to review the results for the third quarter at 9:00 a.m. Eastern Time. The conference call will be simultaneously webcast on the Investor Relations section of the company's website.
Interested parties may access the live audio broadcast by dialing +1 (844) 200-6205 in the United States, +1 (929) 526-1599 for international, and +1 (833) 950-0062 in Canada. The conference ID number is 282898. An audio replay will be available approximately two hours after the completion of the call at +1 (866) 813-9403 in the United States, +44 204 525-0658 for international, and +1 (266) 828-7578 in Canada. The Replay Conference ID number is 673414. The recording will be available for replay through November 22, 2022. The webcast can be accessed at https://events.q4inc.com/attendee/188172240 and will be available for replay.
Use of Non-GAAP Financial Measures
Non-GAAP results are not presentations made in accordance with U.S. generally accepted accounting principles ("GAAP") and are presented only as a supplement to our financial statements based on GAAP. Non-GAAP financial information is provided to enhance the reader's understanding of our financial performance, but none of these non-GAAP financial measures are recognized terms under GAAP. They are not measures of financial condition or liquidity, and should not be considered as an alternative to profit or loss for the period determined in accordance with GAAP or operating cash flows determined in accordance with GAAP. As a result, you should not consider such measures in isolation from, or as a substitute for, financial measures or results of operations calculated or determined in accordance with GAAP.
We use non-GAAP measures in our operational and financial decision-making. We believe that such measures allow us to focus on what we deem to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations, and we also believe that investors may find these non-GAAP financial measures useful for the same reasons. Non-GAAP measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies comparable to us, many of which present non-GAAP measures when reporting their results. These measures can be useful in evaluating our performance against our peer companies because we believe the measures provide users with valuable insight into key components of GAAP financial disclosures. However, non-GAAP measures have limitations as analytical tools and because not all companies use identical calculations, our presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.
Definitions and reconciliations of non-GAAP measures, such as Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, Free Cash Flow, Adjusted Free Cash Flow, Standalone Adjusted EBITDA, organic revenue, organic subscription revenue, organic re-occurring revenue and organic transactional and other revenue to the most directly comparable GAAP measures are provided within the schedules attached to this release. Our presentation of non-GAAP measures should not be construed as an inference that our future results will be unaffected by any of the adjusted items, or that any projections and estimates will be realized in their entirety or at all.
We calculate constant currency by converting the non-U.S. dollar income statement balances for the most current year to U.S. dollars by applying the average exchange rates of the preceding year.
This communication contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management's current views concerning future business, events, trends, contingencies, financial performance, or financial condition, appear at various places in this communication and may use words like "aim," "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "forecast," "future," "goal," "intend," "likely," "may," "might," "plan," "potential," "predict," "project," "see," "seek," "should," "strategy," "strive," "target," "will," and "would" and similar expressions, and variations or negatives of these words. Examples of forward-looking statements include, among others, statements we make regarding: guidance outlook and predictions relating to expected operating results, such as revenue growth and earnings; strategic actions such as acquisitions, joint ventures, and dispositions, including the anticipated benefits therefrom, and our success in integrating acquired businesses; anticipated levels of capital expenditures in future periods; our ability to successfully realize cost savings initiatives and transition services expenses; our belief that we have sufficient liquidity to fund our ongoing business operations; expectations of the effect on our financial condition of claims, litigation, environmental costs, the impact of inflation, the impact of foreign currency fluctuations, the COVID-19 pandemic and governmental responses thereto, contingent liabilities, and governmental and regulatory investigations and proceedings; and our strategy for customer retention, growth, product development, market position, financial results, and reserves. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on management's current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are difficult to predict and many of which are outside of our control. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include those factors discussed under the caption "Risk Factors" in our annual report on Form 10-K, along with our other filings with the U.S. Securities and Exchange Commission ("SEC"). However, those factors should not be considered to be a complete statement of all potential risks and uncertainties. Additional risks and uncertainties not known to us or that we currently deem immaterial may also impair our business operations. Forward-looking statements are based only on information currently available to our management and speak only as of the date of this communication. We do not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. Please consult our public filings with the SEC or on our website at www.clarivate.com.
More detailed information
Clarivate is a global leader in providing solutions to accelerate the pace of innovation. Our bold mission is to help customers solve some of the world's most complex problems by providing actionable information and insights that reduce the time from new ideas to life-changing inventions in the areas of Academia & Government, Life Sciences & Healthcare, Professional Services, and Consumer Goods, Manufacturing & Technology. We help customers discover, protect and commercialize their inventions using our trusted subscription and technology-based solutions coupled with deep domain expertise. For more information, please visit clarivate.com.