Clarivate Announces Commencement of Term Loan Refinancing Transaction
- The company is proactively capitalizing on the favorable debt market environment to provide flexibility within its capital structure.
- The strong free cash flow allows the company to focus on investing for growth and reducing debt to drive long-term shareholder value.
- The non-cash goodwill impairment charge is expected to lower the company's 2023 forecast of a GAAP net loss, but will not impact the 2023 full-year outlook for key financial metrics.
- The proposed refinancing is subject to market and other conditions, with no assurance of completion on favorable terms or at all.
- The non-cash goodwill impairment charge in the range of $800 million to $900 million may impact investor confidence and perception of the company's financial health.
Insights
The initiative by Clarivate to refinance its Term Loan B credit facility is a strategic move to leverage the current debt market conditions. By aiming to extend the maturity to 2031 and securing a new term loan amount of $2.2 billion, the company is seeking to optimize its capital structure. This refinancing could potentially reduce the cost of debt and extend the debt repayment timeline, which may improve the company's liquidity and financial stability. This, in turn, could have a positive effect on the company's credit rating and investor confidence, potentially leading to an appreciation in stock value.
However, the success of this refinancing is contingent on market conditions and the lack of guaranteed favorable terms introduces a degree of uncertainty for investors. The mention of 'proactively capitalizing on the favorable debt market environment' suggests that the company is attempting to lock in lower interest rates before any potential market shifts. For shareholders, the focus on investing for growth while reducing debt is reassuring, as it indicates a commitment to sustainable expansion and value creation.
Clarivate's decision to refinance is not occurring in isolation. It reflects a broader trend where companies with strong cash flows take advantage of favorable market conditions to restructure debt. This trend is indicative of a proactive approach to financial management among firms seeking to balance growth with financial prudence. Clarivate's emphasis on investing for growth while managing its debt levels could signal a strategic direction that prioritizes innovation and market expansion, particularly in the Intellectual Property and Life Sciences & Healthcare segments.
It's important to note that the expected non-cash goodwill impairment charge, while significant, is a non-recurring item that does not affect the operational metrics like Revenues, Organic Revenue Growth and Free Cash Flow. This indicates that the underlying business operations remain sound, despite the accounting adjustments. Investors typically look beyond such one-time charges to gauge the company's ongoing financial health and growth prospects.
The proposed refinancing and the associated goodwill impairment charge involve complex legal and accounting considerations. The impairment charge, estimated between $800 million to $900 million, is a clear indicator of a change in the perceived long-term value of the company's Intellectual Property and Life Sciences & Healthcare segments. From a legal perspective, such impairments must be carefully assessed and disclosed, as they can affect investor perception and could lead to regulatory scrutiny if not properly handled.
Furthermore, the terms of the refinancing deal will be critical to evaluate the legal obligations and protections afforded to both Clarivate and its creditors. Investors should pay close attention to the terms disclosed upon completion of the transaction, as they will provide insight into the company's future financial commitments and the impact on its operational flexibility.
"We are proactively capitalizing on the favorable debt market environment in order to provide further flexibility within our capital structure," said Jonathan Collins, Executive Vice President and Chief Financial Officer. "With our strong free cash flow, we continue to focus on investing for growth and reducing our debt to drive long-term shareholder value."
The Company also announced that it expects to record a non-cash goodwill impairment charge in the range of approximately
Terms of the potential refinancing will be disclosed upon the completion of the transaction. The proposed refinancing is subject to market and other conditions, and there can be no assurance that it will be completed on favorable terms or at all.
About Clarivate
Clarivate™ is a leading global information services provider. We connect people and organizations to intelligence they can trust to transform their perspective, their work and our world. Our subscription and technology-based solutions are coupled with deep domain expertise and cover the areas of Academia & Government, Intellectual Property and Life Sciences & Healthcare. For more information, please visit clarivate.com.
Use of Non-GAAP Financial Measures
Non-GAAP results are not presentations made in accordance with
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 and Standalone Adjusted EBITDA to the most directly comparable GAAP measures are provided within the schedules attached to this release. Our presentation of non-GAAP measures should not be construed as an inference that our future results will be unaffected by any of the adjusted items, or that any projections and estimates will be realized in their entirety or at all.
Forward-Looking Statements
This communication contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management's current views concerning future business, events, trends, contingencies, financial performance, or financial condition, appear at various places in this communication and may use words like "aim," "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "forecast," "future," "goal," "intend," "likely," "may," "might," "plan," "potential," "predict," "project," "see," "seek," "should," "strategy," "strive," "target," "will," and "would" and similar expressions, and variations or negatives of these words. Examples of forward-looking statements include, among others, statements we make regarding: guidance outlook and predictions relating to expected operating results, such as revenue growth and earnings; 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, international hostilities, 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/A, along with our other filings with the
The following table presents our calculation of Adjusted EBITDA and Adjusted EBITDA Margin for the 2023 outlook and reconciles these measures to our Net loss for the same period: | |||||||||||||
AS PRESENTED - | UPDATED FOR | CHANGE | |||||||||||
Year Ending | Year Ending | Year Ending | |||||||||||
(in millions, except percentages) | Low | High | Low | High | Low | High | |||||||
Net loss attributable to ordinary shares | |||||||||||||
Dividends on preferred shares(1) | 75 | 75 | 75 | 75 | - | - | |||||||
Net loss | |||||||||||||
(Benefit) provision for income taxes | (63) | (63) | (63) | (63) | - | - | |||||||
Depreciation and amortization | 707 | 707 | 707 | 707 | - | - | |||||||
Interest expense, net | 292 | 292 | 292 | 292 | - | - | |||||||
Restructuring and lease impairments(2) | 30 | 30 | 30 | 30 | - | - | |||||||
Goodwill and intangible asset impairments(3) | 135 | 135 | 1,035 | 935 | 900 | 800 | |||||||
Transaction related costs | 5 | 5 | 5 | 5 | - | - | |||||||
Mark to market adjustment on financial instruments | (14) | (14) | (14) | (14) | - | - | |||||||
Share-based compensation expense | 130 | 130 | 130 | 130 | - | - | |||||||
Other(4) | (25) | (25) | (25) | (25) | - | - | |||||||
Adjusted EBITDA | |||||||||||||
Adjusted EBITDA margin | 42.0 % | 42.5 % | 42.0 % | 42.5 % | 0.0 % | 0.0 % | |||||||
(1) Dividends on our mandatory convertible preferred shares ("MCPS") are payable quarterly at an annual rate of | |||||||||||||
(2) Reflects restructuring costs expected to be incurred in 2023 associated with the ProQuest acquisition and Segment Optimization restructuring programs. | |||||||||||||
(3) Primarily represents goodwill impairment related to the quantitative goodwill impairment assessment performed over the Company's reporting units and intangible assets impairment related to Assets Held-for-Sale. | |||||||||||||
(4) Primarily includes the gain on legal settlement partially offset by a net loss on foreign exchange re-measurement. | |||||||||||||
Category: Debt
Source: Clarivate Plc
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SOURCE Clarivate Plc
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