Clarivate Reports Second Quarter 2023 Results
- Revenues decreased by 2.6% YoY to $668.8 million in Q2 2023.
- Net loss attributable to ordinary shares increased by $185.4 million YoY to $141.7 million.
- Adjusted EBITDA increased by 3.8% YoY to $284.9 million.
- Subscription revenues decreased by 0.3% to $406.0 million in Q2 2023.
- Re-occurring revenues decreased by 0.9% to $111.0 million in Q2 2023.
- Transactional and other revenues decreased by 9.6% to $151.8 million in Q2 2023.
- Net cash provided by operating activities increased by $65.2 million to $162.4 million in Q2 2023.
- The company revised its 2023 outlook due to lower sales in Life Sciences and Healthcare products and consulting services.
- None.
— Updates 2023 Outlook —
Second Quarter 2023 Financial Highlights
- Revenues of
decreased$668.8 million 2.6% , and3.5% at constant currency(1), driven primarily by the divestiture of MarkMonitor in October 2022, for which there were no comparable amounts in the current year period - Organic revenues(1) decreased
0.4% as an increase in subscription revenues of2.9% was offset by a decline in re-occurring revenues of1.6% and transactional and other revenues of7.5% - Net loss attributable to ordinary shares of
increased$141.7 million driven primarily by the impairment charge in the current year period; Net loss per diluted share of$185.4 million decreased by$0.21 $0.21 - Adjusted Net Income(1) of
decreased$152.2 million 7.8% ; Adjusted Income per diluted share(1) of decreased$0.21 4.5% or$0.01 - Adjusted EBITDA(1) of
increased$284.9 million 3.8% driven by cost savings from integration programs; Adjusted EBITDA Margin(1) of42.6% increased 270 basis points - Net cash provided by operating activities increased
to$65.2 million ; Free cash flow(1) increased$162.4 million to$55.3 million , allowing for continued deleveraging through further debt reduction and share repurchases$104.8 million
First Half of 2023 Financial Highlights
- Revenues of
decreased$1,297.9 million 3.8% , and3.3% at constant currency(1), driven primarily by the divestiture of MarkMonitor in October 2022, for which there were no comparable amounts in the current year period - Organic revenues(1) decreased
0.3% as an increase in subscription revenues of2.9% was offset by a decline in re-occurring revenues of1.7% and transactional and other revenues of7.9% - Net loss attributable to ordinary shares of
decreased$117.0 million driven primarily by the impairment charge in the current year period and lower mark-to-market gain on financial instruments; Net loss per diluted share of$211.5 million decreased by$0.17 $0.10 - Adjusted Net Income(1) of
decreased$283.1 million 11.6% ; Adjusted Income per diluted share(1) of decreased$0.39 9.3% or$0.04 - Adjusted EBITDA(1) of
increased$537.6 million 0.2% driven by cost savings from integration programs; Adjusted EBITDA Margin(1) of41.4% increased 160 basis points - Net cash provided by operating activities increased
to$225.3 million ; Free cash flow(1) increased$389.9 million to$197.5 million million$273.0
"Clarivate continued to deliver on operational progress during the quarter, reinforcing the value proposition of our mission critical solutions across key sectors. The Academia & Government segment delivered improved results following the successful integration of ProQuest and recent product enhancements, which are driving new business, increased usage and higher retention rates," said Jonathan Gear, Chief Executive Officer. "We are taking steps to leverage the power of our portfolio, particularly in the Intellectual Property and Life Sciences & Healthcare segments, which fell short of expectations this quarter. With an established, resilient business model, and a new organizational structure and leadership well in place to enhance accountability, we remain confident in our strategy to deliver accelerating organic growth and margin expansion, as highlighted in our March Investor Day. We remain focused on creating value for our customers, colleagues, and shareholders."
Selected Financial Information
The prior year results include MarkMonitor, which was divested on October 31, 2022, for which there are no comparable amounts in the current year periods.
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||
(in millions, except percentages and per share data), (unaudited) | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||
Revenues, net | $ 668.8 | $ 686.6 | $ (17.8) | (2.6) % | $ 1,297.9 | $ 1,348.8 | $ (50.9) | (3.8) % | |||||||
Net (loss) income attributable to ordinary shares | $ (141.7) | $ 43.7 | $ (185.4) | (424.3) % | $ (117.0) | $ 94.5 | $ (211.5) | (223.8) % | |||||||
Net loss per share, diluted | $ (0.21) | $ — | $ (0.21) | (100.0) % | $ (0.17) | $ (0.07) | $ (0.10) | (142.9) % | |||||||
Weighted-average ordinary shares (diluted) | 675.9 | 678.4 | — | (0.4) % | 675.4 | 683.2 | — | (1.1) % | |||||||
Adjusted EBITDA(1) | $ 284.9 | $ 274.4 | $ 10.5 | 3.8 % | $ 537.6 | $ 536.7 | $ 0.9 | 0.2 % | |||||||
Adjusted net income(1) | $ 152.2 | $ 165.1 | $ (12.9) | (7.8) % | $ 283.1 | $ 320.2 | $ (37.1) | (11.6) % | |||||||
Adjusted diluted EPS(1) | $ 0.21 | $ 0.22 | $ (0.01) | (4.5) % | $ 0.39 | $ 0.43 | $ (0.04) | (9.3) % | |||||||
Adjusted weighted-average ordinary shares (diluted)(1) | 734.9 | 736.6 | — | (0.2) % | 734.8 | 741.6 | — | (0.9) % | |||||||
Net cash provided by operating activities | $ 162.4 | $ 97.2 | $ 65.2 | 67.0 % | $ 389.9 | $ 164.6 | $ 225.3 | 136.9 % | |||||||
Free cash flow(1) | $ 104.8 | $ 49.5 | $ 55.3 | 111.6 % | $ 273.0 | $ 75.5 | $ 197.5 | 261.5 % | |||||||
(Amounts in tables may not sum due to rounding) |
(1) Non-GAAP measure. Please see "Reconciliation to Certain Non-GAAP measures" in this earnings release for important disclosures and reconciliations of these financial measures to the most directly comparable GAAP measure. These terms are defined elsewhere in this earnings release. |
Second Quarter 2023 Commentary
Subscription revenues for the second quarter decreased
Re-occurring revenues for the second quarter decreased
Transactional and other revenues for the second quarter decreased
Balance Sheet and Cash Flow
As of June 30, 2023, cash and cash equivalents of
The Company's total debt outstanding as of June 30, 2023 was
Net cash provided by operating activities of
Updated Outlook for 2023 (forward-looking statement)
"We revised our 2023 outlook due to lower than expected transactional sales of Life Sciences and Healthcare products and consulting services, and lower recurring sales of patent renewals," said Jonathan Collins, Executive Vice President and Chief Financial Officer. "However, we reaffirmed our Adjusted EBITDA Margin outlook, and still expect our revenues, Adjusted EBITDA, Adjusted Diluted EPS and Free Cash Flow to be within our original ranges. We continue to anticipate generating strong cash flow, which we currently expect to allocate between debt repayment to achieve our target of below four-times net leverage by the end of the year and share repurchases."
The full year outlook presented below assumes no further acquisitions, divestitures, or unanticipated events.
Updated 2023 Outlook | Prior 2023 Outlook | |
Revenues | ||
Organic Revenue Growth | ||
Adjusted EBITDA | ||
Adjusted EBITDA Margin | No change | |
Adjusted Diluted EPS(2) | ||
Free Cash Flow |
(2) Adjusted Diluted EPS for 2023 is calculated based on approximately 738 million fully diluted weighted average ordinary 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 release.
Conference Call and Webcast
Clarivate will host a conference call and webcast today to review the results for the second 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 +1 404-975-4839 or toll-free +1 833-470-1428 (in
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, 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-
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, along with our other filings with the
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.
Condensed Consolidated Balance Sheets | |||
(In millions) | |||
(unaudited) | |||
June 30, 2023 | December 31, | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 436.1 | $ 348.8 | |
Restricted cash | 7.0 | 8.0 | |
Accounts receivable, net | 769.7 | 872.1 | |
Prepaid expenses | 101.9 | 89.4 | |
Other current assets | 76.8 | 76.9 | |
Assets held for sale | 26.1 | 0.0 | |
Total current assets | 1,417.6 | 1,395.2 | |
Property and equipment, net | 50.7 | 54.5 | |
Other intangible assets, net | 9,186.4 | 9,437.7 | |
Goodwill | 2,895.5 | 2,876.5 | |
Other non-current assets | 76.0 | 97.9 | |
Deferred income taxes | 26.5 | 24.2 | |
Operating lease right-of-use assets | 52.9 | 58.9 | |
Total Assets | $ 13,705.6 | $ 13,944.9 | |
Liabilities and Shareholders' Equity | |||
Current liabilities: | |||
Accounts payable | $ 108.2 | $ 101.4 | |
Accrued compensation | 101.2 | 132.1 | |
Accrued expenses and other current liabilities | 317.1 | 352.1 | |
Current portion of deferred revenues | 939.6 | 947.5 | |
Current portion of operating lease liability | 24.2 | 25.7 | |
Current portion of long-term debt | 1.1 | 1.0 | |
Liabilities held for sale | 6.5 | 0.0 | |
Total current liabilities | 1,497.9 | 1,559.8 | |
Long-term debt | 4,863.2 | 5,005.0 | |
Non-current portion of deferred revenues | 37.9 | 38.5 | |
Other non-current liabilities | 41.4 | 140.1 | |
Deferred income taxes | 262.1 | 316.1 | |
Operating lease liabilities | 64.8 | 72.9 | |
Total liabilities | 6,767.3 | 7,132.4 | |
Commitments and contingencies | |||
Shareholders' equity: | |||
Preferred Shares, no par value; 14.4 shares authorized; | 1,392.6 | 1,392.6 | |
Ordinary Shares, no par value; unlimited shares authorized as of June 30, 2023 and December 31, 2022; 676.1 and 674.4 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | 11,809.2 | 11,744.7 | |
Accumulated other comprehensive loss | (487.6) | (665.9) | |
Accumulated deficit | (5,775.9) | (5,658.9) | |
Total shareholders' equity | 6,938.3 | 6,812.5 | |
Total Liabilities and Shareholders' Equity | $ 13,705.6 | $ 13,944.9 |
Condensed Consolidated Statement of Operations | |||
(In millions) | |||
(unaudited) | |||
Three Months Ended June 30, | |||
2023 | 2022 | ||
Revenues, net | $ 668.8 | $ 686.6 | |
Operating expenses: | |||
Cost of revenues | 224.2 | 244.1 | |
Selling, general and administrative costs | 192.9 | 186.1 | |
Depreciation and amortization | 178.1 | 175.6 | |
Restructuring and lease impairments | 12.2 | 19.2 | |
Goodwill and intangible asset impairments | 135.2 | — | |
Other operating expense (income), net | 14.5 | (24.6) | |
Total operating expenses | 757.1 | 600.4 | |
(Loss) income from operations | (88.3) | 86.2 | |
Mark to market gain on financial instruments | (2.9) | (49.0) | |
Interest expense and amortization of debt discount, net | 73.0 | 62.3 | |
(Loss) income before income taxes | (158.4) | 72.9 | |
(Benefit) provision for income taxes | (35.3) | 10.5 | |
Net (loss) income | (123.1) | 62.4 | |
Dividends on preferred shares | 18.6 | 18.7 | |
Net (loss) income attributable to ordinary shares | $ (141.7) | $ 43.7 | |
Per share: | |||
Basic | $ (0.21) | $ 0.06 | |
Diluted | $ (0.21) | $ 0.00 | |
Weighted average shares used to compute earnings per share: | |||
Basic | 675.9 | 674.3 | |
Diluted | 675.9 | 678.4 |
Condensed Consolidated Statement of Operations | |||
(In millions) | |||
(unaudited) | |||
Six Months Ended June 30, | |||
2023 | 2022 | ||
Revenues, net | $ 1,297.9 | $ 1,348.8 | |
Operating expenses: | |||
Cost of revenues | 453.9 | 493.3 | |
Selling, general and administrative costs | 387.7 | 379.8 | |
Depreciation and amortization | 350.7 | 352.0 | |
Restructuring and lease impairments | 21.6 | 30.9 | |
Goodwill and intangible asset impairments | 135.2 | — | |
Other operating income, net | (17.5) | (38.3) | |
Total operating expenses | 1,331.6 | 1,217.7 | |
(Loss) income from operations | (33.7) | 131.1 | |
Mark to market gain on financial instruments | (1.8) | (149.4) | |
Interest expense and amortization of debt discount, net | 146.6 | 121.8 | |
(Loss) income before income taxes | (178.5) | 158.7 | |
(Benefit) provision for income taxes | (98.9) | 26.8 | |
Net (loss) income | (79.6) | 131.9 | |
Dividends on preferred shares | 37.4 | 37.4 | |
Net (loss) income attributable to ordinary shares | $ (117.0) | $ 94.5 | |
Per share: | |||
Basic | $ (0.17) | $ 0.14 | |
Diluted | $ (0.17) | $ (0.07) | |
Weighted average shares used to compute earnings per share: | |||
Basic | 675.4 | 678.3 | |
Diluted | 675.4 | 683.2 |
Condensed Consolidated Statements of Cash Flows | |||
(In millions) | |||
(unaudited) | |||
Six Months Ended June 30, | |||
2023 | 2022 | ||
Cash Flows From Operating Activities | |||
Net (loss) income | $ (79.6) | $ 131.9 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 350.7 | 352.0 | |
Share-based compensation | 71.6 | 47.2 | |
Restructuring and impairments | 138.7 | (1.0) | |
Mark to market gain on financial instruments | (1.8) | (149.4) | |
Amortization of debt issuance costs | 9.1 | 7.6 | |
Gain on legal settlement | (49.4) | — | |
Deferred income taxes | (47.8) | (0.9) | |
Other operating activities | 18.8 | (33.6) | |
Changes in operating assets and liabilities: | |||
Accounts receivable | 121.7 | 53.8 | |
Prepaid expenses | (11.9) | (26.9) | |
Other assets | 38.6 | (24.8) | |
Accounts payable | 6.2 | (8.8) | |
Accrued expenses and other current liabilities | (74.2) | (150.3) | |
Deferred revenues | (18.4) | (29.5) | |
Operating leases, net | (4.5) | 3.4 | |
Other liabilities | (77.9) | (6.1) | |
Net cash provided by operating activities | 389.9 | 164.6 | |
Cash Flows From Investing Activities | |||
Capital expenditures | (116.9) | (89.1) | |
Payments for acquisitions and cost method investments, net of cash acquired | (1.1) | (14.3) | |
Proceeds from divestitures, net of cash and restricted cash | 10.5 | — | |
Net cash used in investing activities | (107.5) | (103.4) | |
Cash Flows From Financing Activities | |||
Principal payments on term loan | (150.0) | (14.3) | |
Payment of debt issuance costs and discounts | 0.1 | (2.1) | |
Proceeds from issuance of treasury shares | — | 0.9 | |
Repurchases of ordinary shares | — | (175.0) | |
Cash dividends on preferred shares | (37.7) | (37.7) | |
Proceeds from stock options exercised | — | 0.5 | |
Payments related to finance lease | (0.5) | (1.0) | |
Payments related to tax withholding for stock-based compensation | (9.7) | (10.7) | |
Net cash used in financing activities | (197.8) | (239.4) | |
Effects of exchange rates | 1.7 | (36.5) | |
Net increase (decrease) in cash and cash equivalents | $ 87.3 | $ (71.2) | |
Net decrease in restricted cash | (1.0) | (143.5) | |
Net increase (decrease) in cash and cash equivalents, and restricted cash | 86.3 | (214.7) | |
Beginning of period: | |||
Cash and cash equivalents | $ 348.8 | $ 430.9 | |
Restricted cash | 8.0 | 156.7 | |
Total cash and cash equivalents, and restricted cash, beginning of period | 356.8 | 587.6 | |
End of period: | |||
Cash and cash equivalents | 436.1 | 359.7 | |
Restricted cash | 7.0 | 13.2 | |
Total cash and cash equivalents, and restricted cash, end of period | $ 443.1 | $ 372.9 | |
Supplemental Cash Flow Information: | |||
Cash paid for interest | $ 136.4 | $ 113.4 | |
Cash paid for income tax | $ 22.5 | $ 23.7 | |
Capital expenditures included in accounts payable | $ 10.3 | $ 23.8 | |
Non-Cash Financing Activities: | |||
Retirement of treasury shares | — | (175.0) | |
Dividends accrued on our | 6.2 | 6.2 | |
Total Non-Cash Financing Activities | $ 6.2 | $ (168.8) |
Reconciliations to Certain Non-GAAP Measures
(Amounts in tables may not sum due to rounding)
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA represents Net income (loss) before the provision for income taxes, depreciation and amortization, and interest expense adjusted to exclude acquisition and disposal-related transaction costs, losses on extinguishment of debt, share-based compensation, unrealized foreign currency remeasurement, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues prior to the adoption of FASB ASU No. 2021-08 in 2021, non-operating income or expense, the impact of certain non-cash mark-to-market adjustments on financial instruments, legal settlements, impairments, and other items that are included in net income (loss) 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. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by Revenues, net plus the impact of the deferred revenue purchase accounting adjustments relating to acquisitions prior to 2021.
The following table presents our calculation of Adjusted EBITDA and Adjusted EBITDA Margin for the three and six months ended June 30, 2023 and 2022 and reconciles these measures to our Net income (loss) for the same periods:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
(in millions, except percentages); (unaudited) | 2023 | 2022 | 2023 | 2022 | |||
Net (loss) income attributable to ordinary shares | $ (141.7) | $ 43.7 | $ (117.0) | $ 94.5 | |||
Dividends on preferred shares | 18.6 | 18.7 | 37.4 | 37.4 | |||
Net (loss) income | $ (123.1) | $ 62.4 | $ (79.6) | $ 131.9 | |||
(Benefit) provision for income taxes | (35.3) | 10.5 | (98.9) | 26.8 | |||
Depreciation and amortization | 178.1 | 175.6 | 350.7 | 352.0 | |||
Interest expense and amortization of debt discount, net | 73.0 | 62.3 | 146.6 | 121.8 | |||
Deferred revenues adjustment | — | 0.8 | — | 0.6 | |||
Transaction related costs(1) | 0.7 | 5.1 | 2.4 | 11.8 | |||
Share-based compensation expense | 30.5 | 22.1 | 71.7 | 59.1 | |||
Restructuring and lease impairments(2) | 12.2 | 19.2 | 21.6 | 30.9 | |||
Goodwill and intangible asset impairments(3) | 135.2 | — | 135.2 | — | |||
Mark-to-market gain on financial instruments(4) | (2.9) | (49.0) | (1.8) | (149.4) | |||
Other(5) | 16.5 | (34.6) | (10.3) | (48.8) | |||
Adjusted EBITDA | $ 284.9 | $ 274.4 | $ 537.6 | $ 536.7 | |||
Adjusted EBITDA Margin | 42.6 % | 39.9 % | 41.4 % | 39.8 % |
(1) Includes costs incurred to complete business combination transactions, including acquisitions, dispositions, and capital market activities and include advisory, legal, and other professional and consulting costs. | |||||||
(2) Primarily reflects severance and related benefit costs related to approved restructuring programs. | |||||||
(3) Primarily includes the intangible assets impairment recorded during the three months ended June 30, 2023 related to Assets Held for Sale and Divested Operations. | |||||||
(4) Reflects mark-to-market adjustments on financial instruments under ASC 815, Derivatives and Hedging. | |||||||
(5) The current year periods primarily include net losses on foreign exchange re-measurement and other individually insignificant items that do not reflect our ongoing operating performance. The current year-to-date period was offset by a gain on legal settlement. The prior year periods include net gains on foreign exchange re-measurement and other individually insignificant items that do not reflect our ongoing operating performance. |
Adjusted Net Income and Adjusted Diluted EPS
Adjusted Net Income is calculated using Net income (loss), adjusted to exclude acquisition or disposal-related transaction costs (such costs include net income from continuing operations before the provision for income taxes, depreciation and amortization, and interest income and expense from the divested business), amortization related to acquired intangible assets, share-based compensation, mandatory convertible preferred share dividend expense, unrealized foreign currency remeasurement, transformational and restructuring expenses, acquisition-related adjustments to deferred revenues prior to the adoption of FASB ASU No. 2021-08 in 2021, the impact of certain non-cash mark-to-market adjustments on financial instruments, legal settlements, impairments, and other items that are included in net income (loss) for the period that the Company does not consider indicative of its ongoing operating performance and certain unusual items impacting results in a particular period, and the income tax impact of any adjustments.
We calculate Adjusted Diluted EPS by using Adjusted Net Income divided by Adjusted diluted weighted average shares for the period. The Adjusted diluted weighted average shares assumes that all instruments in the calculation are dilutive.
The following table presents our calculation of Adjusted Net Income and Adjusted Diluted EPS for the three and six months ended June 30, 2023 and 2022 and reconciles these measures to our Net income (loss) and EPS for the same periods:
Three Months Ended June 30, | |||||||
2023 | 2022 | ||||||
(in millions, except per share amounts); (unaudited) | Amount | Per Share | Amount | Per Share | |||
Net loss attributable to ordinary shares, diluted | $ (141.7) | $ (0.21) | $ (3.1) | $ — | |||
Change in fair value of private placement warrants | — | — | 46.8 | 0.07 | |||
Net (loss) income attributable to ordinary shares | $ (141.7) | $ (0.21) | $ 43.7 | $ 0.06 | |||
Dividends on preferred shares | 18.6 | 0.03 | 18.7 | 0.03 | |||
Net (loss) income | $ (123.1) | $ (0.18) | $ 62.4 | $ 0.09 | |||
Deferred revenues adjustment | — | — | 0.8 | — | |||
Transaction related costs(1) | 0.7 | — | 5.1 | 0.01 | |||
Share-based compensation expense | 30.5 | 0.05 | 22.1 | 0.03 | |||
Amortization related to acquired intangible assets | 143.5 | 0.21 | 146.1 | 0.22 | |||
Restructuring and lease impairments(2) | 12.2 | 0.02 | 19.2 | 0.03 | |||
Goodwill and intangible asset impairments(3) | 135.2 | 0.20 | — | — | |||
Mark-to-market gain on financial instruments(4) | (2.9) | — | (49.0) | (0.07) | |||
Other(5) | 16.5 | — | (34.6) | (0.08) | |||
Income tax impact of related adjustments | (60.4) | (0.09) | (7.0) | (0.01) | |||
Adjusted net income and Adjusted diluted EPS | $ 152.2 | $ 0.21 | $ 165.1 | $ 0.22 | |||
Adjusted weighted-average ordinary shares (Diluted) | 734.9 | 736.6 |
(1-5) Refer to associated line item descriptions provided for the Adjusted EBITDA reconciliation table above. |
Six Months Ended June 30, | |||||||
2023 | 2022 | ||||||
(in millions, except per share amounts); (unaudited) | Amount | Per Share | Amount | Per Share | |||
Net loss attributable to ordinary shares, diluted | $ (117.0) | $ (0.17) | $ (47.2) | $ (0.07) | |||
Change in fair value of private placement warrants | — | — | 141.7 | 0.21 | |||
Net (loss) income attributable to ordinary shares | $ (117.0) | $ (0.17) | $ 94.5 | $ 0.14 | |||
Dividends on preferred shares | 37.4 | 0.06 | 37.4 | 0.05 | |||
Net (loss) income | $ (79.6) | $ (0.12) | $ 131.9 | $ 0.19 | |||
Deferred revenues adjustment | — | — | 0.6 | — | |||
Transaction related costs(1) | 2.4 | — | 11.8 | 0.02 | |||
Share-based compensation expense | 71.7 | 0.11 | 59.1 | 0.09 | |||
Amortization related to acquired intangible assets | 287.9 | 0.43 | 295.8 | 0.43 | |||
Restructuring and lease impairments(2) | 21.6 | 0.03 | 30.9 | 0.05 | |||
Goodwill and intangible asset impairments(3) | 135.2 | 0.20 | — | — | |||
Mark-to-market gain on financial instruments(4) | (1.8) | — | (149.4) | (0.22) | |||
Other(5) | (10.3) | (0.05) | (48.8) | (0.11) | |||
Income tax impact of related adjustments | (144.0) | (0.21) | (11.7) | (0.02) | |||
Adjusted net income and Adjusted diluted EPS | $ 283.1 | $ 0.39 | $ 320.2 | $ 0.43 | |||
Adjusted weighted-average ordinary shares (Diluted) | 734.8 | 741.6 |
(1-5) Refer to associated line item descriptions provided for the Adjusted EBITDA reconciliation table above. |
Free Cash Flow
Free cash flow is calculated using 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:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
(in millions); (unaudited) | 2023 | 2022 | 2023 | 2022 | |||
Net cash provided by operating activities | $ 162.4 | $ 97.2 | $ 389.9 | $ 164.6 | |||
Capital expenditures | (57.6) | (47.7) | (116.9) | (89.1) | |||
Free cash flow | $ 104.8 | $ 49.5 | $ 273.0 | $ 75.5 |
Required Reported Data
Standalone Adjusted EBITDA
We are required to report Standalone Adjusted EBITDA, which is identical to Consolidated EBITDA and EBITDA as such terms are defined under our credit facilities, dated as of October 31, 2019, and the indentures governing our secured notes due 2026 issued by Camelot Finance S.A. and guaranteed by certain of our subsidiaries, and the indentures governing the secured and unsecured notes issued by Clarivate Science Holdings Corporation in August 2021, respectively. In addition, the credit facilities and the indentures contain certain restrictive covenants that govern debt incurrence and the making of restricted payments, among other matters. These restrictive covenants utilize Standalone Adjusted EBITDA as a primary component of the compliance metric governing our ability to undertake certain actions otherwise proscribed by such covenants. Standalone Adjusted EBITDA reflects further adjustments to Adjusted EBITDA for cost savings already implemented.
Because Standalone Adjusted EBITDA is required pursuant to the terms of the reporting covenants under the credit facilities and the indentures and because this metric is relevant to lenders and noteholders, management considers Standalone Adjusted EBITDA to be relevant to the operation of its business.
Standalone Adjusted EBITDA is calculated under the credit facilities and the indentures by using our Consolidated Net income (loss) for the trailing 12-month period (defined in the credit facilities and the indentures as our
The following table bridges Net loss to Adjusted EBITDA to Standalone Adjusted EBITDA, as Adjusted EBITDA reflects a substantial portion of the adjustments that comprise Standalone Adjusted EBITDA for the period presented:
(in millions); (unaudited) | Twelve months |
Net loss attributable to ordinary shares | $ (4,247.1) |
Dividends on preferred shares | 75.4 |
Net loss | $ (4,171.7) |
(Benefit) provision for income taxes | (154.6) |
Depreciation and amortization | 709.2 |
Interest expense and amortization of debt discount, net | 295.1 |
Deferred revenues adjustment | 0.4 |
Transaction related costs | 4.8 |
Share-based compensation expense | 114.8 |
Gain on sale from divestitures(1) | (278.5) |
Restructuring and lease impairments(2) | 57.4 |
Goodwill and intangible asset impairments(3) | 4,584.3 |
Mark-to-market gain on financial instruments(4) | (59.2) |
Other | 11.6 |
Adjusted EBITDA | $ 1,113.6 |
Realized foreign exchange gain | (23.1) |
Cost savings(5) | 13.2 |
Standalone Adjusted EBITDA | $ 1,103.7 |
(1) Represents the net gain from the sale of the MarkMonitor Domain Management business during the three months ended December 31, 2022. | |
(2) Primarily reflects severance and related benefit costs related to approved restructuring programs. | |
(3) Primarily includes the intangible assets impairment recorded during the three months ended June 30, 2023 related to Assets Held for Sale and Divested Operations. | |
(4) Reflects mark-to-market adjustments on financial instruments under ASC 815, Derivatives and Hedging. | |
(5) Reflects the estimated annualized run-rate cost savings, net of actual cost savings realized, related to restructuring and other cost savings initiatives undertaken during the period (exclusive of any cost reductions in our estimated standalone operating costs), including synergies related to acquisitions. |
The foregoing adjustment (5) is an estimate and is not intended to represent a pro forma adjustment presented within the guidance of Article 11 of Regulation S-X. Although we believe the estimate is reasonable, actual results may differ from the estimate, and any difference may be material. See "Forward-Looking Statements."
Annualized Contract Value ("ACV") represents the annualized value for the next 12 months of subscription-based client license agreements, assuming that all expiring license agreements during that period are renewed at their current price level. We calculate ACV on a constant currency basis to exclude the effect of foreign currency fluctuations. The following table presents our Annualized Contract Value ("ACV") as of the periods indicated.
June 30, | Change | ||||||
(in millions, except percentages); (unaudited) | 2023 | 2022 | 2023 vs. 2022(1) | ||||
Annualized Contract Value | $ 1,567.2 | $ 1,625.9 | $ (58.7) | (3.6) % |
(1) The change in ACV is primarily due to the divestiture of MarkMonitor in October 2022 and changes in foreign exchange rates, supplemented by organic ACV growth of |
The following table presents the amounts of our subscription, re-occurring and transactional and other revenues, including as a percentage of our total revenues, for the periods indicated, as well as the drivers of the variances between periods.
Variance | Percentage of Factors Increase/(Decrease) | |||||||||
Three Months Ended | Total Variance (Dollars) | Total Variance (Percentage) | Acquisitions | Disposals(1) | FX Impact | Organic | ||||
(in millions, except percentages); (unaudited) | 2023 | 2022 | ||||||||
Subscription revenues | $ 406.0 | $ 407.4 | $ (1.4) | (0.3) % | — % | (4.4) % | 1.2 % | 2.9 % | ||
Re-occurring revenues | 111.0 | 112.0 | (1.0) | (0.9) % | — % | — % | 0.7 % | (1.6) % | ||
Transactional and other revenues | 151.8 | 168.0 | (16.2) | (9.6) % | — % | (2.3) % | 0.2 % | (7.5) % | ||
Deferred revenues adjustment | — | (0.8) | 0.8 | 100.0 % | 100.0 % | — % | — % | — % | ||
Revenues, net | $ 668.8 | $ 686.6 | $ (17.8) | (2.6) % | 0.1 % | (3.2) % | 0.9 % | (0.4) % | ||
(1) Represents revenues from the MarkMonitor divestiture completed in October 2022 and from the assets held-for-sale disposal group. |
Variance | Percentage of Factors Increase/(Decrease) | |||||||||
Six Months Ended | Total Variance (Dollars) | Total Variance (Percentage) | Acquisitions | Disposals(1) | FX Impact | Organic | ||||
(in millions, except percentages); (unaudited) | 2023 | 2022 | ||||||||
Subscription revenues | $ 799.2 | $ 811.2 | $ (12.0) | (1.5) % | — % | (4.4) % | — % | 2.9 % | ||
Re-occurring revenues | 218.7 | 226.5 | (7.8) | (3.4) % | — % | — % | (1.8) % | (1.7) % | ||
Transactional and other revenues | 280.0 | 311.7 | (31.7) | (10.2) % | — % | (1.5) % | (0.8) % | (7.9) % | ||
Deferred revenues adjustment | — | (0.6) | 0.6 | 100.0 % | 100.0 % | — % | — % | — % | ||
Revenues, net | $ 1,297.9 | $ (50.9) | (3.8) % | — % | (3.0) % | (0.5) % | (0.3) % | |||
(1) Represents revenues from the MarkMonitor divestiture completed in October 2022 and from the assets held-for-sale disposal group. |
The following table presents our revenues by Segment for the periods indicated, as well as the drivers of the variances between periods, including as a percentage of such revenues.
Variance | Percentage of Factors Increase/(Decrease) | |||||||||
Three Months Ended | Total Variance (Dollars) | Total Variance (Percentage) | Acquisitions | Disposals(1) | FX Impact | Organic | ||||
(in millions, except percentages); (unaudited) | 2023 | 2022 | ||||||||
Academia & Government | $ 342.0 | $ 332.7 | $ 9.3 | 2.8 % | — % | — % | 1.0 % | 1.8 % | ||
Intellectual Property | 216.3 | 239.2 | (22.9) | (9.6) % | — % | (9.1) % | 0.6 % | (1.1) % | ||
Life Sciences & Healthcare | 110.5 | 115.5 | (5.0) | (4.3) % | — % | — % | 1.0 % | (5.4) % | ||
Deferred revenues adjustment | — | (0.8) | 0.8 | 100.0 % | 100.0 % | — % | — % | — % | ||
Revenues, net | $ 668.8 | $ 686.6 | $ (17.8) | (2.6) % | 0.1 % | (3.2) % | 0.9 % | (0.4) % | ||
(1) Represents revenues from the MarkMonitor divestiture completed in October 2022 and from the assets held-for-sale disposal group. |
Variance | Percentage of Factors Increase/(Decrease) | |||||||||
Six Months Ended | Total Variance (Dollars) | Total Variance (Percentage) | Acquisitions | Disposals(1) | FX Impact | Organic | ||||
(in millions, except percentages); (unaudited) | 2023 | 2022 | ||||||||
Academia & Government | $ 656.7 | $ 644.5 | $ 12.2 | 1.9 % | — % | — % | — % | 1.9 % | ||
Intellectual Property | 425.4 | 480.8 | (55.4) | (11.5) % | — % | (8.4) % | (1.4) % | (1.7) % | ||
Life Sciences & Healthcare | 215.8 | 224.1 | (8.3) | (3.7) % | — % | — % | — % | (3.7) % | ||
Deferred revenues adjustment | — | (0.6) | 0.6 | 100.0 % | 100.0 % | — % | — % | — % | ||
Revenues, net | $ 1,297.9 | $ (50.9) | (3.8) % | — % | (3.0) % | (0.5) % | (0.3) % | |||
(1) Represents revenues from the MarkMonitor divestiture completed in October 2022 and from the assets held-for-sale disposal group. |
The following table presents our calculation of Revenues, net for the 2023 outlook:
Variance | Percentage of Factors Increase / (Decrease) | |||||||||
Year Ending December 31, | Total Variance (Dollars) | Total Variance (Percentage) | Acquisitions | Disposals | FX Impact | Organic | ||||
(in millions, except percentages) | 2023 Outlook mid-point | 2022 | ||||||||
Revenues, net | $ 2,635 | $ 2,660 | $ (25) | (0.9) % | — % | (2.6) % | 0.7 % | 1.0 % |
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:
Year Ending December 31, 2023 (Forecasted) | |||
(in millions, except percentages) | Low | High | |
Net loss attributable to ordinary shares | $ (217) | $ (167) | |
Dividends on preferred shares(1) | 75 | 75 | |
Net loss | $ (142) | $ (92) | |
(Benefit) provision for income taxes | (55) | (55) | |
Depreciation and amortization | 709 | 709 | |
Interest expense and amortization of debt discount, net | 288 | 288 | |
Restructuring and lease impairments(2) | 33 | 33 | |
Goodwill and intangible asset impairments(3) | 135 | 135 | |
Transaction related costs | 2 | 2 | |
Mark to market adjustment on financial instruments | (2) | (2) | |
Share-based compensation expense | 131 | 131 | |
Other(4) | (10) | (10) | |
Adjusted EBITDA | $ 1,090 | $ 1,140 | |
Adjusted EBITDA margin | 42.0 % | 42.5 % |
(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 includes the intangible assets impairment recorded during the three months ended June 30, 2023 related to Assets Held for Sale and Divested Operations | |||
(4) Primarily includes the gain on legal settlement partially offset by a net loss on foreign exchange re-measurement. |
The following table presents our calculation of Adjusted Diluted EPS for the 2023 outlook and reconciles this measure to our Net loss per share for the same period:
Year Ending December 31, 2023 (Forecasted) | |||
Low | High | ||
(in millions) | Per Share | Per Share | |
Net loss attributable to ordinary shares | $ (0.29) | $ (0.23) | |
Dividends on preferred shares(1) | 0.10 | 0.10 | |
Net loss | $ (0.19) | $ (0.13) | |
Restructuring and lease impairments(2) | 0.04 | 0.04 | |
Goodwill and intangible asset impairments(3) | 0.18 | 0.18 | |
Share-based compensation expense | 0.18 | 0.18 | |
Amortization related to acquired intangible assets | 0.78 | 0.78 | |
Other(4) | (0.01) | (0.01) | |
Income tax impact of related adjustments | (0.21) | (0.21) | |
Adjusted Diluted EPS | $ 0.77 | $ 0.83 | |
Adjusted weighted-average ordinary shares (Diluted)(5) | 738 million |
(1-4) Refer to associated line item descriptions provided for the Adjusted EBITDA outlook reconciliation table above. | |||
(5) For the purposes of calculating adjusted earnings per share, the Company has excluded the accrued and anticipated MCPS dividends and assumed the "if-converted" method of share dilution. |
The following table presents our calculation of Free cash flow for the 2023 outlook and reconciles this measure to our Net cash provided by operating activities for the same period:
Year Ending December 31, 2023 (Forecasted) | |||
(in millions) | Low | High | |
Net cash provided by operating activities | $ 695 | $ 745 | |
Capital expenditures | (245) | (245) | |
Free cash flow | $ 450 | $ 500 |
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SOURCE Clarivate Plc
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