Clarivate Plc · NYSE:CLVT
Clarivate — Clarivate Analytics — Investor Day (November 2019)
33 slides from Clarivate's investor day presentation, Nov 12, 2019
Slide 1: Financial performance and capital strategy
Financial performance and capital strategy Richard Hanks Chief Financial Officer November 12, 2019
Slide 2: Forward-Looking Statements
Forward - Looking Statements The accompanying materials contain certain forward - looking statements regarding Clarivate Analytics Plc (the “Company” or “Clarivate”), its financial condition and its results of operations, anticipated synergies and other future expectations . Forward - looking statem
Slide 3: Business model provides clear path to long-term profitable growth
Business model provides clear path to long - term profitable growth Highly - recurring subscription revenue with high retention and revenue visibility Significant operating leverage from ‘build once, sell many times’ Low capital requirements allow high cash flow conversion and strong reinvestment ca
Slide 4: Revenue is balanced by category, offering steady, long-term growth potential
Revenue is balanced by category, offering steady, long - term growth potential Science 56% IP 44% By product group Subscription 83% Transactional 17% By type YTD Sept. 2019 adjusted revenue by category EMEA 28% APAC 24% By geography Americas 48%
Slide 5: Recent revenue growth muted by TR separation but improving
Recent revenue growth has been muted by our focus on TR separation but is improving $935 $951 2017 2018 2019E Adjusted revenue ($M) $962 - $995 0.7% 1.7% 2.9% mid - point Growth
Slide 6: Our ACV gives good visibility to future growth
$731 $755 $759 $767 $764 $783 $789 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Annual contract value 1 for subscription ($M) Our ACV gives good visibility to future growth $30M +3.9% 1 Prepared at constant currency
Slide 7: Focus on separation from TR pressured margins; now on a path to growth
Focus on separation from TR pressured margins; now on a path to growth $320 $273 $290 - $310 34% 29% 30% 2017 2018 2019E Adjusted EBITDA ($M) and margin % Building out standalone infrastructure Driving platform optimization
Slide 8: Shift from internal to external focus will drive revenue growth and operating efficiencies
8 Insert footer Shift from internal to external focus will drive revenue growth and operating efficiencies Inflection point
Slide 9: Revenue by quarter is trending up
Revenue by quarter is trending up $232 $238 $236 $234 $242 $243 Q1 Q2 Q3 Adjusted revenue ($M) 2018 2019 2.1% 2.5% 3.6% Growth constant FX
Slide 10: Evidence of improving margins in 2019
Evidence of improving margins in 2019 $63 $68 $66 $59 $73 $77 Q1 Q2 Q3 Adjusted EBITDA ($M) and adjusted margin 2018 2019 decline increase increase Adjusted margins 27.3% 25.3% 28.3% 30.2% 28.1% 31.7%
Slide 11: Outward focus on customers will drive organic revenue growth of 4 to 6%
Outward focus on customers will allow us to drive organic revenue growth of 4 to 6% exiting 2020 Pricing Retention rate Inside sales Consulting Sales force expansion Improve product UI and UX
Slide 12: Streamlining initiatives to work smarter and scale quickly
Streamlining initiatives will help us to work smarter, scale quickly to achieve margin expansion Insource application development Facilities rationalization Re - platform with AI and machine learning Vendor rationalization renegotiation Headcount optimization
Slide 13: We will recognize financial outcomes from streamlining initiatives
We will recognize financial outcomes from streamlining initiatives Run rate cash savings exiting 2020 $70 - $75M 1X cost to implement $60M Realized opex savings in 2020 $35 - $40M
Slide 14: Strong operating leverage and margin expansion opportunity
Strong operating leverage and margin expansion opportunity Estimated adjusted EBITDA margin 1 expansion sensitivity (bps) Organic r evenue g rowth 2 % 1% 2% 3% 4% 5% 6% +0% +55 +105 + 160 + 210 + 260 + 31 0 +1% - +55 + 105 +1 60 + 210 + 260 +2% (55) - +55 + 105 +1 55 + 205 +3% (110) (55) - + 55 + 10
Slide 15: We are targeting a mid-60s free cash flow conversion rate
We are targeting a mid - 60s free cash flow conversion rate 60% 17% 23% 7% 7% 100% Adjusted EBITDA Capital expenses Interest Cash tax Change in working capital Free cash flow Free cash flow conversion rate • Stable capex ~5% of planned revenue • Lower cash interest due to 2019 refinancing • Cash tax
Slide 16: Capital strategy and return
Capital strategy and return eo
Slide 17: We've accomplished a lot in a short time
• Announced buyout of tax receivable agreement for $200M • Completed secondary offering of 39.7M ordinary shares 1 held by private equity, together with other shareholders – Increases public float to 108M shares, 35% of shares outstanding – Reduces private equity ownership from 71% to 58% • Complete
Slide 18: Clarivate philosophy – capital allocation and return
• Investing in: – Business transformation – Ongoing product and platform enhancements • Cash allocated to reducing leverage • Cash allocated to accretive M&A – Tuck - in acquisitions focused on proprietary databases servicing global markets – Scaled, well - timed strategic acquisitions Clarivate phi
Slide 19: Healthy balance sheet with solid credit ratings provides flexibility
Healthy balance sheet with solid credit ratings provides capital structure flexibility Balance sheet ($M) Q3 2019 Q4 2018 Cash $89 $26 Accounts receivable, net 227 331 Intangibles and goodwill 3,138 3,240 Total assets 3,650 3,709 Deferred revenue 352 408 Accts payable & accrued expenses 190 192 Tax
Slide 20: Dilution analysis
1 Based on shares granted and outstanding as of 9/30/2019 2 Company has call option for the warrants when stock trades at $18 per share for 20 days in a 30 - day period While dilution may increase, value to shareowners increases more Dilution (M, except per share data) $16.87 / share $18 / share $19
Slide 21: Guidance
MAE A Guidance / AAs | 7 hl
Slide 22: Reaffirming 2019 outlook and introducing 2020 guidance
1 Adjusted revenue adds back $0.5M, $0.5M, $0.1M in 2019, 2019 pro forma, and 2020, respectively, in deferred revenues purchased accounting adjustment 2 Pro forma the divestiture of the Mark Monitor brand protection, antipiracy, and antifraud business, announced November 5, 201 9 Reaffirming 2019 ou
Slide 23: Strong cash flow = capacity to reinvest + profitable incremental growth
= strong cash flow = capacity to reinvest + profitable incremental growth Recurring sales Clarivate’s purpose We believe human ingenuity can transform the world and improve our future.
Slide 24: Insert footer
24 Insert footer
Slide 25: The Clarivate way
• Business model with strong financial attributes • Fundamental assets are unmatched anywhere • Embedded in customers’ critical core workflows • Strong, purpose - based culture in place • Multiple initiatives enabling us to continue to focus, simplify and execute • Critical levers to drive growth an
Slide 26: Strong cash flow = capacity to reinvest + profitable incremental growth
= strong cash flow = capacity to reinvest + profitable incremental growth Recurring sales Clarivate’s purpose We believe human ingenuity can transform the world and improve our future.
Slide 27: Insert footer
27 Insert footer
Slide 28: Appendix – Non-GAAP reconciliations
Appendix – Non - GAAP reconciliations
Slide 29: Non-GAAP Reconciliation - Revenues, net to Adjusted revenues
Non GAAP Reconciliation - Revenues, net to Adjusted revenues (in millions) Low High Low High Low High Revenues, net $ 961.5 $ 994.5 $ 961.5 $ 995.5 $ 949.9 $ 969.9 Deferred revenues adjustment (2) 0.5 0.5 0.5 0.5 0.1 0.1 Revenue attributable to business sold n/a n/a (55.0) (56.0) n/a n/a Adjusted re
Slide 30: Non-GAAP Reconciliation - Net Income to Adjusted EBITDA
Non - GAAP Reconciliation - Net Income to Adjusted EBITDA Low High Low High Low High (in millions) Net (loss) income (2) $ (170.5) $ (158.5) $ (166.6) $ (154.6) $ 2.3 $ 16.3 Benefit for income taxes 12.4 12.4 12.4 12.4 14.7 14.7 Depreciation and amortization 189.0 191.0 189.0 191.0 193.0 194.0 Inter
Slide 31: Non-GAAP Reconciliation - Net Income to Adjusted EBITDA (continued)
Non - GAAP Reconciliation - Net Income to Adjusted EBITDA (continued) (9) Includes primarily the net impact of foreign exchange gains and losses related to the re-measurement of balances and other one-time adjustments. (7) Share-based comensation expense for the year ending December 31, 2019 include
Slide 32: Non-GAAP Reconciliation - Adjusted EBITDA Margin
Non - GAAP Reconciliation - Adjusted EBITDA Margin Low High Low High Low High Adjusted revenues $ 962.0 $ 995.0 $ 907.0 $ 940.0 $ 950.0 $ 970.0 Adjusted EBITDA $ 290.0 $ 310.0 $ 290.0 $ 310.0 $ 330.0 $ 350.0 Adjusted EBITDA Margin 30% 31% 32% 33% 35% 36% Year Ending December 31, 2019 (Forecasted) Ye
Slide 33: Non-GAAP Reconciliation - Adjusted Free Cash Flow
Non - GAAP Reconciliation - Adjusted Free Cash Flow Low High Low High Low High (in millions) Net cash provided by operating activities $ 80.3 $ 102.3 $ 80.3 $ 102.3 $ 203.8 $ 227.8 Capital expenditures (55.0)$ (60.0)$ (47.0)$ (52.0)$ (43.8)$ (53.8)$ Free Cash Flow 25.3$ 42.3$ 33.3$ 50.3$ 160.0$ 174.