Clarivate Plc · NYSE:CLVT
Clarivate — Debt Investor Presentation (September 2020)
50 slides from Clarivate's debt investor presentation, Sep 15, 2020
Slide 1: Public Lender Presentation September 2020
Public Lender Presentation September 2020 SPECIAL NOTICE REGARDING PUBLICLY AVAILABLE INFORMATION THE COMPANY HAS REPRESENTED THAT THE INFORMATION CONTAINED IN THIS LENDER PRESENTATION IS EITHER PUBLICLY AVAILABLE OR DOES NOT CONSTITUTE MATERIAL NON-PUBLIC INFORMATION WITH RESPECT TO THE COMPANY OR
Slide 2: Authorization Letter
Authorization Letter Citibank, N.A., BofA Securities, Inc., RBC Capital Markets, LLC, Barclays Bank PLC, HSBC Securities (USA) Inc., and JPMorgan Chase Bank, N.A. September 15, 2020 Attention: Prospective Incremental Term Loan Facility Lenders Ladies and Gentlemen: We refer to the proposed $1,600 mi
Slide 3: Notice To and Undertaking by Recipients
Notice To and Undertaking by Recipients This Lender Presentation (the “Lender Presentation") has been prepared solely for informational purposes from information supplied by or on behalf of Clarivate Plc (the "Company"), and is being furnished by Citibank, N.A., BofA Securities, Inc., RBC Capital Ma
Slide 4: Notice To and Undertaking by Recipients (Cont'd)
Notice To and Undertaking by Recipients (Cont’d) II. Information The Recipient acknowledges and agrees that (i) the Arrangers received the Evaluation Material from third party sources (including the Company) and it is provided to the Recipient for informational purposes, (ii) the Arrangers and their
Slide 5: Forward-Looking Statements
Forward-Looking Statements These materials contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on management’s current belie
Slide 6: Key Management Presenters and Agenda
Key Management Presenters Jerre Stead Richard Hanks Daryl Barber Executive Chairman & Chief Financial Officer Senior Vice President & Treasurer Chief Executive Officer Agenda • Transaction Overview • Compelling Acquisition • Clarivate Business Overview Rationale • CPA Global Overview • Financial Hig
Slide 7: Transaction Overview
Transaction Overview
Slide 8: Transaction Summary
Transaction Summary • On July 29th, Clarivate announced it had signed a definitive agreement to acquire CPA Global (“CPA”) in an all-stock transaction valued at ~$6.8 billion • Including the benefit of tax assets, transaction value implies ~16x 2020 EBITDA multiple inclusive of $75 million run rate
Slide 9: Key Transaction Highlights
Key Transaction Highlights 1 Transaction Creates Leader in Global IP Services • Highly complementary nature of Clarivate and CPA Global creates true end-to-end platform supporting the full IP lifecycle from idea generation to commercialization and protection • Unified workflow and analytics across i
Slide 10: Sources & Uses and Pro Forma Capitalization
Sources & Uses and Pro Forma Capitalization ($ in millions) Sources Amount Uses Amount Incremental Term Loan B $1,600 Purchase CPA Global Equity $6,323(1) (1) (2) Contributed Equity 6,323 CPA Debt Retirement 2,000 Cash from Balance Sheet 445 Estimated Fees, Expenses and OID 45 Total Sources $8,368 T
Slide 11: Summary Terms: Incremental Term Loan B
Summary Terms: Incremental Term Loan B Borrower: “The Term Borrowers” (as defined in the Existing Credit Agreement)(1) (Same as the Existing Credit Agreement) Facility: $1,600 million Incremental Senior Secured Term Loan B Guarantors: Same as the Existing Credit Agreement, including the addition of
Slide 12: Indicative Transaction Timeline
Indicative Transaction Timeline September-2020 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Bank Market Holiday Key Syndication Date Date Event September 15th - Lender Call September 22nd - Commitments Due (5:00 pm ET) Early October - Anticipated fun
Slide 13: Clarivate Business Overview
Clarivate Business Overview
Slide 14: Clarivate has world-leading assets serving large and stable end-markets
Clarivate has world-leading assets serving large and stable end-markets • Leading provider of intellectual property and scientific information, analytical tools & services • Products support customers’ critical decisions in discovery, protection and commercialization of ideas and brands • Global, di
Slide 15: Path to continued long-term profitable growth remains clear
Path to continued long-term profitable growth remains clear Highly recurring subscription revenue with high Recurring revenue retention and revenue visibility + profitable Significant operating leverage from ‘build once, sell incremental growth many times’ Low capital requirements allow high cash fl
Slide 16: Business Model to Weather Current Environment
Business Model to Weather Current Environment • “Must-have” products and services focused on B2B markets with unique content • Sell into durable end markets including government, research institutions and life sciences • Solutions to clients on digital basis and consumed anywhere • Highly resilient
Slide 17: High quality products embedded with customer workflows
High quality products embedded with customer workflows A professor planning a research program accesses Web of Science {"WOS"} to evaluate the current state of research in her discipline, identifying trends within highly regarded and relevant academic journals A university provost evaluating her uni
Slide 18: We have four strategic goals that will move us toward success
We have four strategic goals that will move us toward success Continue to Further increase improve colleague customer delight score engagement score Sustainability Provide superior Focus on investor returns strong top-and- bottom-line growth 18
Slide 19: Colleague engagement survey results
Our recent colleague engagement survey had a response rate of 91%, up 10% from 2019 Engagement score = 76 2019 = 69 (Benchmark Average is 72) 2020 goal: 74 Company’s response to COVID-19 scored 93% favorable 19
Slide 20: Improving customer delight scorecard
Improving customer delight scorecard reflects our commitment to delivering high-value to our customers May ‘20 2019 Information & insights 90 85 Quality of products & services 85 86 Overall Easy to do business with 59 55 customer delight = 79 Overall customer delight 79 76 (Best Practice is 82) Cust
Slide 21: Q2 Highlights
Q2 Highlights Well-positioned business model to weather current environment SCIENCE GROUP: • New Web of Science beta released; New UI, Open Access content added to Journal Citation Reports • COVID Novel Super Virus data lake launched for advanced virology and infectious disease analytics Enhanced •
Slide 22: Q2 Results
Q2 Results Revenue growth driven by acquisitions, new business and pricing; reported revenue increased 13%, excluding divestitures adjusted revenue increased 21%(1) Reported Revenue Adjusted Revenue(1) Adjusted EBITDA(1) +13% actual f/x +14% actual f/x Adjusted EBITDA +14% constant f/x +16% constant
Slide 23: Historical Annualized Contract Value (ACV)
Historical Annualized Contract Value (ACV)(1) • Q2 ’20 includes the acquisition of DRG completed on February 28, 2020 • All periods exclude divested products at actual F/X; divested on January 1, 2020 ($ in millions) $853 $820 + $112 mm YoY + 16% constant f/x Ongoing ACV +5% $759 $750 $741 $727 $723
Slide 24: Efficiently Managing Cost Structure and Freeing up Resources
Efficiently Managing Cost Structure and Freeing up Resources Approximately $105-$110 million in permanent cost reductions ($ in millions) Total Savings Permanent Savings Timing NEW $30 million $5 million Q1-Q4 2020 COVID related $45 million in 2020; $70-75 million run- Cost savings 2019 $70-$75 mill
Slide 25: CPA Global Overview
CPA Global Overview
Slide 26: CPA Global – Leading global provider of IP management solutions
CPA Global – Leading global provider of IP management solutions Company overview Offerings • Automated patent and trademark • CPA Global provides IP portfolio (patents and trademarks) Patent & Trademark Processing Solutions processing solutions management and technology solutions • (~81% of revenue)
Slide 27: Integrated offerings that span the IP lifecycle
Integrated offerings that span the IP lifecycle IP lifecycle management technology underpins delivery of information and execution of transactional tasks improving research, innovation, protection and commercialization of IP LIFECYCLE INFORMATION TRANSACTION PROCESSING MANAGEMENT TECHNOLOGY SERVICES
Slide 28: CPA Global – Large, loyal & diverse customer base
CPA Global – Large, loyal & diverse customer base ~12K customers which includes ~1.7K lifecycle management software customers Jun 20 LTM CPA Global Revenue Jun 20 LTM CPA Global Revenue Representative Customers by Customer Type by Geography 20% 30% 47% 70% 33% 9/10 8/10 Top patent filers in Top pate
Slide 29: CPA Global Historical Overview – Strong revenue growth and profitability
CPA Global Historical Overview – Strong revenue growth and profitability Revenue Adjusted EBITDA1 Adjusted EBITDA Less Capex1 $575M $575M $542M $201M $252M $188M $239M $461M $170M $444M $225M $163M $161M $208M $198M 2017 2018 2019 LTM PF Adj. 2017 2018 2019 LTM PF Adj. 2017 2018 2019 LTM PF Adj. Jun
Slide 30: Compelling Acquisition Rationale
Compelling Acquisition Rationale
Slide 31: Transaction overview
Transaction overview • All-stock transaction in which CPA Global shareholders will receive ~218M Clarivate shares, representing ~35% pro forma ownership of the combined Key Terms company & Structure • Represents ~$6.8B enterprise value based on Clarivate’s 30-day VWAP, which includes ~$900M of prese
Slide 32: Combined company creates unparalleled value in the IP and Innovation ecosystem
Combined company creates unparalleled value in the IP and Innovation management ecosystem $1,717M $766M $617M Pro Forma Pro Forma Pro Forma Adjusted EBITDA Adjusted Revenue1 Adjusted EBITDA1,2 Less Capex1,2 High-Single-Digits 45% 81% Pro Forma Pro Forma Pro Forma Adjusted EBITDA Organic Growth Rate
Slide 33: Significant cost synergies to accelerate earnings growth
Significant cost synergies to accelerate earnings growth $75M of Run-Rate Cost Synergies Fully Realized within 18 months Direct costs $80M $70M $60M Sales & marketing $50M $40M $30M Technology & data $20M $10M $ - Corporate & real estate 2021E 2022E 33
Slide 34: Substantial revenue synergy opportunities represent further upside
Substantial revenue synergy opportunities represent further upside Connecting product offerings will provide customers a unified “project” view across the idea management lifecycle Adding workflow integrations will improve customer efficiency Adding new product that neither company could creat
Slide 35: Clarivate continues to deliver on its priorities
Clarivate continues to deliver on its priorities Strategic Acquisitions Relentless Operational Improvement $70-75M of identified cost efficiencies post- Tuck-Ins to Add Product Capabilities public offering in May 2019 $30M of DRG cost savings are tracking to the Complete the Life plan laid out a
Slide 36: Exceptional Leadership Team
Exceptional Leadership Team Jerre Stead Executive Chairman &Chief Executive Officer, Clarivate • Preeminent business operator with demonstrated success in shareholder value creation • Previously served as Chairman and CEO at IHS, IHS-Markit, Honeywell-Phillips Medical Electronics, Square D Company,
Slide 37: Financial Highlights
Financial Highlights
Slide 38: Combined Company Historical Overview
Combined Company Historical Overview As Reported Revenue As Reported Adjusted EBITDA ($ in millions) ($ in millions) $1,587 $1,717 $1,429 $1,516 $766 $1,362 $579 $518 $481 $519 2017 2018 2019 LTM PF Adj. LTM 2017 2018 2019 LTM PF Adj. LTM Jun 20 Jun 20 Jun 20 Jun 20 % YoY Growth % Margin -- 5% 6% 5%
Slide 39: Financial Policy
Financial Policy Leverage Liquidity Capital Allocation Strong free cash flow generation to be utilized for debt reduction Prioritize debt reduction to return Expected to de-lever ~4.0x at year- More than adequate liquidity in to target leverage levels end 2020 and <3.1x by year-end free cash
Slide 40: Appendix
(S Clarivate” APPENDIX
Slide 41: Q2 Financial Highlights
Q2 Financial Highlights… Solid topline growth and cost efficiencies drove double-digit Adjusted EBITDA(1) growth and significant margin expansion June 30, Excluding ($ in millions except per share data) 2020 2019 % Change Organic(2) Commentary Divestitures(2) Recent acquisitions, new business includ
Slide 42: Q2 Financial Highlights Continued
…Q2 Financial Highlights Continued Significant resources including $609 million in cash and untapped $250 million revolver to continue to invest in strategic growth opportunities June 30, December 31, ($ in millions) $ Change Commentary on Change 2020 2019 Proceeds of ~$278 million received from the
Slide 43: Presentation of certain non-GAAP financial measures excluding CPA
43 Presentation of certain non-GAAP financial measures excluding CPA 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
Slide 44: Presentation of certain non-GAAP financial measures (continued)
44 Presentation of certain non-GAAP financial measures excluding CPA (continued) 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 beli
Slide 45: Reconciliation of Non-GAAP Financial Measures and Required Reported Data
Reconciliation of Non-GAAP Financial Measures and Required Reported Data 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
Slide 46: Reconciliation of Non-GAAP Financial Measures and Required Reported Data
Reconciliation of Non-GAAP Financial Measures and Required Reported Data Descriptions Three Months Ended June 30, Six Months Ended June 30, Adjusted EBITDA adjustments (in millions) 2020 2019 2020 2019 1. In 2020, this is related to a new transition services agreement and offset by the reverse trans
Slide 47: Reconciliation of Non-GAAP Financial Measures and Required Reported Data
Reconciliation of Non-GAAP Financial Measures and Required Reported Data Descriptions Twelve Months Adjusted EBITDA adjustments Ended June 30, (in millions) 2020 1. In 2020, this is related to a new transition services agreement and offset by the reverse transition services agreement from the sale o
Slide 48: Reconciliation of Non-GAAP Financial Measures and Required Reported Data
Reconciliation of Non-GAAP Financial Measures and Required Reported Data Descriptions Three Months Ended June 30, Six Months Ended June 30, Adjusted Net Income and Adjusted Diluted EPS Adjustments 2020 2020 1. In 2020, this is related to a new transition services agreement and offset by the reverse
Slide 49: Pro Forma Selected Financial Data – LTM 6/30/2020
Pro Forma Selected Financial Data – LTM 6/30/2020 6/30/2020 Last Twelve Months Clarivate + CPA Global Combined Clarivate + CPA Global Pro Forma Revenues, net $1,587 $1,717 Operating costs and expenses: Cost of revenues, excluding depreciation and amortization (532) Selling, general and administrativ
Slide 50: 2019 and LTM 6/30/2020 Pro Forma Combined Consolidated Adjusted EBITDA
2019 and LTM 6/30/2020 Pro Forma Combined Consolidated Adjusted EBITDA in $ millions 2019 LTM Jun20 Net loss $ (118.6) $ (35.5) (Benefit) provision for income taxes 18.1 19.0 Depreciation and amortization 274.1 295.0 Interest, net 165.0 152.0 Transition , transaction, TSA and integration costs 101.5
Clarivate — Debt Investor Presentation (September 2020) on 6ix