Clarivate Plc · NYSE:CLVT
Clarivate — Q3 2022 Earnings Presentation
40 slides from Clarivate's earnings presentation, Nov 8, 2022
Slide 1: Q3 2022 Earnings Call
Q3 2022 Earnings Call November 8, 2022
Slide 2: Safe Harbor Statement and Non-GAAP Financial Measures
Safe Harbor Statement and Non-GAAP Financial Measures 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,
Slide 3: Agenda
Agenda Mark Donohue, Introduction Vice President, Investor Relations Jonathan Gear, Business Review Chief Executive Officer Jonathan Collins, Financial Review Executive Vice President and Chief Financial Officer Question & Answer 3
Slide 4: Business Review
Business Review Jonathan Gear Chief Executive Officer
Slide 5: Q3 2022 Business Highlights
Q3 2022 Business Highlights FINANCIAL RESULTS KEY HIGHLIGHTS revenues adj. EBITDA 1 Completed Leadership Transition $636 million $272 million 2 Managed Portfolio via Divestiture $194M from prior year $82M from prior year 1.2% organic growth 42.7% margin 3 Modified Segment Reporting 4 Assessed Growth
Slide 6: Completed Leadership Transition
1 2 3 4 5 6 Completed Leadership Transition Key Observations Highly talented team Exceptional assets Exceptional colleagues across Mission critical solutions, a diverse range of disciplines with best-in-class data Seoul, South Korea Penang, Malaysia Diverse markets Resilient business model Strong en
Slide 7: Managed Portfolio via Divestiture of MarkMonitor
1 2 3 4 5 6 Managed Portfolio via Divestiture of MarkMonitor PRODUCTS STRATEGIC SCIENCE RATIONALE SOLD OUTSIDE OF LS&HC Domain management • Suboptimally aligned with our core competencies Domain security • Enables improved focus on our core IP SSL certificate management business • Empowers product d
Slide 8: Modified Segment Reporting
1 2 3 4 5 6 Modified Segment Reporting Segments 1 Key Offerings Regional Presence 1 ProQuest One™ Academic ProQuest Ebook Central™ ~26% Primo™ EMEA Academia Web of Science™ & Government Alma™ ~56% EndNote™ Americas ~48% ~18% Cortellis™ APAC HDS MedTech360 Life Sciences Dialog™ & Healthcare Drug Safe
Slide 9: Assessed Growth Potential
1 2 3 4 5 6 Assessed Growth Potential Segments 1 Baseline Growth 2 Market Growth 3 Growth Opportunity ~2% ~4% ~2% ~48% Academia & Government ~$1.3B Life Sciences & Healthcare ~17% ~6% ~10% ~4% ~$0.4B ~3% ~6% ~3% ~35% Intellectual Property ~$0.9B ~$2.6B ~3% ~6% ~3% Significant opportunity to expand o
Slide 10: Refined One Clarivate Strategy
1 2 3 4 5 6 Refined One Clarivate Strategy Growth Acceleration Framework #1 #2 #3 #4 #5 Priority Pillars Execute industry focused & Leverage interconnected Go beyond data delivering Enable business processes Serve as a trusted partner, customer-centric go-to- data for customer personas insights & pr
Slide 11: Prioritized 2 Major LS&H Innovations
1 2 3 4 5 6 Prioritized 2 Major LS&H Innovations Real World Data Platform Pharmacovigilance Improving accessibility of real-world data Partnering with our customers to streamline and delivering value-add insights through regulatory compliance across the drug safety platform-based self-service soluti
Slide 12: Financial Review
Financial Review Jonathan Collins Executive Vice President & Chief Financial Officer
Slide 13: Q3 and YTD 2022 Financial Results
Q3 and YTD 2022 Financial Results Inorganic growth drove Changes from Prior Year revenue increase of 44% in the quarter $ in millions except EPS Q3 ‘22 Q3 ‘21 Change YTD ‘22 YTD ‘21 Change Net Loss attributable to Revenues, net $636 $442 $194 $1,985 $1,316 $668 ordinary shares of $4.4 billion Ad
Slide 14: Q3 2022 Revenues and Adjusted EBITDA vs. 2021
Year + Better - Worse Q3 2022 Revenues and Adjusted EBITDA vs. 2021 Revenue Adj. EBITDA $ millions Organic growth of 1.2% was lower than expected as transactional sales Organic Growth: and consulting services in $220 Sub +4.3% LS&H segment declined versus $636 the same period last year Re-occur +2
Slide 15: Segment Financial Trends
Segment Financial Trends Improved discipline Revenue Profit Margin around late renewals drove $ millions 2021 FY OG% 2022 YTD OG% 2021 FY PM% 2022 YTD PM% higher organic growth in Q1 A&G LS&H 4.2% 6.5% A&G LS&H 1.5% 6.1% A&G LS&H 52.9% 34.8% A&G LS&H 36.9% 38.3% ’21 (and FY '21) for A&G IP 3.3% IP
Slide 16: Q3 and YTD 2022 Cash Flow
Q3 and YTD 2022 Cash Flow YTD increase in one-time Changes from Prior Year costs attributed to the pay out of the CPA Global equity $ in millions Q3 ’22 Q3 ‘21 Change YTD ’22 YTD ’21 Change plan Adj. EBITDA $272 $190 $82 $808 $544 $264 Interest, taxes, capital spending, and working capital One-T
Slide 17: FY 2022 Updated Outlook
FY 2022 Updated Outlook Mid-point of revenue range Updated Full Year Guidance Ranges assumes Q4 organic growth rate is flat and the USD ~2.5% strengthens sequentially an Organic Growth 1.5% 3.5% additional 5% $100m revenue decline from ~$2,630M prior guidance contemplates Revenues $2,600M $2,660
Slide 18: FY 2022 Revenues and EBITDA Outlook vs. 2021
Year + Better - Worse FY 2022 Revenues and EBITDA Outlook vs. 2021 Revenue Adj. EBITDA $ millions Mid-point of guidance range contemplates flat organic Organic Growth: Subs ~+3.5% ~$830 growth in Q4 as recurring ~$2,630 order types (subs and re- Re-occur ~+4.5% Trans ~-2.5% ~$120 occurring) may be
Slide 19: FY 2022 Cash Flow Outlook
FY 2022 Cash Flow Outlook Expect incremental profit will Changes from Prior Year fund higher integration and interest costs associated with $ in millions 2022 Outlook 2021 Actuals Change PQ acquisition and will be partially offset by higher cash Adj. EBITDA ~$1,075 $800 ~$275 taxes and capital spe
Slide 20: Capital Structure
Capital Structure Anticipate utilizing FCF, 2022 Capital Allocation 1 Total Debt / Net Leverage MarkMonitor sale proceeds, $ millions $ billions and cash on hand to $35 $75 $5.5 $5.0 deleverage by ~$0.5B in Q4 $3.5 $175 $1.7 Expect to continue to prioritize deleveraging in 2023 $500 $115 4.7x 4.
Slide 21: Key Financial Metrics Trends
Key Financial Metrics Trends Expect next year's top-line to Revenue Adjusted EBITDA be in line with this year as $ billions ~$2.6 $ millions improved organic growth will be offset by MarkMonitor $1.9 $800 ~$1,075 divestiture and carryover $1.3 $487 4.5% impact of USD strengthening $1.0 ~ 41% 42.6%
Slide 22: Investment Highlights
Investment Highlights ~50% Mission critical cash flow conversion products >40% Global and diverse profit margin customer base >90% ~80% retention rates recurring revenue Information services compounder poised to accelerate organic growth and financial returns 22 © 2022 Clarivate Plc. All rights rese
Slide 23: Appendix
( Clarivate” APPENDIX
Slide 24: Presentation of Certain Non-GAAP Financial Measures
Presentation of Certain Non-GAAP Financial Measures This presentation contains financial measures which have not been calculated in accordance with generally accepted accounting principles in the United States of America (“US GAAP“), including Organic/Inorganic Revenues, Adjusted EBITDA, Adjusted EB
Slide 25: Presentation of Certain Non-GAAP Financial Measures
Presentation of Certain Non-GAAP Financial Measures Adjusted EBITDA The use of Adjusted EBITDA instead of US GAAP has limitations as an analytical tool, and you should not consider Adjusted EBITDA in isolation, or as a substitute for analysis of the Company’s results of operations and operating cash
Slide 26: Presentation of Certain Non-GAAP Financial Measures
Presentation of Certain Non-GAAP Financial Measures Adjusted Net Income and Adjusted Diluted EPS We use Adjusted Net Income and Adjusted Diluted Earnings Per Share ("Adjusted Diluted EPS") in our analysis of the financial performance of the Company. We believe Adjusted Net Income and Adjusted Dilute
Slide 27: Presentation of Certain Non-GAAP Financial Measures
Presentation of Certain Non-GAAP Financial Measures Free Cash Flow and Adjusted Free Cash Flow We use free cash flow and adjusted free cash flow in our operational and financial decision-making and believe free cash flow and adjusted free cash flow is useful to investors because similar measures are
Slide 28: Reconciliation of Non-GAAP Financial Measures (QTD)
Reconciliation of Non-GAAP Financial Measures (QTD) The following tables present 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 the drivers of the variances between periods. Vari
Slide 29: Reconciliation of Non-GAAP Financial Measures (YTD)
Reconciliation of Non-GAAP Financial Measures (YTD) The following tables present 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 the drivers of the variances between periods. Vari
Slide 30: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Net Income (Loss) to Adjusted EBITDA Descriptions Three Months Ended Nine Months Ended September 30, September 30, Adjusted EBITDA adjustments 1. Reflects the deferred revenues adjustment made as a result of purchase (in millions); (unaudited) 2022 2021
Slide 31: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Descriptions Net Loss to Adjusted EBITDA Adjusted EBITDA adjustments 1. Reflects the deferred revenues adjustment made as a result of purchase accounting prior to the adoption of FASB ASU No. 2021-08, Accounting for Contract Assets and Contract Liabiliti
Slide 32: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Net Loss to Standalone Adjusted EBITDA Twelve Months Ended September 30, (in millions); (unaudited) 2022 Net loss attributable to ordinary shares $(4,470.3) Descriptions Dividends on preferred shares 75.4 Adjusted EBITDA and Standalone Adjusted EBITDA Ad
Slide 33: Reconciliation of Non-GAAP Financial Measures (QTD)
Reconciliation of Non-GAAP Financial Measures (QTD) Descriptions Net Loss and Net Loss Per Share to Adjusted Net Income and Adjusted Diluted EPS Adjusted Net Income and Adjusted Diluted EPS adjustments 1. Reflects the deferred revenues adjustment made as a result of purchase accounting prior to the
Slide 34: Reconciliation of Non-GAAP Financial Measures (YTD)
Reconciliation of Non-GAAP Financial Measures (YTD) Net Loss and Net Loss Per Share to Adjusted Net Income and Adjusted Diluted EPS Descriptions Adjusted Net Income and Adjusted Diluted EPS adjustments Nine Months Ended September 30, 1. Reflects the deferred revenues adjustment made as a result of p
Slide 35: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Net Loss and Net Loss Per Share to Adjusted Net Income and Adjusted Diluted EPS Year Ended December 31, Year Ended December 31, Descriptions 2021 2020 Adjusted Net Income and Adjusted Diluted EPS adjustments (in millions, except shares and per share amou
Slide 36: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Net Cash Provided By Operating Activities to Free Cash Flow and Adjusted Free Cash Flow Three Months Ended Nine Months Ended September 30, September 30, (in millions); (unaudited) 2022 2021 2022 2021 Net cash provided by operating activities $ 207.8 $ 43
Slide 37: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Net Cash Provided By (Used In) Operating Activities to Free Cash Flow and Adjusted Free Cash Flow Year Ended December 31, (in millions); (unaudited) 2021 2020 2019 Net cash provided by operating activities $ 323.8 $ 263.5 $ 117.6 Capital expenditures (11
Slide 38: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures The following table presents our calculation of Revenues, net for the 2022 outlook: Revenues, Net Variance Increase/(Decrease) Percentage of Factors Increase/(Decrease) Total Variance Total Variance Year Ending December 31, (Dollars) (Percentage) Acquisi
Slide 39: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures The following table presents our calculation of Adjusted Diluted EPS for the FY2022 Outlook and reconciles this measure to our Net income (loss) per share for the same period: Net Income (Loss) Per Fully Diluted Weighted Shares Outstanding to Adjusted Di
Slide 40: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures The following table presents our calculation of Free Cash Flow and Adjusted Free Cash Flow for the FY2022 Outlook and reconciles this measure to our Net cash provided by operating activities for the same period: Net Cash Provided by Operating Activities