Clarivate Plc · NYSE:CLVT
Clarivate — Investor Day (November 2019)
113 slides from Clarivate's investor day presentation, Nov 12, 2019
Slide 1: Focus, simplify, execute: The Clarivate way
Focus, simplify, execute The Clarivate way Jerre Stead CEO 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 statements sh
Slide 3: 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 4: 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 Recurring revenue high retention and revenue visibility + profitable Significant operating leverage from ‘build incremental growth once, sell many times’ = strong cash flow Low capital requir
Slide 5: Time-tested assets built on a legacy of more than 150 years
Our group of time-tested assets has been built on a legacy that goes back more than 150 years 2011 Oct 1864 1955 1957 1963 1980s 1990s - 2012 2016 Dr. Eugene Garfield Monty Hyams begins Web of Science Separate invents citation selling patent launched from indexing and searching bulletins from his Th
Slide 6: What's happened since we set a goal in 2019
Here’s what’s happened since we set a goal in 2019 to acquire a great information services company Sep Jan May Jun Aug Sept Oct Nov 2018 2019 2019 2019 2019 2019 2019 2019 Churchill and Organizational Secondary Investor Clarivate merger efficiency work offering day announced begins Churchill Merger
Slide 7: Building on a legacy of storied assets
Building on a legacy of storied assets
Slide 8: Separation from TR allowed us to focus on our foundation
Separation from TR allowed us to… …focus on strengthening our foundation • Implemented shared services model • Built independent operating functions • Completed ~100 technology separation workstreams • Branded as Clarivate • Began portfolio optimization with 1 divestiture and 4 tuck-in acquisitions
Slide 9: My perspective after two quarters: what's working well
My perspective after being in leadership role for two quarters What’s working well Making • Well-established info services business progress on • Leading market position initiatives to drive • Assets vital to customers our long-term • Long-term customer relationships strategy with most important org
Slide 10: What we are doing differently: The Clarivate way
My perspective after 2 quarters: What we are doing differently • Optimize infrastructure systems • Lean organizational structure Significantly • Sales structure and incentives to drive improve execution, cross- and up-sell financial performance • Modernized product platforms and shareholder • Advanc
Slide 11: Culture matters and is a priority at Clarivate
Culture matters and is a priority at Clarivate 65% of employees stay because of culture Culture matters more than salary for Millennials consider mission and purpose when 79% applying for a job believe it’s important to have a clear mission 89% and purpose Glassdoor culture survey, July 2019
Slide 12: Clarivate's purpose
Clarivate’s purpose We believe human ingenuity can transform the world and improve our future.
Slide 13: Clarivate's vision
Clarivate’s vision We will improve the way the world creates, protects and advances innovation.
Slide 14: Clarivate's mission
Clarivate’s mission We are a trusted, indispensable partner to innovators everywhere by delivering critical data, information, workflow solutions and deep domain expertise.
Slide 15: Clarivate's values
Clarivate’s values Aim for greatness Value every voice Own your actions
Slide 16: 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
Slide 17: Colleague engagement survey results
Our recent colleague engagement survey had a response rate of 81%, up 10% from last year Strengths 75 – feedback 65 – communication Engagement 63 – action taking score = 69 (benchmark is 72) Opportunities 56 – decision making 2020 goal 61 – growth 74 68 – customer focus
Slide 18: Measuring customer delight tells us where to focus
Measuring customer delight tells us exactly where to focus our improvement efforts 86 – quality of products & services 85 – information & insights 55 – easy to do business with Overall customer Customer feedback tells us: delight = 76 • Insight into decision-making critical (Benchmark is 82) • Produ
Slide 19: Sustainability goals: ESG factors will play a key role
Sustainability goals: Environmental, Social and Governance factors will play a key role in our success Q2 2020 - Conduct assessment Exit 2020 - More ESG transparency Q2 2021 - Complete submissions to Dow Jones Sustainability Index and Carbon Disclosure Project YE 2024 - List on Dow Jones Sustainabil
Slide 20: Structures and processes to operate more efficiently
We have put structures and processes in place to operate more efficiently and effectively • Engaged BCG to benchmark performance • Identified opportunities to: – ‘Right-size’ corporate functions Work will – Centralize resources to eliminate duplication be complete in – Move majority of contractors t
Slide 21: Actions allow us to scale: $70-$75M run-rate savings
These actions allow us to: • Scale more easily / efficiently • Integrate future acquisitions more quickly Result: • Be more agile and flexible $70 - $75M • Innovate more rapidly annual run-rate • Focus on customers cash savings exiting 2020 • Leverage existing assets • Create cost savings and margin
Slide 22: Customer base analysis reveals significant opportunities
An analysis of our customer base and their buying histories reveals significant opportunities Customers by average revenue; percent of total revenue 500 $1,000 $918 # of Avg spend per client $k 47% customers $750 320 $500 $346 1.5k $250 13% 4k 12k+ $123 20% $36 $4 5% 15% $0 Largest 500 A B C D
Slide 23: Building a strategic sales organization
Building a strategic sales organization • Deploying strategies to drive growth • Cross-selling Delivering higher-touch • Optimizing prices to close gaps and inconsistencies experience for lower cost across • Increasing number of logos all revenue levels • Serving customers more efficiently – Centers
Slide 24: Technology has a very important role at Clarivate
Technology has a very important role at Clarivate Customer and company growth Optimizing Providing Enabling day-to-day Protecting solutions to product operations in a our systems, drive value for innovation cost-effective data and IP our customers way People Process Technology
Slide 25: Reaffirming 2019 outlook and introducing 2020 guidance
Reaffirming 2019 outlook and introducing 2020 guidance Looking back…said we would exit 2020 with organic growth of 4% – 6%, adjusted EBITDA of 35% - 38% and free cash flow conversion of 60%+ 2019 ($M, except % and per share data) 2019 2020 pro forma2 Adjusted revenue1 $962 - $995 $907 - $940 $950 -
Slide 26: The Clarivate way: very large opportunities ahead
As we build on our solid foundation, there are very large opportunities ahead • Business model with strong financial attributes • Fundamental assets are unmatched anywhere • Embedded in customers’ critical core workflows The • Strong, purpose-based culture in place Clarivate way • Multiple initiativ
Slide 27: Clarivate Technology Group
Clarivate Technology Group Randy Harvey Chief Technology Officer November 12, 2019
Slide 28: Technology has a fundamental role at Clarivate
Technology has a fundamental role at Clarivate Customer and company growth Optimizing Providing Enabling day-to-day Protecting solutions to product operations in a our systems, drive value for innovation cost effective data and IP our customers way People Process Technology
Slide 29: Aligning and simplifying the organization
Our focus is on aligning and simplifying the organization Organization’s past structure Web of Business info systems Life Science Derwent MarkMonitor CompuMark Techstreet Science ERP ERP product product product product product CRM CRM product engineering engineering engineering engineering engineeri
Slide 30: Aligning and simplifying the organization
ORGANIZATION’S PAST STRUCTURE Business info systems Web of Science Life Science Derwent MarkMonitor Compumark TechStreet ERP ERP product product product product product product CRM CRM engineering engineering engineering engineering engineering engineering MM CM ERP ERP CRM CRM Content Content Conte
Slide 31: Building a mature product-engineering culture
We will continue to build a mature product-engineering culture Bring product knowledge Accelerate innovation and in-house delivery velocity • Reduce contractor use to • Develop strong agile culture less than 10% over next • Transition to product view vs 21 months project view • Bring together majori
Slide 32: Modernizing our technology: Business systems
Modernizing our technology: Business systems
Slide 33: Streamlined cloud-based financial systems
We have streamlined and moved to cloud-based financial systems PAST TODAY Tax & corporate tax Treasury management & vendor payment Finance & accounting FP&A & cash collections Source/procurement Credit card payment 13 legacy applications Finance core capabilities • Procure to pay • Record transactio
Slide 34: Cloud-based applications driving efficient CRM
New portfolio of cloud-based applications driving a more efficient CRM business process and better customer experience PAST TODAY Lead / campaign CPQ & salesforce automation CLM Order management / billing 7+ legacy CRM core capabilities applications • Leads and marketing campaigns • Order management
Slide 35: Modernizing our technology: Shared platforms
Modernizing our technology: Shared platforms
Slide 36: Customer intelligence portal
Customer intelligence portal enables us to better understand customers and how they use our content, products and platforms Customer adoption and usage Community and • Multiple-user intelligence communication dashboards including: • Available reports and dashboard for: – Product usage – Sales – Cust
Slide 37: Data access platform (API)
Our data access platform (API) supports and expands DaaS & CaaS delivery services Customer Business API portal admin portal gateway Web-based Web-based tool enabling Cloud-based central environment for employees to define APIs, repository to securely internal and manage access, policies and host Cla
Slide 38: Centralized user authentication and entitlement
Centralized user authentication, entitlement and profile information provides users with common experience across applications IAM platform provides flexible login portal • Username and password • SSO login • Seamless login between applications Usage • 20% of products and platforms converted • 586k
Slide 39: Modernizing our technology: Customer-facing products and platforms
Modernizing our technology: Customer-facing products and platforms
Slide 40: New platforms and major upgrades delivered in 2019
We delivered new platforms and major upgrades in 2019 Cortellis Digital Derwent Innovation Health Intelligence Industrial design on TM go365 Cortellis Drug Discovery Intelligence Web of Science Regulatory information Incites UX BioWorld Converis Newport Trademark.com release
Slide 41: Data analytics and machine learning: drug timeline prediction
Applying data analytics and machine learning Drug timeline and success rate prediction Forecasting timeline and probability of success of a drug Uses 15 years of Outperforms Algorithm learns pharmaceutical standard industry and refines intelligence benchmarking pipeline forecast’s by 25%1 daily expe
Slide 42: Chinese patent summarization in English
Applying data analytics and machine learning Chinese patent summarization in English language Patent volume has grown from ~2.2M in 2013 to ~3.5M in 2018 Created deep learning Model outperformed Reduced lead model, trained on human-generated times from 21 4M patents that summaries in terms days to <
Slide 43: Modernizing our technology: Content acquisition, curation & delivery
Modernizing our technology: Content acquisition, curation & delivery
Slide 44: Project Singularity: treat data as an asset
Project Singularity will enable us to treat data as an asset Content acquisition Content ingestion Speed and quality Single source of truth Automated capabilities for ETL, web Standardized masters store content scraping, content extraction from PDF, and services for automated extraction, print and m
Slide 45: Modernizing our technology: Capitalizing on the cloud
Modernizing our technology: Capitalizing on the cloud
Slide 46: Capitalizing on the cloud
Capitalizing on the cloud Moving forward Building foundation • Auto-provision/scale platforms • Standard builds • Automate deployments • Security groups & framework • Cross-region availability • CI/CD pipeline • Build value from content hubs • Infrastructure as code and ML/AI • Leverage reserved ins
Slide 47: Summary: separation forced acceleration of product engineering
Summary: Separation from TR forced acceleration of development in the product engineering groups Still opportunities to become Benefit - after 2020 we will: efficient and effective: • Common UI pattern library • Be more customer friendly and providing consistent & simpler easier to do business with
Slide 48: The IP Group: Positioned for growth
The IP Group Positioned for growth Jeff Roy President, IP Group November 12, 2019
Slide 49: The biggest impediment to future success is past success
The biggest impediment to a company’s future success is its past success. Dan Schulman CEO, PayPal Inc.
Slide 50: State of IP assets at acquisition
The biggest impediment to a company’s future State of IP assets at acquisition • Focus on top of market success is its past success. • Lack of investment by owner • Not capitalizing on obvious synergies • Older information-consumption models Dan Schulman driving market behavior CEO, PayPal Inc. • Co
Slide 51: Future success
Future success iii
Slide 52: IP market has been static; Clarivate positioned to capitalize
The IP market has been static – Clarivate is uniquely positioned to capitalize on its potential Disrupt the market with investments in technology, upgraded UI, etc. Significant scale differences compared to market peers Difficult-to-recreate assets help differentiate from competitors Source: Derwent
Slide 53: IPG has 13,000 customers and 91% retention
IPG has 13,000 customers and 91% retention rates 92 of the Fortune 100 14M annual patent searches run by users records in world’s 40+ patent offices 72M largest trademark database rely on Derwent World Patent Index, the standard for patent searching databases trusted by 10 of 10 550k standards mos
Slide 54: Our IP business helps companies grow sustainably and predictably
Our IP business helps companies everywhere grow sustainably and predictably First smart units become Home available (IOT) freezers Freon banned and Self-contained energy efficient invented units make models become residential available market viable Refrigerators for home use invented Patent filings
Slide 55: Global investment trends support Clarivate's markets
Global investment trends support Clarivate’s markets As the world invests, the need to establish and protect ideas grows in proportion New technology R&D spend $1.7T global 80% of R&D spend outpacing accelerating R&D spend spend from growth in other in APAC in 2019 10 countries areas by (China, Kore
Slide 56: Tailwinds and underlying market trends support growth strategy
Tailwinds and underlying market trends support growth strategy www Patents Trademarks Domains • 6.7% increase in active • 13.8% increase active • Bad actors have patents worldwide trademarks impacted 93% of • China filed 1.54M patents • 10M applications in 2018; top brands (+46% of global total) 7M
Slide 57: Tailwinds and underlying market trends support growth strategy
Tailwinds and underlying market trends support growth strategy • Brand activity driving need to secure and protect trademarks • China’s innovation lead driving explosive growth in patents and trademarks • Technology convergence creating complexity, increasing need of IP intelligence www Patents Trad
Slide 58: Investing in these areas to accelerate growth
Clarivate will focus on investing in these areas to accelerate growth Strategic goals Acquire Benefit new customers Deepen Capitalize on from Leverage and enter account structural geographic scale adjacent penetration changes trends markets
Slide 59: IPG's responses to market challenges: usability and localization
Clarivate IPG’s responses to market challenges / opportunities Product usability Consumers demanding more • Reinvesting in UI/UX for flagships analytics and improved user • Layering analytics on core products experience • Expand thought leadership and advisory work Localized solutions Geographic shi
Slide 60: IPG's responses to market challenges: price and free alternatives
Clarivate IPG’s responses to market challenges / opportunities Price perceptions Increased competition putting • Successfully defending premium pricing pressure on value-for- on ability to deliver on quality money perceptions • Simplified pricing models to drive expansion, improve retention The “fre
Slide 61: Roadmap for the next 12 months
Roadmap for the next 12 months Platform integration Initiatives to drive sustainable growth The “illusion” of integration Capitalize on existing relationships Increase penetration Improve retention Acquire new customers Q1 2020 Q2 2020 Q3 2020 Q4 2020 2021 Leverage Smart Package key Develop analyti
Slide 62: IP Group is well positioned to capitalize on opportunities
IP Group is well positioned to capitalize on opportunities and grow • Market dynamics support planned growth rates • Technology investments will disrupt Summary Be the IP market and expand our leadership position • Acceleration will come from acquiring new customers in untapped segments and compleme
Slide 63: The Science Group: Overview and outlook
The Science Group Overview and outlook Mukhtar Ahmed President, Science Group November 12, 2019
Slide 64: 2019 Nobel Prizes in Chemistry and Physics
M. Stanley Whittingham Michael Mayor & Didier Queloz 2019 Nobel Prize in Chemistry 2019 Nobel Prize in Physics Development of lithium-ion batteries Discovery of exoplanet orbiting a solar-type star
Slide 65: Radicava, Keytruda, Humira
Radicava Keytruda Humira First novel treatment Cancer immunotherapy Blockbuster antibody for ALS in 22 years, drug launched by Merck launched by Abbott Labs launched by Mitsubishi in 2014, projected sales (now AbbVie) in 2002, Tanabe in 2017 of $20B generated $115B+ in sales since 2010
Slide 66: Our customers bring life-changing innovations with global impact
Our customers bring life-changing innovations with global impact ISI identified 54 researchers as ‘Citation Laureates’ prior to them receiving a Nobel prize Four Citation Laureates received a Nobel Prize in 2019 94% of 50 largest pharma companies rely on Cortellis to bring life- changing drugs to ma
Slide 67: Web of Science data recognizes ground-breaking researchers
Using Web of Science world-class data we measure and recognize individuals behind ground-breaking research Some of the most significant drugs to come to market in the last decade were discovered by our customers
Slide 68: Greater interoperability, connectivity and collaboration to major industries
We deliver greater interoperability, connectivity and collaboration to major industries, enhancing their intended impacts Billions of data points from 1000s of harmonized sources Research Artificial intelligence Intelligence Ontologies Cloud Content as a Service – App Exchange – Predictive Analytics
Slide 69: Industry pain points impacting core customer segments
Industry pain points are impacting our core customer segments Inefficient research Open access infrastructure Academia Publishers The impact of open access is 73% of researchers use 3 requiring publishers to change or more research management their business models systems to carry out research1 Dimi
Slide 70: We accelerate innovation from ideation to outcome
We accelerate innovation from ideation to outcome — enabling the world’s greatest innovators Fund $30B research Conduct EU Research funding across 28 member countries1 & prepare research 2+ years Academic Publish From research grant to publication2 research research lifecycle 2M+ Discover & Research
Slide 71: Platform enables researchers and publishers to bring ideas to life
Our platform enables researchers and publishers to bring their ideas to life Web of Science • Unbiased, independent and objective Innovate • Over 1.7B cited reference • Over 160M data records InCites • Measure & benchmark research Research • Journal Citation Reports Intelligence ScholarOne Cloud • S
Slide 72: Drug and medical device developers rely on us through product lifecycle
Drug and medical device developers rely on us through each step of their product lifecycle $1.5T Pharma R&D spend since 20101 Discovery & pre-clinical 10+ years Clinical To bring a drug to market2 trials 12% Drug & Device Regulatory Drug regulatory approval rate3 approval Development Lifecycle 6+ ye
Slide 73: Platform supports decision making across drug development
Our platform supports decision making, and connects all aspects of drug development Cortellis Drug Discovery • 44K+ genes and targets Innovate • 580K+ drugs and biologics Cortellis clinical • 320k+ patents • 340k trials Research Intelligence Cortellis Regulatory Intelligence Cloud • 32 global regula
Slide 74: Tailwinds heighten the need for analytics and information services
Tailwinds heighten the need for analytics and information services, creating vast opportunities for us Data Healthcare data increasing 48% annually to 2,314 exabytes by 2020, enabling new players to proliferation cure disease, improve quality of life and prevent deaths1 Sciences sectors being disrup
Slide 75: Growth from deeper penetration of core markets
We anticipate growth from deeper penetration of our core markets Science Group core markets $4.9B1 2016-18 CAGR 6.8% Academia & Publisher Pharma drug Life sciences government research services development regulatory 2016-18 CAGR 5.2% 2016-18 CAGR 5.3% 2016-18 CAGR 10% 2016-18 CAGR 5% $2.8B $162M $1.
Slide 76: Adjacent markets with $28.3B in potential
In addition, we have targeted adjacent markets with $28.3B in potential Science Group adjacent opportunities $28.3B Digital health Pharmacovigilance2 Medical device Adjacent industries4 information & data cosmetics, analytics1 analytics3 nutraceuticals, veterinary and food $5B $4.3B $8.6B $10.4B 1Gl
Slide 77: Strategic goals and competitive differentiators
Our strategic goals and competitive differentiators will accelerate our growth Strategic goals Expand: Be Organic & Provide industry’s first Grow Grow a acquisitional exceptional end-to-end R&D alliance world class into new & customer intelligence & channels organization adjacent experience platform
Slide 78: Proprietary ecosystem will lead to revenue growth
Our proprietary ecosystem will lead to revenue growth Next blockbuster product through our alliance and channels app exchange Apps App exchange Research Intelligence Cloud
Slide 79: Shaping the future of research through thought leadership
We are shaping the direction and future of research through our industry thought leadership Institute for Scientific Centre for Medicines Centre for Innovation in Information (ISI) Research (CMR) Regulatory Science (CIRS) Innovate bibliometric and Established and reputable Neutral international foru
Slide 80: Deep expertise delivers increased value compared to free services
Our unparalleled and deep expertise delivers increased value when compared to free services Increase Connect across Assess & benchmark productivity research landscape research ecosystem with 1-click Empower users through expanded Clarivate in platform access Discover with advanced content offerings
Slide 81: Bold investment strategy will drive future growth
Our bold investment strategy will drive future growth Expand into adjacent markets Product peak adoption growth Enhance routes Expand to content ecosystem Customer value M&A Capitalize on existing and relationships Consulting Next-gen AI Localization App M&A exchange CaaS data science Customer delig
Slide 82: Poised to capitalize on $4.9B in core market opportunities
We have a compelling future: Poised to capitalize on $4.9B in core market opportunities Loyal customers Mission-critical with high offerings retention rates Human-centered Outstanding product design growth potential Depth in Agile and disruptive core markets business model
Slide 83: Financial performance and capital strategy
Financial performance and capital strategy Richard Hanks Chief Financial Officer November 12, 2019
Slide 84: Forward-Looking Statements
Forward-Looking Statements The accompanying materials contain certain forward-looking statements regarding Clarivate Analytics Plc (the “Company” or “Clarivate”), its financial condition and its results of operations, anticipated synergies and other future expectations. Forward-looking statements sh
Slide 85: Business model provides clear path to long-term profitable growth
Business model provides clear path to long-term profitable growth Highly-recurring subscription revenue with Recurring sales high retention and revenue visibility + profitable Significant operating leverage from ‘build incremental growth once, sell many times’ = strong cash flow Low capital requirem
Slide 86: Revenue is balanced by category
Revenue is balanced by category, offering steady, long-term growth potential YTD Sept. 2019 adjusted revenue by category By product group By type By geography Transactional APAC 17% 24% IP 44% Americas Science 48% 56% Subscription 83% EMEA 28%
Slide 87: Recent revenue growth muted by TR separation but improving
Recent revenue growth has been muted by our focus on TR separation but is improving Adjusted revenue ($M) $962 - $995 $951 $935 2017 2018 2019E Growth 0.7% 1.7% 2.9% mid-point
Slide 88: ACV gives good visibility to future growth
Our ACV gives good visibility to future growth Annual contract value1 for subscription ($M) $789 $783 $30M $767 $764 +3.9% $759 $755 $731 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 1Prepared at constant currency
Slide 89: Margins pressured by separation; now on a path to growth
Focus on separation from TR pressured margins; now on a path to growth Adjusted EBITDA ($M) and margin % $320 $290 - $310 $273 34% Building out 30% 29% standalone Driving infrastructure platform optimization 2017 2018 2019E
Slide 90: Inflection point
Inflection point Shift from internal to external focus will drive revenue growth and operating efficiencies Insert footer 90
Slide 91: Revenue by quarter is trending up
Revenue by quarter is trending up Adjusted revenue ($M) 2018 2019 $243 $242 $238 $236 $234 $232 Q1 Q2 Q3 Growth constant FX 2.1% 2.5% 3.6%
Slide 92: Evidence of improving margins in 2019
Evidence of improving margins in 2019 Adjusted EBITDA ($M) and adjusted margin 2018 2019 $73 $77 $68 $66 $63 $59 decline increase increase Q1 Q2 Q3 Adjusted margins 27.3% 25.3% 28.3% 30.2% 28.1% 31.7%
Slide 93: Outward focus on customers to drive organic revenue growth
Outward focus on customers will allow us to drive organic revenue growth of 4 to 6% exiting 2020 Sales force expansion Consulting Inside sales Pricing Retention Improve rate product UI and UX
Slide 94: Streamlining initiatives to achieve margin expansion
Streamlining initiatives will help us to work smarter, scale quickly to achieve margin expansion Headcount optimization Facilities rationalization Insource application Re-platform development with AI and machine learning Vendor rationalization renegotiation
Slide 95: Financial outcomes from streamlining initiatives
We will recognize financial outcomes from streamlining initiatives Run rate cash savings exiting 2020 $70 - $75M Realized opex savings in 2020 $35 - $40M 1X cost to implement $60M
Slide 96: Strong operating leverage and margin expansion opportunity
Strong operating leverage and margin expansion opportunity Estimated adjusted EBITDA margin1 expansion sensitivity (bps) Organic revenue growth2 % 1% 2% 3% 4% 5% 6% +0% +55 +105 +160 +210 +260 +310 Base cost inflation +1% - +55 +105 +160 +210 +260 +2% (55) - +55 +105 +155 +205 +3% (110) (55) - +55 +
Slide 97: Targeting a mid-60s free cash flow conversion rate
We are targeting a mid-60s free cash flow conversion rate Free cash flow conversion rate • Stable capex ~5% of planned revenue 100% • Lower cash interest due to 2019 refinancing 17% • Cash taxes are low ~$25M 7% 60% 23% • Working capital 7% improvements driven by revamped quote to cash process Adjus
Slide 98: Capital strategy and return
Capital strategy and return
Slide 99: We've accomplished a lot in a short time
We’ve accomplished a lot in a short time • Announced buyout of tax receivable agreement for $200M • Completed secondary offering of 39.7M ordinary shares1 held by private equity, together with other shareholders – Increases public float to 108M shares, 35% of shares outstanding – Reduces private equ
Slide 100: Capital allocation and return philosophy
Clarivate philosophy – capital allocation and return • Investing in: – Business transformation – Ongoing product and platform enhancements • Cash allocated to reducing leverage • Cash allocated to accretive M&A – Tuck-in acquisitions focused on proprietary databases servicing global markets – Scaled
Slide 101: Healthy balance sheet with solid credit ratings
Healthy balance sheet with solid credit ratings provides capital structure flexibility Balance sheet ($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 102: Dilution may increase, value to shareowners increases more
While dilution may increase, value to shareowners increases more Dilution (M, except per share data) $16.87 / share $18 / share $19 / share $20 / share +16% Basic shares in issue 306 306 306 306 Management options 7.8 8.6 9.3 9.9 Dilution from public warrants 11 12.52 13.6 14.7 Dilution from private
Slide 103: Guidance
Guidance
Slide 104: Reaffirming 2019 outlook and introducing 2020 guidance
Reaffirming 2019 outlook and introducing 2020 guidance 2019 ($M, except % and per share data) 2019 2020 pro forma2 Adjusted revenue1 $962 - $995 $907 - $940 $950 - $970 % change YOY growth 1.2% - 4.6% 1.6% - 5.3% 2.8% - 5.0% Adjusted EBITDA $290 - $310 $290 - $310 $330 - $350 Adjusted EBITDA margin
Slide 105: Clarivate's purpose
Recurring sales Clarivate’s purpose + profitable incremental growth We believe human ingenuity can transform the world and = strong cash flow improve our future. = capacity to reinvest
Slide 106: The Clarivate way
As we build on our solid foundation, there are very large opportunities ahead • Business model with strong financial attributes • Fundamental assets are unmatched anywhere • Embedded in customers’ critical core workflows The • Strong, purpose-based culture in place Clarivate way • Multiple initiativ
Slide 107: Clarivate's purpose
Recurring sales Clarivate’s purpose + profitable incremental growth We believe human ingenuity can transform the world and = strong cash flow improve our future. = capacity to reinvest
Slide 108: Appendix – Non-GAAP reconciliations
Appendix – Non-GAAP reconciliations
Slide 109: Non GAAP Reconciliation - Revenues, net to Adjusted revenues
Non GAAP Reconciliation- Revenues, net to Adjusted revenues Year Ending December 31, 2019 Year Ending December 31, 2019 Year Ending December 31, 2020 (Forecasted) (Pro Forma Forecasted) (1) (Forecasted) (in millions) Low High Low High Low High Revenues, net $ 961.5 $ 994.5 $ 961.5 $ 995.5 $ 949.9 $
Slide 110: Non-GAAP Reconciliation - Net Income to Adjusted EBITDA
Non-GAAP Reconciliation- Net Income to Adjusted EBITDA Year Ending December 31, 2019 Year Ending December 31, 2019 Year Ending December 31, 2020 (Forecasted) (Pro Forma Forecasted) (1) (Forecasted) Low High Low High Low High (in millions) Net (loss) income (2) $ (170.5) $ (158.5) $ (166.6) $ (154.6)
Slide 111: Non-GAAP Reconciliation - Net Income to Adjusted EBITDA (continued)
Non-GAAP Reconciliation- Net Income to Adjusted EBITDA (continued) (3) Includes accruals for payments to Thomson Reuters under the Transition Services Agreement. These costs decreased substantially in 2019, as we are in the final stages of implementing our standalone company infrastructure. In 2020,
Slide 112: Non-GAAP Reconciliation - Adjusted EBITDA Margin
Non-GAAP Reconciliation- Adjusted EBITDA Margin Year Ending December 31, 2019 Year Ending December 31, 2019 Year Ending December 31, 2020 (Forecasted) (Pro Forma Forecasted) (1) (Forecasted) Low High Low High Low High Adjusted revenues $ 962.0 $ 995.0 $ 907.0 $ 940.0 $ 950.0 $ 970.0 Adjusted EBITDA
Slide 113: Non-GAAP Reconciliation - Adjusted Free Cash Flow
Non-GAAP Reconciliation- Adjusted Free Cash Flow Year Ending December 31, 2019 Year Ending December 31, 2019 Year Ending December 31, 2020 (Forecasted) (Pro Forma Forecasted) (1) (Forecasted) Low High Low High Low High (in millions) Net cash provided by operating activities $ 80.3 $ 102.3 $ 80.3 $ 1