Clarivate Plc (CLVT) Bundle
Understanding Clarivate Plc (CLVT) Revenue Streams
Understanding Clarivate Plc’s Revenue Streams
Revenue Breakdown by Segment:
| Segment | Three Months Ended September 30, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Change ($) | Change (%) |
|---|---|---|---|---|
| Academia & Government | 321.3 | 327.2 | (5.9) | (1.8)% |
| Intellectual Property | 199.8 | 211.7 | (11.9) | (5.6)% |
| Life Sciences & Healthcare | 101.1 | 108.3 | (7.2) | (6.6)% |
| Total Revenues | 622.2 | 647.2 | (25.0) | (3.9)% |
Year-over-Year Revenue Growth Rate:
For the nine months ended September 30, 2024, total revenues were $1,893.7 million, a decrease of 2.6% from $1,945.1 million in the same period of 2023. This included:
- Academia & Government: $983.5 million (2024) vs. $983.9 million (2023) - 0.0% change.
- Intellectual Property: $602.3 million (2024) vs. $637.1 million (2023) - −5.5% change.
- Life Sciences & Healthcare: $307.9 million (2024) vs. $324.1 million (2023) - −5.0% change.
Revenue Contribution by Geography:
| Region | Three Months Ended September 30, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Change ($) | Change (%) |
|---|---|---|---|---|
| Americas | 335.4 | 342.8 | (7.4) | (2.2)% |
| EMEA | 158.8 | 176.3 | (17.5) | (9.9)% |
| APAC | 128.0 | 128.1 | (0.1) | (0.1)% |
| Total Revenues | 622.2 | 647.2 | (25.0) | (3.9)% |
Analysis of Significant Changes in Revenue Streams:
The decrease in revenue was primarily driven by:
- Academia & Government segment experiencing a slight decline due to reduced transactional volume.
- Intellectual Property segment suffering from lower subscription revenues and a divestiture of a product group.
- Life Sciences & Healthcare segment facing a decrease attributed to both transactional and subscription revenue declines.
Year-over-Year Revenue Growth Rates by Segment:
| Segment | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Growth Rate (%) |
|---|---|---|---|
| Academia & Government | 983.5 | 983.9 | 0.0% |
| Intellectual Property | 602.3 | 637.1 | −5.5% |
| Life Sciences & Healthcare | 307.9 | 324.1 | −5.0% |
| Total | 1,893.7 | 1,945.1 | −2.6% |
The combination of flat revenues in the Academia & Government segment, along with declines in the other segments, has contributed to the overall decrease in total revenues. The company continues to adapt its strategies to address these challenges and drive future growth.
A Deep Dive into Clarivate Plc (CLVT) Profitability
A Deep Dive into Clarivate Plc's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit amounted to $1,200.0 million, resulting in a gross profit margin of 63.3%. This is a decline from 64.2% in the same period of 2023, reflecting increased operational costs.
Operating Profit Margin: The operating profit for the same period was reported at $21.7 million, yielding an operating profit margin of 1.1%, down from 4.5% in 2023. This decline is attributed to rising expenses and restructuring costs.
Net Profit Margin: The net income for the nine months ended September 30, 2024, was a loss of $444.9 million, translating to a net profit margin of (23.5)%, compared to a margin of (3.5)% in the prior year.
Trends in Profitability Over Time
Over the past few quarters, profitability has shown significant fluctuations:
- Gross Profit Margin: Decreased from 64.2% in 2023 to 63.3% in 2024.
- Operating Profit Margin: Dropped from 4.5% to 1.1% between the two periods.
- Net Profit Margin: Shifted from (3.5)% to (23.5)%.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company's profitability metrics indicate underperformance:
- Industry Gross Profit Margin: Average of 70%.
- Industry Operating Profit Margin: Average of 10%.
- Industry Net Profit Margin: Average of 5%.
Analysis of Operational Efficiency
The operational efficiency of the company can be evaluated through its cost management and gross margin trends:
- Cost Management: The total operating expenses increased to $600.5 million from $560.0 million year-over-year.
- Gross Margin Trends: The gross margin has seen slight erosion, impacting profitability metrics adversely.
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | 63.3% | 64.2% | (0.9%) |
| Operating Profit Margin | 1.1% | 4.5% | (3.4%) |
| Net Profit Margin | (23.5)% | (3.5)% | (20.0%) |
| Total Operating Expenses | $600.5 million | $560.0 million | $40.5 million |
Debt vs. Equity: How Clarivate Plc (CLVT) Finances Its Growth
Debt vs. Equity: How Clarivate Plc Finances Its Growth
As of September 30, 2024, the total outstanding borrowings for the company amounted to $4,681.9 million. This includes various notes and credit facilities.
The breakdown of the debt structure is as follows:
| Type of Debt | Amount (in millions) |
|---|---|
| Term Loans | $2,150.0 |
| Revolving Credit Facility | $700.0 |
| Other Borrowings | $2,831.9 |
The company's debt-to-equity ratio stands at 0.79, which is below the industry average of 1.0. This indicates a balanced approach towards leveraging debt against equity to finance growth.
In January 2024, the company refinanced its existing credit facilities, reducing the interest rate margin from 300 to 275 basis points per annum for loans referencing term SOFR. The refinancing extended debt maturities and lowered annual cash interest costs, enhancing financial flexibility.
Recent debt issuances include:
- $2,150 million term loan facility maturing in 2031
- $700 million revolving credit facility extended to January 31, 2029
Credit ratings have remained stable, with the company maintaining a rating of B1 from Moody's and B+ from S&P, reflecting moderate credit risk.
As of September 30, 2024, the company had $388.5 million in cash and cash equivalents, with an additional $691.9 million available under the revolving credit facility, providing ample liquidity to manage its debt obligations.
The balance between debt financing and equity funding is evident through the company’s share repurchase program, which has authorized up to $500 million for share buybacks. As of September 30, 2024, approximately 15.2 million ordinary shares were repurchased at an average price of $6.59 per share, totaling $100 million.
In summary, the company’s financial structure reflects a strategic balance of debt and equity, providing a foundation for sustainable growth while managing risks associated with leverage.
Assessing Clarivate Plc (CLVT) Liquidity
Assessing Clarivate Plc's Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for Clarivate Plc stands at 0.80, indicating the company's ability to cover its short-term liabilities with its short-term assets. The quick ratio is slightly lower at 0.65, reflecting a tighter liquidity position when excluding inventory from current assets.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, is reported at ($118.4 million), a decrease compared to ($45.3 million) in the same period of the previous year. This indicates a declining trend in working capital, which could signal potential liquidity concerns.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, is $505.3 million, down from $553.3 million in the same period of 2023, representing a decrease of 9%.
Investing activities show a net cash outflow of ($258.1 million), compared to ($170.4 million) in 2023, marking a significant increase in investments and acquisitions.
Financing activities resulted in a net cash outflow of ($230.5 million), an improvement from ($322.2 million) in the previous year, reflecting reduced payments on term loans and preferred share dividends.
| Cash Flow Activity | 2024 (in millions) | 2023 (in millions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Operating Activities | $505.3 | $553.3 | ($48.0) | (9%) |
| Investing Activities | ($258.1) | ($170.4) | ($87.7) | 51% |
| Financing Activities | ($230.5) | ($322.2) | $91.7 | (28%) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds $388.5 million in cash and cash equivalents, which includes $7.7 million in restricted cash. Additionally, there is $691.9 million of available borrowing capacity under the revolving credit facility, which provides a buffer against potential liquidity challenges.
The overall liquidity position shows some strengths due to available cash reserves and borrowing capacity, but the declining trend in working capital raises concerns about the company’s ability to meet its short-term obligations effectively.
Conclusion
While the company's cash flow from operations remains strong, the trends in working capital and the cash flow from investing activities suggest a need for careful monitoring of liquidity. The current and quick ratios indicate that while liquidity is currently manageable, ongoing operational and financial performance will be crucial in maintaining this position.
Is Clarivate Plc (CLVT) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial ratios including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated by dividing the current share price by the earnings per share (EPS). For the nine months ended September 30, 2024, the basic EPS was $(0.69) and the diluted EPS was $(0.69).
Price-to-Book (P/B) Ratio
The P/B ratio is determined by dividing the market price per share by the book value per share. As of September 30, 2024, the total shareholders' equity was $5,604.6 million with 724.1 million shares outstanding, resulting in a book value per share of approximately $7.75.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the enterprise value (EV) was calculated using the formula EV = market capitalization + total debt - cash and cash equivalents. With a market cap of approximately $5 billion, total debt of $4,617 million, and cash and cash equivalents of $388.5 million, the EV is approximately $9.23 billion. The EBITDA for the nine months ended September 30, 2024, was $775.1 million. Thus, the EV/EBITDA ratio is approximately 11.88.
Stock Price Trends
Over the last 12 months, the stock price has shown a downward trend. The price as of September 30, 2024, was approximately $6.69. This represents a decline of approximately 45% from its peak of around $12.00 a year prior.
Dividend Yield and Payout Ratios
The company currently does not pay regular dividends on ordinary shares. However, it had preferred shares with a dividend rate of 5.25%. Following the conversion of preferred shares into ordinary shares in June 2024, no further dividends will be accrued.
Analyst Consensus on Stock Valuation
As of the latest analysis, the consensus among analysts is a mix of hold and sell ratings, with no current buy ratings. The average target price is around $7.00, suggesting limited upside potential given the current trading price.
| Financial Metric | Value |
|---|---|
| P/E Ratio | N/A (Negative EPS) |
| P/B Ratio | 0.86 |
| EV/EBITDA Ratio | 11.88 |
| Current Stock Price | $6.69 |
| Dividend Yield | 0% (Ordinary Shares) |
| Analyst Consensus | Hold/Sell |
Key Risks Facing Clarivate Plc (CLVT)
Key Risks Facing Clarivate Plc
Clarivate Plc faces a variety of internal and external risks that impact its financial health. These include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The company operates in a highly competitive environment, particularly in the information services and analytics sector. For the nine months ended September 30, 2024, total revenues decreased by 2.6% to $1,893.7 million from $1,945.1 million in the same period of 2023.
Regulatory Changes
Regulatory changes, especially concerning data privacy and intellectual property rights, pose significant risks. The enactment of new legislation in jurisdictions where the company operates could lead to increased compliance costs or operational limitations.
Market Conditions
Market conditions, including economic downturns and changes in customer spending, can adversely affect revenue streams. For instance, the revenue from the Americas segment fell by 2.2% to $1,020.6 million for the nine months ended September 30, 2024.
Operational Risks
Operational risks include challenges in maintaining service quality and managing operational costs. The company reported total operating expenses of $2,107.0 million for the nine months ended September 30, 2024, compared to $1,891.6 million in the same period of 2023.
Financial Risks
Financial risks include exposure to interest rate fluctuations and currency exchange rates. The company had $4,681.9 million in outstanding borrowings as of September 30, 2024. Additionally, the net income (loss) for the nine months ended September 30, 2024, was $(444.9) million, compared to $(67.3) million for the same period in 2023.
Strategic Risks
Strategic risks involve the potential failure to execute business strategies effectively. The company reported goodwill and intangible asset impairments of $316.6 million for the nine months ended September 30, 2024.
Mitigation Strategies
To mitigate these risks, the company engages in proactive risk management practices and maintains a diversified portfolio of services. The Board of Directors has authorized a share repurchase program of up to $500.0 million to enhance shareholder value.
| Risk Type | Description | Impact (2024) |
|---|---|---|
| Industry Competition | High competition affecting pricing and market share | Revenue decline of 2.6% |
| Regulatory Changes | Increased compliance costs | Potential cost impact not quantified |
| Market Conditions | Economic downturns affecting customer spending | Americas revenue down 2.2% |
| Operational Risks | Challenges in service quality and cost management | Total operating expenses of $2,107.0 million |
| Financial Risks | Interest rate and currency exchange exposure | Outstanding borrowings of $4,681.9 million |
| Strategic Risks | Failure in executing business strategies | Goodwill impairments of $316.6 million |
Future Growth Prospects for Clarivate Plc (CLVT)
Future Growth Prospects for Clarivate Plc
Analysis of Key Growth Drivers
Clarivate Plc is positioned for growth through various strategic initiatives. The company focuses on product innovations, market expansions, and potential acquisitions to drive its future revenue. In 2024, Clarivate's subscription revenues reached $1,219.8 million, a growth of 1.0% from $1,207.3 million in 2023.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected to stabilize with an estimated overall revenue of $2.5 billion by 2026, reflecting an annual growth rate of approximately 3-5%. The earnings estimates suggest a gradual recovery, with expected net income of $100 million by the end of 2025.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic partnerships are critical for expanding market reach. The company has engaged in collaborations aimed at enhancing data analytics capabilities. In January 2024, a significant partnership was established with a leading technology firm to integrate advanced analytics tools into Clarivate's existing platforms, expected to drive user engagement and retention.
Competitive Advantages That Position the Company for Growth
Clarivate's competitive advantages include a robust subscription model, high customer renewal rates, and a diverse portfolio of intellectual property services. The company's subscription-based revenue model provides a steady cash flow, with net cash provided by operating activities amounting to $505.3 million for the nine months ended September 30, 2024.
| Financial Metrics | 2024 | 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Revenue | $1,893.7 million | $1,945.1 million | ($51.4 million) | (2.6%) |
| Net Income (Loss) | ($444.9 million) | ($67.3 million) | ($377.6 million) | (561.1%) |
| Adjusted EBITDA | $775.1 million | $819.0 million | ($43.9 million) | (5.4%) |
| Free Cash Flow | $298.4 million | $374.7 million | ($76.3 million) | (20.4%) |
Overall, the company’s efforts in operational efficiency and strategic positioning in the market serve as a foundation for future growth. With the ongoing focus on innovation and partnerships, Clarivate is poised to leverage its strengths to navigate through market challenges effectively.
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Updated on 16 Nov 2024
Resources:
- Clarivate Plc (CLVT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Clarivate Plc (CLVT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Clarivate Plc (CLVT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.