What to Expect From Clarivate’s Upcoming Q3 Results?

Clarivate Plc (NYSE:CLVT) is a global leader in providing transformative intelligence, offering data and insights to accelerate innovation. The company operates in a competitive landscape, with peers like Thomson Reuters and Elsevier. On November 6, 2024, Clarivate reported its third-quarter earnings, revealing an EPS of -$0.09128, missing the estimated $0.19. Revenue was $622.2 million, below the expected $640.85 million.

During the earnings call, CEO Matti Shem Tov and CFO Jonathan Collins addressed analysts from major financial institutions, including Oppenheimer and Morgan Stanley. They discussed the company's financial performance and strategic initiatives. Clarivate's revenue decreased by 3.9% to $622.2 million, with organic revenues down 2.6%. Subscription revenues rose by 0.6%, but re-occurring and transactional revenues fell by 1.1% and 13.6%, respectively.

The net loss for the quarter was $65.6 million, translating to a net loss per diluted share of $0.09. Adjusted net income dropped by 12.1% to $134.1 million, and adjusted diluted EPS decreased by 9.5% to $0.19. Adjusted EBITDA was $264.4 million, a 6.0% decline, with the adjusted EBITDA margin falling by 100 basis points to 42.5%, mainly due to lower revenues.

For the nine months ending September 30, 2024, Clarivate's revenues decreased by 2.6% to $1.89 billion. Organic revenues declined by 1.5%, with subscription revenues increasing by 1.2%. However, re-occurring and transactional revenues decreased by 2.3% and 9.3%, respectively. The net loss for this period was $444.9 million, with a net loss per diluted share of $0.69.

Clarivate's financial ratios reflect its current challenges. The negative P/E ratio of -2.68 indicates ongoing losses, while the price-to-sales ratio of 1.35 suggests investors pay $1.35 for every dollar of sales. The debt-to-equity ratio of 0.85 shows moderate debt levels, but a current ratio of 0.88 raises liquidity concerns.

Oppenheimer analysts provided their outlook on Clarivate Plc (NYSE:CLVT) ahead of the upcoming Q2 earnings, expecting the company to deliver on the 5.5% organic growth guidance driven by improved pricing, retention, and cross-sell.

However, the analysts stated that they monitor transactional revenues in the second half of 2022 given the potential of an economic slowdown. Separately, FX headwinds could also weigh on revenues given exposure to EMEA (approximately 30% of revenues) and Asia (approximately 21% of revenues).

The analysts lowered their 2022/2023 EPS estimates to $0.84/$1.00, below the Street estimates of $0.90/$1.07, and reduced their price target to $18 from $23. However, the analysts reiterated their outperform rating given the defensive business model, longer-term secular trends, and benefit from the One Clarivate initiative.

Analysts at RBC Capital provided their outlook on Clarivate Plc (NYSE:CLVT), stating that the company sets up well for 2022 given its organic growth inflection to 6-8% driven by sales reorganization, optimized product bundles, robust NPI driven by Cloud and AI/ML, and lapping of DRG and CPA Global acquisitions.

The analysts estimate the highly accretive ProQuest acquisition will deliver around 34% EPS growth in 2022 and 24% in 2023 while the complementary content and software solutions should enable cross-sell/up-sell opportunities.