Cision Reports Fourth Quarter and Full Year 2018 Results; Provides Updated Full Year 2019 Outlook

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q4 2018
compared
to Q4 2017

Average pro forma subscription customers

39,761

40,833

40,532

40,628

40,252

41,249

41,661

42,349

4.2%

Average annualized pro forma revenue per subscription customer

$10,867

$10,882

$11,101

$11,227

$11,153

$11,186

$11,237

$11,086

(1.3%)

Pro forma transaction customers

42,869

44,451

40,829

41,670

40,216

41,172

38,152

39,173

(6.0%)

Average pro forma revenue per transaction customer

$1,297

$1,361

$1,286

$1,405

$1,382

$1,454

$1,356

$1,526

8.6%

Prior 2019

Updated 2019

Initial Q1 2019

Q1 2018

Revenue

$775 - $785

$775 - $785

$185 - $190

$179.3

Revenue, excluding the impact from purchase accounting

$782 - $792

$782 - $792

$187 - $192

$180.2

Net income (loss)

($5) - $2

($1) - $4

($6) - ($2)

($0.4)

Net income (loss) per share

($0.03) - $0.01

($0.01) - $0.02

($0.04) - ($0.01)

$0.00

Adjusted EBITDA

$270 - $275

$270 - $275

$61 - $63

$58.3

Adjusted net income

$122 - $125

$122 - $125

$28 - $30

$23.1

Adjusted net income per diluted share

$0.82 - $0.84

$0.82 - $0.85

$0.19 - $0.20

$0.19

Pro-forma fully diluted weighted average shares outstanding

149.8

148.0

147.5

123.9

Prior 2019

Updated 2019

Initial Q1 2019

Q1 2018

Depreciation expense

--

$30 - $33

$8 - $9

$7.4

Amortization expense

--

$105 - $110

$26 - $27

$25.9

Amortization expense included in cost of revenue

--

$24 - $26

$6 - $7

$5.6

Interest expense

--

$76 - $79

$19 - $20

$22.1

Debt extinguishment costs

--

$0 - $0

$0 - $0

$2.4

Interest expense, net of debt extinguishment costs

--

$76 - $79

$19 - $20

$19.7

Cash interest expense

--

$64 - $66

$16 - $17

$18.9

Stock-based compensation

--

$7 - $10

$2 - $3

$1.3

Capital expenditures, inclusive of capitalized software development

--

$38 - $42

$8 - $9

$8.8

EUR to USD

1.14

CAD to USD

0.76

Cision Ltd. and its Subsidiaries

Condensed Consolidated Balance Sheets

As of December 31, 2018 and December 31, 2017

(in thousands, except for per share amounts)

(Unaudited)

2018

2017

Assets

Current assets:

Cash and cash equivalents

$          104,769

$          148,654

Accounts receivable, net

120,882

113,008

Prepaid expenses and other current assets

22,824

19,896

Total current assets

248,475

281,558

Property and equipment, net

57,210

53,578

Other intangible assets, net

377,146

456,291

Goodwill

1,171,859

1,136,403

Deferred tax asset

4,034

-

Other assets

7,652

7,528

Total assets

$       1,866,376

$       1,935,358

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt

$            13,210

$            13,349

Accounts payable

15,603

13,327

Accrued compensation and benefits

29,323

25,873

Other accrued expenses

82,507

73,483

Current portion of deferred revenue

139,725

140,351

Total current liabilities

280,368

266,383

Long-term debt, net of current portion

1,205,760

1,266,121

Deferred revenue, net of current portion

1,098

1,412

Deferred tax liability

69,232

62,617

Other liabilities

21,601

22,456

Total liabilities

$       1,578,059

$      1,618,989

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.0001 par value, 20,000,000 shares authorized; no shares issued and outstanding at December 31, 2018 and 2017

-

-

Common stock, $0.0001 par value, 480,000,000 shares authorized; 132,716,541 and 122,634,922 shares issued and outstanding at December 31, 2018 and 2017, respectively

13

12

Additional paid-in capital

797,222

771,813

Accumulated other comprehensive loss

(68,941)

(35,111)

Accumulated deficit

(439,977)

(420,345)

Total stockholders' equity

288,317

316,369

 Total liabilities and stockholders' equity

$       1,866,376

$       1,935,358

Cision Ltd. and its Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except for per share amounts)

(Unaudited)

Three Months Ended December 31,

Year Ended December 31,

2018

2017

2018

2017

Revenue

$        186,369

$        168,959

$        730,373

$    631,637

Cost of revenue

66,580

53,265

266,792

200,836

Gross Profit

119,789

115,694

463,581

430,801

Operating costs and expenses:

Sales and marketing

30,750

31,519

116,095

114,750

Research and development

7,713

5,423

29,995

22,102

General and administrative

40,298

48,940

167,060

166,759

Amortization of intangible assets

20,134

22,853

80,815

89,159

Total operating costs and expenses

98,895

108,735

393,965

392,770

Operating income

20,894

6,959

69,616

38,031

Non operating income (expense):

Foreign exchange gains (losses)

3,013

(3,626)

13,290

(5,458)

Interest and other income (expense), net

(589)

(318)

(117)

2,132

Interest expense

(18,067)

(20,160)

(78,014)

(116,466)

Loss on extinguishment of debt

(6,992)

-

(9,424)

(51,872)

Total non operating loss

(22,635)

(24,104)

(74,265)

(171,664)

Loss before income taxes

(1,741)

(17,145)

(4,649)

(133,633)

Provision for (benefit from) income taxes

9,729

17,347

19,745

(10,591)

Net loss

(11,470)

(34,492)

(24,394)

(123,042)

Other comprehensive income (loss)-foreign currency translation adjustments

(12,048)

2,826

(32,844)

38,791

Comprehensive loss

$       (23,518)

$       (31,666)

$       (57,238)

$    (84,251)

Net loss per share:

Basic and diluted

$            (0.09)

$            (0.28)

$            (0.19)

$        (1.63)

Weighted average shares outstanding used in computing per share amounts:

Basic and diluted

132,714,691

121,917,531

128,819,858

75,696,880

Cision Ltd. and its Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Years Ended December 31, 2018 and December 31, 2017

(in thousands)

(Unaudited)

2018

2017

Cash flows from operating activities

Net loss

$  (24,394)

$ (123,042)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

133,821

139,474

Non-cash interest charges and amortization of debt discount and deferred financing costs

17,498

65,554

Equity-based compensation expense

5,267

4,138

Provision for doubtful accounts

4,409

3,493

Deferred income taxes

(105)

(23,278)

Unrealized currency translation losses (gains)

(13,533)

5,011

Gain on sale of business

-

(1,785)

Other

5,441

(194)

Changes in operating assets and liabilities, net of effects of acquisitions and disposal:

Accounts receivable

(7,784)

(6,349)

Prepaid expenses and other current assets 

1,682

1,579

Other assets 

742

737

Accounts payable

728

(3,831)

Accrued compensation and benefits

3,530

(6,235)

Other accrued expenses

(3,466)

4,068

Deferred revenue

1,808

4,887

Other liabilities

1,484

4,621

Net cash provided by operating activities

127,128

68,848

Cash flows from investing activities

Purchases of property and equipment

(14,629)

(10,734)

Software development costs

(19,804)

(14,953)

Acquisitions of businesses, net of cash received of $2,711 and $12,355

(66,463)

(78,528)

Proceeds from disposal of business

-

23,675

Other

(24)

552

Net cash used in investing activities

(100,920)

(79,988)

Cash flows from financing activities

Proceeds from revolving credit facility

-

5,000

Repayment of revolving credit facility

-

(38,475)

Payment of amounts due to Cision Owner

-

(1,940)

Proceeds from term credit facility, net of debt discount of $10,466

-

1,350,259

Repayments of term credit facility

(63,297)

(1,497,838)

Payments on capital lease obligations

-

(171)

Payments of deferred financing costs

(850)

-

Proceeds from merger and recapitalization

-

305,110

Payment of contingent consideration

(2,873)

–

Net cash provided by (used in) financing activities

(67,020)

121,945

Effect of exchange rate changes on cash and cash equivalents

(3,073)

2,714

Increase (decrease) in cash and cash equivalents

(43,885)

113,519

Cash and cash equivalents

Beginning of year

148,654

35,135

End of the year

$ 104,769

$  148,654

Supplemental disclosure of cash flows information

Cash paid during the year for:

Interest

$   69,816

$  102,400

Income taxes

17,538

10,250

Supplemental non-cash information:

Issuance of securities by Cision Owner in Connection with acquisitions

-

7,000

Non-cash contribution from Cision Owner in connection with merger

-

451,139

Issuance of shares for acquisition

20,143

Cision Ltd. and its Subsidiaries

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA

(in millions)

(Unaudited)

Three Months Ended
December 31, 2017

Three Months Ended
December 31, 2018

Year Ended
December 31, 2017

Year Ended
December 31, 2018

Net loss

$                       (34.5)

$                       (11.5)

$                   (123.0)

$                     (24.4)

Depreciation and amortization

36.1

33.6

139.5

133.8

Interest expense and loss on extinguishment of debt

20.2

25.1

168.3

87.5

Provision (benefit) for income taxes

17.3

9.7

(10.6)

19.7

EBITDA (1)

39.1

56.9

174.2

216.6

Acquisition and offering related costs

16.7

12.7

42.2

45.3

Stock-based compensation

1.2

1.6

4.1

5.3

Deferred revenue reduction from purchase accounting

0.7

-

1.5

1.5

Gain on sale of business

-

-

(1.8)

-

Sponsor fees and expenses

-

-

0.3

-

Unrealized translation (gain) loss

3.5

(3.2)

5.0

(13.5)

Adjusted EBITDA (2)

$                         61.2

$                         68.0

$                    225.5

$                    255.2

Cision Ltd. and its Subsidiaries

Reconciliation of Net Loss to Adjusted Net Income and Adjusted Net Income per Diluted Share

(in millions, except for per share and share amounts)

(Unaudited)

Three Months Ended
December 31, 2017

Three Months Ended
December 31, 2018

Year Ended
December 31, 2017

Year Ended
December 31, 2018

Net loss

$                      (34.5)

$                      (11.5)

$                  (123.0)

$                    (24.4)

Provision (benefit) for income taxes

17.3

9.7

(10.6)

19.7

Acquisition and offering related costs

16.7

12.7

42.2

45.3

Gain on sale of business

-

-

(1.8)

-

Stock-based compensation expense

1.2

1.6

4.1

5.3

Deferred revenue reduction from purchase accounting

0.7

-

1.5

1.5

Amortization related to acquired intangible assets

29.2

26.0

113.8

104.1

Non-recurring interest and loss on extinguishment of debt

-

7.1

55.9

11.4

Sponsor fees and expenses

-

-

0.3

-

Unrealized translation (gain) loss 

3.5

(3.2)

5.0

(13.5)

Adjusted Income before income taxes

34.1

42.4

87.4

149.4

Less: Income tax at a 26% rate for 2018, and a 33% rate for 2017

(11.2)

(11.0)

(28.8)

(38.8)

Adjusted net income (3)

$                        22.9

$                        31.4

$                      58.6

$                   110.6

Pro forma fully-diluted weighted average shares outstanding

121,917,531

132,714,891

102,035,003

128,819,858

Adjusted net income per diluted share (4)

$0.19

$0.24

$0.57

$0.86

Cision Ltd. and its Subsidiaries

Reconciliation of Net Cash Provided by Operating Activities to Adjusted Net Cash Provided by
Operating Activities

(in millions)

(Unaudited)

Three Months Ended
December 31, 2017

Three Months Ended
December 31, 2018

Year Ended
December 31, 2017

Year Ended
December 31, 2018

Net cash provided by operating activities

$                        30.5

$                        37.3

$                      68.8

$                   127.1

Acquisition and offering related costs

16.7

12.7

42.2

45.3

Adjusted net cash provided by operating activities (5)

$                        47.2

$                        50.0

$                   111.0

$                   172.4

(1)

Cision defines EBITDA as net income (loss), plus depreciation and amortization expense, plus interest expense and loss on extinguishment of debt, plus provision for (or minus benefit from) income taxes.

(2)

Cision defines Adjusted EBITDA as EBITDA, further adjusted for acquisition and offering related costs, stock-based compensation, deferred revenue reduction from purchase accounting, (gains) losses related to divested businesses or assets, sponsor fees and expenses, and unrealized translation losses (gains). All of the items included in the reconciliation from net income to Adjusted EBITDA are either non-cash items or are items that we consider to be less useful in assessing our operating performance. In the case of the non-cash items, we believe that investors can better assess our operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect our ability to generate free cash flow or invest in our business. For example, by excluding depreciation and amortization from EBITDA, users can compare operating performance without regard to different accounting determinations such as useful life. In the case of the other items, we believe that investors can better assess operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.

(3)

Cision defines Adjusted net income as net income (loss) plus provision for (or minus benefit from) income taxes, further adjusted for acquisition and offering related costs, (gains) losses related to divested businesses or assets, stock-based compensation, deferred revenue reduction from purchase accounting, amortization related to acquired intangibles, non-recurring interest and losses on extinguishment of debt, sponsor fees and expenses, and unrealized translation losses (gains), which together, sum to Adjusted net income (loss) before income taxes. Adjusted net income (loss) before income taxes is then taxed at an assumed long term corporate tax rate of 33% for 2017 and periods prior, and 26% for 2018 and beyond, pursuant to our preliminary analysis with respect to recent U.S. tax law changes, to determine Adjusted net income. The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a provisional net one-time tax of $11.9 million in the fourth quarter of 2017 based on a reasonable estimate of the income tax effects, primarily from a tax on accumulated foreign earnings, the remeasurement of deferred tax assets and liabilities and new limitations on the deductibility of interest. Our calculation of Adjusted net income excludes this provisional net one-time tax. We continue to finalize the analysis of the tax reform provisions in 2018. All of the items included in the reconciliation from net income to Adjusted net income are either non-cash items or are items that we consider to be less useful in assessing our operating performance. In the case of the non-cash items, we believe that investors can better assess our operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect our ability to generate free cash flow or invest in our business. For example, by excluding the amortization related to acquired intangibles, users can compare operating performance without regard to highly variable amortization expenses related to our acquisitions. In the case of the other items, we believe that investors can better assess operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.

(4)

Cision defines Adjusted net income per diluted share as Adjusted net income, as defined above, divided by the fully-diluted pro forma weighted average shares outstanding for the period. The fully-diluted pro forma weighted average shares outstanding for the respective period assume that the exchange of shares pursuant to our merger with Capitol Acquisition III had taken effect as of the beginning of such period. Additionally, for purposes of calculating the number of fully diluted shares outstanding, we have excluded the potential impact of dilution from outstanding warrants to purchase shares of our common stock prior to the dates of their conversion, and stock options and restricted units issued and outstanding pursuant to our 2017 Omnibus Incentive Plan. During the second quarter of fiscal 2018, we issued an aggregate of 6,342,989 ordinary shares (6,100,209 ordinary shares on May 18, 2018 and 242,780 ordinary shares on June 4, 2018), in exchange for all of our outstanding warrants, pursuant to the completion of our warrant exchange transactions. During the third quarter of 2018, we issued 2,000,000 ordinary shares for the earn-out achieved during the quarter. Commencing on these respective issuance dates, we included the issued shares in our fully-diluted pro forma weighted average share count.

(5)

Cision defines Adjusted net cash provided by operating activities is defined as net cash provided by operating activities adjusted for acquisition related costs and expenses.