Business Context and Reporting Period
This Form 8-K is filed by Clarivate Plc on December 27, 2021, regarding events occurring on December 22, 2021. The filing addresses a material accounting error requiring the restatement of financial statements for the year ended December 31, 2020, and the quarterly periods ended March 31, June 30, and September 30, 2021.
Key Financial Metrics and Impact
The filing does not provide specific revenue, profit, cash flow, or debt figures for the current period. Instead, it details the impact of a restatement:
- Restatement Amount: Up to $185 million in expenses related to stock-based compensation.
- Unaffected Metrics: GAAP revenues, long-term debt, and Adjusted EBITDA (non-GAAP) will not be impacted.
- Affected Metrics: GAAP income (loss) from operations, benefit (provision) for income taxes, net income (loss), earnings (loss) per share, current and non-current assets, current and non-current liabilities, and shareholders' equity.
Material Changes and Error Description
The material change involves the non-reliance on previously issued financial statements due to an error in the treatment of an equity plan from the CPA Global business combination (consummated October 1, 2020). Previously, certain awards were incorrectly included in acquisition accounting. The correct treatment requires recognizing these expenses as stock-based compensation charges over the vesting period (October 1, 2020, to October 1, 2021).
Outlook, Risks, and Management Commentary
- Restatement Process: The Company is preparing a second amendment to its 2020 Form 10-K and amendments to its 2021 Form 10-Q filings to reflect the corrected data.
- Internal Controls: Management expects to report an additional material weakness in internal control over financial reporting following an analysis of the error's cause.
- Consequence: The existence of a material weakness precludes a conclusion that the Company's disclosure controls and procedures and internal control over financial reporting are effective.
- Audit Committee: The matter has been discussed with PricewaterhouseCoopers LLP, the independent registered public accounting firm.
Investor Verification Checklist
- Verify the upcoming amended Form 10-K (2020) and Form 10-Q (2021) filings for restated net income and EPS figures.
- Confirm the specific impact of the $185 million expense allocation across the affected quarters.
- Monitor the Company's disclosure regarding the remediation plan for the identified material weakness in internal controls.
- Review the revised Management's Discussion and Analysis (MD&A) for updated commentary on financial performance.