Overview
Cision (“we,” “us,”
or “our”) is a leading global provider of PR software, media distribution, media intelligence and related professional
services, according to Burton-Taylor International Consulting LLC, as measured by total revenue. Public relations and communications
professionals use our products and services to help manage, execute and measure their strategic PR and communications programs.
We believe that we are an industry-standard SaaS solution for PR and marketing professionals and are deeply embedded in industry
workflow.
We deliver sophisticated, easy-to-use platform
for communicators to reach relevant media influencers and craft compelling campaigns that impact customer behavior. With rich monitoring
and analytics, Cision Communications CloudTM (“C3”), a cloud-based platform that integrates each of our point solutions
into a single unified interface, arms brands with the insights they need to link their earned media to strategic business objectives,
while aligning it with owned and paid channels. This platform enables companies and brands to build consistent, meaningful and
enduring relationships with influencers and buyers in order to amplify their marketplace influence.
We have undergone a strategic
transformation since GTCR’s initial investment in 2014, evolving into a PR and marketing software leader through a
series of complementary acquisitions. The acquisitions of Cision and Vocus, Inc. (“Vocus”) in 2014 and their
subsequent merger established the foundation of the core media database, monitoring and analysis business. Over the 12 months
following this initial merger, we acquired Discovery Group Holdings Ltd. (“Gorkana”) to expand our global
footprint and also completed acquisitions of Visible, Inc. (“Visible”) and Viralheat, Inc.
(“Viralheat”) to enhance our social media functionality. The subsequent acquisition of PRN Group (“PR
Newswire”) in 2016 added the depth and breadth of a global distribution network and making us, we believe, to be the
only vendor with a comprehensive global solution for PR professionals. Following these acquisitions, in October 2016, we
introduced our C3 platform. In the first quarter of 2017, we acquired Bulletin Intelligence, LLC, Bulletin News Network, LLC
and Bulletin News Investment, LLC (collectively, “Bulletin Intelligence”) to expand our capability to provide
expert-curated executive briefings for the Executive Office of the President and corporate C-Suite executives. In the second
quarter of 2017, we acquired L’Argus de la Presse (“Argus”), a Paris-based provider of media
monitoring services to expand our media monitoring solutions and enhance our access to French media content. We acquired
CEDROM-SNi Inc. (“CEDROM”) in December 2017 and PRIME Research Group (“Prime”) in January 2018 in
order to further expand upon our media measurement and analysis services and improve our digital media monitoring
solutions.
We provide our comprehensive solution principally
through subscription contracts which are generally one year or longer, with different tiers of pricing depending on the level of
functionality and customer support required. Our SaaS delivery model provides a stable recurring revenue base. In 2017, we generated
$674 million of revenue, on a pro forma basis assuming a full year of Bulletin Intelligence, Argus, and CEDROM revenues, and, on
the same pro forma basis, approximately 83% of our revenue is generated by customers purchasing services on a subscription or recurring
basis. We consider services recurrent if customers routinely purchase these services from us pursuant to negotiated “rate
card” or similar arrangements, even if we do not have subscription agreements with them. As of December 31, 2017, we had
more than 75,000 customers, of which the top 25 only accounted for 4% of 2017 revenues, on a pro forma basis assuming a full year
of Bulletin Intelligence, Argus and CEDROM revenues.
Industry
PR professionals are responsible for critical
corporate functions including communications and relations with media, government, consumers, industry and community stakeholders.
The process of managing relationships and communications with journalists, analysts, public officials and other key influencers
and audiences is vital to an organization achieving its corporate objectives and financial success. PR is top-of-mind for senior
management executives and a key component of how companies manage and enhance their brands’ reputation through the media.
The primary activities of in-house PR departments and PR agencies include:
|
•
|
Creating and communicating news, feature articles and multimedia;
|
|
•
|
Distributing information to target audiences;
|
|
•
|
Planning, developing, managing and monitoring traditional and social media campaigns and implementing strategies to generate
interest and popularity and influence brand reputation and sentiment;
|
|
•
|
Organizing events such as media visits, receptions and conferences;
|
|
•
|
Editing and producing journals, corporate identity programs, video and other presentations; and
|
|
•
|
Compiling reports on activities and campaign performance.
|
Central to all PR activities is a distribution
strategy, which determines how an organization delivers consistent and well-executed communications to key constituents. The PR
function is rapidly evolving with the proliferation of digital media, as PR professionals work to optimize communications across
multiple online, mobile and social channels as well as traditional media outlets. In a multi-channel, data-driven environment,
content can be distributed to a significantly larger and more targeted audience, increasing the importance of a broad and reliable
distribution network and creating demand for integrated solutions that include distribution, targeting, monitoring and reporting.
The importance of distribution to broader PR success was a driving force behind our decision to acquire PR Newswire,
the world’s largest press release distribution network, according to Burton-Taylor International Consulting LLC, as measured
by total revenue.
PR Professionals Face an Increasingly Complex Landscape
The emergence and proliferation of digital
media, search engine technology and social media has driven rapid change in the public relations and communications industries.
In addition to traditional interaction with journalists and editors to manage news and content distributed through print media
channels, PR and communications professionals must now also interact with and monitor bloggers, online news sites, consumer review
websites, social media platforms and customer communications. The increasing complexity of these functions requires the use of
numerous, sophisticated and often discrete software tools, analytics, and professional services to achieve PR professionals’
business objectives.
Digital Media Landscape is Evolving
Media consumption patterns and brand interactions
with consumers are rapidly evolving. Consumer purchases are increasingly influenced by a variety of different information sources,
including search engines, blogs, online reviews and social media networks. This dynamic presents a challenge for marketing professionals
who have traditionally relied on paid and owned media to shape a brand’s image and perception with consumers. As a result,
marketers are being forced to reevaluate how they reach and engage with their target audience.
As opposed to paid media campaigns, which
directly target consumers through television, radio, print and search engine advertising, or owned media campaigns, which directly
target consumers through company websites or social media accounts, earned media campaigns do not directly target consumers but
rather target key influencers. With consumer behavior increasingly shaped by these influencers, including online reviewers, press
and social media posters, effective earned media campaigns are becoming critical for marketers.
Rising Importance of Earned Media Channels in Driving Purchase Decisions
According to Nielsen, earned media is recognized
as the most trusted media category, yet we believe it receives a smaller allocation of marketing budgets at most companies than
owned and paid media. Marketers have traditionally targeted the paid and owned channels because content is more easily controlled
through those channels; however, declining efficacy of paid media and higher consumer trust in earned media is increasing marketers’
focus on the earned channel, which is our core category.
According to eMarketer, more than $192
billion was spent on paid media in 2016, despite consumers actively trying to reduce their paid media exposure. For example, GlobalWebIndex
indicates that 60% of desktop users have used ad-blockers. Consumers appear to be gravitating instead toward key influencers in
making their purchase decisions. Launchmetrics research indicates that 93% of marketers believe influencer marketing is effective
in raising brand awareness and 75% believe it is effective in generating sales leads.
In addition to having a greater impact
on consumer purchase decisions than paid media, earned media has a lower cost, as distribution is assisted by the content author.
As such, earned media’s return on investment is high. Chief marketing officers are beginning to recognize this dynamic and
the value of earned media, which is driving a shift of paid media dollars into the earned channel, according to Outsell Inc.
Proactive management of earned media has
increased in importance following the recent rise of consumers’ suspicions of “fake news.” Brands have responded
to this challenge by proactively publishing factual content around key issues to manage their brand and reputation where possible.
Press releases are considered an appropriate outlet for this purpose and have long been viewed by journalists and other earned
media sources as a preferred source of reliable information.
Preference for Platforms over Point Solutions
A comprehensive and integrated PR platform
is becoming increasingly critical as the proliferation of new media channels drives complexity in the execution of successful PR
and marketing campaigns. PR, communications and marketing professionals increasingly value and prefer the ease of having the entire
solution set — monitoring, analyzing, identifying and distributing — on a single, integrated platform.
Large Addressable Market
The global communications intelligence
software and services market is approximately $3 billion in annual spend, and has grown at a 6% compound annual growth rate since
2012, according to Burton-Taylor International Consulting LLC. This market comprises spend on press release distribution, media
and social media monitoring, measurement and engagement, and targeting. Key drivers of steady growth in recent years include GDP
and advertising expenditure growth, proliferation of advanced social media tools and an increasing focus on transparency and information
disclosure.
As the needs of PR and marketing professionals
converge, with the mutual desire for measurement and attribution, we believe the PR and communications software market is beginning
to converge with the marketing software market, which IDC estimates will reach $32 billion by 2018. Beyond marketing software,
the broader digital marketing market is expected to reach $195 billion by 2020 according to Statista.
Competitive Strengths
Our competitive strengths include:
Comprehensive and Fully Integrated Cloud-Based Platform
C3 offers the
communications professional a “one-stop shop” for virtually all the tools they need to conceive, execute, monitor
and analyze an earned media campaign. We believe that offering a comprehensive cloud-based platform with multiple integrated
functionalities is what communications professionals require and prefer over the alternative of using several individual
point solutions that are not interconnected, lack consistency and require interactions with and payments to several external
software providers. The effectiveness and appeal of integrated platforms over point solutions has been demonstrated in the
broader marketing realm with the creation and growth of cloud-based platforms such as the Adobe Marketing Cloud, the Oracle
Marketing Cloud and the Salesforce Marketing Cloud.
An Industry Standard for PR Professionals
We believe our PR software is known as
a go-to global SaaS platform for communications professionals and is deeply embedded in industry workflow. For individuals working
in the PR sector, fluency with our platform is viewed by many as a key skill.
Global Product Reach
Our offering has wide geographic reach
within all our vertical markets. We believe that being able to deal with only one provider to deliver earned media solutions across
the globe is a key differentiator that has value to clients, in particular large multi-national corporations that manage PR and
communications efforts globally.
Proprietary Content and Solutions
Our platform incorporates the largest media
database and largest distribution network in the world, as measured by revenue estimates from Burton-Taylor International Consulting
LLC. With our proprietary database of approximately 1.6 million contacts for journalists, bloggers and social influencers, including
contact information, in-depth profiles, preferences and detailed pitching tips, clients can build smarter media lists to connect
with the appropriate influencers and build meaningful relationships. Through our distribution network, customers can conduct both
wide-reaching and targeted campaigns across traditional and digital media in more than 170 countries in over 40 languages.
Ease of Use and Workflow Capabilities
Our products are designed with easy-to-use
functionality, built-in workflow capabilities, a high degree of flexibility in outputs and a sleek and intuitive user interface
to help the communications professional execute their work in the best way possible.
Experienced Management Team with a Proven Track Record
We have a strong, highly experienced management
team. CEO Kevin Akeroyd has more than 25 years of experience reshaping modern digital, social and mobile marketing. In his previous
role, he was an integral member of the team that built the marketing cloud business unit at Oracle from a nascent stage into one
of the largest marketing and advertising technology providers in the industry. Our CFO, Jack Pearlstein, has 20 years of financial,
operational and strategic planning experience with technology companies.
Growth Strategy
We intend to continue to drive growth and
enhance its market position through the following key strategies:
Acquire New Customers
We believe there is still a substantial
opportunity to increase market penetration globally by selling our platform advantage. Most vendors in the market offer point solutions
that address one or two functions in a PR campaign, resulting in the need for multiple vendors. We believe chief marketing officers
prefer integrated platforms over individual solutions. The launch of C3 in October 2016 provided the market with a comprehensive
platform that integrates all the core capabilities needed for a PR software campaign, establishing us as a reference platform for
the PR software market.
Continue to Develop Innovative Products and Features
We understand the importance of offering
an easy-to-use product with extensive features that meet and exceed our customers’ needs. Our product team is constantly
working to introduce new features that augment our existing platform. For example, in 2016 we expanded our media database capabilities,
providing our customers with insights into the audience demographics of each individual influencer and providing tailored influencer
recommendations for each of our customers. Our account management and customer service representatives continuously communicate
the needs of our customers to the product team, providing for continuous platform improvement.
Our new product innovation pipeline aims
to introduce new products to market that improve the way PR and marketing professionals do business. We plan to leverage our new
platform, C3, which provides a fully integrated set of PR capabilities under one umbrella by adding data attribution capabilities.
We believe that our measurement and attribution capabilities, which we added to our products in the first quarter of 2018, will
enable customers to track end-user reach, demographics, engagement and purchase conversion data from their earned media campaigns,
allowing customers to measure return on investment. Subject to the strictest adherence to privacy concerns, we plan to sell the
highly valuable and anonymized consumer and influencer data we compile to brands and media networks that may use the data to improve
audience targeting and increase advertising effectiveness.
Increase Revenue from Existing Customers
We believe a significant opportunity exists
to increase spending by our more than 75,000 existing customers by expanding product and service offerings sold. Because we have
grown through many acquisitions and because a comprehensive platform did not previously exist in the PR software market, many of
our customers use various PR point solutions, including solutions provided by competitors. For example, as of December 31, 2017,
we had approximately 16,000 U.S. customers that we inherited with the acquisition of PR Newswire and had approximately 13,000 other
existing U.S. customers. We estimate that approximately 3,200 of these customers overlapped. By providing the first comprehensive
platform for executing and analyzing earned media campaigns, we are well positioned to increase product penetration among existing
customers by encouraging them to bundle various point solutions under one umbrella. In some markets, we have not yet introduced
our full range of products, but we believe we have the capability to roll out our entire product suite in each of these markets.
We believe this roll out will increase average customer spend through increased product penetration and attract new customers through
a broader product set. Additionally, our sales team has historically been successful in selling higher tiered product or service
offerings to existing clients and will have more opportunities to increase product penetration as our product team continues to
add products and features to our platform.
Expand into New Geographies and Market Segments
We have an expansive global reach, spanning
many major international markets around the globe, including but not limited to, North America, China, EMEA, India, and Latin America.
In many international markets, our presence is currently limited. We view these markets as opportunities for geographic expansion,
especially Latin America, Asia and Continental Europe.
We aim to establish the earned media cloud
as the third marketing software category, alongside paid and owned media, by providing valuable demographic, psychographic, sociographic
and attribution end-user data to our customers and by selling the data to brands and media networks. We believe that our development
of data attribution and data monetization products will enable us to enter the marketing software market. If we are able to establish
ourselves in that market, we could then enter the broader digital marketing market through platform extensions into adjacent earned
media categories. These categories include ratings and reviews, employee amplification, influencer performance and content marketing.
We plan to opportunistically employ both organic initiatives and acquisitions to expand into the digital marketing market.
Selectively Pursue Strategic Acquisitions
We have successfully sourced and
are completing the integration of several strategic acquisitions in the last three years. These acquisitions have
strengthened our market position and enabled us to provide a comprehensive PR communications product suite with a scaled,
efficient cost-structure. Our management actively evaluates additional acquisition opportunities to enhance our position in
the global PR software market by expanding its market reach, geographic presence and product capabilities.
Products and Services
C3, our cloud-based software platform,
delivers critical functionality across the entire earned media lifecycle. We believe that C3 is the first software solution that
allows communications professionals to plan, execute and analyze PR campaigns in a fully integrated fashion. Given the recent launch
of C3, the majority of our revenue today comes from customers who purchase only a subset of the capabilities we currently offer.
As C3 continues to expand its capabilities and these customers are migrated onto the C3 platform, we will attempt to upsell additional
capabilities. For example, a customer who previously used our prior monitoring technology to plan campaigns and monitor campaign
results will now be a candidate to purchase press release distribution services, a capability that we obtained in 2016 through
the PR Newswire acquisition. Customers who purchase the press release distribution service within C3 will have improved ability
to measure the return on investment of specific campaign activities compared to customers who use other press release distribution
services that cannot be accessed within the C3 platform.
For the year ended December 31, 2017,
approximately 83% of our revenue was subscription-based or recurring, with only 17% being transactional. Recurring and
transactional revenue is largely related to our press release distribution services – a capability that we enhanced
with the acquisition of PR Newswire in June 2016 – and we are integrating into our broader platform. These
services are increasingly sold on a subscription basis as part of C3.
Media Database
Discovering and maintaining relationships
with relevant journalists and other influencers that communicate an organization’s message to the public are critical to
any earned media strategy. We offer the largest database in the world, based on database revenue estimates from Burton-Taylor International
Consulting LLC, with contacts for approximately 1.6 million journalists and other influencers across 200 countries, including over
300,000 digital influencers. The database is updated more than 20,000 times daily to provide the most accurate and timely information
to PR and communications professionals.
Our media database is integrated with CRM
tools and content generation and distribution features to give PR and communications professionals access to relevant influencers
when planning a campaign as well as to schedule and record all interactions with contacts. Access to the database is offered both
on a regional and on a global basis.
Media Distribution
The distribution strategy of
an earned media campaign determines how a company delivers consistent and well-executed communications to influencers across
the media spectrum. In a multi-channel, data-driven environment, press releases and other content can be distributed to
a significantly larger audience, increasing the importance of a broad and reliable distribution network. Our
distribution product allows earned media professionals to execute campaigns and distribute corporate news, events
information, content and multimedia through press releases, web and email. Compared to free, high volume channels such as
social media and corporate newsrooms, we believe our distribution platform is an important way for brands to signal the
relative importance of a message. This signaling mechanism is often the difference between a message becoming part of the
“noise” or ending up in the hands of a key influencer. Brands compete for influencer attention with several
thousand stories that are transmitted over the major distribution networks in a day, which compares favorably to competing
with 500 million tweets per day on Twitter.
We believe we have the largest global distribution
network of its kind in the world, based on distribution revenue estimates from Burton-Taylor International Consulting LLC. Our
network reaches traditional and digital media in more than 170 countries in over 40 languages, including major media organizations,
over 10,000 syndicated websites and over 900,000 contacts such as journalists, bloggers and social influencers. Our products enable
communications professionals to distribute press releases and other content such as photos, videos, infographics, financial information
and articles through web, wire and email. In addition, we offer around-the-clock editorial support for clients.
Our premium distribution product is PR
Newswire. For more than 60 years, the PR Newswire offering has represented an industry standard for high-impact dissemination of
critical news, financial releases and other content and has customers spanning Fortune 2000 multinationals, small and medium businesses,
public relations agencies and government entities. Our premium PR Newswire offering is provided to customers globally, with international
operations supporting these customers in Canada, Europe, the Middle East, Asia and Latin America. Additional premium offerings
include a comprehensive suite of products and services for Investor Relations professionals, including distribution for earnings
and other material news, webcasts and conference calls, IR website hosting, and virtual investor conferences.
We offer alternative distribution products,
such as iReach, WebMax, and PRWeb to clients who seek a more economical option. These distribution products generally provide customers
the ability to distribute shorter releases across a smaller network with web-focused delivery and search engine discovery.
We provide multimedia content and broadcast distribution services
to customers under our MultiVu offering. These services include creative expertise and video production to help companies enhance
their communications through webcasts and broadcasts. We also provide hosted, white-label web pages integrated into a customer’s
website and managed on behalf of investor relations and public relations departments.
We provide marketing professionals with a software application
that can be used to create, publish and distribute professional-quality e-mails. Under our iContact offering, we provide this cloud-based
e-mail and social marketing software application that integrates with social media platforms and Salesforce’s Sales Cloud.
Media Monitoring
We enable PR and communications professionals
to track the media coverage of their companies and brands, assess the impact of strategic initiatives and discover how influencers
portray their content and gauge overall brand sentiment. Our products allow clients to monitor all forms of media, including global
print, digital, social media, television and radio sources, and store articles, content and corporate news. Our media monitoring
software tracks and monitors content on over 200,000 digital, print, social and broadcast sources in over 150 countries. We deliver
over 2 million stories to our customers every day. Additionally, through the acquisition of Bulletin Intelligence, we have expanded
our capability to provide expert-curated executive briefings to the Executive Office of the President and corporate C-Suite executives.
With the additional acquisition of Argus, we expect to provide our existing global customer base with enhanced access to French
media content, helping them understand and quantify the impact of their communications and media coverage in France. We also offer
tools to filter and automatically update relevant news sources and content to make monitoring an efficient aspect of customers’
overall PR strategies. The graphics below are examples of monitoring insights we provide to customers from their PR campaigns.
Media Analysis
We provide functionality that enables our
customers to assess media coverage by collecting and analyzing data and metrics configured to meet the needs of the client. Metrics
on audience engagement, campaign reach and effectiveness, sentiment and competitive benchmarking allow PR and communications professionals
to quantify campaign results of earned media strategies. Analysis also provides data-driven insights that inform the creation of
future campaigns and marketing investment.
Our media analysis capabilities also include
a robust technology-enabled service aimed at Global 2000 companies with complex PR strategies, as well as an automated self-serve
module that can be configured by customers for high-level reporting needs. The charts below are examples of analysis insights we
provide to customers from their PR campaigns.
Customers
As of December 31, 2017, we had a large
and highly diversified customer base of more than 75,000 customers, spanning the Americas, Europe and Asia. Customers range from
small businesses to large enterprises across a wide range of industries and also include a large number of PR agencies. Annual
spend for these customers can range from hundreds of dollars for small businesses to several million for the largest customers.
Our customer base includes 92 of the world’s
100 most valuable brands, according to Forbes.com, 97 of the top 100 PR companies in the U.S. and 72 of the top 80 PR companies
in the UK, as listed in the Holmes Report 2017.
Select customers include McDonald’s,
Samsung, Edelman, Coca Cola, Google, and Nike. Our top 25 customers account for only 4% of 2017 revenues, on a pro forma basis
assuming a full year of Bulletin Intelligence, Argus and CEDROM revenues.
Technology Infrastructure
Technology is key to our Communications
Cloud strategy of creating a unique competitive advantage by offering what we believe to be the only globally accessible end-to-end
PR workflow solution in the market. Our PR software platforms are built upon a highly scalable and flexible component or multi-tenant
based infrastructures in a hybrid cloud environment, allowing us to provide a cost effective and secure offering. The platforms
leverage proven delivery technologies along with leading big data and analytic offerings to create a competitive advantage. Our
online infrastructure is geographically distributed across multiple public and private cloud locations to facilitate both resilience
and performance.
We have an experienced and highly skilled
technology team managing product development and IT operations. We utilize a modified agile development approach with a standard
2-week cadence but can accelerate or extend deployment time-frames as needed. This agile approach to development is partnered with
an IT Infrastructure Library focused “DevOps” based approach to ensure that there are appropriate controls and a
heightened focus on the customer experience.
We maintain a focus on continual improvement
from both an IT performance and security perspective. For our critical systems and platforms, we have implemented initiatives and
procedures that include:
|
•
|
A technology risk framework that enables us to identify opportunities for improvement, emerging patterns, and other concerns
so they can be understood, addressed and periodically re-reviewed.
|
|
•
|
A multi-pronged approach to security that includes awareness education, asset and data identification, protection, detection,
response and remediation.
|
|
•
|
An architectural approach that puts security in the forefront for all new development initiatives to improve efficacy and reduce
our longer-term security costs.
|
We intend to extend these approaches to
our other systems, platforms and acquisitions as appropriate.
Over the past two years, we have initiated
several consolidation and integration initiatives aimed at simplifying and modernizing our critical infrastructures to increase
flexibility, improve margins and further improve the customer experience. These initiatives include data center consolidations,
infrastructure upgrades, management information software system enhancements and the deployment of enhanced global operating models
across our operations.
Sales & Marketing
We operate direct sales organizations throughout
the United States and within each of its international markets. As of December 31, 2017, we had approximately 750 direct sales
professionals. In the U.S., we divide our direct sales professionals into two distinct go-to-market teams: new business teams and
account management (renewal) teams. Within each of the two go-to-market teams, U.S. direct sales professionals are further segmented
into groups based upon customer size, including an enterprise group for large customers and agencies, a midmarket group for medium
size customers and a small business group for small customers. Our U.S. new business sales teams source and develop new customer
relationships. Our U.S. account management sales teams focus on maintaining customer relationships, increasing product penetration
and ensuring contract renewals. In the United Kingdom and in several other larger international markets, our direct sales structure
is similar to that in the United States. In our smaller international markets, there are sometimes unified direct sales structures
without clear distinction between new business teams and account management teams.
Our marketing team focuses on
attracting, acquiring and retaining customers through digital demand campaigns, brand building and showcases of customer
success. With persona-based content aimed at communications professionals, the team delivers cross-channel campaigns that
span paid search, email, web and customer events. Supporting our global sales team, marketing also develops messaging,
product positioning, and tools to communicate the business value of our solutions. To establish the Communications Cloud
category, marketing develops insightful thought leadership for our executives to disseminate through content marketing and
keynote presentations. As of December 31, 2017, we had approximately 80 marketing professionals globally.
Competition
The communications software market is highly
fragmented, highly competitive and rapidly evolving. Whereas we believe that our product suite provides a global end-to-end solution,
other industry participants generally operate in select geographic regions or particular verticals including media monitoring and
analysis or distribution. In media monitoring and analysis, industry participants include Meltwater, Kantar Media, Trendkite and
iSentia. In distribution, industry participants include Business Wire, Nasdaq and The London Stock Exchange through its RNS service.
Key factors which impact competition in
our industry include:
|
•
|
Product features, effectiveness and reliability;
|
|
•
|
User interface and ease of use;
|
|
•
|
Media database breadth and quality;
|
|
•
|
Expertise of sales and after-market support organizations;
|
|
•
|
Measurement and attribution capabilities;
|
|
•
|
Breadth and depth of the distribution network;
|
|
•
|
Pace of innovation and product roadmap;
|
|
•
|
Strength of professional services organization;
|
|
•
|
Price of products and services; and
|
|
•
|
Scale and financial stability of the organization.
|
Employees and Culture
Building and maintaining a strong corporate
culture benefits both our customers and our employees and serves as the foundation for the successful execution of our strategy.
As a result, our corporate culture is critical for its growth strategy.
As of December 31, 2017, we had approximately
3,500 global employees, with approximately 1,400 employees located in the U.S. and approximately 2,100 employees located internationally.
We also engage temporary employees and consultants. None of our employees in the United States are members of a union; however,
approximately 500 of our foreign employees are currently subject to collective bargaining agreements and/or are members of local
work councils. We consider relations with our employees to be very good.
Intellectual Property
We rely on a combination of patent, trademark,
copyright and trade secret laws in the United States and other jurisdictions as well as confidentiality procedures and contractual
provisions to protect our proprietary technology and our brand. We have registered, and applied for the registration of, U.S. and
international trademarks, service marks and domain names. Additionally, we have filed U.S. patent applications covering certain
of our proprietary technology and own several issued patents. We also control access to software, documentation and other proprietary
information and enter into confidentiality and proprietary rights agreements with substantially all of our employees, consultants
and other third parties, pursuant to which such employees, consultants and other parties assign to us the intellectual property
rights that they develop and agree to keep confidential our confidential and proprietary information.
We currently license content included in
our cloud-based software from several providers pursuant to data reseller, data distribution and license agreements with these
providers. These agreements provide us with content such as news coverage from print and Internet news sites, as well as contact
information for journalists, analysts, public officials, media outlets and publicity opportunities. The licenses for this content
are non-exclusive. The agreements vary in length, and generally renew automatically subject to certain cancellation provisions
available to the parties. We do not believe that any of our content providers are single source suppliers, the loss of whom would
substantially affect our business.
Our business involves the supply of copyrighted
works of third-parties, including publishers and broadcasters, which necessitates working closely with these copyright owners on
clients’ behalf. Delivering content to clients typically requires copyright fees to be paid to copyright owners. We are typically
able to pass these copyright fees directly through to clients.
We also contract with content providers
for the rights to access and distribute paywalled or subscription-only content. As paywalled content becomes increasingly prevalent
on publisher websites, we expect to continue negotiating access rights with key content providers.
If a claim is asserted that we have
infringed the intellectual property rights of a third-party, we may be required to seek licenses to that technology. In
addition, we license third-party technologies that are incorporated into some elements of our services. Licenses from third
parties may not continue to be available to us at a reasonable cost, or at all. Additionally, the steps we have taken to
protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our intellectual
property rights or proprietary technology. Competitors may also independently develop technologies that are substantially
equivalent or superior to the technologies we employ in our services.
Cyclicality
Demand for our products and services fluctuates
from month to month, with periods of greater demand corresponding to earnings release cycles of public companies and periods of
lower demand corresponding to periods in which activity in the financial markets is reduced, such as during months with fewer business
days and months with more holidays, due to the transactional component of our distribution business.
Executive Officers
The following chart sets forth certain
information regarding our executive officers as of February 1, 2018:
Name
|
|
Age
|
|
Position
|
Kevin Akeroyd
|
|
49
|
|
President, Chief Executive Officer and Director
|
Jack Pearlstein
|
|
54
|
|
Executive Vice President and Chief Financial Officer
|
Whitney Benner
|
|
44
|
|
Chief Human Resources Officer
|
Yujie Chen
|
|
47
|
|
President, Asia-Pacific
|
Robert Coppola
|
|
47
|
|
Chief Information Officer
|
Jason Edelboim
|
|
41
|
|
President, Americas
|
Chris Lynch
|
|
34
|
|
Chief Marketing Officer
|
Rainer Mathes
|
|
63
|
|
President, Cision Insights
|
Michael Piispanen
|
|
51
|
|
Chief Process and Operations Officer
|
Abe Smith
|
|
48
|
|
President, EMEA
|
Steve Solomon
|
|
54
|
|
Chief Accounting Officer
|
Kevin Akeroyd
. Mr. Akeroyd
has served as our Chief Executive Officer and President since August 2016. Mr. Akeroyd has over 25 years of experience in digital,
social and mobile marketing globally. Previously, Mr. Akeroyd was General Manager and Senior Vice President at Oracle Marketing
Cloud from September 2013 to August 2016. Mr. Akeroyd and Oracle created and led the Enterprise Marketing Platform category. Prior
to Oracle, he held senior leadership positions at Badgeville from September 2011 to September 2013, Salesforce.com (Jigsaw/Data.com)
from September 2007 to August 2011. Mr. Akeroyd holds a degree from the University of Washington, Michael G. Foster School of Business
and attended the EPSO program at the Stanford University Graduate School of Business.
Jack Pearlstein
. Mr. Pearlstein
has served as our Chief Financial Officer since June 2014. Previously, from June 2009 to November 2013, he was Chief Financial
Officer of Six3 Systems, Inc., a leading provider of software development, sensor development and signal processing services to
the U.S. intelligence community. As a Chief Financial Officer, Mr. Pearlstein has led three different companies through their initial
public offerings: AppNet from May 1999 to September 2000, DigitalNet from September 2001 to November 2004 and Solera from April
2006 to March 2009. Mr. Pearlstein is a CPA and received his Bachelor of Science in accounting from New York University. He also
holds an MBA in finance from The George Washington University.
Whitney Benner
.
Ms.
Benner has served as our Chief Human Resources Officer since June 2016. Ms. Benner is responsible for developing and executing
human resources strategy in support of the overall business plan and strategic direction of the organization, specifically in the
areas of succession planning, talent management, change management, organizational and performance management, training and development,
and compensation. From June 2013 to June 2016, she was Senior Vice President of Human Resources for PR Newswire, where she set
and implemented human resource strategy in support of the company’s overall business objectives. Before Ms. Benner joined
PR Newswire, she held human resources leadership roles at Medialink and MJI Broadcasting. Ms. Benner holds a Bachelor’s degree
from Skidmore College.
Yujie Chen
. Mr. Chen has
served as our Asia Pacific President since June 2016. Mr. Chen joined PR Newswire in November 2003 and was promoted from Managing
Director (China) to head PR Newswire’s business for the entire Asia-Pacific region in June 2013. Prior to PR Newswire, Mr.
Chen worked in a number of media and publishing industry roles, including with CNBC Asia from June 2003 to November 2003, Deluxe
Global Media from September 2001 to June 2003 and Beijing Television from February 1996 to August 1999. Chen holds an MBA degree
from the Anderson School of Management at UCLA.
Robert Coppola
. Mr. Coppola
has served as our Chief Information Officer since July 2016. Mr. Coppola spent four years from June 2011 to September 2015 with
McGraw-Hill Financial as the Chief Information and Technology Officer for S&P Capital IQ and S&P Dow Jones Indices, a leading
provider of ratings, benchmarking and analytics in the global capital and commodity markets. There, he was responsible for driving
the overarching technology strategy, architecture and development in addition to evolving multiple silo-based teams into one global
operating team. He has also held leadership positions with Thomson Reuters from November 2003 to June 2011 and Bloomberg LP from
September 1992 to November 2003. Mr. Coppola holds a Bachelor’s in Economics from Rutgers University.
Jason Edelboim
. Mr. Edelboim
has served as our President of the Americas since December 2016. Mr. Edelboim was named President of PR Newswire in June 2016,
and prior to that was a Senior Vice President at PR Newswire from June 2013 to June 2016. Mr. Edelboim has over 15 years of experience
at the intersection of media and technology. He previously worked at Bloomberg LP from 2003 to 2009 where he held progressing leadership
roles within the company’s Media Group. Mr. Edelboim holds an MBA from the Stern School of Business at New York University
and a BA from Columbia University.
Chris Lynch
. Mr. Lynch has
served as our Chief Marketing Officer since November 2016. Mr. Lynch is responsible for our global marketing strategy,
which includes communications, product and digital marketing. From January 2014 to October 2016, he ran product marketing and go-to-market
strategy for Oracle’s Marketing Cloud business and also held leadership positions at Badgeville from February 2012 to January
2014 and TIBCO from June 2011 to January 2012. Mr. Lynch attended Northeastern University where he received his Bachelor of Arts
in Journalism.
Rainer
Mathes
. Dr. Mathes has served as President of Cision Insights since January 2018. Cision Insights is dedicated to evaluating
companywide campaign effectiveness through customized intelligence, reporting and industry expertise. Dr. Mathes founded PRIME
Research in 1988 while holding research positions at the Institute of Media Studies at the University of Mainz and later at the
Research Center for Surveys and Methodology in Mannheim. Dr. Mathes developed Prime into a global research organization with locations
in Europe, the United States and Asia.
Dr. Mathes was educated at the University of Mainz where he first
finished his M.A. in Political Science, Communication Science and Linguistics in 1980 before achieving his Ph. D. in Political
Science in 1986 and receiving the ‘Johannes Gutenberg Award’ in the same year.
Michael Piispanen
.
Mr.
Piispanen has served as our Chief Process and Operations Officer since March 2017. Mr. Piispanen leads the development, enhancement
and optimization of business operations, program and project management, business process engineering and merger and acquisition
activities. He also oversees business units across geographies to ensure the delivery of operational excellence and best-in-class
execution to our global client base. Mr. Piispanen brings nearly 30 years of experience across consumer, software, FinTech, and
pharmaceutical industries. Over the last 15 years, he served in a number of roles within Nasdaq’s Corporate Solutions business.
Mr. Piispanen holds an MBA from the F.W. Olin Graduate School of Business at Babson and a BS in Engineering from Worcester Polytechnic
Institute.
Abe Smith
. Mr. Smith has
served as our President of EMEA since September 2017. Mr. Smith has spent the past 17 years with U.S.-based high growth, enterprise
SaaS companies focusing on market transformation. Previously, Mr. Smith was Group Vice President of Emerging Markets for Oracle
from June 2014 to August 2017. Prior to Oracle, Mr. Smith held senior leadership roles at Badgeville from September 2012 to May
2014 and Mindjet from June 2009 to August 2012. Additionally, from January 2007 to June 2009, Mr. Smith led the Emerging Markets
for Cisco in the Unified Communications and Collaboration Group (WebEx). Mr. Smith graduated summa cum laude from the University
of Massachusetts Amherst with a Bachelor’s degree in Political Science.
Steve Solomon
. Mr. Solomon
has served as our Chief Accounting Officer since June 2014. From June 2009 to June 2014, he was Corporate Controller of Six3 Systems,
Inc., a leading provider of software development, sensor development and signal processing services to the US intelligence community.
As a Corporate Controller, Mr. Solomon was at DigitalNet from October 2001 to January 2005 and helped the company through their
initial public offering. Mr. Solomon is a CPA and received his Bachelor of Science in accounting from the University of Maryland.
An investment in our securities involves
a high degree of risk. Investors should carefully consider the risks described below before making an investment decision. Our
business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not
currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of
these risks, and, as a result, investors may lose all or part of their investment. As used in the risks described in this subsection,
references to “we,” “us” and “our” are intended to refer to Cision unless the context clearly
indicates otherwise.
Risks related to our business
Our industry is highly competitive.
We face intense competition from numerous
large and small businesses. This competition includes both product and price competition. Increased competition may result in a
decline in our market share thereby adversely affecting our operating results. The markets in which we operate are fragmented,
competitive and rapidly evolving, and there are limited barriers to entry to certain segments of those markets. We expect the intensity
of competition to increase in the future as existing competitors develop their capabilities and as new companies enter our markets.
If we are unable to compete effectively, it will be difficult for us to maintain our market share and pricing rates and add and
retain customers, and our business, financial condition and results of operations will be seriously harmed.
Increased competition could result in pricing
pressure, reduced sales or lower margins. We face intense price competition in all areas of our business. In particular, the cloud-based
PR services business, the media intelligence business and the media distribution business are characterized by intense price competition.
Our profit margin, and therefore our profitability, is dependent on the rates we are able to charge for our services. We have in
the past lowered prices, and may need to do so in the future, to attempt to gain or maintain market share. These strategies have
not always been successful and have at times hurt operating performance. Additionally, we have also been, and may once again be,
required to adjust pricing to respond to actions by competitors, which could adversely impact operating results. The rates we are
able to charge for our services are affected by a number of factors, including competition, volume fluctuations, productivity of
employees and processes, the value our customers derive from our services and general economic and political conditions. We are
also subject to potential price competition from new competitors and from existing competitors. If we are unable to compete successfully
in respect to the pricing of our services and products, our business, financial condition and operating results may be adversely
affected.
Our competitors may be able to respond
more quickly than we can to new or changing opportunities, technologies, standards or customer requirements or devote greater resources
to the promotion and sale of their products and services than we can. To the extent our competitors have an existing relationship
with a potential customer, that customer may be unwilling to switch vendors due to existing time and financial commitments with
our competitors.
We also expect that new competitors will
enter the cloud-based PR services and distribution market with competing products. Many of these potential competitors have established
or may establish business, financial or strategic relationships among themselves or with existing or potential customers, alliance
partners or other third parties or may combine and consolidate to become more formidable competitors with better resources. It
is possible that these new competitors could rapidly acquire significant market share.
If we are unable to compete successfully
in this environment, our business, financial condition and operating results will be adversely affected.
Economic conditions and market factors, which are beyond our control, may adversely affect our business and financial condition.
Our business performance is impacted by
a number of factors, including economic and market volatility, changes in PR and marketing spending patterns, budgets and priorities,
general economic conditions in North America, Latin America, Europe, the Middle East and Asia, and other factors that are generally
beyond our control. To the extent that global or national economic conditions weaken, our business is likely to be negatively impacted.
Adverse market conditions could reduce customer demand for our services and the ability of our customers, suppliers and other counterparties
to meet their obligations to us. A reduction in customer demand for our products and services due to economic conditions or other
market factors could adversely affect our business, financial condition and operating results.
System limitations or failures could harm our business.
Our businesses depend on the integrity
and performance of the technology, computer, cloud and communications systems supporting them. We manage our services and serve
our customers from a limited number of data center facilities and/or cloud computing services facilities located within the United
States and abroad. If the systems on which we depend cannot expand to cope with increased demand or otherwise fail to perform,
we could experience unanticipated disruptions in service, slower response times and delays in the introduction of new products
and services. These systems may be vulnerable to damage or service interruption resulting from human error, intentional bad acts,
cybersecurity attacks, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems
failures, telecommunications failures and similar events. Given our position in the global PR and media intelligence industry,
we may be more likely than other companies to be a direct target, or an indirect casualty, of such events.
These consequences could result in service
outages, financial losses, decreased customer service and satisfaction and regulatory sanctions. The solutions we provide are susceptible
to telecommunication system failures, data corruption or virus attacks, and they have experienced systems failures and delays in
the past and could experience future systems failures and delays. We have, for example, experienced temporary system outages and
service degradation related to telecommunication, cloud computing and network provider interruptions, denial-of-service attacks
and equipment failures. Although we currently maintain and expect to maintain multiple computer facilities that are designed to
provide redundancy and back-up to reduce the risk of system disruptions and have facilities in place that are expected to maintain
service during a system disruption, such systems and facilities may prove inadequate. If unanticipated events occur, we may need
to expand and upgrade our technology, transaction processing systems and network infrastructure. We do not know whether we will
be able to accurately project the rate, timing or cost of any increases, or expand and upgrade our systems and infrastructure to
accommodate any increases in a timely manner.
While we have programs in place to identify
and minimize our exposure to vulnerabilities and work in collaboration with the technology industry to share corrective measures
with our business partners, we cannot guarantee that such events will not occur in the future. Any system issue that causes an
interruption in services, decreases the responsiveness of our services or otherwise affects our services could impair our reputation,
damage our brand name, result in regulatory penalties and other liability, and negatively impact our business, financial condition
and operating results.
To the extent that any of our vendors or
other third-party service providers experience difficulties, materially change their business relationship with us or are unable
for any reason to perform their obligations, our business or our reputation may be materially adversely affected.
We must continue to introduce new products, initiatives and enhancements to maintain our competitive position.
The PR software and media intelligence
industries are characterized by rapidly changing technology, evolving industry and regulatory standards, new product and service
introductions, frequent enhancements to existing products and services, the emergence of competitors, the adoption of new services
and products and changing customer demands, needs and preferences. We must complete development of, successfully implement and
maintain platforms that have the functionality, performance, capacity, reliability and speed required by our business, as well
as by our customers. While we intend to launch new products and initiatives and continue to explore and pursue opportunities to
strengthen our business and grow our company, we may not be able to keep up with rapid technological and other competitive changes
affecting our industry. For example, we must continue to enhance our platforms to remain competitive, and our business will be
negatively affected if our platforms or the technology solutions we sell to our customers fail to function as expected. If we are
unable to develop our platforms to include other products and markets, or if our platforms do not have the required functionality,
performance, capacity, reliability and speed required by our customers, we may not be able to compete successfully. We may spend
substantial time and money developing new products and initiatives. If these products and initiatives are not successful, we may
not be able to offset their costs, which could have an adverse effect on our business, financial condition and operating results.
Further, our failure to anticipate or respond adequately to changes in technology and customer preferences or any significant delays
in product development efforts, could have a material adverse effect on our business, financial condition and operating results.
In our technology operations, we have invested
substantial amounts in the development of system platforms and in the rollout of our platforms. For the year ended December 31,
2017, we spent $22.1 million on research and development activities and $15.0 million in capitalized software development costs,
and such figures may increase in the future as we strive to develop new products and solutions for our customers. Although investments
are carefully planned, there can be no assurance that the demand for such platforms will justify the related investments and that
the future levels of transactions executed on these platforms will be sufficient to generate an acceptable return on such investments.
We also cannot guarantee that we will be able to compete effectively with new vendors, or that products, services or technologies
developed by others will not render our services non-competitive or obsolete. If we fail to generate adequate revenue from planned
system platforms or new products or services, or if we fail to do so within the envisioned timeframe, it could have an adverse
effect on our results of operations and financial condition. In addition, customers may delay purchases in anticipation of new
products or enhancements.
Our credit facilities contain restrictive covenants that may restrict our ability to take certain actions or capitalize
on business opportunities.
Our credit facilities contain operating
covenants and financial covenants that may limit management’s discretion with respect to certain business matters. Among
other things, these covenants will restrict our ability to incur additional debt, pay dividends, redeem stock, change the nature
of our business, sell or otherwise dispose of assets, make acquisitions or investments, and merge or consolidate with other entities.
As a result of these covenants and restrictions, we will be limited in how we conduct our business and we may be unable to raise
additional debt or other financing to compete effectively or to take advantage of new business opportunities. In addition, our
credit facilities contain covenants that require us to comply with a number of financial ratios, the breach of which could trigger
a default that could, in turn, trigger defaults under other debt obligations. The terms of any future indebtedness we may incur
could include more restrictive covenants. Failure to comply with such restrictive covenants may lead to default and acceleration
under our credit facilities and may impair our ability to conduct business. We may not be able to maintain compliance with these
covenants in the future and, if we fail to do so, we may be unable to obtain waivers from the lenders and/or amend the covenants.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity
and Capital Resources” for a description of our credit facilities.
We will need to invest in our operations to maintain and grow our business and to consummate and integrate acquisitions,
and we may need additional funds, which may not be readily available.
We depend on the availability of adequate
capital to maintain and develop our business. Although we believe that we can meet our current capital requirements from internally
generated funds, cash on hand and available borrowings under our revolving credit facility, we may finance future acquisitions
by issuing additional equity and/or debt, and if the capital and credit markets experience volatility, access to capital or credit
may not be available on terms acceptable to us or at all. Limited access to capital or credit in the future could have an impact
on our ability to refinance debt, maintain our credit rating, meet our regulatory capital requirements, engage in strategic initiatives,
make acquisitions or strategic investments in other companies or react to changing economic and business conditions. If we are
unable to fund our capital or credit requirements, it could have an adverse effect on our business, financial condition and operating
results.
In addition to our debt obligations, we
will need to continue to invest in our operations for the foreseeable future to integrate acquired businesses and to fund new initiatives.
If we do not achieve the expected operating results, we will need to reallocate our cash resources. This may include borrowing
additional funds to service debt payments, which may impair our ability to make investments in our business or to integrate acquired
businesses.
Should we need to raise funds by issuing
additional equity, our equity holders will suffer dilution. In addition, announcement or implementation of future transactions
by us or others could have a material effect on the price of our equity. Should we need to raise funds by incurring additional
debt, we may become subject to covenants even more restrictive than those contained in our credit facilities and our other debt
instruments. The issuance of additional debt could increase our leverage substantially. We could face financial risks associated
with incurring additional debt, particularly if the debt results in significant incremental leverage. Additional debt may reduce
our liquidity, curtail our access to financing markets, impact our standing with credit agencies and increase the cash flow required
for debt service. Any incremental debt incurred to finance an acquisition could also place significant constraints on the operation
of our business. Furthermore, if adverse economic conditions occur, we could experience decreased revenues from our operations
which could affect our ability to satisfy financial and other restrictive covenants to which we are subject under our existing
indebtedness.
We may not be able to successfully integrate acquired businesses, which may result in an inability to realize the anticipated
benefits of our acquisitions and anticipated cost savings.
We must rationalize, coordinate and integrate
the operations of our acquired businesses and other acquisitions we make in the future. This process involves complex technological,
operational and personnel-related challenges, which are time-consuming and expensive and may disrupt our business. The difficulties,
costs and delays that could be encountered may include:
|
•
|
difficulties, costs or complications in combining the companies’ operations, including technology platforms, which could
lead to us not achieving the synergies we anticipate or to customers not renewing their contracts with us as we integrate platforms;
|
|
•
|
inability to maintain uniform standards, controls, procedures and policies as we attempt to integrate the acquired businesses;
|
|
•
|
difficulty streamlining operations or eliminating redundancies, resulting in the failure to achieve expected cost savings;
|
|
•
|
incompatibility of systems and operating methods;
|
|
•
|
reliance on a deal partner for transition services, including billing services;
|
|
•
|
inability to use capital assets efficiently to develop the business of the combined company;
|
|
•
|
difficulties of complying with government-imposed regulations in the United States and abroad, which may be conflicting;
|
|
•
|
resolving possible inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures;
|
|
•
|
the diversion of management’s attention from ongoing business concerns and other strategic opportunities;
|
|
•
|
difficulties in operating acquired businesses in parallel with similar businesses that we operated previously;
|
|
•
|
difficulties in operating businesses we have not operated before;
|
|
•
|
difficulties of integrating multiple acquired businesses simultaneously;
|
|
•
|
the retention of key employees and management, including key management of the companies that we acquire;
|
|
•
|
the implementation of disclosure controls, internal controls and financial reporting systems at non-U.S. subsidiaries to enable
us to comply with generally accepted accounting principles in the United States (“U.S. GAAP”);
|
|
•
|
the coordination of geographically separate organizations;
|
|
•
|
the coordination and consolidation of ongoing and future research and development efforts;
|
|
•
|
possible tax costs or inefficiencies associated with integrating the operations of a combined company;
|
|
•
|
pre-tax restructuring and revenue investment costs;
|
|
•
|
the retention of strategic partners and attracting new strategic partners; and
|
|
•
|
negative impacts on employee morale and performance as a result of job changes, reassignments and reductions in force.
|
For these reasons, we may not achieve the
anticipated financial and strategic benefits from our acquisitions. Actual cost savings and synergies may be lower than we expect
and may take a longer time to achieve than we anticipate, and we may fail to realize the anticipated benefits of acquisitions.
A material breach in security relating to our information systems and regulation related to such breaches could adversely
affect us.
Information security risks have generally
increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, and the increased
sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some
of which may be linked to terrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity
threats to gain access to sensitive information about another company or to alter or disrupt news or information to be distributed
by PR Newswire. Cybersecurity attacks are becoming more sophisticated and include malicious software, ransomware, attempts to gain
unauthorized access to data and other electronic security breaches that could lead to disruptions in critical systems, unauthorized
release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person
who circumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our
operations. We incur significant costs to protect against security breaches, and may incur significant additional costs to alleviate
problems caused by any breaches. Our failure to prevent security breaches, or well-publicized security breaches affecting the Internet
in general, could significantly harm our reputation and business and financial results.
Certain laws and regulations regarding
data security affecting our customers impose requirements regarding the security of information maintained by these customers,
as well as notification to persons whose personal information is accessed by an unauthorized third party. Certain laws may also
require us to protect the security of our employees’ personal data. As a result of any continuing legislative initiatives
and customer demands, we may have to modify our operations with the goal of further improving data security. The cost of compliance
with these laws and regulations is high and is likely to increase in the future. Any such modifications may result in increased
expenses and operating complexity, and we may be unable to increase the rates we charge for our services sufficiently to offset
these increases. Any failure on our part to comply with these laws, regulations and standards can result in negative publicity
and diversion of management time and effort and may subject us to significant liabilities and other penalties.
If customer confidential information, including
material non-public information or personal data we maintain, is inappropriately disclosed due to an information security breach,
or if any person, including any of our employees, negligently disregards or intentionally breaches controls or procedures with
which we are responsible for complying with respect to such data or otherwise mismanages or misappropriates that data, we may have
substantial liabilities to our clients. Any incidents with respect to the handling of such information could subject us to litigation
or indemnification claims with our clients and other parties. In addition, any breach or alleged breach of our confidentiality
agreements with our clients may result in termination of their engagements, resulting in associated loss of revenue and increased
costs.
Our business relies on continued
access to content on similar terms.
Our business relies on continuous access
to content, which is increasingly generated digitally or via social media. If content providers interrupt continuous access, impose
onerous terms for accessing content, refuse to do business with us or move their content behind digital paywalls without providing
access to us, our future financial performance may be adversely affected. Such changes may have a material and adverse impact on
our revenue, business, financial condition, operations and could have an adverse effect on our future financial performance or
position. We rely on third parties to license their technology and provide or make available certain data and other content for
our information databases, our news monitoring service and our social media monitoring service.
Losing access to licensed technology and
content, such as broadcast content, news outlets and social media platforms, could result in delays in the provision of our services
until we develop, identify, license and integrate equivalent technology or content. These third parties may not renew agreements
to provide licenses to us, or may increase the price they charge for their licenses.
Additionally, the quality of the technology
content provided to us may not be acceptable to us and we may need to enter into agreements with additional third parties. Third-party
licenses may not continue to be available to us on commercially reasonable or competitive terms, if at all. Any interruption or
delay in the provision of our services could adversely affect our financial performance and ability to grow revenue, damage our
business and adversely affect our results of operations by forcing customers to seek out other suppliers that can provide access
to their desired licensed content. In the event we are unable to use such third-party technology or content or are unable to enter
into agreements with third parties, we may not be successful in maintaining relationships with key customers and current customers
may not renew their subscription agreements with us or continue purchasing solutions from us, and it may be difficult to acquire
new customers which may have a material and adverse impact on our revenue, business, and could have an adverse effect on our future
financial performance or position.
We rely on third parties to perform certain
functions, and our business could be adversely affected if these third parties fail to perform as expected. We rely on third parties
for regulatory, data center, data storage, data content, clearing and other services. To the extent that any of our vendors or
other third-party service providers experience difficulties, materially change their business relationship with us or is unable
for any reason to perform their obligations, our business, reputation or our financial results may be materially adversely affected.
Damage to our reputation or brand name could have a material adverse effect on our businesses.
One of our competitive strengths is our
strong reputation and brand name. We believe that developing and maintaining awareness of our brands and avoiding damage to our
reputation is critical to our business. Successful promotion of our brands will depend largely on our ability to provide reliable
and useful products and solutions. Various other issues may give rise to reputational risk, including issues relating to:
|
•
|
our ability to maintain the security of our data and systems;
|
|
•
|
the quality and reliability of our technology platforms and systems;
|
|
•
|
the ability to fulfill our regulatory obligations;
|
|
•
|
the ability to execute our business plan, key initiatives or new business ventures;
|
|
•
|
the ability to keep up with changing customer demand;
|
|
•
|
the representation of our business in the media;
|
|
•
|
the accuracy of our financial statements and other financial and statistical information;
|
|
•
|
the accuracy of our financial guidance or other information provided to our investors;
|
|
•
|
the quality of our corporate governance structure;
|
|
•
|
the quality of our products and services;
|
|
•
|
the quality of our disclosure controls or internal controls over financial reporting, including any failures in supervision;
|
|
•
|
extreme price volatility on our markets;
|
|
•
|
any negative publicity surrounding our customers; and
|
|
•
|
any misconduct, fraudulent activity or theft by our employees or other persons formerly or currently associated with us.
|
If we fail to successfully promote and
maintain our brands and protect our reputation, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain
our brands, we may fail to attract new customers or retain our existing customers to the extent necessary to realize a sufficient
return on our brand-building and brand-maintaining efforts, and our business could suffer.
We may be required to recognize impairments of our goodwill, intangible assets or other long-lived assets in the future.
In accordance with U.S. GAAP, we account
for the completion of our acquisitions using the acquisition method of accounting. We allocate the total estimated purchase prices
to net tangible assets, amortizable intangible assets and indefinite-lived intangible assets, and based on their fair values as
of the date of completion of the acquisitions, recording the excess of the purchase price over those fair values as goodwill. Our
financial results, including earnings per share, could be adversely affected by a number of financial adjustments required by U.S.
GAAP. For example, we may have additional depreciation expense as a result of recording acquired tangible assets at fair value
as compared to book value as recorded, or we may incur certain adjustments to reflect the financial condition and operating results
under U.S. GAAP and in U.S. dollars.
Our business acquisitions typically result
in the recording of goodwill and intangible assets, and the recorded values of those assets may become impaired in the future.
As of December 31, 2017, goodwill totaled $1,136.4 million and other intangible assets, net of accumulated amortization, totaled
$456.3 million. The determination of the value of such goodwill and intangible assets requires management to make estimates and
assumptions that affect our consolidated financial statements.
We assess goodwill and intangible assets,
as well as other long-lived assets, including equity and cost method investments, and property and equipment for impairment on
an annual basis or more frequently if indicators of impairment arise. We estimate the fair value of such assets by assessing many
factors, including historical performance, capital requirements and projected cash flows. Considerable management judgment is necessary
to project future cash flows and evaluate the impact of expected operating and macroeconomic changes on these cash flows. Although
the estimates and assumptions we use are consistent with our internal planning process, there are inherent uncertainties in these
estimates.
In addition, we may experience future events
that may result in asset impairments. Future disruptions to our business, prolonged economic weakness or significant declines in
operating results at any of our reporting units or businesses may result in impairment charges to goodwill, intangible assets or
other long-lived assets. A significant impairment charge in the future could have a material adverse effect on our operating results.
We may experience fluctuations in our operating results, which may adversely affect the market price of our ordinary shares.
We have experienced, and expect to continue
to experience, fluctuations in our quarterly revenues and results of operations. For example, we experience fluctuations in our
revenue and earnings as we integrate new acquisitions and based on the seasonal impact of corporate reporting. This and other factors
may contribute to fluctuations in our results of operations from quarter to quarter. A high percentage of our operating expenses,
particularly personnel and rent, are relatively fixed in advance of any particular quarter. As a result, unanticipated variations
in our operating results may cause us to run our operations inefficiently over a period of time, which could have an adverse effect
on our results of operations.
We are the subject of continuing litigation and governmental inquiries.
We are subject to various legal proceedings,
governmental inquiries and claims that arise in the ordinary course of business and otherwise.
Any claims asserted against us, regardless
of merit or eventual outcome, could harm our reputation and have an adverse impact on our reputation, brand and relationships with
our customers and other third parties and could lead to additional related claims. Certain claims may seek injunctive relief and
regulators, as part of settlements or otherwise, may seek to modify our products or services, which could disrupt the ordinary
conduct of our business and operations, reduce our revenues or increase our cost of doing business. Any response to any such litigation
or governmental investigation or claim may cause us to incur significant legal expenses. Substantial recovery against us or fines
or penalties could have a material adverse impact on us, and unfavorable rulings, findings or recoveries in the other proceedings
could have a material adverse impact on the operating results of the period in which the ruling or recovery occurs. See “Business
— Legal Proceedings.”
Insurance may be insufficient to cover our liabilities.
Although we maintain global general liability
insurance, including coverage for errors and omissions and employment practices, this coverage may be inadequate, or may not be
available in the future on acceptable terms, or at all. In addition, we cannot provide assurance that these policies will cover
any claim against us for loss of data or other indirect or consequential damages and defending a suit, regardless of its merit,
could be costly and divert management’s attention.
Failure to protect our intellectual property rights could harm our brand-building efforts and ability to compete effectively.
To protect our intellectual property rights,
we rely on a combination of trademark laws, copyright laws, patent laws, trade secret protection, confidentiality agreements and
other contractual arrangements with our employees, affiliates, clients, strategic partners and others. The protective steps that
we take may be inadequate to deter misappropriation of our proprietary information. Third parties may challenge, circumvent, infringe
or misappropriate our intellectual property, or such intellectual property may not be sufficient to permit us to take advantage
of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance
of service offerings or other competitive harm. For example, competitors may try to use brand names confusingly similar to ours
for similar services in order to benefit from our brand’s value. Others, including our competitors, may independently develop
similar technology, duplicate our services or design around our intellectual property and, in such cases, we could not assert our
intellectual property rights against such parties. Further, our contractual arrangements may not effectively prevent disclosure
of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our confidential information,
and we may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights.
We have registered, or applied to register,
our trademarks in the United States and in over 25 foreign jurisdictions. We also maintain copyright protection on our tangible
materials and pursue patent protection for software products, inventions and other processes developed by us. We also hold a number
of patents, patent applications and licenses in the United States and other foreign jurisdictions. Moreover, we cannot guarantee
that any of our pending patent applications will issue or be approved, and that our existing and future intellectual property rights
will be sufficiently broad to protect our technology and proprietary information or provide us with any competitive advantages.
The United States Patent and Trademark Office, or the USPTO, and various foreign governmental patent agencies require compliance
with a number of procedural, documentary, fee payment and other similar provisions during the patent application process and after
a patent has issued. There are situations in which noncompliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction. If this occurs, our competitors might be able
to enter the market, which would have a material adverse effect on our business. Effective trademark, copyright, patent and trade
secret protection may not be available in every country in which we offer our services. In addition, many countries limit the enforceability
of patents against third parties, including government agencies or government contractors. In these countries, patents may provide
limited or no benefit. Further, intellectual property law, including statutory and case law, particularly in the United States,
is constantly developing, and any changes in the law could make it harder for us to enforce our rights. Failure to protect our
intellectual property adequately could harm our brand and affect our ability to compete effectively. Further, we may not always
detect infringement of our intellectual property rights, and defending our intellectual property rights, even if successfully detected,
prosecuted, enjoined, or remedied, could result in the expenditure of significant financial and managerial resources. An adverse
determination of any litigation or defense proceedings could put our intellectual property at risk of being invalidated or interpreted
narrowly and could put our related pending patent applications at risk of not issuing. Furthermore, because of the substantial
amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential
or sensitive information could be compromised by disclosure in the event of litigation. In addition, during the course of litigation
there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities
analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common
stock.
Moreover, a significant portion of our
intellectual property has been acquired from one or more third parties. While we have conducted diligence with respect to such
acquisitions, because we did not participate in the development or prosecution of much of the acquired intellectual property, we
cannot guarantee that our diligence efforts identified and/or remedied all issues related to such intellectual property, including
potential ownership errors, potential errors during prosecution of such intellectual property, and potential encumbrances that
could limit our ability to enforce such intellectual property rights.
Third parties may assert intellectual property rights claims against us, which may be costly to defend, could require the
payment of damages and could limit our ability to use certain technologies, trademarks or other intellectual property.
We may be subject to costly litigation
if our services and technology are alleged to infringe upon or otherwise violate a third party’s proprietary rights. Third
parties may have, or may eventually be issued, patents that could be infringed by our products, services or technology. Because
patent applications can take years to issue and are often afforded confidentiality for some period of time there may currently
be pending applications, unknown to us, that later result in issued patents that could cover one or more of our products. Any of
these third parties could make a claim of infringement against us with respect to our products, services or technology. We may
also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments,
in connection with any such claim or litigation and to obtain licenses, modify applications or refund fees, which could be costly.
We have been and may also be in the future subject to claims by third parties for patent, copyright or trademark infringement,
breach of license or violation of other third-party intellectual property rights.
Any intellectual property claims, with
or without merit, could be expensive to litigate or settle and could divert management resources and attention. In a patent infringement
claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid or
both. The strength of our defenses will depend on the patents asserted, the interpretation of these patents, and our ability to
invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement and/or invalidity arguments in
our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a
patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent
owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. Successful challenges
against us could require us to modify or discontinue our use of technology or business processes where such use is found to infringe
or violate the rights of others, enter into costly settlement or license agreements, pay costly damage awards, face a temporary
or permanent injunction prohibiting us from marketing or selling certain of our products or services or purchase licenses from
third parties, any of which could adversely affect our business, financial condition and operating results. Additionally, in recent
years, individuals and groups have been purchasing intellectual property assets for the sole purpose of making claims of infringement
or other violations and attempting to extract settlements from companies like ours. Even if we have an agreement for indemnification
against costs associated with litigation, the indemnifying party, if any in such circumstances, may be unable to uphold its contractual
obligations. If we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from
another source, our revenue and earnings could be adversely impacted.
Moreover, our intellectual property acquired
from one or more third parties may have previously been the subject of one or more intellectual property infringement suits and/or
allegations. While we have conducted diligence with respect to such acquisitions, we cannot guarantee that our diligence efforts
identified and/or remedied all issues related to such intellectual property infringement suits and/or allegations. Moreover, we
cannot guarantee that we understand and/or have complied with all obligations related to the settlement of such intellectual property
suits and/or the resolution of such intellectual property allegations.
Future acquisitions, investments, partnerships and joint ventures may require significant resources and/or result in significant
unanticipated losses, costs or liabilities.
Over the past several years, acquisitions
have been significant factors in our growth. Although we cannot predict our rate of growth as the result of acquisitions with complete
accuracy, we believe that additional acquisitions and investments or entering into partnerships and joint ventures will be important
to our growth strategy. Such transactions may be material in size and scope. There can be no assurances that we will be able to
complete suitable acquisitions for a variety of reasons, including the identification of and competition for acquisition targets,
the need for regulatory approvals, the inability of the parties to agree to the structure or purchase price of the transaction,
competition from competitors interested in making similar acquisitions and our inability to finance the transaction on commercially
acceptable terms. Therefore, we cannot be sure that we will be able to complete future transactions on terms favorable to us.
Furthermore, any future acquisitions or
investments in businesses or facilities could entail a number of additional risks, including:
|
•
|
problems with effective integration of operations;
|
|
•
|
the inability to maintain key pre-acquisition business relationships;
|
|
•
|
increased operating costs;
|
|
•
|
the diversion of our management team from other operations;
|
|
•
|
problems with regulatory bodies;
|
|
•
|
declines in the value of investments;
|
|
•
|
exposure to unanticipated liabilities;
|
|
•
|
difficulties in realizing projected efficiencies, synergies and cost savings; and
|
|
•
|
changes in our credit rating and financing costs.
|
Changes in tax laws, regulations or policies, tax rates or tax assets and liabilities could have a material adverse effect
on our financial results.
As a global company, we, like other corporations,
are subject to taxes at the U.S. federal, state and local levels, as well as in non-U.S. jurisdictions. Significant judgment is
required to determine and estimate worldwide tax liabilities. Changes in tax laws, regulations or policies and the amount and composition
of pre-tax income in countries with differing tax rates or valuation of our deferred tax assets and liabilities could result in
us having to pay or accrue higher taxes, which would in turn reduce our net income.
We are subject to potential regular examination
by the Internal Revenue Service and other tax authorities (for example, we are currently under audit in the United States for the
tax period ended December 31, 2014), and from time to time we initiate amendments to previously filed tax returns. We regularly
assess the likelihood of favorable or unfavorable outcomes resulting from these examinations and amendments to determine the adequacy
of our provision for income taxes, which requires estimates and judgments. Although we believe our tax estimates are reasonable,
we cannot assure investors that the tax authorities will agree with such estimates. We may have to engage in litigation to achieve
the results reflected in the estimates, which may be time-consuming and expensive. We cannot assure investors that we will be successful
or that any final determination will not be materially different from the treatment reflected in our historical income tax provisions
and accruals, which could materially and adversely affect our financial condition and results of operations.
In addition, some of our subsidiaries are
subject to tax in the jurisdictions in which they are organized or operate. In computing our tax obligation in these jurisdictions,
we take various tax positions. We cannot assure investors that upon review of these positions the applicable authorities will agree
with our positions. A successful challenge by a tax authority could result in additional tax imposed on our subsidiaries. Our non-U.S.
businesses operate in various international markets, particularly emerging markets that are subject to greater political, economic
and social uncertainties than developed countries. In certain of the countries in which we operate, tax authorities may exercise
significant discretionary and arbitrary powers to make tax demands or decline to refund payments that may be due to us as per tax
returns. As a result, applicable tax laws in jurisdictions where we do business could have a material adverse effect on our financial
condition and results of operations
.
Uncertainties in the interpretation
and application of recent U.S. legislation on tax reform could have a material impact on our financial position and results of
operations.
On December 22, 2017, the Tax Cuts and
Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include,
but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017,
the transition of U.S international taxation from a worldwide tax system to a territorial system, a one-time transition tax on
the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017 and new limitations on the deductibility
of interest. We have calculated our best estimate of the impact of the Act in our year end income tax provision in accordance with
our understanding of the Act and guidance available as of the date of this filing and as a result have recorded $11.9 million as
additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. This provisional
amount relates to the remeasurement of U.S. deferred tax assets and liabilities based on the rates at which they are expected to
reverse in the future, an amount for the change in the valuation allowance necessary for the deferred tax asset related to non-deductible
interest and an amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings
.
On
December 22, 2017, Staff Accounting Bulletin No. 118 (‘‘SAB 118’’) was issued to address the application
of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including
computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB
118, we have determined that the deferred tax expense recorded in connection with the remeasurement of certain deferred tax assets
and liabilities and the current tax expense recorded in connection with the transition tax on the mandatory deemed repatriation
of foreign earnings are provisional amounts at December 31, 2017. Additional work is necessary to do a more detailed analysis of
historical foreign earnings as well as potential correlative adjustments.
Because we have operations across a number of international regions, we are exposed to currency risk.
A significant portion of our revenues are
denominated in foreign currency. For the year ended December 31, 2017, approximately 35% of our revenues were denominated in foreign
currencies. In addition, a significant portion of our expenses are incurred in the local currencies of the countries in which we
operate, including British Pound, the Euro, Swedish Krona and the Canadian Dollar. We have operations in the United States (our
headquarters), Europe, the Americas and a number of other foreign countries. For financial reporting purposes, we translate all
non-U.S. denominated transactions into U.S. dollars in accordance with U.S. GAAP. We therefore have significant exposure to exchange
rate movements between the Pound, Euro, Kroner and Canadian Dollar and other foreign currencies towards the U.S. dollar. Fluctuations
in exchange rates also affect the value of funds held by our foreign subsidiaries. Significant inflation or disproportionate changes
in foreign exchange rates with respect to one or more of these currencies could occur as a result of general economic conditions,
acts of war or terrorism, changes in governmental monetary or tax policy or changes in local interest rates. These exchange rate
differences will affect the translation of our non-U.S. results of operations and financial condition into U.S. dollars as part
of the preparation of our consolidated financial statements.
Our reported financial results may be adversely affected by changes in U.S. GAAP.
U.S. GAAP is subject to interpretation
by the Financial Accounting Standards Board (“FASB”), the American Institute of Certified Public Accountants, the U.S.
Securities and Exchange Commission (the “SEC”) and various bodies formed to promulgate and interpret appropriate accounting
principles. A change in these principles or interpretations, including changes related to revenue recognition, could have a significant
effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a
change.
A substantial portion of our revenue is derived from subscription or recurring revenue streams, and if our existing subscription
customers elect not to renew these agreements, renew these agreements for fewer services, or renew these agreements for less expensive
services, our business, financial condition and results of operations will be adversely affected.
A substantial portion of our solutions
are sold pursuant to subscription agreements, and our customers have no obligation to renew these agreements. For the year ended
December 31, 2017, subscription or recurring revenue streams represented approximately 83% of our revenues. As a result,
we may not be able to consistently and accurately predict future renewal rates. Our subscription customers’ renewal rates
may decline or fluctuate or our subscription customers may renew for fewer services or for less expensive services as a result
of a number of factors, including their level of satisfaction with our solutions, budgetary or other concerns, and the availability
and pricing of competing products. If large numbers of existing subscription customers do not renew these agreements, or renew
these agreements on terms less favorable to us, and if we cannot replace or supplement those non-renewals with new subscription
agreements generating the same or greater level of revenue, our business, financial condition and results of operations will be
adversely affected.
Because we recognize subscription revenue over the term of the applicable subscription agreement, the lack of subscription
renewals or new subscription agreements may not be immediately reflected in our operating results.
We recognize revenue from our subscription
customers over the terms of their subscription agreements. A significant portion of our quarterly revenue usually represents deferred
revenue from subscription agreements entered into during previous quarters. As a result, a decline in new or renewed subscription
agreements in any one quarter will not necessarily be fully reflected in the revenue for the corresponding quarter but will negatively
affect our revenue in future quarters. Additionally, the effect of significant downturns in sales and market acceptance of our
solutions may not be fully reflected in our results of operations until future periods. Our model also makes it difficult for us
to rapidly increase our subscription-based revenue through additional sales in any period, as revenue from new customers must be
recognized over the applicable subscription term.
Because our cloud-based platform is sold to enterprises that often have complex operating environments, we may encounter
long and unpredictable sales cycles, which could adversely affect our operating results in a given period.
Our ability to increase revenue and achieve
profitability depends, in large part, on widespread acceptance of our cloud-based platform by enterprises. As we target our sales
efforts at these customers, we face greater costs, longer sales cycles and less predictability in completing some of our sales.
As a result of the variability and length of the sales cycle, we have limited ability to forecast the timing of sales. A delay
in or failure to complete sales could harm our business and financial results, and could cause our financial results to vary significantly
from period to period. Our sales cycle varies widely, reflecting differences in potential customers’ decision-making processes,
procurement requirements and budget cycles, and is subject to significant risks over which we have little or no control, including:
|
•
|
customers’ budgetary constraints and priorities, including with respect to resource allocation between PR and marketing
and paid versus owned media;
|
|
•
|
the timing of customers’ budget cycles;
|
|
•
|
the need by some customers for lengthy evaluations prior to purchasing products; and
|
|
•
|
the length and timing of customers’ approval processes.
|
Our typical direct sales cycles for more
substantial enterprise customers can often be long, and we expect that this lengthy sales cycle may continue or could even increase
as our products become more complex and we are asked to tailor our solutions to our enterprise customer needs. Longer sales cycles
could cause our operating results and financial condition to suffer in a given period. If we cannot adequately scale our direct
sales force, we will experience further delays in signing new customers, which could slow our revenue growth.
The estimates of market opportunity and forecasts of market growth included in this report may prove to be inaccurate, and
even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at
all.
Market opportunity estimates and growth
forecasts included in this report are subject to significant uncertainty and are based on assumptions and estimates that may not
prove to be accurate. Even if the market in which we compete meets the size estimates and growth forecasted in this report, our
business could fail to grow at similar rates, if at all. For more information regarding the estimates of market opportunity and
the forecasts of market growth included in this report, see the section entitled “Business — Industry.”
Our revenue growth rate in recent
periods, which depends in part on the success of our efforts to sell and cross-sell additional services to existing customers,
may not be indicative of our future performance.
The success of our strategy is dependent,
in part, on the success of our efforts to sell and cross-sell additional services, whether internally developed or acquired in
an acquisition, to our existing customers. These customers might choose not to expand their use of or make additional purchases
of our solutions or may choose to diversify the PR solution providers with which they do business. If we fail to generate additional
business from our current customers, our revenue could grow at a slower rate or decrease. Our historical revenue growth rates are
not indicative of future growth, and we may not achieve similar revenue growth rates in future periods. Investors should not rely
on our revenue for any prior quarterly or annual periods as an indication of our future revenue or revenue growth. Our operating
results may vary as a result of a number of factors, including our ability to execute on our business strategy and compete effectively
for customers and business partners and other factors that are outside of our control. If we are unable to maintain consistent
revenue or revenue growth, our share price could be volatile, and it could be difficult to achieve or maintain profitability.
A portion of our services is provided on a non-recurring basis for specific projects, and our inability to replace large
projects when they are completed or otherwise terminated has adversely affected, and could in the future adversely affect, our
revenues and results of operations.
We provide a portion of our services for
specific projects that generate revenues that terminate on completion of a defined task. For the year ended December 31, 2017,
approximately 3% of our revenue was related to project-based non-recurring revenue activities. While we seek, wherever possible,
on completion or termination of large projects, to counterbalance periodic declines in revenues with new arrangements to provide
services to the same customer or others, our inability to obtain sufficient new projects to counterbalance any decreases in such
work may adversely affect our future revenues and results of operations.
We depend on search engines to attract new customers and to generate readership for our customers’ online news releases,
and if those search engines change their listings or our relationship with them deteriorates or terminates, we may lose customers
or be unable to attract new customers and our business and reputation may be harmed.
We rely on search engines to attract new
customers, and many of our customers locate our websites by clicking through on search results displayed by search engines such
as Google, Bing and Yahoo!. Search engines typically provide two types of search results, algorithmic and purchased listings. Algorithmic
search results are determined and organized solely by automated criteria set by the search engine and a ranking level cannot be
purchased. Advertisers can also pay search engines to place listings more prominently in search results in order to attract users
to advertisers’ websites. We rely on both algorithmic and purchased listings to attract customers to our websites. Search
engines revise their algorithms from time to time in an attempt to optimize their search result listings. If search engines on
which we rely for algorithmic listings modify their algorithms, then our websites may not appear at all or may appear less prominently
in search results, which could result in fewer customers clicking through to our websites, requiring us to resort to other potentially
costly resources to advertise and market our services. If one or more search engines on which we rely for purchased listings modifies
or terminates its relationship with us, our expenses could rise, or our revenue could decline and our business may suffer. Additionally,
the cost of purchased search listing advertising is rapidly increasing as demand for these channels grows, and further increases
could greatly increase our expenses.
Moreover, our news distribution service
depends upon the placement of our customers’ online press releases. If search engines on which we rely modify their algorithms
or purposefully block our content, then information distributed via our news distribution service may not be displayed or may be
displayed less prominently in search results, and as a result we could lose customers or fail to attract new customers and our
results of operations could be adversely affected.
If the delivery of our customers’ emails is limited or blocked, customers may cancel their accounts.
Internet service providers (“ISPs”)
can block emails from reaching their users. The implementation of new or more restrictive policies by ISPs may make it more difficult
to deliver our customers’ emails. If ISPs materially limit or halt the delivery of our customers’ emails, or if we
fail to deliver our customers’ emails in a manner compatible with ISPs’ email handling, authentication technologies
or other policies, then customers may cancel their accounts which could harm our business and financial performance.
Various private spam blacklists may interfere with the effectiveness of our products and our ability to conduct business.
We depend on email to market to and communicate
with our customers, and our customers rely on email to communicate with journalists, social media influencers, and their customers
and members. Various private entities attempt to regulate the use of email for commercial solicitation. These entities often advocate
standards of conduct or practice that exceed legal requirements and classify certain email solicitations that comply with legal
requirements as spam. Some of these entities maintain “blacklists” of companies and individuals, and the websites,
ISPs and Internet protocol addresses associated with those entities or individuals. If a company’s Internet protocol addresses
are listed by a blacklisting entity, emails sent from those addresses may be blocked if they are sent to any Internet domain or
Internet address that subscribes to the blacklisting entity’s service or purchases its blacklist. If our services are blacklisted,
our customers may be unable to effectively use our services, and as a result we could lose customers or fail to attract new customers
and our results of operations could be adversely affected.
Our business relies on our ability
to collect, use and leverage personal data and other content. Changes in privacy laws, regulations, and standards may interfere
with our business.
We are subject to federal, state, and international
laws relating to the collection, use, retention, security, and transfer of personal data. Laws and regulations governing the collection,
use and disclosure of personal data and use of online analytics and tracking technologies are rapidly evolving globally. As a result,
implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. We publicly post
documentation regarding our practices concerning the processing, use, and disclosure of data. Any failure by us, our suppliers,
or other parties with whom we do business to comply with this documentation or with other federal, state, or foreign regulations
could result in proceedings against us by governmental entities or others. In many jurisdictions, enforcement actions and consequences
for noncompliance are rising. In the United States, these include enforcement actions in response to rules and regulations promulgated
under the authority of federal agencies and state attorneys general and legislatures and consumer protection agencies. In addition,
privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards with which
we must legally comply or that contractually apply to us, like the Payment Card Industry Data Security Standard, or PCI DSS. If
we fail to follow these security standards, such as those set forth in the PCI DSS, even if no customer information is compromised,
we may incur significant fines or experience a significant increase in costs.
Internationally, many jurisdictions in
which we operate have established privacy legal framework with which we, our customers or our vendors must comply, including but
not limited to the European Union, or EU. The EU’s data protection landscape is currently unstable, resulting in possible
significant operational costs for internal compliance and risk to our business. In addition, the EU has adopted the General Data
Protection Regulation, or GDPR, which is scheduled to go into effect in May 2018 and contains numerous requirements and changes
from existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection
compliance programs by companies. Specifically, the GDPR will introduce numerous privacy-related changes for companies operating
in the EU, including greater control for data subjects (e.g., the ‘‘right to be forgotten’’), increased
data portability for EU consumers, data breach notification requirements, and increased fines. In particular, under the GDPR, fines
of up to 20 million euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be
imposed for violations of certain of the GDPR’s requirements. The GDPR requirements apply not only to third-party transactions,
but also to transfers of information between us and our subsidiaries, including employee information.
Changes in these laws and regulations,
and self-regulatory frameworks may affect our ability to collect, use and share personal data, and to provide services to customers
that rely on our ability to leverage data. Other proposed legislation could, if enacted, prohibit or limit the use of certain technologies
that track individuals’ activities on web pages, in emails or on the Internet. In addition to government activity, privacy
advocacy groups and the technology and marketing industries are considering various new, additional or different self-regulatory
standards that may place additional burdens on us or our customers, which could reduce demand for our solutions. As a result of
any continuing legislative initiatives and customer demands, we may have to modify our operations to enable us to continue to leverage
personal data and other content. The cost of compliance with these laws and regulations is high and is likely to increase in the
future. Any such modifications may result in increased expenses and operating complexity, and we may be unable to increase the
rates we charge for our services sufficiently to offset these increases. Any failure on our part to comply with these laws, regulations
and standards can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities
and other penalties.
If our solutions fail to perform properly or if they contain technical defects, our reputation would be harmed, our market
share would decline and we could be subject to product liability claims.
Our cloud-based software may contain undetected
errors or defects that may result in product failures, misleading reports or otherwise cause our solutions to fail to perform in
accordance with customer expectations. Because our customers use our solutions for important aspects of their business, any errors
or defects in, or other performance problems with, our solutions could hurt our reputation and may damage our customers’
businesses. If that occurs, we could lose future sales, our existing subscription customers could elect to not renew or, in certain
circumstances, terminate their agreements with us. Product performance problems could result in loss of market share, failure to
achieve market acceptance and the diversion of development resources. If one or more of our solutions fail to perform or contain
a technical defect, a customer may assert a claim against us for substantial damages, whether or not we are responsible for our
solutions’ failure or defect. Product liability claims could require us to spend significant time and money in litigation
or arbitration/dispute resolution or to pay significant settlements or damages.
Our news distribution service is a trusted
information source, and our customers rely on our email services to communicate with journalists, social media influencers, and
their customers and members. To the extent we were to distribute an inaccurate or fraudulent press release or our customers used
our services to transmit negative messages or website links to harmful applications, reproduce and distribute copyrighted and trademarked
material without permission, or report inaccurate or fraudulent data or information, our reputation could be harmed, even though
we are not responsible for the content distributed via our services.
We have incurred operating losses in the past and may incur operating losses in the future.
We have incurred operating losses in the
past and we may incur operating losses in the future. In 2017, we had operating income of $38.0 million. Prior to 2017, we had
operating losses of $19.6 million in 2016 and $27.6 million in 2015. We expect our operating expenses to increase as we continue
to expand our operations, and if our increased operating expenses exceed our revenue growth, we may not be able to generate operating
income.
Our ability to use net operating
loss carryforwards to reduce future tax payments may be subject to limitations.
As of December 31, 2017, we had federal
and state net operating loss carryforwards of $134.1 million. The federal and state net operating loss carryforwards will begin
to expire, if not utilized, beginning in 2031. These net operating loss carryforwards could expire unused and be unavailable to
offset future income tax liabilities. Under the newly enacted federal income tax law, federal net operating losses generated in
2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited.
It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. In addition, under Section
382 of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), if a corporation undergoes an ‘‘ownership
change’’ (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period),
its ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change
income may be limited. If we undergo an ownership change, we may be limited in the portion of net operating loss carryforwards
that we can use in the future to offset taxable income for U.S. Federal and state income tax purposes and the utilization of other
tax attributes to reduce our federal and state income tax expense.
If we are required to collect sales and use or other taxes on our solutions, we may be subject to liability for past sales
and our business, financial condition and results of operations may be adversely affected.
Taxing jurisdictions, including state and
local entities, have differing rules and regulations governing sales and use or other taxes, and these rules and regulations are
subject to varying interpretations that may change over time. In particular, the applicability of sales taxes to our subscription
services and e-commerce transactions in general in various jurisdictions is a complex and evolving issue. It is possible that we
could face sales tax audits and an assertion that we should be collecting sales or other taxes on our services in jurisdictions
where we have not historically done so and do not accrue for sales taxes. The imposition of Internet usage taxes or enhanced enforcement
of sales tax laws could result in substantial tax liabilities for past sales or could have an adverse effect on our business, financial
condition and results of operations.
Our international operations subject us to risks inherent in doing business on an international level, any of which could
increase our costs and hinder our growth.
The operations of our non-U.S. business
are subject to the risk inherent in international operations. Our expansion into lower cost locations may increase operational
risk. Some of these economies may be subject to greater political, economic and social uncertainties than countries with more developed
institutional structures. Political, economic or social events or developments in one or more of these countries could adversely
affect our operations and financial results.
We operate a global business. For the
year ended December 31, 2017, approximately 35% of our revenue was derived from Europe (including the United Kingdom),
Canada, Asia and Latin America. We are subject to certain adverse economic factors relating to overseas economies generally,
including foreign currency fluctuation, inflation, external debt, a negative balance of trade and underemployment. Risks
associated with our international business activities include:
|
•
|
difficulties in managing international operations, including overcoming logistical and communications challenges;
|
|
•
|
trade and tariff restrictions;
|
|
•
|
price or exchange controls;
|
|
•
|
currency control regulations;
|
|
•
|
foreign tax consequences;
|
|
•
|
labor disputes and related litigation and liability;
|
|
•
|
limitations on repatriation of earnings;
|
|
•
|
compliance with foreign laws and different legal standards; and
|
|
•
|
changing laws and regulations, occasionally with retroactive effect.
|
The occurrence of any one of these risks
could negatively affect our international operations and, consequently, our results of operations generally.
We are subject to U.S. and certain
foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations.
Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal
liability and other serious consequences for violations which can harm our business.
We are subject to U.S. export control and
economic sanctions laws and regulations and other restrictions on international trade. As such, we are required to export our technology,
products, and services in compliance with those laws and regulations. If we export our technology, products, or services, the exports
may require authorizations, including a license, a license exception or other appropriate government authorization. Complying with
export control and economic and trade sanctions regulations for a particular transaction may be time-consuming and may result in
the delay or loss of sales opportunities. In addition, the United States and other governments and their agencies impose sanctions
and embargoes on certain countries, their governments and designated parties, which may prohibit the export of certain technology,
products, and services to such persons altogether.
We are also subject to the U.S. Foreign
Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel
Act, the USA PATRIOT Act, the United Kingdom Bribery Act 2010, the Proceeds of Crime Act 2002, and possibly other state and national
anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly
and prohibit companies and their employees, third-party intermediaries, and other associated persons from authorizing, promising,
offering, providing, soliciting, or accepting directly or indirectly, improper payments or benefits to or from any person whether
in the public or private sector. We have direct or indirect interactions with officials and employees of government agencies. We
can be held liable for the corrupt or other illegal activities of our employees, representatives, contractors, business partners,
and agents, even if we do not explicitly authorize or have actual knowledge of such activities.
Any violation of the laws and regulations
described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges,
debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
Our reputation could be damaged or our profitability could suffer if we do not meet the controls and procedures in respect
of the services and solutions we provide to our customers, or if we contribute to our customers’ internal control deficiencies.
Our customers may perform audits or require
us to perform audits, provide audit reports or obtain certifications with respect to the controls and procedures that we use in
the performance of services for such customers, especially when we process data or information belonging to them. Our ability to
acquire new customers and retain existing customers may be adversely affected and our reputation could be harmed if we cannot obtain
an appropriate certification or opinion with respect to our controls and procedures in connection with any such audit in a timely
manner. Additionally, our profitability could suffer if our controls and procedures were to fail or to impair our customers’
ability to comply with their own internal control requirements.
We may dispose of or discontinue existing products and services, which may adversely affect our business, financial condition
and results of operations.
We continually evaluate our various products
and services in order to determine whether any should be discontinued or, to the extent possible, divested. We cannot guarantee
that we have correctly forecasted, or will correctly forecast in the future, the right products or services to dispose of or discontinue,
or that our decision to dispose of or discontinue various investments, products or services is prudent. There are no assurances
that the discontinuance of various products or services will reduce our operating expenses or will not cause us to incur material
charges with such a decision. The disposal or discontinuance of existing solutions presents various risks, including, but not limited
to the inability to find a purchaser for a product or service or the purchase price obtained will not be equal to at least the
book value of the net assets for the product or service, managing the expectations of, and maintaining good relations with, our
customers who previously purchased discontinued solutions, which could prevent us from selling other products to them in the future.
We may also incur other significant liabilities and costs associated with our disposal or discontinuance of solutions, including,
but not limited to employee severance costs and excess facilities costs, all of which could have an adverse effect on our business,
financial condition and results of operations.
The loss of key personnel or of our ability to attract, recruit, retain and develop qualified employees could adversely
affect our business, financial condition and results of operations.
Our success depends upon the continued
services of our senior management and other key personnel who have substantial experience in the PR software and services industry
and the markets in which we offer our services. In addition, our success depends in large part upon the reputation within the industry
of our senior managers. Further, in order for us to continue to successfully compete and grow, we must attract, recruit, develop
and retain personnel, including key executives of organizations we acquire, who will provide us with expertise across the entire
spectrum of our intellectual capital needs. Our success also depends on the skill and experience of our sales force, which we must
continuously work to maintain. While we have a number of key personnel who have substantial experience with our operations, we
must also develop our personnel to provide succession plans capable of maintaining the continuity of our operations. The market
for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace
current personnel who depart with qualified or effective successors.
Failure to retain or attract key personnel
could impede our ability to grow and could result in our inability to operate our business profitably. In addition, contractual
obligations related to confidentiality, assignment of intellectual property rights, and non-solicitation may be ineffective or
unenforceable and departing employees may share our proprietary information with competitors in ways that could adversely impact
us, or seek to solicit customers or recruit our key personnel to competing businesses.
Labor disruptions could materially adversely affect our business, financial condition and results of operations.
As of December 31, 2017, we had approximately
3,500 global employees, with approximately 1,400 employees located in the United States and approximately 2,100 employees located
internationally. In various countries, local law requires our participation in works councils, and we have approximately 500 employees
working under collective bargaining agreements. While we have not experienced any material work stoppages at any of our facilities,
any stoppage or slowdown could cause material interruptions in our business, and we cannot assure investors that alternate qualified
personnel would be available on a timely basis, or at all. As a result, labor disruptions at any of our locations could materially
adversely affect our business, financial condition and results of operations.
Natural disasters and other events beyond our control could adversely affect us.
Natural disasters or other catastrophic
events may cause damage or disruption to our operations, our servers and data centers and the global economy, and thus could have
a strong negative effect on us. Our business operations and our servers and data centers are subject to interruption by natural
disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster
response plans, such events could make it difficult or impossible for us to continue operations, and could decrease demand for
our platform. Our primary data centers are located in Chicago, IL, Sterling, VA, Piscataway, NJ, Raleigh, NC, Paris, France and
London, UK, making our business particularly susceptible to natural disasters in those areas as well as in areas where our third-party
data centers are located. Any natural disaster affecting our data centers could have an adverse effect on our financial condition
and operating results.
Political uncertainty, political unrest or terrorism could adversely affect business conditions in those regions, which
in turn could disrupt our business and adversely impact our results of operations and financial condition.
We conduct business in countries and regions
that are vulnerable to disruptions from political uncertainty, political unrest or terrorist acts. Any damage or disruption from
political uncertainty, political unrest or terrorist acts would damage our ability to provide services, in whole or in part, and/or
otherwise damage our operations and could have an adverse effect on our business, financial condition or results of operations.
Further, political tensions and escalation of hostilities could adversely affect our operations in these countries and therefore
adversely affect our revenues and results of operations. Terrorist attacks and other acts of violence or war could affect us or
our clients by disrupting normal business practices for extended periods of time and reducing business confidence. In addition,
acts of violence or war may make travel more difficult and may effectively curtail our ability to serve our clients’ needs,
any of which could adversely affect our results of operations.
Trends in print news and media readership could have a material adverse effect on our financial performance.
The volume of content from print news sources
has declined in recent years, which has reduced the volume of print news stories delivered through our content offerings. This
has largely been driven by a decline in print media readership which has in turn seen a reduction in media publisher revenue and
journalist numbers associated with media such as print newspapers. If the volume of content continues to decline (e.g., because
of further reductions in journalist numbers by print media publishers), and if we are unable to offset this decline with our current
and/or future other software and services, our future financial performance could be adversely affected.
The development of self-service media intelligence offerings and related technology could have a material adverse effect
on our business.
The proliferation of digital, free-to-access
news content has led to the introduction of low-cost or free self-service media intelligence offerings. Moreover, our insights
group provides human-generated media intelligence analysis and consultation to some of our larger customers. More efficient or
cost-effective technology that replaces the need for such human-generated analysis could have an adverse effect on our business.
Our future financial performance could be affected by customers adopting these low-cost, self-service media intelligence platforms
and technologies.
Decisions to declare future dividends on our ordinary shares will be at the discretion of our board of directors based upon
a review of relevant considerations. Accordingly, there can be no guarantee that we will pay future dividends to our shareholders.
Future declarations of quarterly dividends
and the establishment of future record and payment dates are subject to approval by the board of directors and subject to certain
limitations set forth in the agreements governing our credit facilities. The board’s determination to declare dividends will
depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law and other
factors that the board deems relevant. Based on an evaluation of these factors, the board of directors may determine not to declare
future dividends at all or to declare future dividends at a reduced amount. Accordingly, there can be no guarantee that we will
pay future dividends to our shareholders.
Our shareholders may face difficulties in protecting their interests, as Cayman Islands law provides substantially less
protection when compared to the laws of the United States.
Our corporate affairs are governed by our
amended and restated memorandum and articles of association and by the Companies Law of the Cayman Islands (2016 Revision) (the
“Companies Law”) and common law of the Cayman Islands. The rights of shareholders to take legal action against our
directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands
law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in
part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive,
but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities
of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents
in the United States. In particular, the Cayman Islands have a less exhaustive body of securities laws as compared to the United
States. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the United
States federal courts. As a result, our shareholders may have more difficulty in protecting their interests through actions against
us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in
the United States.
Certain judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands company and a portion
our assets are located outside of the United States. As a result, it may be difficult or impossible for investors to bring an action
against us in the United States in the event that they believe that their rights have been infringed under U.S. federal securities
laws or otherwise. It may not be possible to enforce certain court judgments obtained in the United States against us (or our directors
or officers) in the Cayman Islands. We have been advised that there is no statutory enforcement in the Cayman Islands of judgments
obtained in United States courts, and such matters are governed by the common law of the Cayman Islands. Uncertainty exists as
to whether the courts of the Cayman Islands would:
|
•
|
recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the
civil liabilities provisions of the securities laws of the United States or any state in the United States; or
|
|
•
|
entertain original actions brought in the Cayman Islands against us or our directors or officers predicated upon the securities
laws of the United States or any state in the United States.
|
We have been advised that the uncertainty
with regard to Cayman Islands law relates to whether a judgment obtained from the United States courts under civil liability provisions
of the securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination
is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company. Because
the courts of the Cayman Islands have yet to rule on whether such judgments are penal or punitive in nature, it is uncertain whether
they would be enforceable in the Cayman Islands. We are further advised us that a final and conclusive judgment in the federal
or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines,
penalties or similar charges, will ordinarily be recognized and enforced in the courts of the Cayman Islands without re-examination
of the merits, at common law.
Our business may be adversely affected
by third-party claims, including by governmental bodies, regarding the content and advertising distributed through our service.
We rely on our customers to secure the
rights to redistribute content over the Internet, and we do not screen the content that is distributed through our service. There
is no assurance that our customers have licensed all rights necessary for distribution, including Internet distribution. Other
parties may claim certain rights in the content of our customers. In the event that our customers do not have the necessary distribution
rights related to content or otherwise distribute illegal content, although we have made efforts to limit our liability we may
be required to cease distributing such content or subject to lawsuits and claims of damages for infringement of such rights. Any
claims or investigations could adversely affect our business, financial condition and results of operations.
Risks Related to Our Finances and Capital
Structure
We have and will continue to have high levels of indebtedness.
As of December 31, 2017, we had no outstanding
borrowings and $1.3 million of outstanding letters of credit under our current revolving credit facility (the “2017 Revolving
Credit Facility”) and $1,332 million outstanding under our first lien term loan facility (the “2017 First Lien Term
Credit Facility” and together with the 2017 Revolving Credit Facility, the “2017 First Lien Credit Facility”).
Because borrowings under our 2017 Revolving Credit Facility bear interest at variable rates, any increase in interest rates on
debt that we have not fixed using interest rate hedges will increase our interest expense, reduce our cash flow or increase the
cost of future borrowings or refinancing. Our indebtedness could have important consequences to our investors, including, but not
limited to:
|
•
|
increasing vulnerability to, and reducing its flexibility to respond to, general adverse economic and industry conditions;
|
|
•
|
requiring the dedication of a substantial portion of cash flow from operations to the payment of principal of, and interest
on, its indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions,
joint ventures or other general corporate purposes;
|
|
•
|
limiting flexibility in planning for, or reacting to, changes in its business and the competitive environment; and
|
|
•
|
limiting our ability to borrow additional funds and increasing the cost of any such borrowing.
|
Other than variable rate debt, we believe
our business has relatively large fixed costs and low variable costs, which magnifies the impact of revenue fluctuations on our
operating results. As a result, a decline in our revenue may lead to a relatively larger impact on operating results. A substantial
portion of our operating expenses will be related to personnel costs, regulation and corporate overhead, none of which can be adjusted
quickly and some of which cannot be adjusted at all. Our operating expense levels will be based on our expectations for future
revenue. If actual revenue is below management’s expectations, or if our expenses increase before revenues do, both revenues
less transaction-based expenses and operating results would be materially and adversely affected. Because of these factors, it
is possible that our operating results or other operating metrics may fail to meet the expectations of stock market analysts and
investors. If this happens, the market price of our ordinary shares may be adversely affected.
The credit agreement in respect of our 2017 First Lien Credit Facility contains a change of control provision that could
require us to amend or refinance our indebtedness.
The credit agreement in respect of our
2017 First Lien Credit Facility provides that an event of default will occur upon specified change of control events, which include
us ceasing to beneficially own directly or indirectly all of the voting equity interests of certain credit parties thereunder.
In addition, a change of control event occurs if any person or group beneficially owns directly or indirectly a majority of our
voting equity interests (other than the Sponsor and certain other specified persons). Although we do not currently anticipate that
any such person will beneficially own a majority of the ordinary shares prior to our amendment or refinancing of this indebtedness,
no person is contractually obligated to retain the ordinary shares it holds. If we are unable to amend these agreements or refinance
this indebtedness, we will be limited in our ability to issue additional equity to any person which would acquire a majority of
ordinary shares following such issuance and will need to rely on other sources of financing, including additional borrowings.
Our ability to pay dividends in the future will be subject to our subsidiaries’ ability to distribute cash to us.
We do not anticipate that our board of
directors will declare dividends in the foreseeable future. If we decide to declare dividends in the future, as a holding company,
we will require dividends and other payments from our subsidiaries to meet such cash requirements. Our credit agreements place
certain contractual restrictions on our subsidiaries’ ability to make distributions to us. See Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Overview”
for a discussion of our credit facilities’ restrictions on our subsidiaries’ ability to make distributions to us. In
addition, minimum capital requirements may indirectly restrict the amount of dividends paid upstream, and repatriations of cash
from our subsidiaries may be subject to withholding, income and other taxes in various applicable jurisdictions. If our subsidiaries
are unable to distribute cash to us and we are unable to pay dividends, our ordinary shares may become less attractive to investors
and the price of our ordinary shares may become volatile.
Future changes to tax laws could adversely affect us.
The U.S. government, the Organisation for
Economic Co-operation and Development and other governmental agencies in jurisdictions where we do business have had an extended
focus on issues related to the taxation of multinational corporations. One example is in the area of “base erosion and profit
shifting,” where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower
tax rates. As a result, the tax laws in the countries in which we do business could change on a prospective or retroactive basis,
and any such changes could adversely affect us.
The withdrawal of the U.K. from the European
Union (commonly referred to as Brexit) may cause an increase in our taxes including withholding taxes on repatriation of cash from
jurisdictions that are members of the European Union to or through any of our U.K. subsidiaries as a result of the U.K. no longer
being entitled to benefits provided by the European Union directives.
The so called “anti-inversion” rules under U.S. federal tax law may impose adverse consequences or apply limitations
on our ability to engage in future acquisitions.
Under Section 7874 of the Code, if, following
an acquisition of a U.S. corporation by a foreign corporation, at least 80% of the acquiring foreign corporation’s stock
by (vote and value) is considered to be held by former shareholders of the U.S. corporation by reason of holding stock of such
U.S. corporation then the acquiring corporation could be treated as a U.S. corporation for U.S. federal tax purposes even though
it is a corporation created and organized outside the United States.
In addition, following the acquisition
of a U.S. corporation by a foreign corporation, Section 7874 of the Code can limit the ability of the acquired U.S. corporation
and its U.S. affiliates to utilize U.S. tax attributes (including net operating losses and certain tax credits) to offset U.S.
taxable income resulting from certain transactions if the shareholders of the acquired U.S. corporation hold at least 60% (but
less than 80%), by either vote or value, of the shares of the foreign acquiring corporation by reason of holding shares in the
U.S. corporation, and certain other conditions are met.
Because we are a non-U.S. corporation,
Section 7874 of the Code and the regulations thereunder may apply with respect to any potential future acquisitions of U.S. corporations
by us. As a result, these rules may impose adverse consequences or apply limitations on our ability to engage in future acquisitions.
If we are characterized as a passive foreign investment company for U.S. federal income tax purposes, our U.S. shareholders
may suffer adverse tax consequences.
If 75% or more of our gross income in a
taxable year, including our pro-rata share of the gross income of any company, U.S. or foreign, in which we are considered to own,
directly or indirectly, 25% or more of the shares by value, is passive income, then we will be a passive foreign investment company,
or “PFIC,” for U.S. federal income tax purposes. Alternatively, we will be considered to be a PFIC if at least 50%
of our assets in a taxable year, averaged over the year and ordinarily determined based on fair market value and including our
pro-rata share of the assets of any company in which we are considered to own, directly or indirectly, 25% or more of the shares
by value, are held for the production of, or produce, passive income. Once treated as a PFIC, for any taxable year, a foreign corporation
will generally continue to be treated as PFIC for all subsequent taxable years. If we were to be a PFIC, and a U.S. holder does
not make an election to treat us as a “qualified electing fund,” or QEF, or a “mark-to-market” election,
“excess distributions” to a U.S. holder, and any gain recognized by a U.S. holder on a disposition of our ordinary
shares, would be taxed in an unfavorable way. Among other consequences, our dividends, to the extent that they constituted excess
distributions, would be taxed at the regular rates applicable to ordinary income, rather than the 20% maximum rate applicable to
certain dividends received by an individual from a qualified foreign corporation, and certain “interest” charges may
apply. In addition, gains on the sale of our ordinary shares would be treated in the same way as excess distributions.
The tests for determining PFIC status are
applied annually and it is difficult to make accurate predictions of future income and assets, which are relevant to the determination
of PFIC status. In addition, under the applicable statutory and regulatory provisions, it is unclear whether we would be permitted
to use a gross loss from sales (sales less cost of goods sold) to offset our passive income in the calculation of gross income.
Although we do not expect that we will be a PFIC in the future, in light of the periodic asset and income tests applicable in making
this determination, no assurance can be given that we will not become a PFIC. If we do become a PFIC in the future, U.S. holders
who hold ordinary shares during any period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a
PFIC, subject to exceptions for U.S. holders who made a timely QEF or mark-to-market election, or certain other elections. We do
not currently intend to prepare or provide the information that would enable our shareholders to make a QEF election.
Accordingly, our shareholders are urged
to consult their tax advisors regarding the application of PFIC rules.
We incur increased costs and obligations as a result of being a public company.
As a privately held company, we were not
required to comply with certain corporate governance and financial reporting practices and policies required of a publicly traded
company. As a publicly traded company, we incur significant legal, accounting and other expenses that we were not required to incur
in the recent past, particularly after we are no longer an “emerging growth company” as defined under the Jumpstart
Our Business Startups Act, as amended (the “JOBS Act”). In addition, new and changing laws, regulations and standards
relating to corporate governance and public disclosure, including the Dodd Frank Wall Street Reform and Consumer Protection Act
and the rules and regulations promulgated and to be promulgated thereunder, as well as under the Sarbanes-Oxley Act, the JOBS Act,
and the rules and regulations of the SEC and national securities exchanges have created uncertainty for public companies and increased
the costs and the time that our board of directors and management must devote to complying with these rules and regulations. We
expect these rules and regulations to increase our legal and financial compliance costs and lead to a diversion of management time
and attention from revenue generating activities.
Furthermore, the maintenance of the corporate
infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which
could prevent us from improving our business, results of operations and financial condition. As of December 31, 2017, our management
has concluded that we did not maintain effective controls over the preparation and review of the income tax provision and related
current and deferred income tax accounts. Specifically, a material weakness in the design of our controls did not ensure that the
information used to prepare the income tax provision and related current and deferred income tax accounts was complete and accurate.
For more information about this material weakness, see Item 9A, “Controls and Procedures.” We have made, and will continue
to make, enhancements to our internal controls and procedures for financial reporting and accounting systems to meet our reporting
obligations as a publicly traded company. However, the measures we take may not be sufficient to satisfy our obligations as a publicly
traded company.
For as long as we remain an “emerging
growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not “emerging growth companies.” We may remain an “emerging
growth company” until October 19, 2020 (the fifth anniversary of the consummation of our predecessor’s initial public
offering) or until such earlier time that we have more than $1.07 billion in annual revenues, have more than $700.0 million in
market value of our ordinary shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt securities
over a three-year period. Further, there is no guarantee that the exemptions available to us under the JOBS Act will result in
significant savings. To the extent we choose not to use exemptions from various reporting requirements under the JOBS Act, we will
incur additional compliance costs, which may impact earnings.
As an “emerging growth company,” we cannot be certain if the reduced disclosure requirements applicable to “emerging
growth companies” will make our ordinary shares less attractive to investors.
We are an “emerging growth company,”
as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to obtain an
assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting
firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our
periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and shareholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act provides
that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting
standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise
apply to private companies. We have elected to take advantage of such extended transition period. We cannot predict if investors
will find our ordinary shares less attractive because we rely on these exemptions. If some investors find our ordinary shares less
attractive as a result, there may be a less active market for our ordinary shares and our share price may be more volatile.
If we do not develop and implement all required accounting practices and policies, we may be unable to provide the financial
information required of a U.S. publicly traded company in a timely and reliable manner.
If we fail to maintain effective internal
controls and procedures and disclosure procedures and controls, we may be unable to provide financial information and required
SEC reports that a U.S. publicly traded company is required to provide in a timely and reliable fashion. Any such delays or deficiencies
could penalize us, including by limiting our ability to obtain financing, either in the public capital markets or from private
sources and hurt our reputation and could thereby impede our ability to implement our growth strategy. In addition, any such delays
or deficiencies could result in our failure to meet the requirements for listing of our ordinary shares on a national securities
exchange.
The price of our ordinary shares may be volatile.
The price of our ordinary shares may fluctuate
due to a variety of factors, including:
|
•
|
actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in industry;
|
|
•
|
mergers and strategic alliances in the industry in which we operate;
|
|
•
|
market prices and conditions in the industry in which we operate;
|
|
•
|
changes in government regulation;
|
|
•
|
potential or actual military conflicts or acts of terrorism;
|
|
•
|
the failure of securities analysts to publish research about us, or shortfalls in our operating results compared to levels
forecast by securities analysts;
|
|
•
|
announcements concerning us or our competitors; and
|
|
•
|
the general state of the securities markets.
|
These market and industry factors may materially
reduce the market price of our ordinary shares, regardless of our operating performance.
Reports published by analysts, including projections in those reports that differ from our actual results, could adversely
affect the price and trading volume of our ordinary shares.
We currently expect that securities research
analysts will establish and publish their own periodic projections for our business. These projections may vary widely and may
not accurately predict the results we actually achieve. Our share price may decline if our actual results do not match the projections
of these securities research analysts. Similarly, if one or more of the analysts who write reports on us downgrades our stock or
publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts
ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. While we expect
research analyst coverage, if no analysts commence coverage of us, the trading price and volume for our ordinary shares could be
adversely affected.
We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to the holders of our warrants,
thereby making such warrants worthless.
We have the ability to redeem outstanding
warrants (other than the private warrants) at any time after they become exercisable and prior to their expiration, at $0.01 per
warrant, if the last reported sales price (or the closing bid price of our ordinary shares in the event the ordinary shares are
not traded on any specific trading day) of the ordinary shares equals or exceeds $18.00 per share for any 20 trading days within
a 30-trading day period ending on the third business day prior to the date we send proper notice of such redemption, provided that
on the date we give notice of redemption and during the entire period thereafter until the time we redeem the warrants, we have
an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) covering the
ordinary shares issuable upon exercise of the warrants and a current prospectus relating to them is available. If and when the
warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying
securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force a warrant holder:
(i) to exercise warrants and pay the exercise price therefore at a time when it may be disadvantageous for holders of our warrants
to do so, (ii) to sell warrants at the then-current market price when holders might otherwise wish to hold their warrants or (iii)
to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, will be substantially
less than the market value of such warrants.
We may issue additional ordinary shares or other equity securities without shareholder approval, which would dilute shareholder
ownership interests and may depress the market price of our ordinary shares.
We may issue an aggregate of 6,000,000
ordinary shares to Cision Owner upon achievement of milestone targets, of which 2,000,000 of such shares were issued to Cision
Owner on November 3, 2017. Our issuance of additional ordinary shares or other equity securities of equal or senior rank would
have the following effects:
|
•
|
our existing shareholders’ proportionate ownership interest will decrease;
|
|
•
|
the amount of cash available per share, including for payment of dividends in the future, may decrease;
|
|
•
|
the relative voting strength of each previously outstanding common share may be diminished; and
|
|
•
|
the market price of our ordinary shares may decline.
|
Our amended and restated memorandum and articles of association contain anti-takeover provisions that could adversely affect
the rights of our shareholders.
Our amended and restated memorandum and
articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage
in change-of-control transactions, including, among other things:
|
•
|
provisions that authorize our board of directors, without action by our shareholders, to issue additional ordinary shares and
preferred shares with preferential rights determined by our board of directors;
|
|
•
|
provisions that permit only a majority of our board of directors, the chairman of our board of directors or, for so long as
Cision Owner beneficially and its affiliates own at least 10% of our ordinary shares, Cision Owner to call shareholder meetings
and therefore do not permit shareholders to call shareholder meetings;
|
|
•
|
provisions that impose advance notice requirements, minimum shareholding periods and ownership thresholds, and other requirements
and limitations on the ability of shareholders to propose matters for consideration at shareholder meetings; provided, however,
at any time when Cision Owner beneficially owns, in the aggregate, at least 5% of our ordinary shares, such advance notice procedure
will not apply to it; and
|
|
•
|
a staggered board whereby our directors are divided into three classes, with each class subject to retirement and re-election
once every three years on a rotating basis.
|
These provisions could have the effect
of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging
third parties from seeking to obtain control of our company in a tender offer or similar transaction. With our staggered board
of directors, at least two annual meetings of shareholders will generally be required in order to effect a change in a majority
of our directors. Our staggered board of directors can discourage proxy contests for the election of our directors and purchases
of substantial blocks of our shares by making it more difficult for a potential acquirer to gain control of our board of directors
in a relatively short period of time.