Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38140

Cision Ltd.

(Exact name of registrant as specified in its charter)

Cayman Islands

N/A

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

130 East Randolph Street, 7th Floor

Chicago, Illinois 60601

(Address of principal executive offices)

(Zip code)

(866) 639-5087

(Registrant’s telephone number, including area code)

Not Applicable.

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer	☒		Accelerated filer	☐		Non-accelerated filer	☐		Smaller reporting company	☐
									Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(d) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary shares, par value $0.0001 per share	CISN	New York Stock Exchange

The number of ordinary shares, par value $0.0001 per share, of the registrant outstanding at November 5, 2019 was 148,484,875.

CISION LTD. AND ITS SUBSIDIARIES

INDEX

PART I. – FINANCIAL INFORMATION	3

Item 1. – Financial Statements	3

Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3. – Quantitative and Qualitative Disclosures About Market Risk	40

Item 4. – Controls and Procedures	40

PART II. – OTHER INFORMATION	41

Item 1. – Legal Proceedings	41

Item 1A. – Risk Factors	41

Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3. – Defaults Upon Senior Securities	42

Item 4. – Mine Safety Disclosures	42

Item 5. – Other Information	42

Item 6. – Exhibits	42

SIGNATURES	43

PART I. – FINANCIAL INFORMATION

Item 1. – Financial Statements

Cision Ltd. and its Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share and share amounts)

(Unaudited)

	September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	94,929		$	104,769
Accounts receivable, net		126,975			120,882
Prepaid expenses and other current assets		38,897			22,824
Total current assets		260,801			248,475
Property and equipment, net		62,788			57,210
Other intangible assets, net		376,860			377,146
Goodwill		1,411,646			1,171,859
Operating lease right-of-use assets		59,993			—
Deferred tax asset		4,123			4,034
Other assets		9,296			7,652
Total assets	$	2,185,507		$	1,866,376
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	13,881		$	13,210
Accounts payable		12,867			15,603
Accrued compensation and benefits		35,057			29,323
Operating lease liabilities		14,139			—
Other accrued expenses		61,820			82,507
Current portion of deferred revenue		161,848			139,725
Total current liabilities		299,612			280,368
Long-term debt, net of current portion		1,261,926			1,205,760
Deferred revenue, net of current portion		968			1,098
Operating lease liabilities, net of current portion		59,514			—
Deferred tax liability		74,062			69,232
Other liabilities		9,986			21,601
Total liabilities		1,706,068			1,578,059
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; no shares issued and outstanding at September 30, 2019 and December 31, 2018		—			—
Common stock, $0.0001 par value, 480,000,000 shares authorized; 148,478,535 and 132,716,541 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		15			13
Additional paid-in capital		988,364			797,222
Accumulated other comprehensive loss		(75,204	)		(68,941	)
Accumulated deficit		(433,736	)		(439,977	)
Total stockholders’ equity		479,439			288,317
Total liabilities and stockholders’ equity	$	2,185,507		$	1,866,376

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cision Ltd. and its Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenue	$	185,653		$	177,236		$	561,953		$	544,004
Cost of revenue		63,408			69,177			198,240			200,212
Gross profit		122,245			108,059			363,713			343,792
Operating costs and expenses
Sales and marketing		30,708			27,503			96,370			85,630
Research and development		7,153			7,292			23,021			22,282
General and administrative		44,988			39,002			142,464			126,762
Amortization of intangible assets		18,770			20,167			56,444			60,681
Total operating costs and expenses		101,619			93,964			318,299			295,355
Operating income		20,626			14,095			45,414			48,437
Non operating income (expense):
Foreign exchange gains		8,062			2,196			5,918			10,277
Interest and other income, net		279			380			840			472
Gain on sale of business		—			—			28,144			—
Interest expense		(18,209	)		(19,785	)		(56,392	)		(59,947	)
Loss on extinguishment of debt		—			—			(355	)		(2,432	)
Total non operating loss		(9,868	)		(17,209	)		(21,845	)		(51,630	)
Income (loss) before income taxes		10,758			(3,114	)		23,569			(3,193	)
Provision for income taxes		8,393			3,070			17,328			10,016
Net income (loss)	$	2,365		$	(6,184	)	$	6,241		$	(13,209	)
Other comprehensive loss - foreign currency translation adjustments		(12,169	)		(2,479	)		(6,263	)		(20,796	)
Comprehensive loss	$	(9,804	)	$	(8,663	)	$	(22	)	$	(34,005	)
Net income (loss) per share:
Basic	$	0.02		$	(0.05	)	$	0.04		$	(0.10	)
Diluted	$	0.02		$	(0.05	)	$	0.04		$	(0.10	)
Weighted-average shares outstanding used in computing per share amounts:
Basic		148,131,135			131,104,859			147,215,180			127,507,314
Diluted		148,520,974			131,104,859			147,257,092			127,507,314

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cision Ltd. and its Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share and per share amounts)

(Unaudited)

	Share Capital				Additional			Accumulated Other			Accumulated			Total Stockholders’
	Shares		$		Paid-in Capital			Comprehensive Loss			Deficit			Equity (Deficit)
Balances at December 31, 2017		122,634,922	$	12	$	771,813		$	(35,111	)	$	(420,345	)	$	316,369
Adoption of new accounting standards		—		—		—			(986	)		4,762			3,776
Issuance of shares for acquisition		1,735,269		—		20,144			—			—			20,144
Vesting of RSU’s		375		—		—			—			—			—
Equity-based compensation expense		—		—		1,341			—			—			1,341
Net loss		—		—		—			—			(442	)		(442	)
Foreign currency translation adjustments		—		—		—			7,075			—			7,075
Balances at March 31, 2018		124,370,566	$	12	$	793,298		$	(29,022	)	$	(416,025	)	$	348,263
Conversion of warrants to common stock		6,342,989		1		(1	)		—			—			—
Equity-based compensation expense		—		—		868			—			—			868
Net loss		—		—		—			—			(6,583	)		(6,583	)
Foreign currency translation adjustments		—		—		—			(25,392	)		—			(25,392	)
Balances at June 30, 2018		130,713,555	$	13	$	794,165		$	(54,414	)	$	(422,608	)	$	317,156
Issuance of earn-out shares		2,000,000		—		—			—			—			—
Equity-based compensation expense		—		—		1,503			—			—			1,503
Net loss		—		—		—			—			(6,184	)		(6,184	)
Foreign currency translation adjustments		—		—		—			(2,479	)		—			(2,479	)
Balances at September 30, 2018		132,713,555	$	13	$	795,668		$	(56,893	)	$	(428,792	)	$	309,996

Balances at December 31, 2018		132,716,541	$	13	$	797,222		$	(68,941	)	$	(439,977	)	$	288,317
Issuance of shares for acquisitions		15,591,186		2		182,246			—			—			182,248
Vesting of RSU’s		375		—		—			—			—			—
Exercise of stock options		20,625		—		264			—			—			264
Equity-based compensation expense		—		—		2,081			—			—			2,081
Net income		—		—		—			—			11,634			11,634
Foreign currency translation adjustments		—		—		—			6,851			—			6,851
Balances at March 31, 2019		148,328,727	$	15	$	981,813		$	(62,090	)	$	(428,343	)	$	491,395
Vesting of RSU’s		—		—		—			—			—			—
Exercise of stock options		22,500		—		288			—			—			288
Equity-based compensation expense		—		—		2,562			—			—			2,562
Net loss		—		—		—			—			(7,758	)		(7,758	)
Foreign currency translation adjustments		—		—		—			(945	)		—			(945	)
Balances at June 30, 2019		148,351,227	$	15	$	984,663		$	(63,035	)	$	(436,101	)	$	485,542
Vesting of RSU’s		81,960		—		(121	)		—			—			(121	)
Exercise of stock options		—		—		—			—			—			—
Issuance of shares from ESPP		45,348		—		315			—			—			315
Equity-based compensation expense		—		—		3,507			—			—			3,507
Net income		—		—		—			—			2,365			2,365
Foreign currency translation adjustments		—		—		—			(12,169	)		—			(12,169	)
Balances at September 30, 2019		148,478,535	$	15	$	988,364		$	(75,204	)	$	(433,736	)	$	479,439

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cision Ltd. and its Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2019				2018
Cash flows from operating activities
Net income (loss)	$		6,241		$		(13,209	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			93,709				100,186
Non-cash interest charges and amortization of debt discount and deferred financing costs			7,426				10,158
Equity-based compensation expense			8,206				3,713
Provision for doubtful accounts			4,579				3,972
Deferred income taxes			(332	)			3,437
Unrealized foreign currency gains			(6,528	)			(10,338	)
Gain on sale of business			(28,144	)		—
Payment of contingent consideration			(4,296	)		—
Other		—					86
Changes in operating assets and liabilities, net of effects of acquisitions and disposal:
Accounts receivable			609				967
Prepaid expenses and other current assets			(7,568	)			(848	)
Other assets			(976	)			(726	)
Accounts payable			(4,889	)			(1,721	)
Accrued compensation and benefits			3,229				(321	)
Other accrued expenses			(16,944	)			(7,320	)
Deferred revenue			11,658				1,767
Other liabilities and net change in operating leases			1,488				(14	)
Net cash provided by operating activities			67,468				89,789
Cash flows from investing activities
Purchases of property and equipment			(8,774	)			(10,325	)
Software development costs			(22,531	)			(12,026	)
Acquisitions of businesses, net of cash and restricted cash acquired of $6,068 and $2,711			(148,541	)			(66,463	)
Proceeds from disposal of business			44,865				—
Other			23				5
Net cash used in investing activities			(134,958	)			(88,809	)
Cash flows from financing activities
Proceeds from revolving credit facility			40,000				—
Repayment of revolving credit facility			(40,000	)			—
Proceeds from term credit facility, net of debt discount of $1,013			73,987				—
Repayments of term credit facility			(10,471	)			(59,989	)
Payments of deferred financing costs			(1,619	)			(294	)
Proceeds from the exercise of stock options			552				—
Payment of contingent consideration			(3,695	)			(2,873	)
Net cash provided by (used in) financing activities			58,754				(63,156	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(1,104	)			(2,286	)
Decrease in cash, cash equivalents, and restricted cash			(9,840	)			(64,462	)
Cash, cash equivalents, and restricted cash
Beginning of period			104,769				148,654
End of period	$		94,929		$		84,192

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents	$		94,929		$		84,192
Restricted cash, included in prepaid expenses and other current assets			—				—
Total cash, cash equivalents, and restricted cash	$		94,929		$		84,192

Supplemental disclosure of cash flows information
Issuance of shares for acquisitions	$		182,248		$		20,143

The accompanying notes are an integral part of these condensed consolidated financial statements.

1. Organization

Cision Ltd., a Cayman Islands company and its subsidiaries (collectively, “Cision”, or the “Company”), is a leading provider of cloud-based software, media intelligence and distribution services, and other related professional services to the marketing and public relations industry. Communications professionals use the Company’s products and services to identify and connect with media influencers, manage industry relationships, create and distribute content, monitor media coverage, perform advanced analytics and measure the effectiveness of their campaigns. The Company has primary offices in Chicago, Illinois, Beltsville, Maryland, Ann Arbor, Michigan, New York, New York, Cleveland, Ohio, Austin, Texas, and Albuquerque, New Mexico with additional offices in the United States, as well as Australia, Brazil, Bulgaria, Canada, China, Denmark, France, Germany, Hong Kong, Hungary, India, Indonesia, Malaysia, Mexico, Portugal, Singapore, South Korea, Sweden, Taiwan, the United Kingdom, and Vietnam.

As described in the Company’s 2018 consolidated financial statements included in its Annual Report on Form 10-K, on March 19, 2017, the Company entered into a definitive agreement with Capitol Acquisition Corp. III (NASDAQ: CLAC; “Capitol”), a public investment vehicle, whereby the parties agreed to merge, resulting in the Company becoming a publicly listed company. This merger closed on June 29, 2017.

2. Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10‑Q. Accordingly, they do not include all the information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair statement have been included. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP. Operating results for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any other period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10‑K filed with the U.S. Securities and Exchange Commission ("SEC") on March 1, 2019.

Certain prior period amounts have been adjusted to conform with the adoption of Accounting Standard Update (“ASU”) 2014‑09, Revenue from Contracts with Customers (Topic 606 or the “new revenue standard”) during the fourth quarter of 2018, effective as of January 1, 2018.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to the allowance for doubtful accounts, software development costs, useful lives of property, equipment and internal use software, intangible assets and goodwill, contingent liabilities, and fair value of equity-based awards and income taxes. The Company bases its estimates on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities as well as the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates.

Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value pursuant to a fair value hierarchy based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:

Level 1

Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2

Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3

Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

Revenue Recognition

The Company accounts for revenue contracts with customers by applying the requirements of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (Topic 606), which includes the following steps:

•

Identification of the contract, or contracts with a customer.

•

Identification of the performance obligations in the contract.

•

Determination of the transaction price.

•

Allocation of the transaction price to the performance obligations in the contract.

•

Recognition of the revenue when, or as, the Company satisfies a performance obligation.

The Company derives its revenue from access to its cloud based technology platform and related media management and analysis services sold on a subscription basis. Revenue is also derived from the distribution of press releases on both a subscription basis and separately from non-subscription arrangements. Dependent on the nature of the distribution contract with the customer, the Company recognizes revenue ratably over the term of the subscription contract, or on a per-transaction basis when the press releases are made available to the public.

Subscription services include access to the Company’s software platform and associated hosting services, content and content updates, customer support and media management and analysis services. Subscription services are recognized ratably over the contractual period that the services are delivered, beginning on the date in which such service is made available to the customer. Subscription agreements are typically one year in length and are non-cancelable, though customers have the right to terminate their agreements if the Company materially breaches its obligations under the agreement. Software subscription agreements do not provide customers the right to take possession of the software at any time. The Company does not charge customers an upfront fee for use of the platform and implementation activities are insignificant and not subject to a separate fee. In certain cases, the Company charges annual membership fees which are recognized ratably over the one-year membership period.

The Company accounts for a contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified and payment terms can be identified, the contract has commercial substance and it is probable that the Company will collect substantially all of the consideration. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of the promised service to a customer. The transaction price for subscription arrangements and services is generally fixed at contract inception. The Company’s standard payment terms are generally net 30 days. For transaction-based services, which predominantly comprise press release distributions, customers are invoiced in the month the release is made available to the public.

In the event that a customer arrangement contains multiple services, the Company determines whether such goods or services are distinct performance obligations that should be accounted for separately in the arrangement. When arrangements contain multiple performance obligations, further evaluation is usually not required given such performance obligations are generally recognized over time using the same measure of progress and thus, are accounted for as a single performance obligation. Otherwise, when allocating the transaction price in the arrangement, the Company uses the estimated standalone selling price of each distinct performance obligation. In order to estimate the standalone selling prices, the Company relies on the price charged for stand-alone sales, expected cost plus margin and adjusted market assessment approaches. Revenue is then recognized over the pattern of performance as each obligation is satisfied as discussed above.

As of September 30, 2019, the Company’s remaining performance obligations were $162.8 million, approximately 99.4% of which is expected to be recognized as revenue over the next twelve months and the remainder thereafter. During the nine months ended September 30, 2019, the Company recognized $118.3 million in revenue that was recorded as deferred revenue as of December 31, 2018.

Recent Accounting Pronouncements

New Accounting Pronouncements Adopted

We adopted ASU No. 2016‑02, Leases (Topic 842), as of January 1, 2019, using the effective date method for the modified retrospective approach. Comparative periods were not restated. In addition, the Company elected the package of practical expedients permitted under the transaction guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. The Company also elected the practical expedients pertaining to short-term lease exemptions at transition and going forward. For office leases beginning in 2019 and later, the Company accounts for lease components (components of a contract for which the Company economically benefits from their use and is not highly interrelated with other right of use assets underlying the contract such as base rent) separately from the non-lease components (e.g., common-area maintenance costs). For datacenter leases beginning in 2019 and later, the Company elected the practical expedient to combine its lease and non-lease components that meet the defined criteria and will account for the lease component under Topic 842.

Topic 842 includes multiple changes with one of the most significant impacts being the addition of a right-of-use (“ROU”) asset and a lease liability to the balance sheet for operating leases. A ROU asset represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. An additional change under Topic 842 is the lease term evaluation. Under Topic 842, a leasee shall extend the lease term beyond the original contract term if the company is reasonably certain to exercise their renewal option.

Upon adoption of the new standard, the Company recognized total ROU assets of approximately $66.8 million, total lease liabilities of approximately $78.9 million, and corresponding adjustments to prepaid expenses of $(0.2) million, deferred rent included in other accrued expenses of $1.8 million, and deferred rent included in other liabilities of $10.5 million on the consolidated balance sheets as of as of January 1, 2019. The standard did not materially impact our consolidated net earnings and had no impact on cash flows. The adoption of the new standard also resulted in significant additional disclosures regarding the Company’s leasing activities, as discussed in Note 5.

In February 2018, the FASB issued ASU 2018‑02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which will allow a reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Act”) that are stranded in accumulated other comprehensive income. This ASU also requires certain disclosures about stranded tax effects; however, it does not change the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations. This ASU is effective on January 1, 2019, with early adoption permitted. It must be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. The Company adopted ASU 2018‑02 during the nine months ended September 30, 2019 and it did not have a material impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Effective

In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820), which modifies the disclosure requirements related to fair value measurements. The ASU eliminates the requirement to disclosure and amount and reasons for transfers between Level 1 and Level 2 fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. Entities will now be required to disclose the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018‑14, Compensation – Retirement Benefits- Defined Benefit Plans – General (Subtopic 715‑20), which modifies the disclosure requirements for defined benefit pensions and other postretirement plans. The ASU adds and removes disclosure requirements from the current standard in an effort to improve the effectiveness of retirement benefit disclosures. The ASU is effective for fiscal years ended after December 15, 2020, and early adoption is permitted. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018‑15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350‑40), which clarifies the accounting for costs of implementing a cloud computing service arrangement. The ASU requires companies to capitalize the implementation costs associated with cloud computing service arrangements, regardless as to whether the contract contains a license. The ASU is effective for annual periods in 2020, including interim periods. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.

3. Business Combinations and Dispositions

Purchase of Prime

On January 23, 2018, the Company completed its acquisition of PRIME Research (“Prime”). The purchase price was approximately €75.7 million ($94.1 million) and consisted of approximately €53.1 million ($65.4 million) in cash consideration, the issuance of approximately 1.7 million shares of common stock valued at €16.4 million ($20.1 million), and up to €6.2 million ($8.6 million) of deferred payments due within 18 months. The Company has the discretion to pay up to €2.5 million ($3.1 million) of the deferred payments with common stock. The acquisition of Prime expanded the Company’s comprehensive data-driven offerings that help communications professionals identify influencers, craft meaningful campaigns, and attribute business value to those efforts. At the date of the acquisition, Prime had over 700 employees with offices in Brazil, China, Germany, India, Switzerland, the United Kingdom, and the United States.

Total acquisition costs related to the Prime acquisition were $5.4 million of which $2.3 million were incurred during the nine months ended September 30, 2018 and the rest were incurred in 2017. Total acquisition costs were included in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss. The acquisition was accounted for under the purchase method of accounting. The operating results are included in the accompanying condensed consolidated financial statements from January 23, 2018.

The purchase price has been allocated to the assets acquired and liabilities assumed based on fair values as of the acquisition date.

The following table summarizes the allocation of the purchase price by the Company to the fair value of the assets and liabilities of Prime. The identifiable intangible assets include the trade name, customer relationships and purchased technology and are being amortized over three to eleven years on an accelerated basis. The Company completed the purchase price allocation in January 2019.

(in thousands)
Cash and cash equivalents	$	2,711
Accounts receivable, net		8,186
Prepaid and other assets		1,320
Property, equipment and software, net		1,207
Trade name		1,436
Customer relationships		17,903
Purchased technology		9,881
Goodwill		57,465
Total assets acquired		100,109
Accounts payable, accrued liabilities, and other liabilities		(5,627	)
Deferred revenue		(426	)
Total liabilities assumed		(6,053	)
Net assets acquired	$	94,056

Approximately $39.6 million of goodwill is deductible for tax purposes. The excess of the purchase price over the total net identifiable assets has been recorded as goodwill which is primarily attributable to synergies expected from the expanded technology and service capabilities from the integrated business as well as the value of the assembled workforce in accordance with GAAP.

Other 2018 Acquisition

During the third quarter of 2018, the Company purchased certain immaterial technology and development assets to expand its products and services offerings, and the results of this acquisition have been included in the consolidated results from the acquisition date. The fair value for the assets acquired and liabilities assumed relate to certain identifiable intangible assets and goodwill.

Purchase of Falcon

On January 3, 2019, the Company completed its acquisition of Falcon.io (“Falcon”). The purchase price was approximately €103.4 million ($119.0 million) and consisted of approximately €53.6 million ($61.7 million) in cash consideration, the issuance of approximately 5.1 million ordinary shares valued at €49.8 million ($57.3 million), and up to €5.2 million ($6.0 million) of deferred payments due within 12 months in cash of €2.4 million ($2.8 million) and ordinary shares of €2.8 million ($3.2 million). The cash portion of the consideration was funded with a combination of cash on hand and borrowings under the Company’s Revolving Credit Facility. The Company drew approximately $40.0 million under its Revolving Credit Facility in connection with the closing of the Falcon acquisition, all of which was repaid during the nine months ended September 30, 2019. The acquisition of Falcon solidifies the Company’s market leadership in driving the future of earned media management, moving beyond the tactical nature of PR point solutions. At the date of the acquisition, Falcon had over 250 employees with offices in Denmark, Germany, Hungary, Australia, Bulgaria, and the United States.

Total acquisition costs related to the Falcon acquisition were $2.4 million of which $0.4 million were incurred during the year ended December 31, 2018 and are included in general and administrative expense in the condensed consolidated statements of operations and comprehensive income. The acquisition was accounted for under the purchase method of accounting. The operating results are included in the accompanying condensed consolidated financial statements from January 3, 2019.

The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on estimated fair values as of the acquisition date.

The following table summarizes the preliminary allocation of the purchase price by the Company to the fair value of the assets and liabilities of Falcon. The amounts related to taxes and intangible assets shown below are preliminary and subject to adjustment as additional information is obtained about the facts and circumstances that existed at the date of acquisition. The identifiable intangible assets include the trade name, customer relationships and purchased technology and are being amortized over three to seven years on an accelerated basis. The Company expects to complete the purchase price allocation on or before January 3, 2020.

(in thousands)
Cash and cash equivalents	$		3,492
Accounts receivable, net			5,575
Prepaid and other assets			1,113
Property, equipment and software, net		204
Trade name		483
Customer relationships			33,825
Purchased technology			4,940
Goodwill			87,674
Total assets acquired			137,306
Accounts payable and accrued liabilities			(7,641	)
Deferred revenue			(7,627	)
Deferred taxes			(3,048	)
Total liabilities assumed			(18,316	)
Net assets acquired	$		118,990

Goodwill is not deductible for tax purposes. The preliminary purchase price is subject to customary post-closing adjustments. The excess of the purchase price over the total net identifiable assets has been recorded as goodwill which is primarily attributable to synergies expected from the expanded technology and service capabilities from the integrated business as well as the value of the assembled workforce in accordance with GAAP.

Purchase of TrendKite

On January 23, 2019, the Company completed its acquisition of TrendKite. The purchase price was approximately $219.0 million and consisted of approximately $94.1 million in cash consideration, the issuance of approximately 10.3 million ordinary shares valued at $124.9 million, and up to $3.2 million of deferred payments due in 12 months in cash of approximately $1.3 million and ordinary shares of approximately $1.9 million. The cash portion of the consideration was funded with a combination of cash on hand and additional borrowing under the First Lien Dollar Credit Facility, as disclosed in Note 6. The acquisition of TrendKite will enhance the ability of the Company’s customer base to demonstrate and measure the business impact of their earned media. At the date of acquisition, TrendKite had over 200 employees with offices in the United States and the United Kingdom.

Total acquisition costs related to the TrendKite acquisition were $3.8 million of which $0.9 million were incurred during the year ended December 31, 2018 and are included in general and administrative expense in the condensed consolidated statements of operations and comprehensive income. The acquisition was accounted for under the purchase method of accounting. The operating results are included in the accompanying condensed consolidated financial statements from January 23, 2019.

The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on estimated fair values as of the acquisition date.

The following table summarizes the preliminary allocation of the purchase price by the Company to the fair value of the assets and liabilities of TrendKite. The amounts related to taxes and intangible assets shown below are preliminary and subject to adjustment as additional information is obtained about the facts and circumstances that existed at the date of acquisition. The identifiable intangible assets include the trade name, customer relationships and purchased technology and are being amortized over three to eleven years on an accelerated basis. The Company expects to complete the purchase price allocation on or before January 23, 2020.

(in thousands)
Cash and cash equivalents	$		1,976
Accounts receivable, net			7,714
Prepaid and other assets			1,676
Property, equipment and software, net		820
Trade name		380
Customer relationships			31,930
Purchased technology			4,915
Goodwill			185,108
Total assets acquired			234,519
Accounts payable and accrued liabilities			(4,611	)
Deferred revenue			(8,924	)
Deferred taxes			(2,025	)
Total liabilities assumed			(15,560	)
Net assets acquired	$		218,959

Sale of iContact

On January 22, 2019, the Company sold its email marketing business for approximately $49.3 million of cash consideration, net of working capital adjustments, with up to an additional $4.0 million in cash based upon meeting certain business performance measures over the next 12 months. The fair value of the contingent consideration was $1.9 million based on the net present value of future cash flows using internal models. The Company used the proceeds to pay down the Revolving Credit Facility.

Supplemental Unaudited Pro Forma Information

The acquired entities of Prime, Falcon and TrendKite together contributed revenue of $23.8 million and $11.8 million for the three months ended September 30, 2019 and 2018, respectively and $68.4 million and $34.0 million for the nine months ended September 30, 2019 and 2018, respectively. Net income or loss from these acquisitions for the same period is impracticable to determine due to the extent of integration activities.

The unaudited pro forma information below gives effect to the acquisition of Prime as if it had occurred as of January 1, 2017 and Falcon and TrendKite as if they had occurred as of January 1, 2018. The pro forma results exclude the other acquisition in 2018 discussed above, as it was deemed not material.

The pro forma results presented below show the impact of the acquisitions and related costs as well as the increase in interest expense related to acquisition-related debt.

	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands, except per share data)	2019		2018			2019		2018
Revenue	$	189,395	$	191,637		$	574,231	$	585,763
Net income (loss)		3,891		(12,915	)		13,072		(32,561	)
Net income (loss) per share - basic		0.03		(0.09	)		0.09		(0.23	)
Net income (loss) per share - diluted		0.03		(0.09	)		0.09		(0.23	)

4. Goodwill and Intangibles

Changes in the carrying amounts of goodwill since December 31, 2018 consisted of the following:

(in thousands)
Balance as of December 31, 2018	$	1,171,859
Acquisition of Falcon		87,674
Acquisition of TrendKite		185,108
Sale of iContact		(21,289	)
Effects of foreign currency		(11,706	)
Balance as of September 30, 2019	$	1,411,646

Definite-lived intangible assets consisted of the following at September 30, 2019 and December 31, 2018:

	September 30, 2019
	Gross		Foreign						Net
	Carrying		Currency			Accumulated			Carrying
(in thousands)	Amount		Translation			Amortization			Amount
Trade names and brand	$	370,873	$	(8,987	)	$	(141,770	)	$	220,116
Customer relationships		357,958		(22,927	)		(200,869	)		134,162
Purchased technology		138,746		(8,392	)		(107,772	)		22,582
Balances at September 30, 2019	$	867,577	$	(40,306	)	$	(450,411	)	$	376,860

	December 31, 2018
	Gross		Foreign						Net
	Carrying		Currency			Accumulated			Carrying
(in thousands)	Amount		Translation			Amortization			Amount
Trade names and brand	$	372,010	$	(8,143	)	$	(115,954	)	$	247,913
Customer relationships		321,862		(18,967	)		(203,031	)		99,864
Purchased technology		145,951		(7,408	)		(109,174	)		29,369
Balances at December 31, 2018	$	839,823	$	(34,518	)	$	(428,159	)	$	377,146

Weighted-average useful life at September 30, 2019	Years
Trade names and brand		11.1
Customer relationships		6.2
Purchased technology		2.9

Future expected amortization of intangible assets at September 30, 2019 is as follows:

(in thousands)
Remainder of 2019	$	24,067
2020		84,202
2021		65,990
2022		48,150
2023		35,024
Thereafter		119,427
	$	376,860

5. Leases

The Company has various non-cancelable operating leases, primarily related to office real estate and datacenters, that expire through 2035 and generally contain renewal options for up to five years. Under ASC 842, the lease term includes options to extend or terminate the lease when the Company is reasonably certain that it will exercise the option. The Company will monitor events or changes in circumstances that impact the timing or amount of future lease payments and will adjust the lease liability and corresponding ROU asset as necessary. For office leases beginning in 2019 and later, the Company accounts for lease components (components of a contract for which the Company economically benefits from their use and is not highly interrelated with other right of use assets underlying the contract such as base rent) separately from the non-lease components (e.g., common-area maintenance costs). For datacenter leases beginning in 2019 and later, the Company elected the practical expedient to combine its lease and non-lease components that meet the defined criteria and will account for the lease component under Topic 842. The Company has no significant financing leases. Lastly, the Company has not entered into any future office space leases that will create significant rights and obligations for the Company.

At inception of a contract, the Company determines if the contract contains a lease based on requirements of ASC 842. If a lease with a term greater than 1 year is identified, the Company will add a ROU asset and lease liability to the balance sheet. The Company has elected the practical expedient and expenses all leases with a contract term of 1 year or less. The Company recognizes a lease liability based on the net present value of total lease payments which utilizes an implicit discount rate based on the Company’s collateralized borrowing rate placed on a yield curve. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. To derive the ROU asset, the Company makes required adjustments, such as indirect costs and prepaid or deferred balances, to the lease liability. The Company recognizes operating lease expense on a straight-line basis over the term of the lease within operating expenses and cost of revenue.

	Three months ended			Nine months ended
Lease Cost (in thousands)	September 30, 2019			September 30, 2019
Operating lease cost	$	4,780		$	14,337
Short-term lease cost		822			2,487
Variable lease cost		1,376			5,503
Sublease income		(249	)		(685	)
Total lease cost	$	6,729		$	21,642

Operating leases (thousands)	Classification	September 30, 2019

Operating right-of-use assets	Operating right-of-use assets	$		59,993

Operating lease liabilities (current)	Operating lease liabilities (current)			14,139
Operating lease liabilities (net of current portion)	Operating lease liabilities (net of current portion)			59,514
Total operating lease liabilities		$		73,653

Weighted average remaining lease term			6.7 years
Weighted average discount rate				5.3	%

The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2019 (in thousands):

Remainder of 2019	$	4,617
2020		17,043
2021		14,373
2022		12,400
2023		8,245
Thereafter		31,907
Total lease payments		88,585
Less: imputed interest		(14,932	)
Present value of lease liabilities	$	73,653

As previously disclosed in the Company’s 2018 Form 10‑K and under the previous lease accounting standard, future minimum lease payments under non-cancelable operating leases as of December 31, 2018 were as follows (in thousands):

2019	$	16,288
2020		15,682
2021		13,416
2022		12,494
2023		8,806
Thereafter		27,773
Total future minimum payments	$	94,459

	Nine months ended
(in thousands)	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	13,459
ROU assets obtained in exchange for new operating lease liabilities
Operating leases	$	5,250

6. Debt

Debt consisted of the following at September 30, 2019 and December 31, 2018:

	September 30, 2019
(in thousands)	Short-Term		Long-Term			Total
2017 First Lien Credit Facility	$	13,881	$	1,292,625		$	1,306,506
Unamortized debt discount and issuance costs		—		(30,699	)		(30,699	)
Balances at September 30, 2019	$	13,881	$	1,261,926		$	1,275,807

	December 31, 2018
(in thousands)	Short-Term		Long-Term			Total
2017 First Lien Credit Facility	$	13,210	$	1,241,253		$	1,254,463
Unamortized debt discount and issuance costs		—		(35,493	)		(35,493	)
Balances at December 31, 2018	$	13,210	$	1,205,760		$	1,218,970

2017 First Lien Credit Facility

On August 4, 2017, the Company entered into a refinancing amendment and incremental facility amendment (the “2017 First Lien Credit Facility”) to the 2016 First Lien Credit Facility, with Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and a syndicate of commercial lenders. The 2017 First Lien Credit Facility provided for a tranche of refinancing term loans which refinanced the term loans under the 2016 First Lien Credit Facility in full and provided for additional term loans of $131.2 million. Upon effectiveness of the 2017 First Lien Credit Facility, the 2017 First Lien Credit Facility consists of:

(i)

a revolving credit facility, which permits borrowings and letters of credit of up to $75.0 million (the “2017 Revolving Credit Facility”), of which up to $25.0 million may be used or issued as standby and trade letters of credit;

(ii)

a $960.0 million Dollar-denominated term credit facility (the “2017 First Lien Dollar Term Credit Facility”); and

(iii)

a €250.0 million Euro-denominated term credit facility (the “2017 First Lien Euro Term Credit Facility”) and, together with the 2017 First Lien Dollar Term Credit Facility, the “2017 First Lien Term Credit Facility” and collectively with the 2017 Revolving Credit Facility, the “2017 First Lien Credit Facility”).

The Company used the proceeds from the 2017 First Lien Term Credit Facility to repay all amounts then outstanding under the 2016 First Lien Credit Facility, all amounts outstanding under the 2016 Second Lien Credit Facility, pay all related fees and expenses, and retained remaining cash for general corporate purposes. The Company terminated the 2016 Second Lien Credit Facility in connection with establishing the 2017 First Lien Credit Facility.

On December 14, 2017, the Company amended the 2017 First Lien Credit Facility to borrow an additional $75.0 million of 2017 First Lien Dollar Term Credit Facility. The Company used the money for its acquisition of Prime Research Group.

On February 8, 2018, the Company completed its debt repricing transaction on its 2017 First Lien Credit Facility. The margins on the term loans under the 2017 First Lien Credit Facility were lowered for the alternate base rate, LIBOR rate and EURIBOR rate by 1.00%, 1.00% and 0.75%, respectively. The 2017 Revolver Credit Facility margins were lowered for the alternate base rate, LIBOR rate and EURIBOR rate by 0.75%, 0.75% and 0.50%, respectively. The Company incurred approximately $2.0 million in financing costs in connection with the February 2018 repricing of the 2017 First Lien Credit Facility of which $0.1 million are being amortized using the effective interest method. As a result of this transaction, the Company recorded a loss on extinguishment of $2.4 million.

On October 22, 2018, the Company completed another debt repricing transaction on its 2017 First Lien Credit Facility. The margins for the term loans under the Company’s 2017 First Lien Credit Facility were lowered for the alternate base rate, LIBOR rate and EURIBOR rate each by 0.50%. The 2017 Revolving Credit Facility margins were lowered for the alternate base rate, LIBOR rate, and EURIBOR rate each by 0.50%. The Company incurred approximately $2.3 million in financing costs in connection with the October 2018 repricing of the 2017 First Lien Credit Facility, of which $0.3 million are being amortized using the effective interest method. As a result of this transaction, the Company recorded a loss on extinguishment of $7.0 million.

On December 28, 2018, the Company entered into an Incremental Facility Amendment to increase the revolving credit facility by $25.0 million from $75.0 million to $100.0 million. The Company drew approximately $40.0 million of dollar borrowings under its Revolving Credit Facility in connection with the closing of the Falcon acquisition, all of which was repaid during the three months ended March 31, 2019.

On January 11, 2019, the Company amended the 2017 First Lien Facility to borrow an additional $75.0 million of the 2017 First Lien Dollar Term Credit Facility. The Company used the money for its acquisition of TrendKite. As a result of this transaction, the Company recorded a loss on extinguishment of $0.4 million.

The obligations under the 2017 First Lien Credit Facility are collateralized by substantially all of the assets of Cision’s subsidiary, Canyon Companies S.à.r.l. and each of its subsidiaries organized in the United States (or any state thereof), the United Kingdom, the Netherlands, Luxembourg, and Ireland, subject to certain exceptions.

Interest is charged on U.S. dollar borrowings under the 2017 First Lien Credit Facility, at the Company’s option, at a rate based on (1) the adjusted LIBOR (a rate equal to the London interbank offered rate adjusted for statutory reserves) or (2) the alternate base rate (a rate that is highest of the (i) Deutsche Bank AG, New York Branch’s prime lending rate, (ii) the overnight federal funds rate plus 50 basis points or (iii) the one-month adjusted LIBOR plus 1%), in each case, plus an applicable margin.

The margin applicable to loans under the 2017 First Lien Dollar Term Credit Facility bearing interest at the alternate base rate is 3.25%; the margin applicable to loans under the 2017 First Lien Dollar Term Credit Facility bearing interest at the adjusted LIBOR is 4.25%, provided that each such rate is reduced by 25 basis points if the first lien net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility is less than or equal to 4.00:1.00 at the end of the most recent fiscal quarter. Interest is charged on Euro borrowings under the 2017 First Lien Credit Facility at a rate based on the adjusted EURIBOR (a rate equal to the Euro interbank offered rate adjusted for statutory reserves), plus an applicable margin. The margin applicable to loans under the 2017 First Lien Euro Term Credit Facility bearing interest at the adjusted LIBOR is 4.25%, provided that each such rate is reduced by 25 basis points if the first lien net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility is less than or equal to 4.00:1.00 at the end of the most recent fiscal quarter. As of September 30, 2019, the applicable interest rate under the 2017 First Lien Dollar Term Credit Facility and the 2017 First Lien Euro Term Credit Facility was 4.85% and 3.00%, respectively.

The margin applicable to loans under the 2017 Revolving Credit Facility bearing interest at the alternate base rate, the adjusted LIBOR, and the adjusted Euro interbank offered rate bear interest at rates of 3.00%, 4.00%, and 4.00% respectively; provided that each such rate is reduced by 25 basis points if the first lien net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility is less than or equal to 4.00:1.00 at the end of the most recent fiscal quarter. The maturity dates of the 2017 Revolving Credit Facility and the 2017 First Lien Term Credit Facility are June 16, 2022 and June 16, 2023, respectively.

As of September 30, 2019, the Company had no outstanding borrowings and $1.9 million of outstanding letters of credit under the 2017 Revolving Credit Facility and $1,306.5 million outstanding under the 2017 First Lien Credit Facility.

The Company began to make quarterly principal payments starting December 31, 2017 under each of the 2017 First Lien Dollar Term Credit Facility of $2.8 million and the 2017 First Lien Euro Term Credit Facility of €0.6 million (which amount may be reduced by the application of voluntary and mandatory prepayments pursuant to the terms of the 2017 First Lien Credit Facility), with the remaining balance due June 16, 2023.

The Company may also be required to make certain mandatory prepayments of the 2017 First Lien Credit Facility out of excess cash flow and upon the receipt of proceeds of asset sales and certain insurance proceeds (in each case, subject to certain minimum dollar thresholds and rights to reinvest the proceeds as set forth in the 2017 First Lien Credit Facility).

The 2017 First Lien Credit Facility includes a total net leverage financial maintenance covenant. Such covenant requires that, as of the last day of each fiscal quarter, the total net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility cannot exceed the applicable ratio set forth in the 2017 First Lien Credit Facility for such quarter (subject to certain rights to cure any failure to meet such ratio as set forth in the 2017 First Lien Credit Facility). The 2017 First Lien Credit Facility is also subject to certain customary affirmative covenants and negative covenants. Under the 2017 First Lien Credit Facility, the Company’s subsidiaries have restrictions on making cash dividends, subject to certain exceptions, including that the subsidiaries are permitted to declare and pay cash dividends: (a) in any amount, so long as the total net leverage ratio under the 2017 First Lien Credit Facility would not exceed 3.75 to 1.00 after making such payment; (b) in an amount per annum not greater than 6.0% of (i) the market capitalization of the Company’s common stock (based on the average closing price of its shares during the 30 trading days preceding the declaration of such payment) plus (ii) the $305.2 million in proceeds we received in the business combination with Capitol; (c) in an amount that does not exceed the sum of (i) $20.0 million, plus (ii) 50% of consolidated net income of the Company’s subsidiaries from January 1, 2016 to the end of the most recent quarter plus (iii) certain other amounts set forth in the definition of “Available Amount” in the Company’s 2017 First Lien Credit Facility (provided that it may only include the amounts of consolidated net income described in clause (ii) if the Company’s total net leverage ratio would not exceed 5.00 to 1.00 after making such payment); and (d) in an amount that does not exceed the total net proceeds we receive from any public or private offerings of its common stock or similar equity interests. As of September 30, 2019, the Company was in compliance with these covenants.

The 2017 First Lien Credit Facility provides that an event of default will occur upon specified change of control events. “Change in Control” is defined to include, among other things, the failure by Cision Owner, its affiliates and certain other “Permitted Holders” to

beneficially own, directly or indirectly through one or more holding company parents of Cision, a majority of the voting equity of the borrower thereunder.

The fair value of the Company’s First Lien Credit Facility at September 30, 2019 and December 31, 2018 was $1,303.2 million and $1,210.5 million, respectively. The fair value of the Company’s First and Second Lien debt was considered Level 2 in the fair value hierarchy.

Future Minimum Principal Payments

Future minimum principal payments of debt as of September 30, 2019 are as follows:

(in thousands)
Remainder of 2019	$	3,471
2020		13,881
2021		13,881
2022		13,881
2023		1,261,392
	$	1,306,506

7. Stockholders’ Equity and Equity-Based Compensation

Preferred Stock

The Company is authorized to issue 20,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2019 and December 31, 2018, there are no shares of preferred stock issued or outstanding.

Common Stock

The Company is authorized to issue 480,000,000 shares of common stock with a par value of $0.0001 per share.

Equity-based compensation is classified in the condensed consolidated statements of operations and comprehensive loss in a manner consistent with the statements of operations’ classification of an employee’s salary and benefits as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2019		2018		2019		2018
Cost of revenue	$	124	$	151	$	341	$	376
Selling and marketing		343		192		970		416
Research and development		319		171		842		392
General and administrative		2,777		989		6,053		2,529
Total equity-based compensation expense	$	3,563	$	1,503	$	8,206	$	3,713

The 2017 Omnibus Incentive Plan

In June 2017, the Company adopted the 2017 Omnibus Incentive Plan (the “2017 Plan”). The 2017 Plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting or advisory services for the Company, are eligible for grants under the 2017 Plan.

The 2017 Plan reserved up to 9,100,000 shares of common stock of the Company for issuance in accordance with the plan’s terms, subject to certain adjustments. The purpose of the plan is to provide the Company’s officers, directors, employees and consultants who, by their position, ability and diligence are able to make important contributions to the Company’s growth and profitability, with an incentive to assist the Company in achieving its long-term corporate objectives, to attract and retain executive officers and other employees of outstanding competence and to provide such persons with an opportunity to acquire an equity interest in the Company. Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over one to four years based upon continuous service and expire ten years from the grant date. Restricted stock units can be settled in cash or stock and are granted with an exercise price equal to the market value of the Company’s common stock at the time of grant. Cash-settled restricted stock units qualify as liability awards and will be measured at fair value at the end of each reporting period. Conditions of the performance-based restricted stock units are based on achievement of pre-established performance goals and objectives within the next year and vest based on continuing employment. Conditions of the performance-based stock options are also based on achievement of pre-established performance goals and objectives within the next year, vest based on continuing employment, and have an expiration of ten years.

The Company estimated the fair value of employee stock options using the Black-Scholes option pricing model. The fair values of stock options granted under the 2017 Plan were estimated using the following assumptions:

	Nine months ended September 30, 2019
Stock price volatility		42.0	%
Expected term (years)		6.3
Risk-free interest rate		2.5	%
Dividend yield		—	%

A summary of employee stock option activity for the nine months ended September 30, 2019 under the Company’s 2017 Plan is presented below:

				Weighted-		Weighted-
				Average		Average		Aggregate
				Exercise		Contractual		Intrinsic
	Number of			Price per		Term		Value
	Options			Share		(Years)		(thousands)
Options outstanding as of December 31, 2018		2,112,500		$	14.43		9.3		—
Granted		1,070,000			12.32		—
Exercised		(43,125	)		12.78		—
Forfeited		(950,875	)		13.85		—
Options outstanding as of September 30, 2019		2,188,500		$	13.69		9.0	$	—
Options vested as of September 30, 2019		379,813		$	14.37		8.6	$	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the quoted closing price of the Company’s common stock as of September 30, 2019. The Company received $0.6 million in cash proceeds from the exercise of stock options during the nine months ended September 30, 2019 and no proceeds from the exercise of stock options during the three months ended September 30, 2019. No stock options were exercised during the nine months ended September 30, 2018.

A summary of equity-classified restricted stock units activity for the nine months ended September 30, 2019 under the Company’s 2017 Plan is presented below:

	Number of Shares			Weighted-Average
	Underlying			Grant Date
	Stock Awards			Fair Value
Restricted stock units outstanding as of December 31, 2018		326,394		$	15.28
Granted		4,117,980			10.20
Vested		(93,786	)		16.19
Forfeited		(135,000	)		14.02
Restricted stock units outstanding as of September 30, 2019		4,215,588		$	10.34

During the three months ending September 30, 2019, the Company granted 133,000 shares of cash-settled restricted stock units that remained outstanding at the end of the period. The weighted average fair value of the cash-settled restricted stock units at the grant date was $9.99 and $7.69 as of September 30, 2019. As of September 30, 2019, the Company had $42.0 million of unrecognized compensation expense related to the unvested portion of outstanding stock options and restricted stock units expected to be recognized on a straight-line basis over the weighted-average remaining service period of 3.2 years.

Employee Stock Purchase Plan

As of December 17, 2018, the Company commenced an Employee Stock Purchase Plan (“ESPP”) to allow eligible employees to have up to 10 percent of their annualized base salary withheld and used to purchase common stock, subject to a maximum of $10,000 worth of stock purchased in a calendar year. The price per share of the stock sold to Participants hereunder shall be the product of ninety percent (90%) multiplied by the lower of: (i) the Fair Market Value of such share on the Entry Date of the Option Period in which the Employee elects to become a participant; and (ii) the Fair Market Value of such share on the Exercise Date with respect to such Option Period: provided, however, that in no event shall the Option Price per share be less than the part value of the stock. The ESPP was approved by the Company’s shareholders in the third quarter of 2019. Activity under the ESPP was not significant for the nine months ended September 30, 2019.

8. Net Income (Loss) Per share

Basic net income (loss) per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. For the three and nine months ended September 30, 2019, the Company has excluded 2,000,000 earn out shares as the effect would be anti-dilutive. During the nine months ended September 30, 2018, all warrants were converted to 6,342,989 common shares. For the three and nine months ended September 30, 2018, the Company has excluded the potential effect of the warrants prior to their conversion, additional earn out shares, and the dilutive effect of stock options and restricted stock awards, as described in Note 7, in the calculation of diluted loss per share, as the effect would be anti-dilutive due to losses incurred. As a result, diluted income (loss) per common share is the same as basic income (loss) per common share for all periods presented below.

	Three months ended September 30,					Nine months ended September 30,
(in thousands, except share and per share data)	2019		2018			2019		2018
Numerator:
Net income (loss)	$	2,365	$	(6,184	)	$	6,241	$	(13,209	)
Denominator:
Weighted-average shares outstanding		148,131,135		131,104,859			147,215,180		127,507,314
Effect of dilutive common stock equivalents		389,839		—			41,912		—
Weighted-average shares outstanding		148,520,974		131,104,859			147,257,092		127,507,314

Net income (loss) per share - basic	$	0.02	$	(0.05	)	$	0.04	$	(0.10	)
Net income (loss) per share- diluted	$	0.02	$	(0.05	)	$	0.04	$	(0.10	)

9. Income Taxes

The provision for income taxes is based on the current estimate of the annual effective tax rate adjusted to reflect the tax impact of items discrete to the fiscal period. The annual effective tax rate calculation excludes subsidiaries with pre-tax losses for which no tax benefit can be recognized. The Company estimates its annual effective tax rate to be approximately 50.2% in 2019. The provision for income taxes results in an effective tax rate of 73.5% for the nine months ended September 30, 2019. The difference between the annual effective tax rate and the effective tax rate in the quarter is due to subsidiaries with pre-tax losses for which no tax benefit can be recognized and subsidiaries with pre-tax losses in jurisdictions with a zero percent tax rate that have been removed from pre-tax book income before the annual effective tax rate is applied. The amount of pre-tax book loss removed is approximately $16.7 million. The difference also includes the impact of a $2.9 million benefit primarily related to a change to the valuation allowance and research and development tax credits that are discrete to the fiscal period. This rate includes the impact of United States and Foreign permanent differences and an increase in the valuation allowance for certain disallowed interest in the United States. The United States permanent differences are primarily related to the gain on the sale of the iContact assets related to Goodwill, nondeductible transaction costs, nondeductible public company costs, nondeductible equity compensation and income from Canadian subsidiaries that is taxable in the United States as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Foreign permanent differences are primarily related to nondeductible interest expense in the United Kingdom. The increase in the valuation allowance in the U.S. is related to tax deferred interest expense.

The provision for income tax for the nine months ended September 30, 2018 was $10.0 million. The provision for income tax for the nine months ended September 30, 2018 was primarily driven by using the annual effective tax rate methodology and removing $15.6 million of pre-tax losses for which no tax benefit can be recognized before the annual effective tax rate is applied. It is also impacted by non-deductible permanent differences and the increase in the valuation allowance for disallowed interest in the United States.

The Company’s estimates related to liabilities for uncertain tax positions require it to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. If it determines it is more likely than not that a tax position will be sustained based on its technical merits, the Company records the impact of the position in its condensed consolidated financial statements at the largest amount that is greater than fifty percent likely of being realized upon ultimate settlement. The estimates are updated at each reporting date based on the facts, circumstances and information available. As of September 30, 2019, the Company believes the reasonably possible total amount of unrecognized tax benefits that could increase or decrease in the next twelve months as a result of various statute expirations, audit closures, and/or tax settlements would not be material to its condensed consolidated financial statements.

10. Commitments and Contingencies

Litigation and Claims

The Company from time to time is subject to lawsuits, investigations and claims arising out of the ordinary course of business, including those related to commercial transactions, contracts, government regulation, and employment matters. In the opinion of management, based on all known facts, all such matters are either without merit or are of such kind, or involve such amounts that would not have a material effect on the financial position or results of operations of the Company if disposed of unfavorably.

11. Geographic Information

The following table lists revenue for the three and nine months ended September 30, 2019 and 2018 by geographic region:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2019		2018		2019		2018
Revenue:
Americas - U.S.	$	108,615	$	107,219	$	329,132	$	323,639
Rest of Americas		17,455		15,364		53,510		47,604
EMEA		50,241		46,585		153,449		149,092
APAC		9,342		8,068		25,862		23,669
	$	185,653	$	177,236	$	561,953	$	544,004

The following table lists long-lived assets, net of amortization, as of September 30, 2019 and December 31, 2018 by geographic region:

(in thousands)	September 30, 2019		December 31, 2018
Long-lived assets, net
Americas - U.S.	$	1,302,574	$	1,101,919
Rest of Americas		135,620		130,797
EMEA		454,613		354,886
APAC		31,899		30,299
	$	1,924,706	$	1,617,901

12. Subsequent Events

On October 22, 2019, the Company entered into a definitive agreement to be acquired by an affiliate of Platinum Equity in an all cash transaction valued at approximately $2.74 billion (the “Merger”). Under the terms of the agreement, which has been unanimously approved by the members of Cision Ltd.'s board of directors, an affiliate of Platinum Equity will acquire all of the outstanding ordinary shares of Cision Ltd. for $10.00 per share in cash.

A special meeting of Cision Ltd.'s shareholders will be held as soon as practicable following the filing of a definitive proxy statement with the SEC and subsequent mailing to its shareholders. Certain affiliates of GTCR, collectively holding approximately 34% of the outstanding shares of Cision Ltd., have entered into a voting agreement committing them to, among other things, vote in favor of adopting the acquisition agreement and related plan of merger. The proposed transaction is expected to close in the first quarter of 2020 and is subject to approval by Cision Ltd.'s shareholders, along with the satisfaction of customary closing conditions and certain antitrust regulatory approvals. Upon completion of the acquisition, Cision Ltd. will become wholly owned by an affiliate of Platinum Equity.

Cision Ltd. may solicit alternative acquisition proposals from third parties during a "go-shop" period from the date of the agreement until November 12, 2019, subject to the conditions and limitations set forth in the acquisition agreement. There is no guarantee that this process will result in a superior proposal, and the agreement provides Platinum Equity with a customary right to match a superior proposal and to receive a termination fee if a superior proposal is accepted.

CISION LTD. AND ITS SUBSIDIARIES

Forward-Looking Statements

This Quarterly Report on Form 10‑Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results, which are intended to be covered by the safe harbor provision for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. Words such as “achieve,” “anticipate,” “assumes,” “believes,” “continue,” “could,” “estimate,” “expects,” “forecast,” “hope,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “would,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Although such statements are based on currently available financial and economic data as well as management’s estimates and expectations, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause our actual results to differ materially from what may be inferred from the forward-looking statements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.

Cision Ltd. and its subsidiaries (“we”, the “Company” or “Cision”) believe it is important to communicate our expectations to our securityholders. However, there may be events in the future that Cision’s management is not able to predict accurately or over which Cision has no control. The risk factors and cautionary language discussed in this report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in such forward-looking statements, including among other things:

•

the potential failure to complete the proposed Merger

•

the incurrence of substantial transaction and merger-related costs in connection with the proposed Merger;

•

our estimates of the size of the markets for our products and services;

•

the rate and degree of market acceptance of our products and services;

•

the success of other technologies that compete with our products and services or that may become available in the future;

•

the efficacy of our sales and marketing efforts;

•

the volatility of currency exchange rates;

•

volatility of the market price and liquidity of our ordinary shares;

•

our ability to effectively scale and adapt our technology;

•

our ability to identify and integrate acquisitions and technologies into our platform;

•

our plans to continue to expand internationally;

•

the performance and security of our services;

•

our ability to maintain the listing of our securities on a national securities exchange;

•

potential litigation involving Cision;

•

our ability to retain and attract qualified employees and key personnel;

•

our ability to maintain, protect and enhance our brand and intellectual property;

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general economic conditions; and

•

the result of future financing efforts.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. In addition, all forward-looking statements speak only as of the date of this report. We undertake no obligations to update or publicly revise any forward-looking statements, whether as a result of new information, future events or otherwise other than as required under the federal securities laws. Undue reliance should not be placed on these forward-looking statements.

Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations

This item should be read with our condensed consolidated financial statements and related notes included in Part I, Item 1 - “Financial Statements.” This item also contains forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those forward-looking statements. This discussion contains forward-looking statements about our business, operations, and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations and intentions. Throughout this section, unless otherwise noted “we”, “us” and the “Company” refer to Cision Ltd. and its consolidated subsidiaries. Refer to “Forward-Looking Statements” for additional information. Certain amounts in this section may not foot due to rounding.

Overview

We are 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 public relations and communications programs. Similar to Bloomberg for finance professionals, LinkedIn for HR professionals, and Salesforce for sales professionals, we are an industry standard SaaS solution for PR and marketing professionals and are deeply embedded in industry workflow.

We deliver a 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 Cloud (“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 more than 50,000 customers and an expansive global reach, spanning most major international markets around the globe including Canada, China, India, EMEA, and Latin America. Our total international sales across all countries accounted for 40% of our 2018 revenue.

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 2018, we generated $730.4 million of revenue, approximately 85% of which was 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. In 2018, our top 25 customers accounted for approximately 6.8% of our revenue.

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 twelve 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 acquired Falcon.io (“Falcon”) in January 2019 to improve our social media monitoring and engagement capabilities. We also acquired TrendKite, Inc. (“TrendKite”) in January 2019 to enhance our influencer database and improve our media monitoring and analytics capabilities. After a detailed review of Cision’s long-term business strategy and as a result of our desire to focus on C3, we sold our email marketing business, iContact, in January 2019.

The Merger Agreement

On October 22, 2019, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among MJ23 UK Acquisition Limited (“Parent”), Castle Merger Limited (“Merger Sub”) and the Company, providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent.

If the Merger is completed, each ordinary share, par value $0.0001 per share, of the Company (a “Share”), outstanding as of immediately prior to the effective time of the Merger (other than Shares held by the Company, Parent or Merger Sub, and Ordinary Shares as to which the holder has validly exercised and perfected and not effectively withdrawn or lost their rights to dissent under the applicable provisions of the Companies Law (2018 Revision) of the Cayman Islands) will automatically be surrendered and exchanged for the right to receive cash in an amount equal to $10.00, without interest thereon.

The consummation of the Merger is subject to certain customary conditions, including, but not limited to, (1) receipt of the vote in favor of the authorization of the Merger Agreement by the holders of at least two-thirds of the Shares present and voting in person or by proxy at the shareholders’ meeting; (2) expiration of waiting periods (and any extensions thereof), if any, applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and certain other regulatory approvals in Canada and the European Union, (3) the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) and (4) the absence of any law or order prohibiting, making illegal or enjoining the Merger.

The Merger Agreement contains certain termination rights, including the right of the Company to terminate the Merger Agreement to accept a Superior Proposal (as defined in the Merger Agreement), subject to specified conditions and limitations, and the right of either party to terminate the Merger Agreement if the Merger is not consummated by April 19, 2020. Upon termination of the Merger Agreement by the Company or Parent upon specified conditions, the Company will be required to pay Parent a termination fee of $53.6 million, provided that if the Company terminates the Merger Agreement to accept a Superior Proposal prior to November 19, 2019 and enters into a definitive agreement with an Excluded Party (as defined in the Merger Agreement) at such time, the amount of the termination fee payable to Parent will be $30.6 million. Upon termination of the Merger Agreement by the Company or Parent under other specified conditions, Parent will be required to pay the Company a termination fee of $91.8 million.

For more information about the proposed Merger, see the Company’s Current Report on Form 8-K filed with the SEC on October 22, 2019.

Recent Acquisitions and Divestitures

We made two acquisitions and divested one asset during the nine months ended September 30, 2019.

Acquisition of Falcon.io On January 3, 2019, we completed our acquisition of Falcon. The purchase price was approximately €103.4 million ($119.0 million) and consisted of approximately €53.6 million ($61.7 million) in cash consideration, the issuance of approximately 5.1 million ordinary shares valued at €49.8 million ($57.3 million), and up to €5.2 million ($6.0 million) of deferred payments due within 12 months in cash of €2.4 million ($2.8 million) and ordinary shares of €2.8 million ($3.2 million). The cash portion of the consideration was funded with a combination of cash on hand and borrowings under our Revolving Credit Facility. We drew approximately $40.0 million of dollar borrowings under our Revolving Credit Facility in connection with the closing of the Falcon acquisition, all of which was repaid during the nine months ended September 30, 2019.

Acquisition of TrendKite. On January 23, 2019, we completed our acquisition of TrendKite. The purchase price was approximately $219.0 million, consisting of approximately $94.1 million in cash and approximately 10.3 million ordinary shares valued at $124.9 million. The acquisition of TrendKite will enhance the ability of our customer base to demonstrate and measure the business impact of their earned media communications.

Divestiture of iContact. On January 22, 2019, we sold our email marketing business, iContact, to a strategic buyer. The sale of iContact resulted from a detailed review of our long-term business strategy and desire to focus on C3. We divested iContact for approximately $49.3 million of cash consideration, with up to an additional $4.0 million in cash based upon meeting certain business performance measures over the next 12 months.

The results of operations of these acquired businesses and divestures have been included in our financial statements since the applicable acquisition date or through the divestiture date.

For more information regarding these transactions, see Note 3 to our condensed consolidated financial statements included elsewhere in this report.

Sources of Revenues

We account for revenue contracts with customers by applying the requirements of ASC 606, Revenue Form Contracts With Customers (“ASC 606”).

We derive our revenue from access to our cloud-based technology platform and related media management and analysis services sold on a subscription basis. We also derive revenues from news distribution services on both a subscription basis and separately from non-subscription arrangements. The news releases are distributed to thousands of distribution points on the Internet, which are then indexed by major search engines and also directly to journalists and other key constituents. In 2018, approximately 85% of our revenue was generated by customers purchasing services on a subscription or recurring basis. We consider services recurring if customers routinely purchase these services from us pursuant to a negotiated “rate card” or similar arrangements, even if we do not have subscription agreements with them.

The subscription services include access to our cloud-based software platform, hosting services, content and content updates and customer support. Our subscription agreements are typically one year in length and are typically non-cancelable with customers having the right to terminate their agreements only if we materially breach our obligations under the agreement. Software subscription agreements for our platform do not provide customers the right to take possession of the software at any time. We do not charge customers an upfront fee for use of the technology. Implementation activities are insignificant and not subject to a separate fee. In certain cases, we charge annual membership fees which are recognized over the one-year membership period.

Cost of Revenue and Operating Expenses

Cost of Revenue. Cost of revenue consists primarily of compensation for training, editorial and support personnel, hosting and network infrastructure costs, royalty and license fees for content, press release distribution costs, third-party contractor fees, equipment and software maintenance costs, amortization of our proprietary database and purchased technology, amortization of capitalized software development costs and depreciation associated with computer equipment and software.

Sales and Marketing Expenses. Our sales and marketing expenses consist primarily of compensation for our sales and marketing personnel, related travel costs, sales commissions and incentives, marketing programs, promotional events, webinars, and other brand building expenses.

Research and Development. Our research and development expenses consist primarily of compensation for our software application development personnel and fees to third-party software development firms. Capitalized software development costs are amortized using the straight-line method over the useful life of the software, which is generally two years. All other research and developmental costs are expensed as incurred.

General and Administrative Expenses. Our general and administrative expenses consist primarily of compensation and related expenses for general corporate functions such as executive, legal, finance, human resources, and administrative personnel, as well as costs for external legal, accounting and other professional services, acquisition and other related expenses, third-party payment processing and credit card fees, facilities rent and other corporate expenses.

Depreciation and Amortization. Depreciation includes depreciation of property, equipment and software. Assets acquired under capital leases and leasehold improvements are amortized. Amortization of assets acquired under capital leases is included in depreciation and amortization expense. When assets are retired or otherwise disposed of, the asset and related accumulated depreciation are eliminated from the accounts and resulting gain or loss is recorded in the results of operations. Amortization of intangible assets consist primarily of the amortization of intangibles related to trade name, brand and customer relationships acquired through our acquisitions.

Factors Impacting our Results

Acquisitions and Dispositions

In connection with any acquisition, we are required to recognize any assets acquired and liabilities assumed measured at fair value as of that date. With respect to determining fair value, the excess of the purchase price over these allocations will be assigned to goodwill, which is not amortized for accounting purposes but is subject to testing for impairment, at least annually, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The allocation of the purchase price of any assets acquired in an acquisition will result in increases in amortization expense relating to acquired intangible assets, because we will record the fair value of the acquired intangible assets. We amortize the intangible assets over their estimated useful lives.

Impact of Foreign Exchange Rates

We report in U.S. dollars, and the functional currency of our foreign operating subsidiaries is the local currency, including the British Pound, the Euro, the Swedish Krona and the Canadian Dollar. Many of these currencies have weakened significantly against the U.S. dollar since the end of 2014. For the fiscal year ended December 31, 2018, approximately 40% of our revenues are generated in non-U.S. dollar-denominated currencies. The financial statements of these subsidiaries are translated into U.S. dollars using exchange rates in effect at each balance sheet date for assets and liabilities and average exchange rates during the period for revenues and expenses. To the extent we experience significant currency fluctuations, our results of operations may be impacted.

Retention of, and Expansion within, our Existing Customer Base

Growth of our customer base is important to our continued revenue growth. With our recent acquisition history, we have the opportunity to expand our customer base and to use our new platforms for cross-selling opportunities. Our ability to execute on cross-selling strategies and successfully integrate our acquisitions will have an impact on our results.

Price Competition Could Affect our Business

We face intense price competition in all areas of our business. We have in the past lowered prices, and may need to do so in the future to attempt to gain or maintain market share. 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.

Investment Shift by PR Professionals from “Paid” to “Earned” Media

As the needs of PR and communications professionals have evolved, we are increasingly distributing non-press release content over our network, including multimedia, infographics, white papers and other forms of brand-created content. Companies are progressively more focused on earned media, and we are well-positioned to take advantage of this structural shift in the market. Our results will be affected as the mix of content distributed over our network evolves and PR and communications professionals focus additional spend on earned media.

Increasing Budgets for PR Departments

The switch to social channels as a company’s preferred method to interface with clients and customers has fueled the demand for PR and communications skills and solutions worldwide. PR budgets are increasing as businesses lower paid marketing budgets and leverage the shift towards earned media by actively monitoring and engaging in conversations about their products and services online. To the extent this trend continues, our results of operations will be impacted by this evolution in spending practice.

Market Adoption of Cloud-Based Knowledge Software

We are focused on expanding market awareness of our cloud-based PR solutions. Although we have seen companies adopt our solutions, we expect further growth to coincide with the rapid increase of online content and influencers and new digital media channels. In response to this trend, we have transitioned from traditional print monitoring services to cloud-based solutions capable of managing the entire lifecycle of a PR campaign. To the extent this trend continues, we expect our revenues to experience growth.

Key Performance Measures

The measures of revenue and Adjusted EBITDA are the measures currently utilized by management to assess performance, and we disclose these measures to investors to assist them in providing a meaningful understanding of our performance. We are in the process of an operational, technological and financial integration effort for all recently combined businesses. One of our current objectives is to identify the most relevant key performance indicators to stakeholders for the fully integrated business. The determination as to when we will be able to identify these performance measures will be dependent on our ability to migrate customers from legacy platforms onto the C3 platform. When such integration and implementation is complete and such measures are available and utilized by management, these measures will be included in future disclosures to investors.

Results of Operations

This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for the three and nine months ended September 30, 2019 and 2018. We have derived this data from our unaudited condensed consolidated financial statements included elsewhere in this report.

The following table shows certain income statement data in thousands of dollars and percentages for the periods indicated:

	Three months ended						Three months ended						Nine months ended						Nine months ended
	September 30, 2019						September 30, 2018						September 30, 2019						September 30, 2018
Revenue	$	185,653		100.0		%	$	177,236		100.0		%	$	561,953		100.0		%	$	544,004		100.0		%
Cost of revenue		63,408		34.2		%		69,177		39.0		%		198,240		35.3		%		200,212		36.8		%
Gross profit		122,245		65.8		%		108,059		61.0		%		363,713		64.7		%		343,792		63.2		%
Operating costs and expenses
Sales and marketing		30,708		16.5		%		27,503		15.5		%		96,370		17.1		%		85,630		15.7		%
Research and development		7,153		3.9		%		7,292		4.1		%		23,021		4.1		%		22,282		4.1		%
General and administrative		44,988		24.2		%		39,002		22.0		%		142,464		25.4		%		126,762		23.3		%
Amortization of intangible assets		18,770		10.1		%		20,167		11.4		%		56,444		10.0		%		60,681		11.2		%
Total operating costs and expenses		101,619		54.7		%		93,964		53.0		%		318,299		56.6		%		295,355		54.3		%
Operating income		20,626		11.1		%		14,095		8.0		%		45,414		8.1		%		48,437		8.9		%
Non operating income (expense)
Foreign exchange gains		8,062		4.3		%		2,196		1.2		%		5,918		1.1		%		10,277		1.9		%
Interest and other income, net		279		0.2		%		380		0.2		%		840		0.1		%		472		0.1		%
Gain on sale of business		—		—		%		—		—		%		28,144		5.0		%		—		—		%
Interest expense		(18,209	)	(9.8	)	%		(19,785	)	(11.2	)	%		(56,392	)	(10.0	)	%		(59,947	)	(11.0	)	%
Loss on extinguishment of debt		—		—		%		—		—		%		(355	)	(0.1	)	%		(2,432	)	(0.5	)	%
Total non operating loss		(9,868	)	(5.3	)	%		(17,209	)	(9.8	)	%		(21,845	)	(3.9	)	%		(51,630	)	(9.5	)	%
Income (loss) before income taxes		10,758		5.8		%		(3,114	)	(1.8	)	%		23,569		4.2		%		(3,193	)	(0.6	)	%
Provision for income taxes		8,393		4.5		%		3,070		1.7		%		17,328		3.1		%		10,016		1.8		%
Net income (loss)	$	2,365		1.3		%	$	(6,184	)	(3.5	)	%	$	6,241		1.1		%	$	(13,209	)	(2.4	)	%

Net Income (Loss) to Adjusted EBITDA Reconciliation

We define Adjusted EBITDA as net income (loss), determined in accordance with U.S. GAAP, for the period presented, before depreciation and amortization, interest expense and loss on extinguishment of debt, and income taxes, further adjusted to exclude the following items: (a) acquisition related costs and expenses; (b) stock-based compensation; (c) deferred revenue reduction from purchase accounting; (d) gains or losses related to divested businesses or assets groups; (e) sponsor fees and expenses; and (f) unrealized (gain) or loss on foreign currency translation.

We believe Adjusted EBITDA, when considered along with other performance measures, is a useful measure as it reflects certain drivers of the business, such as sales growth and operating costs. We believe Adjusted EBITDA can be useful in providing an understanding of the underlying operating results and trends and an enhanced overall understanding of our financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under U.S. GAAP, management uses this financial measure to evaluate and forecast business performance. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not take into account certain requirements, such as capital expenditures and related depreciation, principal and interest payments, and tax payments. Adjusted EBITDA is not a presentation made in accordance with U.S. GAAP, and our use of the term Adjusted EBITDA may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.

The presentation of U.S. non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. Investors should read this discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and the related notes thereto also included within.

The following table outlines the reconciliation from net income (loss) to Adjusted EBITDA for the periods indicated:

	Three months ended			Three months ended			Nine months ended			Nine months ended
(in thousands)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Net income (loss)	$	2,365		$	(6,184	)	$	6,241		$	(13,209	)
Depreciation and amortization		31,453			33,308			93,709			100,186
Interest expense and loss on extinguishment of debt		18,209			19,785			56,747			62,379
Income tax		8,393			3,070			17,328			10,016
Acquisition and offering-related costs		8,734			12,843			39,117			32,621
Stock-based compensation		3,563			1,503			8,206			3,713
Deferred revenue reduction from purchase accounting		3,742			291			10,579			1,457
Gain on sale of business		—			—			(28,144	)		—
Unrealized translation gain		(8,368	)		(2,089	)		(6,528	)		(10,338	)
Adjusted EBITDA	$	68,091		$	62,527		$	197,255		$	186,825

Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018

Revenue

Revenue increased $8.5 million, or 4.7%, from $177.2 million for the three months ended September 30, 2018 to $185.7 million for the three months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies in 2019 compared to 2018 decreased revenue by approximately $2.6 million for the three months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the increase in revenue was primarily driven by our acquisitions of Falcon and TrendKite, and growth in our Americas and APAC operations, offset by our divestiture of iContact on January 22, 2019, and declines in our EMEA operations. Revenue from our acquisitions of Falcon and TrendKite was $12.7 million for the three months ended September 30, 2019. Revenue from iContact was $6.9 million for the three months ended September 30, 2018. Revenue from our APAC operations, excluding our acquisitions of Falcon and TrendKite, increased $1.3 million for the three months ended September 30, 2019, due to net growth in subscription and transaction revenues. Revenue from our Americas operations, excluding our acquisitions of Falcon and TrendKite, and the divestiture of iContact increased $3.1 million for the three months ended September 30, 2019, due primarily to net growth in subscription and transaction revenues. Revenue from our EMEA operations, excluding our acquisitions of Falcon and TrendKite, decreased $1.7 million for the three months ended September 30, 2019, due primarily to subscription and transaction revenue declines that resulted from lost customers and lower customer spend from retained customers that exceeded subscription and transaction revenue from new customers won and increased spend from retained customers in the UK and France. For the three months ended September 30, 2019, the change in the U.S. dollar versus other foreign currencies, principally the Euro, the British Pound, and the Canadian Dollar, decreased our EMEA revenue by approximately $2.2 million, decreased our Americas revenue by approximately $0.2 million, and decreased our APAC revenue by approximately $0.2 million.

Cost of Revenue

Cost of revenue decreased $ 5.8 million, or 8.3%, from $69.2 million for the three months ended September 30, 2018 to $63.4 million for the three months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies in 2019 compared to 2018 decreased our cost of revenue by approximately $1.3 million for the three months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the decrease in cost of revenue was primarily driven by our divestiture of iContact, a decrease in depreciation and amortization expenses, and a decrease in employee compensation and related costs, offset by our acquisitions of Falcon and TrendKite, and an increase in content and distribution costs. Cost of revenue from Falcon and TrendKite was $5.6 million for the three months ended September 30, 2019. Cost of revenue from iContact was $2.5 million for the three months ended September 30, 2018. Content and distribution costs, excluding our acquisitions of Falcon and TrendKite and the divestiture of iContact, increased by $1.0 million in the three months ended September 30, 2019 versus the prior year period. Depreciation and amortization expense, excluding our acquisitions of Falcon and TrendKite and the divestiture of iContact, decreased by $1.8 million in the three months ended September 30, 2019 versus the prior year period. Employee compensation and related costs, excluding our acquisitions of Falcon and TrendKite and the divestiture or iContact, decreased $8.2 million in the three months ended September 30, 2019 versus the prior year period.

Sales and Marketing

Sales and marketing expenses increased $3.2 million, or 11.7%, from $27.5 million for the three months ended September 30, 2018 to $30.7 million for the three months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies in 2019 compared to 2018 decreased our sales and marketing expenses by approximately $0.4 million for the three months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the increase in sales and marketing expenses was primarily driven by our acquisitions of Falcon and TrendKite, offset by a decrease in sales and marketing compensation expense, reduced marketing program expenditures, and the divestiture of iContact. Sales and marketing expenses from Falcon and TrendKite was $7.2 million for the three months ended September 30, 2019. Sales and marketing expenses from iContact were $1.5 million for the three months ended September 30, 2018. Sales and marketing compensation and related costs, excluding our acquisitions of Falcon and TrendKite and the divestiture of iContact, decreased $1.6 million in the three months ended September 30, 2019 versus the prior year period. Marketing program expenditures, excluding our acquisitions of Falcon and TrendKite and the divestiture of iContact, declined by approximately $0.6 million in the three months ended September 30, 2019 versus the prior year period.

Research and Development

Research and development expenses decreased $0.1 million, or 1.9%, from $7.3 million for the three months ended September 30, 2018 to $7.2 million for the three months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies in 2019 compared to 2018 decreased our research and development expenses by approximately $0.1 million for the three months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the change in research and development expenses was primarily driven by lower professional and consulting fees, lower compensation and related costs, and the divestiture of iContact, offset by an increase in depreciation expense and our acquisitions of Falcon and TrendKite. Research and development expenses from Falcon and TrendKite were $2.2 million for the three months ended September 30, 2019. Research and development expenses from iContact were $0.2 million for the three months ended September 30, 2018. Professional and consulting fees, excluding our acquisitions of Falcon and TrendKite and our divestiture of iContact, decreased by $0.7 million in the three months ended September 30, 2019 versus the prior year period. Compensation and related costs, excluding our acquisitions of Falcon and TrendKite and our divestiture of iContact, decreased $2.1 million in the three months ended September 30, 2019 versus the prior year period. Depreciation expense, excluding our acquisitions of Falcon and TrendKite and our divestiture of iContact, increased by $0.7 million in the in the three months ended September 30, 2019 versus the prior year period.

General and Administrative

General and administrative expenses increased $6.0 million, or 15.3%, from $39.0 million for the three months ended September 30, 2018 to $45.0 million for the three months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies, principally the Euro, the British Pound, and the Canadian Dollar, in 2019 compared to 2018 decreased our general and administrative expenses by approximately $0.6 million for the three months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the increase in general and administrative expenses was primarily driven by our acquisitions of Falcon and TrendKite, an increase in stock-based compensation expense and an increase in bad debt expense, offset by a decrease in contingent acquisition related payments, our divestiture of iContact, and a decrease in rent and related costs. General and administrative expenses from Falcon and TrendKite were $5.9 million for the three months ended September 30, 2019. General and administrative expenses from iContact were $0.7 million for the three months ended September 30, 2018. Stock-based compensation expense and bad debt expense, excluding our acquisitions of Falcon and TrendKite and our divestiture of iContact, increased by $1.8 million and $1.1 million, respectively, during the three months ended September 30, 2019 versus the prior year period. Contingent acquisition related payments, excluding our acquisitions of Falcon and TrendKite and our divestiture of iContact, decreased by $1.0 million in the three months ended September 30, 2019 versus the prior year period. Rent and related costs, excluding our acquisitions of Falcon and TrendKite and our divestiture of iContact, decreased by $0.9 million during the three months ended September 30, 2019 versus the prior year period.

Foreign Exchange Gains (Losses)

We recognized an $8.1 million and $2.2 million foreign exchange gain for the three months ended September 30, 2019 and September 30, 2018, respectively, due to fluctuations in foreign exchange rates that impacted the carrying value of certain intercompany notes and our 2017 First Lien Euro Term Credit Facility.

Interest Expense

Interest expense decreased $1.6 million, or 8.0%, from $19.8 million for the three months ended September 30, 2018 to $18.2 million for the three months ended September 30, 2019. This decrease was primarily due to lower interest rates on our debt resulting from the October 22, 2018 debt repricing transactions of our 2017 First Lien Credit Facility.

Provision For Income Taxes

For the three months ended September 30, 2019 and September 30, 2018, we recorded a provision for income taxes of $8.4 million and $3.1 million, respectively. The provision for income taxes for the three months ended September 30, 2019 is a result of using the annual effective tax rate methodology. The annual effective tax rate was impacted by excluding subsidiaries with pre-tax losses for which no tax benefit can be recognized in the calculation of the estimated annual effective tax rate, unfavorable permanent differences and an increase to the valuation allowance in the United States. The United States permanent differences are primarily related to the gain on the sale of the iContact assets related to Goodwill, nondeductible transaction costs, nondeductible public company costs, nondeductible equity compensation and income from the Canadian subsidiaries that is taxable in the United States as a result of the Tax Cuts and Jobs Act of 2017. The United Kingdom permanent differences are primarily related to nondeductible interest expense.

The provision for income taxes for the three months ended September 30, 2018 resulted from pre-tax income and the impact of pre-tax losses for which no tax benefit can be recognized, the impact of permanent differences and the increase in the valuation allowance expected to be necessary at the end of the year for certain disallowed interest.

Other Comprehensive Loss

Other comprehensive loss increased $9.7 million for the three months ended September 30, 2019 to a loss of $12.2 million, from an other comprehensive loss of $2.5 million for the three months ended September 30, 2018. This increase was primarily the result of foreign currency translation gains that resulted from changes in the U.S. dollar versus the British Pound that impacted the carrying value of intangibles and goodwill in our UK subsidiaries.

Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018

Revenue

Revenue increased $18.0 million, or 3.3%, from $544.0 million for the nine months ended September 30, 2018 to $562.0 million for the nine months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies in 2019 compared to 2018 decreased revenue by approximately $11.5 million for the nine months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the increase in revenue was primarily driven by our acquisitions of Falcon and TrendKite, and growth in our Americas and APAC operations, offset by our divestiture of iContact, and declines in our EMEA operations. Revenue from our acquisitions of Falcon and TrendKite was $35.4 million for the nine months ended September 30, 2019. Revenue from iContact was $1.4 million for the nine months ended September 30, 2019 and $21.9 million for the nine months ended September 30, 2018. Revenue from our Americas operations, excluding our acquisitions of Falcon and TrendKite, and the divestiture of iContact increased $11.8 million for the nine months ended September 30, 2019, due primarily to net growth in subscription and transaction revenues. Revenue from our APAC operations, excluding our acquisitions of Falcon and TrendKite, increased $2.2 million for the nine months ended September 30, 2019, due to net growth in subscription and transaction revenues. Revenue from our EMEA operations, excluding our acquisitions of Falcon and TrendKite, decreased $10.9 million for the nine months ended September 30, 2019, due primarily to subscription and transaction revenue declines that resulted from lost customers and lower customer spend from retained customers that exceeded subscription and transaction revenue from new customers won and increased spend from retained customers in the UK and France. For the nine months ended September 30, 2019, the change in the U.S. dollar versus other foreign currencies, principally the Euro, the British Pound, and the Canadian Dollar, decreased our EMEA revenue by approximately $8.9 million, decreased our Americas revenue by approximately $1.7 million, and decreased our APAC revenue by approximately $0.9 million.

Cost of Revenue

Cost of revenue decreased $2.0 million, or 1.0%, from $200.2 million for the nine months ended September 30, 2018 to $198.2 million for the nine months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies in 2019 compared to 2018 decreased our cost of revenue by approximately $4.9 million for the nine months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the decrease in cost of revenue was primarily driven by our divestiture of iContact, a decrease in depreciation and amortization expenses, and a decrease in employee compensation and related

costs, offset by our acquisitions of Falcon and TrendKite, an increase in content and distribution costs, and an increase in professional fees. Cost of revenue from Falcon and TrendKite was $14.7 million for the nine months ended September 30, 2019. Excluding our acquisitions of Falcon and TrendKite, and the divestiture of iContact, content and distribution costs and professional fees increased by $5.3 million and $1.2 million, respectively, in the nine months ended September 30, 2019 versus the prior year period. Excluding our acquisitions of Falcon and TrendKite and the divestiture of iContact, employee compensation and related costs and depreciation and amortization costs, decreased $13.2 million and $3.3 million, respectively, in the nine months ended September 30, 2019 versus the prior year period. iContact cost of revenue was $7.5 million in the nine months ended September 30, 2018 and $0.9 million for the nine months ended September 30, 2019.

Sales and Marketing

Sales and marketing expenses increased $10.8 million, or 12.5%, from $85.6 million for the nine months ended September 30, 2018 to $96.4 million for the nine months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies in 2019 compared to 2018 decreased our sales and marketing expenses by approximately $1.6 million for the nine months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the increase in sales and marketing expenses was primarily driven by our acquisitions of Falcon and TrendKite, offset by reduced marketing program expenditures, reduced sales and marketing compensation expense, reduced professional services, and the divestiture of iContact. Sales and marketing expenses from Falcon and TrendKite were $19.9 million for the nine months ended September 30, 2019. Excluding our acquisitions of Falcon and TrendKite and the divestiture of iContact, marketing program expenditures, sales and marketing compensation and related costs, and professional services decreased $1.8 million, $2.0 million, and $0.7 million, respectively, in the nine months ended September 30, 2019 versus the prior year period. Sales and marketing expenses from iContact were $4.1 million for the nine months ended September 30, 2018, and $0.4 million for the nine months ended September 30, 2019.

Research and Development

Research and development expenses increased $0.7 million, or 3.3%, from $22.3 million for the nine months ended September 30, 2018 to $23.0 million for the nine months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies in 2019 compared to 2018 decreased our research and development expenses by approximately $0.6 million for the nine months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the increase in research and development expenses was primarily driven by our acquisitions of Falcon and TrendKite, offset by lower compensation and related costs, lower professional fees, and the divestiture of iContact. Research and development expenses from Falcon and TrendKite were $6.2 million for the nine months ended September 30, 2019. Excluding our acquisitions of Falcon and TrendKite and the divestiture of iContact, compensation and related costs and professional fees decreased $3.2 million and $1.5 million, respectively, in the nine months ended September 30, 2019 versus the prior year period. Research and development expenses from iContact were $0.7 million for the nine months ended September 30, 2018, and $0.1 million for the nine months ended September 30, 2019.

General and Administrative

General and administrative expenses increased $15.7 million, or 12.4%, from $126.8 million for the nine months ended September 30, 2018 to $142.5 million for the nine months ended September 30, 2019. The change in the U.S. dollar versus other foreign currencies, principally the Euro, the British Pound, and the Canadian Dollar, in 2019 compared to 2018 decreased our general and administrative expenses by approximately $3.1 million for the nine months ended September 30, 2019. After adjusting for the change in the U.S. dollar versus other foreign currencies, the increase in general and administrative expenses was primarily driven by our acquisitions of Falcon and TrendKite, an increase in professional fees, and an increase in compensation related costs, offset by a decrease in contingent acquisition related costs, a decrease in equipment, software, and telecommunication costs, a decrease in rent and related costs, reduced depreciation expense, and the divestiture of iContact. General and administrative expenses from Falcon and TrendKite were $17.6 million for the nine months ended September 30, 2019. Excluding our acquisitions of Falcon and TrendKite and the divestiture of iContact, compensation related costs and professional fees increased $3.6 million and $1.0 million, respectively, in the nine months ended September 30, 2019 versus the prior year period. Excluding our acquisitions of Falcon and TrendKite and the divestiture of iContact, contingent acquisition related costs, equipment, software, and telecommunication costs, rent and related costs, and depreciation expense, decreased $1.9 million, $0.9 million, $1.7 million and $0.7 million, respectively, in the nine months ended September 30, 2019 versus the prior year period. General and administrative expenses from iContact were $2.3 million for the nine months ended September 30, 2018, and $0.3 million for the nine months ended September 30, 2019.

Foreign Exchange Gains

We recognized a $5.9 million foreign exchange gain and a $10.3 million foreign exchange gain for the nine months ended September 30, 2019 and September 30, 2018, respectively, due to fluctuations in foreign exchange rates that impacted the carrying value of certain intercompany notes and our 2017 First Lien Euro Term Credit Facility.

Gain on Sale of Business

We recognized a gain on the disposal of our iContact business of $28.1 million during the nine months ended September 30, 2019.

Interest Expense

Interest expense decreased $3.5 million, or 5.9%, from $59.9 million for the nine months ended September 30, 2018 to $56.4 million for the nine months ended September 30, 2019. This decrease was primarily due to lower interest rates on our debt resulting from the debt repricing transactions of our 2017 First Lien Credit Facility on February 8, 2018 and October 22, 2018 that lowered interest rates, this was partially offset by the write-off of approximately $0.4 million of deferred financing costs that was the result of our entering into an incremental facility amendment (the "January 2019 Incremental Amendment") to the credit agreement on January 11, 2019. The January 2019 Incremental Amendment provided for an incremental $75.0 million dollar-denominated term loan facility (the "Incremental Facility"). The terms of the January 2019 Incremental Facility are substantially identical to the terms of other term loan borrowings under the 2017 First Lien Credit Facility. During the nine months ended September 30, 2019, we did not make any voluntary prepayments under our 2017 First Lien Credit Facility.

Loss on Extinguishment of Debt

We had a loss on extinguishment of debt of $0.4 million and $2.4 million for the nine months ended September 30, 2019 and September 30, 2018, respectively.

Provision For Income Taxes

For the nine months ended September 30, 2019 and September 30, 2018, we recorded a provision for income taxes of $17.3 million and $10.0 million, respectively. The provision for income taxes for the nine months ended September 30, 2019 is a result of using the annual effective tax rate methodology. The annual effective tax rate was impacted by excluding subsidiaries with pre-tax losses for which no tax benefit can be recognized in the calculation of the estimated annual effective tax rate, unfavorable permanent differences and a decrease to the valuation allowance in the United States. The United States permanent differences are primarily related to the gain on the sale of the iContact assets related to Goodwill, nondeductible transaction costs, nondeductible public company costs, nondeductible equity compensation and income from the Canadian subsidiaries that is taxable in the United States as a result of the Tax Cuts and Jobs Act of 2017. The United Kingdom permanent differences are primarily related to nondeductible interest expense.

The provision for income taxes for the nine months ended September 30, 2018 resulted from pre-tax income and the impact of pre-tax losses for which no tax benefit can recognized, the impact of permanent differences and the increase in the valuation allowance expected to be necessary at the end of the year for certain disallowed interest.

Other Comprehensive Loss

Other comprehensive loss decreased $14.5 million for the nine months ended September 30, 2019 to a loss of $6.3 million, from an other comprehensive loss of $20.8 million for the nine months ended September 30, 2018. This decrease was primarily the result of foreign currency translation losses that resulted from changes in the U.S. dollar versus the British Pound that impacted the carrying value of intangibles and goodwill in our UK subsidiaries.

Liquidity and Capital Resources

Overview

We fund our business primarily with cash generated from operations and from borrowings under our 2017 First Lien Credit Facility. We use cash to satisfy our contractual obligations and to fund other non-contractual business needs.

Based on the terms of our credit facilities and our current operations and expectations for continued growth, we believe that cash generated from operating activities, together with available borrowings under our 2017 First Lien Credit Facility, will be adequate to meet our current and expected operating, capital investment, acquisition financing and debt service obligations for the next twelve months, although no assurance can be given in this regard.

We believe that our existing cash on hand and cash flow from operations will be sufficient to fund our currently anticipated working capital, capital expenditure, and debt service requirements, for at least the next twelve months. While we have a history of a negative working capital position, as calculated by subtracting current liabilities from current assets, substantially all of this negative balance is created by deferred revenue, which does not represent a liability that will be settled in cash. As of September 30, 2019, excluding both cash balances and deferred revenue, our current assets exceed our current liabilities by $28.1 million.

The dollar and Euro tranches of our 2017 First Lien Credit Facility require quarterly principal repayments in the amount of $2.8 million and €0.6 million per quarter, respectively, which are insignificant compared to the cash we expect to generate from operations. The 2017 First Lien Credit Facility does not mature until 2023, and therefore is not considered to impact our liquidity needs over the next several years. We have been in compliance with all of our applicable credit facility covenants through September 30, 2019.

Our cash flow from operations in all periods to date has been adversely impacted by the cash costs incurred to execute the strategic business combinations we have made, which include acquisition fees and expenses and integration costs required to achieve synergies. Acquisition-related costs and expenses for historical periods are reflected in the Net Income (Loss) to Adjusted EBITDA Reconciliation included elsewhere in this report. While the execution of these strategic business combinations use short-term operating cash, they generate significant long-term cost reductions, revenue synergies and substantial incremental operating cash flow, once fully integrated. We believe that this incremental cash flow will be substantial and will enable us to fund cash interest payments.

For the nine months ended September 30, 2019, net cash provided by operating activities was $67.5 million, after deducting the cash costs incurred to execute the strategic business combinations and the divestiture that we made during the nine months ended September 30, 2019. For the nine months ended September 30, 2019, net cash used in investing activities was $135.0 million. For the nine months ended September 30, 2019, net cash provided by financing activities was $58.8 million, which included the proceeds received from our January 2019 Incremental Amendment.

For these reasons, we believe that our existing cash on hand and cash flow from operations will be sufficient to fund our currently anticipated working capital, capital expenditure, and debt service requirements.

We do not currently expect to declare dividends in the foreseeable future. The declaration of dividends will be subject to our actual future earnings and capital requirements and to the discretion of our board of directors. Our board of directors may take into account such matters as general business conditions, our financial results, capital requirements, contractual, legal and regulatory restrictions and such other factors as our board of directors may deem relevant.

Our ability to pay cash dividends on our ordinary shares will be subject to our continued compliance with the terms of our Credit Facilities. Under our 2017 First Lien Credit Facility, our subsidiaries have restrictions on making cash dividends to us, subject to certain exceptions, including that our subsidiaries are permitted to declare and pay cash dividends:

•

in any amount, so long as the total net leverage ratio under our 2017 First Lien Credit Facility would not exceed 3.75 to 1.00 after making such payment;

•

in an amount per annum not greater than 6.0% of (i) the market capitalization of our common stock (based on the average closing price of our shares during the 30 trading days preceding the declaration of such payment) plus (ii) the $305.2 million in proceeds we received in the merger with Capitol Acquisition Corp. III;

•

in an amount that does not exceed the sum of (i) $20.0 million, plus (ii) 50% of consolidated net income of our subsidiaries from January 1, 2016 to the end of the most recent quarter plus (iii) certain other amounts set forth in the definition of “Available Amount” in our 2017 First Lien Credit Facility (provided that we may only include the amounts of consolidated net income described in clause (ii) if our total net leverage ratio would not exceed 5.00 to 1.00 after making such payments; and

•

in an amount that does not exceed the total net proceeds we receive from any public or private offerings of our common stock or similar equity interests.

As of September 30, 2019, we had $94.9 million of cash and cash equivalents on hand, and we had aggregate unused availability of $98.1 million under our 2017 Revolving Credit Facility. Borrowings under this facility bear interest at a variable rate and are a significant source of our liquidity. Our liquidity needs, including our funding of acquisition activities, causes the aggregate amount of outstanding borrowings under our 2017 Revolving Credit Facility to fluctuate. Accordingly, the amount of borrowing capacity available to us can fluctuate depending on operating cash flows, debt service requirements and acquisition and investment activity.

Our future financial and operating performance, ability to service or refinance our debt and ability to comply with covenants and restrictions contained in our credit agreements governing our credit facilities will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control and will be substantially dependent on the global economy, demand for our products and solutions and our ability to successfully implement our business strategies.

As of September 30, 2019, $43.5 million of cash and cash equivalents were held outside of the United States (inclusive of the controlled foreign corporations owned by the U.S.). We have not provided for income taxes on $62.7 million of undistributed earnings of our foreign subsidiaries, other than certain Canadian subsidiaries, as the earnings are considered permanently reinvested. Notwithstanding this, since the enactment of U.S. tax reform legislation, we have recorded a $6.2 million transition tax and a $4.1 million tax on GILTI income related to our Canadian subsidiaries. This amount includes an estimated $2.8 million of Canadian withholding taxes on the future repatriation of cash from Canada to the United States. The United States does not currently have accumulated earnings and profits and the majority of the other foreign jurisdictions can distribute their earnings to us without significant additional taxation. Accordingly, we have determined that any deferred tax liability associated with a distribution of the undistributed earnings would be immaterial.

Debt Obligations

The following describes the components of our debt obligations as of September 30, 2019. For more information regarding these transactions, see Note 6 to our condensed consolidated financial statements included elsewhere in this report.

2017 First Lien Credit Facility

On August 4, 2017, we entered into the 2017 First Lien Credit Facility with Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and a syndicate of commercial lenders from time to time party thereto. The 2017 First Lien Credit Facility provided for a tranche of refinancing term loans which refinanced the term loans under our 2016 First Lien Credit Agreement in full and provided for additional term loans of $131.2 million. The 2017 First Lien Credit Facility, on the date of effectiveness, consisted of: (i) a revolving loan facility, which permits borrowings and letters of credit of up to $75.0 million, of which, up to $25.0 million may be used or issued as standby and trade letters of credit; (ii) a $960.0 million Dollar-denominated term credit facility (the “2017 First Lien Dollar Term Credit Facility”) and (iii) a €250.0 million Euro-denominated term credit facility (the “2017 First Lien Euro Term Credit Facility”). We used the proceeds from the 2017 First Lien Term Credit Facility to repay all amounts then outstanding under our 2016 First Lien Credit Facility, all amounts outstanding under our 2016 Second Lien Credit Facility, pay all related fees and expenses, and retained remaining cash for general corporate purposes. We terminated the agreement governing the 2016 Second Lien Credit Facility in connection with effecting the 2017 First Lien Credit Facility.

On December 14, 2017, we entered into an incremental facility amendment to the 2017 First Lien Credit Facility (the “December 2017 Incremental Amendment”). The December 2017 Incremental Amendment provided for an incremental $75.0 million dollar-denominated term loan facility. The proceeds from the December 2017 Incremental Amendment were used to fund the Prime acquisition.

On February 8, 2018, we repriced our $1,417 million First Lien Credit Facility (the “February 2018 Repricing”). The repriced first lien credit agreement consisted of a $75.0 million revolving loan facility and a $1,342 million term loan facility. The term loan facility consisted of $1,032 million of U.S. dollar borrowings and €249 million of Euro borrowings. The term loans and revolving borrowings were repriced at an interest rate of LIBOR plus 3.25% for dollar borrowings and EURIBOR plus 3.50% for Euro borrowings. We incurred approximately $2.0 million in financing costs in connection with the February 2018 Repricing of the 2017 First Lien Credit Facility of which $0.1 million are being amortized using the effective interest method. As a result of this transaction, we recorded a loss on extinguishment of $2.4 million.

On October 22, 2018, we repriced our $1,417 million 2017 First Lien Credit Facility (the “October 2018 Repricing”). The repriced first lien credit agreement consisted of a $75.0 million revolving loan facility and a $1,342 million term loan facility. The term loan facility consisted of $1,032 million of U.S. dollar borrowings and €249 million of Euro borrowings. The term loans and revolving borrowings were repriced at an interest rate of LIBOR plus 2.75% for dollar borrowings and EURIBOR plus 3.00% for Euro borrowings. We incurred approximately $2.3 million in financing costs in connection with the October 2018 Repricing of the 2017

First Lien Credit Facility of which $0.3 million are being amortized using the effective interest method. As a result of this transaction, we recorded a loss on extinguishment of $7.0 million.

On December 28, 2018, we entered into an incremental facility amendment (the “December 2018 Incremental Amendment”) to the credit agreement. As a result of the December 2018 Incremental Amendment, available borrowings under the revolving credit facility increased from $75.0 million to $100.0 million.

On January 11, 2019, we entered into the January 2019 Incremental Amendment to the credit agreement. The January 2019 Incremental Amendment provides for an incremental $75.0 million dollar-denominated term loan facility.

On April 30, 2018, June 29, 2018 and September 28, 2018 we made voluntary prepayments of $30.0 million, $10.0 million and $10.0 million, respectively. As September 30, 2019, we had no outstanding borrowings and $1.9 million of outstanding letters of credit under our 2017 Revolving Credit Facility and $1,306.5 million outstanding under the 2017 First Lien Term Credit Facility.

From time to time, we may incur incremental revolving facilities and incremental term loan facilities under the 2017 First Lien Credit Facility in amounts not to exceed $100.0 million plus additional amounts subject to compliance with certain leverage ratios as set forth in the 2017 First Lien Credit Facility and certain other amounts.

Interest is charged on U.S. dollar borrowings under our 2017 First Lien Credit Facility, at our option, at a rate based on (1) the adjusted LIBOR (a rate equal to the London interbank offered rate adjusted for statutory reserves) or (2) the alternate base rate (a rate that is highest of the (i) Deutsche Bank AG, New York Branch’s prime lending rate, (ii) the overnight federal funds rate plus 50 basis points or (iii) the one-month adjusted LIBOR plus 1%), in each case, plus an applicable margin. Following the October 2018 Repricing, the margin applicable to U.S. dollar borrowings under our 2017 First Lien Dollar Term Credit Facility was 1.75% at the alternate base rate and was 2.75% at the adjusted LIBOR rate.

Interest is charged on Euro borrowings under our 2017 First Lien Credit Facility at a rate based on the adjusted EURIBOR (a rate equal to the Euro interbank offered rate adjusted for statutory reserves), plus an applicable margin. Following the October 2018 Repricing, the margin applicable to EURO borrowings under the 2017 First Lien Euro Term Credit Facility was 3.00%. Borrowings under the Revolving Credit Facility bear interest at an interest rate of LIBOR plus 2.75% for dollar borrowings and EURIBOR plus 3.00% for Euro borrowings. The Revolving Credit Facility matures on June 16, 2023.

Revolving borrowings in Canadian dollars bear interest at the adjusted Canadian dollar banker’s acceptance rate plus an applicable margin. Following the October 2018 Repricing, the margin applicable to loans under the 2017 Revolving Credit Facility bearing interest at the alternate base rate, the adjusted LIBOR, and the adjusted Euro interbank offered rate bear interest at rates of 2.25%, 3.25%, and 3.50%, respectively. As of September 30, 2019, the applicable interest rate under the 2017 First Lien Dollar Term Credit Facility and the 2017 First Lien Euro Term Credit Facility was 4.85% and 3.00%, respectively.

We are obligated to make quarterly principal payments under the 2017 First Lien Dollar Term Credit Facility of $2.8 million (which amount may be reduced by the application of voluntary and mandatory prepayments pursuant to the terms of the 2017 First Lien Credit Facility), with the remaining balance due June 16, 2023. We are obligated to make quarterly principal payments under the 2017 First Lien Euro Term Credit Facility of €0.6 million (which amount may be reduced by the application of voluntary and mandatory prepayments pursuant to the terms of the 2017 First Lien Credit Facility), with the remaining balance due June 16, 2023. The maturity date of the 2017 Revolving Credit Facility is June 16, 2023.

We may also be required to make certain mandatory prepayments of the 2017 First Lien Term Credit Facility out of excess cash flow and upon the receipt of proceeds of asset sales and certain insurance proceeds (in each case, subject to certain minimum dollar thresholds and rights to reinvest the proceeds as set forth in the 2017 First Lien Credit Facility). For the fiscal year ended December 31, 2017, no mandatory prepayments were due pursuant to the terms of the 2017 First Lien Term Credit Facility. No mandatory prepayments were made for the fiscal year ended December 31, 2018. No excess cash flow payments were required during the year ended December 31, 2018.

The obligations under the 2017 First Lien Credit Facility are secured by substantially all of the assets of Canyon Companies S.à.r.l. and each of its subsidiaries organized in the United States (or any state thereof), the United Kingdom, the Netherlands, Luxembourg, and Ireland, subject to certain exceptions.

The 2017 First Lien Credit Facility includes a springing financial covenant applicable solely to the 2017 Revolving Credit Facility that is tested at such time that 35% or more (excluding letters of credit that have been cash collateralized and letters of credit in an amount not to exceed $4.0 million) of the aggregate commitments under the 2017 Revolving Credit Facility are drawn and outstanding. Such springing financial covenant requires that, as of the last day of each fiscal quarter, the total net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility cannot exceed the applicable ratio set forth in the 2017 First Lien Credit Facility for such quarter (subject to certain rights to cure any failure to meet such ratio as set forth in the 2017 First Lien Credit Facility). The 2017 First Lien Credit Facility is also subject to certain customary affirmative covenants and negative covenants. Under our 2017 First Lien Credit Facility, our subsidiaries have restrictions on making cash dividends to us, subject to certain exceptions, including that our subsidiaries are permitted to declare and pay cash dividends:

•

in any amount, so long as the total net leverage ratio under our 2017 First Lien Credit Facility would not exceed 3.75 to 1.00 after making such payment;

•

in an amount that does not exceed the total net proceeds we receive from any public or private offerings of our common stock or similar equity interests.

Our 2017 First Lien Credit Facility provides that an event of default will occur upon specified change of control events. “Change in Control” is defined to include, among other things, the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group, other than certain permitted holders (directly or indirectly, including through one or more holding companies), of voting equity interests representing 50% or more of the aggregate ordinary voting power represented by the issued and outstanding voting equity in Cision Ltd.

Cash Flow Analysis

The following tables reflect the changes in cash flows for the comparative periods presented.

	Nine months ended
(in thousands)	2019			2018			Net Change
Net cash provided by (used in):
Operating activities	$	67,468		$	89,789		$	(22,321	)
Investing activities		(134,958	)		(88,809	)		(46,149	)
Financing activities		58,754			(63,156	)		121,910
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(1,104	)		(2,286	)		1,182
Net change in cash, cash equivalents and restricted cash	$	(9,840	)	$	(64,462	)	$	54,622

Cash Flow Provided By Operating Activities

Net cash flows from operating activities consist of net income (loss) adjusted for non-cash items, such as: depreciation and amortization of property and equipment and intangible assets, non-cash interest charges, deferred income taxes, unrealized currency translation losses, equity-based compensation, and for changes in net working capital assets and liabilities. The impact of changes in deferred income taxes primarily relates to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Generally, the most significant factor impacting changes in deferred income taxes relates to nondeductible amortization expense associated with intangible assets.

Net cash provided by operating activities was $67.5 million for the nine months ended September 30, 2019. Net cash provided by operating activities for the nine months ended September 30, 2019 reflects operating profit of $6.2 million, adjusted for non-cash items and an $11.7 million increase in deferred revenue due to the timing of invoicing to our subscription customers, a $7.6 million increase in prepaid expenses and other current assets, a $0.6 million decrease in accounts receivable, a $4.9 million decrease in accounts payable, a $16.9 million decrease in other accrued expenses, a $3.2 million increase in accrued compensation and benefits, and a $1.5 million increase in other liabilities an net change in operating leases.

Net cash provided by operating activities for the nine months ended September 30, 2018 was $89.8 million. Net cash provided by operating activities for the nine months ended September 30, 2018 reflects an operating loss of $13.2 million, adjusted for non-cash items and a $1.8 million increase in deferred revenue due to the timing of invoicing to our subscription customers, a $0.8 million increase in prepaid expenses and other current assets, a $1.0 million decrease in accounts receivable, a $1.7 million decrease in accounts payable, a $7.3 million decrease in other accrued expenses, and a $0.3 million decrease in accrued compensation.

Cash Flow Used In Investing Activities

Net cash used in investing activities was $135.0 million for the nine months ended September 30, 2019, which reflects $148.5 million used for our acquisitions of Falcon and TrendKite, net of cash acquired, and $44.9 million of net proceeds from our disposal of our email marketing assets, after funds deposited in escrow and transaction expenses. Net cash used in investing activities in the nine months ended September 30, 2019 also reflects capitalized software development costs of $22.5 million and purchases of property and equipment of $8.8 million.

Net cash used in investing activities was $88.8 million for the nine months ended September 30, 2018, reflects $66.5 million used for our acquisitions of Prime and Share IQ, net of cash acquired, capitalized software development costs of $12.0 million, and purchases of property and equipment of $10.3 million.

Cash Flow Provided By/(Used In) Financing Activities

Net cash provided by financing activities was $58.8 million for the nine months ended September 30, 2019 which reflects $74.0 million of proceeds, net of expenses, from our term credit facility, repayments on the credit facility of $10.5 million, $3.7 million of contingent consideration payments, $1.6 million in deferred financing payments, and $0.6 million of proceeds from the exercise of stock options.

Net cash used in financing activities was $63.2 million for the nine months ended September 30, 2018 which reflects $60.0 million in repayments of our term loan facility, $0.3 million in deferred financing payments, and contingent consideration payments of $2.9 million related to the Bulletin Intelligence earnout agreement.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet transactions or interests.

Summary of Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. There were no significant changes to critical accounting policies and estimates from those disclosed in Critical Accounting Policies and Estimates within Cision’s Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10‑K filed with the SEC on March 1, 2019.

Recent Accounting Pronouncements

ASU 2016‑02, Leases (Topic 842). ASU 2016‑02 requires lessees to recognize ROU assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. We adopted ASU 2016‑02 effective for the nine months ended September 30, 2019. See Note 2 to our Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Seasonality

We have experienced in the past, and expect to continue to experience, seasonal fluctuations in our revenues as a result of press release cycles, primarily related to the release of public company operating results and other corporate news events.

Effects of Inflation

While inflation may impact revenues and cost of services, we believe the effects of inflation, if any, on the results of operations and financial condition have not been significant. However, there can be no assurance that the results of operations and financial condition will not be materially impacted by inflation in the future.

Item 3. – Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. These risks include interest rate risk and foreign exchange risk.

Interest Rate Risk

Our 2017 First Lien Credit Facility bears interest at variable rates based on LIBOR plus a fixed margin. As of September 30, 2019, we had $1,306.5 million in outstanding borrowings under our 2017 First Lien Credit Facility. Through September 30, 2019, at LIBOR and EURIBOR rates below 3.5% and 0.5%, respectively, 100.0% of our outstanding borrowings bear interest at variable rates. Outstanding borrowings under our 2017 First Lien Credit Facility are subject to a 1% LIBOR floor. As of September 30, 2019, the 3‑month LIBOR rate and 3‑month EURIBOR rate were approximately 2.1% and 0.0%, respectively. A hypothetical 1% increase in the interest rate on our indebtedness as of September 30, 2019 would increase our cash interest expense by approximately $13.1 million per annum.

Foreign Exchange Risk

The reporting currency for all periods presented is the U.S. dollar. The functional currency for our foreign operating subsidiaries is the local currency, including the British Pound, the Euro, the Swedish Krona and the Canadian Dollar. These currencies all weakened significantly against the U.S. dollar. Approximately 40% of our 2018 revenues were generated in non-U.S. dollar-denominated currencies. The financial statements of these subsidiaries are translated into U.S. dollars using exchange rates in effect at each balance sheet date for assets and liabilities and average exchange rates during the period for revenues and expenses. The resulting translation adjustments are included in accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

Item 4. – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) as of September 30, 2019. Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2019 because of a material weakness in our internal control over financial reporting relating to the design and maintenance of information technology general controls for certain information systems relevant to the preparation of financial statements.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. – OTHER INFORMATION

Item 1. – Legal Proceedings

From time to time, we are subject to various litigation incidental to our business and to governmental investigations related to our products and services. We are not currently party to any legal proceedings or investigations that would reasonably be expected to have a material adverse effect on our business or financial condition. See “Risk Factors — We are the subject of continuing litigation and governmental inquiries.” in our Annual Report on Form 10‑K filed with the SEC on March 1, 2019.

Item 1A. – Risk Factors

Except as set forth below, there have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10‑K filed with the SEC on March 1, 2019, which is accessible on the SEC’s website at www.sec.gov.

The announcement and pendency of our agreement to be acquired by an affiliate of Platinum Equity could have an adverse effect on our business.

On October 22, 2019, we entered into the Merger Agreement with affiliates of Platinum Equity. Uncertainty about the effect of the Merger on our employees, customers and other business partners may have an adverse effect on our business, financial condition and results of operations regardless of whether the Merger is consummated. These risks to the business include the following, all of which could be exacerbated by a delay in the completion of the Merger:

• the diversion of significant management time and resources towards the completion of the Merger;

• difficulties with maintaining relationships with customers and business partners;

• diminished ability to retain and hire key personnel;

• the inability to pursue alternative business opportunities or make appropriate changes to our business because of requirements in the Merger Agreement that, subject to certain exceptions, conditions and limitations, we conduct our business in the ordinary course of business consistent with past practice and not engage in certain kinds of transactions prior to the completion of the Merger;

• litigation related to the Merger and the costs related thereto; and

• the incurrence of significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger.

Failure to consummate the Merger within the expected timeframe or at all could have a material adverse impact to our business, financial condition and results of operations.

There can be no assurance that the Merger will occur. Consummation of the Merger is subject to certain conditions and there can be no assurance that these conditions will be satisfied in a timely manner or at all. The Merger Agreement also contains termination rights for both us and Parent and could require us to pay a termination fee. If we are required to make these payments, doing so may materially adversely affect our business, financial condition and results of operations. In addition, if the Merger is not completed, and there are no other parties willing and able to acquire Cision at a price of $10.00 per share or higher, on terms acceptable to us, the price of our ordinary shares will likely decline to the extent that the current market price of our ordinary shares reflects an assumption that the Merger will be completed. Also, we will continue to incur significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger for which we will have received little or no benefit if the Merger is not completed. Many of the fees will be payable by us even if the Merger is not completed and may relate to activities that we would have not undertaken other than to complete the Merger. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community. Finally, any disruption to our business resulting from the announcement and pendency of the Merger and from intensifying competition from our competitors, including any adverse changes in our relationships with our employees, customers and business partners, could continue or accelerate in the event of a failed transaction.

Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. – Defaults Upon Senior Securities

None.

Item 4. – Mine Safety Disclosures

Not applicable.

Item 5. – Other Information

None.

Item 6. – Exhibits

Exhibit		Description
2.1†		Agreement and Plan of Merger, dated as of October 22, 2019, by and among MJ23 UK Acquisition Limited, Castle Merger Limited and Cision Ltd. (incorporated by Reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 23, 2019).
10.1		Voting Agreement, dated as of October 22, 2019, by and among MJ23 UK Acquisition Limited, Canyon Holdings (Cayman), L.P. and GTCR Investment X AIV, Ltd. (incorporated by Reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 23, 2019).
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		iXBRL Instance Document.
101.SCH*		iXBRL Taxonomy Extension Schema Document.
101.CAL*		iXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		iXBRL Taxonomy Extension Definitions Linkbase Document.
101.LAB*		iXBRL Taxonomy Extension Label Linkbase Document.
101.PRE*		iXBRL Taxonomy Extension Presentation Linkbase Document.
104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, has been formatted in Inline XBRL.

†	Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission on request.

*	Filed herewith.

Certification has been furnished, is not deemed filed and is not to be incorporated by reference into any of the registrant’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	CISION LTD.

Dated: November 8, 2019	By:	/s/ Jack Pearlstein
	Name:	Jack Pearlstein
	Title:	Chief Financial Officer

	By:	/s/ Steve Solomon
	Name:	Steve Solomon
	Title:	Chief Accounting Officer