Diversey Holdings, Ltd. ("Diversey") (NASDAQ: DSEY) announced
Q2 results with continued strength in Food & Beverage and
better than expected recovery in base Institutional business in
countries where reopenings have begun.
SECOND QUARTER HIGHLIGHTS
- Reported Q2 net sales grew 3.9% vs 2020 with continued strength
in Food & Beverage, encouraging base Institutional recovery in
the countries where re-openings are more advanced and favorable
foreign currency translation, offset by some infection prevention
revenue normalization versus very strong gains last year.
- Reported Q2 net sales declined 4.4% vs pre-COVID 2019 baseline
as global lockdowns continued to impact many sectors, including
education, office buildings, hospitality and food service.
- Net loss of $1.3 million in Q2 versus $16.4 million net income
in 2020 and $12.8 million net loss in pre-COVID 2019
- Q2 Adjusted net income of $46.8 million versus $38.8 million in
2020 and $22.9 million in pre-COVID 2019, representing 20.6% and
104.4% growth, respectively.
- Adjusted EBITDA of $101.3 million and margin of 15.6%
represents a gap of 130 basis points versus Q2 2020 due to lapping
prior year furlough subsidies, some normalization of infection
prevention against the peak in 2020, and short-term raw material
pressures, but represents a 250 basis point improvement versus
pre-COVID Q2 2019 with continued focus on cost management in a
difficult environment.
Unaudited |
Second Quarter Ended June 30 |
(millions) |
2021 |
2020 |
% Change |
2019 |
% Change |
Net sales |
$ |
650.1 |
|
|
$ |
625.8 |
|
3.9 |
|
% |
|
$ |
679.9 |
|
|
(4.4 |
) |
% |
Income (loss) before
taxes |
(11.1 |
) |
|
22.0 |
|
|
|
NM |
|
(8.0 |
) |
|
38.8 |
|
% |
Net income (loss) |
(1.3 |
) |
|
16.4 |
|
|
|
NM |
|
(12.8 |
) |
|
(89.8 |
) |
% |
Adjusted net income(1) |
46.8 |
|
|
38.8 |
|
20.6 |
|
% |
|
22.9 |
|
|
104.4 |
|
% |
|
|
|
|
|
|
Adjusted EBITDA(1) |
101.3 |
|
|
105.9 |
|
(4.3 |
) |
% |
|
88.8 |
|
|
14.1 |
|
% |
% Margin(1) |
15.6 |
|
% |
16.9 |
% |
(130 |
) |
bps |
|
13.1 |
|
% |
250 |
|
bps |
(1) See the “Non-GAAP Financial Information and Segment Adjusted
EBITDA” section herein for explanations of these financial
measures.
“We are pleased to report another good quarter, bringing our
first half results in line with our IPO plan despite a difficult
operating environment. We expanded adjusted EBITDA margin 250 basis
points versus pre-COVID levels, as we manage costs and pass through
price to cover inflation, while focusing on the fundamentals of
delivering great product and service for our customers,” said Phil
Wieland, Diversey’s Chief Executive Officer. “Our Food and Beverage
growth continues to be strong and the early Institutional results
in countries that have reopened were better than expected, which
gives us confidence in the future. As a leading provider of
hygiene, infection prevention and cleaning solutions amidst a
pandemic, we believe we are well positioned to capture significant
growth due to elevated hygiene standards. Further, we are also well
positioned to continue helping customers save water, labor, energy
and waste as environmental impact becomes even more of a focus
across industries.”
Second Quarter 2021 Consolidated Results
Reported net sales grew 3.9% vs prior year or decreased 1.6%
when adjusting for currency. We're seeing continued strength in
Food & Beverage, encouraging base Institutional recovery in the
countries where re-openings are more advanced and favorable foreign
currency translation, offset by some infection prevention revenue
normalization versus very strong gains last year. Reported net
sales were 4.4% lower than pre-COVID 2019 baseline as lockdowns
continued to impact many sectors, including education, office
buildings, hospitality and food service.
Loss before income taxes of $11.1 million in the second quarter
of 2021 included Special Items (as defined below) of $38.8 million
and compared to income before taxes of $22.0 million in Q2 2020
including Special Items of $6.6 million. Adjusted net income in Q2
2021 was $46.8 million compared to $38.8 million in Q2 2020 and
$22.9 million in Q2 2019, representing 20.6% and 104.4% growth,
respectively.
Adjusted EBITDA for Q2 2021 was $101.3 million, representing
continued growth of 14.1% versus pre-COVID 2019 despite lower net
sales, and a 4.3% decline compared to Q2 2020. Adjusted EBITDA
margin expanded 250 basis points compared to pre-COVID 2019 with
continued focus on cost management in a difficult environment and
declined 130 basis points compared to Q2 2020 due to lapping prior
year furlough subsidies, some normalization of infection prevention
against the peak in 2020, and short-term raw material pressures.
Adjusted EBITDA margin of 15.6% in Q2 2021 was a 90 basis points
improvement over Q1 2021 Adjusted EBITDA margin of 14.7%,
representing strong sequential quarter over quarter margin
improvement.
Segment Review
Institutional
Unaudited |
Second Quarter Ended June 30 |
(millions) |
2021 |
2020 |
% Change |
2019 |
% Change |
Net sales |
$ |
476.4 |
|
$ |
474.8 |
|
0.3 |
|
% |
$ |
515.3 |
|
(7.5 |
) |
% |
Adjusted EBITDA |
|
78.1 |
|
|
83.0 |
|
(5.9 |
) |
% |
|
79.3 |
|
(1.5 |
) |
% |
% Margin |
|
16.4 |
% |
|
17.5 |
% |
(110) |
|
bps |
|
15.4 |
% |
100 |
|
bps |
Reported net sales in the Institutional segment of $476.4
million were 0.3% above Q2 2020 and 7.5% below Q2 2019. The
recovery of our base Institutional business was better than
expected in the limited number of countries that have reopened. As
expected, that recovery was offset by comparing to the peak of
infection prevention sales last year while customers were building
inventory at the start of the pandemic. Adjusted EBITDA margin
declined 110 basis points vs Q2 2020 against a tough infection
prevention comparison and lapping furlough subsidies, but improved
by 100 basis points vs Q2 2019 from ongoing efficiency initiatives.
Acquisitions contributed $2.5 million to sales growth and $0.7
million to Adjusted EBITDA.
Food & Beverage
Unaudited |
Second Quarter Ended June 30 |
(millions) |
2021 |
2020 |
% Change |
2019 |
% Change |
Net sales |
$ |
173.7 |
|
$ |
151.0 |
|
15.0 |
|
% |
$ |
164.6 |
|
5.5 |
|
% |
Adjusted EBITDA |
|
35.1 |
|
|
31.6 |
|
11.1 |
|
% |
|
24.3 |
|
44.4 |
|
% |
% Margin |
|
20.2 |
% |
|
20.9 |
% |
70 |
|
bps |
|
14.8 |
% |
540 |
|
bps |
The Food & Beverage segment continues its upward trajectory
in top line while improving margins. Net sales of $173.7 million in
Q2 2021 increased 15.0% versus prior year and 5.5% versus Q2 2019,
continuing to gain share and realize early success with the new
water treatment offering. Adjusted EBITDA of $35.1 million grew
11.1% versus Q2 2020 and 44.4% versus Q2 2019. Margin improvement
of +70 basis points versus the prior year and +540 basis points
versus pre-COVID 2019 reflect pricing actions and cost control
measures that were in place before the global pandemic and will
continue. Acquisitions contributed $3.2 million to sales growth and
$0.5 million to Adjusted EBITDA.
Corporate
Unaudited |
Second Quarter Ended June 30 |
(millions) |
2021 |
2020 |
% Change |
2019 |
% Change |
Adjusted EBITDA |
$ |
(11.9 |
) |
|
$ |
(8.7 |
) |
|
(36.8 |
) |
% |
$ |
(14.8 |
) |
|
19.6 |
|
% |
% Net Sales |
|
(1.8 |
) |
% |
|
(1.4 |
) |
% |
(40 |
) |
bps |
|
(2.2 |
) |
% |
40 |
|
bps |
The increase in corporate costs from $8.7 million in Q2 2020 to
$11.9 million in Q2 2021 was primarily due to an increase in the
realized foreign exchange losses caused by internal cash-pooling
activity and remains $2.9 million below pre-COVID 2019 level.
Outlook
We’re confident that our base business will continue to improve
as markets reopen and we continue to implement new business that we
won over the last year. We’re already seeing this recovery play out
in some markets with higher vaccination rates. For infection
prevention outside of healthcare, we’re seeing demand lower than
the peak of the pandemic, but much higher than pre-pandemic levels.
We continue to see strong behavioral changes from customers, which
we expect to sustain elevated sales in the future. In F&B we
expect to see continued growth in both our core business and newer
water treatment portfolio.
We expect to show quarter on quarter improvement for the
remainder of the year, pending the impact of the Delta variant,
change in the pace of reopenings and potential challenges with raw
material and carrier availability. However, with the current status
of delayed reopenings and pricing actions that will build through
the end of the year, it’s likely that more of our
quarter-on-quarter growth will come in Q4 than was originally
planned for Q3. With that said, we are optimistic about future
business prospects and continue to make investments in the business
for the longer term. Further, our M&A pipeline is robust and we
expect to make additional acquisitions in the second half.
About Diversey
Diversey’s mission is to protect and care for people through
leading hygiene, infection prevention, and cleaning solutions. We
develop and deliver innovative products, services, and technologies
that save lives and protect our environment. Over the course of 95
years, the Diversey brand has become synonymous with product
quality, service, and innovation.
For more information, visit www.diversey.com or follow us on
LinkedIn, Facebook, or Twitter @diversey.
Diversey Holdings, Ltd.Investor Contact:Grant
Graverir@diversey.com
Conference Call and Webcast Information
Management will host a conference call today, August 13, 2021 at
8:30 am ET to discuss the results for Q2 2021.
Interested parties may access the conference call live over the
phone by dialing 1-877-407-0784 (Toll Free) or 1-201-689-8560
(Toll/International) and requesting the Diversey Second Quarter
2021 Earnings Conference Call. Participants are asked to dial in a
few minutes prior to the call to register for the event. Related
materials that will be referenced on the call are available to the
public at ir.diversey.com. The event will also be available live
via webcast which can be accessed here.
An audio replay of the conference call will be available
approximately three hours after the conference call until 11:59 pm
ET on August 27, 2021 and can be accessed by dialing 1-844-512-2921
(domestic) or 1-412-317-6671 (international), and providing the
passcode 13719093.
Cautionary Statements Regarding Forward-Looking
Information
This communication contains forward-looking statements that are
subject to substantial risks and uncertainties. All statements
other than statements of historical fact included in this
communication, including statements regarding our business
strategy, future operations and results thereof, future financial
position, future revenue, projected costs, prospects, current and
prospective products, current and prospective collaborations,
timing and likelihood of success, plans and objectives of
management, expected market growth and future results of current
and anticipated products are forward-looking statements. You can
identify forward-looking statements by the fact that they do not
relate strictly to historical or current facts. These statements
may include words such as “anticipate”, “estimate”, “expect”,
“project”, “plan”, "potential", "predict", “intend”, “believe”,
“may”, "might", “will”, "would", “should”, “can have”, "could",
"continue", "contemplate", "target", “likely” and other words and
terms of similar meaning in connection with any discussion of the
timing or nature of future operating or financial performance or
other events although not all forward-looking statements contain
these identifying words. For example, all statements we make
relating to our estimated and projected costs, expenditures, cash
flows, growth rates and financial results or our plans and
objectives for future operations, growth initiatives, or strategies
are forward-looking statements. All forward-looking statements
involve unknown risks, and other important factors that may cause
actual results performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements,
including:
- the continuation of the COVID-19 pandemic may cause disruptions
to our operations, customer demand, and our suppliers’ ability to
support us;
- uncertain global economic conditions which have had and could
continue to have an adverse effect on our consolidated financial
condition and results of operations;
- the global nature of our operations exposes us to numerous
risks that could materially adversely affect our consolidated
financial condition and results of operations;
- fluctuations between non-U.S. currencies and the U.S. dollar
could materially impact our consolidated financial condition or
results of operations;
- political and economic instability and risk of government
actions affecting our business and our customers or suppliers may
adversely impact our business, results of operations and cash
flows;
- raw material pricing, availability and allocation by suppliers
as well as energy-related costs may negatively impact our results
of operations, including our profit margins;
- if we do not develop new and innovative products or if
customers in our markets do not accept them, our results would be
negatively affected;
- cyber risks and the failure to maintain the integrity of our
operational or security systems or infrastructure;
- the introduction of the Organization for Economic Cooperation
and Development’s Base Erosion and Profit Shifting may adversely
affect our effective rate of tax in future periods;
- the consolidation of customers may adversely affect our
business, consolidated financial condition or results of
operations;
- we experience competition in the markets for our products and
services and in the geographic areas in which we operate;
- instability and uncertainty in the credit and financial markets
could adversely impact the availability of credit that we and our
customers need to operate our business;
- new and stricter regulations may affect our business and
consolidated condition and results of operations; and
- the other risks described under “Risk Factors” in Diversey’s
prospectus dated March 24, 2021 filed with the Securities and
Exchange Commission in connection with our recently completed
IPO.
We derive many of our forward-looking statements from our
operating budgets and forecasts, which are based on many detailed
assumptions. While we believe that our assumptions are reasonable,
we caution that it is very difficult to predict the impact of known
factors, and it is impossible for us to anticipate all factors that
could affect our actual results. All written and oral
forward-looking statements attributable to us, or persons acting on
our behalf, are expressly qualified in their entirety by these
cautionary statements as well as other cautionary statements that
are made from time to time in our other SEC filings and public
communications. You should evaluate all forward-looking statements
in the context of these risks and uncertainties.
We caution you that the important factors referenced above may
not contain all of the factors that are important to you. In
addition, we cannot assure you that we will realize the results or
developments we expect or anticipate or, even if substantially
realized, that they will result in the consequences or affect us or
our operations in the way we expect. The forward-looking statements
included herein are made only as of the date hereof. We undertake
no obligation to update or revise any forward-looking statement as
a result of new information, future events or otherwise, except as
otherwise required by law.
Non-GAAP Financial Information
We present financial information that conforms to generally
accepted accounting principles in the United States (“U.S. GAAP").
We also present financial information that does not conform to U.S.
GAAP ("Non-GAAP"), as our management believes it is useful to
investors.
The Non-GAAP financial metrics exclude items that we consider to
be certain specified items (“Special Items”), such as restructuring
charges, transition and transformation costs, certain transaction
and other charges related to acquisitions and divestitures, gains
and losses related to acquisitions and divestitures, and certain
other items. We evaluate unusual or Special Items on an individual
basis. Our evaluation of whether to exclude an unusual or Special
Item for purposes of determining our Non-GAAP financial measures
considers both the quantitative and qualitative aspects of the
item, including among other things (i) its nature, (ii) whether or
not it relates to our ongoing business operations, and (iii)
whether or not we expect it to occur as part of our normal business
on a regular basis.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are supplemental measures that are
not required by, or presented in accordance with, U.S. GAAP. We
define EBITDA as income (loss) before income tax provisions
(benefit), interest expense, and depreciation and amortization, and
Adjusted EBITDA, as EBITDA adjusted for other items to (i)
eliminate certain non-operating income or expense items, (ii)
eliminate the impact of certain non-cash and other items that are
included in net income (loss) that we do not consider indicative of
our ongoing operating performance, and (iii) eliminate certain
unusual and non-recurring items impacting results in a particular
period.
EBITDA and Adjusted EBITDA are not measures of our financial
performance under U.S. GAAP and should not be considered as an
alternative to revenues, net income (loss), income (loss) before
income tax provision or any other performance measures derived in
accordance with U.S. GAAP, nor should they be considered as
alternatives to cash flows from operating activities as a measure
of liquidity in accordance with U.S. GAAP. In addition, our method
of calculating EBITDA and Adjusted EBITDA may vary from the methods
used by other companies.
Our management considers EBITDA and Adjusted EBITDA to be key
indicators of our financial performance. Additionally, we believe
EBITDA and Adjusted EBITDA are frequently used by securities
analysts, investors and other interested parties in the evaluation
of companies in our industry. We also believe that investors,
analysts and rating agencies consider EBITDA and Adjusted EBITDA
useful means of measuring our ability to meet our debt service
obligations and evaluating our financial performance, and
management uses these measures for one or more of these purposes.
Our presentation of EBITDA and Adjusted EBITDA should not be
construed as an inference that our future results will be
unaffected by unusual or nonrecurring items. EBITDA and Adjusted
EBITDA have important limitations as analytical tools and you
should not consider them in isolation or as a substitute for
analysis of our results as reported under U.S. GAAP. The use of
EBITDA and Adjusted EBITDA instead of net income has limitations as
an analytical tool.
Adjusted Net Income
Adjusted Net Income (as defined below) and Adjusted Earnings
(Loss) Per Share (“Adjusted EPS”) are Non-GAAP financial measures.
We define Adjusted Net Income as net income (loss) adjusted to (i)
eliminate certain non-operating income or expense items, (ii)
eliminate the impact of certain non-cash and other items that are
included in net income that we do not consider indicative of our
ongoing operating performance, (iii) eliminate certain unusual and
non-recurring items impacting results in a particular period, and
(iv) reflect the tax effect of items (i) through (iii) and other
tax special items.
We believe that in addition to our results determined in
accordance with GAAP, Adjusted Net Income and Adjusted EPS are
useful in evaluating our business, results of operations and
financial condition. We believe that Adjusted Net Income and
Adjusted EPS may be helpful to investors because they provide
consistency and comparability with past financial performance and
facilitate period to period comparisons of our operations and
financial results, as they eliminate the effects of certain
variables from period to period for reasons that we do not believe
reflect our underlying operating performance or are unusual or
infrequent in nature. However, Adjusted Net Income and Adjusted EPS
are presented for supplemental informational purposes only and
should not be considered in isolation or as a substitute or
alternative for financial information presented in accordance with
GAAP.
Adjusted Net Income and Adjusted EPS have limitations as
analytical tools.
Diversey Holdings,
Ltd.Condensed Consolidated Balance
Sheets(Unaudited)
(in
millions except per share amounts) |
June 30, 2021 |
December 31, 2020 |
Assets |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
70.7 |
|
|
$ |
192.9 |
|
|
Trade receivables, net of
allowance for doubtful accounts of $26.4 and $28.7 |
372.8 |
|
|
342.0 |
|
|
Other receivables |
58.2 |
|
|
71.0 |
|
|
Inventories |
331.2 |
|
|
282.4 |
|
|
Prepaid expenses and other
current assets |
88.2 |
|
|
62.0 |
|
|
Total current assets |
921.1 |
|
|
950.3 |
|
|
Property and equipment,
net |
187.1 |
|
|
188.3 |
|
|
Goodwill |
463.9 |
|
|
467.0 |
|
|
Intangible assets, net |
2,238.2 |
|
|
2,311.4 |
|
|
Other non-current assets |
343.8 |
|
|
369.1 |
|
|
Total assets |
$ |
4,154.1 |
|
|
$ |
4,286.1 |
|
|
|
|
|
Liabilities and stockholders' equity |
|
|
Current liabilities: |
|
|
|
Short-term borrowings |
$ |
3.2 |
|
|
$ |
0.4 |
|
|
Current portion of long-term
debt |
14.9 |
|
|
13.2 |
|
|
Accounts payable |
426.7 |
|
|
404.6 |
|
|
Accrued restructuring
costs |
16.4 |
|
|
26.3 |
|
|
Other current liabilities |
394.1 |
|
|
512.4 |
|
|
Total current liabilities |
855.3 |
|
|
956.9 |
|
|
Long-term debt, less current
portion |
1,935.5 |
|
|
2,686.7 |
|
|
Preferred equity
certificates |
|
0 |
|
|
641.7 |
|
|
Deferred taxes |
174.4 |
|
|
181.1 |
|
|
Other non-current
liabilities |
564.7 |
|
|
328.3 |
|
|
Total liabilities |
3,529.9 |
|
|
4,794.7 |
|
|
Commitments and
contingencies |
|
|
Stockholders' equity: |
|
|
|
Common stock, $0.01 par value
per share, 0 and 243,163,947 shares authorized and outstanding in
2021 and 2020, respectively |
— |
|
|
2.2 |
|
|
Ordinary shares, $0.0001 par
value per share; 1,000,000,000 and 0 shares authorized, 301,269,707
and 0 shares outstanding in 2021 and 2020, respectively |
|
0.0 |
|
|
— |
|
|
Preferred shares, $0.0001 par
value per share, 200,000,000 and 0 shares authorized, 0 and 0
shares outstanding in 2021 and 2020, respectively |
— |
|
|
— |
|
|
Additional paid-in
capital |
|
1419.8 |
|
|
247.2 |
|
|
Accumulated deficit |
(642.3 |
) |
|
(545.3 |
) |
|
Accumulated other
comprehensive loss |
(153.3 |
) |
|
(212.7 |
) |
|
Total stockholders' equity |
624.2 |
|
|
(508.6 |
) |
|
Total liabilities and stockholders' equity |
$ |
4,154.1 |
|
|
$ |
4,286.1 |
|
Diversey Holdings,
Ltd.Condensed Consolidated Statements of
Operations(Unaudited)
|
Three Months Ended June 30, |
Six Months Ended June 30, |
(in millions except
per share amounts) |
2021 |
2020 |
2021 |
2020 |
Net sales |
$ |
650.1 |
|
|
$ |
625.8 |
|
|
$ |
1,281.6 |
|
|
$ |
1,280.7 |
|
|
Cost of sales |
384.5 |
|
|
365.5 |
|
|
769.6 |
|
|
739.1 |
|
|
Gross profit |
265.6 |
|
|
260.3 |
|
|
512.0 |
|
|
541.6 |
|
|
Selling, general and
administrative expenses |
206.2 |
|
|
179.8 |
|
|
449.3 |
|
|
393.9 |
|
|
Transition and transformation
costs |
10.2 |
|
|
3.8 |
|
|
25.6 |
|
|
8.8 |
|
|
Management fee |
— |
|
|
1.9 |
|
|
19.4 |
|
|
3.8 |
|
|
Amortization of intangible
assets |
24.1 |
|
|
24.6 |
|
|
48.4 |
|
|
49.2 |
|
|
Restructuring costs |
2.1 |
|
|
1.9 |
|
|
2.6 |
|
|
3.3 |
|
|
Operating income (loss) |
23.0 |
|
|
48.3 |
|
|
(33.3 |
) |
|
82.6 |
|
|
Interest expense |
27.9 |
|
|
30.8 |
|
|
71.6 |
|
|
62.4 |
|
|
Foreign currency (gain) loss
related to Argentina subsidiaries |
2.2 |
|
|
(0.3 |
) |
|
0.2 |
|
|
0.6 |
|
|
Other (income) expense,
net |
4.0 |
|
|
(4.2 |
) |
|
4.1 |
|
|
(17.5 |
) |
|
Income (loss) before income tax provision (benefit) |
(11.1 |
) |
|
22.0 |
|
|
(109.2 |
) |
|
37.1 |
|
|
Income tax provision
(benefit) |
(9.8 |
) |
|
5.6 |
|
|
(12.2 |
) |
|
16.8 |
|
|
Net income (loss) |
$ |
(1.3 |
) |
|
$ |
16.4 |
|
|
$ |
(97.0 |
) |
|
$ |
20.3 |
|
|
|
|
|
|
|
Basic income (loss) per
share |
$ |
— |
|
|
$ |
0.07 |
|
|
$ |
(0.35 |
) |
|
$ |
0.08 |
|
|
Diluted income (loss) per
share |
$ |
— |
|
|
$ |
0.07 |
|
|
$ |
(0.35 |
) |
|
$ |
0.08 |
|
|
Basic weighted average shares
outstanding |
|
300.8 |
|
|
|
243.2 |
|
|
|
274.2 |
|
|
|
243.2 |
|
|
Diluted weighted average
shares outstanding |
|
300.8 |
|
|
|
243.2 |
|
|
|
274.2 |
|
|
|
243.2 |
|
|
|
|
|
|
|
Reconciliation of gross margin
to adjusted gross margin: |
|
|
|
|
Net sales |
$ |
650.1 |
|
|
$ |
625.8 |
|
|
$ |
1,281.6 |
|
|
$ |
1,280.7 |
|
|
|
|
|
|
|
Cost of sales, as
reported |
384.5 |
|
|
365.5 |
|
|
769.6 |
|
|
739.1 |
|
|
Less share-based compensation
included in cost of sales |
(1.3 |
) |
|
— |
|
|
(6.0 |
) |
|
— |
|
|
Non-GAAP adjusted cost of sales |
$ |
383.2 |
|
|
$ |
365.5 |
|
|
$ |
763.6 |
|
|
$ |
739.1 |
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
Reported gross margin |
40.9 |
|
% |
41.6 |
|
% |
40.0 |
|
% |
42.3 |
|
% |
Non-GAAP adjusted gross margin |
41.1 |
|
% |
41.6 |
|
% |
40.4 |
|
% |
42.3 |
|
% |
Diversey Holdings,
Ltd.Condensed Consolidated Statements of Cash
Flows(Unaudited)
|
|
|
|
|
Six Months Ended June 30, |
(in
millions) |
2021 |
2020 |
Operating
activities: |
|
|
|
Net income (loss) |
$ |
(97.0 |
) |
$ |
20.3 |
|
|
Adjustments to
reconcile net income (loss) to cash provided by (used in) operating
activities: |
|
|
|
Depreciation and amortization |
94.0 |
|
96.2 |
|
|
Amortization of deferred financing costs and original issue
discount |
19.3 |
|
5.1 |
|
|
Gain on cash flow hedges |
— |
|
(1.5 |
) |
|
Deferred taxes |
(6.2 |
) |
(0.7 |
) |
|
Non-cash foreign currency exchange (gain) loss |
7.6 |
|
(8.8 |
) |
|
Share-based compensation |
53.2 |
|
0.6 |
|
|
Impact of highly inflationary economy - Argentina |
0.2 |
|
0.6 |
|
|
Provision for bad debts |
3.3 |
|
13.0 |
|
|
Provision for slow moving inventory |
3.1 |
|
3.1 |
|
|
Other non-cash, net |
(8.3 |
) |
(0.5 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
Trade receivables, net |
(66.8 |
) |
(6.2 |
) |
|
Inventories, net |
(53.1 |
) |
(91.1 |
) |
|
Accounts payable |
25.2 |
|
(14.6 |
) |
|
Income taxes, net |
(23.0 |
) |
0.8 |
|
|
Other assets and liabilities, net |
(51.2 |
) |
(10.9 |
) |
Cash
provided by (used in) operating activities |
(99.7 |
) |
5.4 |
|
Investing
activities: |
|
|
|
Acquisition of
intellectual property |
(3.0 |
) |
— |
|
|
Dosing and
dispensing equipment |
(30.2 |
) |
(21.1 |
) |
|
Capital
expenditures |
(11.6 |
) |
(12.7 |
) |
|
Collection of
deferred factored receivables |
32.4 |
|
38.3 |
|
Cash
provided by (used in) investing activities |
(12.4 |
) |
4.5 |
|
Financing
activities: |
|
|
|
Contingent
consideration payments |
(0.1 |
) |
— |
|
|
Proceeds from
short-term borrowings |
3.1 |
|
(0.3 |
) |
|
Proceeds from
revolving credit facility |
25.0 |
|
90.0 |
|
|
Payments on
revolving credit facility |
(25.0 |
) |
(210.0 |
) |
|
Proceeds from
long-term borrowings |
— |
|
167.4 |
|
|
Payments on
long-term borrowings |
(733.9 |
) |
(11.5 |
) |
|
Payment of
deferred financing costs |
(2.5 |
) |
— |
|
|
Issuance of
ordinary shares sold in IPO, net of offering costs |
725.7 |
|
— |
|
Cash
provided by (used in) financing activities |
(7.7 |
) |
35.6 |
|
Exchange rate
changes on cash |
(2.9 |
) |
(4.2 |
) |
|
Increase
(decrease) in cash, cash equivalents and restricted cash |
(122.7 |
) |
41.3 |
|
Cash, cash
equivalents and restricted cash at beginning of period |
201.7 |
|
142.3 |
|
Cash, cash
equivalents and restricted cash at end of period |
$ |
79.0 |
|
$ |
183.6 |
|
Supplemental Cash
Flow Information: |
|
|
|
Interest
payments |
$ |
57.5 |
|
$ |
58.4 |
|
|
Income tax
payments |
$ |
16.8 |
|
$ |
11.4 |
|
|
Conversion of
preferred equity certificates to equity |
$ |
620.9 |
|
$ |
114.3 |
|
|
Beneficial
interest obtained for factored receivables |
$ |
17.1 |
|
$ |
34.5 |
|
The following tables reconcile net income (loss) before income
tax provision (benefit) to EBITDA and Adjusted EBITDA for the
periods presented:
|
Three Months Ended June 30, |
(in
millions) |
2021 |
2020 |
2019 |
Income (loss) before income tax provision (benefit) |
$ |
(11.1 |
) |
$ |
22.0 |
|
$ |
(8.0 |
) |
Interest expense |
27.9 |
|
30.8 |
|
36.9 |
|
Interest income |
(1.2 |
) |
(1.2 |
) |
(1.7 |
) |
Amortization expense of
intangible assets |
24.1 |
|
24.6 |
|
22.9 |
|
Depreciation expense included
in cost of sales |
20.8 |
|
21.2 |
|
21.0 |
|
Depreciation expense included
in selling, general and administrative expenses |
2.0 |
|
1.9 |
|
1.6 |
|
EBITDA |
62.5 |
|
99.3 |
|
72.7 |
|
Transition and transformation
costs and non-recurring costs(1) |
10.2 |
|
3.8 |
|
10.2 |
|
Restructuring costs(2) |
2.1 |
|
1.9 |
|
4.9 |
|
Foreign currency loss (gain)
related to Argentina subsidiaries(3) |
2.2 |
|
(0.3 |
) |
4.2 |
|
Adjustment for tax
indemnification asset(4) |
1.3 |
|
1.3 |
|
0.2 |
|
Acquisition accounting
adjustments (5) |
— |
|
— |
|
0.7 |
|
Bain Capital management
fee(6) |
— |
|
1.9 |
|
1.9 |
|
Non-cash pension and other
post-employment benefit plan(7) |
(3.9 |
) |
(3.1 |
) |
(2.3 |
) |
Unrealized foreign currency
exchange loss (gain)(8) |
1.7 |
|
(0.5 |
) |
(2.7 |
) |
Factoring and securitization
fees(9) |
1.2 |
|
1.2 |
|
0.9 |
|
Share-based
compensation(10) |
19.8 |
|
0.3 |
|
— |
|
Tax receivable agreement
adjustments(11) |
4.1 |
|
— |
|
— |
|
Other items |
0.1 |
|
0.1 |
|
(1.9 |
) |
Non-GAAP consolidated
Adjusted EBITDA |
$ |
101.3 |
|
$ |
105.9 |
|
$ |
88.8 |
|
|
Six Months Ended June 30, |
(in
millions) |
2021 |
2020 |
2019 |
Income (loss) before income tax provision (benefit) |
$ |
(109.2 |
) |
$ |
37.1 |
|
$ |
(53.5 |
) |
Interest expense |
71.6 |
|
62.4 |
|
71.0 |
|
Interest income |
(2.1 |
) |
(3.4 |
) |
(3.3 |
) |
Amortization expense of
intangible assets |
48.4 |
|
49.2 |
|
45.8 |
|
Depreciation expense included
in cost of sales |
41.6 |
|
43.0 |
|
40.7 |
|
Depreciation expense included
in selling, general and administrative expenses |
4.0 |
|
3.9 |
|
2.9 |
|
EBITDA |
54.3 |
|
192.2 |
|
103.6 |
|
Transition and transformation
costs and non-recurring costs(1) |
25.6 |
|
8.8 |
|
24.9 |
|
Restructuring costs(2) |
2.6 |
|
3.3 |
|
4.9 |
|
Foreign currency loss (gain)
related to Argentina subsidiaries(3) |
0.2 |
|
0.6 |
|
5.2 |
|
Adjustment for tax
indemnification asset(4) |
1.3 |
|
1.3 |
|
0.2 |
|
Acquisition accounting
adjustments (5) |
— |
|
— |
|
1.4 |
|
Bain Capital management
fee(6) |
19.4 |
|
3.8 |
|
3.8 |
|
Non-cash pension and other
post-employment benefit plan(7) |
(7.7 |
) |
(6.2 |
) |
(4.7 |
) |
Unrealized foreign currency
exchange loss (gain)(8) |
7.6 |
|
(8.8 |
) |
1.6 |
|
Factoring and securitization
fees(9) |
2.2 |
|
1.9 |
|
1.8 |
|
Share-based
compensation(10) |
83.3 |
|
0.6 |
|
— |
|
Tax receivable agreement
adjustments(11) |
4.1 |
|
— |
|
— |
|
Other items |
1.1 |
|
0.6 |
|
(1.8 |
) |
Non-GAAP consolidated
Adjusted EBITDA |
$ |
194.0 |
|
$ |
198.1 |
|
$ |
140.9 |
|
The following table reconciles net income (loss) to Adjusted Net
Income and basic and diluted earnings (loss) per share to Adjusted
EPS for the periods presented:
|
Three Months Ended June 30, |
|
2021 |
2020 |
2019 |
(in millions, except per share amounts) |
Net Income (Loss) |
Basic and diluted EPS(15) |
Net Income (Loss) |
Basic and diluted EPS(15) |
Net Income (Loss) |
Basic and diluted EPS(15) |
Reported (GAAP) |
$ |
(1.3 |
) |
$ |
— |
|
$ |
16.4 |
|
$ |
0.07 |
|
$ |
(12.8 |
) |
$ |
(0.05 |
) |
Amortization expense of intangible assets |
24.1 |
|
0.08 |
|
24.6 |
|
0.10 |
|
22.9 |
|
0.09 |
|
Transition and transformation costs and non-recurring costs(1) |
10.2 |
|
0.03 |
|
3.8 |
|
0.02 |
|
10.2 |
|
0.04 |
|
Restructuring costs(2) |
2.1 |
|
0.01 |
|
1.9 |
|
0.01 |
|
4.9 |
|
0.02 |
|
Foreign currency loss (gain) related to Argentina
subsidiaries(3) |
2.2 |
|
0.01 |
|
(0.3 |
) |
— |
|
4.2 |
|
0.02 |
|
Adjustment for tax indemnification asset(4) |
1.3 |
|
— |
|
1.3 |
|
0.01 |
|
0.2 |
|
— |
|
Acquisition accounting adjustments(5) |
— |
|
— |
|
— |
|
— |
|
0.7 |
|
— |
|
Bain Capital management fee(6) |
— |
|
— |
|
1.9 |
|
0.01 |
|
1.9 |
|
0.01 |
|
Non-cash pension and other post-employment benefit plan(7) |
(3.9 |
) |
(0.01 |
) |
(3.1 |
) |
(0.01 |
) |
(2.3 |
) |
(0.01 |
) |
Unrealized foreign currency exchange loss (gain)(8) |
1.7 |
|
0.01 |
|
(0.5 |
) |
— |
|
(2.7 |
) |
(0.01 |
) |
Factoring and securitization fees(9) |
1.2 |
|
— |
|
1.2 |
|
— |
|
0.9 |
|
— |
|
Share-based compensation(10) |
19.8 |
|
0.07 |
|
0.3 |
|
— |
|
— |
|
— |
|
Tax
receivable agreement adjustments(11) |
|
4.1 |
|
|
0.01 |
|
— |
|
— |
|
— |
|
— |
|
Accelerated expense of deferred financing and original issue
discount costs(12) |
|
2.1 |
|
|
0.01 |
|
— |
|
— |
|
— |
|
— |
|
Other items |
0.1 |
|
— |
|
0.1 |
|
— |
|
(1.9 |
) |
(0.01 |
) |
Tax
effects related to non-GAAP adjustments(13) |
(8.7 |
) |
(0.03 |
) |
(6.8 |
) |
(0.03 |
) |
(7.6 |
) |
(0.03 |
) |
Discrete tax adjustments(14) |
(8.2 |
) |
(0.03 |
) |
(2.0 |
) |
(0.01 |
) |
4.3 |
|
0.02 |
|
Adjusted (Non-GAAP) |
$ |
46.8 |
|
$ |
0.16 |
|
$ |
38.8 |
|
$ |
0.16 |
|
$ |
22.9 |
|
$ |
0.09 |
|
|
Six Months Ended June 30, |
|
2021 |
2020 |
2019 |
(in millions, except
per share amounts) |
Net Income (Loss) |
Basic and diluted EPS(15) |
Net Income (Loss) |
Basic and diluted EPS(15) |
Net Income (Loss) |
Basic and diluted EPS(15) |
Reported (GAAP) |
$ |
(97.0 |
) |
$ |
(0.35 |
) |
$ |
20.3 |
|
$ |
0.08 |
|
$ |
(57.3 |
) |
$ |
(0.24 |
) |
Amortization expense of
intangible assets |
48.4 |
|
0.18 |
|
49.2 |
|
0.20 |
|
45.8 |
|
0.19 |
|
Transition and transformation
costs and non-recurring costs(1) |
25.6 |
|
0.09 |
|
8.8 |
|
0.04 |
|
24.9 |
|
0.10 |
|
Restructuring costs(2) |
2.6 |
|
0.01 |
|
3.3 |
|
0.01 |
|
4.9 |
|
0.02 |
|
Foreign currency loss (gain)
related to Argentina subsidiaries(3) |
0.2 |
|
— |
|
0.6 |
|
— |
|
5.2 |
|
0.02 |
|
Adjustment for tax
indemnification asset(4) |
1.3 |
|
— |
|
1.3 |
|
0.01 |
|
0.2 |
|
— |
|
Acquisition accounting
adjustments(5) |
— |
|
— |
|
— |
|
— |
|
1.4 |
|
0.01 |
|
Bain Capital management
fee(6) |
19.4 |
|
0.07 |
|
3.8 |
|
0.02 |
|
3.8 |
|
0.02 |
|
Non-cash pension and other
post-employment benefit plan(7) |
(7.7 |
) |
(0.03 |
) |
(6.2 |
) |
(0.03 |
) |
(4.7 |
) |
(0.02 |
) |
Unrealized foreign currency
exchange loss (gain)(8) |
7.6 |
|
0.03 |
|
(8.8 |
) |
(0.04 |
) |
1.6 |
|
0.01 |
|
Factoring and securitization
fees(9) |
2.2 |
|
0.01 |
|
1.9 |
|
0.01 |
|
1.8 |
|
0.01 |
|
Share-based
compensation(10) |
83.3 |
|
0.30 |
|
0.6 |
|
— |
|
— |
|
— |
|
Tax receivable agreement
adjustments(11) |
|
4.1 |
|
|
0.01 |
|
— |
|
— |
|
— |
|
— |
|
Accelerated expense of
deferred financing and original issue discount costs(12) |
|
14.0 |
|
|
0.05 |
|
— |
|
— |
|
— |
|
— |
|
Other items |
1.1 |
|
— |
|
0.6 |
|
— |
|
(1.8 |
) |
(0.01 |
) |
Tax effects related to
non-GAAP adjustments(13) |
(24.4 |
) |
(0.09 |
) |
(12.1 |
) |
(0.05 |
) |
(17.3 |
) |
(0.07 |
) |
Discrete tax
adjustments(14) |
(6.7 |
) |
(0.02 |
) |
(2.0 |
) |
(0.01 |
) |
4.3 |
|
0.02 |
|
Adjusted
(Non-GAAP) |
$ |
74.0 |
|
$ |
0.27 |
|
$ |
61.3 |
|
$ |
0.25 |
|
$ |
12.8 |
|
$ |
0.05 |
|
(1) |
In the period following the Diversey Acquisition, we incurred costs
primarily consisting of professional and consulting services in
such areas as information technology, controllership, tax,
treasury, transformation services, human resources, procurement and
supply chain in establishing ourselves as a standalone company and
to position ourselves for future growth. Costs incurred in 2021
include those necessary to become a publicly traded Company. |
(2) |
Includes costs related to restructuring programs including expenses
mainly related to reduction in headcount. |
(3) |
Effective July 1, 2018, Argentina was deemed to have a highly
inflationary economy and the functional currency for our Argentina
operations was changed from the Argentinian Peso to the United
States dollar and remeasurement charges/credits are recorded in our
Condensed Consolidated Statements of Operations rather than as a
component of Cumulative Translation Adjustment on our Condensed
Consolidated Balance Sheets. |
(4) |
In connection with the Diversey Acquisition, the purchase agreement
governing the transaction includes indemnification provisions with
respect to tax liabilities. The offset to this adjustment is
included in income tax provision. |
(5) |
In connection with the 2017 Acquisition, Twister Acquisition and
Zenith Acquisition, we recorded fair value increases to our
inventory. These amounts represent the amortization of this
increase. |
(6) |
Represents fees paid to Bain Capital pursuant a management
agreement whereby we have received general business consulting
services; financial, managerial and operational advice; advisory
and consulting services with respect to selection of advisors;
advice in different fields; and financial and strategic planning
and analysis. The management agreement was terminated in March 2021
pursuant to its terms upon the consummation of the IPO, and we
recorded a termination fee of $17.5 million during the six months
ended June 30, 2021. |
(7) |
Represents the net impact of the expected return on plan assets,
interest cost, and settlement cost components of net periodic
defined benefit income related to our defined benefit pension
plans. |
(8) |
Represents the unrealized foreign currency exchange impact on our
operations, primarily attributed to the valuation of the U.S.
Dollar-denominated debt held by our European entity. |
(9) |
On November 15, 2018, we entered into a factoring Master Agreement
with Factofrance, S.A. Additionally, on April 22, 2020, the Company
entered into a securitization arrangement with PNC Bank to sell
certain North American customer receivables without recourse on a
revolving basis. This amount represents the fees to complete the
sale of the receivables without recourse. Refer to Note 5 —
Financial Statement Details in the Notes to our Condensed
Consolidated Financial Statements included in our Quarterly Report
on Form 10-Q for additional information. |
(10) |
Represents compensation expense associated with our Management
Equity Incentive Plan and Long-Term Incentive Plan awards. See Note
19 — Share-Based Compensation in the Notes to our Condensed
Consolidated Financial Statements included in our Quarterly Report
on Form 10-Q for additional information. |
(11) |
Represents the adjustment to our Tax Receivable Agreement liability
primarily due to changes in tax laws that impact the realizability
of the attributes of the Tax Receivable Agreement. See Note 13 —
Income Taxes in the Notes to our Condensed Consolidated Financial
Statements included in our Quarterly Report on Form 10-Q for
additional information. |
(12) |
Represents accelerated non-cash expense of deferred financing costs
and original issue discount costs as the Company's U.S. Dollar
Incremental Term Loan was fully repaid and the Euro Term Loan was
paid down significantly using proceeds from the IPO. |
(13) |
The tax rate used to calculate the tax impact of the pre-tax
adjustments is based on the jurisdiction in which the charge was
recorded. |
(14) |
Represents adjustments related to discrete tax items including
uncertain tax provisions, impacts from rate changes in certain
jurisdictions and changes in our valuation allowance. |
(15) |
For purposes of calculating earnings (loss) per share the Company
has retrospectively presented earnings (loss) per share as if the
Reorganization Transactions had occurred at the beginning of the
earliest period presented. Such retrospective presentation reflects
an increase of approximately 47.4 million shares due to the
exchange of shares in Constellation for shares in the Company. |
The following table represents net sales by
segment:
(in millions, except
percentages) |
Institutional |
Food & Beverage |
Total |
Q2 2020 Net Sales |
$ |
474.8 |
|
75.9 |
|
% |
|
$ |
151.0 |
24.1 |
% |
|
$ |
625.8 |
|
|
|
|
Organic change (non-U.S.
GAAP) |
|
(26.7 |
) |
(5.6 |
) |
% |
|
|
10.9 |
7.2 |
% |
|
|
(15.8 |
) |
(2.5 |
) |
% |
Acquisition |
|
2.5 |
|
0.5 |
|
% |
|
|
3.2 |
2.1 |
% |
|
|
5.7 |
|
0.9 |
|
% |
Constant dollar change
(non-U.S. GAAP) |
|
(24.2 |
) |
(5.1 |
) |
% |
|
|
14.1 |
9.3 |
% |
|
|
(10.1 |
) |
(1.6 |
) |
% |
Foreign currency
translation |
|
25.8 |
|
5.4 |
|
% |
|
|
8.6 |
5.7 |
% |
|
|
34.4 |
|
5.5 |
|
% |
Total change |
|
1.6 |
|
0.3 |
|
% |
|
|
22.7 |
15.0 |
% |
|
|
24.3 |
|
3.9 |
|
% |
Q2 2021 Net
Sales |
$ |
476.4 |
|
73.3 |
|
% |
|
$ |
173.7 |
26.7 |
% |
|
$ |
650.1 |
|
|
|
|
Diversey (NASDAQ:DSEY)
Historical Stock Chart
From Jun 2024 to Jul 2024
Diversey (NASDAQ:DSEY)
Historical Stock Chart
From Jul 2023 to Jul 2024