Donnelley Financial Solutions, Inc. (NYSE: DFIN), (the
“Company”) today reported financial results for the first
quarter 2020.
Highlights:
First-quarter 2020
First-quarter 2019
Net Sales
$220.7 million
$229.6 million
GAAP Net Earnings (Loss)
$4.1 million
($1.4 million)
Non-GAAP Adjusted EBITDA(1)
$30.1 million
$23.7 million
Operating Cash Flow(2)
($37.1 million)
($68.3 million)
Free Cash Flow(1) (3)
($44.0 million)
($83.4 million)
(1) Non-GAAP Adjusted EBITDA (“Adjusted EBITDA”) and Free Cash
Flow are non-GAAP measures that exclude the impact of items noted
in the reconciliation tables below. The tables below provide
reconciliations to the most comparable GAAP measures. (2) Due to
the seasonality of the Company’s business it is a user of cash in
the first half of the year, with more than all of its operating
cash flow being generated in the second half of the year. (3)
Defined as operating cash flow less capital expenditures.
- Company introduces new business segmentation, better aligning
the organizational structure to its software transformation
strategy
- First-quarter 2020 GAAP fully diluted net earnings per share of
$0.12, up $0.16 from the prior year; non-GAAP fully diluted
earnings per share of $0.21, up $0.15 from the first quarter of
2019
- Record first-quarter software solutions net sales of $47.3
million; software solutions net sales accounted for 21.4% of total
first-quarter 2020 net sales, up 190 basis points from 19.5% as a
percentage of total net sales in the first quarter 2019
- First-quarter 2020 Adjusted EBITDA of $30.1 million, up $6.4
million, or 27.0%, from the first quarter of 2019; Adjusted EBITDA
margin of 13.6%, up 330 basis points from the first quarter 2019,
primarily due to continued focus on cost control initiatives and an
improved business mix
- First-quarter 2020 operating cash flow improved $31.2 million,
or 45.7%, from the first quarter 2019; first-quarter free cash flow
improved $39.4 million, or 47.2%, from the first quarter 2019
- Reduced total debt by $75.1 million from the first quarter of
2019
- Company repurchased approximately 616,000 shares of its common
stock during the quarter, at an average price of $6.19 per share,
or $3.8 million in aggregate, under the Company’s $25 million stock
repurchase program
- Company purchased and retired $66.5 million (notional value) of
its 8.25% senior notes due October 15, 2024 at an average price of
95.25 and recognized a pre-tax gain on the extinguishment of debt
of $2.3 million
“We are pleased with our strong first-quarter results, which
continue the trend of improving our mix of revenue toward software
solutions and tech-enabled services, both of which have higher
incremental profit margins. This trend, coupled with ongoing cost
reductions, resulted in year-over-year expansion in Adjusted EBITDA
margin for the third consecutive quarter, despite a weaker than
expected market environment that negatively impacted our
transactions and Venue dataroom offerings. We continue to
aggressively delever, bringing down first-quarter total debt by $75
million compared to the first quarter of 2019, further
strengthening our balance sheet and enhancing our financial
flexibility. We ended the quarter with net leverage of 2.3x, and
will continue to prioritize debt reduction, consistent with the
approach we have taken historically,” said Daniel N. Leib, DFIN’s
president and chief executive officer.
Leib continued, “Midway through the first quarter, our
operations in Asia were negatively impacted by COVID-19-related
shutdowns that significantly slowed transactional activity. As the
virus spread globally, U.S. transactional market activity,
primarily in M&A and IPO, also slowed significantly in the last
couple weeks of the quarter. We continue to operate as an essential
business, with the majority of our employee base working from home
and all production and distribution facilities being fully
operational. The demand for our recurring software solutions and
tech-enabled compliance offerings remains robust through the
crisis, with FundSuiteArc having a strong quarter, growing
first-quarter revenues nearly 14%, while also booking several new
customer contracts. ActiveDisclosure continues to perform well,
again showing double-digit revenue growth in the first quarter,
while continuing to add new customers at a steady pace.”
“Entering the second quarter, global IPO filings and M&A
activity remain slow, as the markets adjust to operating in a
pandemic environment. The duration and magnitude of COVID-19’s
impact on our transactional and Venue offerings remains unclear,
and as such, we are retracting our previous guidance for 2020, with
the intent of bringing it back when visibility improves. We
continue to aggressively manage our cost structure to mitigate the
impact and, as the market leader in transactional filing, remain
poised to drive transactional revenue and profit growth when market
conditions return to a more normalized level,” Leib concluded.
New Business Segmentation
“Today we are pleased to introduce a new set of realigned
reportable segments that we believe are better aligned with our
software transformation strategy, provide us better visibility into
the unique growth and profit drivers of each business, and create
enhanced transparency and accountability for results across the
company,” said David Gardella, DFIN’s chief financial officer.
The Company will now report in the following business
segments:
Capital Markets – Software Solutions includes software solutions
to help manage public and private transaction processes; extract
data and analyze contracts; collaborate; and tag, validate and file
SEC documents. This segment includes the Company’s software
offerings of Venue, ActiveDisclosure and eBrevia, among others.
Capital Markets – Compliance & Communications Management
includes technology-enabled services and print and distribution
solutions for deal solutions and SEC compliance requirements.
Investment Companies – Software Solutions includes the Company’s
FundSuiteArc software offering, which enables mutual fund
companies, alternative investment companies and third-party fund
administrators to store and manage compliance and regulatory
information.
Investment Companies – Compliance & Communications
Management includes the Company’s technology-enabled solutions for
its investment companies clients to prepare and file registration
forms, as well as XBRL-formatted filings. In addition, this segment
includes print and distribution solutions for its clients to
communicate with their investors.
Net Sales
Net sales in the first quarter of 2020 were $220.7 million, a
decrease of $8.9 million, or 3.9%, from the first quarter of 2019.
Net sales decreased primarily due to lower mutual funds compliance
and transaction print, lower commercial print and lower capital
market transactional print, partially offset by continued software
solutions growth, primarily from FundSuiteArc and
ActiveDisclosure.
GAAP Net Earnings
First-quarter 2020 net earnings were $4.1 million, or $0.12 per
diluted share, compared to a net loss of $1.4 million, or $0.04
loss per diluted share, in the first quarter of 2019. The first
quarter 2020 net earnings included after-tax losses of $4.6
million, or $0.13 per diluted share, primarily related to
restructuring and share-based compensation expense, and an
after-tax gain of $1.7 million, or $0.05 per diluted share related
to the extinguishment of debt. The first-quarter 2019 net losses
included various items totaling $3.6 million, or $0.10 per diluted
share, all of which are excluded from the presentation of non-GAAP
net earnings. Additional details regarding the amount and nature of
these and other items are included in the attached schedules.
Adjusted EBITDA and Net Earnings
Adjusted EBITDA in the first quarter of 2020 was $30.1 million,
compared to $23.7 million in the first quarter of 2019. Adjusted
EBITDA margin in the first quarter of 2020 was 13.6%, an
improvement of 330 basis points versus the first quarter of 2019.
The increase in Adjusted EBITDA was primarily driven by the impact
of cost control initiatives and improved business mix.
Non-GAAP net earnings totaled $7.2 million, or $0.21 earnings
per diluted share, in the first quarter of 2020 compared to
non-GAAP net earnings of $2.2 million, or $0.06 earnings per
diluted share, in the first quarter of 2019. Reconciliations of net
earnings to Adjusted EBITDA, non-GAAP net earnings and Adjusted
EBITDA margin, are presented in the attached schedules.
2020 Guidance
The Company is suspending its previously announced full-year
2020 financial guidance due to the unpredictability of the duration
and magnitude of the impact of the COVID-19 pandemic.
Conference Call Details
DFIN will hold a conference call and webcast today, Thursday,
May 7, 2020 at 9:00 a.m. Eastern time (8:00 a.m. Central time) to
discuss its first-quarter 2020 financial results, provide a general
business update and respond to investor questions.
The conference call can be accessed via telephone as
follows:
Domestic toll-free #: 833-227-5840
International toll #: 647-689-4064 Conference ID: 3559294
A live webcast of the call will also be available on the
Company’s investor relations website. Please visit
investor.dfinsolutions.com at least fifteen minutes prior to the
start of the call to register, download and install any necessary
audio software.
If you are unable to participate during the live teleconference,
a replay of the conference call will be available from 12:00 a.m.
Eastern time, May 8, 2020 until 11:59 p.m. Eastern time, May 14,
2020. To access the replay, please dial 800-585-8367 (domestic) or
416-621-4642 (international). The Conference ID for the replay is:
3559294. The replay will also be available as a webcast on the
Company’s investor relations website.
About DFIN
DFIN is a leading global risk and compliance solutions company.
We provide domain expertise, enterprise software and data analytics
for every stage of our clients’ business and investment lifecycles.
Markets fluctuate, regulations evolve, technology advances, and
through it all, DFIN delivers confidence with the right solutions
in moments that matter. Learn about DFIN’s end-to-end risk and
compliance solutions online at DFINsolutions.com or you can also
follow us on Twitter @DFINSolutions or on LinkedIn.
Use of non-GAAP Information
This news release may contain certain non-GAAP measures,
including non-GAAP selling, general, and administrative expenses
(“SG&A”), non-GAAP income from operations, non-GAAP operating
margin, Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP effective
tax rate, non-GAAP net earnings, non-GAAP diluted earnings per
share, free cash flow and organic net sales. The Company believes
that these non-GAAP measures, when presented in conjunction with
comparable GAAP measures, provide useful information about the
Company’s operating results and liquidity and enhance the overall
ability to assess the Company’s financial performance. The Company
uses these measures, together with other measures of performance
under GAAP, to compare the relative performance of operations in
planning, budgeting and reviewing the performance of its
business.
The Company’s non-GAAP statement of operations measures,
non-GAAP SG&A, non-GAAP SG&A as % of total net sales,
non-GAAP income from operations, non-GAAP operating margin,
Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP effective tax
rate, non-GAAP net earnings and non-GAAP diluted earnings per
share, are adjusted to exclude the impact of certain costs,
expenses, gains and losses and other specified items that
management believes are not indicative of our ongoing operations.
These adjusted measures exclude the impact of expenses associated
with the Company’s acquisition activities, COVID-19 related
expenses, spin-off related expenses, non-recurring investor-related
fees, share-based compensation and eliminate potential differences
in results of operations between periods caused by factors such as
historic cost and age of assets, financing and capital structures,
taxation positions or regimes, restructuring, impairment and other
charges and gain or loss on certain equity investments and asset
sales.
Free cash flow is a non-GAAP financial measure and is defined by
the Company as net cash flow provided by operating activities less
capital expenditures. By adjusting for the level of capital
investment in operations, the Company believes that free cash flow
can provide useful additional basis for understanding the Company’s
ability to generate cash after capital investment and provides a
comparison to peers with differing capital intensity.
Organic net sales is a non-GAAP financial measure and is defined
by the Company as reported net sales adjusted for the changes in
foreign exchange rates.
These non-GAAP measures should be considered in addition to, not
a substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP. In addition, these measures are
defined differently by different companies in our industry and,
accordingly, such measures may not be comparable to
similarly-titled measures of other companies.
Use of Forward-Looking Statements
This news release includes certain "forward-looking statements"
within the meaning of, and subject to the safe harbor created by,
Section 21E of the Securities Exchange Act of 1934, as amended,
with respect to the business, strategy and plans of DFIN and its
expectations relating to future financial condition and
performance. Statements that are not historical facts, including
statements about DFIN management’s beliefs and expectations, are
forward-looking statements. Words such as "believes,"
"anticipates," "estimates," "expects," "intends," "aims,"
"potential," "will," "would," "could," "considered," "likely,"
"estimate" and variations of these words and similar future or
conditional expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such
statements. While DFIN believes these expectations, assumptions,
estimates and projections are reasonable, such forward-looking
statements are only predictions and involve known and unknown risks
and uncertainties, many of which are beyond DFIN’s control. By
their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend upon future
circumstances that may or may not occur. Actual results may differ
materially from DFIN’s current expectations depending upon a number
of factors affecting the business and risks associated with the
performance of the business. These factors include such risks and
uncertainties detailed in DFIN periodic public filings with the
SEC, including but not limited to those discussed under "Risk
Factors" in DFIN's Form 10-K for the fiscal year ended December 31,
2019, those discussed under “Cautionary Statement” in DFIN’s
quarterly Form 10-Q filings, and in other investor communications
of DFIN’s from time to time. DFIN does not undertake to and
specifically declines any obligation to publicly release the
results of any revisions to these forward-looking statements that
may be made to reflect future events or circumstances after the
date of such statement or to reflect the occurrence of anticipated
or unanticipated events.
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Condensed Consolidated Balance
Sheets
(UNAUDITED)
(in millions, except per share
data)
March 31, 2020
December 31, 2019
Assets
Cash and cash equivalents
$
7.7
$
17.2
Receivables, less allowances for expected
losses of $9.7 in 2020 (2019 - $7.7)
214.6
161.4
Inventories
15.2
11.1
Prepaid expenses and other current
assets
21.2
15.9
Assets held for sale
5.6
5.6
Total current assets
264.3
211.2
Property, plant and equipment, net
16.5
17.5
Right-of-use assets
80.3
80.7
Software, net
55.2
55.0
Goodwill
449.7
450.3
Other intangible assets, net
18.4
21.9
Deferred income taxes, net
9.1
9.0
Other noncurrent assets
41.3
41.3
Total assets
$
934.8
$
886.9
Liabilities
Accounts payable
$
72.1
$
58.5
Accrued liabilities
120.0
121.0
Total current liabilities
192.1
179.5
Long-term debt
336.6
296.0
Deferred compensation liabilities
18.8
20.0
Pension and other postretirement benefits
plan liabilities
57.2
58.8
Noncurrent lease liabilities
57.8
57.9
Other noncurrent liabilities
5.2
6.1
Total liabilities
667.7
618.3
Equity
Preferred stock, $0.01 par value
Authorized: 1.0 shares; Issued: None
—
—
Common stock, $0.01 par value
Authorized: 65.0 shares;
Issued and outstanding: 34.8 shares and
33.8 shares in 2020 (2019 - 34.5 shares and 34.2 shares)
0.3
0.3
Treasury stock, at cost: 1.0 shares in
2020 (2019 - 0.3 shares)
(9.4
)
(4.2
)
Additional paid-in-capital
227.5
225.2
Retained earnings
135.5
131.9
Accumulated other comprehensive loss
(86.8
)
(84.6
)
Total equity
267.1
268.6
Total liabilities and equity
$
934.8
$
886.9
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Condensed Consolidated Statements
of Operations
(UNAUDITED)
(in millions, except per share
data)
For the Three Months Ended
March 31,
2020
2019
Net sales
Tech-enabled services
$
81.9
$
83.2
Software solutions
47.3
44.7
Print and distribution
91.5
101.7
Total net sales
220.7
229.6
Cost of sales (1)
Tech-enabled services
42.8
48.8
Software solutions
24.8
26.6
Print and distribution
68.7
78.5
Total cost of sales
136.3
153.9
Selling, general and administrative
expenses (1)
57.0
54.9
Depreciation and amortization
12.4
12.1
Restructuring, impairment and other
charges, net
3.1
2.1
Income from operations
11.9
6.6
Interest expense, net
4.6
8.9
Investment and other income, net
(0.4
)
(0.6
)
Earnings (loss) before income
taxes
7.7
(1.7
)
Income tax expense (benefit)
3.6
(0.3
)
Net earnings (loss)
$
4.1
$
(1.4
)
Net earnings (loss) per share:
Basic
$
0.12
$
(0.04
)
Diluted
$
0.12
$
(0.04
)
Weighted average number of common
shares outstanding:
Basic
34.2
34.0
Diluted
34.3
34.0
Additional
information:
Gross margin (1)
38.2
%
33.0
%
SG&A as a % of total net sales (1)
25.8
%
23.9
%
Operating margin
5.4
%
2.9
%
Effective tax rate
46.8
%
17.6
%
__________
(1) Exclusive of depreciation and amortization
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Reconciliation of GAAP to
Non-GAAP Measures
For the Three Months Ended March
31, 2020 and 2019
(UNAUDITED)
(in millions, except per share
data)
For the Three Months Ended
March 31, 2020
Net
Income
earnings (loss)
from
Operating
Net
per diluted
SG&A
operations
margin
earnings (loss)
share (1)
GAAP basis measures
$
57.0
$
11.9
5.4
%
$
4.1
$
0.12
Non-GAAP adjustments:
Restructuring, impairment and other
charges, net
—
3.1
1.4
%
2.2
0.06
Share-based compensation expense
(2.3
)
2.3
1.0
%
2.4
0.07
Gain on debt extinguishment (2)
—
—
—
(1.7
)
(0.05
)
COVID-19 related expenses
—
0.8
0.4
%
0.6
0.02
eBrevia contingent consideration
0.4
(0.4
)
(0.2
%)
(0.4
)
(0.01
)
Total Non-GAAP adjustments
(1.9
)
5.8
2.6
%
3.1
0.09
Non-GAAP measures
$
55.1
$
17.7
8.0
%
$
7.2
$
0.21
For the Three Months Ended
March 31, 2019
Net (loss)
Income
earnings
from
Operating
Net (loss)
per diluted
SG&A
operations
margin
earnings
share (1)
GAAP basis measures
$
54.9
$
6.6
2.9
%
$
(1.4
)
$
(0.04
)
Non-GAAP adjustments:
Restructuring, impairment and other
charges, net
—
2.1
0.9
%
1.6
0.04
Share-based compensation expense
(1.5
)
1.5
0.7
%
1.1
0.03
Investor-related expenses
(1.0
)
1.0
0.4
%
0.7
0.02
Spin-off related transaction expenses
(0.4
)
0.4
0.2
%
0.3
0.01
Income tax adjustments
—
—
—
(0.1
)
(0.00
)
Total Non-GAAP adjustments
(2.9
)
5.0
2.2
%
3.6
0.10
Non-GAAP measures
$
52.0
$
11.6
5.1
%
$
2.2
$
0.06
__________
(1) Net earnings per diluted share totals may not foot due to
rounding. (2) Gain on debt extinguishment is recorded within
interest expense, net in the Company’s Unaudited Condensed
Consolidated Statements of Operations
The Company believes that certain non-GAAP measures, when
presented in conjunction with comparable GAAP measures, are useful
because that information is an appropriate measure for evaluating
the Company’s operating performance. Internally, the Company uses
this non-GAAP information as an indicator of business performance,
and evaluates management’s effectiveness with specific reference to
this indicator. These measures should be considered in addition to,
not a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP.
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Segment GAAP to Non-GAAP
Operating Income and Adjusted EBITDA and Margin Reconciliation
For the Three Months Ended March
31, 2020 and 2019
(UNAUDITED)
(in millions)
Capital Markets - Software
Solutions
Capital Markets - Compliance
and Communications Management
Investment Companies -
Software Solutions
Investment Companies -
Compliance and Communications Management
Corporate
Consolidated
For the Three
Months Ended March 31, 2020
Net sales
$
31.2
$
99.1
$
16.1
$
74.3
$
—
$
220.7
Income (loss) from operations
1.8
21.4
0.1
2.1
(13.5
)
11.9
Operating margin %
5.8
%
21.6
%
0.6
%
2.8
%
nm
5.4
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges, net
0.3
0.5
0.3
0.4
1.6
3.1
Share-based compensation expense
—
—
—
—
2.3
2.3
COVID-19 related expenses
—
0.3
—
0.5
—
0.8
eBrevia contingent consideration
—
—
—
—
(0.4
)
(0.4
)
Total Non-GAAP adjustments
0.3
0.8
0.3
0.9
3.5
5.8
Non-GAAP income (loss) from operations
$
2.1
$
22.2
$
0.4
$
3.0
$
(10.0
)
$
17.7
Non-GAAP operating margin %
6.7
%
22.4
%
2.5
%
4.0
%
nm
8.0
%
Depreciation and amortization
3.1
4.0
2.9
2.4
—
12.4
Adjusted EBITDA
$
5.2
$
26.2
$
3.3
$
5.4
$
(10.0
)
$
30.1
Adjusted EBITDA margin %
16.7
%
26.4
%
20.5
%
7.3
%
nm
13.6
%
For the Three
Months Ended March 31, 2019
Net sales
$
30.5
$
102.0
$
14.2
$
82.9
$
—
$
229.6
Income (loss) from operations
0.1
14.7
(3.7
)
6.7
(11.2
)
6.6
Operating margin %
0.3
%
14.4
%
(26.1
%)
8.1
%
nm
2.9
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges, net
0.3
0.9
0.1
0.4
0.4
2.1
Share-based compensation expense
—
—
—
—
1.5
1.5
Investor-related expenses
—
—
—
—
1.0
1.0
Spin-off related transaction expenses
—
—
—
—
0.4
0.4
Total Non-GAAP adjustments
0.3
0.9
0.1
0.4
3.3
5.0
Non-GAAP income (loss) from operations
$
0.4
$
15.6
$
(3.6
)
$
7.1
$
(7.9
)
$
11.6
Non-GAAP operating margin %
1.3
%
15.3
%
(25.4
%)
8.6
%
nm
5.1
%
Depreciation and amortization
3.1
3.5
3.4
2.1
—
12.1
Adjusted EBITDA
$
3.5
$
19.1
$
(0.2
)
$
9.2
$
(7.9
)
$
23.7
Adjusted EBITDA margin %
11.5
%
18.7
%
(1.4
%)
11.1
%
nm
10.3
%
__________
nm - Not meaningful
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Segment GAAP to Non-GAAP
Operating Income and Adjusted EBITDA and Margin Reconciliation
For the Three Months Ended March
31, 2019 and June 30, 2019
(UNAUDITED)
(in millions)
Capital Markets - Software
Solutions
Capital Markets - Compliance
and Communications Management
Investment Companies -
Software Solutions
Investment Companies -
Compliance and Communications Management
Corporate
Consolidated
For the Three
Months Ended March 31, 2019
Net sales
$
30.5
$
102.0
$
14.2
$
82.9
$
—
$
229.6
Income (loss) from operations
0.1
14.7
(3.7
)
6.7
(11.2
)
6.6
Operating margin %
0.3
%
14.4
%
(26.1
%)
8.1
%
nm
2.9
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges, net
0.3
0.9
0.1
0.4
0.4
2.1
Share-based compensation expense
—
—
—
—
1.5
1.5
Investor-related expenses
—
—
—
—
1.0
1.0
Spin-off related transaction expenses
—
—
—
—
0.4
0.4
Total Non-GAAP adjustments
0.3
0.9
0.1
0.4
3.3
5.0
Non-GAAP income (loss) from operations
$
0.4
$
15.6
$
(3.6
)
$
7.1
$
(7.9
)
$
11.6
Non-GAAP operating margin %
1.3
%
15.3
%
(25.4
%)
8.6
%
nm
5.1
%
Depreciation and amortization
3.1
3.5
3.4
2.1
—
12.1
Adjusted EBITDA
$
3.5
$
19.1
$
(0.2
)
$
9.2
$
(7.9
)
$
23.7
Adjusted EBITDA margin %
11.5
%
18.7
%
(1.4
%)
11.1
%
nm
10.3
%
For the Three
Months Ended June 30, 2019
Net sales
$
32.2
$
127.2
$
15.7
$
83.8
$
—
$
258.9
Income (loss) from operations
3.4
38.3
(2.5
)
5.8
(11.6
)
33.4
Operating margin %
10.6
%
30.1
%
(15.9
%)
6.9
%
nm
12.9
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges, net
0.7
2.5
—
0.5
0.1
3.8
Share-based compensation expense
—
—
—
—
3.6
3.6
Loss on sale of Language Solutions
business
—
—
—
—
2.8
2.8
Investor-related expenses
—
—
—
—
0.5
0.5
Total Non-GAAP adjustments
0.7
2.5
—
0.5
7.0
10.7
Non-GAAP income (loss) from operations
$
4.1
$
40.8
$
(2.5
)
$
6.3
$
(4.6
)
$
44.1
Non-GAAP operating margin %
12.7
%
32.1
%
(15.9
%)
7.5
%
nm
17.0
%
Depreciation and amortization
3.0
3.8
3.0
2.2
—
12.0
Adjusted EBITDA
$
7.1
$
44.6
$
0.5
$
8.5
$
(4.6
)
$
56.1
Adjusted EBITDA margin %
22.0
%
35.1
%
3.2
%
10.1
%
nm
21.7
%
__________
nm - Not meaningful
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Segment GAAP to Non-GAAP
Operating Income and Adjusted EBITDA and Margin Reconciliation
For the Three Months Ended
September 30, 2019 and December 31, 2019
(UNAUDITED)
(in millions)
Capital Markets - Software
Solutions
Capital Markets - Compliance
and Communications Management
Investment Companies -
Software Solutions
Investment Companies -
Compliance and Communications Management
Corporate
Consolidated
For the Three
Months Ended September 30, 2019
Net sales
$
31.5
$
82.2
$
15.0
$
67.2
$
—
$
195.9
Income (loss) from operations
2.8
16.8
(1.7
)
20.1
(5.9
)
32.1
Operating margin %
8.9
%
20.4
%
(11.3
%)
29.9
%
nm
16.4
%
Non-GAAP
Adjustments
Gain on sale of building
—
—
—
(19.2
)
—
(19.2
)
Restructuring, impairment and other
charges, net
0.3
1.6
—
0.2
0.7
2.8
Share-based compensation expense
—
—
—
—
2.6
2.6
Acquisition-related expenses
—
—
—
—
0.1
0.1
Total Non-GAAP adjustments
0.3
1.6
—
(19.0
)
3.4
(13.7
)
Non-GAAP income (loss) from operations
$
3.1
$
18.4
$
(1.7
)
$
1.1
$
(2.5
)
$
18.4
Non-GAAP operating margin %
9.8
%
22.4
%
(11.3
%)
1.6
%
nm
9.4
%
Depreciation and amortization
3.2
4.0
3.1
2.4
—
12.7
Adjusted EBITDA
$
6.3
$
22.4
$
1.4
$
3.5
$
(2.5
)
$
31.1
Non-GAAP Adjusted EBITDA margin %
20.0
%
27.3
%
9.3
%
5.2
%
nm
15.9
%
For the Three
Months Ended December 31, 2019
Net sales
$
32.5
$
78.3
$
17.7
$
61.8
$
—
$
190.3
Income (loss) from operations
3.3
16.5
0.1
(3.2
)
(10.3
)
6.4
Operating margin %
10.2
%
21.1
%
0.6
%
(5.2
%)
nm
3.4
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges, net
0.1
1.0
0.5
0.4
2.9
4.9
Share-based compensation expense
—
—
—
—
1.2
1.2
Loss on sale of Language Solutions
business
—
—
—
—
1.2
1.2
Spin-off related transaction expenses
—
—
—
—
(0.4
)
(0.4
)
Total Non-GAAP adjustments
0.1
1.0
0.5
0.4
4.9
6.9
Non-GAAP income (loss) from operations
$
3.4
$
17.5
$
0.6
$
(2.8
)
$
(5.4
)
$
13.3
Non-GAAP operating margin %
10.5
%
22.3
%
3.4
%
(4.5
%)
nm
7.0
%
Depreciation and amortization
3.3
4.0
3.2
2.2
0.1
12.8
Adjusted EBITDA
$
6.7
$
21.5
$
3.8
$
(0.6
)
$
(5.3
)
$
26.1
Adjusted EBITDA margin %
20.6
%
27.5
%
21.5
%
(1.0
%)
nm
13.7
%
__________
nm - Not meaningful
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Segment GAAP to Non-GAAP
Operating Income and Adjusted EBITDA and Margin Reconciliation
For the Twelve Months Ended
December 31, 2019
(UNAUDITED)
(in millions)
Capital Markets - Software
Solutions
Capital Markets - Compliance
and Communications Management
Investment Companies -
Software Solutions
Investment Companies -
Compliance and Communications Management
Corporate
Consolidated
For the Twelve
Months Ended December 31, 2019
Net sales
$
126.7
$
389.7
$
62.6
$
295.7
$
—
$
874.7
Income (loss) from operations
9.6
86.3
(7.8
)
29.4
(39.0
)
78.5
Operating margin %
7.6
%
22.1
%
(12.5
%)
9.9
%
nm
9.0
%
Non-GAAP
Adjustments
Gain on sale of building
—
—
—
(19.2
)
—
(19.2
)
Restructuring, impairment and other
charges, net
1.4
6.0
0.6
1.5
4.1
13.6
Share-based compensation expense
—
—
—
—
8.9
8.9
Loss on sale of Language Solutions
business
—
—
—
—
4.0
4.0
Investor-related expenses
—
—
—
—
1.5
1.5
Acquisition-related expenses
—
—
—
—
0.1
0.1
Total Non-GAAP adjustments
1.4
6.0
0.6
(17.7
)
18.6
8.9
Non-GAAP income (loss) from operations
$
11.0
$
92.3
$
(7.2
)
$
11.7
$
(20.4
)
$
87.4
Non-GAAP operating margin %
8.7
%
23.7
%
(11.5
%)
4.0
%
nm
10.0
%
Depreciation and amortization
12.6
15.3
12.7
8.9
0.1
49.6
Adjusted EBITDA
$
23.6
$
107.6
$
5.5
$
20.6
$
(20.3
)
$
137.0
Adjusted EBITDA margin %
18.6
%
27.6
%
8.8
%
7.0
%
nm
15.7
%
__________
nm - Not meaningful
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Condensed Consolidated Statements
of Cash Flows
(UNAUDITED)
(in millions)
For the Three Months Ended
March 31,
2020
2019
Operating Activities
Net earnings (loss)
$
4.1
$
(1.4
)
Adjustments to reconcile net earnings
(loss) to net cash used in operating activities:
Depreciation and amortization
12.4
12.1
Provision for expected losses on accounts
receivable
1.6
1.0
Share-based compensation
2.3
1.5
Gain on debt extinguishment
(2.3
)
—
Deferred income taxes
(0.5
)
(2.8
)
Net pension plan income
(0.5
)
(0.5
)
Amortization of right-of-use assets
5.8
5.7
Other
0.1
2.0
Changes in operating assets and
liabilities - net of acquisitions:
Accounts receivable, net
(55.7
)
(63.6
)
Inventories
(4.2
)
(2.7
)
Prepaid expenses and other current
assets
(4.7
)
(3.2
)
Accounts payable
12.5
23.9
Income taxes payable and receivable
2.1
(11.3
)
Accrued liabilities and other
(4.0
)
(23.3
)
Lease liabilities
(5.9
)
(5.5
)
Pension and other postretirement benefits
plan contributions
(0.2
)
(0.2
)
Net cash used in operating activities
(37.1
)
(68.3
)
Investing Activities
Capital expenditures
(6.9
)
(15.1
)
Acquisition of business, net of cash
acquired
—
(2.2
)
Purchase of investment
(1.3
)
—
Other investing activities
—
0.2
Net cash used in investing activities
(8.2
)
(17.1
)
Financing Activities
Revolving facility borrowings
146.5
178.5
Payments on revolving facility
borrowings
(40.5
)
(130.0
)
Payments on long-term debt
(63.3
)
—
Treasury share repurchases
(5.2
)
(1.2
)
Debt issuance costs
—
(0.2
)
Net cash provided by financing
activities
37.5
47.1
Effect of exchange rate on cash and cash
equivalents
(1.7
)
1.5
Net decrease in cash and cash
equivalents
(9.5
)
(36.8
)
Cash and cash equivalents at beginning of
year
17.2
47.3
Cash and cash equivalents at end of
period
$
7.7
$
10.5
Supplemental cash flow
information
Income taxes paid (net of refunds)
$
2.0
$
13.8
Interest paid
$
2.6
$
1.5
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Condensed Consolidated Statements
of Cash Flows
(UNAUDITED)
(in millions)
Additional
Information:
For the Three Months Ended
March 31,
2020
2019
Net cash used in operating activities
$
(37.1
)
$
(68.3
)
Less: capital expenditures
6.9
15.1
Free Cash Flow
$
(44.0
)
$
(83.4
)
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Reconciliation of Reported to
Organic Net Sales
(UNAUDITED)
(in millions)
Capital Markets - Software
Solutions
Capital Markets - Compliance
and Communications Management
Investment Companies -
Software Solutions
Investment Companies -
Compliance and Communications Management
Consolidated
Reported Net
Sales:
For the Three Months Ended March 31,
2020
$
31.2
$
99.1
$
16.1
$
74.3
$
220.7
For the Three Months Ended March 31,
2019
30.5
102.0
14.2
82.9
229.6
Net sales change
2.3
%
(2.8
%)
13.4
%
(10.4
%)
(3.9
%)
Supplementary
non-GAAP information:
Year-over-year impact of changes in
foreign exchange (FX) rates
(0.3
%)
(0.3
%)
(0.7
%)
—
(0.2
%)
Net organic sales change
2.6
%
(2.5
%)
14.1
%
(10.4
%)
(3.7
%)
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Reconciliation of GAAP Net
Earnings (Loss) to Adjusted EBITDA
(UNAUDITED)
(in millions)
For the Twelve
Months Ended
For the Three Months
Ended
March 31,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
GAAP net earnings
$
43.1
$
4.1
$
7.0
$
14.7
$
17.3
Adjustments
Net gain on sale of building
(19.2
)
—
—
(19.2
)
—
Gain on equity investment
(13.6
)
—
(13.6
)
—
—
Restructuring, impairment and other
charges, net
14.6
3.1
4.9
2.8
3.8
Share-based compensation expense
9.7
2.3
1.2
2.6
3.6
COVID-19 related expenses
0.8
0.8
—
—
—
eBrevia contingent consideration
(0.4
)
(0.4
)
—
—
—
Net loss on sale of Language Solutions
business
4.0
—
1.2
—
2.8
Pension settlement charges
3.9
—
3.9
—
—
Investor-related expenses
0.5
—
—
—
0.5
Acquisition-related expenses
0.1
—
—
0.1
—
Spin-off related transaction expenses
(0.4
)
—
(0.4
)
—
—
Depreciation and amortization
49.9
12.4
12.8
12.7
12.0
Interest expense, net
33.8
4.6
11.5
8.6
9.1
Pension income and other income, net
(1.8
)
(0.4
)
(0.4
)
(0.5
)
(0.5
)
Income tax expense (benefit)
18.4
3.6
(2.0
)
9.3
7.5
Total Non-GAAP adjustments
100.3
26.0
19.1
16.4
38.8
Adjusted EBITDA
$
143.4
$
30.1
$
26.1
$
31.1
$
56.1
Net sales
$
865.8
$
220.7
$
190.3
$
195.9
$
258.9
Adjusted EBITDA margin %
16.6
%
13.6
%
13.7
%
15.9
%
21.7
%
For the Twelve
Months Ended
For the Three Months
Ended
March 31,
2019
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
GAAP net earnings (loss)
$
64.5
$
(1.4
)
$
(1.0
)
$
48.0
$
18.9
Adjustments
Gain on equity investment
(11.8
)
—
—
(11.8
)
—
Restructuring, impairment and other
charges, net
5.8
2.1
0.3
0.8
2.6
Share-based compensation expense
8.9
1.5
2.0
2.1
3.3
Net gain on sale of Language Solutions
business
(53.8
)
—
(0.3
)
(53.5
)
—
Investor-related expenses
1.5
1.0
0.5
—
—
Acquisition-related expenses
0.6
—
0.3
—
0.3
Gain on e-Brevia investment
(1.8
)
—
(1.8
)
—
—
Spin-off related transaction expenses
12.7
0.4
0.2
3.7
8.4
Disposition-related expenses
6.3
—
0.3
4.5
1.5
Depreciation and amortization
47.5
12.1
12.7
11.6
11.1
Interest expense, net
36.6
8.9
9.5
8.4
9.8
Pension income and other income, net
(4.5
)
(0.6
)
(0.9
)
(2.2
)
(0.8
)
Income tax expense (benefit)
25.3
(0.3
)
(2.4
)
19.7
8.3
Total Non-GAAP adjustments
73.3
25.1
20.4
(16.7
)
44.5
Adjusted EBITDA
$
137.8
$
23.7
$
19.4
$
31.3
$
63.4
Net sales
$
937.4
$
229.6
$
200.3
$
216.9
$
290.6
Adjusted EBITDA margin %
14.7
%
10.3
%
9.7
%
14.4
%
21.8
%
Donnelley Financial Solutions,
Inc. and Subsidiaries ("DFIN")
Debt and Liquidity Summary
(UNAUDITED)
(in millions)
Total
Liquidity
March 31, 2020
December 31, 2019
March 31, 2019
Availability
Stated amount of the Revolving Facility
(1)
$
300.0
$
300.0
$
300.0
Less: availability reduction from
covenants
—
68.4
138.9
Amount available under the Revolving
Facility
300.0
231.6
161.1
Usage
Borrowings under the Revolving
Facility
106.0
—
48.5
Impact on availability related to
outstanding
letters of credit
—
—
—
Amount used under the Revolving
Facility
106.0
—
48.5
Availability under the Revolving
Facility
194.0
231.6
112.6
Cash
7.7
17.2
10.5
Net Available Liquidity
$
201.7
$
248.8
$
123.1
Long-term debt
336.6
296.0
411.7
Adjusted EBITDA for the twelve months
ended March 31, 2020 and 2019, and the year ended December 31,
2019
$
143.4
$
137.0
$
137.8
Non-GAAP Gross Leverage (defined as
total debt divided by Adjusted EBITDA)
2.3
x
2.2
x
3.0
x
Non-GAAP Net Debt (defined as total debt
less cash)
328.9
278.8
401.2
Non-GAAP Net Leverage (defined as
non-GAAP Net Debt divided by Adjusted EBITDA)
2.3
x
2.0
x
2.9
x
__________
(1) The Company has a $300.0 million senior secured revolving
credit facility (the “Revolving Facility”). The Revolving Facility
is subject to a number of covenants, including a minimum Interest
Coverage Ratio and a maximum Leverage Ratio, both as defined and
calculated in the credit agreement. Based on the Company’s results
of operations for the twelve months ended March 31, 2020 and
existing debt, the Company would have had the ability to utilize an
incremental $194 million of the $300.0 million Revolving Facility
and not have been in violation of the terms of the agreement.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200507005074/en/
Investor Contact: Justin Ritchie Investor Relations
investors@dfinsolutions.com
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