Donnelley Financial Solutions (NYSE: DFIN) today reported
financial results for the first quarter 2019.
Highlights:
- First-quarter net sales of $229.6
million, in line with guidance
- U.S. Investment Markets net sales
increased by 4.0% from the first quarter of 2018 as a result of a
special proxy project, as well as growth in annual report and
prospectus solutions
- SaaS net sales increased by 6.5% from
the first quarter of 2018, primarily driven by ActiveDisclosure;
SaaS net sales represented 18.5% of first-quarter net sales
- Company reaffirms full-year 2019
guidance
“We are pleased with the strong demand we saw in U.S. Investment
Markets for our market-leading regulatory and compliance
solutions,” said Daniel N. Leib, DFIN’s president and chief
executive officer. “As we anticipated, capital markets’
transactional activity was negatively impacted by the government
shutdown early in the quarter, yet activity levels strengthened
each successive month and returned to more normalized levels in
March.”
“We exit the first quarter in line with our expectations, and
enter our seasonally strongest period with a robust transactional
pipeline, keeping us on track to achieve our full-year guidance
while we continue to execute on our digital-focused strategy,” Leib
concluded.
Net Sales
Net sales in the first quarter of 2019 were $229.6 million, a
decrease of $25.6 million, or 10.0%, from the first quarter of 2018
driven largely by the impact of the sale of the Language Solutions
business and lower global transactional activity. After adjusting
for the 2018 sale of the Language Solutions business, changes in
foreign exchange rates and the 2018 acquisition of eBrevia, organic
net sales decreased 2.5% from the first quarter of 2018. The
organic decline was primarily driven by lower global transactional
activity, partially offset by higher mutual fund volume in U.S.
Investment Markets, higher compliance volume in U.S. Capital
Markets and growth in global SaaS solutions, primarily in
ActiveDisclosure and FundSuiteArc.
GAAP Earnings
First-quarter 2019 net loss was $1.4 million, or $0.04 loss per
diluted share, compared to net earnings of $7.7 million, or $0.23
earnings per diluted share, in the first quarter of 2018. The
first-quarter 2019 net loss included after-tax adjustments of $3.6
million and first-quarter 2018 net earnings included after-tax
adjustments of $7.9 million, 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.
Non-GAAP Adjusted EBITDA and Net Earnings
Non-GAAP adjusted EBITDA in the first quarter of 2019 was $23.7
million, compared to $40.8 million in the first quarter of 2018.
Non-GAAP adjusted EBITDA margin in the first quarter of 2019 was
10.3%, 570 basis points lower than in the first quarter of 2018.
The Non-GAAP adjusted EBITDA decrease was primarily driven by lower
global transactional activity and the sale of the Language
Solutions business, partially offset by the impact of cost saving
initiatives.
Non-GAAP net earnings totaled $2.2 million, or $0.06 per diluted
share, in the first quarter of 2019 compared to non-GAAP net
earnings of $15.6 million, or $0.46 per diluted share, in the first
quarter of 2018. Reconciliations of net earnings to non-GAAP
adjusted EBITDA and non-GAAP net earnings, as well as non-GAAP
adjusted EBITDA margin, are presented in the attached
schedules.
Sale of the Language Solutions Business
On July 22, 2018, the Company sold its Language Solutions
business for net proceeds of $77.5 million in cash. As such,
first-quarter 2019 results exclude Language Solutions, while
first-quarter 2018 results include Language Solutions. The sale
negatively impacted the first-quarter net sales comparison by $18.8
million and negatively impacted the gross profit and non-GAAP
adjusted EBITDA comparisons by approximately $5.5 million and $1.0
million, respectively, inclusive of estimated net stranded
costs.
Similarly, the sale will negatively impact the year-over-year
comparisons in the second and third quarters of 2019. In the second
quarter, the sale will negatively impact the net sales comparison
by $19.8 million and negatively impact the gross profit and
non-GAAP adjusted EBITDA comparisons by approximately $5.3 million
and $1.5 million, respectively, inclusive of estimated net stranded
costs. In the third quarter, the sale will negatively impact the
net sales comparison by $3.2 million and negatively impact the
gross profit and non-GAAP adjusted EBITDA comparisons by
approximately $1.2 million and $0.5 million, respectively,
inclusive of estimated net stranded costs.
2019 Guidance
The Company reaffirms its previous full-year guidance for
2019.
2019
Guidance
Net sales $910 to $940 million Non-GAAP adjusted EBITDA $145 to
$155 million Depreciation and amortization Approximately $48
million Interest expense Approximately $35 million Non-GAAP
effective tax rate 29% to 31% Diluted share count Approximately 35
million Capital expenditures $40 to $45 million Free cash flow(1)
$40 to $45 million
(1) Defined as operating cash flow
less capital expenditures.
Certain components of the guidance given above are provided on a
non-GAAP basis only, without providing a reconciliation to guidance
provided on a GAAP basis. Information is presented in this manner,
consistent with SEC rules, because the preparation of such a
reconciliation could not be accomplished without “unreasonable
efforts.” The Company does not have access to certain information
that would be necessary to provide such a reconciliation, including
non-recurring items that are not indicative of the Company’s
ongoing operations. Such items include, but are not limited to,
restructuring charges, impairment charges, spinoff-related
transaction expenses, acquisition-related expenses, gains or losses
on investments and business disposals and other similar gains or
losses not reflective of the Company's ongoing operations. The
Company does not believe that this information is likely to be
significant to an assessment of the Company’s ongoing operations,
given that it is not an indicator of business performance.
Conference Call
DFIN will host a conference call and simultaneous webcast to
discuss its first-quarter results today, Thursday, May 2, 2019, at
9:00 a.m. Eastern time (8:00 a.m. Central time). The live webcast
will be accessible on DFIN’s web site at
investor.dfinsolutions.com. Individuals wishing to participate on
the call must register in
advance at http://www.meetme.net/DFIN. After
registering, participants will receive dial-in numbers, a passcode,
and a personal identification number (PIN) that is used to uniquely
identify their presence and automatically join them into the audio
conference. A webcast replay will be archived on the Company’s web
site for 30 days after the call.
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 contains certain non-GAAP measures, including
non-GAAP SG&A, non-GAAP SG&A as % of total net sales,
non-GAAP income from operations, non-GAAP operating margin,
non-GAAP adjusted EBITDA, non-GAAP 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.
Our 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, non-GAAP
adjusted EBITDA, non-GAAP 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, 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 and the purchase or disposition of
businesses.
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,
2018, 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.
Condensed Consolidated Balance Sheets
As of March 31, 2019 and December 31,
2018
(UNAUDITED)
(in millions, except per share data)
March 31, 2019 December 31, 2018
Assets
Cash and cash equivalents $ 10.5 $ 47.3
Receivables, less allowances for doubtful
accounts of
$8.6 in 2019 (2018 - $7.9)
235.6 172.9 Inventories 14.8 12.1 Prepaid expenses and other
current assets 20.8 16.7 Total Current Assets
281.7 249.0 Property, plant and equipment - net 38.1 32.2
Right-of-use assets 95.5 — Software - net 49.9 47.8 Goodwill 450.2
450.0 Other intangible assets - net 33.6 37.2 Deferred income taxes
12.3 9.7 Other noncurrent assets 41.1 42.8
Total
Assets $ 1,002.4 $ 868.7
Liabilities
Accounts payable $ 98.0 $ 72.4 Accrued liabilities
113.7
126.0 Total Current Liabilities
211.7
198.4 Long-term debt 411.7 362.7 Deferred compensation
liabilities 19.8 19.5 Pension and other postretirement benefits
plan liabilities 50.1 51.3 Noncurrent lease liabilities
73.9
— Other noncurrent liabilities 7.7 10.8
Total
Liabilities 774.9 642.7
Equity
Common stock, $0.01 par value Authorized: 65.0 shares; Issued: 34.4
shares in 2019 (2018 - 34.2 shares) 0.3 0.3 Treasury stock, at
cost: 0.2 shares in 2019 (2018 - 0.1 shares) (3.6 ) (2.4 )
Additional paid-in capital 218.0 216.5 Retained earnings 92.9 94.3
Accumulated other comprehensive loss (80.1 ) (82.7 )
Total Equity 227.5 226.0
Total Liabilities and Equity $ 1,002.4
$ 868.7
Donnelley Financial Solutions,
Inc.
Condensed Consolidated Statements of
Operations
For the Three Months Ended March 31, 2019
and 2018
(UNAUDITED)
(in millions, except per share data)
For the Three Months Ended March 31, 2019
GAAP
ADJUSTMENTS
TO NON-GAAP
2019
NON-GAAP
2018
GAAP
ADJUSTMENTS
TO NON-GAAP
2018
NON-GAAP
Services net sales $ 127.9 $ — $ 127.9 $ 159.5 $ — $ 159.5 Products
net sales 101.7 — 101.7 95.7 —
95.7
Total net sales 229.6
— 229.6 255.2 —
255.2
Services cost of sales (1)
75.4 — 75.4 85.9 — 85.9
Products cost of sales (1)
78.5 — 78.5 72.7 — 72.7
Total cost of sales (1)
153.9 — 153.9
158.6 — 158.6
Selling, general and administrative
expenses (SG&A) (1)
54.9 (2.9 ) 52.0 66.1 (10.3 ) 55.8 Restructuring, impairment and
other
charges - net
2.1 (2.1 ) — 0.7 (0.7 ) — Depreciation and amortization 12.1
— 12.1 10.4 — 10.4
Income
from operations 6.6 5.0
11.6 19.4 11.0
30.4 Interest expense-net 8.9 — 8.9 9.0 — 9.0 Investment and
other income - net (0.6 ) — (0.6 ) (0.8
) — (0.8 )
(Loss) earnings before income taxes
(1.7 ) 5.0 3.3
11.2 11.0 22.2
Income tax (benefit) expense (2)
(0.3 ) 1.4 1.1 3.5 3.1
6.6
Net (loss) earnings $ (1.4 )
$ 3.6 $ 2.2 $ 7.7
$ 7.9 $ 15.6 Net (loss) earnings per
share: Basic net (loss) earnings per share
$
(0.04 ) $ 0.06 $ 0.23
$ 0.46 Diluted net (loss) earnings per share
$
(0.04 ) $ 0.06 $ 0.23
$ 0.46 Weighted average number of
common shares outstanding:
Basic
34.0 34.0 33.7 33.7 Diluted
34.0 34.1 33.9 33.9
Additional
information:
Gross margin (1)
33.0 % 33.0 % 37.9 % 37.9 %
SG&A as a % of total net sales (1)
23.9 % 22.6 % 25.9 % 21.9 % Operating margin 2.9 % 5.1 % 7.6 % 11.9
% Effective tax rate 17.6 % 33.3 % 31.3 % 29.7 %
(1)
Exclusive of depreciation and amortization
(2)
During the first quarter of 2017, the Company adopted Accounting
Standards Update No. 2016-09 “Compensation–Stock Compensation
(Topic 718): Improvements to Employee Share Based Payment
Accounting," which required all excess tax benefits and tax
deficiencies to be recognized as discrete items within income tax
expense or benefit in the income statement in the reporting period
in which they occur. Beginning in the first quarter of 2019, these
discrete tax items are excluded from Non-GAAP income tax expense or
benefit. Prior periods have not been revised.
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.
Reconciliation of GAAP to Non-GAAP
Measures
For the Three Months Ended March 31, 2019
and 2018
(UNAUDITED)
(in millions, except per share data)
For the Three Months Ended March 31, 2019
SG&A Income
from
operations
Operating
margin
Net (loss)
earnings
Net (loss)
earnings
per diluted
share
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
— — 0.0 % (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
For the Three Months Ended March 31, 2018
SG&A Income
from
operations
Operating
margin
Net
earnings
Net
earnings
per diluted
share
GAAP basis measures $ 66.1 $ 19.4 7.6 % $ 7.7 $ 0.23 Non-GAAP
adjustments: Restructuring, impairment and other
charges - net
— 0.7 0.3 % 0.5 0.01 Spin-off related transaction expenses (7.8 )
7.8 3.0 % 5.6 0.17 Share-based compensation expense (1.8 ) 1.8 0.7
% 1.3 0.04 Disposition-related expenses (0.5 ) 0.5 0.2 % 0.4 0.01
Acquisition-related expenses (0.2 ) 0.2 0.1 %
0.1 0.00 Total Non-GAAP adjustments (10.3 )
11.0 4.3 % 7.9 0.23 Non-GAAP measures $
55.8 $ 30.4 11.9 % $ 15.6 $ 0.46
Donnelley Financial Solutions,
Inc.
Segment GAAP to Non-GAAP Operating Income
and Non-GAAP Adjusted EBITDA and Margin Reconciliation
For the Three Months Ended March 31, 2019
and 2018
(UNAUDITED)
(in millions)
U.S. International Corporate
Consolidated
For the Three
Months Ended March 31, 2019
Net sales $ 202.8 $ 26.8 $ — $ 229.6 Income (loss) from operations
21.3 (3.3 ) (11.4 ) 6.6 Operating margin % 10.5 % (12.3 %) nm 2.9 %
Non-GAAP
Adjustments
Restructuring, impairment and other charges - net 0.6 0.6 0.9 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 0.6 0.6
3.8 5.0 Non-GAAP income (loss) from operations $ 21.9 $ (2.7
) $ (7.6 ) $ 11.6 Non-GAAP operating margin % 10.8 % (10.1 %) nm
5.1 % Depreciation and amortization 10.3 1.6
0.2 12.1 Non-GAAP Adjusted EBITDA $ 32.2 $ (1.1 ) $
(7.4 ) $ 23.7 Non-GAAP Adjusted EBITDA margin % 15.9 % (4.1 %) nm
10.3 %
For the Three
Months Ended March 31, 2018
Net sales $ 213.1 $ 42.1 $ — $ 255.2 Income (loss) from operations
26.4 2.5 (9.5 ) 19.4 Operating margin % 12.4 % 5.9 % nm 7.6 %
Non-GAAP
Adjustments
Restructuring, impairment and other charges - net 0.7 (0.1 ) 0.1
0.7 Spin-off related transaction expenses 6.3 — 1.5 7.8 Share-based
compensation expense — — 1.8 1.8 Disposition-related expenses — —
0.5 0.5 Acquisition-related expenses — — 0.2
0.2 Total Non-GAAP adjustments 7.0 (0.1 ) 4.1 11.0
Non-GAAP income (loss) from operations $ 33.4 $ 2.4 $ (5.4 ) $ 30.4
Non-GAAP operating margin % 15.7 % 5.7 % nm 11.9 %
Depreciation and amortization 8.9 1.4 0.1
10.4 Non-GAAP Adjusted EBITDA $ 42.3 $ 3.8 $ (5.3 ) $ 40.8
Non-GAAP Adjusted EBITDA margin % 19.8 % 9.0 % nm 16.0 %
Donnelley Financial Solutions,
Inc.
Condensed Consolidated Statements of Cash
Flows
For the Three Months Ended March 31, 2019
and 2018
(UNAUDITED)
(in millions)
For the Three Months Ended March 31, 2019
2018 Net (loss) earnings $ (1.4 ) $ 7.7 Adjustments
to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization 12.1 10.4 Provision for doubtful
accounts receivable 1.0 1.0 Share-based compensation 1.5 1.8
Deferred income taxes (2.8 ) 0.6 Net pension plan income (0.5 )
(0.8 ) Other 8.7 0.5 Changes in operating assets and liabilities -
net of acquisitions: Accounts receivable - net (63.6 ) (65.4 )
Inventories (2.7 ) (5.8 ) Prepaid expenses and other current assets
(1.4 ) (0.2 ) Accounts payable 23.9 20.3 Income taxes payable and
receivable (11.3 ) 0.6 Accrued liabilities and other (31.6 ) (23.1
) Pension and other postretirement benefits plan contributions
(0.2 ) (1.2 )
Net cash used in operating
activities $ (68.3 ) $ (53.6
) Capital expenditures (15.1 ) (6.4 ) Acquisition of
business, net of cash acquired (2.2 ) — Other investing activities
0.2 —
Net cash used in investing activities
$ (17.1 ) $ (6.4 )
Revolving facility borrowings 178.5 88.0 Payments on revolving
facility borrowings (130.0 ) (68.0 ) Proceeds from issuance of
common stock — 1.2 Treasury share repurchases (1.2 ) (0.8 ) Debt
issuance costs (0.2 ) —
Net cash provided by
financing activities $ 47.1 $ 20.4
Effect of exchange rate on cash and cash equivalents 1.5
(0.3 )
Net decrease in cash and cash equivalents
(36.8 ) (39.9 ) Cash and
cash equivalents at beginning of year 47.3 52.0
Cash and cash equivalents at end of period $
10.5 $ 12.1
Additional
Information:
2019 2018 For the Three Months Ended
March 31: Net cash used in operating activities $ (68.3 ) $ (53.6 )
Less: capital expenditures 15.1 6.4 Free cash flow $
(83.4 ) $ (60.0 )
Donnelley Financial Solutions,
Inc.
Reconciliation of Reported to Organic Net
Sales
For the Three Months Ended March 31, 2019
and 2018
(UNAUDITED)
(in millions)
U.S. Capital Markets Investment Markets
Language Solutions Total U.S. International Consolidated
Reported Net
Sales:
For the Three Months Ended
March 31, 2019
$ 109.7 $ 93.1 $ — $ 202.8 $ 26.8 $ 229.6 For the Three
Months Ended
March 31, 2018 (1)
117.5 89.5 6.1 213.1 42.1 255.2
Net sales change (6.6
%) 4.0 % (100.0 %)
(4.8 %) (36.3 %)
(10.0 %)
Supplementary
non-GAAP information:
Year-over-year impact of changes in foreign exchange (FX)
rates — % — % — % — % (2.6 %) (0.4 %) Year-over-year impact
of the Language Solutions disposition — % — % (100.0 %) (2.8 %)
(30.1 %) (7.3 %) Year-over-year impact of the eBrevia
acquisition 0.5 % — % — % 0.3 % — % 0.2 %
Net organic sales change
(2) (7.1 %) 4.0
% — %
(2.3 %)
(3.6 %) (2.5 %)
(1)
Certain prior year amounts were restated to conform to the
Company’s current reporting unit structure. The former Language
Solutions and other reporting unit has been renamed “Language
Solutions.” Certain results previously included within the former
Language Solutions and other reporting unit are now included within
the Investment Markets reporting unit.
(2)
Adjusted for the impact of changes in FX rates, the Language
Solutions disposition and the eBrevia acquisition.
Donnelley Financial Solutions,
Inc.
Reconciliation of GAAP Net Earnings (Loss)
to Non-GAAP Adjusted EBITDA
For the Three and Twelve Months Ended
March 31, 2019 and 2018
(UNAUDITED)
(in millions)
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
Income tax expense (benefit) 25.3 (0.3 ) (2.4 ) 19.7 8.3 Interest
expense-net 36.6 8.9 9.5 8.4 9.8 Investment and other income-net
(18.1 ) (0.6 ) (2.7 ) (14.0 ) (0.8 ) Depreciation and amortization
47.5 12.1 12.7 11.6 11.1 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 Investor-related expenses (1) 1.5 1.0 0.5 — —
Spin-off related transaction expenses 12.7 0.4 0.2 3.7 8.4 Gain on
sale of business (53.8 ) — (0.3 ) (53.5 ) — Disposition-related
expenses 6.3 — 0.3 4.5 1.5 Acquisition-related expenses 0.6
— 0.3 — 0.3 Total Non-GAAP adjustments
73.3 25.1 20.4 (16.7 ) 44.5
Non-GAAP adjusted EBITDA
$ 137.8 $ 23.7 $ 19.4
$ 31.3 $ 63.4 Net sales $ 937.4
$ 229.6 $ 200.3 $ 216.9 $ 290.6 Non-GAAP adjusted EBITDA margin %
14.7 % 10.3 % 9.7 % 14.4 % 21.8 % For the Twelve
Months Ended
For the Three Months Ended
March 31,2018
March 31,2018
December 31,2017
September 30,2017
June 30,2017
GAAP net earnings (loss) $ 8.1 $
7.7 $ (23.7 ) $ 5.3
$ 18.8
Adjustments
Income tax expense 43.2 3.5 24.5 2.1 13.1 Interest expense-net 40.8
9.0 10.2 10.6 11.0 Investment and other income-net (3.4 ) (0.8 )
(0.9 ) (0.8 ) (0.9 ) Depreciation and amortization 44.7 10.4 12.8
10.6 10.9 Restructuring, impairment and other charges-net 4.0 0.7
0.7 (0.6 ) 3.2 Share-based compensation expense 7.5 1.8 1.6 1.7 2.4
Spin-off related transaction expenses 21.6 7.8 6.7 2.6 4.5
Disposition-related expenses 0.5 0.5 — — — Acquisition-related
expenses 0.4 0.2 0.2 — — Total
Non-GAAP adjustments 159.3 33.1 55.8 26.2 44.2
Non-GAAP
adjusted EBITDA $ 167.4 $ 40.8
$ 32.1 $ 31.5 $ 63.0
Net sales $ 992.8 $ 255.2 $ 224.8 $ 222.6 $ 290.2 Non-GAAP
adjusted EBITDA margin % 16.9 % 16.0 % 14.3 % 14.2 % 21.7 %
(1)
Expenses incurred related to non-routine investor matters
which include third-party advisory and consulting fees and legal
fees.
Donnelley Financial Solutions, Inc.
Debt and Liquidity Summary
As of March 31, 2019 and 2018 and December
31, 2018
(UNAUDITED)
(in millions)
Total
Liquidity
March 31, 2019 December 31, 2018 March 31,
2018
Availability
Stated amount of the Revolving Facility (1) $ 300.0 $ 300.0 $ 300.0
Less: availability reduction from covenants 138.9
45.3 80.2 Amount available under the Revolving Facility
161.1 254.7 219.8
Usage
Borrowings under the Revolving Facility 48.5 — 20.0
Impact on availability related to
outstanding letters of credit
— — — Amount used under the Revolving Facility
48.5 — 20.0 Availability
under the Revolving Facility 112.6 254.7 199.8
Cash (2) 10.5 47.3 12.1 Net Available Liquidity $
123.1 $ 302.0 $ 211.9 Short-term debt $ — $ — $ —
Long-term debt 411.7 362.7 478.8 Total debt $
411.7 $ 362.7 $ 478.8 Non-GAAP adjusted EBITDA for the
twelve months ended March 31, 2019 and 2018, and the year ended
December 31, 2018 $ 137.8 $ 154.9 $ 167.4
Non-GAAP Gross
Leverage (defined as total debt divided by non-GAAP adjusted
EBITDA) 3.0 x 2.3 x 2.9
x Non-GAAP Net Debt (defined as total debt less cash)
$ 401.2 $ 315.4 $ 466.7
Non-GAAP Net Leverage (defined as
non-GAAP Net Debt divided by non-GAAP adjusted EBITDA)
2.9 x 2.0 x 2.8 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. There was $48.5 million of
outstanding borrowings under the Revolving Facility as of March 31,
2019. Based on the Company’s results of operations for the twelve
months ended March 31, 2019 and existing debt, the Company would
have had the ability to utilize an incremental $112.6 million of
the $300.0 million Revolving Facility and not have been in
violation of the terms of the agreement.
(2)
Approximately 70% of cash as of March 31, 2019, 37% of cash as of
December 31, 2018 and 71% of cash as of March 31, 2018 was located
outside of the U.S. The Company began to repatriate excess cash at
its foreign subsidiaries to the U.S. during the three months ended
March 31, 2019 and expects additional repatriations during 2019.
The Company recorded deferred taxes attributable to the
book-over-tax outside basis differences in its foreign subsidiaries
for the excess cash repatriated as of March 31, 2019. As the
foreign earnings have previously been subject to U.S. tax, the
Company estimates that the repatriation of the related foreign cash
to the U.S. will create minimal additional tax expense.
Repatriation of some foreign cash balances are further restricted
by local laws.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190502005192/en/
Investor Contact:Justin RitchieInvestor
Relationsinvestors@dfinsolutions.com
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