Donnelley Financial Solutions (NYSE: DFIN) today reported
financial results for the second quarter 2019.
Highlights:
- Second-quarter net sales of $258.9 million
- U.S. Investment Markets net sales increased by 3.7% from the
second quarter of 2018 due to continued strong demand for proxy and
prospectus solutions
- SaaS net sales increased by 4.1% from the second quarter of
2018, representing 18.6% of second-quarter net sales; strong
performance in ActiveDisclosure, partially offset by the ongoing
impact of a soft M&A environment on Venue
- Company reaffirms full-year 2019 guidance
“The environment for capital markets transactional activity
improved from the first quarter, as IPO activity bounced back in
the second quarter, with DFIN supporting several large high-profile
transactions. The improved IPO activity was offset by fewer M&A
deals being completed in the quarter, resulting in lower overall
transactional net sales compared to the second quarter of 2018,”
said Daniel N. Leib, DFIN’s president and chief executive officer.
“We have, however, seen an improvement in our pipeline of new
M&A transactions. We remain optimistic that this activity will
positively impact our transactional and Venue revenue trends in the
back half of the year.”
Leib continued, “Elsewhere in the business, we are pleased with
the strong demand we continued to see in U.S. Investment Markets,
as well as with the ongoing client adoption of ActiveDisclosure. We
strengthened our competitive position in key areas, adding dozens
of new clients across our solutions.”
“We enter the second half of 2019 with transactional sales
momentum and a continued focus on controlling cost, keeping us on
track to meet our full-year guidance, and expect to end the year at
or below the low end of our targeted leverage range of 2.25x to
2.75x,” Leib concluded.
Net Sales
Net sales in the second quarter of 2019 were $258.9 million, a
decrease of $31.7 million, or 10.9%, from the second quarter of
2018 driven largely by the impact of the sale of the Language
Solutions business as well as lower U.S. Capital Markets
transactional and compliance 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 4.0% from the second quarter of 2018. The organic
decline was primarily driven by lower U.S Capital Markets
transactional and compliance activity, partially offset by higher
mutual fund volume in U.S. Investment Markets, and SaaS solutions
growth, primarily in ActiveDisclosure as well as FundSuiteArc.
GAAP Earnings
Second-quarter 2019 net earnings were $17.3 million, or $0.51
earnings per diluted share, compared to net earnings of $18.9
million, or $0.56 earnings per diluted share, in the second quarter
of 2018. The second-quarter 2019 net earnings included after-tax
adjustments of $8.1 million and second-quarter 2018 net earnings
included after-tax adjustments of $11.6 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 second quarter of 2019 was $56.1
million, compared to $63.4 million in the second quarter of 2018.
Non-GAAP adjusted EBITDA margin in the second quarter of 2019 was
21.7%, 10 basis points lower than in the second quarter of 2018.
The Non-GAAP adjusted EBITDA decrease was primarily driven by lower
U.S. Capital Markets transactional activity and the sale of the
Language Solutions business, partially offset by the impact of cost
saving initiatives.
Non-GAAP net earnings totaled $25.4 million, or $0.74 per
diluted share, in the second quarter of 2019 compared to non-GAAP
net earnings of $30.5 million, or $0.90 per diluted share, in the
second 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,
second-quarter 2019 results exclude Language Solutions, while
second-quarter 2018 results include Language Solutions. The sale
negatively impacted the second-quarter net sales comparison by
$19.8 million and negatively impacted 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.
Similarly, the sale will negatively impact the year-over-year
comparisons in the third quarter of 2019. 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.
On a full-year basis for 2019, the sale negatively impacts the
year-over-year net sales comparison by $41.8 million and negatively
impacts the gross profit and non-GAAP adjusted EBITDA comparisons
by approximately $12.0 million and $3.0 million, respectively,
inclusive of estimated net stranded costs.
2019 Guidance
The Company reaffirms its previous announced full-year guidance
for 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 second-quarter results today, Thursday, August 1, 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 June 30, 2019 and December
31, 2018
(UNAUDITED)
(in millions, except per share
data)
June 30, 2019
December 31, 2018
Assets
Cash and cash equivalents
$
9.5
$
47.3
Receivables, less allowances for doubtful
accounts of
$10.7 in 2019 (2018 - $7.9)
260.7
172.9
Inventories
13.0
12.1
Prepaid expenses and other current
assets
17.7
16.7
Total Current Assets
300.9
249.0
Property, plant and equipment - net
37.0
32.2
Right-of-use assets
84.4
—
Software - net
51.6
47.8
Goodwill
450.3
450.0
Other intangible assets - net
30.0
37.2
Deferred income taxes
14.3
9.7
Other noncurrent assets
40.6
42.8
Total Assets
$
1,009.1
$
868.7
Liabilities
Accounts payable
$
78.0
$
72.4
Accrued liabilities
123.2
126.0
Total Current Liabilities
201.2
198.4
Long-term debt
419.1
362.7
Deferred compensation liabilities
19.9
19.5
Pension and other postretirement benefits
plan liabilities
49.0
51.3
Noncurrent lease liabilities
62.8
—
Other noncurrent liabilities
8.0
10.8
Total Liabilities
760.0
642.7
Equity
Common stock, $0.01 par value
Authorized: 65.0 shares;
Issued: 34.5 shares in 2019 (2018 - 34.2
shares)
0.3
0.3
Treasury stock, at cost: 0.2 shares in
2019 (2018 - 0.1 shares)
(3.7
)
(2.4
)
Additional paid-in capital
221.6
216.5
Retained earnings
110.2
94.3
Accumulated other comprehensive loss
(79.3
)
(82.7
)
Total Equity
249.1
226.0
Total Liabilities and Equity
$
1,009.1
$
868.7
Donnelley Financial Solutions,
Inc.
Condensed Consolidated Statements
of Operations
For the Three and Six Months
Ended June 30, 2019 and 2018
(UNAUDITED)
(in millions, except per share
data)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2019
2018
2019
2018
Services net sales
$
161.2
$
187.9
$
289.1
$
347.4
Products net sales
97.7
102.7
199.4
198.4
Total net sales
258.9
290.6
488.5
545.8
Services cost of sales (1)
75.6
92.0
151.0
177.9
Products cost of sales (1)
73.4
73.6
151.9
146.3
Total cost of sales (1)
149.0
165.6
302.9
324.2
Selling, general and administrative
expenses (SG&A) (1)
57.9
75.1
112.8
141.2
Restructuring, impairment and other
charges - net
3.8
2.6
5.9
3.3
Depreciation and amortization
12.0
11.1
24.1
21.5
Other operating loss (2)
2.8
—
2.8
—
Income from operations
33.4
36.2
40.0
55.6
Interest expense - net
9.1
9.8
18.0
18.8
Investment and other income - net
(0.5
)
(0.8
)
(1.1
)
(1.6
)
Earnings before income taxes
24.8
27.2
23.1
38.4
Income tax expense
7.5
8.3
7.2
11.8
Net earnings
$
17.3
$
18.9
$
15.9
$
26.6
Net earnings per share:
Basic net earnings per share
$
0.51
$
0.56
$
0.47
$
0.79
Diluted net earnings per share
$
0.51
$
0.56
$
0.47
$
0.78
Weighted average number of common
shares outstanding:
Basic
34.1
33.8
34.0
33.7
Diluted
34.2
34.0
34.1
33.9
Additional
information:
Gross margin (1)
42.4
%
43.0
%
38.0
%
40.6
%
SG&A as a % of total net sales (1)
22.4
%
25.8
%
23.1
%
25.9
%
Operating margin
12.9
%
12.5
%
8.2
%
10.2
%
Effective tax rate
30.2
%
30.5
%
31.2
%
30.7
%
(1)
Exclusive of depreciation and
amortization
(2)
Includes an estimated settlement of
amounts related to the July 2018 disposition of the Language
Solutions business
Donnelley Financial Solutions,
Inc.
Reconciliation of GAAP to
Non-GAAP Measures
For the Three and Six Months
Ended June 30, 2019 and 2018
(UNAUDITED)
(in millions, except per share
data)
For the Three Months Ended
June 30, 2019
For the Six Months Ended June
30, 2019
SG&A
Income from operations
Operating margin
Net earnings
Net earnings per diluted
share
SG&A
Income from operations
Operating margin
Net earnings
Net earnings per diluted
share
GAAP basis measures
$
57.9
$
33.4
12.9
%
$
17.3
$
0.51
$
112.8
$
40.0
8.2
%
$
15.9
$
0.47
Non-GAAP adjustments:
Restructuring, impairment and other
charges - net
—
3.8
1.4
%
2.9
0.08
—
5.9
1.2
%
4.5
0.13
Share-based compensation expense
(3.6
)
3.6
1.4
%
2.7
0.08
(5.1
)
5.1
1.0
%
3.8
0.11
Loss on sale of business
—
2.8
1.1
%
2.1
0.06
—
2.8
0.6
%
2.1
0.06
Investor-related expenses
(0.5
)
0.5
0.2
%
0.4
0.01
(1.5
)
1.5
0.3
%
1.1
0.03
Spin-off related transaction expenses
—
—
—
—
—
(0.4
)
0.4
0.1
%
0.3
0.01
Income tax adjustments (1)
—
—
—
—
—
—
—
0.0
%
(0.1
)
—
Total Non-GAAP adjustments
(4.1
)
10.7
4.1
%
8.1
0.23
(7.0
)
15.7
3.2
%
11.7
0.34
Non-GAAP measures
$
53.8
$
44.1
17.0
%
$
25.4
$
0.74
$
105.8
$
55.7
11.4
%
$
27.6
$
0.81
For the Three Months Ended
June 30, 2018
For the Six Months Ended June
30, 2018
SG&A
Income
from
operations
Operating
margin
Net
earnings
Net
earnings
per diluted
share
SG&A
Income
from
operations
Operating
margin
Net
earnings
Net
earnings
per diluted
share
GAAP basis measures
$
75.1
$
36.2
12.5
%
$
18.9
$
0.56
$
141.2
$
55.6
10.2
%
$
26.6
$
0.78
Non-GAAP adjustments:
Restructuring, impairment and other
charges - net
—
2.6
0.9
%
1.9
0.05
—
3.3
0.6
%
2.4
0.07
Spin-off related transaction expenses
(8.4
)
8.4
2.9
%
6.0
0.18
(16.2
)
16.2
3.0
%
11.6
0.34
Share-based compensation expense
(3.3
)
3.3
1.1
%
2.4
0.07
(5.1
)
5.1
0.9
%
3.7
0.11
Disposition-related expenses
(1.5
)
1.5
0.5
%
1.1
0.03
(2.0
)
2.0
0.4
%
1.5
0.05
Acquisition-related expenses
(0.3
)
0.3
0.1
%
0.2
0.01
(0.5
)
0.5
0.1
%
0.3
0.01
Total Non-GAAP adjustments
(13.5
)
16.1
5.5
%
11.6
0.34
(23.8
)
27.1
5.0
%
19.5
0.58
Non-GAAP measures
$
61.6
$
52.3
18.0
%
$
30.5
$
0.90
$
117.4
$
82.7
15.2
%
$
46.1
$
1.36
(1)
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.
Segment GAAP to Non-GAAP
Operating Income and Non-GAAP Adjusted EBITDA and Margin
Reconciliation
For the Three Months Ended June
30, 2019 and 2018
(UNAUDITED)
(in millions)
U.S.
International
Corporate
Consolidated
For the Three
Months Ended June 30, 2019
Net sales
$
223.2
$
35.7
$
—
$
258.9
Income (loss) from operations
40.4
1.6
(8.6
)
33.4
Operating margin %
18.1
%
4.5
%
nm
12.9
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges - net
2.7
0.4
0.7
3.8
Share-based compensation expense
—
—
3.6
3.6
Loss on sale of business
1.2
1.6
—
2.8
Investor-related expenses
—
—
0.5
0.5
Total Non-GAAP adjustments
3.9
2.0
4.8
10.7
Non-GAAP income (loss) from operations
$
44.3
$
3.6
$
(3.8
)
$
44.1
Non-GAAP operating margin %
19.8
%
10.1
%
nm
17.0
%
Depreciation and amortization
10.1
1.8
0.1
12.0
Non-GAAP Adjusted EBITDA
$
54.4
$
5.4
$
(3.7
)
$
56.1
Non-GAAP Adjusted EBITDA margin %
24.4
%
15.1
%
nm
21.7
%
For the Three
Months Ended June 30, 2018
Net sales
$
242.5
$
48.1
$
—
$
290.6
Income (loss) from operations
46.9
1.6
(12.3
)
36.2
Operating margin %
19.3
%
3.3
%
nm
12.5
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges - net
0.6
1.9
0.1
2.6
Spin-off related transaction expenses
7.7
—
0.7
8.4
Share-based compensation expense
—
—
3.3
3.3
Disposition-related expenses
—
—
1.5
1.5
Acquisition-related expenses
—
—
0.3
0.3
Total Non-GAAP adjustments
8.3
1.9
5.9
16.1
Non-GAAP income (loss) from operations
$
55.2
$
3.5
$
(6.4
)
$
52.3
Non-GAAP operating margin %
22.8
%
7.3
%
nm
18.0
%
Depreciation and amortization
9.5
1.4
0.2
11.1
Non-GAAP Adjusted EBITDA
$
64.7
$
4.9
$
(6.2
)
$
63.4
Non-GAAP Adjusted EBITDA margin %
26.7
%
10.2
%
nm
21.8
%
Donnelley Financial Solutions,
Inc.
Segment GAAP to Non-GAAP
Operating Income and Non-GAAP Adjusted EBITDA and Margin
Reconciliation
For the Six Months Ended June 30,
2019 and 2018
(UNAUDITED)
(in millions)
U.S.
International
Corporate
Consolidated
For the Six
Months Ended June 30, 2019
Net sales
$
426.0
$
62.5
$
—
$
488.5
Income (loss) from operations
61.7
(1.7
)
(20.0
)
40.0
Operating margin %
14.5
%
(2.7
%)
nm
8.2
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges - net
3.3
1.0
1.6
5.9
Share-based compensation expense
—
—
5.1
5.1
Loss on sale of business
1.2
1.6
—
2.8
Investor-related expenses
—
—
1.5
1.5
Spin-off related transaction expenses
—
—
0.4
0.4
Total Non-GAAP adjustments
4.5
2.6
8.6
15.7
Non-GAAP income (loss) from operations
$
66.2
$
0.9
$
(11.4
)
$
55.7
Non-GAAP operating margin %
15.5
%
1.4
%
nm
11.4
%
Depreciation and amortization
20.4
3.4
0.3
24.1
Non-GAAP Adjusted EBITDA
$
86.6
$
4.3
$
(11.1
)
$
79.8
Non-GAAP Adjusted EBITDA margin %
20.3
%
6.9
%
nm
16.3
%
For the Six
Months Ended June 30, 2018
Net sales
$
455.6
$
90.2
$
—
$
545.8
Income (loss) from operations
73.3
4.1
(21.8
)
55.6
Operating margin %
16.1
%
4.5
%
nm
10.2
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges - net
1.3
1.8
0.2
3.3
Spin-off related transaction expenses
14.0
—
2.2
16.2
Share-based compensation expense
—
—
5.1
5.1
Disposition-related expenses
—
—
2.0
2.0
Acquisition-related expenses
—
—
0.5
0.5
Total Non-GAAP adjustments
15.3
1.8
10.0
27.1
Non-GAAP income (loss) from operations
$
88.6
$
5.9
$
(11.8
)
$
82.7
Non-GAAP operating margin %
19.4
%
6.5
%
nm
15.2
%
Depreciation and amortization
18.4
2.8
0.3
21.5
Non-GAAP Adjusted EBITDA
$
107.0
$
8.7
$
(11.5
)
$
104.2
Non-GAAP Adjusted EBITDA margin %
23.5
%
9.6
%
nm
19.1
%
Donnelley Financial Solutions,
Inc.
Condensed Consolidated Statements
of Cash Flows
For the Six Months Ended June 30,
2019 and 2018
(UNAUDITED)
(in millions)
For the Six Months Ended June
30,
2019
2018
Net earnings
$
15.9
$
26.6
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depreciation and amortization
24.1
21.5
Provision for doubtful accounts
receivable
3.2
3.5
Share-based compensation
5.1
5.1
Deferred income taxes
(4.8
)
1.7
Net pension plan income
(1.0
)
(1.6
)
Other
18.3
1.7
Changes in operating assets and
liabilities - net of acquisitions:
Accounts receivable - net
(90.7
)
(102.1
)
Inventories
(0.9
)
(4.8
)
Prepaid expenses and other current
assets
(0.9
)
0.8
Accounts payable
6.1
13.3
Income taxes payable and receivable
(5.2
)
3.9
Accrued liabilities and other
(34.1
)
(18.3
)
Pension and other postretirement benefits
plan contributions
(0.4
)
(1.5
)
Net cash used in operating
activities
$
(65.3
)
$
(50.2
)
Capital expenditures
(26.2
)
(15.6
)
Acquisition of business, net of cash
acquired
(2.6
)
—
Other investing activities
0.1
—
Net cash used in investing
activities
$
(28.7
)
$
(15.6
)
Revolving facility borrowings
337.0
206.5
Payments on revolving facility
borrowings
(281.5
)
(179.5
)
Proceeds from issuance of common stock
—
1.2
Treasury share repurchases
(1.3
)
(0.8
)
Debt issuance costs
(0.2
)
—
Net cash provided by financing
activities
$
54.0
$
27.4
Effect of exchange rate on cash and cash
equivalents
2.2
(1.8
)
Net decrease in cash and cash
equivalents
(37.8
)
(40.2
)
Cash and cash equivalents at beginning of
year
47.3
52.0
Cash and cash equivalents at end of
period
$
9.5
$
11.8
Additional
Information:
2019
2018
For the Six Months Ended June 30:
Net cash used in operating activities
$
(65.3
)
$
(50.2
)
Less: capital expenditures
26.2
15.6
Free cash flow
$
(91.5
)
$
(65.8
)
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
)
2019
2018
For the Three Months Ended June 30:
Net cash provided by operating
activities
$
3.0
$
3.4
Less: capital expenditures
11.1
9.2
Free cash flow
$
(8.1
)
$
(5.8
)
Donnelley Financial Solutions,
Inc.
Reconciliation of Reported to
Organic Net Sales
For the Three and Six Months
Ended June 30, 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
June 30, 2019
$
128.3
$
94.9
$
—
$
223.2
$
35.7
$
258.9
For the Three Months Ended
June 30, 2018 (1)
144.6
91.5
6.4
242.5
48.1
290.6
Net sales change
(11.3
%)
3.7
%
(100.0
%)
(8.0
%)
(25.8
%)
(10.9
%)
Supplementary
non-GAAP information:
Year-over-year impact of changes in
foreign exchange (FX) rates
—
%
—
%
—
%
—
%
(2.3
%)
(0.4
%)
Year-over-year impact of the Language
Solutions disposition
—
%
—
%
(100.0
%)
(2.7
%)
(27.9
%)
(6.7
%)
Year-over-year impact of the eBrevia
acquisition
0.5
%
—
%
—
%
0.3
%
—
%
0.2
%
Net organic sales change (2)
(11.8
%)
3.7
%
—
%
(5.6
%)
4.4
%
(4.0
%)
U.S.
Capital Markets
Investment Markets
Language Solutions
Total U.S.
International
Consolidated
Reported Net
Sales:
For the Six Months Ended
June 30, 2019
$
238.0
$
188.0
$
—
$
426.0
$
62.5
$
488.5
For the Six Months Ended
June 30, 2018 (1)
262.1
181.0
12.5
455.6
90.2
545.8
Net sales change
(9.2
%)
3.9
%
(100.0
%)
(6.5
%)
(30.7
%)
(10.5
%)
Supplementary
non-GAAP information:
Year-over-year impact of changes in
foreign exchange (FX) rates
—
%
—
%
—
%
—
%
(2.4
%)
(0.4
%)
Year-over-year impact of the Language
Solutions disposition
—
%
—
%
(100.0
%)
(2.8
%)
(29.0
%)
(7.1
%)
Year-over-year impact of the eBrevia
acquisition
0.5
%
—
%
—
%
0.3
%
—
%
0.3
%
Net organic sales change (2)
(9.7
%)
3.9
%
—
%
(4.0
%)
0.7
%
(3.3
%)
(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 June 30, 2019 and 2018
(UNAUDITED)
(in millions)
For the Twelve
Months Ended
For the Three Months
Ended
June 30, 2019
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
GAAP net earnings (loss)
$
62.9
$
17.3
$
(1.4
)
$
(1.0
)
$
48.0
Adjustments
Income tax expense (benefit)
24.5
7.5
(0.3
)
(2.4
)
19.7
Interest expense-net
35.9
9.1
8.9
9.5
8.4
Investment and other income-net
(17.8
)
(0.5
)
(0.6
)
(2.7
)
(14.0
)
Depreciation and amortization
48.4
12.0
12.1
12.7
11.6
Restructuring, impairment and other
charges-net
7.0
3.8
2.1
0.3
0.8
Share-based compensation expense
9.2
3.6
1.5
2.0
2.1
Investor-related expenses
2.0
0.5
1.0
0.5
—
Spin-off related transaction expenses
4.3
—
0.4
0.2
3.7
Loss (gain) on sale of business
(51.0
)
2.8
—
(0.3
)
(53.5
)
Disposition-related expenses
4.8
—
—
0.3
4.5
Acquisition-related expenses
0.3
—
—
0.3
—
Total Non-GAAP adjustments
67.6
38.8
25.1
20.4
(16.7
)
Non-GAAP adjusted EBITDA
$
130.5
$
56.1
$
23.7
$
19.4
$
31.3
Net sales
$
905.7
$
258.9
$
229.6
$
200.3
$
216.9
Non-GAAP adjusted EBITDA margin %
14.4
%
21.7
%
10.3
%
9.7
%
14.4
%
For the Twelve
Months Ended
For the Three Months
Ended
June 30, 2018
June 30, 2018
March 31, 2018
December 31, 2017
September 30, 2017
GAAP net earnings (loss)
$
8.2
$
18.9
$
7.7
$
(23.7
)
$
5.3
Adjustments
Income tax expense
38.4
8.3
3.5
24.5
2.1
Interest expense-net
39.6
9.8
9.0
10.2
10.6
Investment and other income-net
(3.3
)
(0.8
)
(0.8
)
(0.9
)
(0.8
)
Depreciation and amortization
44.9
11.1
10.4
12.8
10.6
Restructuring, impairment and other
charges-net
3.4
2.6
0.7
0.7
(0.6
)
Share-based compensation expense
8.4
3.3
1.8
1.6
1.7
Spin-off related transaction expenses
25.5
8.4
7.8
6.7
2.6
Disposition-related expenses
2.0
1.5
0.5
—
—
Acquisition-related expenses
0.7
0.3
0.2
0.2
—
Total Non-GAAP adjustments
159.6
44.5
33.1
55.8
26.2
Non-GAAP adjusted EBITDA
$
167.8
$
63.4
$
40.8
$
32.1
$
31.5
Net sales
$
993.2
$
290.6
$
255.2
$
224.8
$
222.6
Non-GAAP adjusted EBITDA margin %
16.9
%
21.8
%
16.0
%
14.3
%
14.2
%
Donnelley Financial Solutions,
Inc.
Debt and Liquidity Summary
As of June 30, 2019 and 2018 and
December 31, 2018
(UNAUDITED)
(in millions)
Total
Liquidity
June 30, 2019
December 31, 2018
June 30, 2018
Availability
Stated amount of the Revolving Facility
(1)
$
300.0
$
300.0
$
300.0
Less: availability reduction from
covenants
165.3
45.3
130.4
Amount available under the Revolving
Facility
134.7
254.7
169.6
Usage
Borrowings under the Revolving
Facility
55.5
—
27.0
Impact on availability related to
outstanding
letters of credit
—
—
—
Amount used under the Revolving
Facility
55.5
—
27.0
Availability under the Revolving
Facility
79.2
254.7
142.6
Cash (2)
9.5
47.3
11.8
Net Available Liquidity
$
88.7
$
302.0
$
154.4
Short-term debt
$
—
$
—
$
—
Long-term debt
419.1
362.7
486.3
Total debt
$
419.1
$
362.7
$
486.3
Non-GAAP adjusted EBITDA for the twelve
months ended June 30, 2019 and 2018, and the year ended December
31, 2018
$
130.5
$
154.9
$
167.8
Non-GAAP Gross Leverage (defined as
total debt divided by non-GAAP adjusted EBITDA)
3.2
x
2.3
x
2.9
x
Non-GAAP Net Debt (defined as total debt
less cash)
$
409.6
$
315.4
$
474.5
Non-GAAP Net Leverage (defined as
non-GAAP Net Debt divided by non-GAAP adjusted EBITDA)
3.1
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 $55.5
million of outstanding borrowings under the Revolving Facility as
of June 30, 2019. Based on the Company’s results of operations for
the twelve months ended June 30, 2019 and existing debt, the
Company would have had the ability to utilize an incremental $79.2
million of the $300.0 million Revolving Facility and not have been
in violation of the terms of the agreement.
(2)
Approximately 58% of cash as of June 30,
2019, 37% of cash as of December 31, 2018 and 81% of cash as of
June 30, 2018 was located outside of the U.S. The Company
repatriated excess cash at its foreign subsidiaries to the U.S.
during the six months ended June 30, 2019 and will evaluate its
ability to make additional cash repatriations during the fourth
quarter of 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190801005152/en/
Investor Contact: Justin Ritchie Investor Relations
investors@dfinsolutions.com
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