Donnelley Financial Solutions, Inc. (NYSE: DFIN), (the
“Company”) today reported financial results for the fourth
quarter and full year 2019.
Fourth-quarter and full-year
highlights:
Fourth-quarter 2019
Full-year 2019
Net Sales
$190.3 million
$874.7 million
GAAP Net Earnings
$7.0 million
$37.6 million
Non-GAAP Adjusted EBITDA(1)
$26.1 million
$137.0 million
Operating Cash Flow(2)
$58.7 million
$54.5 million
Free Cash Flow(1)(2)(3)
$49.0 million
$9.7 million
(1)
Non-GAAP 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)
Full-year 2019 Operating Cash
Flow and Free Cash Flow include taxes and fees paid associated with
the 2019 sales of the Company’s Secaucus, NJ facility and a portion
of certain equity investments, as well as taxes paid related to the
2018 sale of the Company’s Language Solutions business. In
aggregate, these items negatively impacted full-year 2019 Operating
Cash Flow and Free Cash Flow by approximately $18.3 million.
(3)
Defined as operating cash flow
less capital expenditures.
- Fourth-quarter 2019 GAAP fully diluted net earnings per share
of $0.20, up $0.23 from the prior year; non-GAAP fully diluted
earnings per share of $0.22, up $0.28 from the prior year
- Fourth-quarter 2019 operating cash flow of $58.7 million, up
5.0% from the prior year; free cash flow of $49.0 million, up 17.8%
from the prior year
- Record quarterly software-as-a-service (“SaaS”) net sales of
$49.8 million, up 7.9% from the prior year; SaaS net sales
accounted for 26.2% of total fourth-quarter 2019 net sales
- Fourth-quarter 2019 non-GAAP adjusted EBITDA margin of 13.7%,
up 400 basis points from the prior year, primarily due to continued
focus on cost controls and an improved business mix
- Completed the sale of Secaucus, NJ facility and sold a portion
of certain equity investments in 2019, generating $43.4 million of
cash proceeds (approximately $29.7 million after taxes and fees
associated with the 2019 sale transactions)
- Reduced total debt by $66.7 million during 2019, paying off
term loan; ended the year with total debt of $296.0 million and
$17.2 million of cash and cash equivalents
- Company announces $25 million common stock repurchase
program
- Company issues full-year 2020 guidance
“We are pleased to see the reacceleration in SaaS net sales
growth in the fourth quarter. ActiveDisclosure again led the way,
growing more than 20%, while adding dozens of new clients. SaaS
made up 26.2% of fourth-quarter total net sales, up from 23.0% in
last year’s fourth quarter, showing positive momentum heading into
2020,” said Daniel N. Leib, DFIN’s president and chief executive
officer.
Leib continued, “Together our team addressed a challenging
M&A environment this year, which significantly impacted our
capital markets transactional business, rationalizing costs and
improving consolidated fourth-quarter 2019 non-GAAP EBITDA margin
to 13.7%, compared to 9.7% in the fourth-quarter of 2018, all while
either maintaining or improving market share. Looking forward, as
the market leader, we remain poised to capitalize on a rebound in
capital markets transactional activity in 2020 and beyond.”
“We remain steadfast in executing our long-term strategy to
transition our traditional clients to software-first solutions,
introduce new solutions to market, and continue to maintain share
elsewhere in our portfolio. This strategy is focused on sustainable
EBITDA and free cash flow growth through incremental SaaS sales and
increased profitability from our traditional businesses through
planned efficiencies. Additionally, we continue to look to deploy
capital in ways that will generate long-term value for
shareholders. As such, our board authorized a $25 million stock
repurchase program, reflecting our deep belief in the intrinsic
value of the company,” Leib concluded.
Net Sales
Net sales in the fourth quarter of 2019 were $190.3 million, a
decrease of $10.0 million, or 5.0%, from the fourth quarter of
2018. After adjusting for the 2018 acquisition of eBrevia and
changes in foreign exchange rates, organic net sales decreased 5.2%
from the fourth quarter of 2018. The decrease was driven largely by
lower capital markets transactions and compliance volume, as well
as lower mutual fund print volume, which was partially offset by
growth in SaaS solutions, primarily in ActiveDisclosure and
FundSuiteArc.
GAAP Net Earnings
Fourth-quarter 2019 net earnings were $7.0 million, or $0.20 per
diluted share, compared to a net loss of $1.0 million, or $0.03
loss per diluted share, in the fourth-quarter of 2018. The fourth
quarter 2019 net earnings included an after-tax unrealized and
realized gain of $9.7 million, or $0.28 per diluted share, in part
related to the sale of a portion of the Company’s investment in
AuditBoard; an after-tax loss of $3.1 million related to the
extinguishment of the term loan, or $0.09 loss per diluted share;
and other items totaling $7.2 million, or $0.21 loss per diluted
share. The fourth-quarter 2018 net losses included various items
totaling $1.1 million, or $0.03 loss 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.
Non-GAAP Adjusted EBITDA and Net Earnings
Non-GAAP adjusted EBITDA in the fourth quarter of 2019 was $26.1
million, compared to $19.4 million in the fourth quarter of 2018.
Non-GAAP adjusted EBITDA margin in the fourth quarter of 2019 was
13.7%, an improvement of 400 basis points versus the fourth quarter
of 2018. The increase in non-GAAP adjusted EBITDA was primarily
driven by the impact of cost savings initiatives and improved
business mix.
Non-GAAP net earnings totaled $7.6 million, or $0.22 earnings
per diluted share, in the fourth quarter of 2019 compared to a
non-GAAP net loss of $2.1 million, or $0.06 loss per diluted share,
in the fourth quarter of 2018. Reconciliations of net earnings to
non-GAAP adjusted EBITDA, non-GAAP net earnings and 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. 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. The Language Solutions business did
not impact the year-over-year comparisons in the fourth-quarter of
2019.
Share Repurchase Program
Today the Company announced that its board of directors
authorized the repurchase of up to $25 million of the Company's
outstanding common stock from time to time in one or more
transactions on the open market or in privately negotiated
purchases. The stock repurchase program will be effective through
December 31, 2021.
The timing and amount of any shares repurchased will be
determined by the Company's management based on its evaluation of
market conditions and other factors. Repurchases may also be made
under a Rule 10b5-1 plan, which would permit shares to be
repurchased when the Company might otherwise be precluded from
doing so under insider trading laws. The repurchase program may be
suspended or discontinued at any time.
2020 Guidance
The Company provides the following full-year guidance for
2020.
2020
Guidance
Net Sales
$860 to $880 million
Non-GAAP adjusted EBITDA
$140 to $145 million
Depreciation and amortization
Approximately $55 million
Interest expense
Approximately $30 million
Non-GAAP effective tax rate
29% to 31%
Diluted share count(1)
Approximately 35 million
Operating cash flow
$70 to $75 million
Capital expenditures
Approximately $35 million
Free cash flow
$35 to $40 million
(1)
Excludes the impact of potential
share repurchases
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, gains or losses on
investments 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 Details
DFIN will hold a conference call and webcast today, Wednesday,
February 26, 2020 at 9:00 a.m. Eastern time (8:00 a.m. Central
time) to discuss its fourth-quarter and full-year 2019 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: 4694888
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, February 26, 2020 until 11:59 p.m. Eastern time,
March 4, 2020. To access the replay, please dial 800-585-8367
(domestic) or 416-621-4642 (international). The Conference ID for
the replay is: 4694888. 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 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.
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,
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,
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)
December 31, 2019
December 31, 2018
Assets
Cash and cash equivalents
$
17.2
$
47.3
Receivables, less allowances for doubtful
accounts of $7.7 in 2019 (2018 - $7.9)
161.4
172.9
Inventories
11.1
12.1
Prepaid expenses and other current
assets
15.9
16.7
Assets held for sale
5.6
—
Total current assets
211.2
249.0
Property, plant and equipment-net
17.5
32.2
Right-of-use assets
80.7
—
Software-net
55.0
47.8
Goodwill
450.3
450.0
Other intangible assets-net
21.9
37.2
Deferred income taxes
9.0
9.7
Other noncurrent assets
41.3
42.8
Total assets
$
886.9
$
868.7
Liabilities
Accounts payable
$
58.5
$
72.4
Accrued liabilities
121.0
126.0
Total current liabilities
179.5
198.4
Long-term debt
296.0
362.7
Deferred compensation liabilities
20.0
19.5
Pension and other postretirement benefits
plan liabilities
58.8
51.3
Noncurrent lease liabilities
57.9
—
Other noncurrent liabilities
6.1
10.8
Total liabilities
618.3
642.7
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: 34.5 shares and
34.2 shares in 2019 (2018 - 34.2 shares and 34.1 shares)
0.3
0.3
Treasury stock, at cost: 0.3 shares in
2019 (2018 - 0.1 shares)
(4.2
)
(2.4
)
Additional paid-in capital
225.2
216.5
Retained earnings
131.9
94.3
Accumulated other comprehensive loss
(84.6
)
(82.7
)
Total equity
268.6
226.0
Total liabilities and equity
$
886.9
$
868.7
Donnelley Financial Solutions,
Inc. and Subsidiaries (“DFIN”)
Condensed Consolidated Statements
of Operations
(UNAUDITED)
(in millions, except per share
data)
For the Three Months Ended
December 31,
For the Twelve Months Ended
December 31,
2019
2018
2019
2018
Services net sales
$
134.5
$
132.1
$
554.0
$
618.0
Products net sales
55.8
68.2
320.7
345.0
Total net sales
190.3
200.3
874.7
963.0
Services cost of sales (1)
66.9
75.4
284.8
328.8
Products cost of sales (1)
51.3
54.4
257.6
258.5
Total cost of sales (1)
118.2
129.8
542.4
587.3
Selling, general and administrative
expenses (SG&A) (1)
46.8
54.4
205.8
258.2
Restructuring, impairment and other
charges - net
4.9
0.3
13.6
4.4
Depreciation and amortization
12.8
12.7
49.6
45.8
Other operating loss (income) (2)
1.2
(0.3
)
(15.2
)
(53.8
)
Income from operations
6.4
3.4
78.5
121.1
Interest expense - net
11.5
9.5
38.1
36.7
Investment and other income - net
(10.1
)
(2.7
)
(11.7
)
(18.3
)
Earnings (loss) before income
taxes
5.0
(3.4
)
52.1
102.7
Income tax (benefit) expense (3)
(2.0
)
(2.4
)
14.5
29.1
Net earnings (loss)
$
7.0
$
(1.0
)
$
37.6
$
73.6
Net earnings (loss) per share:
Basic
$
0.20
$
(0.03
)
$
1.10
$
2.18
Diluted
$
0.20
$
(0.03
)
$
1.10
$
2.16
Weighted average number of common
shares outstanding:
Basic
34.3
33.9
34.1
33.8
Diluted
34.4
33.9
34.3
34.0
Additional
information:
Gross margin (1)
37.9
%
35.2
%
38.0
%
39.0
%
SG&A as a % of total net sales (1)
24.6
%
27.2
%
23.5
%
26.8
%
Operating margin
3.4
%
1.7
%
9.0
%
12.6
%
Effective tax rate (3)
nm
70.6
%
27.8
%
28.3
%
(1)
Exclusive of depreciation and
amortization.
(2)
Includes the gain on sale of a
building and a loss related to the July 2018 disposition of the
Language Solutions business for the twelve months ended December
31, 2019, as well as the gain on the sale of the Language Solutions
business recognized during the twelve months ended December 31,
2018.
(3)
Includes the impact of a
valuation allowance recognized on certain operations for the three
and twelve months ended December 31, 2019.
nm – Not Meaningful
Donnelley Financial Solutions,
Inc. and Subsidiaries (“DFIN”)
Reconciliation of GAAP to
Non-GAAP Measures
(UNAUDITED)
(in millions, except per share
data)
For the Three Months Ended
December 31, 2019
For the Twelve Months Ended
December 31, 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
(1)
GAAP basis measures
$
46.8
$
6.4
3.4
%
$
7.0
$
0.20
$
205.8
$
78.5
9.0
%
$
37.6
$
1.10
Non-GAAP adjustments:
Net gain on sale of building
—
—
—
—
—
—
(19.2
)
(2.2
%)
(13.7
)
(0.40
)
Gain on equity investment
—
—
—
(9.7
)
(0.28
)
—
—
—
(9.7
)
(0.28
)
Restructuring, impairment and other
charges - net
—
4.9
2.6
%
3.3
0.10
—
13.6
1.6
%
9.9
0.29
Share-based compensation expense
(1.2
)
1.2
0.6
%
1.3
0.04
(8.9
)
8.9
1.0
%
7.0
0.20
Loss on debt extinguishment
—
—
—
3.1
0.09
—
—
—
3.1
0.09
Net loss on sale of Language Solutions
business
—
1.2
0.6
%
0.1
0.00
—
4.0
0.5
%
2.2
0.06
Pension settlement charges
—
—
—
2.8
0.08
—
—
—
2.8
0.08
Investor-related expenses
—
—
—
—
—
(1.5
)
1.5
0.1
%
1.1
0.03
Acquisition-related expenses
—
—
—
—
—
(0.1
)
0.1
—
—
—
Spin-off related expenses
0.4
(0.4
)
(0.2
%)
(0.3
)
(0.01
)
—
—
—
—
—
Total Non-GAAP adjustments
(0.8
)
6.9
3.6
%
0.6
0.02
(10.5
)
8.9
1.0
%
2.7
0.08
Non-GAAP measures
$
46.0
$
13.3
7.0
%
$
7.6
$
0.22
$
195.3
$
87.4
10.0
%
$
40.3
$
1.17
For the Three Months Ended
December 31, 2018
For the Twelve Months Ended
December 31, 2018
SG&A
Income from operations
Operating margin
Net earnings
Net earnings (loss) per
diluted share
SG&A
Income from operations
Operating margin
Net earnings
Net earnings per diluted
share
GAAP basis measures
$
54.4
$
3.4
1.7
%
$
(1.0
)
$
(0.03
)
$
258.2
$
121.1
12.6
%
$
73.6
$
2.16
Non-GAAP adjustments:
Net gain on sale of Language Solutions
business
—
(0.3
)
(0.1
%)
(0.2
)
(0.01
)
—
(53.8
)
(5.6
%)
(38.6
)
(1.14
)
Gain on equity investment
—
—
—
—
—
—
—
—
(8.5
)
(0.25
)
Gain on eBrevia investment
—
—
—
(1.5
)
(0.04
)
—
—
—
(1.5
)
(0.04
)
Restructuring, impairment and other
charges - net
—
0.3
0.1
%
0.2
0.01
—
4.4
0.4
%
3.2
0.09
Spin-off related transaction expenses
(0.2
)
0.2
0.1
%
0.1
0.00
(20.1
)
20.1
2.1
%
14.6
0.43
Share-based compensation expense
(2.0
)
2.0
1.0
%
1.4
0.04
(9.2
)
9.2
0.9
%
6.7
0.20
Disposition-related expenses
(0.3
)
0.3
0.1
%
0.4
0.01
(6.8
)
6.8
0.7
%
5.1
0.15
Acquisition-related expenses
(0.3
)
0.3
0.1
%
0.2
0.01
(0.8
)
0.8
0.1
%
0.5
0.02
Investor-related expenses
(0.5
)
0.5
0.3
%
0.4
0.01
(0.5
)
0.5
0.1
%
0.4
0.01
Income tax adjustments
—
—
—
(2.1
)
(0.06
)
—
—
—
(2.1
)
(0.06
)
Total Non-GAAP adjustments
(3.3
)
3.3
1.6
%
(1.1
)
(0.03
)
(37.4
)
(12.0
)
(1.3
%)
(20.2
)
(0.59
)
Non-GAAP measures
$
51.1
$
6.7
3.3
%
$
(2.1
)
$
(0.06
)
$
220.8
$
109.1
11.3
%
$
53.4
$
1.57
__________
(1)
Net earnings per diluted share
totals may not foot due to rounding.
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 Non-GAAP Adjusted EBITDA and Margin
Reconciliation
(UNAUDITED)
(in millions)
U.S.
International
Corporate
Consolidated
For the Three
Months Ended December 31, 2019
Net sales
$
161.7
$
28.6
$
—
$
190.3
Income (loss) from operations
12.6
0.3
(6.5
)
6.4
Operating margin %
7.8
%
1.0
%
nm
3.4
%
Non-GAAP
Adjustments
Restructuring, impairment and other
charges - net
2.6
1.2
1.1
4.9
Share-based compensation expense
—
—
1.2
1.2
Net loss on sale of Language Solutions
business
1.5
(0.3
)
—
1.2
Spin-off related transaction expenses
—
—
(0.4
)
(0.4
)
Total Non-GAAP adjustments
4.1
0.9
1.9
6.9
Non-GAAP income (loss) from operations
$
16.7
$
1.2
$
(4.6
)
$
13.3
Non-GAAP operating margin %
10.3
%
4.2
%
nm
7.0
%
Depreciation and amortization
10.3
2.2
0.3
12.8
Non-GAAP Adjusted EBITDA
$
27.0
$
3.4
$
(4.3
)
$
26.1
Non-GAAP Adjusted EBITDA margin %
16.7
%
11.9
%
nm
13.7
%
For the Three
Months Ended December 31, 2018
Net sales
$
170.7
$
29.6
$
—
$
200.3
Income (loss) from operations
12.3
0.5
(9.4
)
3.4
Operating margin %
7.2
%
1.7
%
nm
1.7
%
Non-GAAP
Adjustments
Net gain on sale of Language Solutions
business
—
(0.3
)
—
(0.3
)
Restructuring, impairment and other
charges - net
0.1
(0.1
)
0.3
0.3
Spin-off related transaction expenses
0.9
—
(0.7
)
0.2
Share-based compensation expense
—
—
2.0
2.0
Disposition-related expenses
—
0.2
0.1
0.3
Acquisition-related expenses
—
—
0.3
0.3
Investor-related expenses
—
—
0.5
0.5
Total Non-GAAP adjustments
1.0
(0.2
)
2.5
3.3
Non-GAAP income (loss) from operations
$
13.3
$
0.3
$
(6.9
)
$
6.7
Non-GAAP operating margin %
7.8
%
1.0
%
nm
3.3
%
Depreciation and amortization
10.9
1.7
0.1
12.7
Non-GAAP Adjusted EBITDA
$
24.2
$
2.0
$
(6.8
)
$
19.4
Non-GAAP Adjusted EBITDA margin %
14.2
%
6.8
%
nm
9.7
%
Donnelley Financial Solutions,
Inc. and Subsidiaries (“DFIN”)
Segment GAAP to Non-GAAP
Operating Income and Non-GAAP Adjusted EBITDA and Margin
Reconciliation
(UNAUDITED)
(in millions)
U.S.
International
Corporate
Consolidated
For the Twelve
Months Ended December 31, 2019
Net sales
$
761.4
$
113.3
$
—
$
874.7
Income (loss) from operations
113.5
(2.3
)
(32.7
)
78.5
Operating margin %
14.9
%
(2.0
%)
nm
9.0
%
Non-GAAP
Adjustments
Net gain on sale of building
(19.2
)
—
—
(19.2
)
Restructuring, impairment and other
charges - net
7.5
2.2
3.9
13.6
Share-based compensation expense
—
—
8.9
8.9
Net loss on sale of Language Solutions
business
2.7
1.3
—
4.0
Investor-related expenses
—
—
1.5
1.5
Acquisition-related expenses
—
—
0.1
0.1
Total Non-GAAP adjustments
(9.0
)
3.5
14.4
8.9
Non-GAAP income (loss) from operations
$
104.5
$
1.2
$
(18.3
)
$
87.4
Non-GAAP operating margin %
13.7
%
1.1
%
nm
10.0
%
Depreciation and amortization
41.3
7.6
0.7
49.6
Non-GAAP Adjusted EBITDA
$
145.8
$
8.8
$
(17.6
)
$
137.0
Non-GAAP Adjusted EBITDA margin %
19.1
%
7.8
%
nm
15.7
%
For the Twelve
Months Ended December 31, 2018
Net sales
$
811.8
$
151.2
$
—
$
963.0
Income (loss) from operations
134.0
31.6
(44.5
)
121.1
Operating margin %
16.5
%
20.9
%
nm
12.6
%
Non-GAAP
Adjustments
Net gain on sale of Language Solutions
business
(26.6
)
(27.2
)
—
(53.8
)
Restructuring, impairment and other
charges - net
2.0
1.8
0.6
4.4
Spin-off related transaction expenses
16.5
—
3.6
20.1
Share-based compensation expense
—
—
9.2
9.2
Disposition-related expenses
—
1.4
5.4
6.8
Acquisition-related expenses
—
—
0.8
0.8
Investor-related expenses
—
—
0.5
0.5
Total Non-GAAP adjustments
(8.1
)
(24.0
)
20.1
(12.0
)
Non-GAAP income (loss) from operations
$
125.9
$
7.6
$
(24.4
)
$
109.1
Non-GAAP operating margin %
15.5
%
5.0
%
nm
11.3
%
Depreciation and amortization
39.6
5.7
0.5
45.8
Non-GAAP Adjusted EBITDA
$
165.5
$
13.3
$
(23.9
)
$
154.9
Non-GAAP Adjusted EBITDA margin %
20.4
%
8.8
%
nm
16.1
%
Donnelley Financial Solutions,
Inc. and Subsidiaries (“DFIN”)
Condensed Consolidated Statements
of Cash Flows
(UNAUDITED)
(in millions)
For the Twelve Months Ended
December 31,
2019
2018
Operating Activities
Net earnings
$
37.6
$
73.6
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
49.6
45.8
Provision for doubtful accounts
receivable
3.2
4.9
Impairment charges
3.0
—
Share-based compensation
8.9
9.2
Loss on debt extinguishment
4.1
—
Deferred income taxes
2.5
10.5
Net pension plan expense (income)
1.8
(3.2
)
Gain on equity investments
(13.6
)
(13.6
)
Net gain on sale of building
(19.2
)
—
Net loss (gain) on disposition of Language
Solutions business
4.0
(53.8
)
Amortization of right-of-use assets
22.1
—
Other
3.1
2.3
Changes in operating assets and
liabilities - net of acquisitions:
Accounts receivable - net
8.7
(25.3
)
Inventories
1.0
(1.6
)
Prepaid expenses and other current
assets
2.6
1.2
Accounts payable
(13.6
)
10.7
Income taxes payable and receivable
(13.0
)
9.2
Accrued liabilities and other
(13.5
)
(1.7
)
Lease liabilities
(23.8
)
—
Pension and other postretirement benefits
plan contributions
(1.0
)
(1.9
)
Net cash provided by operating
activities
54.5
66.3
Investing Activities
Capital expenditures
(44.8
)
(37.1
)
Proceeds from sale of building
30.6
—
Acquisition of business, net of cash
acquired
(4.5
)
(12.5
)
Purchase of investment
(2.3
)
—
Proceeds from sale of investment
12.8
3.1
(Payments for) proceeds from disposition
of Language Solutions business
(4.0
)
77.5
Other investing activities
—
(0.8
)
Net cash (used in) provided by investing
activities
(12.2
)
30.2
Financing Activities
Revolving facility borrowings
515.5
360.0
Payments on revolving facility
borrowings
(515.5
)
(360.0
)
Payments on long-term debt
(72.5
)
(97.5
)
Proceeds from issuance of common stock
—
1.2
Treasury share repurchases
(1.8
)
(1.5
)
Debt issuance costs
(0.2
)
(1.2
)
Net cash used in financing activities
(74.5
)
(99.0
)
Effect of exchange rate on cash and cash
equivalents
2.1
(2.2
)
Net decrease in cash and cash
equivalents
(30.1
)
(4.7
)
Cash and cash equivalents at beginning of
year
47.3
52.0
Cash and cash equivalents at end of
period
$
17.2
$
47.3
Supplemental cash flow
information:
Income taxes paid (net of refunds)
$
25.0
$
10.1
Interest paid
$
31.9
$
34.6
Donnelley Financial Solutions,
Inc. and Subsidiaries (“DFIN”)
Condensed Consolidated Statements
of Cash Flows
(UNAUDITED)
(in millions)
Additional
Information:
For the Three Months
Ended
For the Twelve Months
Ended
December 31,
December 31,
2019
2018
2019
2018
Net cash provided by operating
activities
$
58.7
$
55.9
$
54.5
$
66.3
Less: capital expenditures
9.7
14.3
44.8
37.1
Free Cash Flow
$
49.0
$
41.6
$
9.7
$
29.2
Donnelley Financial Solutions,
Inc. and Subsidiaries (“DFIN”)
Reconciliation of Reported to
Organic Net Sales
(UNAUDITED)
(in millions)
U.S.
Capital Markets
Investment Markets
Language Solutions
Total U.S.
International
Consolidated
Reported Net
Sales:
For the Three Months Ended
December 31, 2019
$
85.9
$
75.8
$
—
$
161.7
$
28.6
$
190.3
For the Three Months Ended
December 31, 2018
91.4
79.3
—
170.7
29.6
200.3
Net sales change
(6.0
%)
(4.4
%)
---
%
(5.3
%)
(3.4
%)
(5.0
%)
Supplementary
Non-GAAP information:
Year-over-year impact of changes in
foreign exchange (FX) rates
—
%
—
%
—
%
—
%
(0.4
%)
(0.1
%)
Year-over-year impact of the eBrevia
acquisition
0.8
%
—
%
—
%
0.4
%
—
%
0.3
%
Net organic sales change
(6.8
%)
(4.4
%)
—
%
(5.7
%)
(3.0
%)
(5.2
%)
U.S.
Capital Markets
Investment Markets
Language Solutions
Total U.S.
International
Consolidated
Reported Net
Sales:
For the Twelve Months Ended
December 31, 2019
$
421.0
$
340.4
$
—
$
761.4
$
113.3
$
874.7
For the Twelve Months Ended
December 31, 2018
456.0
342.1
13.7
811.8
151.2
963.0
Net sales change
(7.7
%)
(0.5
%)
(100.0
%)
(6.2
%)
(25.1
%)
(9.2
%)
Supplementary
Non-GAAP information:
Year-over-year impact of changes in
foreign exchange (FX) rates
—
%
—
%
—
%
—
%
(2.0
%)
(0.4
%)
Year-over-year impact of the Language
Solutions disposition
—
%
—
%
(100.0
%)
(1.7
%)
(18.6
%)
(4.2
%)
Year-over-year impact of the eBrevia
acquisition
0.5
%
—
%
—
%
0.2
%
—
%
0.3
%
Net organic sales change
(8.2
%)
(0.5
%)
—
%
(4.7
%)
(4.5
%)
(4.9
%)
Donnelley Financial Solutions,
Inc. and Subsidiaries (“DFIN”)
Reconciliation of GAAP Net
Earnings (Loss) to Non-GAAP Adjusted EBITDA
(UNAUDITED)
(in millions)
For the Twelve
Months Ended
For the Three Months
Ended
December 31, 2019
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
GAAP net earnings (loss)
$
37.6
$
7.0
$
14.7
$
17.3
$
(1.4
)
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
13.6
4.9
2.8
3.8
2.1
Share-based compensation expense
8.9
1.2
2.6
3.6
1.5
Net loss on sale of Language Solutions
business
4.0
1.2
—
2.8
—
Pension settlement charges
3.9
3.9
—
—
—
Investor-related expenses
1.5
—
—
0.5
1.0
Acquisition-related expenses
0.1
—
0.1
—
—
Spin-off related transaction expenses
—
(0.4
)
—
—
0.4
Depreciation and amortization
49.6
12.8
12.7
12.0
12.1
Interest expense-net
38.1
11.5
8.6
9.1
8.9
Pension income and other income, net
(2.0
)
(0.4
)
(0.5
)
(0.5
)
(0.6
)
Income tax expense (benefit)
14.5
(2.0
)
9.3
7.5
(0.3
)
Total Non-GAAP adjustments
99.4
19.1
16.4
38.8
25.1
Non-GAAP adjusted EBITDA
$
137.0
$
26.1
$
31.1
$
56.1
$
23.7
Net sales
$
874.7
$
190.3
$
195.9
$
258.9
$
229.6
Non-GAAP adjusted EBITDA margin %
15.7
%
13.7
%
15.9
%
21.7
%
10.3
%
For the Twelve
Months Ended
For the Three Months
Ended
December 31, 2018
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
GAAP net earnings (loss)
$
73.6
$
(1.0
)
$
48.0
$
18.9
$
7.7
Adjustments
Gain on equity investment
(11.8
)
—
(11.8
)
—
—
Restructuring, impairment and other
charges-net
4.4
0.3
0.8
2.6
0.7
Share-based compensation expense
9.2
2.0
2.1
3.3
1.8
Net gain on sale of Language Solutions
business
(53.8
)
(0.3
)
(53.5
)
—
—
Investor-related expenses
0.5
0.5
—
—
—
Acquisition-related expenses
0.8
0.3
—
0.3
0.2
Gain on eBrevia investment
(1.8
)
(1.8
)
—
—
—
Spin-off related transaction expenses
20.1
0.2
3.7
8.4
7.8
Disposition-related expenses
6.8
0.3
4.5
1.5
0.5
Depreciation and amortization
45.8
12.7
11.6
11.1
10.4
Interest expense-net
36.7
9.5
8.4
9.8
9.0
Pension income and other income-net
(4.7
)
(0.9
)
(2.2
)
(0.8
)
(0.8
)
Income tax expense (benefit)
29.1
(2.4
)
19.7
8.3
3.5
Total Non-GAAP adjustments
81.3
20.4
(16.7
)
44.5
33.1
Non-GAAP adjusted EBITDA
$
154.9
$
19.4
$
31.3
$
63.4
$
40.8
Net sales
$
963.0
$
200.3
$
216.9
$
290.6
$
255.2
Non-GAAP adjusted EBITDA margin %
16.1
%
9.7
%
14.4
%
21.8
%
16.0
%
Donnelley Financial Solutions,
Inc. and Subsidiaries (“DFIN”)
Debt and Liquidity Summary
(UNAUDITED)
(in millions)
Total
Liquidity
December 31, 2019
December 31, 2018
Availability
Stated amount of the Revolving Facility
(1)
$
300.0
$
300.0
Less: availability reduction from
covenants
68.4
45.3
Amount available under the Revolving
Facility
231.6
254.7
Usage
Borrowings under the Revolving
Facility
—
—
Impact on availability related to
outstanding
letters of credit
—
—
Amount used under the Revolving
Facility
—
—
Availability under the Revolving
Facility
231.6
254.7
Cash (2)
17.2
47.3
Net Available Liquidity
$
248.8
$
302.0
Long-term debt
296.0
362.7
Non-GAAP adjusted EBITDA for the twelve
months ended December 31, 2019 and 2018
$
137.0
$
154.9
Non-GAAP Gross Leverage (defined as
total debt divided by non-GAAP adjusted EBITDA)
2.2
x
2.3
x
Non-GAAP Net Debt (defined as total debt
less cash)
$
278.8
$
315.4
Non-GAAP Net Leverage (defined as
non-GAAP Net Debt divided by non-GAAP adjusted EBITDA)
2.0
x
2.0
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 Company’s credit agreement. There
were no outstanding borrowings under the Revolving Facility as of
December 31, 2019. Based on the Company’s results of operations for
the twelve months ended December 31, 2019 and existing debt, the
Company would have had the ability to utilize an incremental $231.6
million of the $300.0 million Revolving Facility and not have been
in violation of the terms of the agreement.
(2)
Approximately 36% of cash as of
December 31, 2019 and 37% of cash as of December 31, 2018 was
located outside of the U.S. The Company repatriated excess cash at
its foreign subsidiaries to the U.S. during the twelve months ended
December 31, 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200226005193/en/
Investor Contact: Justin Ritchie Investor Relations
investors@dfinsolutions.com
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