Dun & Bradstreet(DNB) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Unaudited Q2 2023 financial statements reveal revenue growth, increased net loss, stable operating cash flow, and a slight decrease in total assets and liabilities Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) The statement shows increased revenue for both periods, but a decline in operating income and a significant widening of net loss attributable to the company | Financial Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $554.7M | $537.3M | $1,095.1M | $1,073.3M | | Operating Income | $16.5M | $29.7M | $24.4M | $46.1M | | Net Loss | ($18.8M) | $0.0M | ($51.6M) | ($29.8M) | | Net Loss Attributable to D&B | ($19.4M) | ($1.8M) | ($53.1M) | ($33.1M) | | Diluted Loss Per Share | ($0.04) | $0.00 | ($0.12) | ($0.08) | - Revenue increased for both the three and six-month periods ending June 30, 2023, compared to the same periods in 2022, while operating income declined, and net loss attributable to the company widened significantly[9] Condensed Consolidated Balance Sheets The balance sheet indicates a slight decrease in total assets and total liabilities from December 2022 to June 2023 | Balance Sheet Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $690.1M | $703.9M | | Total Assets | $9,267.2M | $9,471.9M | | Total Current Liabilities | $974.6M | $1,102.6M | | Long-term Debt | $3,613.0M | $3,552.2M | | Total Liabilities | $5,817.6M | $5,963.5M | | Total Stockholder Equity | $3,438.9M | $3,499.3M | - From December 31, 2022, to June 30, 2023, total assets decreased from $9.47 billion to $9.27 billion, and total liabilities decreased from $5.96 billion to $5.82 billion, primarily due to a reduction in 'Other accrued and current liabilities'[14] Condensed Consolidated Statements of Cash Flows Cash flow from operations remained stable, while cash used in financing activities increased due to dividend payments and non-controlling interest purchases | Cash Flow Activity (Six Months Ended June 30) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $214.6M | $216.5M | | Net cash used in investing activities | ($81.2M) | ($103.4M) | | Net cash used in financing activities | ($88.0M) | ($64.7M) | | Increase in cash and cash equivalents | $52.2M | $38.4M | - For the six months ended June 30, 2023, cash from operations was stable at $214.6 million, while cash used in financing activities increased, primarily due to dividend payments and the purchase of non-controlling interests[18] Notes to Condensed Consolidated Financial Statements The notes provide details on the company's operating segments, revenue recognition policies, debt structure, and derivative financial instruments - The company operates through two segments, North America and International, both providing Finance & Risk and Sales & Marketing solutions[27][31] Revenue Recognition (Six Months Ended June 30) | Revenue Recognition (Six Months Ended June 30) | 2023 | 2022 | | :--- | :--- | :--- | | Revenue recognized at a point in time | $443.4M | $423.1M | | Revenue recognized over time | $651.7M | $650.2M | | Total revenue recognized | $1,095.1M | $1,073.3M | - Total debt as of June 30, 2023, was $3.646 billion, a slight increase from year-end 2022, comprising term loans, a revolving facility, and senior unsecured notes[45] - The company uses interest rate and cross-currency swaps to manage risks, with the notional amount of interest rate swaps at $2.75 billion as of June 30, 2023[90][93][96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) Management reports Q2 2023 revenue growth of 3.2% (3.8% constant currency), but operating income declined and net loss widened, despite a 3.1% increase in Adjusted EBITDA with stable margins Business Overview Dun & Bradstreet is a global provider of business decisioning data and analytics, operating through two segments with a highly recurring revenue model - Dun & Bradstreet is a global provider of business decisioning data and analytics, offering Finance & Risk and Sales & Marketing solutions[138] - The company operates through two segments: North America (United States and Canada) and International (including U.K., Europe, Greater China, India, and Worldwide Network alliances)[144] - The business model features highly recurring, diversified revenue, significant operating leverage, low capital requirements, and strong free cash flow[142] Results of Operations Q2 2023 saw revenue growth across segments, but operating income declined and net loss widened, despite an increase in Adjusted EBITDA Revenue Performance (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | Change | Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $554.7M | $537.3M | +3.2% | +3.8% | | North America Revenue | $391.6M | $381.3M | +2.7% | +2.8% | | International Revenue | $163.1M | $156.0M | +4.6% | +6.2% | - For Q2 2023, total organic revenue increased by 3.9% after excluding divestiture and foreign exchange impacts[175] - Operating income for Q2 2023 decreased by 44.5% to $16.5 million, primarily due to a 12.9% increase in Cost of Services driven by higher data acquisition and processing costs[191][192][201] Adjusted EBITDA Performance (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $206.2M | $200.0M | +3.1% | | Adjusted EBITDA Margin | 37.2% | 37.2% | 0 bps | - Net loss attributable to the company widened to $19.4 million in Q2 2023, driven by lower operating income and a $13.4 million increase in net interest expense[213][221] Liquidity and Capital Resources The company maintains sufficient liquidity through operating cash flow and credit facilities, with total debt at approximately $3.7 billion as of June 30, 2023 - Primary liquidity sources include cash from operations, cash on hand, and credit facility borrowings, which the company believes are sufficient to meet short-term needs for at least the next twelve months[225][226] Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $214.6M | $216.5M | | Net cash used in investing activities | ($81.2M) | ($103.4M) | | Net cash used in financing activities | ($88.0M) | ($64.7M) | - As of June 30, 2023, the company held cash and cash equivalents of $260.6 million, with the majority held by foreign operations[228] - Total debt stood at approximately $3.7 billion as of June 30, 2023, with interest rate risk actively managed through swaps[237][227] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks, including currency exchange rates, investment values, and interest rates, have not materially changed since year-end 2022 - The company's main market risks pertain to currency exchange rates, investment market values, and interest rates[240] - No material changes to market risks were reported as of June 30, 2023, compared to the year-end 2022 report[240] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023[245] - There were no changes during the quarter ended June 30, 2023, that materially affected internal control over financial reporting[246] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various ordinary course legal and regulatory matters, including two right of publicity class action lawsuits for which no loss is currently probable or estimable - The company is involved in ordinary course litigation, including class action lawsuits and regulatory investigations[64] - Two class action lawsuits, DeBose v. Dun & Bradstreet and Batis v. Dun & Bradstreet, allege misuse of names on the Hoovers website, for which the company has not established a financial reserve[69][71][72] Item 1A. Risk Factors The company faces risks from governmental regulations, including an FTC consent order and inquiry, and the evolving landscape of stringent data privacy laws, leading to compliance challenges and increased operational burdens - The company is subject to a 20-year consent order with the U.S. Federal Trade Commission (FTC) finalized in April 2022, requiring specific compliance practices[250] - An FTC study of the small business credit reporting industry, initiated in March 2023, could lead to new rulemaking or actions impacting the business[251] - The company faces risks from a growing number of U.S. state privacy laws and international regulations, which are becoming more stringent and create significant compliance expenses and operational burdens[249][252] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - No unregistered sales of equity securities or use of proceeds were reported[254] Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - No defaults upon senior securities were reported[254] Item 5. Other Information No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2023 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in the second quarter of 2023[255]