Dun & Bradstreet(DNB) - 2022 Q2 - Quarterly Report

FORM 10-Q This document is a quarterly report filed by Dun & Bradstreet Holdings, Inc. with the SEC, providing unaudited financial information and disclosures PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including the statements of operations, balance sheets, cash flows, and stockholder equity, along with comprehensive notes providing detailed disclosures and explanations for the reported figures Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) (Unaudited) This statement details the company's revenues, operating income, net income, and comprehensive income for the specified periods | Metric | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | |:----------------------------------------------------------|:--------------------------------------|:--------------------------------------|:------------------------------------|:------------------------------------| | Revenue | 537.3 | 520.9 | 1,073.3 | 1,025.4 | | Operating income (loss) | 29.7 | 26.9 | 46.1 | 35.2 | | Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. | (1.8) | (51.7) | (33.1) | (76.7) | | Basic earnings (loss) per share | — | (0.12) | (0.08) | (0.18) | | Diluted earnings (loss) per share | — | (0.12) | (0.08) | (0.18) | | Comprehensive income (loss) attributable to Dun & Bradstreet Holdings, Inc. | (76.2) | (36.8) | (120.3) | (109.6) | Condensed Consolidated Balance Sheets (Unaudited) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | June 30, 2022 ($M) | December 31, 2021 ($M) | |:----------------------------|:-------------------|:-----------------------| | Total current assets | 748.1 | 718.0 | | Total non-current assets | 8,948.5 | 9,279.2 | | Total assets | 9,696.6 | 9,997.2 | | Total current liabilities | 948.0 | 1,004.9 | | Total liabilities | 6,050.9 | 6,251.9 | | Total stockholder equity | 3,582.1 | 3,681.2 | | Total equity | 3,645.7 | 3,745.3 | | Total liabilities and stockholder equity | 9,696.6 | 9,997.2 | Condensed Consolidated Statements of Cash Flows (Unaudited) This statement reports the cash inflows and outflows from operating, investing, and financing activities | Metric | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | |:------------------------------------------------|:------------------------------------|:------------------------------------| | Net cash provided by (used in) operating activities | 216.5 | 292.5 | | Net cash provided by (used in) investing activities | (103.4) | (749.0) | | Net cash provided by (used in) financing activities | (64.7) | 281.4 | | Effect of exchange rate changes on cash and cash equivalents | (10.0) | 0.4 | | Increase (decrease) in cash, cash equivalents and restricted cash | 38.4 | (174.7) | | Cash, Cash Equivalents and Restricted Cash, End of Period | 215.5 | 177.6 | Condensed Consolidated Statements of Stockholder Equity (Unaudited) This statement details changes in the company's equity accounts over the reporting period | Metric | Balance, January 1, 2022 ($M) | Balance, June 30, 2022 ($M) | |:----------------------------------------|:------------------------------|:----------------------------|\n| Capital surplus | 4,500.4 | 4,521.6 | | Accumulated deficit | (761.8) | (794.9) | | Accumulated other comprehensive loss | (57.1) | (144.3) | | Total stockholder equity | 3,681.2 | 3,582.1 | Notes to Condensed Consolidated Financial Statements (Unaudited) These notes provide detailed disclosures and explanations for the figures presented in the condensed consolidated financial statements Note 1 -- Basis of Presentation The company's unaudited condensed consolidated financial statements are prepared in conformity with GAAP and reflect management's estimates. The business is managed and reported through two segments: North America (US and Canada) and International (UK, Nordics, DACH, CEE, Greater China, India, and WWN alliances). Global events like COVID-19 and the Russia/Ukraine conflict introduce uncertainty to financial estimates - The company operates through two primary segments: North America (US and Canada) and International (UK, Nordics, DACH, CEE, Greater China, India, and WWN alliances)[18] - Ongoing global events, including the COVID-19 pandemic and the Russia/Ukraine conflict, continue to cause economic disruption and volatility, impacting management's estimates and assumptions[18] Note 2 -- Recent Accounting Pronouncements The company early adopted ASU No. 2021-08 in Q4 2021, which changed the accounting for contract assets and liabilities in business combinations. It is also monitoring ASU No. 2020-04 and 2021-01 regarding the transition from LIBOR to alternative reference rates, with a proposed extension of the transition date to December 31, 2024 - The company early adopted ASU No. 2021-08 in Q4 2021, requiring contract assets and liabilities in business combinations to be recognized and measured based on Topic 606 guidance, rather than fair value[20][22] - The company may apply temporary optional expedients for contract modifications and hedge accounting related to the LIBOR transition (ASU No. 2020-04 and 2021-01) through December 31, 2022, with a proposed extension to December 31, 2024[23] Note 3 -- Revenue The company's future revenue from unsatisfied performance obligations totals $2,832.2 million as of June 30, 2022. Revenue is recognized both at a point in time and over time, with the latter accounting for the majority. Deferred revenue increased by $15.3 million from December 31, 2021, to June 30, 2022, primarily due to advance payments | Metric | Amount ($M) | |:----------------------------------------|:------------| | Future revenue (Total) | 2,832.2 | | - Remainder of 2022 | 768.0 | | - 2023 | 815.4 | | - 2024 | 463.1 | | - 2025 | 223.5 | | - 2026 | 149.3 | | - Thereafter | 412.9 | | Revenue Recognition Timing | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | |:---------------------------|:--------------------------------------|:--------------------------------------|:------------------------------------|:------------------------------------| | At a point in time | 214.3 | 212.5 | 423.1 | 417.5 | | Over time | 323.0 | 308.4 | 650.2 | 607.9 | | Total revenue recognized | 537.3 | 520.9 | 1,073.3 | 1,025.4 | - Deferred revenue increased by $15.3 million from December 31, 2021, to June 30, 2022, primarily due to cash payments received in advance of satisfying performance obligations[28] Note 4 -- Restructuring Charges Restructuring charges, primarily for employee severance and contract terminations, decreased significantly in 2022 compared to 2021. For the three months ended June 30, 2022, charges were $2.4 million (down from $10.1 million in 2021), and for the six months, they were $7.7 million (down from $15.9 million in 2021) | Restructuring Charges ($M) | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:---------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Total charges | 2.4 | 10.1 | 7.7 | 15.9 | | Severance costs | 1.9 | 8.0 | 4.4 | 12.7 | | Contract termination & other exit costs | 0.5 | 2.1 | 3.3 | 3.2 | | Restructuring Reserves ($M) | Balance as of Dec 31, 2021 | Balance as of Mar 31, 2022 | Balance as of June 30, 2022 | |:----------------------------|:---------------------------|:---------------------------|:----------------------------| | Severance and termination | 4.7 | 3.8 | 3.0 | | Contract termination & other costs | 3.3 | 3.3 | 2.7 | | Total | 8.0 | 7.1 | 5.7 | Note 5 -- Notes Payable and Indebtedness The company's total debt decreased slightly to $3,712.5 million as of June 30, 2022, from $3,744.8 million at December 31, 2021. This change reflects a January 2022 debt refinancing where $460 million in Incremental Term Loans (2029 Term Loan) were established to redeem $420 million of 6.875% Senior Secured Notes, resulting in a $23.0 million loss on debt extinguishment | Debt Category ($M) | June 30, 2022 (Carrying Value) | December 31, 2021 (Carrying Value) | |:-------------------|:-------------------------------|:-----------------------------------| | Total short-term debt | 32.7 | 28.1 | | Total long-term debt | 3,679.8 | 3,716.7 | | Total debt | 3,712.5 | 3,744.8 | - On January 18, 2022, the company established $460 million in Incremental Term Loans (2029 Term Loan) to redeem $420 million of 6.875% Senior Secured Notes due 2026, incurring a $23.0 million loss on debt extinguishment[42] - The 2029 Term Loan bears interest at SOFR + 325 basis points (4.747% at June 30, 2022), while the 2026 Term Loan bears interest at LIBOR + 325 basis points (4.874% at June 30, 2022)[46][47] - The Revolving Facility has $755 million available at June 30, 2022, with an interest rate of 4.592%[48] Note 6 -- Other Assets and Liabilities This note details the composition of other non-current assets, other accrued and current liabilities, and other non-current liabilities. Key changes include a decrease in right-of-use assets and long-term lease liabilities, and a reduction in accrued interest expense | Other Non-Current Assets ($M) | June 30, 2022 | December 31, 2021 | |:------------------------------|:--------------|:------------------| | Right of use assets | 57.8 | 71.9 | | Prepaid pension assets | 37.8 | 36.6 | | Investments | 26.5 | 27.2 | | Other various | 36.2 | 36.9 | | Total | 158.3 | 172.6 | | Other Accrued and Current Liabilities ($M) | June 30, 2022 | December 31, 2021 | |:-------------------------------------------|:--------------|:------------------| | Accrued operating costs | 112.0 | 110.4 | | Accrued interest expense | 2.9 | 12.6 | | Short-term lease liability | 21.7 | 26.0 | | Accrued income tax | 5.9 | 16.4 | | Other various | 44.0 | 32.9 | | Total | 186.5 | 198.3 | | Other Non-Current Liabilities ($M) | June 30, 2022 | December 31, 2021 | |:-----------------------------------|:--------------|:------------------| | Deferred revenue - long term | 15.7 | 13.7 | | U.S. tax liability associated with the 2017 Act | 39.3 | 44.6 | | Long-term lease liability | 47.1 | 59.4 | | Liabilities for unrecognized tax benefits | 18.8 | 19.2 | | Other various | 11.5 | 7.8 | | Total | 132.4 | 144.7 | Note 7 -- Contingencies The company is involved in various legal and regulatory matters, including an FTC investigation that resulted in a consent order and refund checks, and two right of publicity class actions (DeBose v. Dun & Bradstreet Holdings, Inc. and Batis v. Dun & Bradstreet Holdings, Inc.). While some matters could be material, the ultimate resolution of currently pending legal proceedings is not expected to have a material adverse effect on financial condition - The FTC investigation concluded with a consent agreement, leading to the company sending notices and refund checks to eligible customers by May 27, 2022[61] - Two class action lawsuits, DeBose v. Dun & Bradstreet Holdings, Inc. and Batis v. Dun & Bradstreet Holdings, Inc., allege unauthorized use of names and personas for product promotion, with motions to dismiss filed by the company[63][65] - Management does not believe the ultimate resolution of currently pending legal proceedings will have a material adverse effect on the company's financial condition[58] Note 8 -- Income Taxes The effective tax rate for the three months ended June 30, 2022, was 16.7% (tax benefit of $0.1 million on a pre-tax loss of $0.7 million), a significant change from (509.1)% in the prior year. For the six months, the rate was 23.3% (tax benefit of $9.4 million on a pre-tax loss of $40.5 million), compared to (78.8)% in the prior year. These changes were primarily due to an increase in net deferred tax liabilities from a state tax apportionment change and an enacted tax rate change in the U.K | Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:-------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Effective tax rate | 16.7% | (509.1)% | 23.3% | (78.8)% | | Tax benefit (provision) | $0.1M | $(43.0)M | $9.4M | $(33.2)M | - The change in effective tax rate was primarily due to an increase in net deferred tax liabilities resulting from a state tax apportionment change related to a new corporate headquarters building in Florida and an enacted tax rate change in the U.K[68][69] Note 9 -- Pension and Postretirement Benefits The net periodic pension cost (income) for the three months ended June 30, 2022, was an income of $(10.2) million, compared to $(12.2) million in the prior year. For the six months, it was an income of $(20.6) million, compared to $(24.3) million in the prior year | Components of net periodic cost (income) ($M) | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:----------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Service cost | 0.8 | 1.3 | 1.6 | 2.6 | | Interest cost | 8.8 | 6.9 | 17.6 | 13.7 | | Expected return on plan assets | (19.8) | (20.9) | (39.8) | (41.7) | | Amortization of prior service cost (credit) | — | — | — | — | | Amortization of actuarial loss (gain) | — | 0.5 | — | 1.1 | | Net periodic cost (income) | (10.2) | (12.2) | (20.6) | (24.3) | Note 10 -- Stock Based Compensation Total stock-based compensation expense increased to $15.3 million for the three months ended June 30, 2022 (from $7.1 million in 2021) and to $26.0 million for the six months (from $14.7 million in 2021), primarily due to 2022 annual grants and accelerated share expense. Unrecognized compensation expense totals $78.1 million as of June 30, 2022, with a weighted-average amortization period of 2.2 years | Stock-based compensation expense ($M) | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:--------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Restricted stock and RSUs | 14.6 | 4.5 | 22.0 | 7.6 | | Stock options | 0.6 | (0.4) | 1.6 | 1.1 | | Incentive units | 0.1 | 3.0 | 2.4 | 6.0 | | Total compensation expense | 15.3 | 7.1 | 26.0 | 14.7 | - Unrecognized equity-based compensation cost as of June 30, 2022, is $78.1 million, with a weighted-average amortization period of 2.2 years[75] - ESPP expense was approximately $1 million for the three months and $2 million for the six months ended June 30, 2022[76] Note 11 -- Earnings (Loss) Per Share Basic and diluted earnings (loss) per share were $(0.00) for the three months ended June 30, 2022, and $(0.08) for the six months ended June 30, 2022. The weighted-average number of shares outstanding remained relatively stable | Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:----------------------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. | $(1.8)M | $(51.7)M | $(33.1)M | $(76.7)M | | Basic earnings (loss) per share | — | (0.12) | (0.08) | (0.18) | | Diluted earnings (loss) per share | — | (0.12) | (0.08) | (0.18) | | Weighted average number of shares outstanding-basic | 429,137,384 | 428,884,721 | 428,959,588 | 428,695,323 | | Weighted average number of shares outstanding-diluted | 429,137,384 | 428,884,721 | 428,959,588 | 428,695,323 | Note 12 -- Financial Instruments The company uses derivative financial instruments, including interest rate swaps and cross-currency interest rate swaps, to manage exposure to interest rate and foreign currency fluctuations, not for speculative purposes. As of June 30, 2022, the notional amount of interest rate swaps was $1.25 billion, and new cross-currency swaps with a notional amount of $375 million were entered into in April 2022 to hedge net investments in foreign subsidiaries - The company uses interest rate swaps to manage interest rate exposure on outstanding debt, with a notional amount of $1.25 billion at June 30, 2022, up from $1 billion at December 31, 2021[87] - In April 2022, the company entered into cross-currency interest rate swaps with an aggregate notional amount of $375 million, designated as net investment hedges, to protect foreign investments against exchange rate changes[51][94] | Derivative Instrument ($M) | June 30, 2022 (Fair Value) | December 31, 2021 (Fair Value) | |:---------------------------|:---------------------------|:-------------------------------| | Interest rate Swaps (Asset) | 52.4 | 10.1 | | Cross-currency swaps (Asset) | 1.7 | — | | Foreign exchange forwards (Asset) | 0.6 | 1.9 | | Foreign exchange forwards (Liability) | 2.3 | 0.7 | Note 13 -- Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive loss (AOCI) increased from $(57.1) million at January 1, 2022, to $(144.3) million at June 30, 2022. This change was primarily driven by foreign currency translation adjustments and cash flow hedge derivatives, partially offset by net investment hedge derivatives | AOCI Component ($M) | Balance, January 1, 2022 | Balance, June 30, 2022 | |:--------------------|:-------------------------|:-----------------------| | Foreign currency translation adjustments | (52.6) | (176.0) | | Net investment hedge derivative | — | 5.5 | | Defined benefit pension plans | (11.9) | (12.1) | | Cash flow hedge derivative | 7.4 | 38.3 | | Total | (57.1) | (144.3) | Note 14 -- Acquisitions In 2021, the company acquired Eyeota for $172.4 million and NetWise for $69.8 million, both accounted for as purchase transactions and allocated to the North America segment. The acquisition of Bisnode for $805.8 million in January 2021, allocated to the International segment, has finalized its purchase accounting. Pro forma financial information is provided assuming these acquisitions occurred on January 1, 2020 - In November 2021, the company acquired Eyeota Holdings Pte Ltd for $172.4 million in cash, allocating goodwill and intangible assets to its North America segment[109][110] - In November 2021, the company acquired NetWise Data, LLC for $69.8 million, funded by cash on hand, also allocating goodwill and intangible assets to its North America segment[116][117] - The January 2021 acquisition of Bisnode Business Information Group AB for $805.8 million (cash and common stock) has finalized its purchase accounting and is included in the International segment[124][125] | Pro Forma Financial Information ($M) | Three months ended June 30, 2021 | Six months ended June 30, 2021 | |:-------------------------------------|:---------------------------------|:-------------------------------| | Total pro forma revenue | 532.6 | 1,051.0 | | Pro forma net income (loss) attributable to Dun & Bradstreet Holdings, Inc. | (53.9) | (77.2) | Note 15 -- Goodwill and Intangible Assets Goodwill decreased to $3,437.1 million at June 30, 2022, from $3,493.3 million at January 1, 2022, primarily due to foreign currency fluctuations. Other intangible assets also decreased to $4,541.7 million from $4,824.5 million over the same period, mainly due to amortization and foreign currency impacts | Asset Category ($M) | January 1, 2022 | June 30, 2022 | |:--------------------|:----------------|:--------------| | Computer software | 557.4 | 578.9 | | Goodwill | 3,493.3 | 3,437.1 | | Other Intangibles ($M) | January 1, 2022 | June 30, 2022 | |:-----------------------|:----------------|:--------------| | Customer relationships | 1,793.3 | 1,657.4 | | Reacquired rights | 284.7 | 251.3 | | Database | 1,285.1 | 1,186.8 | | Other indefinite-lived intangibles | 1,280.0 | 1,280.0 | | Other intangibles | 181.4 | 166.2 | | Total | 4,824.5 | 4,541.7 | - Changes in computer software, goodwill, and other intangibles were primarily due to foreign currency fluctuations, acquisitions (Eyeota and NetWise), and amortization[132] Note 16 -- Segment Information The company reports financial results through North America and International segments. North America revenue increased by 6.7% for the three months and 7.5% for the six months ended June 30, 2022, while International revenue decreased by 4.7% and 2.7% respectively, largely due to foreign exchange impacts. Adjusted EBITDA for North America decreased, while International improved | Revenue ($M) | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:-------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | North America | 381.3 | 357.2 | 748.6 | 696.6 | | International | 156.0 | 163.7 | 324.7 | 333.6 | | Consolidated total | 537.3 | 520.9 | 1,073.3 | 1,025.4 | | Adjusted EBITDA ($M) | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:---------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | North America | 161.4 | 167.4 | 314.7 | 318.5 | | International | 46.5 | 42.6 | 101.6 | 94.1 | | Corporate and other | (7.9) | (11.7) | (26.2) | (28.6) | | Consolidated total | 200.0 | 198.3 | 390.1 | 384.0 | | Customer Solution Set Revenue ($M) | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:-----------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Finance & Risk | 311.4 | 303.8 | 622.6 | 599.3 | | Sales & Marketing | 225.9 | 217.1 | 450.7 | 426.1 | | Total Revenue | 537.3 | 520.9 | 1,073.3 | 1,025.4 | Note 17 -- Related Parties The company has significant related party relationships with the Investor Consortium (Bilcar, THL, Cannae Holdings, Black Knight, CC Capital) who exert voting influence. Key executives hold dual roles. The company has agreements with Black Knight and Paysafe for data licensing, products, and services, generating revenue and incurring expenses - The Investor Consortium (Bilcar, THL, Cannae Holdings, Black Knight, CC Capital) continues to exercise significant voting influence over the company[145] - The company has a five-year agreement with Black Knight, expecting $24 million in data license fees and incurring $34 million for products and services[147] - For the three and six months ended June 30, 2022, revenue from Black Knight was $3.3 million and operating expenses were $0.5 million and $1.0 million, respectively[147] - A 10-year agreement with Paysafe provides data license and risk management solutions, recognizing revenue of $1.5 million and $2.4 million for the three and six months ended June 30, 2022, respectively[147] Note 18 -- Subsequent Event On July 28, 2022, the Board of Directors declared a quarterly cash dividend of $0.05 per share of common stock, payable on September 22, 2022, to shareholders of record as of September 1, 2022 - A quarterly cash dividend of $0.05 per share was declared on July 28, 2022, payable on September 22, 2022[148] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2022. It covers business overview, recent developments, key components of results, key performance metrics, and a detailed analysis of operating results and liquidity, highlighting impacts from acquisitions, foreign exchange, and global economic conditions Business Overview Dun & Bradstreet is a leading global provider of business decisioning data and analytics, aiming to deliver a global network of trust. Its core solutions, Finance & Risk and Sales & Marketing, are embedded in client workflows to inform critical business decisions. The company serves over 200,000 clients globally, with a strong presence in North America and growing international markets, underpinned by a highly recurring revenue model and strong operating leverage - Dun & Bradstreet is a global leader in business decisioning data and analytics, providing Finance & Risk and Sales & Marketing solutions[153][154][156] - The company serves over 200,000 clients globally across various industries and geographies, with a strong presence in North America and expanding international markets[157] - The business model is characterized by highly recurring, diversified revenue, significant operating leverage, low capital requirements, and strong free cash flow, leading to high client retention[158] Segments The company manages its business and reports financial results through two segments: North America, offering Finance & Risk and Sales & Marketing data in the US and Canada; and International, providing similar solutions directly in the U.K., Europe, Greater China, India, and indirectly through Worldwide Network alliances - The company's two reporting segments are North America (US and Canada) and International (UK, Europe, Greater China, India, and WWN alliances)[160] Recent Developments Recent developments include a debt refinancing in January 2022, the ongoing Russia/Ukraine conflict exacerbating global economic uncertainty and impacting foreign currency, and the continued monitoring of the COVID-19 pandemic's effects, though the company's distributed workforce model has maintained operations Debt Refinancing The company completed a debt refinancing in January 2022, establishing $460 million in Incremental Term Loans to redeem $420 million of Senior Secured Notes - On January 18, 2022, the company amended its credit agreement to establish $460 million in Incremental Term Loans, using the proceeds to redeem $420 million of 6.875% Senior Secured Notes due 2026[161] Russia/Ukraine Conflict and Current Economic Conditions The Russia/Ukraine conflict has intensified global economic uncertainty, impacting supply chains, inflation, and foreign currency exchange rates - The Russia/Ukraine conflict has exacerbated global economic uncertainty, potentially disrupting supply chains, broadening inflationary costs, and adversely affecting customers, vendors, and financial markets[162][163] - A strengthening U.S. dollar against currencies like the Euro and SEK has negatively impacted reported revenue from non-U.S. markets, which account for approximately 30% of total revenue[163] COVID-19 Update The COVID-19 pandemic continues to cause disruptions, but the company's distributed workforce model has maintained operations without significant impact - The COVID-19 pandemic continues to cause disruptions, but the company's distributed workforce model has successfully maintained operations without significant impact on productivity or financial performance[165][166] Recent Accounting Pronouncements This section refers to Note 2 for details on recent accounting pronouncements and their potential impact on financial reporting - Refer to Note 2 of the unaudited condensed consolidated financial statements for details on recent accounting pronouncements[167] Key Components of Results of Operations This section defines the primary revenue and expense categories used in the company's financial reporting, including subscription-based revenue from Finance & Risk and Sales & Marketing solutions, various operating costs, non-operating income/expense, and income tax provisions Revenue Revenue is primarily generated from subscription-based contracts for Finance & Risk and Sales & Marketing data, analytics, and services - Revenue is primarily generated through subscription-based contractual arrangements for Finance & Risk and Sales & Marketing data, analytics, and related services[168] - Finance & Risk solutions provide global information, monitoring, portfolio analysis, and support for supply chain risk management and compliance[169] - Sales & Marketing solutions offer analytics to optimize sales and marketing strategies, cleanse CRM data, and target high-probability prospects[170] Expenses Expenses include cost of services, selling and administrative costs, and depreciation and amortization related to assets and acquisitions - Cost of services includes data acquisition, royalty fees, database costs, service fulfillment, technology support, and personnel-related costs[171] - Selling and administrative expenses cover personnel costs for sales, administrative, and corporate management, professional services, advertising, and occupancy costs[173] - Depreciation and amortization expenses relate to property, plant, and equipment, as well as purchased and developed software and other intangible assets from acquisitions[174] Non-Operating Income and Expense Non-operating items encompass interest expense/income, costs from early debt repayments, dividends, divestiture gains/losses, and derivative mark-to-market adjustments - Non-operating income and expense includes interest expense/income, costs from early debt repayments, dividends, gains/losses from divestitures, and mark-to-market expense for derivatives[175] Provision for Income Tax Expense (Benefit) This provision accounts for international, U.S. federal, state, and local income taxes across various jurisdictions - Provision for income tax expenses (benefit) represents international, U.S. federal, state, and local income taxes based on income in multiple jurisdictions[176] Key Metrics This section defines the non-GAAP financial measures used by management to evaluate performance, including adjusted revenue, organic revenue, adjusted EBITDA, adjusted net income, and adjusted net earnings per diluted share, along with their respective adjustments and exclusions Adjusted Revenue Adjusted revenue includes a revenue adjustment for the Bisnode acquisition timing and isolates foreign exchange rate changes for period-over-period comparison - Adjusted revenue includes a revenue adjustment due to the timing of the Bisnode acquisition and isolates the effects of foreign exchange rate changes for period-over-period comparison[180] Organic Revenue Organic revenue is adjusted revenue before foreign exchange effects, excluding revenue from acquired businesses for the first twelve months and divested businesses - Organic revenue is defined as adjusted revenue before the effect of foreign exchange, excluding revenue from acquired businesses for the first twelve months and current/prior year revenue from divested businesses[181] Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA excludes various non-cash and non-recurring items, while Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by Adjusted Revenue - Adjusted EBITDA excludes depreciation, amortization, interest, income tax, other non-operating items, equity in affiliates, non-controlling interests, purchase accounting adjustments, equity-based compensation, restructuring charges, M&A costs, transition costs, legal expenses, and asset impairment[182] - Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by adjusted revenue[183] Adjusted Net Income Adjusted net income excludes incremental amortization, purchase accounting adjustments, equity-based compensation, restructuring, M&A, transition, legal, asset impairment, and debt refinancing costs - Adjusted net income excludes incremental amortization from purchase accounting, other purchase accounting adjustments, equity-based compensation, restructuring charges, M&A operating/non-operating costs, transition costs, legal expenses, asset impairment, debt refinancing/extinguishment costs, and the tax effect of non-GAAP adjustments and the CARES Act[185] Adjusted Net Earnings Per Diluted Share Adjusted net earnings per diluted share is calculated by dividing adjusted net income by the weighted average number of common shares outstanding, including dilutive stock awards - Adjusted net earnings per diluted share is calculated by dividing adjusted net income by the weighted average number of common shares outstanding, including the dilutive effect of stock incentive awards[186] Results of Operations This section provides a detailed analysis of the company's financial performance for the three and six months ended June 30, 2022, compared to the prior year. It covers GAAP results, revenue by segment and solution set, consolidated operating costs, adjusted EBITDA, interest income/expense, other income/expense, income taxes, and net income/loss, highlighting key drivers and impacts from acquisitions, divestitures, and foreign exchange GAAP Results This section presents the company's financial performance based on Generally Accepted Accounting Principles for the reported periods | Metric | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | |:----------------------------------------------------------|:--------------------------------------|:--------------------------------------|:------------------------------------|:------------------------------------| | Revenue | 537.3 | 520.9 | 1,073.3 | 1,025.4 | | Operating income (loss) | 29.7 | 26.9 | 46.1 | 35.2 | | Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. | (1.8) | (51.7) | (33.1) | (76.7) | | Basic earnings (loss) per share | — | (0.12) | (0.08) | (0.18) | | Diluted earnings (loss) per share | — | (0.12) | (0.08) | (0.18) | | Net income (loss) margin | (0.3)% | (9.9)% | (3.1)% | (7.5)% | Revenue Total revenue increased by 3.1% to $537.3 million for the three months and 4.7% to $1,073.3 million for the six months ended June 30, 2022, compared to the prior year. Organic revenue, excluding foreign exchange and acquisitions/divestitures, grew by 3.7% and 4.1% for the respective periods, driven by underlying business growth | Metric | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Change ($M) | Change (%) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | Change ($M) | Change (%) | |:----------------------------------------------------------|:--------------------------------------|:--------------------------------------|:------------|:-----------|:------------------------------------|:------------------------------------|:------------|:-----------| | Total Revenue | 537.3 | 520.9 | 16.4 | 3.1% | 1,073.3 | 1,025.4 | 47.9 | 4.7% | | Organic Revenue (before FX, acquisitions & divestitures) | 536.7 | 517.8 | 18.9 | 3.7% | 1,065.5 | 1,023.6 | 41.9 | 4.1% | North America Segment North America revenue increased by 6.7% to $381.3 million for the three months and 7.5% to $748.6 million for the six months ended June 30, 2022. Organic revenue growth was 2.8% and 3.6% respectively, driven by new business and higher customer spend in Finance & Risk, and acquisitions in Sales & Marketing | Metric | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Change ($M) | Change (%) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | Change ($M) | Change (%) | |:----------------------------------------------------------|:--------------------------------------|:--------------------------------------|:------------|:-----------|:------------------------------------|:------------------------------------|:------------|:-----------| | Total North America Revenue | 381.3 | 357.2 | 24.1 | 6.7% | 748.6 | 696.6 | 52.0 | 7.5% | | North America Organic Revenue (excl. acquisitions & FX) | N/A | N/A | 9.8 | 2.8% | N/A | N/A | 24.9 | 3.6% | Finance & Risk North America Finance & Risk revenue increased by 4.9% to $209.5 million for the three months and 5.5% to $411.7 million for the six months ended June 30, 2022, primarily due to new business and higher customer spend in Third Party Risk and Supply Chain Risk Management solutions, partially offset by lower government sector revenue | Metric | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Change ($M) | Change (%) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | Change ($M) | Change (%) | |:----------------------------|:--------------------------------------|:--------------------------------------|:------------|:-----------|:------------------------------------|:------------------------------------|:------------|:-----------| | North America Finance & Risk Revenue | 209.5 | 199.7 | 9.8 | 4.9% | 411.7 | 390.2 | 21.5 | 5.5% | - Growth was driven by new business and higher customer spend in Third Party Risk and Supply Chain Risk Management solutions, partially offset by lower revenue from the government sector[200][201] Sales & Marketing North America Sales & Marketing revenue increased by 9.1% to $171.8 million for the three months and 10.0% to $336.9 million for the six months ended June 30, 2022, primarily driven by the acquisitions of Eyeota and NetWise | Metric | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Change ($M) | Change (%) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | Change ($M) | Change (%) | |:----------------------------|:--------------------------------------|:--------------------------------------|:------------|:-----------|:------------------------------------|:------------------------------------|:------------|:-----------| | North America Sales & Marketing Revenue | 171.8 | 157.5 | 14.3 | 9.1% | 336.9 | 306.4 | 30.5 | 10.0% | - Revenue growth was primarily driven by the impact of the acquisitions of Eyeota and NetWise, contributing approximately $14 million for the three months and $26 million for the six months[203][204] International Segment International revenue decreased by 4.7% to $156.0 million for the three months and 2.7% to $324.7 million for the six months ended June 30, 2022, primarily due to negative foreign exchange impacts. Excluding these impacts and divestitures, organic revenue increased by 5.7% and 5.1% respectively | Metric | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Change ($M) | Change (%) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | Change ($M) | Change (%) | |:----------------------------------------------------------|:--------------------------------------|:--------------------------------------|:------------|:-----------|:------------------------------------|:------------------------------------|:------------|:-----------| | Total International Revenue | 156.0 | 163.7 | (7.7) | (4.7)% | 324.7 | 333.6 | (8.9) | (2.7)% | | International Organic Revenue (excl. FX & divestiture) | N/A | N/A | 9.1 | 5.7% | N/A | N/A | 16.8 | 5.1% | Finance & Risk International Finance & Risk revenue decreased by 2.1% to $101.9 million for the three months and 0.3% to $210.9 million for the six months ended June 30, 2022. Before the negative foreign exchange impact, revenue increased by 6.8% and 6.3% respectively, driven by growth across all markets, particularly Europe (API solutions), UK (D&B Credit), and WWN alliances | Metric | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Change ($M) | Change (%) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | Change ($M) | Change (%) | |:----------------------------|:--------------------------------------|:--------------------------------------|:------------|:-----------|:------------------------------------|:------------------------------------|:------------|:-----------| | International Finance & Risk Revenue | 101.9 | 104.1 | (2.2) | (2.1)% | 210.9 | 211.4 | (0.5) | (0.3)% | - Excluding foreign exchange impact, revenue increased by $7.0 million (6.8%) for the three months and $13.2 million (6.3%) for the six months, driven by API solution sales in Europe, D&B Credit growth in the UK, and higher cross-border data fees from WWN alliances[207][208] Sales & Marketing International Sales & Marketing revenue decreased by 9.3% to $54.1 million for the three months and 6.8% to $113.8 million for the six months ended June 30, 2022. Before foreign exchange impact, revenue increased by 1.9% and 1.7% respectively, driven by UK data sales and WWN product royalties, partially offset by a divested German business | Metric | Three months ended June 30, 2022 ($M) | Three months ended June 30, 2021 ($M) | Change ($M) | Change (%) | Six months ended June 30, 2022 ($M) | Six months ended June 30, 2021 ($M) | Change ($M) | Change (%) | |:----------------------------|:--------------------------------------|:--------------------------------------|:------------|:-----------|:------------------------------------|:------------------------------------|:------------|:-----------| | International Sales & Marketing Revenue | 54.1 | 59.6 | (5.5) | (9.3)% | 113.8 | 122.2 | (8.4) | (6.8)% | - Excluding foreign exchange impact, revenue increased by $1.2 million (1.9%) for the three months and $2.1 million (1.7%) for the six months, driven by UK data sales and WWN product royalties, partially offset by a divested business-to-consumer business in Germany[209][210] Consolidated Operating Costs Consolidated operating costs increased by 2.8% to $507.6 million for the three months and 3.7% to $1,027.2 million for the six months ended June 30, 2022. This was driven by higher cost of services and selling and administrative expenses, partially offset by decreases in depreciation and amortization and restructuring charges. Operating income improved by 10.2% and 30.8% for the respective periods | Operating Costs ($M) | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Change ($M) | Change (%) | Six months ended June 30, 2022 | Six months ended June 30, 2021 | Change ($M) | Change (%) | |:---------------------|:---------------------------------|:---------------------------------|:------------|:-----------|:-------------------------------|:-------------------------------|:------------|:-----------| | Cost of services (excl. D&A) | 181.6 | 167.3 | 14.3 | 8.5% | 358.3 | 328.2 | 30.1 | 9.2% | | Selling and administrative expenses | 176.6 | 164.3 | 12.3 | 7.5% | 364.8 | 344.1 | 20.7 | 6.0% | | Depreciation and amortization | 147.0 | 152.3 | (5.3) | (3.4)% | 296.4 | 302.0 | (5.6) | (1.8)% | | Restructuring charges | 2.4 | 10.1 | (7.7) | (76.5)% | 7.7 | 15.9 | (8.2) | (51.9)% |\n| Operating costs | 507.6 | 494.0 | 13.6 | 2.8% | 1,027.2 | 990.2 | 37.0 | 3.7% | | Operating income (loss) | 29.7 | 26.9 | 2.8 | 10.2% | 46.1 | 35.2 | 10.9 | 30.8% | Cost of Services (exclusive of depreciation and amortization) Cost of services increased by $14.3 million (8.5%) for the three months and $30.1 million (9.2%) for the six months ended June 30, 2022. This was primarily due to increased costs from acquisitions (Eyeota and NetWise) and higher data/data processing costs, partially offset by lower net personnel costs and favorable foreign exchange impacts - Three-month increase of $14.3 million (8.5%) driven by $10.3 million from acquisitions and higher data/data processing costs, partially offset by lower net personnel costs and favorable foreign exchange[213] - Six-month increase of $30.1 million (9.2%) driven by $18.4 million from acquisitions and higher data/data processing costs, partially offset by lower net personnel costs and favorable foreign exchange[214] Selling and Administrative Expenses Selling and administrative expenses increased by $12.3 million (7.5%) for the three months and $20.7 million (6.0%) for the six months ended June 30, 2022. This was mainly due to acquisitions and higher net personnel costs (retention, equity-based compensation), partially offset by lower office/occupancy costs and legal costs, and favorable foreign exchange impacts - Three-month increase of $12.3 million (7.5%) due to acquisitions ($4.7 million) and higher net personnel costs ($10 million), partially offset by lower office/occupancy costs and favorable foreign exchange ($8 million)[215] - Six-month increase of $20.7 million (6.0%) due to acquisitions ($8.5 million) and higher net personnel costs ($21 million), partially offset by lower legal costs ($11 million) and favorable foreign exchange ($11 million)[216] Depreciation and Amortization Depreciation and amortization expenses decreased by $5.3 million (3.4%) for the three months and $5.6 million (1.8%) for the six months ended June 30, 2022. This was primarily due to foreign exchange impacts and lower amortization of intangible assets from the Take-Private Transaction and Bisnode acquisition, partially offset by additional expense from Eyeota, NetWise acquisitions, and the new headquarters building - Three-month decrease of $5.3 million (3.4%) and six-month decrease of $5.6 million (1.8%) primarily due to foreign exchange and lower amortization of intangible assets from prior acquisitions, partially offset by new acquisitions and the headquarters building[217][219] Restructuring Charges Restructuring charges significantly decreased by $7.7 million (76.5%) for the three months and $8.2 million (51.9%) for the six months ended June 30, 2022, compared to the prior year. This reduction was primarily due to higher exit costs in the prior year related to initiatives in International businesses - Three-month restructuring charges decreased by $7.7 million (76.5%) and six-month charges decreased by $8.2 million (51.9%) due to higher exit costs in the prior year related to International business operational improvements[220][221] Operating Income (Loss) Consolidated operating income improved by $2.8 million (10.2%) to $29.7 million for the three months and $10.9 million (30.8%) to $46.1 million for the six months ended June 30, 2022. This improvement was driven by higher revenue from underlying business, partially offset by increased business costs and negative foreign exchange impacts - Three-month operating income improved by $2.8 million (10.2%) and six-month operating income improved by $10.9 million (30.8%), driven by higher underlying business revenue, partially offset by increased business costs and foreign exchange impacts[222][223] Adjusted EBITDA and adjusted EBITDA margin by segment Consolidated adjusted EBITDA increased by 0.8% for the three months a