Dun & Bradstreet(DNB) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2021, and comparative periods, including the impact of the Bisnode acquisition and a retrospective accounting change Note 3 -- Revenue As of March 31, 2021, the company had $2,357.8 million in future revenue allocated to unsatisfied performance obligations, with deferred revenue increasing by $155.0 million during the quarter Future Revenue from Unsatisfied Performance Obligations (as of March 31, 2021) | Period | Amount (in millions) | | :--- | :--- | | Remainder of 2021 | $1,003.3 | | 2022 | $583.7 | | 2023 | $315.6 | | 2024 | $125.7 | | 2025 | $94.1 | | Thereafter | $235.4 | | Total | $2,357.8 | - The deferred revenue balance increased by $155.0 million from December 31, 2020, to March 31, 2021, mainly due to advance cash payments and the Bisnode acquisition, offset by the recognition of $219.4 million in revenue that was previously deferred[26] Note 5 -- Notes Payable and Indebtedness As of March 31, 2021, total debt stood at $3,674.0 million with a carrying value of $3,576.1 million, following a term loan amendment and a $300 million incremental term loan draw for the Bisnode acquisition Total Debt Summary (as of March 31, 2021) | Debt Instrument | Principal Amount (in millions) | Carrying Value (in millions) | | :--- | :--- | :--- | | New Term Loan Facility | $2,804.0 | $2,727.9 | | 6.875% New Senior Secured Notes | $420.0 | $412.2 | | 10.250% New Senior Unsecured Notes | $450.0 | $436.0 | | Total Debt | $3,674.0 | $3,576.1 | - In January 2021, the company amended its credit agreement to reduce the applicable margin for the term loan facility by 0.50% to LIBOR plus 3.25%[44] - Proceeds from a $300 million Incremental Term Loan, established in November 2020, were drawn in January 2021 to help finance the acquisition of Bisnode[43] Note 14 -- Acquisitions On January 8, 2021, the company acquired Bisnode for $805.8 million, comprising $646.9 million in cash and $158.9 million in common stock, adding significant intangible assets and goodwill - The acquisition of Bisnode was completed on January 8, 2021, for a total consideration of $805.8 million, comprising $646.9 million in cash and 6,237,087 shares of common stock valued at $158.9 million[106] Bisnode Initial Purchase Price Allocation Highlights | Assets Acquired / Liabilities Assumed | Fair Value (in millions) | | :--- | :--- | | Intangible assets (Reacquired right) | $271.0 | | Intangible assets (Database) | $116.0 | | Intangible assets (Customer relationships) | $106.0 | | Goodwill | $488.4 | | Total assets acquired | $1,185.8 | | Total liabilities assumed | $380.0 | Note 16 -- Segment Information For Q1 2021, North America revenue was $339.4 million, while International revenue grew significantly to $169.9 million due to the Bisnode acquisition, contributing to a consolidated Adjusted EBITDA of $185.6 million Revenue by Segment (Q1 2021 vs Q1 2020) | Segment | Q1 2021 Revenue (in millions) | Q1 2020 Revenue (in millions) | | :--- | :--- | :--- | | North America | $339.4 | $341.5 | | International | $169.9 | $71.6 | | Corporate and other | $(4.8) | $(17.4) | | Consolidated total | $504.5 | $395.7 | Adjusted EBITDA by Segment (Q1 2021 vs Q1 2020) | Segment | Q1 2021 Adjusted EBITDA (in millions) | Q1 2020 Adjusted EBITDA (in millions) | | :--- | :--- | :--- | | North America | $151.0 | $144.5 | | International | $51.5 | $24.0 | | Corporate and other | $(16.9) | $(33.4) | | Consolidated total | $185.6 | $135.1 | Condensed Consolidated Statement of Operations (Q1 2021 vs Q1 2020) | Metric | Three months ended March 31, 2021 (in millions) | Three months ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Revenue | $504.5 | $395.7 | | Operating income (loss) | $8.3 | $(7.2) | | Net income (loss) attributable to Dun & Bradstreet | $(25.0) | $41.9 | | Diluted earnings (loss) per share | $(0.06) | $0.13 | Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2021 (in millions) | December 31, 2020 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $173.4 | $352.3 | | Goodwill | $3,318.2 | $2,857.9 | | Total assets | $9,924.9 | $9,220.3 | | Total long-term debt | $3,548.0 | $3,255.8 | | Total liabilities | $6,246.7 | $5,636.4 | | Total equity | $3,678.2 | $3,583.9 | Condensed Consolidated Statement of Cash Flows (Q1 2021 vs Q1 2020) | Cash Flow Activity | Three months ended March 31, 2021 (in millions) | Three months ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $168.2 | $5.1 | | Net cash used in investing activities | $(637.9) | $(34.0) | | Net cash provided by financing activities | $290.1 | $103.9 | - On January 8, 2021, the company acquired 100% ownership of Bisnode Business Information Group AB for a total purchase price of $805.8 million, with Bisnode's financial results included in the International segment since the acquisition date[16] - Effective January 1, 2021, the company eliminated the one-month reporting lag for its international subsidiaries, applying this accounting policy change retrospectively to all periods presented, resulting in recasted financial statements for 2020[17] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) Management discusses the company's Q1 2021 financial performance, highlighting a 28% increase in total revenue driven by the Bisnode acquisition, and a 37% growth in Adjusted EBITDA to $185.6 million Results of Operations In Q1 2021, the company reported an operating income of $8.3 million, an improvement from a prior-year loss, though net loss attributable to the company was $25.0 million due to non-recurring gains and tax benefits in Q1 2020, while Adjusted net income increased 98% to $97.8 million Revenue by Segment and Solution (Q1 2021 vs Q1 2020) | Segment / Solution | Q1 2021 Revenue (in millions) | Q1 2020 Revenue (in millions) | % Change | | :--- | :--- | :--- | :--- | | North America | $339.4 | $341.5 | (1)% | | - Finance & Risk | $190.5 | $192.8 | (1)% | | - Sales & Marketing | $148.9 | $148.7 | 0% | | International | $169.9 | $71.6 | 137% | | - Finance & Risk | $107.4 | $58.6 | 83% | | - Sales & Marketing | $62.5 | $13.0 | 382% | | Total Revenue | $504.5 | $395.7 | 28% | - Operating expenses increased 16% to $160.9 million, and selling and administrative expenses increased 44% to $179.8 million, both primarily due to costs from the newly acquired Bisnode business[210][211] - Interest expense decreased by $34.1 million (41%) due to lower interest rates from Term Loan repricing and a lower overall debt balance compared to the prior year[223] Liquidity and Capital Resources The company's primary liquidity sources are cash from operations and its revolving credit facility, with $173.4 million in cash and cash equivalents as of March 31, 2021, and the Bisnode acquisition funded by cash, stock, and a $300 million incremental term loan draw, supplemented by a $98.4 million CARES Act refund - As of March 31, 2021, the company held $173.4 million in cash and cash equivalents, with $161.7 million held by foreign operations[240] - The company utilized relief opportunities from the CARES Act, resulting in a net income tax cash benefit of approximately $98.4 million, of which $66.2 million was received in January 2021[239] - The company's credit ratings were upgraded by S&P, Moody's, and Fitch in mid-2020 following steps to reduce debt and leverage[235] - Total revenue for Q1 2021 increased by $108.8 million, or 28% (27% before foreign exchange effects), compared to Q1 2020, primarily driven by the net impact of the Bisnode acquisition, which contributed $87.7 million in net revenue[198] - Consolidated adjusted EBITDA for Q1 2021 increased by $50.5 million, or 37%, to $185.6 million, with the adjusted EBITDA margin improving by 240 basis points to 36.5%, largely due to the Bisnode acquisition and lower purchase accounting deferred revenue adjustments[218] - Operating cash flow increased significantly to $168.2 million in Q1 2021 from $5.1 million in Q1 2020, driven by a $66 million net tax refund from the CARES Act, lower interest payments, and lower bonus payments[243] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that there have been no material changes in the company's market risks since its last Annual Report on Form 10-K, with primary risks remaining related to currency exchange rates, investment market values, and interest rates on borrowings - As of March 31, 2021, no material change had occurred in the company's market risks compared to the disclosure in its Annual Report on Form 10-K filed on February 25, 2021[251] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, excluding the recently acquired Bisnode from the assessment of internal control over financial reporting - The CEO and CFO concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective at a reasonable assurance level[255] - Management excluded the recently acquired Bisnode from its assessment of internal control over financial reporting as of March 31, 2021[255] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 7 of the financial statements, detailing ongoing legal matters, including an FTC investigation into credit managing and monitoring products - Information regarding legal proceedings is incorporated by reference from Note 7 — Contingencies in Part I of the report[258] Item 1A. Risk Factors The company reports that there have been no material changes to its risk factors since the filing of its Annual Report on Form 10-K on February 25, 2021 - There have been no material changes in risk factors since the filing of the Annual Report on Form 10-K[259] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On January 8, 2021, the company issued 6,237,087 shares of common stock in a private placement, valued at $158.9 million, as partial consideration for the Bisnode acquisition - On January 8, 2021, the company issued 6,237,087 shares of common stock in a private placement to partially fund the acquisition of Bisnode, valued at $158.9 million[260] Other Items (Items 3, 4, 5, 6) This section confirms no defaults on senior securities, no applicable mine safety disclosures, and no other material information to report under Item 5, with Item 6 listing filed exhibits - The company reports no defaults on senior securities, no mine safety disclosures, and no other material information for the period[261]