Dun & Bradstreet(DNB) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's analysis of financial condition and 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 stockholders' equity, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items for the three months ended March 31, 2024 and 2023 Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) (Unaudited) This statement details revenues, operating costs, and net income (loss) for the three months ended March 31, 2024 and 2023 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Revenue | $564.5 | $540.4 | | Operating costs | $547.9 | $532.5 | | Operating income (loss) | $16.6 | $7.9 | | Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. | $(23.2) | $(33.7) | | Basic earnings (loss) per share | $(0.05) | $(0.08) | | Diluted earnings (loss) per share | $(0.05) | $(0.08) | Condensed Consolidated Balance Sheets (Unaudited) This statement presents the company's assets, liabilities, and equity as of March 31, 2024, and December 31, 2023 Condensed Consolidated Balance Sheets | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Total assets | $8,978.7 | $9,135.9 | | Total liabilities | $5,609.6 | $5,704.3 | | Total equity | $3,369.1 | $3,431.6 | | Cash and cash equivalents | $216.0 | $188.1 | | Accounts receivable, net | $170.0 | $258.0 | | Deferred revenue (current) | $622.5 | $590.0 | Condensed Consolidated Statements of Cash Flows (Unaudited) This statement outlines cash flows from operating, investing, and financing activities for the three months ended March 31, 2024 and 2023 Condensed Consolidated Statements of Cash Flows | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Net cash provided by operating activities | $158.9 | $155.7 | | Net cash used in investing activities | $(54.9) | $(39.6) | | Net cash used in financing activities | $(75.7) | $(122.2) | | Increase (decrease) in cash and cash equivalents | $27.9 | $(4.3) | | Cash and Cash Equivalents, End of Period | $216.0 | $204.1 | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) This statement details changes in total stockholders' equity, including net income (loss) and dividends, for Q1 2024 Changes in Total Stockholders' Equity | Metric | March 31, 2024 (in millions) | January 1, 2024 (in millions) | | :-------------------------------- | :----------------------------- | :---------------------------- | | Total stockholders' equity | $3,355.4 | $3,419.1 | | Net income (loss) | $(23.2) | $(811.1) (Accumulated deficit) | | Equity-based compensation plans | $7.6 | — | | Dividends declared | $(21.9) | — | Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1 -- Basis of Presentation This note outlines the preparation of the interim financial statements in accordance with GAAP, identifies the company's two reporting segments (North America and International), and details a reclassification of certain data royalty and project fulfillment costs from 'Selling and administrative expenses' to 'Cost of services' for enhanced transparency, with no impact on operating or net income - The Company manages its business and reports financial results through two segments: North America (Finance & Risk, Sales & Marketing in US and Canada) and International (Finance & Risk, Sales & Marketing in UK, Europe, Greater China, India, and WWN alliances)[22][26] - During Q1 2024, the Company reclassified $11.9 million (Q1 2023) and $30.8 million (FY 2023) of data royalty and project fulfillment costs from 'Selling and administrative expenses' to 'Cost of services', this reclassification had no impact on total operating costs, operating income, net income (loss), earnings (loss) per share, or segment results[24] Note 2 -- Recent Accounting Pronouncements This note discusses recently adopted and issued accounting pronouncements, the company completed the transition from LIBOR to SOFR in Q2 2023 with no financial impact, and new FASB ASUs on Segment Reporting (ASU 2023-07) and Income Taxes (ASU 2023-09) are not expected to materially impact the financial statements upon adoption - The transition of reference rate from LIBOR to SOFR was completed in Q2 2023 and did not result in a financial impact to the consolidated financial statements[27] - ASU No. 2023-07, 'Segment Reporting,' effective for fiscal years beginning after December 15, 2023, is not expected to have a material impact[28] - ASU No. 2023-09, 'Income Taxes,' effective for fiscal years beginning after December 15, 2024, is not expected to have a material impact[29] Note 3 -- Revenue This note details the company's revenue recognition, including future revenue from unsatisfied performance obligations, the timing of revenue recognition (point in time vs. over time), and changes in contract balances such as accounts receivable and deferred revenue, noting seasonal fluctuations Future Revenue from Unsatisfied Performance Obligations | Period | Amount (in millions) | | :----------- | :------------------- | | Remainder of 2024 | $1,124.5 | | 2025 | $781.0 | | 2026 | $498.3 | | 2027 | $220.9 | | 2028 | $156.6 | | Thereafter | $264.7 | | Total | $3,046.0 | Timing of Revenue Recognition | Timing | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Revenue recognized at a point in time | $214.5 | $215.6 | | Revenue recognized over time | $350.0 | $324.8 | | Total revenue recognized | $564.5 | $540.4 | - Accounts receivable, net, decreased by $88.0 million from December 31, 2023, to March 31, 2024, primarily due to seasonal fluctuation[33] - Deferred revenue increased by $39.1 million from December 31, 2023, to March 31, 2024, primarily due to cash payments received in advance of satisfying performance obligations[34] Note 4 -- Restructuring Charges This note details the restructuring charges incurred by the company, primarily consisting of employee severance costs and contract terminations, which decreased to $3.4 million in Q1 2024 from $4.2 million in Q1 2023 Restructuring Charges | Category | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Severance costs | $2.9 | $3.1 | | Contract termination and other exit costs | $0.5 | $1.1 | | Total restructuring charges | $3.4 | $4.2 | - Approximately 65 employees were impacted by severance costs in Q1 2024, with cash payments substantially completed by the end of Q3 2024[40] Note 5 -- Notes Payable and Indebtedness This note summarizes the company's borrowings, highlighting a significant debt refinancing in January 2024 where existing term loans were fully repaid using proceeds from a new $3,103.6 million 2029 Term Loan B, the Revolving Facility's maturity was also extended, and a $37.1 million loss on debt extinguishment was recorded Summary of Borrowings (Carrying Value) | Category | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :-------------------------- | :----------------------------- | :------------------------------ | | Total short-term debt | $31.0 | $32.7 | | Total long-term debt | $3,506.8 | $3,512.5 | | Total debt | $3,537.8 | $3,545.2 | - On January 29, 2024, the Company established a new $3,103.6 million 2029 Term Loan B, using proceeds to fully repay previously existing term loans (2026 Term Loan and 2029 Term Loan)[45] - A loss on debt extinguishment of $37.1 million was recorded for the three months ended March 31, 2024, related to unamortized debt issuance costs[45] - The Revolving Facility's maturity date was extended to February 15, 2029, and the applicable margin was reduced[45] Note 6 -- Accounts Receivable Securitization Facility This note describes the company's three-year revolving securitization facility, under which customer receivables are transferred to a third-party financial institution, the company derecognized $232.5 million in receivables in Q1 2024 and incurred $3.8 million in fees for the facility - The Company derecognized accounts receivable of $232.5 million for the three months ended March 31, 2024, compared to $256.6 million for the same period in 2023[55] - Fees incurred for the facility were $3.8 million for the three months ended March 31, 2024, an increase from $3.1 million in the prior year period[56] Note 7 -- Other Assets and Liabilities This note provides a detailed breakdown of other non-current assets, other accrued and current liabilities, and other non-current liabilities, showing changes between March 31, 2024, and December 31, 2023 Other Non-Current Assets | Category | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :------------------------------------------ | :----------------------------- | :------------------------------ | | Right of use assets | $48.6 | $43.1 | | Long-term contract assets | $21.1 | $18.0 | | Prepaid cloud computing fees and deferred implementation costs | $29.0 | $23.2 | | Total Other Non-Current Assets | $206.6 | $187.8 | Other Accrued and Current Liabilities | Category | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :-------------------------- | :----------------------------- | :------------------------------ | | Accrued operating costs | $96.4 | $94.3 | | Accrued interest expense | $10.8 | $5.3 | | Accrued income tax | $2.1 | $15.3 | | Other accrued liabilities | $48.9 | $66.2 | | Total Other Accrued and Current Liabilities | $172.5 | $196.1 | Other Non-Current Liabilities | Category | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :------------------------------------------ | :----------------------------- | :------------------------------ | | Deferred revenue - long term | $26.3 | $19.7 | | U.S. tax liability associated with the 2017 Act | $29.4 | $29.4 | | Long-term lease liability | $40.0 | $33.8 | | Liabilities for unrecognized tax benefits | $14.7 | $19.8 | | Total Other Non-Current Liabilities | $129.8 | $118.2 | Note 8 -- Contingencies This note addresses the company's involvement in various legal and regulatory matters, including class action lawsuits related to right of publicity, management believes the ultimate resolution of these matters will not have a material adverse effect on the financial condition, and no reserve has been established as a loss is not yet probable and estimable - The Company is involved in various pending and threatened litigation and regulatory matters, including class action lawsuits (DeBose v. Dun & Bradstreet Holdings, Inc. and Batis v. Dun & Bradstreet Holdings, Inc.) alleging right of publicity violations[62][67][69] - Management does not believe the ultimate resolution of currently pending legal proceedings will have a material adverse effect on the financial condition, and no reserve has been established as a loss is not both probable and reasonably estimable[65][68][70] Note 9 -- Income Taxes This note explains the company's effective tax rate, which was 66.0% for Q1 2024, reflecting a tax benefit of $44.2 million, the change from the prior year's 26.0% rate was primarily due to a decrease in uncertain tax positions and a reduction in GILTI inclusion, partially offset by the impact of the Pillar Two Global Minimum Tax Effective Tax Rate and Benefit | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Effective tax rate | 66.0% | 26.0% | | Tax benefit | $44.2 million | $11.8 million | - The change in the effective tax rate was primarily due to a decrease in uncertain tax positions from an audit settlement and a reduction to GILTI inclusion, partially offset by the impact of the BEPS - Pillar Two Global Minimum Tax[71] Note 10 -- Pension and Postretirement Benefits This note presents the components of net periodic cost (income) for the company's pension plans and postretirement benefit obligations for the three months ended March 31, 2024 and 2023 Net Periodic Pension Cost (Income) | Component | Pension plans (Q1 2024, in millions) | Pension plans (Q1 2023, in millions) | Postretirement benefit obligations (Q1 2024, in millions) | Postretirement benefit obligations (Q1 2023, in millions) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :-------------------------------------------------------- | :-------------------------------------------------------- | | Service cost | $0.4 | $0.4 | — | — | | Interest cost | $15.4 | $16.0 | — | — | | Expected return on plan assets | $(19.9) | $(19.9) | — | — | | Amortization of prior service cost (credit) | — | — | $(0.1) | $(0.1) | | Amortization of actuarial loss (gain) | $(0.3) | $(0.6) | — | — | | Net periodic cost (income) | $(4.4) | $(4.1) | $(0.1) | $(0.1) | Note 11 -- Stock Based Compensation This note details the stock-based compensation expense for restricted stock, restricted stock units, and stock options, along with their expected tax benefits, it also provides activity summaries for stock options and restricted stock/units, and information on the Employee Stock Purchase Plan Stock-Based Compensation Expense | Category | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Restricted stock and restricted stock units | $16.1 | $15.8 | | Stock options | $1.8 | $4.7 | | Total compensation expense | $17.9 | $20.5 | - As of March 31, 2024, total unrecognized compensation cost related to stock options was $5.4 million, expected to be recognized over a weighted average period of 1.3 years[76] - As of March 31, 2024, total unrecognized compensation cost related to non-vested restricted stock and restricted stock units was $88.2 million, expected to be recognized over a weighted average period of 2.2 years[78] Note 12 -- Earnings (Loss) Per Share This note provides the computation of basic and diluted earnings (loss) per share, a reconciliation of common stock issued and outstanding, and details on the quarterly cash dividend declared by the Board of Directors Earnings (Loss) Per Share | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. | $(23.2) million | $(33.7) million | | Basic earnings (loss) per share | $(0.05) | $(0.08) | | Diluted earnings (loss) per share | $(0.05) | $(0.08) | | Weighted average number of shares outstanding-basic | 431,555,922 | 429,584,681 | | Weighted average number of shares outstanding-diluted | 431,555,922 | 429,584,681 | - As of March 31, 2024, there were 442,735,803 common shares outstanding[83] - A quarterly cash dividend of $0.05 per share of common stock was declared on February 8, 2024, payable on March 21, 2024[84] Note 13 -- Financial Instruments This note details the company's management of global market risks, including foreign exchange and interest rate fluctuations, through the use of derivative instruments such as interest rate swaps, cross-currency interest rate swaps, and foreign exchange forward contracts, it also provides fair value measurements of these instruments - The Company uses interest rate swaps with an aggregate notional amount of $2,750 million (as of March 31, 2024) to manage the impact of interest rate changes on earnings, designated as cash flow hedges[93] - Cross-currency interest rate swaps with an aggregate notional amount of $625 million (as of March 31, 2024) are used to hedge a portion of net investments in foreign subsidiaries against foreign currency exchange rate changes, designated as net investment hedges[97][99] - Foreign exchange forward contracts with notional amounts of $523.9 million (as of March 31, 2024) are used to hedge intercompany balance positions and are not designated as hedging instruments[96] Fair Value of Derivative Instruments | Category | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :------------------------------------------ | :----------------------------- | :------------------------------ | | Asset derivatives | $51.5 | $41.1 | | Liability derivatives | $28.0 | $36.4 | Note 14 -- Accumulated Other Comprehensive Income (Loss) This note summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) (AOCI), including foreign currency translation adjustments, net investment hedge derivatives, defined benefit pension plans, and cash flow hedge derivatives Accumulated Other Comprehensive Income (Loss) (AOCI) | Component | Balance, January 1, 2024 (in millions) | Balance, March 31, 2024 (in millions) | | :-------------------------------- | :----------------------------------- | :---------------------------------- | | Foreign currency translation adjustments | $(142.5) | $(177.9) | | Net investment hedge derivative | $(10.5) | $(5.6) | | Defined benefit pension plans | $(62.2) | $(62.6) | | Cash flow hedge derivative | $16.5 | $21.2 | | Total | $(198.7) | $(224.9) | - Total reclassifications out of AOCI, net of tax, for the three months ended March 31, 2024, amounted to $(16.3) million[111] Note 15 -- Goodwill and Intangible Assets This note provides a summary of the changes in computer software, goodwill, and other intangible assets, including additions, amortization, and the impact of foreign currency fluctuations for the three months ended March 31, 2024 and 2023 Goodwill and Computer Software | Asset | January 1, 2024 (in millions) | March 31, 2024 (in millions) | | :---------------- | :---------------------------- | :--------------------------- | | Computer software | $666.3 | $671.4 | | Goodwill | $3,445.8 | $3,424.7 | Other Intangibles | Asset | January 1, 2024 (in millions) | March 31, 2024 (in millions) | | :-------------------- | :---------------------------- | :--------------------------- | | Customer relationships | $1,316.7 | $1,261.7 | | Reacquired rights | $233.9 | $222.8 | | Database | $940.6 | $900.5 | | Other indefinite-lived intangibles | $1,280.0 | $1,280.0 | | Other intangibles | $144.7 | $140.2 | | Total Other Intangibles | $3,915.9 | $3,805.2 | - Amortization for computer software was $40.7 million and for other intangibles was $99.0 million for the three months ended March 31, 2024[112][115] Note 16 -- Segment Information This note provides disaggregated financial information by the company's two segments (North America and International) and by solution set (Finance & Risk and Sales & Marketing), including revenue, Adjusted EBITDA, depreciation and amortization, capital expenditures, and assets Revenue by Segment | Segment | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | % Increase | | :-------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | North America | $386.6 | $374.7 | 3.2% | | International | $177.9 | $165.7 | 7.4% | | Consolidated total | $564.5 | $540.4 | 4.5% | Adjusted EBITDA by Segment | Segment | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | % Increase | | :-------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | North America | $152.1 | $150.5 | 1.0% | | International | $64.3 | $55.6 | 15.6% | | Corporate and other | $(15.1) | $(16.1) | 6.8% | | Consolidated total | $201.3 | $190.0 | 6.0% | Disaggregated Revenue by Solution | Solution | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | % Increase | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | Finance & Risk | $328.1 | $312.0 | 5.2% | | Sales & Marketing | $236.4 | $228.4 | 3.5% | | Total Revenue | $564.5 | $540.4 | 4.5% | Note 17 -- Related Parties This note discloses various transactions and agreements with related parties, including entities affiliated with Bilcar, THL, Cannae Holdings, and CC Capital, as well as Paysafe, these include lease agreements and data license/service agreements - The Company recognized an expense credit of $0.3 million (Q1 2024) and $0.1 million (Q1 2023) from a lease agreement with Paysafe for office space[129] - Revenue recognized from agreements with Paysafe for data license and risk management solutions was $2.1 million (Q1 2024) and $1.7 million (Q1 2023)[131] - A five-year agreement with Black Knight (entered June 2021) involved D&B receiving $24 million in data license fees and Black Knight providing $34 million in products and services[130] Note 18 -- Subsequent Events This note reports on significant events that occurred after the balance sheet date, including the Board of Directors declaring a quarterly cash dividend and authorizing a new three-year stock repurchase program - On April 30, 2024, the Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on June 20, 2024[132] - On April 30, 2024, the Board authorized a new three-year stock repurchase program (2024 Repurchase Program) to repurchase up to 10.0 million shares of common stock through April 30, 2027[133] 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 months ended March 31, 2024, it includes an overview of the business, recent developments, key components of results, and a detailed analysis of revenue, operating costs, and liquidity, along with reconciliations of non-GAAP financial measures Forward-Looking Statements This section highlights forward-looking statements subject to risks and uncertainties, with no obligation to update - The report contains forward-looking statements based on management's beliefs and assumptions, which are subject to risks and uncertainties, and actual results may differ materially from projections[134][135] - The Company undertakes no obligation to update any forward-looking statements[134] Business Overview This section provides an overview of Dun & Bradstreet as a global provider of business decisioning data and analytics, serving 240,000 clients - Dun & Bradstreet is a leading global provider of business decisioning data and analytics, aiming to deliver a global network of trust[137] - The Company offers Finance & Risk solutions (commercial credit, supply chain, compliance) and Sales & Marketing solutions (CRM data, sales optimization)[138][140] - As of December 31, 2023, the Company had approximately 240,000 global clients across various industries and geographies[141] Segments This section identifies the company's two operating segments: North America and International - The Company manages its business through two segments: North America (United States and Canada) and International (UK, Europe, Greater China, India, and Worldwide Network alliances)[144][118] Recent Developments This section highlights recent significant events, including debt refinancing, a new stock repurchase program, and macroeconomic impacts - On January 29, 2024, the Company completed a debt refinancing, establishing a new $3,103.6 million 2029 Term Loan B and extending the Revolving Facility's maturity to February 15, 2029[144] - On April 30, 2024, the Board of Directors authorized a new three-year stock repurchase program for up to 10.0 million shares[147] - The business is impacted by macroeconomic conditions, including foreign currency fluctuations (approximately 30% of revenues from non-U.S. markets), elevated interest rates, and geopolitical conflicts[148][149][151] Key Components of Results of Operations This section outlines primary revenue drivers and key expense categories, including Cost of Services and Selling and Administrative Expenses - Revenue is primarily generated through subscription-based contractual arrangements for Finance & Risk and Sales & Marketing solutions[153][154][155] - Key expense categories include Cost of Services (data acquisition, technology support), Selling and Administrative Expenses (personnel, professional services), Depreciation and Amortization (property, software, intangibles), Non-Operating Income and (Expense) - Net (interest, debt costs, derivatives), and Provision for Income Tax Expense (Benefit)[157][158][159][160][161] Key Metrics This section describes non-GAAP financial measures used to evaluate performance, including adjusted EBITDA and adjusted net income - The Company uses non-GAAP financial measures including organic revenue, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted net earnings per diluted share to evaluate performance[162] - Adjustments to GAAP results typically exclude acquisition/divestiture-related costs, restructuring charges, equity-based compensation, transition costs, debt refinancing costs, non-operating pension-related income/expenses, non-cash derivative gains/losses, and other non-recurring charges[165][166][170] Results of Operations This section provides a detailed analysis of the company's financial performance, including GAAP and non-GAAP results GAAP Results This section presents the company's GAAP financial results, including revenue, operating income, and net income (loss) for Q1 2024 vs Q1 2023 GAAP Financial Results (Q1 2024 vs. Q1 2023) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (in millions) | % Change | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :------------------- | :------- | | Revenue | $564.5 | $540.4 | $24.1 | 4.5% | | Operating income (loss) | $16.6 | $7.9 | $8.7 | 108.6% | | Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. | $(23.2) | $(33.7) | $10.5 | -31.2% | | Basic earnings (loss) per share | $(0.05) | $(0.08) | $0.03 | -37.5% | | Diluted earnings (loss) per share | $(0.05) | $(0.08) | $0.03 | -37.5% | Non-GAAP Reconciliations and Key Performance Measures This section provides key non-GAAP performance measures, including Adjusted EBITDA and Adjusted net income, for Q1 2024 vs Q1 2023 Non-GAAP Key Performance Measures (Q1 2024 vs. Q1 2023) | Metric | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | % Change | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :------- | | Adjusted EBITDA | $201.3 | $190.0 | 6.0% | | Adjusted EBITDA margin | 35.7% | 35.2% | +50 bps | | Adjusted net income | $85.0 | $80.5 | 5.6% | | Adjusted net earnings per diluted share | $0.20 | $0.19 | 5.3% | Revenue Analysis This section analyzes the company's revenue performance, detailing increases in total, North America, and International revenues - Total revenue increased by $24.1 million, or 4.5% (4.1% before foreign exchange), to $564.5 million for Q1 2024, driven by underlying business growth and positive foreign exchange impact, partially offset by a divestiture[175][176] - North America revenue increased by 3.2% to $386.6 million, with Finance & Risk growing 3.5% and Sales & Marketing growing 2.9%[179][180][181] - International revenue increased by 7.4% (6.3% before foreign exchange) to $177.9 million, with Finance & Risk growing 8.3% and Sales & Marketing growing 5.5%, organic International revenue increased by 6.8%[182][183][184] Operating Costs Analysis This section analyzes changes in operating costs, including cost of services, selling and administrative expenses, and depreciation and amortization - Cost of services increased by $16.3 million, or 7.8%, to $224.1 million, primarily due to higher cloud infrastructure costs ($18 million, including $8 million in technology transition costs)[186] - Selling and administrative expenses increased by $1.3 million, or 0.8%, to $176.4 million, driven by higher selling and marketing costs, partially offset by lower corporate overhead[187] - Depreciation and amortization decreased by $1.4 million, or 0.9%, to $144.0 million, due to lower amortization of M&A-related intangible assets, partially offset by higher amortization from internally developed software[189] - Restructuring charges decreased by $0.8 million, or 18.9%, to $3.4 million, primarily due to lower facility exit costs in the prior year quarter[190] Operating Income (Loss) Analysis This section analyzes the increase in consolidated operating income, driven by higher revenue and lower data acquisition costs - Consolidated operating income increased by $8.7 million, or 108.6%, to $16.6 million, driven by higher revenue and lower data acquisition costs, partially offset by increased cloud infrastructure costs[191] Adjusted EBITDA and Adjusted EBITDA Margin Analysis This section analyzes the increase in consolidated adjusted EBITDA and adjusted EBITDA margin, with segment-specific performance - Consolidated adjusted EBITDA increased by $11.3 million, or 6.0%, to $201.3 million, resulting in a 50 basis point increase in adjusted EBITDA margin to 35.7%[193] - North America adjusted EBITDA increased by 1.0% to $152.1 million, but its margin decreased by 90 basis points to 39.3%[194][195] - International adjusted EBITDA improved by 15.6% to $64.3 million, with its margin increasing by 250 basis points to 36.1%[196] Interest Income (Expense) — Net Analysis This section analyzes changes in interest income and expense, noting the impact of higher interest rates and debt refinancing costs - Interest income increased by $0.2 million, or 14.7%, to $1.6 million, primarily due to higher interest rates[198] - Interest expense increased by $30.0 million, or 54.2%, to $(85.3) million, primarily due to a $37.1 million write-off of debt issuance costs from the term loan amendment, partially offset by a $7.8 million amortization gain from interest rate swap amendments[199] Other Income (Expense) — Net Analysis This section analyzes changes in non-operating pension-related income and miscellaneous other income (expense) - Non-operating pension-related income increased by $0.3 million, or 6.5%, to $4.9 million, due to lower interest costs[200] - Miscellaneous other income (expense) - net decreased by $0.8 million, primarily due to fees incurred for the accounts receivable securitization facility[201] Provision for Income Taxes Analysis This section analyzes the effective tax rate and tax benefit for Q1 2024, attributing changes to uncertain tax positions and GILTI inclusion - The effective tax rate for Q1 2024 was 66.0% (tax benefit of $44.2 million), compared to 26.0% (tax benefit of $11.8 million) in Q1 2023[202] - The change was primarily due to a decrease in uncertain tax positions from an audit settlement and a reduction in GILTI inclusion, partially offset by the impact of the BEPS - Pillar Two Global Minimum Tax[202] Net Income (Loss) Analysis This section analyzes the decrease in net loss, driven by a larger tax benefit, higher operating income, and interest rate swap gains - Net loss attributable to Dun & Bradstreet Holdings, Inc. decreased by $10.5 million to $(23.2) million in Q1 2024, compared to $(33.7) million in Q1 2023[203] - This improvement was driven by a larger tax benefit ($32.4 million), higher operating income ($8.7 million), and a $7.8 million amortization gain from interest rate swaps, partially offset by $37.1 million in debt extinguishment costs[203] Adjusted Net Income and Adjusted Net Earnings per Diluted Share Analysis This section analyzes the increase in adjusted net income and adjusted net earnings per diluted share, driven by higher adjusted EBITDA and lower tax expense - Adjusted net income increased to $85.0 million (Q1 2024) from $80.5 million (Q1 2023), and adjusted net earnings per diluted share increased to $0.20 from $0.19[204] - The increase was primarily due to higher adjusted EBITDA and lower tax expense, partially offset by higher depreciation and amortization, increased interest expense, and higher fees from the accounts receivable securitization facility[204] Liquidity and Capital Resources This section discusses the company's liquidity sources, uses, and capital resources, including cash flows, debt, and off-balance sheet arrangements Overview This section outlines the company's primary liquidity sources and uses, affirming sufficient liquidity for short-term needs - Primary liquidity sources include cash flows from operating activities, cash and cash equivalents, and short-term borrowings under the senior secured credit facility[205] - Principal uses of liquidity are working capital, capital investments (including computer software), debt service, business acquisitions, and other general corporate purposes[205] - The Company believes current liquidity sources are sufficient to meet short-term needs for at least the next twelve months and actively manages interest rate risk through debt reduction and interest rate swaps[206][207] Cash Flow Overview This section provides a summary of cash flows from operating, investing, and financing activities, and cash equivalents Summary of Cash Flows (Q1 2024 vs. Q1 2023) | Category | Three months ended March 31, 2024 (in millions) | Three months ended March 31, 2023 (in millions) | Change (in millions) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :------------------- | | Net cash provided by operating activities | $158.9 | $155.7 | $3.2 | | Net cash used in investing activities | $(54.9) | $(39.6) | $(15.3) | | Net cash used in financing activities | $(75.7) | $(122.2) | $46.5 | | Total cash provided during the period before FX | $28.3 | $(6.1) | $34.4 | - As of March 31, 2024, cash and cash equivalents totaled $216.0 million, with $179.3 million held by foreign operations[209] Cash Provided by (Used in) Operating Activities This section details drivers of higher operating cash flows and quantifies the impact of interest rate changes - Higher operating cash flows in Q1 2024 were primarily driven by improved collection from accounts receivables, net of payments to vendors and employees[211] - A 100 basis point increase or decrease in the weighted average interest rate would result in an incremental increase or decrease in annual interest expense of approximately $31 million, respectively, with a net exposure of approximately $3 million after interest rate swaps[212] Cash Provided by (Used in) Investing Activities This section explains the increase in net cash used in investing activities, primarily due to higher software development payments - Net cash used in investing activities increased by $15.3 million in Q1 2024, primarily due to higher payments for software development ($11.8 million) and lower net cash proceeds from foreign currency contract settlements ($3.1 million)[213] - Expected capital expenditures for 2024 are in the range of $195 million to $205 million[213] Cash Provided by (Used in) Financing Activities This section details the decrease in net cash used in financing activities, primarily due to higher net debt issuance proceeds - Net cash used in financing activities decreased by $46.5 million in Q1 2024, primarily due to higher net debt issuance proceeds ($3,077.0 million) and lower repayments on the Revolving Facility and finance lease arrangements[214] - This was partially offset by higher term loan repayments ($3,095.4 million) and lower proceeds from Revolving Facility borrowings[214] Capital Resources and Debt This section provides a summary of the company's borrowings, detailing total short-term and long-term debt Summary of Borrowings (Carrying Value) | Category | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :-------------------------- | :----------------------------- | :------------------------------ | | Total short-term debt | $31.0 | $32.7 | | Total long-term debt | $3,506.8 | $3,512.5 | | Total debt | $3,537.8 | $3,545.2 | Contractual Obligations This section refers to the 2023 Annual Report on Form 10-K for details on debt, operating leases, and pension obligations - Details on debt, operating leases, pension obligations, and vendor commitments are incorporated by reference from the 2023 Annual Report on Form 10-K[217] Off-Balance Sheet Arrangements This section clarifies that the company has no off-balance sheet arrangements other than derivative instruments - The Company does not have any off-balance sheet arrangements other than foreign exchange forward contracts, interest rate swaps, and cross-currency swaps, as discussed in Note 13[218] 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, which primarily include currency exchange rates, market value of investments, and interest rates, since the filing of its Annual Report on Form 10-K - No material changes in market risks (currency exchange rates, investment market value, interest rates) occurred as of March 31, 2024, compared to the disclosure in the 2023 Annual Report on Form 10-K[219] Item 4. Controls and Procedures This section reports that management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2024, and concluded they were effective, no material changes in internal control over financial reporting were identified during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2024, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[220][224] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during Q1 2024[225] PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings This section incorporates by reference the information on legal proceedings from Note 8 to the condensed consolidated financial statements - Information regarding legal proceedings is included in Note 8 — Contingencies[226] Item 1A. Risk Factors This section states that there have been no material changes in the company's risk factors since its Annual Report on Form 10-K filed on February 22, 2024 - No material changes in risk factors have occurred since the Annual Report on Form 10-K filed on February 22, 2024[227] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities and no use of proceeds during the period[227] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the period - There were no defaults upon senior securities during the period[227] Item 4. Mine Safety Disclosures This section indicates that the item is not applicable to the company - This item is not applicable[227] Item 5. Other Information This section reports that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement for the purchase or sale of company securities during the first quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement for the purchase or sale of Company securities in Q1 2024[227] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including forms of restricted stock awards, certifications from the CEO and CFO, and iXBRL financial statements - Exhibits include forms of restricted stock award agreements, CEO and CFO certifications (Sarbanes-Oxley Act), and iXBRL formatted financial statements[229]