CHICAGO--(BUSINESS WIRE)--
Donnelley Financial Solutions (NYSE: DFIN) today reported
financial results for the first quarter 2018.
Highlights:
-
First-quarter net sales of $255.2 million declined 4.5% from the first
quarter of 2017
-
First-quarter GAAP net earnings of $7.7 million, or $0.23 per diluted
share, compared to GAAP net earnings in the first quarter of 2017 of
$9.3 million, or $0.28 per diluted share
-
First-quarter non-GAAP net earnings(1) of $15.2 million, or
$0.45 per diluted share, compared to non-GAAP net earnings in the
first quarter of 2017 of $13.9 million, or $0.42 per diluted share
-
Non-GAAP adjusted EBITDA(1) in the quarter was $40.3
million, or 15.8% of net sales, compared to non-GAAP adjusted EBITDA
in the first quarter of 2017 of $44.2 million, or 16.5% of net sales
-
Company reaffirms full-year 2018 guidance
|
(1)
|
|
Non-GAAP net earnings and non-GAAP adjusted EBITDA are non-GAAP
measures that exclude the impact of items noted in the
reconciliation tables below. See the tables below for amounts and
reconciliations to the most comparable GAAP measures.
|
| |
|
“I am pleased with our first-quarter results, which were in line with
our expectations,” said Daniel N. Leib, Donnelley Financial’s President
and Chief Executive Officer. “We continued to see double-digit growth in
our SaaS revenue, driven by Venue and ActiveDisclosure, and remain
excited about the future growth opportunities in our SaaS offerings. The
growth in these areas partially offset declines in the transactional
portion of U.S. Capital Markets and the funds portion of U.S. Investment
Markets, against our most challenging quarter from a year-over-year
comparison perspective. Given our first-quarter performance and outlook
for the balance of the year, our full-year 2018 guidance remains
unchanged.”
Leib continued, “Capital spending in the first quarter was slightly
lower than we expected. We continue to be excited about growth-oriented
investment opportunities, but at the same time remain committed to our
disciplined approach toward capital deployment, as well as to our
targeted gross leverage range of 2.25x to 2.75x.”
Net Sales
Net sales in the first quarter of 2018 were $255.2 million, a decrease
of $12.1 million, or 4.5%, from the first quarter of 2017. After
adjusting for changes in foreign exchange rates and the impact of the
adoption of the new revenue recognition standard(2), organic
sales decreased 6.0% from the first quarter of 2017. This decline was
primarily due to the non-recurring special proxy volume that positively
impacted U.S. Investment Markets in the first quarter of 2017, as well
as lower transactional and compliance volume within U.S. Capital
Markets, which was partially offset by growth in our SaaS and global
Language Solutions offerings.
|
(2)
|
|
On January 1, 2018, the Company adopted the Accounting Standards
Update No. 2014-09 "Revenue from Contracts with Customers (Topic
606)" ("the new revenue recognition standard") using the modified
retrospective approach applied to contracts that were not completed
as of January 1, 2018.
|
| |
|
GAAP Earnings
First-quarter 2018 net earnings were $7.7 million, or $0.23 per diluted
share, compared to net earnings of $9.3 million, or $0.28 per diluted
share, in the first quarter of 2017. The first-quarter net earnings
included after-tax charges of $7.5 million and $4.6 million in 2018 and
2017, respectively.
Non-GAAP Adjusted EBITDA and Net Earnings
Non-GAAP adjusted EBITDA in the first quarter of 2018 was $40.3 million,
compared to $44.2 million in the first quarter of 2017. Non-GAAP
adjusted EBITDA margin in the first quarter of 2018 was 15.8%, 70 basis
points lower than in the first quarter of 2017. The decrease in non-GAAP
adjusted EBITDA and non-GAAP adjusted EBITDA margin was primarily driven
by lower mutual funds proxy volume and lower capital markets
transactional volume as well as higher investments, partially offset by
company-wide cost reductions and higher volume in International.
Non-GAAP net earnings totaled $15.2 million, or $0.45 per diluted share,
in the first quarter of 2018 compared to non-GAAP net earnings of $13.9
million, or $0.42 per diluted share, in the first quarter of 2017.
Reconciliations of net earnings to non-GAAP adjusted EBITDA and non-GAAP
net earnings, as well as non-GAAP adjusted EBITDA margin, are presented
in the attached schedules.
2018 Guidance
The Company reaffirms its previous full-year guidance for 2018:
|
| 2018 Guidance |
|
Net sales
| |
Approximately $1 billion,
representing organic growth in the
range of 1% to 2%
|
|
Non-GAAP adjusted EBITDA(1) | | $165 to $175 million |
|
Depreciation and amortization
| |
Approximately $50 million |
|
Interest expense
| |
Approximately $37 million |
|
Non-GAAP effective tax rate
| |
29% to 31%
|
|
Diluted share count
| |
Approximately 34 million
|
|
Capital expenditures
| | $40 to $45 million |
|
Free cash flow(2) | | $55 to $60 million |
|
(1)
|
|
Pension income excluded from non-GAAP adjusted EBITDA beginning in
2018; prior periods have also been restated in the tables below
|
|
(2)
| |
Defined as operating cash flow less capital expenditures. 2018 free
cash flow guidance includes approximately $15 million for
spinoff-related transition expenses.
|
| |
|
Certain components of the guidance given above are provided on a
non-GAAP basis only, without providing a reconciliation to guidance
provided on a GAAP basis. Information is presented in this manner,
consistent with SEC rules, because the preparation of such a
reconciliation could not be accomplished without “unreasonable efforts.”
The Company does not have access to certain information that would be
necessary to provide such a reconciliation, including non-recurring
items that are not indicative of the Company’s ongoing operations. Such
items include, but are not limited to, restructuring charges, impairment
charges, spinoff-related transaction expenses, acquisition-related
expenses, gains or losses on investments and business disposals and
other similar gains or losses not reflective of the Company's ongoing
operations. The Company does not believe that this information is likely
to be significant to an assessment of the Company’s ongoing operations,
given that it is not an indicator of business performance.
Conference Call
Donnelley Financial will host a conference call and simultaneous webcast
to discuss its first-quarter results today, Wednesday, May 2, at 9:00
a.m. Eastern Time (8:00 a.m. Central Time). The live webcast will be
accessible on Donnelley Financial’s web site: www.dfsco.com.
Individuals wishing to participate on the call must
register in advance at http://www.meetme.net/DFIN.
After registering, participants will receive dial-in numbers, a
passcode, and a personal identification number (PIN) that is used to
uniquely identify their presence and automatically join them into the
audio conference. A webcast replay will be archived on the Company’s web
site for 30 days after the call. In addition, a telephonic replay of the
call will be available for seven days at 630.652.3042, passcode 7739939#.
About Donnelley Financial
With the right solutions in moments that matter, Donnelley Financial
Solutions (NYSE: DFIN) delivers risk and compliance solutions that fuse
deep industry experience, unparalleled service, and elegant technologies
to provide our clients with insights that power their decisions and
shape global markets. The company has 3,400 employees in 61 locations
across 18 countries, serving thousands of clients globally. For more
information about Donnelley Financial Solutions, visit www.dfsco.com
or follow us on Twitter @DonnelleyFin
or on LinkedIn.
Use of non-GAAP Information
This news release contains certain non-GAAP measures, including non-GAAP
SG&A, non-GAAP SG&A as % of total net sales, non-GAAP income from
operations, non-GAAP operating margin, non-GAAP adjusted EBITDA,
non-GAAP adjusted EBITDA margin, non-GAAP effective tax rate, non-GAAP
net earnings, non-GAAP diluted earnings per share, free cash flow and
organic net sales. The Company believes that these non-GAAP measures,
when presented in conjunction with comparable GAAP measures, provide
useful information about the Company’s operating results and liquidity
and enhance the overall ability to assess the Company’s financial
performance. The Company uses these measures, together with other
measures of performance under GAAP, to compare the relative performance
of operations in planning, budgeting and reviewing the performance of
its business.
Our non-GAAP statement of operations measures, non-GAAP SG&A, non-GAAP
SG&A as % of total net sales, non-GAAP income from operations, non-GAAP
operating margin, non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA
margin, non-GAAP effective tax rate, non-GAAP net earnings and non-GAAP
diluted earnings per share, are adjusted to exclude the impact of
certain costs, expenses, gains and losses and other specified items that
management believes are not indicative of our ongoing operations. These
adjusted measures exclude the impact of expenses associated with the
Company’s acquisition activities, spin-off related expenses, share-based
compensation and eliminate potential differences in results of
operations between periods caused by factors such as depreciation and
amortization methods, historic cost and age of assets, financing and
capital structures, taxation positions or regimes, restructuring,
impairment and other charges and gain or loss on certain equity
investments and asset sales.
Free cash flow is a non-GAAP financial measure and is defined by the
Company as net cash flow provided by operating activities less capital
expenditures. By adjusting for the level of capital investment in
operations, the Company believes that free cash flow can provide useful
additional basis for understanding the Company’s ability to generate
cash after capital investment and provides a comparison to peers with
differing capital intensity.
Organic net sales is a non-GAAP financial measure and is defined by the
Company as reported net sales adjusted for the impact of changes in
foreign exchange rates and acquired and disposed businesses.
These non-GAAP measures should be considered in addition to, not a
substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP. In addition, these measures are
defined differently by different companies in our industry and,
accordingly, such measures may not be comparable to similarly-titled
measures of other companies.
Use of Forward-Looking Statements
This news release includes certain "forward-looking statements" within
the meaning of, and subject to the safe harbor created by, Section 21E
of the Securities Exchange Act of 1934, as amended, with respect to the
business, strategy and plans of Donnelley Financial and its expectations
relating to future financial condition and performance. Statements that
are not historical facts, including statements about Donnelley Financial
management’s beliefs and expectations, are forward-looking statements.
Words such as "believes," "anticipates," "estimates," "expects,"
"intends," "aims," "potential," "will," "would," "could," "considered,"
"likely," "estimate" and variations of these words and similar future or
conditional expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such
statements. While Donnelley Financial believes these expectations,
assumptions, estimates and projections are reasonable, such
forward-looking statements are only predictions and involve known and
unknown risks and uncertainties, many of which are beyond Donnelley
Financial’s control. By their nature, forward-looking statements involve
risk and uncertainty because they relate to events and depend upon
future circumstances that may or may not occur. Actual results may
differ materially from Donnelley Financial’s current expectations
depending upon a number of factors affecting the business and risks
associated with the performance of the business. These factors include
such risks and uncertainties detailed in Donnelley Financial’s periodic
public filings with the SEC, including but not limited to those
discussed under "Risk Factors" in Donnelley Financial's Form 10-K for
the fiscal year ended December 31, 2017, those discussed under
“Cautionary Statement” in Donnelley Financial’s quarterly Form 10-Q
filings, and in other investor communications of Donnelley Financial’s
from time to time. Donnelley Financial does not undertake to and
specifically declines any obligation to publicly release the results of
any revisions to these forward-looking statements that may be made to
reflect future events or circumstances after the date of such statement
or to reflect the occurrence of anticipated or unanticipated events.
Donnelley Financial Solutions, Inc. |
Condensed Consolidated Balance Sheets
|
As of March 31, 2018 and December 31, 2017
|
(UNAUDITED) |
(in millions, except per share data) |
|
|
|
| March 31, 2018 | |
| December 31, 2017 | |
Assets | | | | | | | | |
|
Cash and cash equivalents
| |
$
|
12.1
| | |
$
|
52.0
| |
|
Receivables, less allowances for doubtful accounts of
$7.7 in 2018 (2017 - $7.3)
| | |
239.0
| | | |
165.2
| |
|
Inventories
| | |
18.5
| | | |
23.3
| |
|
Prepaid expenses and other current assets
| |
|
28.2
| | |
|
29.6
| |
|
Total Current Assets
| |
|
297.8
| | |
|
270.1
| |
|
Property, plant and equipment - net
| | |
33.1
| | | |
34.7
| |
|
Goodwill
| | |
447.3
| | | |
447.4
| |
|
Other intangible assets - net
| | |
36.5
| | | |
39.9
| |
|
Software-net
| | |
41.8
| | | |
41.1
| |
|
Deferred income taxes
| | |
21.0
| | | |
22.2
| |
|
Other noncurrent assets
| |
|
37.7
| | |
|
38.1
| |
| Total Assets | | $ | 915.2 | | | $ | 893.5 | |
| | | | | | | |
|
Liabilities | | | | | | | | |
|
Accounts payable
| |
$
|
87.7
| | |
$
|
67.8
| |
|
Accrued liabilities
| |
|
91.5
| | |
|
119.2
| |
|
Total Current Liabilities
| |
|
179.2
| | |
|
187.0
| |
|
Long-term debt
| | |
478.8
| | | |
458.3
| |
|
Deferred compensation liabilities
| | |
21.8
| | | |
22.8
| |
|
Pension and other postretirement benefits plan liabilities
| | |
51.0
| | | |
52.5
| |
|
Other noncurrent liabilities
| |
|
22.8
| | |
|
23.5
| |
| Total Liabilities | |
| 753.6 | | |
| 744.1 | |
| | | | | | | |
|
Equity | | | | | | | | |
|
Common stock, $0.01 par value
| | | | | | | | |
|
Authorized: 65.0 shares;
| | | | | | | | |
Issued: 34.0 shares in 2018 (2017 - 33.8 shares)
| | |
0.3
| | | |
0.3
| |
|
Treasury stock, at cost: 0.1 shares in 2018 (2017 - less than 0.1
shares)
| | |
(1.7
|
)
| | |
(0.9
|
)
|
|
Additional paid-in capital
| | |
208.9
| | | |
205.7
| |
|
Retained earnings
| | |
17.5
| | | |
8.9
| |
|
Accumulated other comprehensive loss
| |
|
(63.4
|
)
| |
|
(64.6
|
)
|
| Total Equity | |
| 161.6 | | |
| 149.4 | |
| Total Liabilities and Equity | | $ | 915.2 | | | $ | 893.5 | |
| | | | | | | |
|
| Donnelley Financial Solutions, Inc. |
Condensed Consolidated Statements of Operations
|
For the Three Months Ended March 31, 2018 and 2017
|
(UNAUDITED) |
(in millions, except per share data) |
|
|
|
| For the Three Months Ended March 31, | |
| | 2018 | |
| ADJUSTMENTS | |
| 2018 | |
| 2017 | |
| ADJUSTMENTS | |
| 2017 | |
| | GAAP | | | TO NON-GAAP | | | NON-GAAP | | | GAAP | | | TO NON-GAAP | | | NON-GAAP | |
|
Services net sales
| |
$
|
159.5
| | |
$
|
—
| | |
$
|
159.5
| | |
$
|
154.0
| | |
$
|
—
| | |
$
|
154.0
| |
|
Products net sales
| |
|
95.7
| | |
|
—
| | |
|
95.7
| | |
|
113.3
| | |
|
—
| | |
|
113.3
| |
| Total net sales | |
| 255.2 | | |
| — | | |
| 255.2 | | |
| 267.3 | | |
| — | | |
| 267.3 | |
|
Services cost of sales (1)
| | |
85.9
| | | |
—
| | | |
85.9
| | | |
77.7
| | | |
—
| | | |
77.7
| |
|
Services cost of sales with
R.R. Donnelley affiliates (1) (2)
| | |
—
| | | |
—
| | | |
—
| | | |
9.9
| | | |
—
| | | |
9.9
| |
|
Products cost of sales (1)
| | |
72.7
| | | |
—
| | | |
72.7
| | | |
63.0
| | | |
—
| | | |
63.0
| |
|
Products cost of sales with
R.R. Donnelley affiliates (1) (2)
| |
|
—
| | |
|
—
| | |
|
—
| | |
|
18.8
| | |
|
—
| | |
|
18.8
| |
| Total cost of sales (1) | |
| 158.6 | | |
| — | | |
| 158.6 | | |
| 169.4 | | |
| — | | |
| 169.4 | |
|
Selling, general and administrative
expenses (SG&A) (1) (3)
| | |
66.1
| | | |
(9.8
|
)
| | |
56.3
| | | |
57.5
| | | |
(3.8
|
)
| | |
53.7
| |
|
Restructuring, impairment and other
charges - net
| | |
0.7
| | | |
(0.7
|
)
| | |
—
| | | |
3.8
| | | |
(3.8
|
)
| | |
—
| |
|
Depreciation and amortization
| |
|
10.4
| | |
|
—
| | |
|
10.4
| | |
|
10.2
| | |
|
—
| | |
|
10.2
| |
| Income from operations | |
| 19.4 | | |
| 10.5 | | |
| 29.9 | | |
| 26.4 | | |
| 7.6 | | |
| 34.0 | |
|
Interest expense-net
| | |
9.0
| | | |
—
| | | |
9.0
| | | |
11.1
| | | |
—
| | | |
11.1
| |
|
Investment and other income – net (3)
| |
|
(0.8
|
)
| |
|
—
| | |
|
(0.8
|
)
| |
|
(0.8
|
)
| |
|
—
| | |
|
(0.8
|
)
|
| Earnings before income taxes | |
| 11.2 | | |
| 10.5 | | |
| 21.7 | | |
| 16.1 | | |
| 7.6 | | |
| 23.7 | |
|
Income tax expense
| |
|
3.5
| | |
|
3.0
| | |
|
6.5
| | |
|
6.8
| | |
|
3.0
| | |
|
9.8
| |
| Net earnings | | $ | 7.7 | | | $ | 7.5 | | | $ | 15.2 | | | $ | 9.3 | | | $ | 4.6 | | | $ | 13.9 | |
| Net earnings per share: | | | | | | | | | | | | | | | | | | | | | | | | |
|
Basic net earnings per share
| | $ | 0.23 | | | | | | | $ | 0.45 | | | $ | 0.29 | | | | | | | $ | 0.43 | |
|
Diluted net earnings per share
| | $ | 0.23 | | | | | | | $ | 0.45 | | | $ | 0.28 | | | | | | | $ | 0.42 | |
| Weighted average number of common shares outstanding (2): | | | | | | | | | | | | | | | | | | | | | | | | |
|
Basic
| | | 33.7 | | | | | | | | 33.7 | | | | 32.6 | | | | | | | | 32.6 | |
|
Diluted
| | | 33.9 | | | | | | | | 33.9 | | | | 32.8 | | | | | | | | 32.8 | |
Additional information: | | | | | | | | | | | | | | | | | | | | | | | | |
|
Gross margin (1)
| | |
37.9
|
%
| | | | | | |
37.9
|
%
| | |
36.6
|
%
| | | | | | |
36.6
|
%
|
|
SG&A as a % of total net sales (1)
| | |
25.9
|
%
| | | | | | |
22.1
|
%
| | |
21.5
|
%
| | | | | | |
20.1
|
%
|
|
Operating margin
| | |
7.6
|
%
| | | | | | |
11.7
|
%
| | |
9.9
|
%
| | | | | | |
12.7
|
%
|
|
Effective tax rate
| | |
31.3
|
%
| | | | | | |
30.0
|
%
| | |
42.2
|
%
| | | | | | |
41.4
|
%
|
|
(1)
|
|
Exclusive of depreciation and amortization
|
|
(2)
| |
Beginning in the quarter ended June 30, 2017, LSC Communications,
Inc (“LSC”) no longer qualified as a related party, therefore the
amounts disclosed related to LSC are only presented for the three
months ended March 31, 2017. Beginning in the quarter ended
September 30, 2017, R.R. Donnelley & Sons Company ("RRD") no longer
qualified as a related party, therefore the amounts disclosed
related to RRD are only presented for the three months ended March
31, 2017
|
|
(3)
| |
During the three months ended March 31, 2018, the Company adopted
Accounting Standards Update No. 2017-07 “Compensation—Retirement
Benefits (Topic 715): Improving the Presentation of Net Periodic
Pension Cost and Net Periodic Postretirement Benefit Cost” ("ASU
2017-07"), which resulted in the presentation of net pension income
within investment and other income in the condensed consolidated
statement of operations instead of selling, general and
administrative expenses. Prior period net pension income was also
reclassified.
|
The Company believes that certain non-GAAP measures, when presented in
conjunction with comparable GAAP measures, are useful because that
information is an appropriate measure for evaluating the Company’s
operating performance. Internally, the Company uses this non-GAAP
information as an indicator of business performance, and evaluates
management’s effectiveness with specific reference to this indicator.
These measures should be considered in addition to, not a substitute
for, or superior to, measures of financial performance prepared in
accordance with GAAP.
| Donnelley Financial Solutions, Inc. |
Reconciliation of GAAP to Non-GAAP Measures
|
For the Three Months Ended March 31, 2018 and 2017
|
(UNAUDITED) |
(in millions, except per share data) |
|
|
|
| For the Three Months Ended March 31, 2018 |
| | | |
| |
|
| | |
| |
|
| Net |
| | | | | Income | | | | | | | | | earnings |
| | | | | from | | | Operating | | | Net | | | per diluted |
|
| SG&A | |
| operations | |
| margin | |
| earnings | |
| share |
|
GAAP basis measures
| |
$
|
66.1
| | |
$
|
19.4
| | |
|
7.6
|
%
| |
$
|
7.7
| | |
$
|
0.23
|
|
Non-GAAP adjustments:
| | | | | | | | | | | | | | | | | | | |
|
Restructuring, impairment and other
charges - net
| | |
—
| | | |
0.7
| | | |
0.3
|
%
| | |
0.5
| | | |
0.01
|
|
Spin-off related transaction expenses
| | |
(7.8
|
)
| | |
7.8
| | | |
3.0
|
%
| | |
5.6
| | | |
0.17
|
|
Share-based compensation expense
| | |
(1.8
|
)
| | |
1.8
| | | |
0.7
|
%
| | |
1.3
| | | |
0.04
|
|
Acquisition-related expenses
| |
|
(0.2
|
)
| |
|
0.2
| | |
|
0.1
|
%
| |
|
0.1
| | |
|
0.00
|
|
Total Non-GAAP adjustments
| |
|
(9.8
|
)
| |
|
10.5
| | |
|
4.1
|
%
| |
|
7.5
| | |
|
0.22
|
|
Non-GAAP measures
| |
$
|
56.3
| | |
$
|
29.9
| | |
|
11.7
|
%
| |
$
|
15.2
| | |
$
|
0.45
|
| | | | | | | | | | | | | | | | | | |
|
| | For the Three Months Ended March 31, 2017 |
| | | | | | | | | | | | | | Net |
| | | | | Income | | | | | | | | | earnings |
| | | | | from | | | Operating | | | Net | | | per diluted |
| | SG&A | |
| operations | |
| margin | |
| earnings | |
| share |
|
GAAP basis measures
| |
$
|
57.5
| | |
$
|
26.4
| | | |
9.9
|
%
| |
$
|
9.3
| | |
$
|
0.28
|
|
Non-GAAP adjustments:
| | | | | | | | | | | | | | | | | | | |
|
Restructuring, impairment and other
charges - net
| | |
—
| | | |
3.8
| | | |
1.4
|
%
| | |
2.3
| | | |
0.07
|
|
Spin-off related transaction expenses
| | |
(2.7
|
)
| | |
2.7
| | | |
1.0
|
%
| | |
1.6
| | | |
0.05
|
|
Share-based compensation expense
| |
|
(1.1
|
)
| |
|
1.1
| | |
|
0.4
|
%
| |
|
0.7
| | |
|
0.02
|
|
Total Non-GAAP adjustments
| |
|
(3.8
|
)
| |
|
7.6
| | |
|
2.8
|
%
| |
|
4.6
| | |
|
0.14
|
|
Non-GAAP measures
| |
$
|
53.7
| | |
$
|
34.0
| | |
|
12.7
|
%
| |
$
|
13.9
| | |
$
|
0.42
|
| | | | | | | | | | | | | | | | | | |
|
| Donnelley Financial Solutions, Inc. |
Segment GAAP to Non-GAAP Operating Income and Non-GAAP Adjusted
EBITDA and Margin Reconciliation
|
For the Three Months Ended March 31, 2018 and 2017
|
(UNAUDITED) |
(in millions) |
|
|
|
| U.S. | |
|
International
| |
|
Corporate
| |
|
Consolidated
| |
For the Three Months Ended March 31, 2018 | | | | | | | | | | | | | | | | |
|
Net sales
| |
$
|
213.1
| | |
$
|
42.1
| | |
$
|
—
| | |
$
|
255.2
| |
|
Income (loss) from operations
| | |
26.4
| | | |
2.5
| | | |
(9.5
|
)
| | |
19.4
| |
|
Operating margin %
| | |
12.4
|
%
| | |
5.9
|
%
| |
nm
| | | |
7.6
|
%
|
| | | | | | | | | | | | | | | |
|
Non-GAAP Adjustments | | | | | | | | | | | | | | | | |
|
Restructuring, impairment and other charges - net
| | |
0.7
| | | |
(0.1
|
)
| | |
0.1
| | | |
0.7
| |
|
Spin-off related transaction expenses
| | |
6.3
| | | |
—
| | | |
1.5
| | | |
7.8
| |
|
Share-based compensation expense
| | |
—
| | | |
—
| | | |
1.8
| | | |
1.8
| |
|
Acquisition-related expenses
| |
|
—
| | |
|
—
| | |
|
0.2
| | |
|
0.2
| |
|
Total Non-GAAP adjustments
| | |
7.0
| | | |
(0.1
|
)
| | |
3.6
| | | |
10.5
| |
| | | | | | | | | | | | | | | |
|
|
Non-GAAP income (loss) from operations
| |
$
|
33.4
| | |
$
|
2.4
| | |
$
|
(5.9
|
)
| |
$
|
29.9
| |
|
Non-GAAP operating margin %
| | |
15.7
|
%
| | |
5.7
|
%
| |
nm
| | | |
11.7
|
%
|
| | | | | | | | | | | | | | | |
|
|
Depreciation and amortization
| |
|
8.9
| | |
|
1.4
| | |
|
0.1
| | |
|
10.4
| |
|
Non-GAAP Adjusted EBITDA
| |
$
|
42.3
| | |
$
|
3.8
| | |
$
|
(5.8
|
)
| |
$
|
40.3
| |
|
Non-GAAP Adjusted EBITDA margin
| | |
19.8
|
%
| | |
9.0
|
%
| |
nm
| | | |
15.8
|
%
|
| | | | | | | | | | | | | | | |
|
For the Three Months Ended March 31, 2017 | | | | | | | | | | | | | | | | |
|
Net sales
| |
$
|
230.4
| | |
$
|
36.9
| | |
$
|
—
| | |
$
|
267.3
| |
|
Income (loss) from operations
| | |
37.0
| | | |
0.2
| | | |
(10.8
|
)
| | |
26.4
| |
|
Operating margin %
| | |
16.1
|
%
| | |
0.5
|
%
| |
nm
| | | |
9.9
|
%
|
| | | | | | | | | | | | | | | |
|
Non-GAAP Adjustments | | | | | | | | | | | | | | | | |
|
Restructuring, impairment and other charges - net
| | |
2.5
| | | |
0.7
| | | |
0.6
| | | |
3.8
| |
|
Spin-off related transaction expenses
| | |
—
| | | |
—
| | | |
2.7
| | | |
2.7
| |
|
Share-based compensation expense
| |
|
—
| | |
|
—
| | |
|
1.1
| | |
|
1.1
| |
|
Total Non-GAAP adjustments
| | |
2.5
| | | |
0.7
| | | |
4.4
| | | |
7.6
| |
| | | | | | | | | | | | | | | |
|
|
Non-GAAP income (loss) from operations
| |
$
|
39.5
| | |
$
|
0.9
| | |
$
|
(6.4
|
)
| |
$
|
34.0
| |
|
Non-GAAP operating margin %
| | |
17.1
|
%
| | |
2.4
|
%
| |
nm
| | | |
12.7
|
%
|
| | | | | | | | | | | | | | | |
|
|
Depreciation and amortization
| |
|
8.8
| | |
|
1.4
| | |
|
—
| | |
|
10.2
| |
|
Non-GAAP Adjusted EBITDA
| |
$
|
48.3
| | |
$
|
2.3
| | |
$
|
(6.4
|
)
| |
$
|
44.2
| |
|
Non-GAAP Adjusted EBITDA margin
| | |
21.0
|
%
| | |
6.2
|
%
| |
nm
| | | |
16.5
|
%
|
| | | | | | | | | | | | | | |
|
| Donnelley Financial Solutions, Inc. |
Condensed Consolidated Statements of Cash Flows
|
For the Three Months Ended March 31, 2018 and 2017
|
(UNAUDITED) |
(in millions) |
|
|
|
| For the Three Months Ended March 31, | |
| | 2018 | |
| 2017 | |
|
Net earnings
| |
$
|
7.7
| | |
$
|
9.3
| |
|
Adjustments to reconcile net earnings to net cash used in operating
activities:
| | | | | | | | |
|
Depreciation and amortization
| | |
10.4
| | | |
10.2
| |
|
Provision for doubtful accounts receivable
| | |
1.0
| | | |
1.8
| |
Share-based compensation
| | |
1.8
| | | |
1.1
| |
|
Deferred income taxes
| | |
0.6
| | | |
(2.2
|
)
|
Net pension plan income
| | |
(0.8
|
)
| | |
(0.8
|
)
|
|
Other
| | |
0.5
| | | |
0.4
| |
|
Changes in operating assets and liabilities - net of acquisitions:
| | | | | | | | |
|
Accounts receivable - net
| | |
(65.4
|
)
| | |
(66.7
|
)
|
|
Inventories
| | |
(5.8
|
)
| | |
(3.4
|
)
|
|
Prepaid expenses and other current assets
| | |
(0.2
|
)
| | |
(4.4
|
)
|
|
Accounts payable
| | |
20.3
| | | |
15.0
| |
|
Income taxes payable and receivable
| | |
0.6
| | | |
7.7
| |
|
Accrued liabilities and other
| | |
(23.1
|
)
| | |
(6.1
|
)
|
|
Pension and other postretirement benefits plan contributions
| |
|
(1.2
|
)
| |
|
(0.1
|
)
|
| Net cash used in operating activities | | $ | (53.6 | ) | | $ | (38.2 | ) |
| | | | | | | |
|
|
Capital expenditures
| | |
(6.4
|
)
| | |
(4.3
|
)
|
Purchase of investment
| | |
—
| | | |
(3.4
|
)
|
|
Other investing activities
| |
|
—
| | |
|
0.2
| |
| Net cash used in investing activities | | $ | (6.4 | ) | | $ | (7.5 | ) |
| | | | | | | |
|
|
Revolving facility borrowings
| | |
88.0
| | | |
57.0
| |
|
Payments on revolving facility borrowings
| | |
(68.0
|
)
| | |
(37.0
|
)
|
|
Debt issuance costs
| | |
—
| | | |
(1.5
|
)
|
|
Net transfers related to the Separation
| | |
—
| | | |
3.1
| |
|
Proceeds from issuance of common stock
| | |
1.2
| | | |
—
| |
|
Treasury stock repurchases
| |
|
(0.8
|
)
| |
|
—
| |
| Net cash provided by financing activities | | $ | 20.4 | | | $ | 21.6 | |
|
Effect of exchange rate on cash and cash equivalents
| |
|
(0.3
|
)
| |
|
0.2
| |
| Net decrease in cash and cash equivalents | |
| (39.9 | ) | |
| (23.9 | ) |
|
Cash and cash equivalents at beginning of year
| |
|
52.0
| | |
|
36.2
| |
| Cash and cash equivalents at end of period | | $ | 12.1 | | | $ | 12.3 | |
| | | | | | | |
|
Additional Information: | | | | | | | | |
| | 2018 | | | 2017 | |
| For the Three Months Ended March 31: | | | | | | | | |
|
Net cash used in operating activities
| |
$
|
(53.6
|
)
| |
$
|
(38.2
|
)
|
|
Less: capital expenditures
| |
|
6.4
| | |
|
4.3
| |
|
Free cash flow
| |
$
|
(60.0
|
)
| |
$
|
(42.5
|
)
|
| | | | | | | |
|
| Donnelley Financial Solutions, Inc. |
Reconciliation of Reported to Organic Net Sales
|
For the Three Months Ended March 31, 2018 and 2017
|
(UNAUDITED) |
(in millions) |
|
|
| U.S. | | | | |
| | | |
| | | |
| | | | |
Language
| | | | | | | | | |
|
Capital
| |
Investment
| |
Solutions
| |
Total
| | | | | | | |
|
Markets
| |
Markets
| |
and other
| | U.S. | | |
International
| | |
Consolidated
| |
Reported Net Sales: | | | | | | | | | | | | | | | | | | | | |
|
For the Three Months Ended March 31, 2018
|
$
|
117.5
| |
$
|
84.6
| |
$
|
11.0
| |
$
|
213.1
| | |
$
|
42.1
| | |
$
|
255.2
| |
| | | | | | | | | | | | | | | | | | | |
|
|
For the Three Months Ended March 31, 2017
| |
119.1
| | |
100.1
| | |
11.2
| | |
230.4
| | |
36.9
| | |
267.3
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales change |
| (1.3 | %) |
| (15.5 | %) |
| (1.8 | %) |
| (7.5 | %) |
|
| 14.1 | % |
|
| (4.5 | %) |
| | | | | | | | | | | | | | | | | | | |
|
Supplementary non-GAAP information: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
|
Year-over-year impact of changes in foreign exchange (FX) rates
| |
—
|
%
| |
—
|
%
| |
—
|
%
| |
—
|
%
| | |
6.8
|
%
| | |
0.9
|
%
|
| | | | | | | | | | | | | | | | | | | |
|
|
Year-over-year impact of the adoption of the new revenue recognition
standard (1)
| |
5.8
|
%
| |
(5.9
|
%)
| |
—
|
%
| |
0.4
|
%
| | |
1.6
|
%
| | |
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net organic sales change (2) |
| (7.1 | %) |
| (9.6 | %) |
| (1.8 | %) |
| (7.9 | %) |
|
| 5.7 | % |
|
| (6.0 | %) |
|
(1)
|
|
Adjusted for the adoption of the new revenue recognition standard
|
|
(2)
| |
Adjusted for the impact of changes in FX rates and the adoption of
the new revenue standard.
|
| |
|
| Donnelley Financial Solutions, Inc. |
Reconciliation of GAAP Net Earnings (Loss) to Non-GAAP Adjusted
EBITDA
|
For the Three and Twelve Months Ended March 31, 2018 and 2017
|
(UNAUDITED) |
(in millions) |
|
|
|
|
For the Twelve
Months Ended
| |
|
For the Three Months Ended
| |
| |
March 31,
2018
| | |
March 31,
2018
| |
|
December 31,
2017
| |
|
September 30,
2017
| |
|
June 30,
2017
| |
| GAAP net earnings (loss) | | $ | 8.1 | | | $ | 7.7 | | | $ | (23.7 | ) | | $ | 5.3 | | | $ | 18.8 | |
| | | | | | | | | | | | | | | | | | | |
|
Adjustments | | | | | | | | | | | | | | | | | | | | |
|
Income tax expense
| | |
43.2
| | | |
3.5
| | |
|
24.5
| | | |
2.1
| | | |
13.1
| |
|
Interest expense-net
| | |
40.8
| | | |
9.0
| | |
|
10.2
| | | |
10.6
| | | |
11.0
| |
|
Investment and other income-net(1) | | |
(3.4
|
)
| | |
(0.8
|
)
| |
|
(0.9
|
)
| | |
(0.8
|
)
| | |
(0.9
|
)
|
|
Depreciation and amortization
| | |
44.7
| | | |
10.4
| | |
|
12.8
| | | |
10.6
| | | |
10.9
| |
|
Restructuring, impairment and other charges-net
| | |
4.0
| | | |
0.7
| | |
|
0.7
| | | |
(0.6
|
)
| | |
3.2
| |
|
Share-based compensation expense
| | |
7.5
| | | |
1.8
| | |
|
1.6
| | | |
1.7
| | | |
2.4
| |
|
Spin-off related transaction expenses
| | |
21.6
| | | |
7.8
| | |
|
6.7
| | | |
2.6
| | | |
4.5
| |
|
Acquisition-related expenses
| |
|
0.4
| | |
|
0.2
| | |
|
0.2
| | |
|
—
| | |
|
—
| |
|
Total Non-GAAP adjustments
| | |
158.8
| | | |
32.6
| | |
|
55.8
| | | |
26.2
| | | |
44.2
| |
| | | | | | | | | | | | | | | | | | | |
|
| Non-GAAP adjusted EBITDA | | $ | 166.9 | | | $ | 40.3 | | | $ | 32.1 | | | $ | 31.5 | | | $ | 63.0 | |
| | | | | | | | | | |
| | | | | | | | | |
|
Net sales
| |
$
|
992.8
| | |
$
|
255.2
| | |
$
|
224.8
| | |
$
|
222.6
| | |
$
|
290.2
| |
|
Non-GAAP adjusted EBITDA margin %
| | |
16.8
|
%
| | |
15.8
|
%
| | |
14.3
|
%
| | |
14.2
|
%
| | |
21.7
|
%
|
| | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
|
| |
For the Twelve
Months Ended
| | |
For the Three Months Ended
| |
| |
March 31,
2017
| | |
March 31,
2017
| | |
December 31,
2016
| | |
September 30,
2016
| | |
June 30,
2016
| |
| GAAP net earnings (loss) | | $ | 55.0 | | | $ | 9.3 | | | $ | (0.8 | ) | | $ | 10.2 | | | $ | 36.3 | |
| | | | | | | | | | | | | | | | | | | |
|
Adjustments | | | | | | | | | | | | | | | | | | | | |
|
Income tax expense (benefit)
| | |
33.2
| | | |
6.8
| | | |
(4.1
|
)
| | |
7.9
| | | |
22.6
| |
|
Interest expense (income)-net
| | |
22.5
| | | |
11.1
| | | |
11.4
| | | |
(0.1
|
)
| | |
0.1
| |
|
Investment and other income-net(1) | | |
(1.6
|
)
| | |
(0.8
|
)
| | |
(0.6
|
)
| | |
(0.2
|
)
| | |
—
| |
|
Depreciation and amortization
| | |
44.0
| | | |
10.2
| | | |
13.2
| | | |
9.8
| | | |
10.8
| |
|
Restructuring, impairment and other charges-net
| | |
8.6
| | | |
3.8
| | | |
1.8
| | | |
1.7
| | | |
1.3
| |
|
Share-based compensation expense
| | |
3.3
| | | |
1.1
| | | |
1.3
| | | |
0.2
| | | |
0.7
| |
|
Spin-off related transaction expenses
| |
|
7.6
| | |
|
2.7
| | |
|
4.9
| | |
|
—
| | |
|
—
| |
|
Total Non-GAAP adjustments
| | |
117.6
| | | |
34.9
| | | |
27.9
| | | |
19.3
| | | |
35.5
| |
| | | | | | | | | | | | | | | | | | | |
|
| Non-GAAP adjusted EBITDA | | $ | 172.6 | | | $ | 44.2 | | | $ | 27.1 | | | $ | 29.5 | | | $ | 71.8 | |
| | | | | | | | | | | | | | | | | | | |
|
|
Net sales
| |
$
|
1,010.7
| | |
$
|
267.3
| | |
$
|
221.0
| | |
$
|
224.4
| | |
$
|
298.0
| |
|
Non-GAAP adjusted EBITDA margin %
| | |
17.1
|
%
| | |
16.5
|
%
| | |
12.3
|
%
| | |
13.1
|
%
| | |
24.1
|
%
|
|
(1)
|
|
During the three months ended March 31, 2018, the Company adopted
ASU 2017-07, which resulted in the presentation of net pension
income within investment and other income in the condensed
consolidated statement of operations instead of selling, general and
administrative expenses. Prior period net pension income was also
reclassified.
|
| |
|
| Donnelley Financial Solutions, Inc. |
Debt and Liquidity Summary
|
As of March 31, 2018 and 2017 and December 31, 2017
|
(UNAUDITED) |
(in millions) |
|
|
Total Liquidity |
| March 31, 2018 | |
| December 31, 2017 | |
| March 31, 2017 | |
Availability | | | | | | | | | | | | |
|
Stated amount of the Revolving Facility
| |
$
|
300.0
| | |
$
|
300.0
| | |
$
|
300.0
| |
Less: availability reduction from covenants
| |
|
80.2
| | |
|
—
| | |
|
107.5
| |
|
Amount available under the Revolving Facility (1) | | |
219.8
| | | |
300.0
| | | |
192.5
| |
| | | | | | | | | | | |
|
Usage | | | | | | | | | | | | |
|
Borrowings under the Revolving Facility (1) | | |
20.0
| | | |
—
| | | |
20.0
| |
Impact on availability related to outstanding letters of credit
| |
|
—
| | |
|
—
| | |
|
2.2
| |
| | |
20.0
| | | |
—
| | | |
22.2
| |
| |
|
| | |
|
| | |
|
| |
|
Availability under the Revolving Facility
| |
|
199.8
| | |
|
300.0
| | |
|
170.3
| |
| | | | | | | | | | | |
|
|
Cash (2) | | |
12.1
| | | |
52.0
| | | |
12.3
| |
| | | | | | | | | | | |
|
|
Net Available Liquidity
| |
$
|
211.9
| | |
$
|
352.0
| | |
$
|
182.6
| |
| | | | | | | | | | | |
|
| | | | | | | | | | | |
|
|
Short-term debt
| |
$
|
—
| | |
$
|
—
| | |
$
|
—
| |
|
Long-term debt
| |
|
478.8
| | |
|
458.3
| | |
|
607.5
| |
|
Total debt
| |
$
|
478.8
| | |
$
|
458.3
| | |
$
|
607.5
| |
| | | | | | | | | | | |
|
|
Non-GAAP adjusted EBITDA for the twelve
| | | | | | | | | | | | |
|
months ended March 31, 2018 and 2017, and
| | | | | | | | | | | | |
|
the year ended December 31, 2017
| |
$
|
166.9
| | |
$
|
170.8
| | |
$
|
172.6
| |
| | | | | | | | | | | |
|
| Non-GAAP Gross Leverage (defined as total | | | | | | | | | | | | |
| debt divided by non-GAAP adjusted | | | | | | | | | | | | |
| EBITDA) | | | 2.9 | x | | | 2.7 | x | | | 3.5 | x |
|
(1)
|
|
The Company has a $300.0 million senior secured revolving credit
facility (the “Revolving Facility”). The Revolving Facility is
subject to a number of covenants, including a minimum Interest
Coverage Ratio and a maximum Leverage Ratio, both as defined and
calculated in the Credit Agreement. There was $20.0 million of
outstanding borrowings under the Revolving Facility as of March
31, 2018. Based on the Company’s results of operations for the
twelve months ended March 31, 2018 and existing debt, the Company
would have had the ability to utilize $199.8 million of the $300.0
million Revolving Facility and not have been in violation of the
terms of the agreement
|
|
(2)
| |
Approximately 71% of cash as of March 31, 2018, 30% of cash as of
December 31, 2017 and 84% of cash as of March 31, 2017 was located
outside of the U.S. Certain cash balances of foreign subsidiaries
may be subject to U.S. or local country taxes if repatriated to the
U.S. In addition, repatriation of some foreign cash balances is
further restricted by local laws.
|
| |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180502005320/en/
Investor Contact:
Sloan Bohlen
Solebury Communications
Group
investors@dfsco.com
Source: Donnelley Financial Solutions