Dun & Bradstreet Reports Second Quarter 2018 Results
SHORT HILLS, N.J.--(BUSINESS WIRE)--Aug 8, 2018--Dun & Bradstreet (NYSE: DNB) today reported results for the second quarter ended June 30, 2018.
Second Quarter 2018 HighlightsRevenue: GAAP revenue of $439.6 million, up 8% year over year both after and before the effect of foreign exchange.As Adjusted revenue of $394.4 million, down 3% year over year after the effect of foreign exchange (down 4% before the effect of foreign exchange).Organic revenue decreased 4% year over year. As previously mentioned, timing shifts related to several large contracts impacted growth by 3%. Operating Income: GAAP operating income of $112.2 million, up 46% year over year.As Adjusted operating income of $80.4 million, down 11% year over year. The decline in operating income was due to the timing shifts of several large contracts referenced above. Diluted Earnings per Share (“EPS”): GAAP diluted EPS of $2.50 compared to $1.22 for the second quarter of 2017.As Adjusted diluted EPS of $1.40, flat year over year.
GAAP results are based on Accounting Standards Codification ASC 606, Revenue from Contracts with Customers (“ASC 606”) basis for 2018 and on Accounting Standards Codification ASC 605, Revenue Recognition (“ASC 605”) basis for 2017. As Adjusted and organic numbers on ASC 605 basis for both periods.
See attached Schedules 4 and 5 for a reconciliation of As Adjusted metrics to GAAP results, as well as the definitions of the non-GAAP financial measures that the Company uses to evaluate the business.
Deferred revenue for the Company as of June 30, 2018 was $592.1 million (based on ASC 606 standards). Under ASC 605 standards, deferred revenue as of June 30, 2018 was $645.3 million, flat year over year; Americas was $571.9 million, flat year over year and Non-Americas was $73.4 million, flat year over year. After adjusting for the effect of foreign exchange and acquisitions and dispositions, total Company deferred revenue (based on ASC 605 standards) was down 1%, Americas was flat and Non-Americas was down 3%, each as compared to June 30, 2017.
Second Quarter 2018 Segment Results
AmericasGAAP revenue of $367.9 million was up 10% year over year both after and before the effect of foreign exchange; As Adjusted revenue of $320.9 million was down 5% year over year both after and before the effect of foreign exchange; GAAP operating income of $126.3 million was up 62% year over year; As Adjusted operating income of $80.7 million was down 12% year over year.
Non-AmericasGAAP revenue of $71.7 million was down 1% year over year after the effect of foreign exchange (down 4% before the effect of foreign exchange); As Adjusted revenue of $73.5 million was up 3% year over year after the effect of foreign exchange (down 1% before the effect of foreign exchange); GAAP operating income of $18.4 million was down 9% year over year; As Adjusted operating income of $20.7 million was up 3% year over year.
See attached Schedules 4 and 5 for additional detail. Additional financial information can be found within the Company’s posted financial model, available at http://investor.dnb.com/financial-information/financial-model.
Use of Non-GAAP Financial Measures
In addition to reporting generally accepted accounting principles in the United States of America (“GAAP”) results, the Company evaluates performance and reports on a total company basis and on a business segment level basis its results (such as revenue, operating income, operating income growth, operating margin, net income, tax rate and diluted earnings per share) on an “As Adjusted” basis. The term “As Adjusted” refers to the following: the elimination of the impact of ASC 606; the elimination of the effect on revenue due to purchase accounting fair value adjustments to deferred revenue; restructuring charges; other non-core gains and charges that are not in the normal course of our business (such as gains and losses on sales of businesses, impairment charges, effect of significant changes in tax laws and material tax and legal settlements); acquisition and divestiture-related fees (such as costs for bankers, legal fees, diligence costs, retention payments, and contingent consideration adjustments); and acquisition-related intangible amortization expense. A recurring component excluded from our “As Adjusted” results is our restructuring charges, which we believe do not reflect our underlying business performance. Such charges are variable from period to period based upon actions identified and taken during each period. Additionally, our “As Adjusted” results exclude the results of Discontinued Operations.
We also isolate the effects of changes in foreign exchange rates on our revenue growth because we believe it is useful for investors to be able to compare revenue from one period to another, both after and before the effects of foreign exchange. The change in our operating performance attributable to foreign currency rates is determined by converting both our prior and current periods by a constant rate. As a result, we monitor our “As Adjusted” revenue growth both after and before the effects of foreign exchange.
We also analyze “As Adjusted” revenue growth on an organic basis because management believes this information provides important insight into the underlying/ongoing performance of the business. Organic revenue excludes the estimated revenue contribution from acquired businesses for one year from the date of the acquisition and net divested revenue which we define as the historical revenues from the divested businesses net of the annual ongoing future revenue streams resulting from the commercial arrangements entered into in connection with such divestitures.
We may from time to time use the term sales, which we define as the annual value of committed customer contracts. This term is often referred to as bookings or commitments by other companies.
We also monitor free cash flow as a measure of our business. We define free cash flow as net cash provided by operating activities minus capital expenditures and additions to computer software and other intangibles. Free cash flow measures our available cash flow for potential debt repayment, acquisitions, share repurchases, dividend payments and additions to cash, cash equivalents and short-term investments. We believe free cash flow to be relevant and useful to our investors as this measure is used by our management in evaluating the funding available after supporting our ongoing business operations and our portfolio of investments.
We also monitor deferred revenue after adjusting for the effect of foreign exchange, dispositions, acquisitions and the impacts of the write-down of deferred revenue due to purchase accounting.
We believe that the use of our non-GAAP financial measures provides useful supplemental information to our investors. Non-GAAP results are presented only as a supplement to the financial statements presented in accordance with GAAP. The non-GAAP financial information is provided to enhance the reader’s understanding of our underlying financial performance. These non-GAAP financial measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as an alternative measure of revenue, operating income, operating margin, net income, diluted EPS or net cash provided by operating activities as determined in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and related notes are presented and defined in Schedules 4 and 5 attached to this press release.
Second Quarter 2018 Teleconference Update
Dun & Bradstreet also announced today that it entered into a definitive agreement to be acquired by an affiliate of CC Capital. A copy of that press release can be found on Dun & Bradstreet’s Investor Relations website at http://investor.dnb.com. In light of the announced transaction, the earnings conference call scheduled for Thursday, August 9, 2018 at 8 a.m. ET. will no longer take place.
About Dun & Bradstreet
Dun & Bradstreet helps companies around the world improve their business performance. The global leader in commercial data and analytics, we glean insight from data to enable our customers to connect with the prospects, suppliers, clients and partners that matter most. Since 1841, companies of every size rely on Dun & Bradstreet to help them manage risk and reveal opportunity.
Forward-Looking and Cautionary Statements
We may from time-to-time make written or oral “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements contained in filings with the Securities and Exchange Commission, in reports to shareholders and in press releases and investor Web casts. These forward-looking statements include, without limitation, any statements related to financial guidance or strategic goals. These forward-looking statements can also be identified by the use of words like “anticipates,” “aspirations,” “believes,” “commits,” “continues,” “estimates,” “expects,” “goals,” “guidance,” “intends,” “plans,” “projects,” “strategy,” “targets,” “will” and other words of similar meaning. They can also be identified by the fact that they do not relate strictly to historical or current facts.
We cannot guarantee that any forward-looking statement will be realized. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements and whether to invest in, or remain invested in, our securities.
In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying the following important factors that, individually or in the aggregate, could cause actual results to differ materially from those contained in any forward-looking statements made by us; any such statement is qualified by reference to the following cautionary factors: (i) risks and uncertainties related to the proposed merger as contemplated by that certain Agreement and Plan of Merger entered into by the Company on August 8, 2018 (the “Merger”), including, but not limited to, the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; the failure of the parties to satisfy conditions to completion of the proposed Merger, including the failure of the Company’s stockholders to approve the proposed Merger or the failure of the parties to obtain required regulatory approvals; the risk that regulatory or other approvals are delayed or are subject to terms and conditions that are not anticipated; (ii) reliance on third parties to support critical components of our business model; (iii) our ability to protect our information technology infrastructure against cyber attack and unauthorized access; (iv) risks associated with potential violations of the Foreign Corrupt Practices Act and similar laws; (v) customer demand for our products; (vi) risks associated with recent changes in our executive management team and Board of Directors; (vii) the integrity and security of our global databases and data centers; (viii) our ability to maintain the integrity of our brand and reputation; (ix) our ability to renew large contracts and the related revenue recognition and timing thereof; (x) the impact of macro-economic challenges on our customers and vendors; (xi) future laws or regulations with respect to the collection, compilation, storage, use, cross-border transfer, publication and/or sale of information and adverse publicity or litigation concerning the commercial use of such information; (xii) our ability to acquire and successfully integrate other businesses, products and technologies; (xiii) adherence by third-party members of our Dun & Bradstreet Worldwide Network, or other third parties who license and sell under the Dun & Bradstreet name, to our quality standards and to the renewal of their agreements with Dun & Bradstreet; (xiv) the effects of foreign and evolving economies, exchange rate fluctuations, legislative or regulatory requirements and the implementation or modification of fees or taxes to collect, compile, store, use, transfer cross-border, publish and/or sell data; (xv) the impact of the announcement of, or failure to complete, the proposed merger on our relationships with employees, customers, suppliers, vendors and other business partners; and potential or actual litigation; and (xvi) the other factors described under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Legal Proceedings” and elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K, our other Quarterly Reports on Form 10-Q and the Company’s other reports or documents filed or furnished with the Securities and Exchange Commission.
It should be understood that it is not possible to predict or identify all risk factors. Consequently, the above list of important factors and the Risk Factors discussed in Item 1A. of our Annual Report on Form 10-K and in our Quarterly Reports on Form 10-Q should not be considered to be a complete discussion of all of our potential trends, risks and uncertainties. Except as otherwise required by federal securities laws, we do not undertake any obligation to update any forward-looking statement we may make from time-to-time.
Additional Information and Where to Find It
We will file with the SEC and mail to our stockholders a proxy statement in connection with the proposed merger. We urge investors and security holders to read the proxy statement when it becomes available because it will contain important information regarding the proposed merger. You may obtain a free copy of the proxy statement (when available) and other related documents filed by the Company with the SEC at the SEC’s website at www.sec.gov. You also may obtain the proxy statement (when it is available) and other documents filed by us with the SEC relating to the proposed merger for free by accessing our website at www.dnb.com by clicking on the link for “Investor Relations”, then clicking on the link for “Financial Information” and selecting “Annual Reports and Proxies.”
Participants in the Solicitation
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company’s stockholders in connection with the proposed merger. Information regarding the interests of these directors and executive officers in the proposed merger will be included in the proxy statement when it is filed with the SEC. You may find additional information about the Company’s directors and executive officers in our proxy statement for its 2018 Annual Meeting of Stockholders, which was filed with the SEC on March 27, 2018. You can obtain free copies of these documents from the Company using the contact information above.
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