NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Tabular dollar amounts in millions, except share data and per share data)
Note 1 --Basis of Presentation
The accompanying interim condensed consolidated financial statements of Dun & Bradstreet Holdings, Inc. and its subsidiaries ("we" or "us" or "our" or the "Company") were prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). They should be read in conjunction with the consolidated financial statements and related notes, which appear in the consolidated financial statements for the year ended December 31, 2023, included in our Annual Report on Form 10-K and filed with the Securities and Exchange Commission ("SEC") on February 22, 2024. The condensed consolidated financial statements for interim periods do not include all disclosures required by GAAP for annual financial statements and are not necessarily indicative of results for the full year or any subsequent period. In the opinion of our management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the unaudited consolidated financial position, results of operations and cash flows at the dates and for the periods presented have been included.
We manage our business and report our financial results through the following two segments:
•North America offers Finance & Risk and Sales & Marketing data, analytics and business insights in the United States and Canada; and
•International offers Finance & Risk and Sales & Marketing data, analytics and business insights directly in the United Kingdom and Ireland ("U.K."), Northern Europe (Sweden, Norway, Denmark, Finland, Estonia and Latvia), Central Europe (Germany, Austria, Switzerland and various other central and eastern European countries) (together as "Europe"), Greater China, India and indirectly through our Worldwide Network alliances ("WWN alliances").
All intercompany transactions and balances have been eliminated in consolidation. Where appropriate, we have reclassified certain prior year amounts to conform to the current year presentation.
Our condensed consolidated financial statements presented herein reflect the latest estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the unaudited consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented.
During the first quarter of 2024, we changed the presentation of certain data royalty and project fulfillment costs in our condensed consolidated statement of income. Specifically, we changed the classification of these costs from "Selling and administrative expenses" to "Cost of services (exclusive of depreciation and amortization)", as we believe that presenting these costs based on their nature, as opposed to their function as was done historically, provides more useful information and enhances transparency. Prior year period results have been recast to reflect this change in presentation and to conform to the current period presentation. As a result, we reclassified $11.9 million and $30.8 million for the three months ended March 31, 2023 and for the year ended December 31, 2023, respectively, from "Selling and administrative expenses" to "Cost of services (exclusive of depreciation and amortization)". This reclassification has no impact on total operating costs, operating income, net income (loss), earnings (loss) per share or segment results. Additionally, the reclassification has no impact on the consolidated balance sheets or consolidated statements of cash flows.
Note 2 -- Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standards Updates (“ASUs”) and applicable authoritative guidance. The ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on our consolidated financial position, results of operations and/or cash flows.
Recently Adopted Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04 "Facilitation of the Effects of Reference Rate Reform on Financial Reporting" to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform - Scope,” which clarified the scope and application of the original guidance in ASU No. 2020-04. On December 21, 2022, the FASB issued ASU No. 2022-06 which extends the transition date to December 31, 2024. During the second quarter of
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
2023, we modified agreements governing our Senior Secured Credit Facility and interest rate swaps to complete the transition of reference rate from LIBOR to Secured Overnight Financing Rate ("SOFR"). This transition did not result in a financial impact to our consolidated financial statements.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280)." The guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments in this ASU enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, beginning after December 15, 2024. We do not expect the adoption of this authoritative guidance to have a material impact on our consolidated balance sheets, statements of operations and statements of cash flows.
In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740)", which requires consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2024. The guidance is to be applied on a prospective basis, though retrospective application is permitted. We do not expect the adoption of this authoritative guidance to have a material impact on our consolidated balance sheets, statements of operations and statements of cash flows.
Note 3 -- Revenue
The total amount of the transaction price for our revenue contracts allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2024 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remainder of 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter | | Total |
| Future revenue | $ | 1,124.5 | | | $ | 781.0 | | | $ | 498.3 | | | $ | 220.9 | | | $ | 156.6 | | | $ | 264.7 | | | $ | 3,046.0 | |
The table of future revenue does not include any amount of variable consideration that is a sales or usage-based royalty in exchange for distinct data licenses or that is allocated to a distinct service period within a single performance obligation that is a series of distinct service periods.
Timing of Revenue Recognition
| | | | | | | | | | | | | | | |
| | Three months ended March 31, | | |
| 2024 | | 2023 | | | | |
| 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 | | | | | |
Contract Balances
| | | | | | | | | | | |
| At March 31, 2024 | | At December 31, 2023 |
| Accounts receivable, net | $ | 170.0 | | | $ | 258.0 | |
Short-term contract assets (1) | $ | 8.6 | | | $ | 4.3 | |
Long-term contract assets (2) | $ | 21.1 | | | $ | 18.0 | |
| Short-term deferred revenue | $ | 622.5 | | | $ | 590.0 | |
Long-term deferred revenue (3) | $ | 26.3 | | | $ | 19.7 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
(1) Included within "Other current assets" in the condensed consolidated balance sheet.
(2) Included within "Other non-current assets" in the condensed consolidated balance sheet.
(3) Included within "Other non-current liabilities" in the condensed consolidated balance sheet.
The decrease in accounts receivable of $88.0 million from December 31, 2023 to March 31, 2024 was primarily due to seasonal fluctuation.
The increase in deferred revenue of $39.1 million from December 31, 2023 to March 31, 2024 was primarily due to cash payments received or due in advance of satisfying our performance obligations, largely offset by $261.7 million of revenue recognized that was included in the deferred revenue balance at December 31, 2023.
The increase in contract assets of $7.4 million was primarily due to new contract assets recognized, net of new amounts reclassified to receivables during 2024, partially offset by $13.3 million of contract assets included in the balance at January 1, 2024 that were reclassified to receivable when they became unconditional.
See Note 16 for a schedule detailing the disaggregation of revenue.
Assets Recognized for the Costs to Obtain a Contract
Commission assets, net of accumulated amortization included in deferred costs, were $162.6 million and $161.7 million as of March 31, 2024 and December 31, 2023, respectively.
The amortization of commission assets was $12.1 million and $10.3 million for the three months ended March 31, 2024 and 2023, respectively.
Note 4 -- Restructuring Charges
We incurred restructuring charges (which generally consist of employee severance costs and contract terminations). These charges were incurred as a result of eliminating, consolidating, standardizing and/or automating our business functions.
Three months ended March 31, 2024 vs. Three months ended March 31, 2023
We recorded total restructuring charges of $3.4 million for the three months ended March 31, 2024, consisting of:
•Severance costs of $2.9 million under ongoing benefit arrangements. Approximately 65 employees were impacted. Most of the employees impacted exited the Company by the end of the first quarter of 2024. The cash payments for these employees will be substantially completed by the end of the third quarter of 2024; and
•Contract termination, write down of right of use assets and other exit costs, including those to consolidate or close facilities of $0.5 million.
We recorded total restructuring charges of $4.2 million for the three months ended March 31, 2023, consisting of:
•Severance costs of $3.1 million under ongoing benefit arrangements. Approximately 50 employees were impacted. Most of the employees impacted exited the Company by the end of the first quarter of 2023. The cash payments for these employees were substantially completed by the end of the third quarter of 2023; and
•Contract termination, write down of right of use assets and other exit costs, including those to consolidate or close facilities of $1.1 million.
The following table sets forth the restructuring reserves and utilization included within "Accrued payroll" in the condensed consolidated balance sheets for the three months ended March 31, 2024 and March 31, 2023, respectively:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
| | | | | | | | | | | | | | | | | |
| | Severance | | Contract termination
and other
exit costs | | Total |
| | | | | |
2024: | | | | | |
Balance remaining as of December 31, 2023 | $ | 2.4 | | | $ | 0.8 | | | $ | 3.2 | |
Charge taken during first quarter 2024 (1) | 2.9 | | | 0.1 | | | 3.0 | |
Payments made during first quarter 2024 | (2.6) | | | (0.4) | | | (3.0) | |
Balance remaining as of March 31, 2024 | $ | 2.7 | | | $ | 0.5 | | | $ | 3.2 | |
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| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| 2023: | | | | | |
| Balance remaining as of December 31, 2022 | $ | 4.8 | | | $ | 2.2 | | | $ | 7.0 | |
Charge taken during first quarter 2023 (1) | 3.1 | | | 0.5 | | | 3.6 | |
| Payments made during first quarter 2023 | (4.0) | | | (0.8) | | | (4.8) | |
| Balance remaining as of March 31, 2023 | $ | 3.9 | | | $ | 1.9 | | | $ | 5.8 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
(1)Balance excludes charges accounted for under ASU No. 2016-02, "Leases (Topic 842)."
Note 5 -- Notes Payable and Indebtedness
Our borrowings are summarized in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2024 | | December 31, 2023 |
| Maturity | | Principal amount | | Debt issuance costs and discount* | | Carrying value | | Principal amount | | Debt issuance costs and discount* | | Carrying value |
| Debt maturing within one year: | | | | | | | | | | | | | |
2029 Term loan B (1) | January 18, 2029 | | $ | 31.0 | | | $ | — | | | $ | 31.0 | | | $ | — | | | $ | — | | | $ | — | |
2026 Term loan (1) | Fully paid off in January 2024 | | — | | | — | | | — | | | 28.1 | | | — | | | 28.1 | |
2029 Term loan (1) | Fully paid off in January 2024 | | — | | | — | | | — | | | 4.6 | | | — | | | 4.6 | |
| Total short-term debt | | | $ | 31.0 | | | $ | — | | | $ | 31.0 | | | $ | 32.7 | | | $ | — | | | $ | 32.7 | |
| | | | | | | | | | | | | |
| Debt maturing after one year: | | | | | | | | | | | | | |
2029 Term loan B (1) | January 18, 2029 | | $ | 3,072.6 | | | $ | 20.9 | | | $ | 3,051.7 | | | $ | — | | | $ | — | | | $ | — | |
2026 Term loan (1) | Fully paid off in January 2024 | | — | | | — | | | — | | | 2,623.6 | | | 33.0 | | | 2,590.6 | |
2029 Term loan (1) | Fully paid off in January 2024 | | — | | | — | | | — | | | 447.3 | | | 5.3 | | | 442.0 | |
Revolving facility (1) (2) | February 15, 2029 | | — | | | — | | | — | | | 25.0 | | | — | | | 25.0 | |
5.000% Senior unsecured notes (1) | December 15, 2029 | | 460.0 | | | 4.9 | | | 455.1 | | | 460.0 | | | 5.1 | | | 454.9 | |
| Total long-term debt | | | $ | 3,532.6 | | | $ | 25.8 | | | $ | 3,506.8 | | | $ | 3,555.9 | | | $ | 43.4 | | | $ | 3,512.5 | |
| Total debt | | | $ | 3,563.6 | | | $ | 25.8 | | | $ | 3,537.8 | | | $ | 3,588.6 | | | $ | 43.4 | | | $ | 3,545.2 | |
*Initial debt issuance costs were recorded as a reduction of the carrying amount of the debt and amortized over the contractual term of the debt. Balances represent the unamortized portion of debt issuance costs and discounts.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
(1) The 5.000% Senior Unsecured Notes and the Senior Secured Credit Facilities contain certain covenants that limit our ability to incur additional indebtedness and guarantee indebtedness, create liens, engage in mergers or acquisitions, sell, transfer or otherwise dispose of assets, pay dividends and distributions or repurchase capital stock, prepay certain indebtedness and make investments, loans and advances. We were in compliance with these non-financial covenants at March 31, 2024 and December 31, 2023.
(2) The Revolving Facility contains a springing financial covenant requiring compliance with a maximum ratio of first lien net indebtedness to consolidated EBITDA of 6.75. The financial covenant applies only if the aggregate principal amount of borrowings under the Revolving Facility and certain outstanding letters of credit exceeds 35% of the total amount of commitments under the Revolving Facility on the last day of any fiscal quarter. The financial covenant did not apply at March 31, 2024 and December 31, 2023.
Senior Secured Credit Facilities
On February 8, 2019, the Company entered into a credit agreement governing its Senior Secured Credit Facilities (the "Senior Secured Credit Facilities"). Subsequently, the credit agreement has been amended several times. Currently, the Senior Secured Credit Facilities consist of a senior secured term loan facility and a senior secured revolving credit facility.
On January 29, 2024, we amended our credit agreement related to the then existing $451.9 million term loan with a maturity date of January 18, 2029 (the "2029 Term Loan"), to reduce its interest rate by 0.25%, resulting in a margin spread of SOFR plus 2.75% per annum and to increase the then existing term loan facility by $2,651.7 million to establish a new term loan with an aggregate principal amount of $3,103.6 million and a maturity date of January 18, 2029 (“2029 Term Loan B”). The proceeds from the 2029 Term Loan B were used to fully repay the previously existing term loans, including the senior secured term loan with a maturity date of February 8, 2026 (the "2026 Term Loan") and the 2029 Term Loan. As a result, we recorded a loss on debt extinguishment of $37.1 million related to the unamortized debt issuance costs associated with the then existing 2026 and 2029 Term Loan. The loss was recorded within “Non-operating income (expense)-net” for the three months ended March 31, 2024. Initial debt issuance costs of $21.6 million related to the 2029 Term Loan B were recorded as a reduction of the carrying amount of long term debt and will be amortized over the contractual term of the term loan. Concurrently, we also amended our credit agreement governing the Revolving Facility to extend the maturity date to February 15, 2029, and to reduce the applicable margin by 50 basis points, resulting in a margin spread of SOFR plus 2.50% per annum, subject to a leverage-based pricing grid. The Credit Spread Adjustment under the Revolving Facility was also removed as part of the amendment. Total fees paid associated with the amendment of the Revolving Facility were $5.0 million, which is deferred and amortized over the term of the new arrangement, together with the original unamortized deferred costs.
Borrowings under the Senior Secured Credit Facilities bear interest at a rate per annum equal to an applicable margin over a SOFR or LIBOR for the interest period relevant to such borrowing, subject to interest rate floors, and secured by substantially all of the Company’s assets. We completed the transition of reference rate from LIBOR to SOFR in the second quarter of 2023. We utilized the expedients set forth in ASC Topic 848, including those relating to derivative instruments used in hedging relationships. This transition did not result in a financial impact to our consolidated financial statements.
Other details of the Senior Secured Credit Facilities:
•For the 2029 Term Loan B, beginning June 30, 2024, the principal amount is required to be paid down in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount, with the balance being payable on January 18, 2029. The 2029 Term Loan B bears interest at a rate per annum equal to 275 basis points over a SOFR rate for the interest period. The interest rate associated with the outstanding balance of the 2029 Term Loan B at March 31, 2024 was 8.082%.
•For the previously existing 2029 Term Loan, beginning June 30, 2022, the principal amount was required to be paid down in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount, with the balance being payable on January 18, 2029. The interest rate per annum for the 2029 Term Loan was based on a SOFR rate plus a margin of 325 basis points at December 31, 2023. The interest rate associated with the outstanding balance of the 2029 Term Loan at December 31, 2023 was 8.355%.
•For the previously existing 2026 Term Loan, beginning June 30, 2020, the principal amount was required to be paid down in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount, with the balance being payable on February 8, 2026. The interest rate per annum for the 2026 Term Loan was based on a SOFR rate plus a margin of 285 basis points, inclusive of the SOFR credit spread adjustment, at December 31, 2023. The interest rate associated with the outstanding balance of the 2026 Term Loan at December 31, 2023 was 8.205%.
•Borrowings under the Revolving Facility bear interest at a rate per annum equal to SOFR plus 250 basis points, subject to a leverage-based pricing grid, at March 31, 2024 and 310 basis points over a SOFR rate, inclusive of the SOFR credit spread adjustment, at December 31, 2023. The aggregate amount available under the Revolving
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
Facility is $850 million. The available borrowings under the Revolving Facility at March 31, 2024 and December 31, 2023 were $850.0 million and $825.0 million, respectively. The interest rate associated with the outstanding balance of the Revolving Facility at December 31, 2023 was 8.462%. Initial debt issuance costs related to the Revolving Facility were included in "Other non-current assets" on the consolidated balance sheet and are amortized over the term of the Revolving Facility.
Other
We were contingently liable under open standby letters of credit and bank guarantees issued by our banks in favor of third parties totaling $9.6 million at March 31, 2024 and $10.2 million at December 31, 2023.
We entered into interest rate swaps and cross currency interest rate swaps, with various maturity dates, in order to manage the impact of interest rate changes. As of March 31, 2024 and December 31, 2023, we had interest rate swap contracts of $2,750 million and cross-currency interest rate contracts with an aggregate notional amount of $625 million and $375 million, respectively. See Note 13 for more detailed discussion.
Note 6 -- Accounts Receivable Securitization Facility
In September 2022, the Company entered into a three-year revolving securitization facility agreement to transfer customer receivables of one of our U.S. subsidiaries (“Originator”) through our bankruptcy-remote subsidiary (“SPE”) to a third-party financial institution (“Purchaser”) on a recurring basis in exchange for cash equal to the gross receivables transferred. The facility had a monthly drawing limit of $215 million at both March 31, 2024 and December 31, 2023. Transfers of our U.S. accounts receivable from the SPE to the Purchaser are accounted for as a sale of financial assets, and the accounts receivable are derecognized from the consolidated financial statements, as the SPE transfers effective control and risk associated with the transferred accounts receivable. Other than collection and administrative responsibilities, the Company and related subsidiaries have no continuing involvement in the transferred accounts receivable. The accounts receivable, once sold, are no longer available to satisfy creditors of the Company or the related subsidiaries in the event of bankruptcy. These sales are transacted at the face value of the relevant accounts receivable. The future outstanding balance of trade receivables that will be sold is expected to vary based on the level of activity and other factors. The receivables sold are fully guaranteed by the SPE that also pledges further accounts receivable as collateral under this agreement. The Company controls and therefore consolidates the SPE in its consolidated financial statements.
The Company derecognized accounts receivable of $232.5 million and $256.6 million for the three months ended March 31, 2024 and 2023, respectively. The Company collected $232.5 million and $256.6 million of accounts receivable sold under this agreement during the three months ended March 31, 2024 and 2023, respectively. Unsold accounts receivable of $37.9 million and $112.0 million were pledged by the SPE as collateral to the Purchaser as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, recourse liability related to the receivables sold that has not been collected was immaterial.
Fees incurred for the facility, including fees for administrative responsibilities, during the three months ended March 31, 2024 and 2023, were $3.8 million and $3.1 million, respectively, and have been reflected within "Non-operating income (expense) – net" in the condensed consolidated statements of operations and comprehensive income (loss).
Cash activity related to the facility is reflected in "Net cash provided by operating activities" in the condensed consolidated statements of cash flows.
Note 7 -- Other Assets and Liabilities
Other Non-Current Assets:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
| | | | | | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 | | | | |
Right of use assets (1) | $ | 48.6 | | | $ | 43.1 | | | | | |
| Prepaid pension assets | 5.6 | | | 5.6 | | | | | |
| Investments | 21.4 | | | 20.6 | | | | | |
| Deferred income tax | 16.2 | | | 17.2 | | | | | |
| Long-term contract assets | 21.1 | | | 18.0 | | | | | |
| Prepaid cloud computing fees and deferred implementation costs | 29.0 | | | 23.2 | | | | | |
| Other | 64.7 | | | 60.1 | | | | | |
| Total | $ | 206.6 | | | $ | 187.8 | | | | | |
(1)We recognized $9.6 million related to new operating leases for the three months ended March 31, 2024.
Other Accrued and Current Liabilities:
| | | | | | | | | | | |
| March 31,
2024 | | December 31, 2023 |
Accrued operating costs | $ | 96.4 | | | $ | 94.3 | |
| Accrued interest expense | 10.8 | | | 5.3 | |
Short-term lease liability (1) | 14.3 | | | 15.0 | |
| Accrued income tax | 2.1 | | | 15.3 | |
Other accrued liabilities (2) | 48.9 | | | 66.2 | |
| Total | $ | 172.5 | | | $ | 196.1 | |
(1)We recognized $0.1 million related to new operating leases for the three months ended March 31, 2024.
(2)The decrease was primarily driven by lower interest rate swap liabilities and payments for prior year accrued liabilities.
Other Non-Current Liabilities:
| | | | | | | | | | | |
| March 31,
2024 | | December 31, 2023 |
| 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 (1) | 40.0 | | | 33.8 | |
| Liabilities for unrecognized tax benefits | 14.7 | | | 19.8 | |
| Other | 19.4 | | | 15.5 | |
| Total | $ | 129.8 | | | $ | 118.2 | |
(1)We recognized $9.5 million related to new operating leases for the three months ended March 31, 2024.
Note 8 -- Contingencies
In the ordinary course of business, we are involved in various pending and threatened litigation and regulatory matters related to our operations, such as claims brought by our clients in connection with commercial disputes, defamation claims by subjects of our reporting, and employment claims made by our current or former employees, some of which include claims for punitive or exemplary damages. Our ordinary course litigation may also include class action lawsuits, which make allegations related to various aspects of our business. From time to time, we are also subject to regulatory investigations or other proceedings by state and federal regulatory authorities as well as authorities outside of the U.S., some of which take the form of civil investigative demands or subpoenas. Some of these regulatory inquiries may result in the assessment of fines for violations of regulations or settlements with such authorities requiring a variety of remedies. We believe that none of these actions depart from customary litigation or regulatory inquiries incidental to our business.
We review lawsuits and other legal and regulatory matters (collectively "legal proceedings") on an ongoing basis when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, management bases its decision on its assessment of the ultimate outcome assuming all appeals have been exhausted. For legal proceedings where it
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
has been determined that a loss is both probable and reasonably estimable, a liability based on known facts and which represents our best estimate has been recorded. Actual losses may materially differ from the amounts recorded and the ultimate outcome of our pending cases is generally not yet determinable.
While some of these matters could be material to our operating results or cash flows for any particular period if an unfavorable outcome results, at present we do not believe the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition.
In addition, in the normal course of business, and including without limitation, our merger and acquisition activities, strategic relationships and financing transactions, the Company indemnifies other parties, including clients, lessors and parties to other transactions with the Company, with respect to certain matters. We have agreed to hold the other parties harmless against losses arising from a breach of representations or covenants, or arising out of other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. The Company has also entered into indemnity obligations with its officers and directors.
Right of Publicity Class Actions
DeBose v. Dun & Bradstreet Holdings, Inc., No. 2:22-cv-00209-ES-CLW (D.N.J.)
On January 17, 2022, Plaintiff Rashad DeBose filed a Class Action Complaint against the Company, alleging that the Company used the purported class members’ names and personas to promote paid subscriptions to the Company’s Hoovers product website without consent, in violation of the Ohio right of publicity statute and Ohio common law prohibiting misappropriation of a name or likeness. On March 30, 2022, the Company filed a motion to dismiss the Complaint. The motion was briefed, and in November 2022 the Court requested supplemental briefing. Supplemental briefing was completed in January 2023. The Court has not yet set a date for oral argument. Discovery is ongoing.
In accordance with ASC 450 Contingencies, the Company is continuing to defend the claims and evaluate any potential exposure; however, at this time we have no basis to determine that a loss in connection with this matter is both probable and reasonably estimable, and thus no reserve has been established.
Batis v. Dun & Bradstreet Holdings, Inc., No. 4:22-cv-01924-AGT (N.D.Cal.)
On March 25, 2022, Plaintiff Odette R. Batis filed a Class Action Complaint against the Company, alleging that the Company used the purported class members’ names and personas to promote paid subscriptions to the Company’s Hoovers product website without consent, in violation of the California right of publicity statute, California common law prohibiting misappropriation of a name or likeness and California’s Unfair Competition Law. On June 30, 2022, the Company filed a motion to dismiss the Complaint pursuant to California’s anti-SLAPP statute. On February 10, 2023, the District Court denied the motion to dismiss. The decision was subject to an automatic right of appeal, and the Company has appealed the matter to the Ninth Circuit. On January 18, 2024, the Ninth Circuit affirmed the district court’s determination that the anti-SLAPP statute does not apply. On February 1, 2024, D&B filed a petition for rehearing or rehearing en banc seeking to vacate the Ninth Circuit ruling. Subsequently, on February 15, 2024, the Ninth Circuit issued an order stating that the petition will be held in abeyance pending the resolution of en banc rehearing of another similar case pending before the Ninth Circuit, Martinez v. ZoomInfo Technologies, Inc. (“Martinez”). On March 1, 2024, the Ninth Circuit vacated the en banc rehearing in the Martinez case. On March 7, 2024, the parties wrote a joint letter requesting that the pending petition for rehearing be determined.
In accordance with ASC 450 Contingencies, the Company is continuing to defend the claims and evaluate any potential exposure; however, at this time we have no basis to determine that a loss in connection with this matter is both probable and reasonably estimable, and thus no reserve has been established.
Note 9 -- Income Taxes
The effective tax rate for the three months ended March 31, 2024 was 66.0%, reflecting a tax benefit of $44.2 million on pre-tax loss of $67.0 million, compared to 26.0% for the three months ended March 31, 2023, which reflected a tax benefit of $11.8 million on pre-tax loss of $45.4 million. The change in the effective tax rate for the three months ended March 31, 2024 compared to the prior year quarter was primarily a result of a decrease to our uncertain tax positions as a result of an audit settlement and a reduction to the Global Intangible Low-Taxed Income ("GILTI") inclusion in the U.S. due to an election allowing for the exclusion of certain income, partially offset by the impact of the Global Anti-Base Erosion and Profit Shifting ("BEPS") - Pillar Two Global Minimum Tax introduced by The Organization for Economic Co-operation and Development ("OECD").
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
Note 10 -- Pension and Postretirement Benefits
Net Periodic Pension Cost
The following table sets forth the components of the net periodic cost (income) associated with our pension plans and our postretirement benefit obligations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension plans | | Postretirement benefit obligations |
| Three months ended March 31, | | | | Three months ended March 31, | | |
| 2024 | | 2023 | | | | | | 2024 | | 2023 | | | | |
| Components of net periodic cost (income): | | | | | | | | | | | | | | | |
| 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
The following table sets forth the components of our stock-based compensation and expected tax benefit for the three months ended March 31, 2024 and 2023 related to the plans in effect during the respective period:
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
| Stock-based compensation expense: | 2024 | | 2023 | | | | |
Restricted stock and restricted stock units | $ | 16.1 | | | $ | 15.8 | | | | | |
Stock options (1) | 1.8 | | | 4.7 | | | | | |
| Total compensation expense | $ | 17.9 | | | $ | 20.5 | | | | | |
| | | | | | | |
| Expected tax benefit: | | | | | | | |
| Restricted stock and restricted stock units | $ | 1.6 | | | $ | 1.7 | | | | | |
| Stock options | 0.1 | | | 0.2 | | | | | |
| Total expected tax benefit | $ | 1.7 | | | $ | 1.9 | | | | | |
(1)Lower expense for stock options was primarily due to the impact of the accelerated attribution method used to recognize expense for the performance-based stock option grants.
Stock Options
We accounted for stock options based on grant date fair value. Service condition options were valued using the Black-Scholes valuation model. Market condition options were valued using a Monte Carlo valuation model.
The following table summarizes the stock options activity for the three months ended March 31, 2024:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
| | | | | | | | | | | | | | | | | | | | | | | |
| Stock options |
| Number of
options | | Weighted-average
exercise price | | Weighted-average remaining contractual term (in years) | | Aggregate intrinsic value |
Balances, January 1, 2024 | 10,865,868 | | | $19.31 | | 5.7 | | $— |
| Granted | — | | | $— | | | | |
| Forfeited | (64,499) | | | $15.89 | | | | |
| Exercised | — | | | $— | | | | |
Balances, March 31, 2024 | 10,801,369 | | | $19.33 | | 5.5 | | $— |
| | | | | | | |
Expected to vest as of March 31, 2024 | 4,721,369 | | | $15.89 | | 8.4 | | $— |
Exercisable as of March 31, 2024 | 6,080,000 | | | $22.00 | | 3.2 | | $— |
As of March 31, 2024, total unrecognized compensation cost related to stock options was $5.4 million, which was expected to be recognized over a weighted average period of 1.3 years.
Restricted Stock and Restricted Stock Units
Restricted stock and restricted stock units are valued on the award grant date at the closing market price of our stock.
The following table summarizes the restricted stock and restricted stock units activity for the three months ended March 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | |
| Restricted stock and Restricted stock units |
| Number of
shares | | Weighted-average
grant date
fair value | | Weighted-average remaining contractual term (in years) | | Aggregate intrinsic value |
Balances, January 1, 2024 | 8,682,523 | | | $13.78 | | 1.0 | | $101.6 |
| Granted | 5,290,217 | | | $10.44 | | | | |
| Forfeited | (68,486) | | | $13.22 | | | | |
| Vested | (2,909,844) | | | $14.47 | | | | |
Balances, March 31, 2024 | 10,994,410 | | | $11.99 | | 1.5 | | $110.4 |
As of March 31, 2024, total unrecognized compensation cost related to non-vested restricted stock and restricted stock units was $88.2 million, which is expected to be recognized over a weighted average period of 2.2 years.
Employee Stock Purchase Plan ("ESPP")
Under the Dun & Bradstreet Holdings, Inc. Employee Stock Purchase Plan, eligible employees are allowed to voluntarily make after-tax contributions ranging from 3% to 15% of eligible earnings. The Company contributes varying matching amounts to employees, as specified in the plan document, after a one year holding period. We recorded the associated expense of $0.6 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively.
Note 12 -- Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
In periods when we report net income, diluted earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period plus the dilutive effect of our outstanding stock incentive awards. For periods when we report a net loss, diluted earnings per share is equal to basic earnings per share, as the impact of our outstanding stock incentive awards is considered to be antidilutive.
The following table sets forth the computation of basic and diluted earnings (loss) per share:
| | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31, | | |
| | 2024 | | 2023 | | | | |
| Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. | | $ | (23.2) | | | $ | (33.7) | | | | | |
| | | | | | | | |
| Weighted average number of shares outstanding-basic | | 431,555,922 | | | 429,584,681 | | | | | |
Weighted average number of shares outstanding-diluted (1) | | 431,555,922 | | | 429,584,681 | | | | | |
| | | | | | | | |
| Earnings (loss) per share of common stock attributable to Dun & Bradstreet Holdings, Inc.: | | | | | | | | |
| Basic | | $ | (0.05) | | | $ | (0.08) | | | | | |
| Diluted | | $ | (0.05) | | | $ | (0.08) | | | | | |
(1)The weighted average number of shares outstanding used in the computation of diluted earnings per share for the three months ended March 31, 2024 and 2023, excludes the effect of 10.9 million and 11.7 million, respectively, of potentially issuable common shares that are anti-dilutive to the diluted earnings per share computation.
Below is a reconciliation of our common stock issued and outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | Common Shares | | Treasury Shares (1) | | Common Shares Outstanding |
Shares as of December 31, 2023 | | 439,735,256 | | | (886,920) | | | 438,848,336 | |
Shares issued for the three months ended March 31, 2024 | | 4,820,581 | | | N/A | | 4,820,581 | |
Shares forfeited for the three months ended March 31, 2024 (2) | | (933,114) | | | N/A | | (933,114) | |
Shares as of March 31, 2024 | | 443,622,723 | | | (886,920) | | | 442,735,803 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
(1)Primarily related to the forfeiture of unvested incentive units granted prior to the IPO.
(2)Includes shares surrendered related to payroll tax withheld for the vested restricted shares.
The following dividends were declared by our Board of Directors and subsequently paid during the three months ended March 31, 2024:
| | | | | | | | | | | | | | | | | | | | |
| Declaration Date | | Record Date | | Payment Date | | Dividends Per Share |
| February 8, 2024 | | March 7, 2024 | | March 21, 2024 | | $ | 0.05 | |
Dividends accrued for restricted shares are contingent and payable upon vesting of the underlying restricted shares.
Note 13 -- Financial Instruments
The Company is exposed to global market risks, including risks from changes in foreign exchange rates and changes in interest rates. Accordingly, we use derivatives to manage the aforementioned financial exposures that occur in the normal course of business. We do not use derivatives for trading or speculative purposes. By their nature, all such instruments involve risk, including the credit risk of non-performance by counterparties. However, at March 31, 2024 and December 31, 2023, there was no significant risk of loss in the event of non-performance of the counterparties to these financial instruments. We control our exposure to credit risk through monitoring procedures and by selection of reputable counterparties. Collateral is generally not required for these types of investments.
Our trade receivables do not represent a significant concentration of credit risk at March 31, 2024 and December 31, 2023, because we sell to a large number of clients in different geographical locations and industries.
Interest Rate Risk Management
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
Our objective in managing our exposure to interest rates is to limit the impact of interest rate changes on our earnings, cash flows and financial position, and to lower our overall borrowing costs. To achieve these objectives, we maintain a practice that floating-rate debt be managed within a minimum and maximum range of our total debt exposure. To manage our exposure and limit volatility, we may use fixed-rate debt, floating-rate debt and/or interest rate swaps. We recognize all derivative instruments as either assets or liabilities at fair value in the consolidated balance sheet.
We use interest rate swaps to manage the impact of interest rate changes on our earnings. Under the swap agreements, we make monthly payments based on the fixed interest rate and receive monthly payments based on the floating rate. The purpose of the swaps is to mitigate the variation of future cash flows from changes in the floating interest rates on our existing debt. The swaps are designated and accounted for as cash flow hedges. Changes in the fair value of the hedging instruments are recorded in other comprehensive income (loss) ("OCI"), net of tax, and reclassified to earnings in the same line item associated with the hedged item when the hedged item impacts earnings.
Effective on August 28, 2023, we amended our interest rate swap agreements with an aggregate notional amount of $1,000 million that originally matured on March 27, 2024 ("2024 interest rate swaps"). The amendments extend the maturity date to March 27, 2025. Under the amended agreements, the Company pays a fixed rate of 3.214% and receives the one-month SOFR rate. As a result of the amendment, the 2024 interest rate swaps were de-designated and the unrealized gain of $29.0 million included within accumulated other comprehensive income (loss) was frozen and will be systematically reclassified to earnings as a reduction to interest expense over the original term of the 2024 interest rate swaps. Additionally, the amended swaps had an aggregate fair value of $29.0 million at inception and will be ratably recorded to accumulated other comprehensive income (loss) and reclassified to earnings as an increase to interest expense over the term of the amended interest rate swaps. At the inception of the amended interest rate swaps, we performed a quantitative effectiveness assessment and determined that the swaps qualified for cash flow hedge accounting. Changes in the fair value of the hedging instruments are recorded in OCI, net of tax, and reclassified to earnings in the same line item associated with the hedged item when the hedged item impacts earnings. Additionally, we perform quantitative tests to assess hedging effectiveness over the remaining life of the amended swaps.
On February 2, 2023, the Company entered into three-year interest rate swaps with an aggregate notional amount of $1,500 million, effective January 27, 2023 through February 8, 2026. For these swaps, the Company pays a fixed rate of 3.695% and received the one-month LIBOR rate through June 27, 2023 and receives the one-month Term SOFR rate after June 27, 2023 for the remainder of the term.
During the second quarter of 2023, we modified our Senior Secured Credit Facility to complete the transition of reference rate from LIBOR to SOFR. As a result, our interest rate swap agreements which previously received one-month LIBOR interest were also modified to receive one-month SOFR interest. We utilized the expedients set forth in ASC Topic 848, including those relating to derivative instruments used in hedging relationships. This transition did not result in a financial impact to our consolidated financial statements.
The following table summarizes our interest rate swaps as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
Expiration date | | Fixed rate | | Notional amount | |
| | | | March 31, 2024 | | December 31, 2023 | |
| February 27, 2025 | | 1.629% | | $250 | | $250 | |
| March 27, 2025 | | 3.214% | | 1,000 | | 1,000 | |
| February 8, 2026 | | 3.695% | | 1,500 | | 1,500 | |
| Total interest rate swaps | | | | $2,750 | | $2,750 | |
Foreign Exchange Risk Management
Our objective in managing exposure to foreign currency fluctuations is to reduce the volatility caused by foreign exchange rate changes on the earnings, cash flows and financial position of our international operations. From time to time, we follow a practice of hedging certain balance sheet positions denominated in currencies other than the functional currency applicable to each of our various subsidiaries. In addition, we are subject to foreign exchange risk associated with our
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
international earnings and net investments in our foreign subsidiaries. We may use short-term, foreign exchange forward and, from time to time, option contracts to execute our hedging strategies. Certain derivatives are designated as accounting hedges.
Foreign exchange forward contracts
To decrease earnings volatility, we currently hedge substantially all our intercompany balance positions denominated in a currency other than the functional currency applicable to each of our various subsidiaries with short-term, foreign exchange forward contracts. The underlying transactions and the corresponding foreign exchange forward contracts are marked to market at the end of each quarter and the fair value impacts are reflected within “Non-operating income (expense) – net” in the condensed consolidated statements of operations and comprehensive income (loss).
These contracts are denominated primarily in the British pound sterling, the Euro, the Swedish Krona, and the Norwegian Krone. Our foreign exchange forward contracts are not designated as hedging instruments under authoritative guidance and typically have maturities of 12 months or less.
As of March 31, 2024 and December 31, 2023, the notional amounts of our foreign exchange contracts were $523.9 million and $653.1 million, respectively.
Cross-currency interest rate swaps
To protect the value of our investments in our foreign operations against adverse changes in foreign currency exchange rates, we hedge a portion of our net investment in one or more of our foreign subsidiaries by using cross-currency interest rate swaps. Cross currency swaps are designated as net investment hedges of a portion of our foreign investments denominated in the non-U.S. dollar currency. The component of the gains and losses on our net investment in these designated foreign operations driven by changes in foreign exchange rates, are partly offset by movements in the fair value of our cross-currency swap contracts. The change in the fair value of the swaps in each period is reported in OCI, net of tax. Such amounts will remain in accumulated OCI until the liquidation or substantial liquidation of our investment in the underlying foreign operations. Through the respective maturity dates of each of the swap contracts, we receive monthly fixed-rate interest payments, which are recorded as contra expense within "Interest expense" in the condensed consolidated statements of operations and comprehensive income (loss). They are designated as net investment hedges of a portion of our foreign investments denominated in the Euro currency.
On February 28, 2024, we executed three tranches of cross currency swaps with a total notional amount of $250 million (€230.6). Two tranches have a notional amount of $75 million each with a four-year term, where we receive USD coupons at fixed rates of 1.271% and 1.224%, respectively, and pay EUR coupons of 0%. The remaining tranche has a notional amount of $100 million with a five-year term, where we receive USD coupons at the fixed rate of 1.260%, and pay EUR coupons of 0%. On the maturity date of each tranche, we will receive the respective notional amount in USD and pay the counterparty the same in euros. We received aggregate payments of $0.3 million for the three months ended March 31, 2024. These payments were recorded as contra expense within "Interest expense" in the condensed consolidated statements of operations and comprehensive income (loss). These swaps were terminated on April 16, 2024 and replaced with new swaps with similar notional amounts and terms. Upon the termination of the swaps, we paid cash of $0.4 million, which will be reported in OCI for the three and six months ended June 30, 2024, and will remain within accumulated OCI until the period in which a disposal or substantial liquidation of the entities hedged occurs.
On July 15, 2022, we executed three tranches of cross currency swaps, each with a notional amount of $125 million (€124 million) at two, three, and four-year terms, where we receive USD coupons at fixed rates of 2.205%, 1.883%, and 1.723%, respectively, and pay EUR coupons of 0%. On the maturity date of each tranche, we will receive the notional amount of $125 million, and pay the counterparty €124 million. We received aggregate payments of $1.8 million for both the three months ended March 31, 2024 and 2023. These payments were recorded as contra expense within "Interest expense" in the condensed consolidated statements of operations and comprehensive income (loss). Effective April 19, 2024 we amended our cross currency interest rate swap agreements with an aggregate notional amount of $125 million that mature on July 19, 2024. The amendments extend the maturity date to July 19, 2027. As a result of the amendment, the cross currency interest rate swap with the maturity date of July 19, 2024 was de-designated and the unrealized loss of $0.3 million related to the off-market component included within accumulated other comprehensive income (loss) will be systematically reclassified to earnings as a reduction to interest expense through July 19, 2027.
Fair Values of Derivative Instruments in the Condensed Consolidated Balance Sheets:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Asset derivatives | | Liability derivatives |
| | March 31, 2024 | | December 31, 2023 | | March 31, 2024 | | December 31, 2023 |
| | Balance sheet
location | | Fair value | | Balance sheet
location | | Fair value | | Balance sheet
location | | Fair value | | Balance sheet
location | | Fair value |
| Derivatives designated as hedging instruments: | | | | | | | | | | | | | | | |
| Cash flow hedge derivative: | | | | | | | | | | | | | | | |
| Interest rate swaps | Other current assets | | $ | 47.1 | | | Other current assets | | $ | 33.1 | | | Other accrued &
current liabilities | | $ | — | | | Other accrued &
current liabilities | | $ | — | |
| Net investment hedge derivative: | | | | | | | | | | | | | | | |
| Cross-currency swaps | Other current assets | | — | | | Other current assets | | — | | | Other accrued &
current liabilities | | 27.5 | | | Other accrued &
current liabilities | | 34.1 | |
| Total derivatives designated as hedging instruments | | | $ | 47.1 | | | | | $ | 33.1 | | | | | $ | 27.5 | | | | | $ | 34.1 | |
| Derivatives not designated as hedging instruments: | | | | | | | | | | | | | | | |
| Foreign exchange forward contracts | Other current
assets | | $ | 4.4 | | | Other current
assets | | $ | 8.0 | | | Other accrued &
current liabilities | | $ | 0.5 | | | Other accrued &
current liabilities | | $ | 2.3 | |
| | | | | | | | | | | | | | | |
| Total derivatives not designated as hedging instruments | | | $ | 4.4 | | | | | $ | 8.0 | | | | | $ | 0.5 | | | | | $ | 2.3 | |
| Total derivatives | | | $ | 51.5 | | | | | $ | 41.1 | | | | | $ | 28.0 | | | | | $ | 36.4 | |
The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount of pre-tax net gain or (loss) recognized in OCI on derivative | | | | Amount of gain or (loss) reclassified from accumulated OCI into income | | | | Amount of gain or (loss) recognized in income on derivative |
| | Three months ended March 31, | | | | Three months ended March 31, | | | | Three months ended March 31, |
| Derivatives designated as hedging instruments | | 2024 | | 2023 | | Location of gain or (loss) reclassified from accumulated OCI into income | | 2024 | | 2023 | | Location of gain or (loss) recognized in income on derivative | | 2024 | | 2023 |
| Cash flow hedge derivative: | | | | | | | | | | | | | | | | |
| Interest rate swaps | | $ | 6.3 | | | $ | (14.5) | | | Interest expense | | $ | 21.2 | | | $ | 14.3 | | | Interest expense | | $ | 21.2 | | | $ | 14.3 | |
| Net investment hedge derivative: | | | | | | | | | | | | | | | | |
| Cross-currency swaps | | $ | 6.6 | | | $ | (3.3) | | | | | $ | — | | | $ | — | | | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Amount of gain (loss) recognized in income on derivatives |
| | | | Three months ended March 31, | | |
| Derivatives not designated as hedging instruments | | Location of gain or (loss) recognized in income on derivatives | | 2024 | | 2023 | | | | |
| | | | | | | | | | |
| Foreign exchange forward contracts | | Non-operating income (expense) – net | | $ | 1.0 | | | $ | 3.8 | | | | | |
The net amount related to the interest rate swaps expected to be reclassified into earnings over the next 12 months is approximately $44 million.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
Fair Value of Financial Instruments
Our financial assets and liabilities that are reflected in the condensed consolidated financial statements include derivative financial instruments, cash and cash equivalents, accounts receivable, other receivables, accounts payable, short-term borrowings and long-term borrowings.
The following table summarizes fair value measurements by level at March 31, 2024 for assets and liabilities measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | |
| Quoted prices in
active markets
for identical
assets (level I) | | Significant other
observable
inputs (level II) | | Significant
unobservable
inputs
(level III) | | Balance at March 31, 2024 |
| Assets: | | | | | | | |
Cash equivalents (1) | $ | 13.8 | | | $ | — | | | $ | — | | | $ | 13.8 | |
| Other current assets: | | | | | | | |
Foreign exchange forwards (2) | $ | — | | | $ | 4.4 | | | $ | — | | | $ | 4.4 | |
Interest rate swap arrangements (3) | $ | — | | | $ | 47.1 | | | $ | — | | | $ | 47.1 | |
| Liabilities: | | | | | | | |
| Other accrued and current liabilities: | | | | | | | |
Foreign exchange forwards (2) | $ | — | | | $ | 0.5 | | | $ | — | | | $ | 0.5 | |
| | | | | | | |
Cross-currency swap arrangements (3) | $ | — | | | $ | 27.5 | | | $ | — | | | $ | 27.5 | |
The following table summarizes fair value measurements by level at December 31, 2023 for assets and liabilities measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | |
| Quoted prices in
active markets
for identical
assets (level I) | | Significant other
observable
inputs (level II) | | Significant
unobservable
inputs
(level III) | | Balance at December 31, 2023 |
| Assets: | | | | | | | |
Cash equivalents (1) | $ | 0.9 | | | $ | — | | | $ | — | | | $ | 0.9 | |
| Other current assets: | | | | | | | |
Foreign exchange forwards (2) | $ | — | | | $ | 8.0 | | | $ | — | | | $ | 8.0 | |
Interest rate swap arrangements (3) | $ | — | | | $ | 33.1 | | | $ | — | | | $ | 33.1 | |
| Liabilities: | | | | | | | |
| Other accrued and current liabilities: | | | | | | | |
Foreign exchange forwards (2) | $ | — | | | $ | 2.3 | | | $ | — | | | $ | 2.3 | |
Cross-currency swap arrangements (3) | $ | — | | | $ | 34.1 | | | $ | — | | | $ | 34.1 | |
(1)The carrying value of cash equivalents represents fair value as they consist of highly liquid investments with an initial term from the date of purchase by the Company to maturity of three months or less.
(2)Fair value is determined based on observable market data and considers a factor for nonperformance in the valuation.
(3)Fair value is determined based on observable market data.
There were no transfers between Levels I and II or transfers in or transfers out of Level III in the fair value hierarchy for both the three months ended March 31, 2024 and 2023.
At March 31, 2024 and December 31, 2023, the fair value of cash and cash equivalents, accounts receivable, other receivables and accounts payable approximated carrying value due to the short-term nature of these instruments. The estimated fair values of other financial instruments subject to fair value disclosures, determined based on valuation models using discounted cash flow methodologies with market data inputs from globally recognized data providers and third-party quotes from major financial institutions (categorized as Level II in the fair value hierarchy), are as follows:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at |
| | March 31, 2024 | | December 31, 2023 |
| | Carrying
amount | | Fair value | | Carrying
amount | | Fair value |
| | | | | | | |
Long-term debt (1) | $ | 455.1 | | | $ | 423.0 | | | $ | 454.9 | | | $ | 420.3 | |
| Revolving facility | $ | — | | | $ | — | | | $ | 25.0 | | | $ | 24.6 | |
Term loans (2) | $ | 3,082.7 | | | $ | 2,925.2 | | | $ | 3,065.3 | | | $ | 3,003.9 | |
(1)Represents the 5.000% Senior Unsecured Notes.
(2)Includes short-term and long-term portions of the Term Loan Facility.
Items Measured at Fair Value on a Nonrecurring Basis
In addition to assets and liabilities that are recorded at fair value on a recurring basis, we record assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges and for acquisition accounting in accordance with the guidance in ASC 805 "Business Combinations."
Note 14 -- Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) ("AOCI"): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Foreign currency translation adjustments | | Net investment hedge derivative | | Defined benefit pension plans | | Cash flow hedge derivative | | Total |
Balance, January 1, 2024 | | $ | (142.5) | | | $ | (10.5) | | | $ | (62.2) | | | $ | 16.5 | | | $ | (198.7) | |
| Other comprehensive income (loss) before reclassifications | | (35.4) | | | 4.9 | | | — | | | 20.6 | | | (9.9) | |
| Amounts reclassified from accumulated other comprehensive income (loss), net of tax | | — | | | — | | | (0.4) | | | (15.9) | | | (16.3) | |
Balance, March 31, 2024 | | $ | (177.9) | | | $ | (5.6) | | | $ | (62.6) | | | $ | 21.2 | | | $ | (224.9) | |
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| Balance, January 1, 2023 | | $ | (172.3) | | | $ | 2.0 | | | $ | (58.1) | | | $ | 48.4 | | | $ | (180.0) | |
| Other comprehensive income (loss) before reclassifications | | 6.3 | | | (2.4) | | | — | | | (0.1) | | | 3.8 | |
| Amounts reclassified from accumulated other comprehensive income (loss), net of tax | | — | | | — | | | (0.7) | | | (10.6) | | | (11.3) | |
Balance, March 31, 2023 | | $ | (166.0) | | | $ | (0.4) | | | $ | (58.8) | | | $ | 37.7 | | | $ | (187.5) | |
The following table summarizes the reclassifications out of AOCI:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
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| | | | Amount reclassified from accumulated other comprehensive income (loss) |
| | | | Three months ended March 31, | | |
| Details about accumulated other comprehensive income (loss) components | | Affected line item in the statement where net income (loss) is presented | | 2024 | | 2023 | | | | |
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| | | | | | | | | | |
| | | | | | | | | | |
| Defined benefit pension plans: | | | | | | | | | | |
| Amortization of prior service costs | | Other income (expense) - net | | $ | (0.1) | | | $ | (0.1) | | | | | |
| Amortization of actuarial gain/loss | | Other income (expense) - net | | (0.3) | | | (0.6) | | | | | |
| Cash flow hedge derivative: | | | | | | | | | | |
| Interest rate swaps | | Interest expense | | (21.2) | | | (14.3) | | | | | |
| Total before tax | | | | (21.6) | | | (15.0) | | | | | |
| Tax benefit (expense) | | | | 5.3 | | | 3.7 | | | | | |
| Total reclassifications for the period, net of tax | | | | $ | (16.3) | | | $ | (11.3) | | | | | |
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Note 15 -- Goodwill and Intangible Assets
Computer Software and Goodwill: | | | | | | | | | | | | | | |
| | Computer software | | Goodwill |
| January 1, 2024 | | $ | 666.3 | | | $ | 3,445.8 | |
Additions at cost (1) | | 52.5 | | | — | |
| Amortization | | (40.7) | | | — | |
| | | | |
Other (2) | | (6.7) | | | (21.1) | |
| March 31, 2024 | | $ | 671.4 | | | $ | 3,424.7 | |
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| January 1, 2023 | | $ | 631.8 | | | $ | 3,431.3 | |
Additions at cost (1) | | 44.0 | | | — | |
| Amortization | | (34.9) | | | — | |
| Impairment / Write-off | | (0.3) | | | — | |
Other (2) | | 2.2 | | | 4.4 | |
| March 31, 2023 | | $ | 642.8 | | | $ | 3,435.7 | |
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Other Intangibles:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Customer relationships | | Reacquired rights | | Database | | Other indefinite-lived intangibles | | Other intangibles | | Total |
| January 1, 2024 | | $ | 1,316.7 | | | $ | 233.9 | | | $ | 940.6 | | | $ | 1,280.0 | | | $ | 144.7 | | | $ | 3,915.9 | |
| Additions at cost | | — | | | — | | | — | | | — | | | 0.1 | | | 0.1 | |
| Amortization | | (52.4) | | | (4.8) | | | (37.7) | | | — | | | (4.1) | | | (99.0) | |
Other (2) | | (2.6) | | | (6.3) | | | (2.4) | | | — | | | (0.5) | | | (11.8) | |
| March 31, 2024 | | $ | 1,261.7 | | | $ | 222.8 | | | $ | 900.5 | | | $ | 1,280.0 | | | $ | 140.2 | | | $ | 3,805.2 | |
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| January 1, 2023 | | $ | 1,536.7 | | | $ | 245.5 | | | $ | 1,100.0 | | | $ | 1,280.0 | | | $ | 157.9 | | | $ | 4,320.1 | |
| Additions at cost | | — | | | — | | | — | | | — | | | 0.1 | | | 0.1 | |
| Amortization | | (56.8) | | | (4.7) | | | (41.0) | | | — | | | (4.2) | | | (106.7) | |
Other (2) | | 1.1 | | | 2.8 | | | 0.1 | | | — | | | 1.1 | | | 5.1 | |
| March 31, 2023 | | $ | 1,481.0 | | | $ | 243.6 | | | $ | 1,059.1 | | | $ | 1,280.0 | | | $ | 154.9 | | | $ | 4,218.6 | |
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(1)Primarily related to software-related enhancements on products and purchased software.
(2)Primarily due to the impact of foreign currency fluctuations.
Note 16 -- Segment Information
Our segment disclosure is intended to provide the users of our condensed consolidated financial statements with a view of the business that is consistent with management of the Company.
We manage our business and report our financial results through the following two segments:
•North America offers Finance & Risk and Sales & Marketing data, analytics and business insights in the United States and Canada; and
•International offers Finance & Risk and Sales & Marketing data, analytics and business insights directly in the U.K., Europe, Greater China and India and indirectly through our WWN alliances.
We use adjusted EBITDA as the primary profitability measure for making decisions regarding ongoing operations. We define adjusted EBITDA as net income (loss) attributable to Dun & Bradstreet Holdings, Inc. excluding the following items: (i) depreciation and amortization; (ii) interest expense and income; (iii) income tax benefit or provision; (iv) other non-operating expenses or income; (v) equity in net income of affiliates; (vi) net income attributable to non-controlling interests; (vii) equity-based compensation; (viii) restructuring charges; (ix) merger and acquisition-related operating costs; (x) transition costs primarily consisting of non-recurring expenses associated with transformational and integration activities; and (xi) other adjustments include non-recurring charges such as legal expense associated with significant legal and regulatory matters and impairment charges. Our client solution sets are Finance & Risk and Sales & Marketing. Inter-segment sales are immaterial, and no single client accounted for 10% or more of our total revenue.
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
| | 2024 | | 2023 | | | | |
| Revenue: | | | | | | | |
| North America | $ | 386.6 | | | $ | 374.7 | | | | | |
| International | 177.9 | | | 165.7 | | | | | |
| Consolidated total | $ | 564.5 | | | $ | 540.4 | | | | | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
| | 2024 | | 2023 | | | | |
| Adjusted EBITDA: | | | | | | | |
| North America | $ | 152.1 | | | $ | 150.5 | | | | | |
| International | 64.3 | | | 55.6 | | | | | |
| Corporate and other | (15.1) | | | (16.1) | | | | | |
| Consolidated total | $ | 201.3 | | | $ | 190.0 | | | | | |
| Depreciation and amortization | (144.0) | | | (145.4) | | | | | |
| Interest expense - net | (83.7) | | | (53.9) | | | | | |
| Benefit (provision) for income taxes | 44.2 | | | 11.8 | | | | | |
| Other income (expense) - net | 0.1 | | | 0.6 | | | | | |
| Equity in net income of affiliates | 0.9 | | | 0.8 | | | | | |
| Net income (loss) attributable to non-controlling interest | (1.3) | | | (0.9) | | | | | |
| Equity-based compensation | (17.9) | | | (20.5) | | | | | |
| Restructuring charges | (3.4) | | | (4.2) | | | | | |
| Merger, acquisition and divestiture-related operating costs | (0.2) | | | (2.6) | | | | | |
Transition costs (1) | (17.4) | | | (8.4) | | | | | |
Other adjustments (2) | (1.8) | | | (1.0) | | | | | |
| Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. | $ | (23.2) | | | $ | (33.7) | | | | | |
(1)Transition costs primarily consisting of non-recurring expenses associated with investments to transform our technology and back-office infrastructure, including investment in the architecture of our technology platforms and cloud-focused infrastructure. The transformation efforts require us to dedicate separate resources in order to develop the new cloud-based infrastructure in parallel with our current environment.
(2)Adjustments were primarily related to legal fees associated with ongoing legal matters discussed in Note 8 and impairment charges.
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
| | 2024 | | 2023 | | | | |
Depreciation and amortization by segment: | | | | | | | |
| North America | $ | 25.5 | | | $ | 20.1 | | | | | |
| International | 5.8 | | | 5.1 | | | | | |
| Total segments | 31.3 | | | 25.2 | | | | | |
Corporate and other (1) | 112.7 | | | 120.2 | | | | | |
| Consolidated total | $ | 144.0 | | | $ | 145.4 | | | | | |
| | | | | | | |
Cash paid for capital expenditures by segment: | | | | | | | |
| Capital expenditures: | | | | | | | |
| North America | $ | 0.4 | | | $ | 0.6 | | | | | |
| International | 0.9 | | | 0.2 | | | | | |
| Total segments | 1.3 | | | 0.8 | | | | | |
| Corporate and other | — | | | 0.5 | | | | | |
| Consolidated total | $ | 1.3 | | | $ | 1.3 | | | | | |
| Additions to computer software and other intangibles: | | | | | | | |
| North America | $ | 47.3 | | | $ | 31.4 | | | | | |
| International | 8.2 | | | 8.0 | | | | | |
| Total segments | 55.5 | | | 39.4 | | | | | |
| Corporate and other | 0.9 | | | 5.2 | | | | | |
| Consolidated total | $ | 56.4 | | | $ | 44.6 | | | | | |
(1)Depreciation and amortization for Corporate and other includes incremental amortization resulting from the application of purchase accounting in connection with historical merger and acquisition transactions.
Supplemental Geographic and Disaggregated Revenue Information:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| Assets: | | | |
| North America | $ | 7,491.7 | | | $ | 7,643.3 | |
| International | 1,487.0 | | | 1,492.6 | |
| Consolidated total | $ | 8,978.7 | | | $ | 9,135.9 | |
| | | |
| Goodwill: | | | |
| North America | $ | 2,929.6 | | | $ | 2,929.6 | |
| International | 495.1 | | | 516.2 | |
| Consolidated total | $ | 3,424.7 | | | $ | 3,445.8 | |
| | | |
| Other intangibles: | | | |
| North America | $ | 3,367.6 | | | $ | 3,451.5 | |
| International | 437.6 | | | 464.4 | |
| Consolidated total | $ | 3,805.2 | | | $ | 3,915.9 | |
| | | |
Other long-lived assets (1): | | | |
| North America | $ | 909.0 | | | $ | 891.6 | |
| International | 214.3 | | | 209.1 | |
| Consolidated total | $ | 1,123.3 | | | $ | 1,100.7 | |
Total long-lived assets (1) | $ | 8,353.2 | | | $ | 8,462.4 | |
(1)Excludes deferred income tax of $16.2 million and $17.2 million as of March 31, 2024 and December 31, 2023, respectively, included within "Other non-current assets" in the condensed consolidated balance sheet. See Note 7 for additional details.
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
Disaggregated Revenue: | 2024 | | 2023 | | | | |
| | | | | | | | |
North America (1): | | | | | | | |
| Finance & Risk | $ | 208.1 | | | $ | 201.2 | | | | | |
| Sales & Marketing | 178.5 | | | 173.5 | | | | | |
| Total North America | $ | 386.6 | | | $ | 374.7 | | | | | |
| International: | | | | | | | |
| Finance & Risk | $ | 120.0 | | | $ | 110.8 | | | | | |
| Sales & Marketing | 57.9 | | | 54.9 | | | | | |
| Total International | $ | 177.9 | | | $ | 165.7 | | | | | |
| Total Revenue: | | | | | | | |
| Finance & Risk | $ | 328.1 | | | $ | 312.0 | | | | | |
| Sales & Marketing | 236.4 | | | 228.4 | | | | | |
| Total Revenue | $ | 564.5 | | | $ | 540.4 | | | | | |
(1)Substantially all of the North America revenue is attributable to the United States.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
(Tabular dollar amounts, except share data and per share data, in millions)
Note 17 -- Related Parties
The following describes certain transactions and agreements in which the Company and our affiliates, executive officers and certain directors are involved.
During the three months ended March 31, 2024 and 2023, a significant portion of D&B common stock was collectively held by entities affiliated with Bilcar, LLC ("Bilcar"), Thomas H. Lee Partners, L.P. ("THL"), Cannae Holdings, Inc. ("Cannae Holdings"), CC Capital Partners LLC ("CC Capital"), and for the three months ended March 31, 2023 only, Black Knight, Inc. (("Black Knight") and, together with Bilcar, THL, Cannae Holdings and CC Capital, the "Investor Consortium"). In addition, the Investor Consortium was able to exercise significant voting influence over fundamental and significant corporate matters and transactions by their agreement to vote in favor of the election of five members of our board of directors, which expired on June 30, 2023. Upon the expiration of the voting agreement on June 30, 2023, Black Knight and CC Capital are no longer considered to be related parties.
Our Chief Executive Officer Anthony Jabbour also served as the Chairman and Chief Executive Officer of Black Knight until May 16, 2022, at which time he transitioned to the role of Executive Chairman of the board of directors of Black Knight. Following the acquisition of Black Knight by Intercontinental Exchange, Inc. ("ICE"), Mr. Jabbour resigned from his position as Executive Chairman of Black Knight. Mr. Jabbour is also a member of the board of directors of Paysafe Limited ("Paysafe"), which is an investment held by Cannae Holdings and accounted for as an equity investment. Additionally, William P. Foley II, our Executive Chairman, also previously served as non-executive Chairman of Cannae Holdings and, since February 10, 2024, has served as Chairman, Chief Executive Officer and Chief Investment Officer of Cannae Holdings. Further, our director Richard N. Massey previously served as Chief Executive Officer and a director of Cannae Holdings, and since February 10, 2024, has served as Vice Chairman and a director of Cannae Holdings.
In December 2022, Paysafe signed a 63 month lease agreement with D&B for the occupancy of the fourth floor of our headquarters building in Jacksonville, Florida. Total rental payments over the lease term will aggregate to $4.2 million. We recognized expense credit of $0.3 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively. We recorded $0.1 million and $0.2 million within "Other current assets" as of March 31, 2024 and December 31, 2023, respectively, and $0.1 million within "Other non-current liabilities" as of both March 31, 2024 and December 31, 2023.
In June 2021, we entered into a five-year agreement with Black Knight. Pursuant to the agreement, D&B will receive total data license fees of approximately $24 million over a five-year period. Also over the five-year period, Black Knight is engaged to provide certain products and data, as well as professional services for an aggregate fee of approximately $34 million. In addition, D&B and Black Knight will jointly market certain solutions and data. The agreement was approved by our Audit Committee. Related party expenses for the three months ended March 31, 2023 were $0.5 million.
In September 2021, we entered into a 10-year agreement with Paysafe. Pursuant to the agreement, D&B provides data license and risk management solution services to Paysafe. The agreement is cancellable by either party without penalty at each annual anniversary of the contract effective date by providing written notice not less than 90 days prior to the anniversary date. In March 2024, we entered into an additional three-year agreement with Paysafe, pursuant to which D&B will provide Paysafe marketing solutions. Both agreements were approved by our Audit Committee. In connection with the agreements associated with Paysafe, we recognized revenue of $2.1 million and $1.7 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, we included a receivable from Paysafe of $1.9 million and $3.4 million, respectively, within "Accounts receivable."
In the normal course of business, we reimburse affiliates for certain travel costs incurred by Dun & Bradstreet Holdings, Inc. executives and board members.
Note 18 -- Subsequent Events
On April 30, 2024, our Board of Directors declared a quarterly cash dividend of $0.05 per share of common stock. The dividend will be payable on June 20, 2024, to shareholders of record as of June 6, 2024.
Also on April 30, 2024, our Board of Directors authorized a new three-year stock repurchase program, (the "2024 Repurchase Program"), under which the Company may repurchase up to 10.0 million shares of its common stock. Purchases may be made from time to time in the open market at prevailing prices or in privately negotiated transactions through April 30, 2027. The repurchase program does not obligate the Company to acquire any specific number of shares and may be suspended or terminated at any time.