Donnelley financial reports third-quarter 2018 results
Chicago--(business wire)--donnelley financial solutions (nyse: dfin) today reported financial results for the third quarter 2018. highlights: completed the sale of language solutions business on july 22, 2018 for $77.5 million in cash third-quarter net sales of $216.9 million decreased 2.6% from the third quarter of 2017 excluding the impact of the sale of language solutions, the adoption of the new revenue recognition standard(1) and changes in foreign exchange rates, organic sales increased 5.1% from the third quarter of 2017 saas sales increased by 14.9% from the third quarter of 2017 excluding the impact of the sale of language solutions, the adoption of the new revenue recognition standard(1) and changes in foreign exchange rates, organic sales increased 5.1% from the third quarter of 2017 saas sales increased by 14.9% from the third quarter of 2017 third-quarter gaap net earnings of $48.0 million, or $1.40 per diluted share, compared to gaap net earnings in the third quarter of 2017 of $5.3 million, or $0.16 per diluted share third-quarter 2018 includes gain on the sale of language solutions and gain on an equity investment third-quarter 2018 includes gain on the sale of language solutions and gain on an equity investment third-quarter non-gaap net earnings(2) of $9.4 million, or $0.27 per diluted share, compared to non-gaap net earnings in the third quarter of 2017 of $6.9 million, or $0.20 per diluted share non-gaap adjusted ebitda(2) in the quarter of $31.3 million, or 14.4% of net sales, compared to non-gaap adjusted ebitda in the third quarter of 2017 of $31.5 million, or 14.2% of net sales company reaffirms full-year 2018 guidance for net sales, non-gaap adjusted ebitda and free cash flow “we are pleased with our third-quarter results, which reflect continued strength in our capital markets business, as well as the improving trend in investment markets that we expected to see coming into the quarter, resulting in organic revenue growth of 5.1%,” said daniel n. leib, donnelley financial's president and chief executive officer. “importantly, we continued to execute against our strategic priorities, achieving 14.9% growth in our saas offerings, which represented 19.5% of third-quarter sales.” leib added, “also consistent with our strategy, we sold our language solutions business in the third quarter, providing additional financial flexibility to focus on our core regulatory and compliance offerings. we ended the third quarter with $341.0 million of net debt, representing net leverage of 2.0x, a reduction of 0.8x from the third quarter of 2017.” net sales net sales in the third quarter of 2018 were $216.9 million, a decrease of $5.7 million, or 2.6%, from the third quarter of 2017 driven by the disposition of the language solutions business. after adjusting for the sale of language solutions, the impact of the adoption of the new revenue recognition standard and changes in foreign exchange rates, organic sales increased 5.1% from the third quarter of 2017. this increase was primarily driven by higher transactional volume in u.s. and international capital markets and growth in saas offerings across our operating segments, partially offset by lower compliance volume in u.s. capital markets and lower healthcare and commercial print volume in u.s. investment markets. gaap earnings third-quarter 2018 net earnings were $48.0 million, or $1.40 per diluted share, compared to net earnings of $5.3 million, or $0.16 per diluted share, in the third quarter of 2017. third-quarter 2018 includes an after-tax gain of $38.4 million, or $1.13 per diluted share, related to the gain on the sale of language solutions, an after-tax gain of $8.5 million, or $0.25 per diluted share, related to the gain on an equity investment and after-tax charges of $8.3 million, or $0.25 per diluted share, all of which are excluded from the presentation of non-gaap earnings. third-quarter 2017 includes after-tax charges of $1.6 million, or $0.04 per diluted share, which are excluded from the presentation of non-gaap net earnings. non-gaap adjusted ebitda and net earnings non-gaap adjusted ebitda in the third quarter of 2018 was $31.3 million, compared to $31.5 million in the third quarter of 2017. non-gaap adjusted ebitda margin in the third quarter of 2018 was 14.4%, 20 basis points higher than in the third quarter of 2017. higher volume in transactional capital markets more than offset lower volume in capital markets compliance and investment markets healthcare and commercial print. non-gaap net earnings totaled $9.4 million, or $0.27 per diluted share, in the third quarter of 2018 compared to non-gaap net earnings of $6.9 million, or $0.20 per diluted share, in the third quarter of 2017. reconciliations of net earnings to non-gaap adjusted ebitda and non-gaap net earnings, as well as non-gaap adjusted ebitda margin, are presented in the attached schedules. 2018 guidance the company provides the following updated full-year guidance for 2018. current guidance previous guidance certain components of the guidance given above are provided on a non-gaap basis only, without providing a reconciliation to guidance provided on a gaap basis. information is presented in this manner, consistent with sec rules, because the preparation of such a reconciliation could not be accomplished without “unreasonable efforts.” the company does not have access to certain information that would be necessary to provide such a reconciliation, including non-recurring items that are not indicative of the company’s ongoing operations. such items include, but are not limited to, restructuring charges, impairment charges, spinoff-related transaction expenses, acquisition-related expenses, gains or losses on investments and business disposals and other similar gains or losses not reflective of the company's ongoing operations. the company does not believe that this information is likely to be significant to an assessment of the company’s ongoing operations, given that it is not an indicator of business performance. conference call donnelley financial will host a conference call and simultaneous webcast to discuss its third-quarter results today, wednesday, november 7, at 9:00 a.m. eastern time (8:00 a.m. central time). the live webcast will be accessible on donnelley financial’s web site at www.dfsco.com. individuals wishing to participate on the call must register in advance at http://www.meetme.net/dfin. after registering, participants will receive dial-in numbers, a passcode, and a personal identification number (pin) that is used to uniquely identify their presence and automatically join them into the audio conference. a webcast replay will be archived on the company’s web site for 30 days after the call. in addition, a telephonic replay of the call will be available for seven days at 630.652.3042, passcode 7739939#. about donnelley financial with the right solutions in moments that matter, donnelley financial solutions (nyse: dfin) delivers risk and compliance solutions that fuse deep industry experience, unparalleled service, and elegant technologies to provide our clients with insights that power their decisions and shape global markets. the company has 3,100 employees in 59 locations across 17 countries, serving thousands of clients globally. for more information about donnelley financial solutions, visit www.dfsco.com or follow us on twitter @donnelleyfin or on linkedin. use of non-gaap information this news release contains certain non-gaap measures, including non-gaap sg&a, non-gaap sg&a as % of total net sales, non-gaap income from operations, non-gaap operating margin, non-gaap adjusted ebitda, non-gaap adjusted ebitda margin, non-gaap effective tax rate, non-gaap net earnings, non-gaap diluted earnings per share, free cash flow and organic net sales. the company believes that these non-gaap measures, when presented in conjunction with comparable gaap measures, provide useful information about the company’s operating results and liquidity and enhance the overall ability to assess the company’s financial performance. the company uses these measures, together with other measures of performance under gaap, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. our non-gaap statement of operations measures, non-gaap sg&a, non-gaap sg&a as % of total net sales, non-gaap income from operations, non-gaap operating margin, non-gaap adjusted ebitda, non-gaap adjusted ebitda margin, non-gaap effective tax rate, non-gaap net earnings and non-gaap diluted earnings per share, are adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of our ongoing operations. these adjusted measures exclude the impact of expenses associated with the company’s acquisition activities, spin-off related expenses, share-based compensation and eliminate potential differences in results of operations between periods caused by factors such as depreciation and amortization methods, historic cost and age of assets, financing and capital structures, taxation positions or regimes, restructuring, impairment and other charges and gain or loss on certain equity investments and asset sales. free cash flow is a non-gaap financial measure and is defined by the company as net cash flow provided by operating activities less capital expenditures. by adjusting for the level of capital investment in operations, the company believes that free cash flow can provide useful additional basis for understanding the company’s ability to generate cash after capital investment and provides a comparison to peers with differing capital intensity. organic net sales is a non-gaap financial measure and is defined by the company as reported net sales adjusted for the impact of changes in foreign exchange rates and acquired and disposed businesses. these non-gaap measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with gaap. in addition, these measures are defined differently by different companies in our industry and, accordingly, such measures may not be comparable to similarly-titled measures of other companies. use of forward-looking statements this news release includes certain "forward-looking statements" within the meaning of, and subject to the safe harbor created by, section 21e of the securities exchange act of 1934, as amended, with respect to the business, strategy and plans of donnelley financial and its expectations relating to future financial condition and performance. statements that are not historical facts, including statements about donnelley financial management’s beliefs and expectations, are forward-looking statements. words such as "believes," "anticipates," "estimates," "expects," "intends," "aims," "potential," "will," "would," "could," "considered," "likely," "estimate" and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. while donnelley financial believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond donnelley financial’s control. by their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur. actual results may differ materially from donnelley financial’s current expectations depending upon a number of factors affecting the business and risks associated with the performance of the business. these factors include such risks and uncertainties detailed in donnelley financial’s periodic public filings with the sec, including but not limited to those discussed under "risk factors" in donnelley financial's form 10-k for the fiscal year ended december 31, 2017, those discussed under “cautionary statement” in donnelley financial’s quarterly form 10-q filings, and in other investor communications of donnelley financial’s from time to time. donnelley financial does not undertake to and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events. donnelley financial solutions, inc. condensed consolidated balance sheets as of september 30, 2018 and december 31, 2017 (unaudited) (in millions, except per share data) assets receivables, less allowances for doubtful accounts of $8.7 in 2018 (2017 - $7.3) liabilities equity donnelley financial solutions, inc. condensed consolidated statements of operations for the three and nine months ended september 30, 2018 and 2017 (unaudited) (in millions, except per share data) gaap to non-gaap non-gaap gaap to non-gaap non-gaap gaap to non-gaap non-gaap gaap to non-gaap non-gaap weighted average number of common shares outstanding (2): additional information: effective tax rate the company believes that certain non-gaap measures, when presented in conjunction with comparable gaap measures, are useful because that information is an appropriate measure for evaluating the company’s operating performance. internally, the company uses this non-gaap information as an indicator of business performance, and evaluates management’s effectiveness with specific reference to this indicator. these measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with gaap. donnelley financial solutions, inc. reconciliation of gaap to non-gaap measures for the three and nine months ended september 30, 2018 and 2017 (unaudited) (in millions, except per share data) from operations margin earnings net earnings per diluted share from operations margin earnings earnings per diluted share restructuring, impairment and other charges - net from operations margin earnings earnings per diluted share from operations margin earnings earnings per diluted share restructuring, impairment and other charges - net donnelley financial solutions, inc. segment gaap to non-gaap operating income and non-gaap adjusted ebitda and margin reconciliation for the three months ended september 30, 2018 and 2017 (unaudited) (in millions) for the three months ended september 30, 2018 non-gaap adjustments for the three months ended september 30, 2017 non-gaap adjustments donnelley financial solutions, inc. segment gaap to non-gaap operating income and non-gaap adjusted ebitda and margin reconciliation for the nine months ended september 30, 2018 and 2017 (unaudited) (in millions) for the nine months ended september 30, 2018 non-gaap adjustments for the nine months ended september 30, 2017 non-gaap adjustments donnelley financial solutions, inc. condensed consolidated statements of cash flows for the nine months ended september 30, 2018 and 2017 (unaudited) (in millions) adjustments to reconcile net earnings to net cash provided by operating activities: inventories additional information: donnelley financial solutions, inc. reconciliation of reported to organic net sales for the three and nine months ended september 30, 2018 and 2017 (unaudited) (in millions) reported net sales: september 30, 2018 september 30, 2017 (1) supplementary non-gaap information: reported net sales: september 30, 2018 september 30, 2017 (1) supplementary non-gaap information: certain prior year amounts were restated to conform to the company’s current reporting unit structure. adjusted for the impact of changes in fx rates, the adoption of the new revenue recognition standard and the language solutions disposition. donnelley financial solutions, inc. reconciliation of gaap net earnings (loss) to non-gaap adjusted ebitda for the three and twelve months ended september 30, 2018 and 2017 (unaudited) (in millions) months ended september 30, 2018 2018 2018 2017 adjustments months ended 2017 2017 2017 2017 2016 adjustments donnelley financial solutions, inc. debt and liquidity summary as of september 30, 2018 and 2017 and december 31, 2017 (unaudited) (in millions) total liquidity availability 90.9 209.1 usage letters of credit 209.1 265.3 the company has a $300.0 million senior secured revolving credit facility (the “revolving facility”). the revolving facility is subject to a number of covenants, including a minimum interest coverage ratio and a maximum leverage ratio, both as defined and calculated in the credit agreement. there were no outstanding borrowings under the revolving facility as of september 30, 2018. based on the company’s results of operations for the twelve months ended september 30, 2018 and existing debt, the company would have had the ability to utilize an incremental $209.1 million of the $300.0 million revolving facility and not have been in violation of the terms of the agreement. approximately 54% of cash as of september 30, 2018, 30% of cash as of december 31, 2017 and 33% of cash as of september 30, 2017 was located outside of the u.s. certain cash balances of foreign subsidiaries may be subject to u.s. or local country taxes if repatriated to the u.s. in addition, repatriation of some foreign cash balances is further restricted by local laws.
