The statements contained in this Quarterly Report on Form 10-Q (this "Quarterly
Report") that are not purely historical are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including statements regarding our expectations, hopes, intentions or
strategies regarding the future. All forward-looking statements included in this
document are based on information available to us on the date hereof, and we
assume no obligation to update any such forward-looking statements. It is
important to note that our actual results could vary materially from those
forward-looking statements contained herein due to many factors, including, but
not limited to: changes in general economic, business and political conditions,
including changes in the financial markets and changes in conditions resulting
from the outbreak of a pandemic such as the novel coronavirus COVID-19
("COVID-19"); the overall impact of COVID-19 and measures to curb its spread,
including the effect of governmental or voluntary mitigation measures such as
business shutdowns, social distancing, and stay-at-home orders; risks associated
with the Investment Company Act of 194; our potential inability to find suitable
acquisition candidates, acquisitions in lines of business that will not
necessarily be limited to our traditional areas of focus, or difficulties in
integrating acquisitions; significant competition that our operating
subsidiaries face; risks associated with our Split-Off from Fidelity National
Financial, Inc.; risks related to the externalization of certain of our
management functions to our Manager; and other risks detailed in the "Statement
Regarding Forward-Looking Information," "Risk Factors" and other sections of our
Annual Report on Form 10-K for the year ended
The following discussion should be read in conjunction with our Annual Report.
Overview
For a description of our business, including descriptions of segments and recent business developments, see the discussion under Basis of Financial Statements in Note A to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report, which is incorporated by reference into this Part I, Item 2.
Business Trends and Conditions Dun & Bradstreet. Businesses rely on business-to-business data and analytics providers to extract data-driven insights and make better decisions. For example, in commercial lending and trade credit, the scarcity of readily available credit history makes the extension of credit a time-consuming and imprecise process. In procurement, businesses face increasingly complex and global supply chains, making the assessment of compliance and viability of all suppliers prohibitively difficult and expensive if not conducted effectively. In sales and marketing, businesses have benefited from the proliferation of customer relationship management, Marketing Automation and Sales Acceleration tools designed to help identify, track and improve both customer management and prospecting growth activities. While these tools are helping to fill sales funnels and improve the progression of opportunities, key challenges remain in sales force productivity, effective client segmentation and marketing campaign activation. Common stumbling blocks include incorrect, or outdated, contact information, duplicated or inaccurate firmographic data and a lack of synchronization between the various platforms in the marketing technology ecosystem. D&B helps its clients solve these mission critical business problems. D&B believes the total addressable market (''TAM'') in which it operates is large, growing and significantly underpenetrated. D&B participates in the big data and analytics software market, as defined byInteractive Data Corporation , or IDC, which represents a collection of software markets that functionally address decision support and decision automation. This market includes business intelligence and analytics tools, analytic data management and integration platforms and analytics and performance management applications. Within the broader market of data and analytics solutions, D&B serves a number of different markets, including the commercial credit data, sales and marketing data and Governance, Risk and Compliance ("GRC") markets to provide clients with decisioning support and automation. As D&B continues to drive innovation in its solutions, it expects to address a greater portion of this TAM as new use cases for its data assets and analytical capabilities are introduced. D&B believes there are several key trends in the global macroeconomic environment generating additional growth in D&B's TAM and increasing the demand for its solutions, including growing recognition by business of the value of analytics and data-informed business decisioning, growth in data creation and applications driven by the proliferation of new technologies with new data sets and applications, advances in analytical capabilities that are unlocking the value of data, and heightened compliance requirements in the regulatory environment for business driven by the growth of new technologies. Paysafe. Paysafe provides payment solutions through three primary lines of business: Integrated Processing, Digital Wallet and eCash Solutions. Paysafe's Integrated Processing business is focused on card not present and card present solutions for small to medium size business merchants. Paysafe's Digital Wallet business provides wallet based online payment solutions through its Skrill and NETELLER brands. Paysafe's eCash Solutions business enables consumers to use cash to facilitate online purchases through its paysafecard prepaid vouchers. With over 20 years of online payment experience, Paysafe connects businesses and consumers across 70 payment types in over 40 currencies around the world. It provides these payment solutions 34
--------------------------------------------------------------------------------
Table of Contents
in the following principal verticals; e-commerce, online gambling, and online gaming; the principal markets being inNorth America andEurope . Paysafe's solutions are highly differentiated in the market and help solve the complexities of digital commerce, remove significant friction and pain points from the customer experience and enable its business and consumer clients to transact in a faster, safer and more convenient manner. For example, Paysafe leverages the advantages of its Paysafe Network to extend its digital capabilities beyond basic card-based payments and unlock the monetization potential of local digital wallets, close to 70 major alternative payment methods, crypto-currencies and cash transactions. Paysafe also leverages its technology, risk management expertise and compliance infrastructure to empower buyers and sellers to connect and transact in more complex verticals where traditional services do not work well, such as iGaming and gaming. Paysafe also offer more traditional services, such as eCommerce payments and small and medium sized business merchant acquiring and differentiate these by integrating new technologies to make them more powerful and convenient, such as its global gateway and smart devices to create a differentiated value proposition. Within digital commerce, Paysafe serves a number of specific industry verticals and has established a strong position in iGaming and Gaming, which Paysafe has identified as its key verticals because it believes there is significant market potential for growth and expansion in these areas, and Paysafe is committed to focusing on opportunities for organic and inorganic growth in iGaming and Gaming. The iGaming industry is highly regulated, and participation requires specific expertise, significant technology development and compliance infrastructure to facilitate cross-border commerce successfully. Laws governing the vertical are complex, vary considerably by geography and are continually evolving, which creates a significant opportunity to provide value-added services to iGaming providers due to a strong focus on risk management. The ability to develop and offer products and services that comply with applicable regulations provides valuable advantages to address this large and attractive market opportunity. Restaurant Group. The restaurant industry is highly competitive and is often affected by changes in consumer tastes and discretionary spending patterns; changes in general economic conditions; public safety conditions or concerns; demographic trends; weather conditions; the cost of food products, labor, energy and other operating costs; and governmental regulations. Higher labor costs due to state and local minimum wage increases and shopping pattern shifts to e-commerce and "ready to eat" grocery and convenience stores have had a negative impact on restaurant performance, particularly in the casual and family dining restaurants in which the company operates. The restaurant industry is also characterized by high capital investments for new restaurants and relatively high fixed or semi-variable restaurant operating expenses. Because of the high fixed and semi-variable expenses, changes in sales in existing restaurants are generally expected to significantly affect restaurant profitability because many restaurant costs and expenses are not expected to change at the same rate as sales. The most significant commodities that may affect our cost of food and beverage are beef, seafood, poultry, and dairy, which accounted for approximately half of our overall cost of food and beverage in the past. Generally, temporary increases in these costs are not passed on to guests; however, in the past, we have adjusted menu prices to compensate for increased costs of a more permanent nature. Average weekly sales per restaurant are typically higher in the first and fourth quarters than in other quarters, and we typically generate a disproportionate share of our earnings from operations in the first and fourth quarters. Holidays, severe weather and other disruptive conditions may impact sales volumes seasonally in some operating regions. Our revenues in future periods will continue to be subject to these and other factors that are beyond our control and, as a result, are likely to fluctuate. COVID-19. InMarch 2020 , the outbreak of COVID-19 was declared a national health emergency inthe United States and worldwide. As a result of the unprecedented social restrictions related to COVID-19, our Restaurant Group brands experienced a significant reduction in guest counts beginning in the last two weeks ofMarch 2020 and continuing through the end of the year. In response to the outbreak and these changing conditions, our Restaurant Group brands closed the dining rooms in substantially all of our restaurants in lateMarch 2020 with substantially all remaining closed to dine in customers through earlyMay 2020 . During such time, most of our restaurants were solely operating to-go and delivery services in the jurisdictions where government regulations permit restaurants to continue to operate and where the guest demand made such operations sustainable. We temporarily closed certain restaurants, modified work hours for our Restaurant Group employees and identified and implemented cost savings measures throughout our Restaurant Group operations. Timing of reopening stores and resulting guest traffic has varied by jurisdiction. In the second half of 2020, our Restaurant Group experienced a gradual increase in guest traffic and revenues compared to the first half of 2020; however, the volume of customers visiting our stores remained below our historical levels throughDecember 31, 2020 . We experienced an increase in revenues from to-go and delivery sales from historical experience; however, comparable store sales across all of our restaurant brands remained depressed compared to previous years through the first quarter of 2021. 35
--------------------------------------------------------------------------------
Table of Contents
Coinciding with the first available vaccines for COVID-19 inDecember 2020 , capacity restrictions on dining rooms began to ease in most jurisdictions in which our Restaurant Group operates. Furthermore, theU.S. government provided significant stimulus to consumers through direct payments toU.S. citizens. Through the three months endedMarch 31, 2021 , we were still operating a limited number of restaurants with restricted capacity. In light of recent spread of new variants of COVID-19, uncertainty remains regarding the continued rate of immunization in the public, timing of an economic recovery, and changed guest decision-making with regard to dining in restaurants. Beginning in the three months endedJune 30, 2021 , we began to experience increases in same store sales compared to the corresponding period in 2020. This trend has continued through the three months endedSeptember 30, 2021 . However, same store sales remain lower compared to the corresponding periods in 2019. The COVID-19 outbreak and these responses have affected and may continue to adversely affect our Restaurant Group brands' guest traffic, sales and operating costs. See further discussion of the impact of COVID-19 on our Restaurant Group in the Results of Operations subsection below. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance withU.S. GAAP. The Critical Accounting Policies and Estimates disclosed in Item 7 of our Annual Report are hereby incorporated by reference. Other than as described below, there have been no changes to our critical accounting policies and estimates. Investments in unconsolidated affiliates. On an ongoing basis, management monitors the Company's investments in unconsolidated affiliates to determine whether there are indications that the fair value of an investment may be other-than-temporarily below our recorded book value of the investment. Factors considered when determining whether a decline in the fair value of an investment is other-than-temporary include, but are not limited to: the length of time and the extent to which the market value has been less than book value, the financial condition and near-term prospects of the investee, and the intent and ability of the Company to retain its investment in the investee for a period of time sufficient to allow for any anticipated recovery in market value. As ofSeptember 30, 2021 , the fair value of our investment in Paysafe based on quoted market prices was$418.8 million and the book value of our investment in Paysafe was$810.6 million prior to any impairment. Due primarily to the quantum of the decrease in the fair market value of our investment, management determined the decrease in value of our investment in Paysafe was other-than-temporary. Accordingly, we recorded an impairment of$391.8 million in the three months endedSeptember 30, 2021 which is included in Recognized (losses) gains, net, on our Condensed Consolidated Statement of Operations. 36
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source