DUN & BRADSTREET HOLDINGS, INC.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help the reader understand the
results of operations, financial condition and cash flows of Dun & Bradstreet
Holdings, Inc. MD&A is provided as a supplement to, and should be read in
conjunction with our audited consolidated financial statements and accompanying
notes thereto included elsewhere herein. Unless otherwise noted, all dollar
amounts in tables are in millions. This Management's Discussion and Analysis of
Financial Condition and Results of Operations contain forward-looking
statements. See "Forward-Looking Statements" and "Item 1A.-Risk Factors" for a
discussion of the uncertainties, risks and assumptions associated with these
statements. Actual results may differ materially from those contained in any
forward-looking statements.
Overview
Dun & Bradstreet is a leading global provider of business decisioning data and
analytics. Our mission is to deliver a global network of trust, enabling clients
to transform uncertainty into confidence, risk into opportunity and potential
into prosperity. Clients embed our trusted, end-to-end solutions into their
daily workflows to inform commercial credit decisions, confirm suppliers are
financially viable and compliant with laws and regulations, enhance salesforce
productivity and gain visibility into key markets. Our solutions support our
clients' mission critical business operations by providing proprietary and
curated data and analytics to help drive informed decisions and improved
outcomes.
Leveraging our category-defining commercial credit data and analytics, our
Finance & Risk solutions are used in the critical decisioning processes of
finance, risk, compliance and procurement departments worldwide. We are a market
leader in commercial credit decisioning, with many of the top businesses in the
world utilizing our solutions to make informed decisions when considering
extending business loans and trade credit. We are also a leading provider of
data and analytics to businesses looking to analyze supplier relationships and
more effectively collect outstanding receivables. We believe our proprietary
Paydex score, a numerical indicator based on promptness of a business's payments
to its suppliers and vendors, is widely relied upon as an important measure of
credit health for businesses. We are well positioned to provide accessible and
actionable insights and analytics that mitigate risk and uncertainty, and
ultimately protect and drive increased profitability for our clients.
Our Sales & Marketing solutions combine firmographic, personal contact, intent
and non-traditional, or "alternative," data to assist clients in optimizing
their sales and marketing strategy by cleansing customer relationship management
("CRM") data and narrowing their focus and efforts on the highest probability
prospects. As global competition continues to intensify, businesses need
assistance with focusing their sales pipelines into a condensed list so that
they can have their best sellers target the highest probability return accounts.
We provide invaluable insights into businesses that can help our clients grow
their businesses in a more efficient and effective manner.
We leverage these differentiated capabilities to serve a broad set of clients
across multiple industries and geographies. As of December 31, 2022 , we have a
global client base of more than 240,000, including some of the largest companies
in the world. Covering nearly all industry verticals, including financial
services, technology, communications, government, retail, transportation and
manufacturing, our data and analytics support a wide range of use cases. In
terms of our geographic footprint, we have an industry-leading presence in North
America , a growing presence in the United Kingdom and Ireland ("UK"), Nordics
(Sweden , Norway , Denmark and Finland ), DACH (Germany , Austria and Switzerland )
and CE (Central and Eastern Europe ) regions ("Europe"), Greater China and India
through our majority or wholly-owned subsidiaries and a broader global presence
through our Worldwide Network alliances ("WWN alliances").
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We believe that we have an attractive business model that is underpinned by
highly recurring, diversified revenue, significant operating leverage, low
capital requirements and strong free cash flow. The proprietary and embedded
nature of our data and analytics solutions and the integral role that we play in
our clients' decision-making processes have historically translated into high
client retention and revenue visibility. We also benefit from strong operating
leverage given our centralized database and solutions, which allow us to
generate strong contribution margins and free cash flow.
Segments
Our segment disclosure is intended to provide the users of our 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
•International offers Finance & Risk and Sales & Marketing data, analytics and
business insights directly in the
Factors Affecting our Results of Operations
Economic Conditions
Our business is impacted by general economic conditions and exposed to global market volatility and uncertainties, such as inflation, rising interest rates and foreign currency fluctuation. Since the start of 2022, theU.S. dollar has gained significantly due to macro drivers. Approximately 30% of our revenues are generated from non-U.S. markets. A strengtheningU.S. dollar against certain currencies of markets where we operate, in particular, the Euro, British Pound and SEK, has negatively impacted ourU.S. dollar reported revenue in 2022. See further discussion within the revenue section of MD&A. Inflation has been widespread globally in 2022 as central banks across the world raised interest rates significantly in an effort to tame inflation. The condition is expected to continue in 2023, although at a slower speed. The ongoing inflationary environment could negatively impact our clients' business performance due to slowing customer spending, and consequently lower demand for our Sales & Marketing solutions.
In addition, in a challenging macroeconomic environment, the probability of businesses, including the businesses of our clients, becoming insolvent increases. Disruptions in the financial markets could limit the ability or willingness of our clients to extend credit to their customers or cause our clients to constrain budgets, which could adversely impact demand for our data and analytics solutions.
We are also exposed to macroeconomic pressure as a result of geopolitical conflicts and the lingering COVID-19 pandemic. In our continued response to the COVID-19 pandemic, we implemented operational changes to ensure the safety of our workforce and to ensure that we continue to serve our clients. We have adopted a distributed workforce model which has been successful and has not significantly affected our operations. Our exposure as a result of theRussia /Ukraine conflicts and the sanctions imposed by global governments onRussia , is limited to our relationship with the WWN alliance in the region, which is immaterial. However, an escalation of the conflict or expansion of sanctions could further disrupt global supply chains, broaden inflationary costs, and have a material adverse effect on our customers, vendors and financial markets.
Regulatory Requirements
In recent years, there has been an increased legislative and regulatory focus on
data privacy practices. As a result, federal and state governments have enacted
various new laws, rules and regulations. One example of such legislation is the
California Consumer Privacy Act of 2018 ("CCPA") and the California Privacy
Rights Act ("CPRA") and similar laws in other U.S. states, such as Colorado ,
Connecticut , Utah , and Virginia . These laws apply to certain businesses that
collect personal information from residents in those states, and bestow broad
data subject rights on individuals similar to data subject rights under GDPR and
other laws in Europe . We are also subject to data protection and privacy laws
and regulations in countries outside of the U.S. where we conduct business,
including recently adopted and amended laws in Europe , Canada , and China . See
"Business-Regulatory Matters" in Item 1.
Recent Developments
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The following developments impact the year-over-year comparability of our results of operations, balance sheet and cash flows:
Accounts Receivable Facility
InSeptember 2022 , the Company entered into a three-year revolving securitization facility agreement to transfer trade receivables of one of ourU.S. subsidiaries through our bankruptcy-remote subsidiary to a third party financial institution on a recurring basis in exchange for cash equal to the gross receivables transferred. The facility initially had monthly drawing limits ranging from$160 million to$215 million , and was subsequently modified to$170 million to$215 million inDecember 2022 . During the year endedDecember 31, 2022 , the Company received a net cash benefit of$183.1 million related to the facility. See Note 7 to the consolidated financial statements for further discussion.
Purchase of Non-Controlling Equity Interest
OnNovember 1, 2022 , we purchased the non-controlling equity interest ("NCI") of ourChina operations from a third-party entity forRMB 815.4 million , of whichRMB 169.1 million , or$23.2 million was paid inNovember 2022 . The remaining balance of approximately$94 million is expected to be paid within one year and is reported within "Other accrued and current liabilities" as ofDecember 31, 2022 . The transaction was accounted for as an equity transaction among shareholders, and accordingly, no gain or loss was recognized in consolidated net income or comprehensive income. See Note 17 to the consolidated financial statements for detailed discussion.
Business Acquisitions
OnNovember 15, 2021 , we acquired 100% of the outstanding ownership interests inNetWise Data LLC ("NetWise"), a provider of business to business and business to consumer identity graph and audience targeting data. The results of NetWise have been included in ourNorth America segment from the date of the acquisition. OnNovember 5, 2021 , we acquired 100% of the outstanding ownership interests inEyeota Holdings Pte Ltd ("Eyeota"), a global online and offline data onboarding and transformation company. The results of Eyeota have been included in ourNorth America segment from the date of the acquisition. OnJanuary 8, 2021 , we acquired 100% ownership ofBisnode Information Group AB ("Bisnode").Bisnode is a leading European data and analytics firm and long-standing member of the Dun & Bradstreet WWN alliances. The acquisition increases our client base, and expands and enhances our constantly expanding business database, known as our "Data Cloud". The results ofBisnode have been included in our International segment from the date of the acquisition.
Debt Refinancing
OnJanuary 18, 2022 , we amended our credit agreement datedFebruary 8, 2019 , specifically related to the Term Loan Facility, to establish Incremental Term Loans in an aggregate principal amount of$460 million . We used the proceeds of such Incremental Term Loans to redeem our outstanding$420 million in aggregate principal amount of our 6.875% Senior Secured Notes due 2026 and pay related fees, costs, premiums and expenses. See Note 6 to the consolidated financial statements for further discussion. OnDecember 20, 2021 , we issued$460 million in aggregate principal amount of 5.000% Senior Unsecured Notes dueDecember 15, 2029 . The proceeds from the Senior Unsecured Notes and cash on hand were used to fund the full redemption of the$450 million in aggregate principal amount of our 10.250% Senior Unsecured Notes due 2027, inclusive of an early redemption premium of$29.5 million . As a result of the redemption, we recorded a total expense of$41.8 million related to the debt extinguishment within "Non-operating income (expense)-net" for the year endedDecember 31, 2021 .
Real Estate Acquisition
OnJune 30, 2021 , we completed the purchase of an office building inJacksonville, Florida for our new global headquarters, with a purchase price of$76.6 million , paid in cash. The relocation of the headquarters is part of our strategic investment.
Recently Issued Accounting Standards
See Note 3 to the consolidated financial statements for disclosure of the impact
that recent accounting pronouncements may have on the Consolidated Financial
Statements.
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Critical Accounting Policies and Estimates
In preparing our consolidated financial statements and accounting for the
underlying transactions and balances reflected therein, we have applied the
significant accounting policies described in Note 2 to the consolidated
financial statements. Of those policies, we consider the policies described
below to be critical because they are both most important to the portrayal of
our financial condition and results, and they require management's subjective or
complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain. We base our estimates on
historical experience and on various other factors that we believe to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.
If actual results in a given period ultimately differ from previous estimates, the actual results could have a material impact on such period.
Revenue Recognition
We recognize revenues in accordance withFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"). Application of the various accounting principles related to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, complex arrangements with non-standard terms and conditions may require significant contract interpretation to determine the appropriate accounting, including whether multiple goods and services in the contract are each separate performance obligations. Other judgments include determining whether we are acting as the principal in a transaction, primarily as it relates to transactions with alliances and partners, and whether separate contracts with the same client entered into at or about the same time should be combined into a single contract. We also use judgment to assess whether it is probable we will collect the consideration to which we will be entitled in exchange for the goods or services transferred. We base our judgment on the client's ability and intention to pay that amount of consideration when it falls due which includes an assessment of their historical payment experience, credit risk indicators and the market and economic conditions affecting the client. We allocate the transaction price to each performance obligation deliverable based on the relative standalone selling price basis. When the standalone selling price is not directly observable from actual standalone sales, we estimate a standalone selling price making maximum use of any observable data and estimates of what a client in the market would be willing to pay for those goods or services.
Pension and Postretirement Benefit Obligations
Our defined-benefit pension plans are accounted for on an actuarial basis, which requires the selection of various assumptions. For each plan, the most significant assumptions include an expected long-term rate of return on plan assets, a discount rate, mortality rates of participants and expectation of mortality improvement. The expected long-term rate of return on the plan assets that is utilized in determining pension expense is derived based on target asset allocation as well as expected returns on asset categories of plan investments. For theU.S. Qualified Plan, our most significant pension obligation, the long-term rate of return assumption was 5.50%, 6.00% and 6.50% for 2022, 2021 and 2020, respectively. For 2023, we will use a long-term rate of return of 5.40%. The 5.40% assumption represents our best estimate of the expected long-term future investment performance of theU.S. Qualified Plan, after considering expectations for future capital market returns and the plan's asset allocation. As ofDecember 31, 2022 , theU.S. Qualified Plan was 42% invested in return-seeking assets and 58% invested in liability-hedging assets. Another key assumption is the discount rate, which is used to measure the present value of pension plan obligations and postretirement health care obligations. The discount rates are derived using a yield curve approach which matches projected plan benefit payment streams with bond portfolios, reflecting actual liability duration unique to our plans. We use the spot rate approach to measure service and interest cost components of net periodic benefit costs by applying the specific spot rates along that yield curve to the plans' liability cash flows. We believe this approach provides a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows and their corresponding spot rates on the yield curve. Mortality assumptions are used to estimate life expectancy of plan participants, determining projected pension obligations and the period over which retirement plan benefits are expected to be paid. For ourU.S. plans mortality assumptions, we used PRI 2012 mortality table ("PRI-2012") atDecember 31, 2022 and 2021, together with mortality improvement projection scales MP-2021. The mortality improvement projection scale for theDecember 31, 2022 remeasurement was adjusted for COVID-19 factors, which resulted in a reduction of the projected benefit obligations for theU.S. plan of approximately$10 million . AtDecember 31, 2021 , the adoption of the updated mortality improvement scale MP-2021 resulted in a reduction of the projected benefit obligations for theU.S. plans of approximately$5 million .
Changes in the above key assumptions for our global pension plans would have the
following effects to our pension obligations at
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Long-Term Rate of Return Discount Rate
25 Basis Points 25 Basis Points
Increase Decrease Increase Decrease
Increase (decrease) in pension
cost $ (3.6) $ 3.6 $ 0.7 $ (1.3)
Increase (decrease) in pension
obligation $ - $ - $ (33.9) $ 35.4
We believe that the assumptions used are appropriate, though changes in these
assumptions would affect our pension and other postretirement obligations and
benefit costs.
See Note 11 to the consolidated financial statements for more information regarding costs of, and assumptions for, our pension and postretirement benefit obligations and costs.
Goodwill and indefinite-lived intangible assets are not amortized and are tested for impairment at least annually atDecember 31 and more often if an event occurs or circumstances change which indicate it is more likely than not that fair value is less than carrying amount. If a qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit or an indefinite-lived intangible asset exceeds its estimated fair value, an additional quantitative evaluation is performed. The annual impairment tests of goodwill and indefinite-lived intangible assets may be completed through qualitative assessments. We may elect to bypass the qualitative assessment and proceed directly to a quantitative impairment test for goodwill or indefinite-lived intangible assets in any period. We may resume the qualitative assessment for any reporting unit or indefinite-lived intangible asset in any subsequent period.Goodwill As ofDecember 31, 2022 and 2021, our consolidated balance sheet included goodwill of$3,431.3 million and$3,493.3 million , respectively. We assess recoverability of goodwill at the reporting unit level. A reporting unit is an operating segment or a component of an operating segment which is a business and for which discrete financial information is available and reviewed by a segment manager. Our reporting units are Finance & Risk and Sales & Marketing within theNorth America segment, and theU.K. ,Europe ,Greater China ,India and our WWN alliances within the International segment. For the qualitative goodwill impairment test, we analyze actual and projected reporting unit growth trends for revenue and profits, as well as historical performance. We also assess critical factors that may have an impact on the reporting units, including macroeconomic conditions, market-related exposures, regulatory environment, cost factors, changes in the carrying amount of net assets, any plans to dispose of all or part of the reporting unit, and other reporting unit specific factors such as changes in key personnel, strategy, customers or competition. In addition we assess whether the market value of the Company compared to the book amounts are indicative of an impairment. For quantitative goodwill impairment test, we determine the fair value of our reporting units based on the market approach and also in certain instances using the income approach to further validate our results. Under the market approach, we estimate the fair value based on market multiples of current year earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted as necessary for non-recurring items, for each individual reporting unit. We use judgment in identifying the relevant comparable company market multiples (i.e., recent divestitures or acquisitions, facts and circumstances surrounding the market, dominance, growth rate, etc.). For the income approach, we use the discounted cash flow method to estimate the fair value of a reporting unit. The projected cash flows are based on management's most recent view of the long-term outlook for each reporting unit. Factors specific to each reporting unit could include revenue growth, profit margins, terminal value, capital expenditure projections, assumed tax rates, discount rates and other assumptions deemed reasonable by management. When applicable, as a reasonableness check, we reconcile the estimated fair values derived in the valuations for the total Company based on the individual reporting units to our total enterprise value (calculated by multiplying the closing price of our common stock by the number of shares outstanding at that time, adjusted for the value of our debt). Our determination of EBITDA multiples and projected cash flows are sensitive to the risk of future variances due to market conditions as well as business unit execution risks. Management assesses the relevance and reliability of the multiples and projected cash flows by considering factors unique to its reporting units, including recent operating results, business plans, economic projections, anticipated future cash flows, recent market transactions involving comparable businesses and other data. EBITDA multiples and projected cash flows can also be significantly impacted by the future growth opportunities for the reporting unit as well as for the Company itself, general market and geographic sentiment and pending or recently completed merger transactions. Consequently, if future results fall below our forward-looking projections for an extended period of time, the results of future impairment tests could indicate that impairment exists. Although we believe the multiples of EBITDA in our market 41
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approach and the projected cash flows in our income approach are reasonable assumptions about our business, a significant increase in competition or reduction in our competitive capabilities could have a significant adverse impact on our ability to retain market share and thus on the projected values for our reporting units.
An impairment charge is recorded if a reporting unit's carrying value exceeds its fair value. The impairment charge is also limited to the amount of goodwill allocated to the reporting unit. An impairment charge, if any, is recorded as an operating expense in the period that the impairment is identified.
For 2022, 2021 and 2020, we performed qualitative tests for each of our reporting units and the results of our tests indicated that it was not more likely than not that the goodwill in any reporting unit was impaired.
Indefinite-Lived Intangible Assets
Under the qualitative approach, we perform impairment tests for indefinite-lived intangible assets based on macroeconomic and market conditions, industry considerations, overall performance and other relevant factors. If we elect to bypass the qualitative assessment for any indefinite-lived intangible asset, or if a qualitative assessment indicates it is more likely than not that the estimated carrying amount of such asset exceeds its fair value, we proceed to a quantitative approach. Under the quantitative approach, we estimate the fair value of the indefinite-lived intangible asset and compare it to its carrying value. An impairment loss is recognized if the carrying value exceeds the fair value. The estimated fair value is determined primarily using income approach based on the expected present value of the projected cash flows of the assets. Our indefinite-lived intangible assets primarily includeDun & Bradstreet trade name which was recognized in connection with the Take-Private Transaction. As a result of the impairment tests performed using quantitative approach, no impairment charges for indefinite-lived intangible assets have been recognized for the years endedDecember 31, 2022 , 2021 and 2020.
Fair Value Measurements
Assets and liabilities are subject to fair value measurements in certain circumstances, including purchase accounting applied to assets and liabilities acquired in a business combination and long-lived assets that are written down to fair value when they are impaired. We use the acquisition method of accounting for all business combinations. This method requires us to allocate the cost of the acquisition to the assets acquired and the liabilities assumed based on the estimates of fair value for such items, including intangible assets and technology acquired. The excess of the purchase consideration over the fair value of assets acquired and liabilities assumed is recorded as goodwill. A fair value measurement is determined as the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. The determination of fair value often requires us to make significant estimates and assumptions such as determining an appropriate discount rate that factors in both risk and liquidity premiums, identifying the similarities and differences in market transactions, weighting those differences accordingly and then making the appropriate adjustments to those market transactions to reflect the risks specific to the asset or liability being valued. Other significant assumptions include projecting our future cash flows related to revenues and expenses based on our business plans and outlook which can be significantly impacted by our future growth opportunities, general market environment and geographic sentiment. We may use third-party valuation consultants to assist in the determination of such estimates. See Notes 11, 12, 14 and 16 to the consolidated financial statements for further information on fair value measurements and acquisitions.
Income Taxes
As ofDecember 31, 2022 and 2021, our consolidated balance sheet included non-current deferred tax liabilities of$1,023.7 million and$1,207.2 million , respectively. We are subject to income taxes inthe United States and many foreign jurisdictions. In determining our consolidated provision for income taxes for financial statement purposes, we must make certain estimates and judgments. These estimates and judgments affect the determination of the recoverability of certain deferred tax assets and the calculation of certain tax liabilities, which arise from temporary differences between the tax and financial statement recognition of revenue and expense and net operating losses. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence including our past operating results, as applicable, the existence of cumulative losses in the most recent years and our forecast of future taxable income. In estimating future taxable income, we develop assumptions, including the amount of future pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying businesses. 42
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We currently have recorded valuation allowances in certain jurisdictions that we will maintain until it is more likely than not the deferred tax assets will be realized. Our income tax expense recorded in the future may be reduced to the extent of decreases in our valuation allowances. The realization of our remaining deferred tax assets is primarily dependent on future taxable income in the appropriate jurisdiction. Any reduction in future taxable income may require that we record an additional valuation allowance against our deferred tax assets. An increase in the valuation allowance could result in additional income tax expense in such period and could have a significant impact on our future earnings. Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management records the effect of a tax rate or law change on our deferred tax assets and liabilities in the period of enactment. Future tax rate or law changes could have a material adverse effect on our financial condition, results of operations or cash flows.
Key Components of Results of Operations
Revenue
We generate ourNorth America and International segment revenue primarily through subscription-based contractual arrangements that we enter into with clients to provide data, analytics and analytics-related services either individually, or as part of an integrated offering of multiple services. These arrangements occasionally include offerings from more than one business unit to the same client. • We provide Finance & Risk solutions that offer clients access to our most complete and up-to-date global information, comprehensive monitoring and portfolio analysis. We also provide various business information reports that are consumed in a transactional manner across multiple platforms. Clients also use our services to manage supply chain risks and comply with anti-money laundering and global anti-bribery and corruption regulations. • We generate our Sales & Marketing solutions revenue by providing sophisticated analytics and solutions to help our clients increase revenue from new and existing businesses, enabling B2B sales and marketing professionals to accelerate sales, enhance go-to-market activity, engage clients in a meaningful way, close business faster and improve efficiency in advertising campaigns.
Expenses
Cost of Services (exclusive of depreciation and amortization)
Cost of services (exclusive of depreciation and amortization). We define cost of services as those expenses that are directly related to producing our products, services and solutions. These expenses primarily include data acquisition and royalty fees, costs related to our databases, service fulfillment costs, call center and technology support costs, hardware and software maintenance costs, telecommunication expenses, personnel-related costs associated with these functions and occupancy costs associated with the facilities where these functions are performed.
Selling and Administrative Expenses
Selling and administrative expenses primarily include personnel-related costs for sales, administrative and corporate management employees, costs for professional and consulting services, advertising and occupancy and facilities expense of these functions.
Depreciation and Amortization
Depreciation and amortization expenses consist of depreciation related to investments in property, plant and equipment, as well as amortization of purchased and developed software and other intangible assets, principally database and client relationships recognized in connection with the Take-Private Transaction inFebruary 2019 and acquisitions, primarily theBisnode acquisition completed onJanuary 8, 2021 .
Non-Operating Income and (Expense) - Net
Non-operating income and (expense) - net includes interest expense, interest
income, costs associated with early debt repayments, dividends from cost-method
investments, gains and losses from divestitures, mark-to-market expense related
to certain derivatives, and other non-operating income and expenses.
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Provision for Income Tax Expense (Benefit)
Provision for income tax expense (benefit) represents international,
Key Metrics
In addition to reporting GAAP results, we evaluate performance and report our
results on the non-GAAP financial measures discussed below. We believe that the
presentation of these non-GAAP measures provides useful information to investors
and rating agencies regarding our results, operating trends and performance
between periods. These non-GAAP financial measures include adjusted revenue,
organic revenue, adjusted earnings before interest, taxes, depreciation and
amortization ("adjusted EBITDA"), adjusted EBITDA margin, adjusted net income
and adjusted net earnings per diluted share. Adjusted results are non-GAAP
measures that adjust for the impact due to certain acquisition and divestiture
related revenue and expenses, such as costs for banker fees, legal fees, due
diligence, retention payments and contingent consideration adjustments,
restructuring charges, equity-based compensation, and other non-core gains and
charges that are not in the normal course of our business, such as costs
associated with early debt redemptions, gains and losses on sales of businesses,
impairment charges, the effect of significant changes in tax laws and material
tax and legal settlements. We exclude amortization of recognized intangible
assets resulting from the application of purchase accounting because it is
non-cash and not indicative of our ongoing and underlying operating performance.
Recognized intangible assets arise from acquisitions, primarily the Take-Private
Transaction. We believe that recognized intangible assets by their nature are
fundamentally different from other depreciating assets that are replaced on a
predictable operating cycle. Unlike other depreciating assets, such as developed
and purchased software licenses or property and equipment, there is no
replacement cost once these recognized intangible assets expire and the assets
are not replaced. Additionally, our costs to operate, maintain and extend the
life of acquired intangible assets and purchased intellectual property are
reflected in our operating costs as personnel, data fee, facilities, overhead
and similar items. Management believes it is important for investors to
understand that such intangible assets were recorded as part of purchase
accounting and contribute to revenue generation. Amortization of recognized
intangible assets will recur in future periods until such assets have been fully
amortized. In addition, we isolate the effects of changes in foreign exchange
rates on our revenue growth because we believe it is useful for investors to be
able to compare revenue from one period to another, both after and before the
effects of foreign exchange rate changes. The change in revenue performance
attributable to foreign currency rates is determined by converting both our
prior and current periods' foreign currency revenue by a constant rate. As a
result, we monitor our adjusted revenue growth both after and before the effects
of foreign exchange rate changes. We believe that these supplemental non-GAAP
financial measures provide management and other users with additional meaningful
financial information that should be considered when assessing our ongoing
performance and comparability of our operating results from period to period.
Our management regularly uses our supplemental non-GAAP financial measures
internally to understand, manage and evaluate our business and make operating
decisions. These non-GAAP measures are among the factors management uses in
planning for and forecasting future periods. Non-GAAP financial measures should
be viewed in addition to, and not as an alternative to our reported results
prepared in accordance with GAAP.
Our non-GAAP or adjusted financial measures reflect adjustments based on the following items, as well as the related income tax.
Adjusted Revenue
We define adjusted revenue as revenue to include a revenue adjustment due to the timing of the completion of theBisnode acquisition. Management uses this measure to evaluate ongoing performance of the business period over period. In addition, we isolate the effects of changes in foreign exchange rates on our revenue growth because we believe it is useful for investors to be able to compare revenue from one period to another, both after and before the effects of foreign exchange rate changes. The change in revenue performance attributable to foreign currency rates is determined by converting both our prior and current periods' foreign currency revenue by a constant rate. 44 -------------------------------------------------------------------------------- Table of Contents Organic Revenue We define organic revenue as adjusted revenue before the effect of foreign exchange excluding revenue from acquired businesses for the first twelve months. In addition, organic revenue excludes current and prior year revenue associated with divested businesses. We believe the organic measure provides investors and analysts with useful supplemental information regarding the Company's underlying revenue trends by excluding the impact of acquisitions and divestitures. Revenue from acquired businesses is primarily related to the acquisitions ofEyeota Holdings Pte Ltd ("Eyeota") andNetWise Data, LLC ("NetWise") in the fourth quarter of 2021. See Note 16 to the consolidated financial statements included within this Form 10-K. Revenue from divested businesses is related to the business-to-consumer business inGermany that was sold during the second quarter of 2022.
Adjusted EBITDA and Adjusted EBITDA Margin
We define adjusted EBITDA as net income (loss) attributable to
•depreciation and amortization;
•interest expense and income;
•income tax benefit or provision;
•other non-operating expenses or income;
•equity in net income of affiliates;
•net income attributable to non-controlling interests;
•equity-based compensation;
•restructuring charges;
•merger, acquisition and divestiture-related operating costs;
•transition costs primarily consisting of non-recurring expenses associated with transformational and integration activities, as well as incentive expenses associated with our synergy program; and
•other adjustments primarily related to non-cash charges and gains, including impairment charges and adjustments as the result of the application of purchase accounting mainly related to the deferred commission cost amortization associated with the Take-Private Transaction and revenue adjustment associated with theBisnode acquisition. In addition, other adjustments also include non-recurring charges such as legal expense associated with significant legal and regulatory matters.
We calculate adjusted EBITDA margin by dividing adjusted EBITDA by adjusted revenue.
Adjusted Net Income
We define adjusted net income as net income (loss) attributable to
•incremental amortization resulting from the application of purchase accounting. We exclude amortization of recognized intangible assets resulting from the application of purchase accounting because it is non-cash and is not indicative of our ongoing and underlying operating performance. The Company believes that recognized intangible assets by their nature are fundamentally different from other depreciating assets that are replaced on a predictable operating cycle. Unlike other depreciating assets, such as developed and purchased software licenses or property and equipment, there is no replacement cost once these recognized intangible assets expire and the assets are not replaced. Additionally, the Company's costs to operate, maintain and extend the life of acquired intangible assets and purchased intellectual property are reflected in the Company's operating costs as personnel, data fee, facilities, overhead and similar items;
•equity-based compensation;
•restructuring charges;
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•merger, acquisition and divestiture-related operating costs;
•transition costs primarily consisting of non-recurring expenses associated with transformational and integration activities, as well as incentive expenses associated with our synergy program;
•merger, acquisition and divestiture-related non-operating costs;
•debt refinancing and extinguishment costs;
•non-recurring pension charges;
•other adjustments primarily related to non-cash charges and gains, including impairment charges and adjustments as the result of the application of purchase accounting mainly related to the deferred commission cost amortization associated with the Take-Private Transaction and revenue adjustment associated with theBisnode acquisition. In addition, other adjustments also include non-recurring charges such as legal expense associated with significant legal and regulatory matters.
•tax effect of the non-GAAP adjustments; and
•other tax effect adjustments related to the tax impact of statutory tax rate changes on deferred taxes, the enactment of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and other discrete items.
Adjusted Net Earnings Per Diluted Share
We calculate adjusted net earnings per diluted share by dividing adjusted net income (loss) by the weighted average number of common shares outstanding for the period plus the dilutive effect of common shares potentially issuable in connection with awards outstanding under our stock incentive plan.
Results of Operations
This section of this Form 10-K generally discusses year endedDecember 31, 2022 and 2021 financial results and year-over-year comparisons between these years. Discussions related to the year endedDecember 31, 2020 financial results and year-over-year comparisons between the years endedDecember 31, 2021 and 2020 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 . GAAP Results
The following table sets forth our historical results of operations for the periods indicated below (In millions):
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Year Ended December 31,
2022 2021
Revenue $ 2,224.6 $ 2,165.6
Cost of services (exclusive of depreciation and amortization) 721.4 664.3
Selling and administrative expenses 745.6 714.7
Depreciation and amortization 587.2 615.9
Restructuring charge 20.5 25.1
Operating costs 2,074.7 2,020.0
Operating income (loss) 149.9 145.6
Interest income 2.2 0.7
Interest expense (193.2) (206.4)
Other income (expense) - net 13.9 14.9
Non-operating income (expense) - net (177.1) (190.8)
Income (loss) before provision (benefit) for income taxes and equity in net income of affiliates
(27.2) (45.2)
Less: provision (benefit) provision for income taxes (28.8) 23.4
Equity in net income of affiliates 2.5 2.7
Net income (loss) 4.1 (65.9)
Less: net (income) loss attributable to the non-controlling interest
(6.4) (5.8)
Net income (loss) attributable to
(2.3)
Net income (loss) margin (1) (0.1) % (3.3) %
(1)Net income (loss) margin is defined as Net income (loss) attributable to
Key Performance Measures
Management, including our Chief Operating Decision Makers, evaluates the financial performance of our businesses based on a variety of key indicators. These indicators include the non-GAAP measures adjusted revenue, organic revenue, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted net earnings per diluted share. Adjusted results are non-GAAP measures that adjust for the impact due to certain acquisition and divestiture related revenue and expenses, such as costs for banker fees, legal fees, due diligence, retention payments and contingent consideration adjustments, restructuring charges, equity-based compensation, and other non-core gains and charges that are not in the normal course of our business, such as costs associated with early debt redemptions, gains and losses on sales of businesses, impairment charges, the effect of significant changes in tax laws and material tax and legal settlements. In addition, we isolate the effects of changes in foreign exchange rates on our revenue growth because we believe it is useful for investors to be able to compare revenue from one period to another, both after and before the effects of foreign exchange rate changes. The change in revenue performance attributable to foreign currency rates is determined by converting both our prior and current periods' foreign currency by a constant rate. As a result, we monitor our adjusted revenue growth both after and before the effects of foreign exchange rate changes.
The table below sets forth our key performance measures for the periods indicated (In millions, except per share data):
Year Ended
2022 2021
Non - GAAP Financial Measures
Adjusted revenue (a) $ 2,224.6 $ 2,170.2
Organic revenue (a) $ 2,242.6 $ 2,166.4
Adjusted EBITDA (a) $ 863.5 $ 847.1
Adjusted EBITDA margin (a) 38.8 % 39.0 %
Adjusted net income (a) $ 472.4 $ 471.1
Adjusted earnings per share (a) $
1.10
(a) Including impact of deferred revenue purchase accounting adjustments $ -$ (0.2) 47
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Reconciliations of the above non-GAAP financial measures to the most directly
comparable GAAP financial measures are presented in the tables below (In
millions, except per share data):
Year Ended December 31,
2022 2021
GAAP revenue $ 2,224.6 $ 2,165.6
Revenue adjustment due to the Bisnode acquisition close timing - 4.6
Adjusted revenue (a) 2,224.6 2,170.2
Foreign currency impact 69.5 3.1
Adjusted revenue before the effect of foreign currency $ 2,294.1 $ 2,173.3 Net revenue from acquisition and divestiture - before the effect of foreign currency
(51.5) (6.9)
Organic revenue - before the effect of foreign currency (a) $ 2,242.6 $ 2,166.4
North America $ 1,587.1 $ 1,499.4
International 637.5 671.0
Segment revenue 2,224.6 2,170.4
Corporate and other - (0.2)
Foreign currency impact 69.5 3.1
Adjusted revenue before the effect of foreign currency $ 2,294.1 $ 2,173.3 Net revenue from acquisition and divestiture - before the effect of foreign currency
(51.5) (6.9)
Organic revenue - before the effect of foreign currency (a)
$ 2,166.4 (a) Including impact of deferred revenue purchase accounting adjustments $ -$ (0.2) Year Ended December 31, 2022 2021
Net income (loss) attributable to
(2.3) $ (71.7)
Depreciation and amortization 587.2 615.9
Interest expense - net 191.0 205.7
(Benefit) provision for income tax - net (28.8) 23.4
EBITDA 747.1 773.3
Other income (expense) - net (13.9) (14.9)
Equity in net income of affiliates (2.5) (2.7)
Net income (loss) attributable to non-controlling interest 6.4 5.8
Equity-based compensation 66.0 33.3
Restructuring charges 20.5 25.1
Merger and acquisition-related operating costs 23.4 14.1
Transition costs 24.4 11.6
Other adjustments (1) (7.9) 1.5
Adjusted EBITDA $ 863.5 $ 847.1
North America $ 718.0 $ 715.3
International 202.2 194.1
Corporate and other (a) (56.7) (62.3)
Adjusted EBITDA (a) $ 863.5 $ 847.1 (a) Including impact of deferred revenue purchase accounting adjustments $
-
(1) Adjustments for 2022, 2021 and 2020 were primarily related to non-cash purchase accounting adjustments for deferred commission costs associated with the Take-Private Transaction and non-recurring legal reserve adjustments related to theFTC matter in 2022 and 2021 and an environmental matter in 2020. 48
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Year Ended December 31,
2022 2021
Net income (loss) attributable to
494.0 535.7
Equity-based compensation 66.0 33.3
Restructuring charges 20.5 25.1
Merger and acquisition-related operating costs 23.4 14.1
Transition costs 24.4 11.6
Merger and acquisition-related non-operating (gain) costs 3.7 2.2
Debt refinancing and extinguishment costs 24.3 43.0
Non-recurring pension charges 2.1 -
Other adjustments (1) (7.9) 1.5
Tax impact of non-GAAP adjustments (156.1) (165.2)
Other tax effect adjustments (19.7) 41.5
Adjusted net income (loss) attributable to
$ 472.4 $ 471.1 Adjusted diluted earnings (loss) per share of common stock$ 1.10 $ 1.10 Weighted average number of shares outstanding - diluted 430.0 429.8
(a) Including impact of deferred revenue purchase accounting adjustments $ -
(1) Adjustments for 2022, 2021 and 2020 were primarily related to non-cash purchase accounting adjustments for deferred commission assets associated with the Take-Private Transaction and non-recurring legal reserve adjustments related to theFTC matter in 2022 and 2021 and an environmental matter in 2020.
Revenue
Year Ended
Total revenue was$2,224.6 million for the year endedDecember 31, 2022 , compared to$2,165.6 million for the year endedDecember 31, 2021 , an increase of$59.0 million , or 2.7% (5.8% before the effect of foreign exchange). Adjusted revenue increased$54.4 million , or 2.5% (5.6% before the effect of foreign exchange) for the year endedDecember 31, 2022 , compared to the prior year, attributable to growth in the underlying business and the impact of the acquisitions and the divestiture of our business-to-consumer business inGermany , partially offset by the negative impact of foreign exchange. Excluding the impact of the acquisitions and the divestiture of$44.6 million and the negative impact of foreign exchange of$66.4 million , total organic revenue increased$76.2 million , or 3.5%, for the year endedDecember 31, 2022 , compared to the year endedDecember 31, 2021 , primarily reflecting growth across both of our segments. The changes in revenue are discussed further in the segment level discussion below.
Revenue by segment was as follows (In millions):
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Year Ended December 31,
$
Increase %
2022 2021 (Decrease) Increase (Decrease)
North America :
Finance & Risk $ 866.9 $ 834.7 $ 32.2 3.9 %
Sales & Marketing 720.2 664.7 55.5 8.3 %
Total North America $ 1,587.1 $ 1,499.4 $ 87.7 5.8 %
International:
Finance & Risk $ 419.1 $ 430.3 $ (11.2) (2.6) %
Sales & Marketing 218.4 240.7 (22.3) (9.2) %
Total International $ 637.5 $ 671.0 $ (33.5) (5.0) %
Corporate and other:
Finance & Risk $ - $ (2.2) $ 2.2 **
Sales & Marketing - (2.6) 2.6 **
Total Corporate and other $ - $ (4.8) $ 4.8 **
Total Revenue:
Finance & Risk $ 1,286.0 $ 1,262.8 $ 23.2 1.8 %
Sales & Marketing 938.6 902.8 35.8 4.0 %
Total Revenue $ 2,224.6 $ 2,165.6 $ 59.0 2.7 %
** Not Meaningful
North America Segment
For the year ended December 31, 2022 , North America revenue increased $87.7
million , or 5.8% (6.0% before the effect of foreign exchange), compared to the
year ended December 31, 2021 . Excluding the negative impact of foreign exchange
of $1.6 million and the impact of acquisitions which contributed revenue of
$49.4 million , North America organic revenue increased $39.9 million , or 2.7%.
See further discussion below on revenue by solutions.
Finance & Risk
For the year endedDecember 31, 2022 , North America Finance & Risk revenue increased$32.2 million , or 3.9% (4.0% before the effect of foreign exchange), compared to the year endedDecember 31, 2021 . Excluding the negative impact of foreign exchange of$1.0 million , revenue increased$33.2 million , or 4.0%, primarily due to a net increase in revenue across our Finance solutions and Risk solutions of approximately$67 million , principally attributable to new business and higher customer spend in our Third Party Risk and SupplyChain Risk Management solutions, partially offset by lower revenue from the government sector of approximately$29 million .
Sales & Marketing
For the year endedDecember 31, 2022 , North America Sales & Marketing revenue increased$55.5 million , or 8.3% (8.4% before the effect of foreign exchange), compared to the year endedDecember 31, 2021 . Excluding the negative impact of foreign exchange of$0.6 million , revenue increased$56.1 million , or 8.4%, primarily driven by the impact of the acquisitions of Eyeota and NetWise, which contributed revenue of approximately$47 million .
International Segment
For the year endedDecember 31, 2022 , International revenue decreased$33.5 million , or 5.0% (4.6% increase before the effect of foreign exchange) compared to the year endedDecember 31, 2021 . Excluding the negative impact of foreign exchange of$64.8 million and the impact of the divestiture of our business-to-consumer business inGermany of$4.8 million , International organic revenue increased$36.1 million , or 5.4%. See further discussion below on revenue by solutions. 50 -------------------------------------------------------------------------------- Table of Contents Finance & Risk For the year endedDecember 31, 2022 , International Finance & Risk revenue decreased$11.2 million , or 2.6% (6.2% increase before the effect of foreign exchange) compared to the year endedDecember 31, 2021 . Excluding the negative impact of foreign exchange of$38.0 million , revenue increased$26.8 million , or 6.2%, attributable to growth across all markets, including higher revenue of approximately$11 million fromEurope driven by greater API solution sales, higher revenue of approximately$8 million from ourAsia market primarily attributable to greater API solution sales and local market offerings, higher revenue of approximately$5 million from WWN alliances due to higher cross border data fees and product royalties, and higher revenue of approximately$3 million from ourU.K. market, mainly attributable to growth in Finance Analytics.
Sales and Marketing
For the year endedDecember 31, 2022 ,International Sales & Marketing revenue decreased$22.3 million , or 9.2% (1.9% increase before the effect of foreign exchange) compared to the year endedDecember 31, 2021 . Excluding the negative impact of foreign exchange of$26.8 million and the impact of the divestiture of$4.8 million , International organic revenue increased$9.3 million , or 3.9%, primarily as a result of growth of approximately$7 million from ourU.K. market driven by higher data sales, increased revenue of approximately$3 million from WWN product royalties, and increased API solution sales of approximately$2 million inEurope .
Consolidated Operating Costs
Consolidated operating costs were as follows (In millions):
Year Ended December 31,
$
Increase %
2022 2021 (Decrease) Increase (Decrease)
Cost of services (exclusive of depreciation and
amortization) $ 721.4 $ 664.3 $ 57.1 8.6 %
Selling and administrative expenses 745.6 714.7 30.9 4.3 %
Depreciation and amortization 587.2 615.9 (28.7) (4.7) %
Restructuring charges 20.5 25.1 (4.6) (18.1) %
Operating costs $ 2,074.7 $ 2,020.0 $ 54.7 2.7 %
Operating income (loss) $ 149.9 $ 145.6 $ 4.3 2.9 %
Cost of Services (exclusive of depreciation and amortization)
Cost of services (exclusive of depreciation and amortization) increased$57.1 million , or 8.6%, for the year endedDecember 31, 2022 , compared to the year endedDecember 31, 2021 , primarily due to increased costs of$33.0 million from the acquisitions of Eyeota and NetWise which closed in the fourth quarter of 2021. Excluding the impact of the acquisitions, cost of services increased$24.1 million , or 3.6% for the year endedDecember 31, 2022 , compared to the prior year, primarily due to higher data and data processing costs of approximately$56 million , partially offset by lower net personnel costs of approximately$31 million . Total cost of services was favorably impacted by foreign exchange of approximately$28 million for the year endedDecember 31, 2022 , compared to the prior year.
Selling and Administrative Expenses
Selling and administrative expenses increased$30.9 million , or 4.3%, for the year endedDecember 31, 2022 , compared to the year endedDecember 31, 2021 , primarily due to increased costs of$11.9 million from the acquisitions of Eyeota and NetWise. Excluding the impact of the acquisitions, selling and administrative expenses increased$18.9 million , or 2.6% due to higher net personnel costs of approximately$47 million driven by retention costs and equity-based compensation, partially offset by lower costs of approximately$29 million primarily attributable to lower legal costs related to an accrual for a legal matter in the prior year and lower office facility costs. Total selling and administrative expenses were favorably impacted by foreign exchange of approximately$25 million for the year endedDecember 31, 2022 , compared to the prior year period. 51 -------------------------------------------------------------------------------- Table of Contents Depreciation and Amortization Depreciation and amortization decreased$28.7 million , or 4.7%, for the year endedDecember 31, 2022 , compared to the year endedDecember 31, 2021 , primarily due to the impact of foreign exchange and lower amortization due to the accelerated amortization method applied to intangible assets recognized associated with the Take-Private Transaction and theBisnode acquisition, partially offset by additional expense associated with the acquisitions of Eyeota and NetWise.
Restructuring Charges
Restructuring charges decreased$4.6 million , or 18.1%, for the year endedDecember 31, 2022 , compared to the year endedDecember 31, 2021 , primarily due to higher exit costs in the prior year related to initiatives in our International businesses to improve operational performance and profitability, partially offset by charges associated with ourNorth America initiatives in the current year. Operating Income (Loss) Consolidated operating income was$149.9 million for the year endedDecember 31, 2022 , an improvement of$4.3 million , or 2.9%, compared to the year endedDecember 31, 2021 . The increase in operating income was driven by higher revenue of$59.0 million , lower depreciation and amortization expense of$28.7 million and lower restructuring charges of$4.6 million , partially offset by higher business costs largely attributable to the data and data processing costs and also as a result of acquisitions of Eyeota and NetWise inNovember 2021 . Excluding the impact of the acquisitions, operating income was$153.1 million , an improvement of$7.5 million , or 5.1% Adjusted EBITDA and adjusted EBITDA margin by segment were as follows (In millions): Year Ended December 31, $ Increase % 2022 2021 (Decrease) Increase (Decrease)North America : Adjusted EBITDA$ 718.0 $ 715.3 $ 2.7 0.4 % Adjusted EBITDA margin 45.2 % 47.7 % (250) bps International: Adjusted EBITDA$ 202.2 $ 194.1 $ 8.1 4.2 % Adjusted EBITDA margin 31.7 % 28.9 % 280 bps Corporate and other: Adjusted EBITDA$ (56.7) $ (62.3) $ 5.6 9.1 % Consolidated total: Adjusted EBITDA$ 863.5 $ 847.1 $ 16.4 1.9 % Adjusted EBITDA margin 38.8 % 39.0 % (20) bps Net income (loss) margin (0.1) % (3.3) % 320 bps Consolidated net loss margin was 0.1% and 3.3% for the years endedDecember 31, 2022 and 2021, respectively, an improvement of 320 basis points. Consolidated adjusted EBITDA was$863.5 million for the year endedDecember 31, 2022 , compared to$847.1 million for the year endedDecember 31, 2021 , an increase of$16.4 million , or 1.9%. Higher adjusted EBITDA for the year endedDecember 31, 2022 compared to the prior year was primarily due to revenue growth from the underlying business and the impact of the acquisitions, partially offset by investments leading to higher data and data processing costs and the impact of foreign exchange resulting from a strengtheningU.S. dollar. Consolidated adjusted EBITDA was negatively impacted by foreign exchange of approximately$15 million for the year endedDecember 31, 2022 . Consolidated adjusted EBITDA margin was 38.8% for the year endedDecember 31, 2022 , compared to 39.0% for the prior year period, a decrease of 20 basis points. Excluding the impact of the acquisitions, consolidated adjusted EBITDA margin was 39.5% for the year endedDecember 31, 2022 , an improvement of 30 basis points compared to the prior year. North America Segment 52
-------------------------------------------------------------------------------- Table of ContentsNorth America adjusted EBITDA was$718.0 million for the year endedDecember 31, 2022 , compared to$715.3 million for the year endedDecember 31, 2021 , an increase of$2.7 million , or 0.4%. The increase in adjusted EBITDA was primarily due to higher revenue driven by growth from the underlying business and the impact of the acquisitions, partially offset by investments leading to higher data and data processing costs. Adjusted EBITDA margin was 45.2% for the year endedDecember 31, 2022 , compared to 47.7% for the prior year period, a decrease of 250 basis points. Excluding the impact of the acquisitions, adjusted EBITDA margin was 46.5% for the year endedDecember 31, 2022 .
International Segment
International adjusted EBITDA was$202.2 million for the year endedDecember 31, 2022 , compared to$194.1 million for the year endedDecember 31, 2021 , an increase of$8.1 million , or 4.2%. The improvement in adjusted EBITDA was primarily due to revenue growth from the underlying business, partially offset by foreign exchange loss resulting from a strengtheningU.S. dollar. Adjusted EBITDA margin was 31.7% for the year endedDecember 31, 2022 , compared to 28.9% for the prior year, an improvement of 280 basis points.
Corporate and Other
Corporate adjusted EBITDA was a loss$56.7 million for the year endedDecember 31, 2022 , compared to a loss of$62.3 million for the year endedDecember 31, 2021 , an improvement of$5.6 million , or 9.1%. The improvement in adjusted EBITDA was primarily attributable to lower personnel costs.
Interest Income (Expense) - Net
Interest income (expense) - net was as follows (In millions):
Year Ended December 31,
$ %
2022 2021 Change Change
Interest income $ 2.2 $ 0.7 $ 1.5 205.9 %
Interest expense (193.2) (206.4) 13.2 6.4 %
Interest income (expense) - net $ (191.0) $ (205.7) $ 14.7 7.1 %
Interest income increased
Interest expense decreased$13.2 million for the year endedDecember 31, 2022 , compared to the prior year. The decrease was primarily due to lower interest rates as a result of debt refinancing and lower expense associated with the write off of debt issuance costs and discount in the current year in connection with the early redemption of the 6.875% Senior Secured Notes, compared to the prior year related to the repayment of the 10.250% Senior Unsecured Notes. See Note 6 to the consolidated financial statements for further discussion. Other Income (Expense) - Net
Other income (expense) - net was as follows (In millions):
Year Ended December 31,
$ %
2022 2021 Change Change
Non-operating pension income (expense)
(21) %
Debt redemption premium (16.3) (29.5) 13.2 45 %
Miscellaneous other income (expense) - net (12.0) (9.3) (2.7) (29) %
Other income (expense) - net $ 13.9 $ 14.9 $ (1.0) (6) %
Non-operating pension income (expense) was an income of $42.2 million for the
year ended December 31, 2022 , compared to an income of $53.7 million for the
year ended December 31, 2021 , a decrease of $11.5 million , primarily due to
higher interest costs in the current year.
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Early debt redemption premium was related to the early redemption of the 6.875%
Senior Secured Notes in January 2022 and the 10.250% Senior Unsecured Notes in
December 2021 . See Note 6 to the consolidated financial statements for further
discussion.
The change in miscellaneous other income (expense) - net of $2.7 million for the
year ended December 31, 2022 , compared to the year ended December 31, 2021 , was
primarily due to fees associated with our accounts receivable securitization
facility initiated in September 2022 .
Provision for Income Taxes
Effective tax rate for the year endedDecember 31, 2020 49.6 % Impact of uncertain tax positions 1.5 Impact of income earned in non-U.S. jurisdictions (1) 19.6 Impact of non-deductible charges
(12.7)
Impact of non-deductible change in fair value of make-whole derivative liability for the Series A Preferred Stock
3.0
Impact of tax credits and deductions (2) 23.7
Impact of GILTI Inclusion (2) (43.4)
Impact of change in state tax (3)
(63.7)
Impact of valuation allowance (2.7) Impact of CARES Act (25.5) Other (1.2) Effective tax rate for the year endedDecember 31, 2021 (51.8) % Impact of uncertain tax positions (4.3) Impact of income earned in non-U.S. jurisdictions (1) 42.5 Impact of non-deductible charges (4)
(30.5)
Impact of tax credits and deductions 2.2 Impact of GILTI Inclusion
(29.3)
Impact of change in state tax (3)
181.1
Impact of valuation allowance 0.5 Other (4.4) Effective tax rate for the year endedDecember 31, 2022
106.0 %
(1)Primarily due to higher pre-tax income from our non-
(2)Primarily due to the impact of lower consolidated pre-tax loss for the year
ended
(3)Primarily related to the impact of state apportionment changes in 2022 and
higher state tax in the state of
(4)Primarily attributable to non-deductible equity-based compensation.
Net Income (Loss)
Net income (loss) attributable toDun & Bradstreet Holdings, Inc. was a net loss of$2.3 million for the year endedDecember 31, 2022 , compared to a net loss of$71.7 million for the year endedDecember 31, 2021 . The improvement of$69.4 million for the year endedDecember 31, 2022 , compared to the prior year, was primarily due to: •improvement in operating income (loss) of$4.3 million in the current year largely due to higher revenue from our underlying businesses, the impact of acquisitions that closed in 2021, lower depreciation and amortization expense, partially offset by higher business costs largely attributable to higher investment in data and data processing costs.
•lower interest expense of
•Higher tax benefit of
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Adjusted Net Income and Adjusted Diluted Earnings Per Share
Adjusted net income was$472.4 million for the year endedDecember 31, 2022 compared to$471.1 million for the year endedDecember 31, 2021 , an increase of$1.3 million , or 0.3%. Adjusted net earnings per share was$1.10 in both the year endedDecember 31, 2022 and 2021. The increase in adjusted net income was primarily driven by revenue growth from the underlying business and lower interest expense, partially offset by investments leading to higher data and data processing costs and higher depreciation and amortization expense.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity consist of cash flows provided by operating activities, cash and cash equivalents on hand and our short-term borrowings under our senior secured credit facility. Our principal uses of liquidity are working capital, capital investments (including computer software), debt service, business acquisitions and other general corporate purposes. We believe that cash provided by operating activities, supplemented as needed with available financing arrangements, is sufficient to meet our short-term needs for at least the next twelve months, including interest payments, contractual obligations, capital expenditures, dividend payments, tax liabilities and restructuring charges. We continue to generate substantial cash from ongoing operating activities and manage our capital structure to meet short- and long-term objectives including investing in existing businesses and strategic acquisitions. In addition, we have the ability to use the short-term borrowings from the Revolving Facility to supplement the seasonality in the timing of receipts in order to fund our working capital needs. Our future capital requirements will depend on many factors that are difficult to predict, including the size, timing and structure of any future acquisitions, future capital investments and future results of operations. Our access to the capital markets can be impacted by factors outside of our control, including rising inflation and interest rates, the ongoingRussia /Ukraine conflict and the impact of COVID-19. Currently, while we do not expect the impact of rising inflation and interest rates, COVID-19 and theRussia /Ukraine conflict to affect our ability to fund our operating needs for the foreseeable future, the ultimate impact will be difficult to predict, and depends on, among many factors, the duration of inflation, the currentRussia /Ukraine conflict, government mandates or guidance regarding COVID-19 restrictions, the expansion of sanctions and their effects on global market conditions and on our clients and vendors, which continue to be uncertain at this time and cannot be predicted. In addition, we actively manage the impact of rising interest rates by reducing debt and entering into interest rate swaps and cross-currency swaps.
Cash Flow
As ofDecember 31, 2022 , we had cash and cash equivalents of$208.4 million , of which$205.7 million was held by our foreign operations. We utilize a variety of planning strategies in an effort to ensure that our worldwide cash is available when and where it is needed. Subsequent to the enactment of the Tax Cuts and Jobs Act ("2017 Act"), a significant portion of the cash and cash equivalents held by our foreign subsidiaries are no longer subject toU.S. income tax upon repatriation tothe United States . However, a portion of our cash held by our foreign operations is still subject to foreign income tax or withholding tax upon repatriation. As a result, we intend to reinvest indefinitely all earnings post 2017 from ourChina andIndia subsidiaries. Cash held in ourChina andIndia operations totaled$40.3 million as ofDecember 31, 2022 . Information about our cash flows, by category, is presented in the Consolidated Statements of Cash Flows. The following table summarizes our cash flows for the periods presented (In millions): Year Ended December 31, 2022 2021 Net cash provided by (used in) operating activities$ 537.1 $ 503.7 Net cash provided by (used in) investing activities (210.5) (1,078.7) Net cash provided by (used in) financing activities (281.1) 400.1 Total cash provided during the period before the effect of exchange rate changes$ 45.5 $ (174.9) 55
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Cash Provided by (Used in) Operating Activities
Net cash from operating activities increased$33.4 million for the year endedDecember 31, 2022 , compared to the year endedDecember 31, 2021 , primarily driven by a net cash benefit of$183.1 million in 2022 from the trade receivable securitization facility and lower interest payments of approximately$13 million in the current year period as a result of debt refinancing, partially offset by higher net tax payment of approximately$127 million in 2022 due to non-recurring cash benefit of$66.2 million received in the prior year period related to the application of the CARES Act and higher tax payments in the current year period due to payment deadline relief granted by theU.S. government attributable to the IDA Hurricane Relief. The remaining change was primarily due to an increase in cash paid to suppliers and employees. InSeptember 2022 , the Company entered into a three-year revolving securitization facility agreement to transfer trade receivables of one of ourU.S. subsidiaries through our bankruptcy-remote subsidiary to a third-party financial institution on a recurring basis in exchange for cash equal to the gross receivables transferred. The facility initially had monthly drawing limits ranging from$160 million to$215 million , and was subsequently modified to$170 million to$215 million inDecember 2022 . During the year endedDecember 31, 2022 , the Company received a net cash benefit of$183.1 million related to the facility. See Note 7 to the consolidated financial statements for further discussion. The CARES Act, which was signed into law onMarch 27, 2020 by theU.S. government, was designed to provide relief to businesses during the COVID-19 pandemic, including allowing the amendment of prior tax returns to obtain tax refunds through the modification of rules related to the net operating losses. We utilized the relief opportunities provided by the Act. The application of the Act resulted in a net cash benefit of approximately$98.4 million . OnJanuary 22, 2021 we received$66.2 million of the$98.4 million due to us. We expect operating cash requirements in 2023 to be primarily related to payments for interest, contractual obligations, tax liability and other working capital needs. We typically have various contractual obligations in our normal course of business, including those recorded as liabilities in our consolidated balance sheet, and certain purchase commitments that are not recognized, but are disclosed in the notes to our consolidated financial statements. A significant portion of these contractual obligations are related to payments for enterprise-wide information-technology services. See Note 20 to the consolidated financial statements for further discussion on contractual obligations. We anticipate interest payments and payments for our contractual obligations to be approximately$265 million and$357 million in 2023, respectively. We expect cash requirements to be comparable to 2022 and sufficient in 2023 to meet other working capital needs in the normal course of business, such as payments for salaries and wages, and data acquisition. We expect to continue to generate substantial cash from ongoing operating activities. 56 -------------------------------------------------------------------------------- Table of Contents Cash Provided by (Used in) Investing Activities Net cash used in investing activities decreased$868.2 million for the year endedDecember 31, 2022 , compared to the year endedDecember 31, 2021 , primarily due to higher net payment of$844.3 million in the prior year for the acquisitions ofBisnode , Eyeota and NetWise and payment of$76.6 million in the prior year for the purchase of an office building inJacksonville, Florida for our new global headquarters, partially offset by higher payment of$34.6 million for software development and higher net cash settlement payments of$16.3 million in the current year from foreign currency and net investment hedging activities. During 2021, we acquiredBisnode for a total purchase price of$805.8 million , inclusive of cash acquired of$29.9 million . The transaction closed with a combination of cash of$646.9 million and 6,237,087 newly issued shares of common stock of the Company in a private placement valued at$158.9 million based on the stock closing price onJanuary 8, 2021 . Upon the close of the transaction, we settled a zero-cost foreign currency collar and received$21.0 million , which reduced our net cash payment for the acquisition. The transaction was partially funded by the proceeds from the$300 million borrowing from the Incremental Term Loan. During 2021, we also acquired Eyeota and NetWise for an aggregate purchase price of$242.1 million , inclusive of acquired cash of$9.7 million . The acquisitions were partially funded with borrowings from our revolving credit facility. See Note 16 to the consolidated financial statements for further discussion.
We expect capital expenditures in 2023 to be in the range of
Cash Provided by (Used in) Financing Activities
Net cash used in financing activities increased$681.2 million for the year endedDecember 31, 2022 , compared the year endedDecember 31, 2021 , primarily due to lower net proceeds from debt issuance of$297.9 million in the current year, inclusive of borrowings under the term loan facility, higher net repayment of$269.7 million for credit facility borrowing, higher repayment of$78.5 million for term loan borrowing, payment of$42.9 million for dividends and payment of$23.6 million for the purchase of non-controlling interest of ourChina operations in 2022, partially offset by lower payment of$43.2 million for debt redemption activities in the current year period compared to the prior year.
See below and Note 6 to the consolidated financial statements for further discussion on our debt.
Cash Requirements and Other Obligations
Contractual Commitments
AtDecember 31, 2022 , we had contractual commitments to repay debt, settle payments to purchase services, settle tax liabilities, make lease payments and fund pension plans. The following table presents our contractual obligations as ofDecember 31, 2022 (In millions): Payment due Total within one year Contractual obligations Short-term and long-term debt (1)$ 4,648.0 $ 298.0 Operating leases (2)$ 68.7 $ 20.5 Commitments to purchase obligations (3) $
2,091.1
$ 144.2 $ 6.6 Tax liabilities related to the 2017 Act $
44.5 $ 5.2
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(1)Amounts include interest payments. See Note 6 to the consolidated financial statements for further discussion.
(2)See Note 8 to the consolidated financial statements for further discussion.
(3)See Note 20 to the consolidated financial statements for further discussion.
(4)See Note 11 to the consolidated financial statements for further discussion.
Dividends StartingJuly 28, 2022 , our Board of Directors declared a quarterly cash dividend of$0.05 per share of common stock. We intend to continue returning capital to shareholders in the form of dividends, subject to declaration by our Board of Directors. Capital Resources and Debt
Currently, in addition to cash generated from our operating activities, we also borrow from time to time from our credit facility and issue long-term debt.
Below is a summary of our borrowings as ofDecember 31, 2022 andDecember 31, 2021 (In millions): At December 31, 2022 At December 31, 2021 Debt issuance Debt issuance Principal costs and Principal costs and Maturity amount discount Carrying value amount discount Carrying value Debt maturing within one year: 2026 Term loan February 8, 2026$ 28.1 $ - $ 28.1$ 28.1 $ - $ 28.1 2029 Term loan January 18, 2029 4.6 - 4.6 - - - Total short-term debt$ 32.7 $
- $ 32.7
- $ 28.1
Debt maturing after one year: 2026 Term loan February 8, 2026$ 2,651.7 $ 49.2 $ 2,602.5 $ 2,754.8 $ 64.5 $ 2,690.3 2029 Term loan January 18, 2029 451.9 6.5 445.4 - - - Revolving facility September 11, 2025 50.3 - 50.3 160.0 - 160.0 5.000% Senior unsecured December 15, 2029 notes 460.0 6.0 454.0 460.0 6.8 453.2 Fully paid off in 6.875% Senior secured notes January 2022 - - - 420.0 6.8 413.2 Total long-term debt$ 3,613.9 $ 61.7 $ 3,552.2 $ 3,794.8 $ 78.1 $ 3,716.7 Total debt$ 3,646.6 $ 61.7 $ 3,584.9 $ 3,822.9 $ 78.1 $ 3,744.8
Senior Secured Credit Facilities
Our Senior Secured Credit Facilities consist of a senior secured term loan facility and a senior secured revolving credit facility. Our senior secured term loan facility includes a seven-year senior secured term loan with a maturity date ofFebruary 8, 2026 ("2026 Term Loan"), and a seven-year senior secured term loan with a maturity date ofJanuary 18, 2029 ("2029 Term Loan"). Our five-year senior secured revolving credit facility has a maturity date ofSeptember 11, 2025 . OnJanuary 18, 2022 , we amended our Senior Secured Credit Facilities agreement, specifically related to the Term Loan Facility, to establish Incremental Term Loans, or 2029 Term Loan, in an aggregate principal amount of$460 million with a maturity date ofJanuary 18, 2029 . We used the proceeds from the 2029 Term Loans to redeem our then-outstanding 6.875% Senior Secured Note. See discussion below under "Senior Notes." Borrowings under the Senior Secured Credit Facilities bear interest at a rate per annum equal to an applicable margin over a LIBOR or Secured Overnight Financing Rate ("SOFR") for the interest period relevant to such borrowing, subject to interest rate floors, and they are secured by substantially all of the Company's assets.
Other details of the Senior Secured Credit Facilities (See Note 6 for further discussion):
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•For the 2029 Term Loan, beginning June 30, 2022 , 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 . As such, the required payment in 2023 is expected
to be approximately $5 million . The 2029 Term Loan bears interest at a rate per
annum equal to 325 basis points over a SOFR rate for the interest period. The
interest rate associated with the outstanding balance of the 2029 Term Loan at
December 31, 2022 was 7.573%.
•For the 2026 Term Loan, beginning June 30, 2020 , the principal amount of the
Term Loan Facility 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 February 8, 2026 . On September 15, 2022 , we
paid down an additional $75 million to reduce the borrowing of the 2026 Term
Loan. As such, the required payment in 2023 is expected to be approximately $28
million . The margin to LIBOR was 325 basis points as of both December 31, 2022
and 2021. The interest rates associated with the outstanding balances of the
2026 Term Loan at December 31, 2022 and December 31, 2021 were 7.639% and
3.352%, respectively.
• For borrowings under the Revolving Facility, the margin to LIBOR was 325 basis
points at both December 31, 2022 and 2021, subject to a ratio-based pricing
grid. The aggregate amount available under the Revolving Facility is $850
million . The available borrowing under the Revolving Facility at December 31,
2022 and December 31, 2021 were $799.7 million and $690.0 million , respectively.
The interest rates associated with the outstanding balances of the Revolving
Facility at December 31, 2022 and December 31, 2021 were 7.574% and 3.104%,
respectively.
Senior Notes
The 6.875% Senior Secured Notes and the 5.000% Senior Unsecured Notes may be redeemed at our option, in whole or in part, following specified events and on specified redemption dates and at the redemption prices specified in the indenture governing the 6.875% Senior Secured Notes and the 5.000% Senior Unsecured Notes. OnDecember 20, 2021 , we issued$460 million in aggregate principal amount of 5.000% Senior Unsecured Notes dueDecember 15, 2029 . The proceeds from the Senior Unsecured Notes and cash on hand were used to fund the full redemption of the then-existing$450 million in aggregate principal amount of our 10.250% Senior Unsecured Notes, inclusive of a make whole payment of$29.5 million , accrued interest and other fees and expenses.
On
The Senior Secured Credit Facilities, the 5.000% Senior Unsecured Notes, and the 6.875% Senior Secured Notes contain certain covenants that limited our ability to enter into certain transactions. In addition, the Revolving Facility contains a financial covenant requiring the maintenance of debt to EBITDA ratios which are defined in the facility credit agreement in effect. We were in compliance with the respective financial and non-financial covenants atDecember 31, 2022 andDecember 31, 2021 .
See Note 6 to the consolidated financial statements for a more complete discussion of our debt.
Currently our credit rating is B+ by S&P Global, B2 by Moody's and BB- by Fitch.
Off-Balance Sheet Arrangements
We do not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements, other than our foreign exchange forward contracts, interest rate swaps and cross currency swaps discussed in Note 14 to the consolidated financial statements.
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