DUN & BRADSTREET HOLDINGS, INC. The statements contained in this report that are not purely historical are forward-looking statements, including statements regarding expectations, hopes, intentions or strategies regarding the future. Forward-looking statements are based onDun & Bradstreet's management's beliefs, as well as assumptions made by, and information currently available to, them. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, such as those contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A"). Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. It is not possible to predict or identify all risk factors. Consequently, the risks and uncertainties listed below should not be considered a complete discussion of all of our potential trends, risks and uncertainties. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties that forward-looking statements are subject to include, but are not limited to: (i) an outbreak of disease, global or localized health pandemic or epidemic, or the fear of such an event (such as the COVID-19 global pandemic), including the global economic uncertainty and measures taken in response; (ii) the short- and long-term effects of the COVID-19 global pandemic, including the pace of recovery or any future resurgence; (iii) our ability to implement and execute our strategic plans to transform the business; (iv) our ability to develop or sell solutions in a timely manner or maintain client relationships; (v) competition for our solutions; (vi) harm to our brand and reputation; (vii) unfavorable global economic conditions; (viii) risks associated with operating and expanding internationally; (ix) failure to prevent cybersecurity incidents or the perception that confidential information is not secure; (x) failure in the integrity of our data or systems; (xi) system failures and personnel disruptions, which could delay the delivery of our solutions to our clients; (xii) loss of access to data sources; (xiii) failure of our software vendors and network and cloud providers to perform as expected or if our relationship is terminated; (xiv) loss or diminution of one or more of our key clients, business partners or government contracts; (xv) dependence on strategic alliances, joint ventures and acquisitions to grow our business; (xvi) our ability to protect our intellectual property adequately or cost-effectively; (xvii) claims for intellectual property infringement; (xviii) interruptions, delays or outages to subscription or payment processing platforms; (xix) risks related to acquiring and integrating businesses and divestitures of existing businesses; (xx) our ability to retain members of the senior leadership team and attract and retain skilled employees; (xxi) compliance with governmental laws and regulations; (xxii) risks associated with our structure and status as a "controlled company;" and (xxiii) the other factors described under the headings "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in our consolidated financial statements for the year endedDecember 31, 2019 , included in our final prospectus datedJune 30, 2020 and filed with theSecurities and Exchange Commission onJuly 2, 2020 , our other Quarterly Reports and the Company's other reports or documents. The following discussion and analysis ofDun & Bradstreet Holdings, Inc.'s financial condition and results of operations is provided as a supplement to the unaudited condensed consolidated financial statements for the three and six months endedJune 30, 2020 , and should be read in conjunction with the audited consolidated financial statements for the year endedDecember 31, 2019 , the unaudited condensed consolidated financial statements for the three months endedMarch 31, 2020 , our "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our final prospectus datedJune 30, 2020 and filed with theSecurities and Exchange Commission onJuly 2, 2020 . References in this discussion and analysis to "the Company," "Dun & Bradstreet ," "we," "us" and "our" refer toDun & Bradstreet Holdings, Inc. and its subsidiaries. Business OverviewDun & 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 enhance salesforce productivity, gain visibility into key markets, inform commercial credit decisions and confirm that suppliers are financially viable and compliant with laws and regulations. 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 41 -------------------------------------------------------------------------------- Table of Contents 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. We have a global client base of approximately 135,000, 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 inNorth America , a growing presence in theUnited Kingdom ,Ireland ,India andGreater China through our majority or wholly-owned subsidiaries and a broader global presence through our Worldwide Network alliances ("WWN alliances"). We believe that we have an attractive business model that is underpinned by highly recurring, diversified revenues, 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 Since the Take-Private Transaction, management has made changes to transform our business. As a result, during the fourth quarter of 2019, we changed the composition of our reportable segments, the classification of revenue by solution set and our measure of segment profit (from operating income to adjusted earnings before interest, income taxes, depreciation and amortization ("EBITDA") in the information that we provide to our chief operating decision makers ("CODMs") to better align with how they assess performance and allocate resources. Latin America Worldwide Network, which was previously included in theAmericas reportable segment, is currently included in the International segment. Accordingly, prior period results have been recast to conform to the current presentation of segments, revenue by solution set, and the measure of segment profit. These changes do not impact our consolidated results. 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 inthe United States andCanada ; and •International offers Finance & Risk and Sales & Marketing data, analytics and business insights directly in theUnited Kingdom /Ireland ("U.K."),Greater China ,India and indirectly through our Worldwide Network Alliances. Recent Developments Initial Public Offering OnJuly 6, 2020 , we completed an initial public offering ("IPO") of 90,047,612 shares of our common stock, par value$0.0001 per share at an offering price of$22.00 per share. Immediately subsequent to the closing of the IPO, a subsidiary of Cannae Holdings, a subsidiary of Black Knight and affiliates ofCC Capital purchased from us in a private placement$200.0 million ,$100.0 million and$100.0 million , respectively, of our common stock at a price per share equal to 98.5% of the IPO price. We issued 18,458,000 shares of common stock in connection with the private placement. A total of 108,506,312 shares of common stock were issued in the IPO and concurrent private placement for gross proceeds of$2,381.0 million . See Note 18 to the unaudited condensed consolidated financial statements for further discussion, including the use of proceeds. 42 -------------------------------------------------------------------------------- Table of Contents COVID-19 Impact The global coronavirus ("COVID-19") pandemic has caused disruptions in supply chains, affecting workforce, production and sales across the world, leading to disruptions and volatility in the global financial markets and economy. There is considerable uncertainty regarding the extent of the impact and the duration. The extent of the impact of COVID-19 on our operational and financial performance will depend on the effect on our customers and vendors, all of which are uncertain at this time and cannot be predicted. SinceMarch 2020 , substantially all of our employees have been working from home. We are following the requirements and protocols published by theU.S. Centers for Disease Control , theWorld Health Organization and country, state and local governments. We continue to serve our clients the high level of service they have come to expect from us. Our transition to working from home has been successful and has not significantly affected our operations. While our results of operations, financial condition, and cash flows for the three and six months endedJune 30, 2020 have not been materially affected, our usage-based solutions across our Finance & Risk business units and certain of our International markets have been impacted by COVID-19 as discussed further within the revenue session of the MD&A. In addition, we experience longer collection cycles for certain groups of customers. As a result, we considered our current expectations of future economic conditions, including the impact of COVID-19, when estimating our allowance for doubtful accounts. We made an immaterial increase to our allowance for doubtful accounts in the second quarter of 2020 as a result of our current estimate of the impact COVID-19 will have on the collectability of our accounts receivable. Given the current economic condition, we continue to carefully monitor the COVID-19 pandemic and its impact on our business including, but not limited to, implementing additional operational processes to monitor customer sales and collections, taking precautionary measures to ensure sufficient liquidity and adjusting operations to ensure business continuity. While our productivity and financial performance for the three and six months endedJune 30, 2020 have not been impacted materially by the pandemic, the ultimate impact will be difficult to predict and depends on, among many factors, the duration of the pandemic and its ultimate impact to our customers, vendors, and the financial markets. In response to liquidity issues that businesses are facing as a result of the COVID-19 pandemic, The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act" or the "Act") was signed into law onMarch 27, 2020 by theU.S. government. Among other reliefs, the Act provides assistance to businesses through the modification of rules related to net operating losses and interest expense deductions. Many of these modifications are designed to provide critical cash flow and liquidity to businesses during the COVID-19 pandemic, including allowing the amendment of prior tax returns to obtain tax refunds. The Act also allows for the deferral of 2020 employer FICA payroll taxes to 2021 and 2022 as well as delaying any federal tax payments dueApril 15, 2020 andJune 15, 2020 untilJuly 15, 2020 . The Company intends to utilize the relief opportunities provided by the Act. As a result of the application of the Act, the Company expects to realize a net income tax cash benefit of approximately$90 million , of which$53.7 million is reflected in our effective tax rate for the six months endedJune 30, 2020 . We have also deferred 2020 FICA payroll tax payments of approximately$12 million , with half due at the end of 2021 and the remaining half at the end of 2022. Recently Issued Accounting Standards See Note 2 to the unaudited condensed consolidated financial statements for disclosure of the impact that recent accounting pronouncements may have on the unaudited condensed consolidated financial statements. Key Components of Results of Operations Revenue We generate ourNorth America and International segment revenues 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. 43 -------------------------------------------------------------------------------- Table of Contents • We generate our Sales & Marketing 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
Operating Expenses
Operating 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, General & Administrative Expenses Selling, General & 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 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. Non-Operating Income and Expense Non-operating income and expense includes interest expense, interest income, 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. Provision for Income Tax Expense (Benefit) Provision for income tax expenses (benefit) represents international,U.S. federal, state and local income taxes based on income in multiple jurisdictions for our corporate subsidiaries. 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, adjusted earnings before interest, taxes, depreciation and amortization (''adjusted EBITDA''), adjusted EBITDA margin and adjusted net income. Adjusted results are non-GAAP measures that adjust for the impact due to purchase accounting application and divestitures, restructuring charges, equity-based compensation, acquisition and divestiture-related costs (such as costs for bankers, legal fees, due diligence, retention payments and contingent consideration adjustments) and other non-core gains and charges that are not in the normal course of our business (such as gains and losses on sales of businesses, impairment charges, effect of significant changes in tax laws and material tax and legal settlements). 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, or 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 44 -------------------------------------------------------------------------------- Table of Contents 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 adjusted to include revenue for the period fromJanuary 8 to February 7, 2019 (''International lag adjustment'') for the Predecessor related to the lag reporting for our International operations. On a GAAP basis, we report International results on a one-month lag, and for 2019 the Predecessor period for International isDecember 1, 2018 throughJanuary 7, 2019 . The Successor period for International isFebruary 8, 2019 (commencing on the closing date of the Take-Private Transaction) throughNovember 30, 2019 for the Successor period fromJanuary 1, 2019 toDecember 31, 2019 . The International lag adjustment is to facilitate comparability of 2019 periods to 2020 periods. Adjusted EBITDA and Adjusted EBITDA Margin We define adjusted EBITDA as net income (loss) attributable toDun & Bradstreet Holdings, Inc. (Successor) /The Dun & Bradstreet Corporation (Predecessor) excluding the following items: •depreciation and amortization; •interest expense and income; •income tax benefit or provision; •other expenses or income; •equity in net income of affiliates; •net income attributable to non-controlling interests; •dividends allocated to preferred stockholders; •revenue and expense adjustments to include results for the period fromJanuary 8 to February 7, 2019 , for the Predecessor related to the International lag adjustment (see above discussion); •other incremental or reduced expenses from the application of purchase accounting (e.g. commission asset amortization); •equity-based compensation; •restructuring charges; •merger and acquisition-related operating costs; •transition costs primarily consisting of non-recurring incentive expenses associated with our synergy program; •legal reserve and costs associated with significant legal and regulatory matters; and •asset impairment. 45 -------------------------------------------------------------------------------- Table of Contents 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 toDun & Bradstreet Holdings, Inc. (Successor) /The Dun & Bradstreet Corporation (Predecessor) adjusted for the following items: •revenue and expense adjustments to include results for the period fromJanuary 8 to February 7, 2019 , for the Predecessor related to the International lag adjustment (see above discussion); •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; •other incremental or reduced expenses from the application of purchase accounting (e.g. commission asset amortization); •equity-based compensation; •restructuring charges; •merger and acquisition-related operating costs; •transition costs primarily consisting of non-recurring incentive expenses associated with our synergy program; •legal reserve and costs associated with significant legal and regulatory matters; •change in fair value of the make-whole derivative liability associated with the Series A Preferred Stock; •asset impairment; •non-recurring pension charges, related to pension settlement charge and actuarial loss amortization eliminated as a result of the Take-Private Transaction; •dividends allocated to preferred stockholders; •merger, acquisition and divestiture-related non-operating costs; •debt refinancing and extinguishment costs; and •tax effect of the non-GAAP adjustments and the impact resulting from the enactment of the CARES Act. See Note 8 for further details. 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. For consistency purposes, we assume the stock split effected onJune 23, 2020 at the beginning of each of the Predecessor periods. Results of Operations GAAP Results As a result of the Take-Private Transaction onFebruary 8, 2019 , the historical financial statements and information are presented on a Successor and Predecessor basis. In the accompanying unaudited condensed consolidated financial statements, 46 -------------------------------------------------------------------------------- Table of Contents references to Predecessor refer to the results of operations and cash flows ofThe Dun & Bradstreet Corporation and its subsidiaries prior to the closing of the Take-Private Transaction. References to Successor refer to the consolidated financial position ofDun & Bradstreet Holdings, Inc. and its subsidiaries as ofJune 30, 2020 andDecember 31, 2019 , and the results of operations and cash flows ofDun & Bradstreet Holdings, Inc. and its subsidiaries after the Take-Private Transaction for the three months endedJune 30, 2020 and 2019 and the six months endedJune 30, 2020 and the period fromJanuary 1, 2019 toJune 30, 2019 . During the period fromJanuary 1, 2019 toFebruary 7, 2019 ,Dun & Bradstreet Holdings, Inc. had no significant operations and limited assets and had only incurred transaction related expenses prior to the Take-Private Transaction. The Predecessor and Successor unaudited condensed consolidated financial information presented herein is not comparable primarily due to financing of the Take-Private Transaction and the application of acquisition accounting in the Successor financial statements as ofFebruary 8, 2019 , as further described in Note 12, of which the most significant impacts are (i) transaction costs incurred and the pension settlement charge associated with the Take-Private Transaction, (ii) a shorter Successor period for our International operations for the period fromJanuary 1, 2019 toJune 30, 2019 , (iii) increased amortization expense for the intangible assets, and (iv) additional interest expense associated with debt financing arrangements entered into in connection with the Take-Private Transaction. To facilitate comparability of the six-month period endedJune 30, 2020 to the six-month period endedJune 30, 2019 , we present below the combination of consolidated results fromJanuary 1, 2019 toJune 30, 2019 , comprising the Successor consolidated results fromJanuary 1, 2019 toJune 30, 2019 , the Predecessor consolidated results for the period fromJanuary 1, 2019 toFebruary 7, 2019 and certain pro forma adjustments that give effect to the Take-Private Transaction as if it had occurred onJanuary 1, 2019 (combined pro forma results for the six-month period endedJune 30, 2019 ). These pro forma adjustments are prepared in accordance with Article 11 of Regulation S-X to include additional deferred revenue adjustment, additional amortization related to the recognized intangible assets and additional interest expenses associated with the Successor debt. In addition, non-recurring transaction costs directly attributable to the transaction, acceleration vesting costs related to the Predecessor's restricted stock units, one-time pension settlement charge and actuarial loss amortization are eliminated from the respective period. We compare results for the six-month period endedJune 30, 2020 (Successor) to the combined pro forma results for the six-month period endedJune 30, 2019 . We present the information for the six-month period endedJune 30, 2019 in this format to assist readers in understanding and assessing the trends and significant changes in our results of operations on a comparable basis. We believe this presentation is appropriate because it provides a more meaningful comparison and more relevant analysis of our results of operations for the 2020 period compared with the 2019 period. The following table sets forth our historical results of operations for the periods indicated below: 47
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Three-Month Period Six-Month Period
Pro Forma
Adjustments Combined
Successor Predecessor for the Six Pro Forma
Three Months Three Months Period from January Period from January 1 Months Ended Six Months
Ended June 30 , Ended June 30 , Six Months Ended 1 to June 30, 2019 to February 7, 2019 June 30, 2019 Ended June
2020 2019 June 30, 2020 (1) (2) (a) 30, 2019
Revenue $ 420.6 $ 398.9 $ 815.9 $ 573.0 $ 178.7 $ (16.0) (b) $ 735.7
Operating expenses 139.2 127.8 278.1 192.2 56.7 - 248.9
Selling and administrative expenses 143.4 126.0 269.3 339.6 122.4 (212.9) (c) 249.1
Depreciation and amortization 132.6 136.8 266.9 217.3 11.1 45.1 (d) 273.5
Restructuring charge 6.8 17.4 11.3 35.9 0.1 - 36.0
Operating costs 422.0 408.0 825.6 785.0 190.3 (167.8) 807.5
Operating income (loss) (1.4) (9.1) (9.7) (212.0) (11.6) 151.8 (71.8)
Interest income 0.2 0.6 0.5 1.6 0.3 - 1.9
Interest expense (78.0) (86.0) (161.0) (135.0) (5.5) (29.7) (e) (170.2)
Other income (expense) - net (122.7) 8.1 (32.7) 12.3 (86.0) 89.5 (f) 15.8
Non-operating income (expense) - net (200.5) (77.3) (193.2) (121.1) (91.2) 59.8 (152.5)
Income (loss) before provision for
income taxes and equity in net income
of affiliates (201.9) (86.4) (202.9) (333.1) (102.8) 211.6 (224.3)
Less: (benefit) provision for income
taxes (27.5) (23.1) (101.8) (60.1) (27.5) 47.2 (g) (40.4)
Equity in net income of affiliates 0.6 2.8 1.2 2.9 0.5 - 3.4
Net income (loss) (173.8) (60.5) (99.9) (270.1) (74.8) 164.4 (180.5)
Less: net income attributable to the
non-controlling interest (1.2) (1.5) (1.6) (1.9) (0.8) - (2.7)
Less: dividends allocated to
preferred stockholders (32.1) (32.0) (64.1) (49.9) - (13.7) (h) (63.6)
Net income (loss) attributable to Dun
& Bradstreet Holdings, Inc.
(Successor) / The Dun & Bradstreet
Corporation (Predecessor) $ (207.1) $ (94.0) $ (165.6) $ (321.9) $ (75.6) $ 150.7 $ (246.8)
(1) Successor financials reflect results for North America for the period from
February 8, 2019 to June 30, 2019 for the period from January 1, 2019 to June
30, 2019 . Successor financials reflect results for International for the period
from February 8, 2019 through May 31, 2019 for the period from January 1, 2019
to June 30, 2019 , due to International's one-month lag reporting and the
Take-Private Transaction which occurred on February 8, 2019 .
(2) Predecessor financials reflect results for North America for the period from
January 1, 2019 through February 7, 2019 , and for International for the period
from December 1, 2018 through January 7, 2019 , due to International's one-month
lag reporting.
Notes for the Pro Forma Adjustments for the Six Months Ended June 30, 2019
(a) Pro forma adjustments are prepared to give effect to the Take-Private
Transaction as if it had occurred on January 1, 2019 . The adjustments are
prepared in accordance with Article 11 of Regulation S-X. No adjustment has been
made for the "lag" month of International results due to the impact of the
one-month lag described in footnotes (1) and (2) to the above table.
(b) Represents deferred revenue purchase accounting adjustments as a result of
the Take-Private Transaction. In accordance with ASC 805, deferred revenue is
recognized at fair value representing direct costs to fulfill plus a reasonable
margin. The pro forma adjustment reflects the purchase accounting associated
with the Take-Private Transaction as if it had occurred on January 1, 2019 .
(c) Consists of Successor transaction costs of $147.4 million included in the
Successor period from January 1, 2019 to June 30, 2019 , Predecessor transaction
costs of $52.0 million included in the Predecessor period from
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January 1, 2019 to February 7, 2019 , $3.1 million related to amortization
expense associated with deferred commissions and $10.4 million expense
associated with the acceleration of Predecessor's stock options and restricted
stock units in connection with the Take-Private Transaction. The commission
asset purchase accounting adjustment and one-time costs are directly
attributable to the Take-Private Transaction.
(d) Represents incremental amortization expenses related to intangible assets
recognized as a result of the Take-Private Transaction in accordance with ASC
805, giving effect to the purchase accounting associated with the Take-Private
Transaction as if it had occurred on January 1, 2019 . The pro forma incremental
amortization expenses are calculated based on the fair value of the acquired
assets.
(e) Represents incremental interest expenses resulting from the new debt
issuance in connection with the Take-Private Transaction, giving effect to the
transaction as if it had occurred on January 1, 2019 .
(f) Eliminates one-time pension settlement charge of $85.8 million related to
Dun & Bradstreet's then-existing U.S. Non-Qualified Plan, eliminates
$3.8 million of actuarial loss amortization as a result of unrecognized
actuarial losses as of February 8, 2019 being set to zero in accordance with ASC
805 and records $0.1 million additional amortization expense related to deferred
issuance costs associated with our new revolving credit facility, giving effect
to the Take-Private Transaction as if it had occurred on January 1, 2019 .
(g) Represents net tax effect of the above pro forma adjustments. A blended
statutory tax rate of 22.3% is applied to the pro forma adjustments.
(h) Provides for additional preferred dividends for the period from January 1,
2019 to February 7, 2019 , giving effect to the Take-Private Transaction as if it
had occurred on January 1, 2019 .
Key Performance Measures
Management, including our CODMs, evaluates the financial performance of our
businesses based on a variety of key indicators. These indicators include the
non-GAAP measures adjusted revenue, adjusted EBITDA, adjusted EBITDA margin and
adjusted net income. Adjusted results are non-GAAP measures that adjust for
certain acquisition and divestiture related revenue and expenses (such as 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 gains and losses on sales of businesses, impairment charges, 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 before and after 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:
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Three-Month Period Six-Month Period
Pro Forma Combined
Successor Predecessor Adjustments Pro Forma
Three Months Three Months Period from Period from January for the Six Six Months
Ended June Ended June 30 , Six Months Ended January 1 to June 1 to February 7 , Months Ended Ended June
30, 2020 2019 June 30, 2020 30, 2019 2019 June 30, 2019 30, 2019
Non - GAAP Financial Measures
Adjusted revenue (a) $ 420.6 $ 398.9 $ 815.9 $ 573.0 $ 204.6 $ (16.0) $ 761.6
Adjusted EBITDA (a) $ 176.1 $ 148.5 $ 309.5 $ 189.1 $ 66.3 $ (16.0) $ 239.4
Adjusted EBITDA margin (a) 41.9 % 37.2 % 37.9 % 33.0 % 32.4 % - 31.4 %
Adjusted net income (a) $ 81.6 $ 44.7 $ 130.3 $ 35.9 $ 45.8 $ (12.4) $ 69.3
Adjusted earnings per share (a) $ 0.26 $ 0.14 $ 0.41 $ 0.11 $ 0.15 $ (0.04) $ 0.22
(a) Including impact of deferred
revenue purchase accounting
adjustments:
Impact to adjusted revenue and
adjusted EBITDA $ (2.1) $ (38.0) $ (19.5) $ (60.1) $ - $ (16.0) $ (76.1)
Impact to adjusted EBITDA margin (0.3) % (5.5) % (1.5) % (6.4) % - % N/A (6.2) %
Net impact to adjusted net income $ (1.6) $ (29.8) $ (14.5) $ (47.2) $ - $ (12.4) $ (59.6)
Net impact to adjusted earnings
per share $ - $ (0.10) $ (0.05) $ (0.15) $ - N/A $ (0.15) Reconciliations of the above non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables below:
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Three-Month Period Six-Month Period
Pro Forma Combined
Successor Predecessor Adjustments Pro Forma
Three Months Three Months Period from Period from January for the Six Six Months
Ended June Ended June 30 , Six Months Ended January 1 to June 1 to February 7 , Months Ended Ended June
30, 2020 2019 June 30, 2020 30, 2019 2019 June 30, 2019 30, 2019
Revenue $ 420.6 $ 398.9 $ 815.9 $ 573.0 $ 178.7 $ (16.0) $ 735.7
International lag adjustment - - - - 25.9 - 25.9
Adjusted revenue (a) 420.6 398.9 815.9 573.0 204.6 (16.0) 761.6
Foreign currency impact 2.7 1.8 4.2 2.1 1.0 - 3.1
Adjusted revenue before the
effect of foreign currency $ 423.3 $ 400.7 $ 820.1 $ 575.1 $ 205.6 (a) Includes deferred revenue purchase accounting adjustments$ (2.1) $ (38.0) $ (19.5) $ (60.1) $ -$ (16.0) $ (76.1) North America$ 354.3 $ 360.9 $ 695.8 $ 542.1 $ 148.2 $ -$ 690.3 International 68.4 76.0 139.6 91.0 56.4 - 147.4 Segment revenue 422.7 436.9$ 835.4 633.1 204.6 - 837.7 Corporate and other (2.1) (38.0) (19.5) (60.1) - (16.0) (76.1) Foreign currency impact 2.7 1.8 4.2 2.1 1.0 - 3.1 Adjusted revenue before the effect of foreign currency$ 423.3 $ 400.7 $ 820.1 $ 575.1 $ 205.6 $ (16.0) $ 764.7 51
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Three-Month Period Six-Month Period
Pro Forma Combined
Successor Predecessor Adjustments Pro Forma
Three Months Three Months Period from January for the Six Six Months
Ended June 30 , Ended June 30 , Six Months Ended Period from January 1 to February 7 , Months Ended Ended June
2020 2019 June 30, 2020 1 to June 30, 2019 2019 June 30, 2019 30, 2019
Net income (loss) attributable to Dun &
Bradstreet Holdings, Inc. (Successor) /
Dun & Bradstreet Corporation
(Predecessor) $ (207.1) $ (94.0) $ (165.6) $ (321.9) $ (75.6) $ 150.7 $ (246.8)
Depreciation and amortization 132.6 136.8 266.9 217.3 11.1 45.1 273.5
Interest expense - net 77.8 85.4 160.5 133.4 5.2 29.7 168.3
(Benefit) provision for income tax - net (27.5) (23.1) (101.8) (60.1) (27.5) 47.2 (40.4)
EBITDA (24.2) 105.1 160.0 (31.3) (86.8) 272.7 154.6
Other income (expense) - net 122.7 (8.1) 32.7 (12.3) 86.0 (89.5) (15.8)
Equity in net income of affiliates (0.6) (2.8) (1.2) (2.9) (0.5) - (3.4)
Net income (loss) attributable to
non-controlling interest 1.2 1.5 1.6 1.9 0.8 - 2.7
Dividends allocated to preferred
stockholders 32.1 32.0 64.1 49.9 - 13.7 63.6
International lag adjustment - - - - 2.7 - 2.7
Other incremental or reduced expenses
from the application of purchase
accounting (4.9) (6.4) (9.9) (10.5) - (3.1) (13.6)
Equity-based compensation 25.1 3.7 28.9 4.2 11.7 (10.4) 5.5
Restructuring charges 6.8 17.4 11.3 35.9 0.1 - 36.0
Merger and acquisition-related operating
costs 2.0 1.2 4.4 148.6 52.0 (199.4) 1.2
Transition costs 15.7 2.5 17.3 3.5 0.3 - 3.8
Legal reserve associated with
significant legal and regulatory matters - 0.1 - (0.2) - - (0.2)
Asset impairment 0.2 2.3 0.3 2.3 - - 2.3
Adjusted EBITDA $ 176.1 $ 148.5 $ 309.5 $ 189.1 $ 66.3 $ (16.0) $ 239.4
North America 170.1 175.1 313.9 246.6 55.3 - 301.9
International 20.2 27.5 43.4 30.3 20.3 - 50.6
Corporate and other (a) (14.2) (54.1) (47.8) (87.8) (9.3) (16.0) (113.1)
Adjusted EBITDA (a) $ 176.1 $ 148.5 $ 309.5 $ 189.1 $ 66.3 $ (16.0) $ 239.4
Adjusted EBITDA Margin (a) 41.9 % 37.2 % 37.9 % 33.0 % 32.4 % - % 31.4 %
(a) Including impact of deferred revenue
purchase accounting adjustments:
Impact to adjusted EBITDA $ (2.1) $ (38.0) $ (19.5) $ (60.1) $ - $ (16.0) $ (76.1)
Impact to adjusted EBITDA margin (0.3) % (5.5) % (1.5) % (6.4) % - % N/A (6.2) %
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Three-Month Period Six-Month Period
Pro Forma Combined
Successor Predecessor Adjustments Pro Forma
Three Months Three Months Period from January for the Six Six Months
Ended June 30 , Ended June 30 , Six Months Ended Period from January 1 to February 7 , Months Ended Ended June
2020 2019 June 30, 2020 1 to June 30, 2019 2019 June 30, 2019 30, 2019
Net income (loss) attributable to Dun &
Bradstreet Holdings, Inc. (Successor) /
The Dun & Bradstreet Corporation
(Predecessor) $ (207.1) $ (94.0) $ (165.6) $ (321.9) $ (75.6) $ 150.7 $ (246.8)
Lag adjustment - - - - 2.7 - 2.7
Incremental amortization of intangible
assets resulting from the application
of purchase accounting 117.6 123.4 237.7 197.2 3.0 45.1 245.3
Other incremental or reduced expenses
from the application of purchase
accounting (4.9) (6.4) (9.9) (10.5) - (3.1) (13.6)
Equity-based compensation 25.1 3.7 28.9 4.2 11.7 (10.4) 5.5
Restructuring charges 6.8 17.4 11.3 35.9 0.1 - 36.0
Merger and acquisition-related
operating costs 2.0 1.2 4.4 148.6 52.0 (199.4) 1.2
Transition costs 15.7 2.5 17.3 3.5 0.3 - 3.8
Legal reserve and costs associated with
significant legal and regulatory
matters - 0.1 - (0.2) - - (0.2)
Change in fair value of make-whole
derivative liability 102.6 - 32.8 - - -
Asset impairment 0.2 2.3 0.3 2.3 - - 2.3
Non-recurring pension charges - - - 0.1 89.4 (89.5) -
Predecessor pro forma incremental
interest expense - - - - - 29.7 29.7
Dividends allocated to preferred
stockholders 32.1 32.0 64.1 49.9 - 13.7 63.6
Merger and acquisition-related
non-operating costs - - - (0.8) 0.5 - (0.3)
Debt refinancing and extinguishment
costs 41.3 - 48.3 - - - -
Tax impact of the CARES Act 1.9 - (53.7) - - - -
Tax effect of the non-GAAP and pro
forma adjustments (51.7) (37.5) (85.6) (72.4) (38.3) 50.8 (59.9)
Adjusted net income (loss) attributable
to Dun & Bradstreet Holdings, Inc.
(Successor) / The Dun & Bradstreet
Corporation (Predecessor) (a) $ 81.6 $ 44.7 $ 130.3 $ 35.9 $ 45.8 $ (12.4) $ 69.3
Adjusted diluted earnings (loss) per
share of common stock $ 0.26 $ 0.14 $ 0.41 $ 0.11 $ 0.15 $ (0.04) $ 0.22
Weighted average number of shares
outstanding - diluted (b) 314.5 314.5 314.5 314.5 314.5 314.5 314.5
(a) Including impact of deferred
revenue purchase accounting
adjustments:
Pre-tax impact $ (2.1) $ (38.0) $ (19.5) $ (60.1) $ - $ (16.0) $ (76.1)
Tax impact 0.5 8.2 5.0 12.9 - 3.6 16.5
Net impact to Adjusted net income
(loss) attributable to Dun & Bradstreet
Holdings, Inc. (Successor) / The Dun &
Bradstreet Corporation (Predecessor) $ (1.6) $ (29.8) $ (14.5) $ (47.2) $ - $ (12.4) $ (59.6)
Net impact to adjusted diluted earnings
(loss) per share of common stock $ - $ (0.10) $ (0.05) $ (0.15) $ - N/A $ (0.15) (b) For consistency purposes, we assume the stock split effected on
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Revenue
Three Months EndedJune 30, 2020 versus Three Months EndedJune 30, 2019 Total revenue increased$21.7 million , or 5% (6% before the effect of foreign exchange) for the three months endedJune 30, 2020 (Successor), compared to the three months endedJune 30, 2019 (Successor). The increase in total revenue was primarily due to the net impact of lower purchase accounting deferred revenue adjustments of$35.9 million , partially offset by a decrease in the current year period inNorth America revenue of$6.6 million , or 2% (both after and before the effect of foreign exchange) and a decrease in International revenue of$7.6 million , or 10% (9% decrease before the effect of foreign exchange).
Six Months Ended
Total revenue was$815.9 million for the six months endedJune 30, 2020 (Successor),$573.0 million for the period fromJanuary 1, 2019 toJune 30, 2019 (Successor), and$178.7 million for the period fromJanuary 1, 2019 toFebruary 7, 2019 (Predecessor). Total revenue increased$242.9 million , or 42%, and$637.2 million , or 357%, for the six months endedJune 30, 2020 (Successor), compared to the prior year period fromJanuary 1, 2019 toJune 30, 2019 (Successor) and the period fromJanuary 1, 2019 toFebruary 7, 2019 (Predecessor), respectively. The increase was primarily due to the impact of the partial period results reflected in each of the prior year periods resulting from the Take-Private Transaction. In addition, revenue was reduced by$19.5 million and$60.1 million for the six months endedJune 30, 2020 (Successor) and for the period fromJanuary 1, 2019 toJune 30, 2019 (Successor), respectively, as a result of deferred revenue adjustments arising from the Take-Private Transaction. Revenue for the period fromJanuary 1, 2019 toFebruary 7, 2019 (Predecessor) was reduced by$25.9 million due to the International lag adjustment. Total revenue increased$80.2 million , or 11% (both after and before the effect of foreign exchange), for the six months endedJune 30, 2020 (Successor) compared to the combined pro forma six months endedJune 30, 2019 . The increase in total revenue for the six months endedJune 30, 2020 compared to the combined pro forma six months endedJune 30, 2019 was primarily due to the net impact of lower purchase accounting deferred revenue adjustments of$56.6 million (inclusive of pro forma deferred revenue adjustment), which had an impact of approximately eight percentage points on the year over year increase, and the International lag adjustment of$25.9 million included in the prior year period which had an impact of approximately four percentage points on the year over year increase. The above increases were partially offset by a net decrease in total segment revenue for the six months endedJune 30, 2020 (Successor), compared to the combined pro forma six months endedJune 30, 2019 , driven by a decrease in International total revenue of$7.8 million , or 5% (both after and before the effect of foreign exchange), partially offset by an increase inNorth America total revenue of$5.5 million , or 1% (both after and before the effect of foreign exchange).
Revenue by segment was as follows (in millions):
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Three-Month Period Six-Month Period
Combined
Pro Forma Pro Forma
Successor Predecessor Adjustments Six Months
Three Months Three Months Period from Period from January for the Six Ended June
Ended June Ended June 30 , Six Months Ended January 1 to June 1 to February 7 , Months Ended 30, 2019
30, 2020 2019 June 30, 2020 30, 2019 2019 June 30, 2019 (1)
North America :
Finance & Risk $ 193.6 $ 200.8 $ 386.6 $ 302.7 $ 80.4 $ - $ 383.1
Sales & Marketing 160.7 160.1 309.2 239.4 67.8 - 307.2
Total North America $ 354.3 $ 360.9 $ 695.8 $ 542.1 $ 148.2 $ - $ 690.3
International:
Finance & Risk $ 55.9 $ 63.9 $ 113.4 $ 75.7 $ 43.4 $ - $ 119.1
Sales & Marketing 12.5 12.1 26.2 15.3 13.0 - 28.3
Total International $ 68.4 $ 76.0 $ 139.6 $ 91.0 $ 56.4 $ - $ 147.4
Corporate and Other:
Finance & Risk $ (0.3) $ (23.1) $ (10.2) $ (36.5) $ (19.2) $ (9.7) $ (65.4)
Sales & Marketing (1.8) (14.9) (9.3) (23.6) (6.7) (6.3) (36.6)
Total Corporate and Other (2) $ (2.1) $ (38.0) $ (19.5) $ (60.1) $ (25.9) $ (16.0) $ (102.0)
Total Revenue:
Finance & Risk $ 249.2 $ 241.6 $ 489.8 $ 341.9 $ 104.6 $ (9.7) $ 436.8
Sales & Marketing 171.4 157.3 326.1 231.1 74.1 (6.3) 298.9
Total Revenue $ 420.6 $ 398.9 $ 815.9 $ 573.0 $ 178.7 $ (16.0) $ 735.7
(1) See further details discussed in notes to "GAAP Results," for the Pro Forma
Adjustments for the Six Months Ended June 30, 2019 included elsewhere within
Item 2.
(2) Revenue for Corporate and Other represents deferred revenue purchase
accounting and International lag adjustments recorded in accordance with GAAP
related to the Take-Private Transaction and recent acquisitions.
North America Segment
For the three months ended June 30, 2020 (Successor), North America revenue
decreased $6.6 million , or 2% (both after and before the effect of foreign
exchange) compared to the three months ended June 30, 2019 (Successor). The
decrease was due to decreased revenue from Finance & Risk solutions, partially
offset by an increase in Sales & Marketing solutions. See further discussion
below on revenue by solutions.
For the six months ended June 30, 2020 (Successor), North America revenue
increased $153.7 million , or 28%, and $547.6 million , or 370%, compared to the
prior year period from January 1, 2019 to June 30, 2019 (Successor) and the
period from January 1, 2019 to February 7, 2019 (Predecessor), respectively. The
increase was primarily due to the impact of the partial period results reflected
in each of the prior year periods resulting from the Take-Private Transaction.
For the six months ended June 30, 2020 , North America revenue increased $5.5
million , or 1% (both after and before the effect of foreign exchange) compared
to the combined pro forma six months ended June 30, 2019 . See further discussion
below on revenue by solutions.
Finance & Risk
For the three months ended June 30, 2020 (Successor), North America Finance &
Risk revenue decreased $7.2 million , or 4% (both after and before the effect of
foreign exchange) compared to the three months ended June 30, 2019 (Successor).
The decrease was primarily driven by lower revenue of approximately $6 million
due to structural changes we made within our legacy Credibility solutions, along
with the impact of COVID-19 which contributed to lower usage revenues
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across our Finance and Risk solutions of approximately $4 million . These
declines were partially offset by an increase in our subscription-based revenues
of approximately $3 million .
For the six months ended June 30, 2020 (Successor), North America Finance & Risk
revenue increased $83.9 million , or 28%, and $306.2 million , or 381%, compared
to the prior year period from January 1, 2019 to June 30, 2019 (Successor) and
the period from January 1, 2019 to February 7, 2019 (Predecessor), respectively.
The increase was primarily due to the impact of the partial period results
reflected in each of the prior year periods resulting from the Take-Private
Transaction.
For the six months ended June 30, 2020 , North America Finance & Risk revenue
increased $3.5 million , or 1% (both after and before the effect of foreign
exchange) compared to the combined pro forma six months ended June 30, 2019 . The
increase was primarily due to higher subscription-based revenue of approximately
$15 million , partially offset by lower revenue of approximately $7 million
primarily due to structural changes we made within our legacy Credibility
solutions and lower usage. In addition, the impact of COVID-19 contributed to
lower usage revenue across our Finance and Risk solutions of approximately $4
million .
Sales & Marketing
For the three months ended June 30, 2020 (Successor), North America Sales &
Marketing revenue increased $0.6 million , or less than 1% (both after and before
the effect of foreign exchange) compared to the three months ended June 30, 2019
(Successor). The increase was primarily due to revenue of $4.7 million from the
acquisition of Lattice, which was acquired at the beginning of the third quarter
of 2019, partially offset by lower royalty revenue of approximately $4 million
from Data.com legacy partnership.
For the six months ended June 30, 2020 (Successor), North America Sales &
Marketing revenue increased $69.8 million , or 29%, and $241.4 million , or 356%,
compared to the prior year period from January 1, 2019 to June 30, 2019
(Successor) and the period from January 1, 2019 to February 7, 2019
(Predecessor), respectively. The increase was primarily due to the impact of the
partial period results reflected in each of the prior year periods resulting
from the Take-Private Transaction.
For the six months ended June 30, 2020 , North America Sales & Marketing revenue
increased $2.0 million , or 1% (both after and before the effect of foreign
exchange) compared to the combined pro forma six months ended June 30, 2019 . The
increase was primarily due to revenue of $9.6 million from the acquisition of
Lattice, which was acquired at the beginning of the third quarter of 2019,
partially offset by lower royalty revenue of approximately $8 million from
Data.com legacy partnership.
International Segment
For the three months ended June 30, 2020 (Successor), International revenue
decreased $7.6 million , or 10% (9% before the effect of foreign exchange)
compared to the three months ended June 30, 2019 (Successor). Excluding the
negative impact of foreign exchange of $0.7 million , decreased revenue of $6.9
million was due to declines in Finance & Risk solutions, partially offset by
increases in Sales & Marketing solutions. See further discussion below on
revenue by solutions.
For the six months ended June 30, 2020 (Successor), International revenue
increased $48.6 million , or 53%, and $83.2 million , or 147%, compared to the
prior year period from January 1, 2019 to June 30, 2019 (Successor) and the
period from January 1, 2019 to February 7, 2019 (Predecessor), respectively. The
increase was primarily due to the impact of the partial period results reflected
in each of the prior year periods resulting from the Take-Private Transaction.
For the six months ended June 30, 2020 , International revenue decreased
$7.8 million , or 5% (both after and before the effect of foreign exchange)
compared to the combined pro forma six months ended June 30, 2019 . Excluding the
negative impact of foreign exchange of $0.9 million , revenue decreased $6.9
million . See further discussion below on revenue by solutions.
Finance & Risk
For the three months ended June 30, 2020 (Successor), International Finance &
Risk revenue decreased $8.0 million , or 12% (11% before the effect of foreign
exchange) compared to the three months ended June 30, 2019 (Successor).
Excluding the negative impact of foreign exchange of $0.6 million , the $7.4
million decline in revenue was driven primarily by lower revenue of
approximately $4 million from WWN alliances due to non-recurring revenue in the
prior year period. In addition,
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revenue from our U.K. market was impacted by timing of usage of approximately $2
million related to a specific customer. Lastly, lower usage volume in our Asia
market of approximately $2 million was primarily due to the impact of COVID-19.
For the six months ended June 30, 2020 (Successor), International Finance & Risk
revenue increased $37.7 million , or 50%, and $70.0 million , or 162%, compared to
the prior year period from January 1, 2019 to June 30, 2019 (Successor) and the
period from January 1, 2019 to February 7, 2019 (Predecessor), respectively. The
increase was primarily due to the impact of the partial period results reflected
in each of the prior year periods resulting from the Take-Private Transaction.
For the six months ended June 30, 2020 , International Finance & Risk revenue
decreased $5.7 million , or 5% (4% before the effect of foreign exchange)
compared to the combined pro forma six months ended June 30, 2019 . Excluding the
negative impact of foreign exchange of $0.7 million , decreased revenue of $5.0
million was driven primarily by lower revenue from WWN alliances of
approximately $2 million mainly due to non-recurring revenue in the prior year
period and lower revenue of approximately $2 million due to timing of usage
related to a specific customer in our U.K. market.
Sales and Marketing
For the three months ended June 30, 2020 (Successor), International Sales &
Marketing revenue increased $0.4 million , or 4% (both after and before the
effect of foreign exchange) compared to the three months ended June 30, 2019
(Successor). Increased revenue was primarily due to increased product royalties
from WWN alliances of $0.7 million .
For the six months ended June 30, 2020 (Successor) International Sales &
Marketing revenue increased $10.9 million , or 71%, and $13.2 million , or 101%,
compared to the prior year period from January 1, 2019 to June 30, 2019
(Successor) and the period from January 1, 2019 to February 7, 2019
(Predecessor), respectively. The increase was primarily due to the impact of the
partial period results reflected in each of the prior year periods resulting
from the Take-Private Transaction.
For the six months ended June 30, 2020 , International Sales & Marketing revenue
decreased $2.1 million , or 8% (7% decrease before the effect of foreign
exchange) compared to the combined pro forma six months ended June 30, 2019 .
Excluding the negative impact of foreign exchange of $0.2 million , International
Sales & Marketing revenue declined $1.9 million , primarily driven by lower
product royalties from WWN alliances of $1.5 million .
Consolidated Operating Costs
Consolidated operating costs were as follows:
Three-Month Period Six-Month Period
Combined
Pro Forma
Successor Predecessor Six Months
Three Months Three Months Period from January Ended June
Ended June Ended June 30 , Six Months Ended Period from January 1 to February 7 , 30, 2019
30, 2020 2019 June 30, 2020 1 to June 30, 2019 2019 (1)
Operating expenses $ 139.2 $ 127.8 $ 278.1 $ 192.2 $ 56.7 $ 248.9
Selling and administrative expenses 143.4 126.0 269.3 339.6 122.4 249.1
Depreciation and amortization 132.6 136.8 266.9 217.3 11.1 273.5
Restructuring charge 6.8 17.4 11.3 35.9 0.1 36.0
Operating costs $ 422.0 $ 408.0 $ 825.6 $ 785.0 $ 190.3 $ 807.5
Operating income (loss) $ (1.4) $ (9.1) $ (9.7) $ (212.0) $ (11.6) $ (71.8)
(1) See further details discussed in notes to "GAAP Results," for the Pro Forma
Adjustments for the Six Months Ended June 30, 2019 included elsewhere within
Item 2.
Operating expenses were $139.2 million for the three months ended June 30, 2020
(Successor), an increase of $11.4 million , or 9%, compared to the three months
ended June 30, 2019 (Successor), primarily due to an infrastructure related
one-time transition cost of approximately $8 million in the current year period
and $3.6 million from the acquisition of Lattice, which was acquired at the
beginning of the third quarter of 2019.
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Operating expenses were$278.1 million for the six months endedJune 30, 2020 (Successor), an increase of$85.9 million , or 45%, compared to the prior year period fromJanuary 1, 2019 toJune 30, 2019 (Successor) and an increase of$221.4 million , or 390%, compared to the period fromJanuary 1, 2019 toFebruary 7, 2019 (Predecessor), primarily due to the impact of the partial period results reflected in each of the prior year periods resulting from the Take-Private Transaction. Operating expenses increased$29.2 million , or 12%, for the six months endedJune 30, 2020 compared to the combined pro forma six months endedJune 30, 2019 , primarily due to additional costs of$11.6 million from the acquisition of Lattice, increased fulfillment and data acquisition costs of approximately$8 million , higher data processing costs of approximately$8 million and an infrastructure related one-time transition cost of approximately$8 million , partially offset by lower personnel and travel costs of approximately$8 million and higher capitalizable costs of approximately$9 million .The remaining increase was primarily due to the International lag adjustment of$14.8 million included in the prior year period associated with the Take-Private Transaction. Selling and Administrative Expenses Selling and administrative expenses were$143.4 million for the three months endedJune 30, 2020 (Successor), an increase of$17.4 million , or 14%, compared to the three months endedJune 30, 2019 (Successor), primarily due to higher equity-based compensation of approximately$21 million in the current year period related to stock options granted in connection with the IPO and additional costs of$2.8 million from the acquisition of Lattice, partially offset by lower net personnel and travel expenses of approximately$11 million primarily resulting from ongoing cost management efforts. Selling and administrative expenses were$269.3 million for the six months endedJune 30, 2020 (Successor), a decrease of$70.3 million , or 21%, compared to the period fromJanuary 1, 2019 toJune 30, 2019 (Successor), and an increase of$146.9 million , or 120%, compared to the period fromJanuary 1, 2019 toFebruary 7, 2020 (Predecessor). The decrease compared to the prior year Successor period was primarily due to the Successor transaction costs of$147.4 million included in the prior year period, partially offset by the impact of the partial period results reflected in the prior year period resulting from the Take-Private Transaction. The increase compared to the prior year Predecessor period was primarily due to the impact of partial period results reflected in the prior year period as a result of the Take-Private Transaction, partially offset by the Predecessor transaction costs of$52.0 million included in the prior year period. Selling and administrative expenses were$249.1 million for the combined pro forma six months endedJune 30, 2019 , excluding one-time transaction costs directly attributable to the Take-Private Transaction. Selling and administrative expenses increased$20.2 million , or 8%, for the six months endedJune 30, 2020 , compared to the combined pro forma six months endedJune 30, 2019 . The increase was primarily due to higher equity-based compensation of approximately$25 million in the current year period related to options granted in connection with the IPO, the International lag adjustment of$8.3 million included in the prior year period associated with the Take-Private Transaction, and additional costs of$3.0 million related to the acquisition of Lattice. The aforementioned increases were partially offset by lower personnel and travel costs of approximately$21 million primarily resulting from ongoing cost management efforts. Depreciation and Amortization Depreciation and amortization expenses were$132.6 million for the three months endedJune 30, 2020 (Successor), a decrease of$4.2 million , or 3%, compared to the three months endedJune 30, 2019 (Successor), primarily due to the accelerating amortization method applied to the customer relationship and database intangible assets recognized in connection with the Take-Private Transaction. Depreciation and amortization expenses were$266.9 million ,$217.3 million and$11.1 million for the six months endedJune 30, 2020 (Successor), the period fromJanuary 1, 2019 toJune 30, 2019 (Successor), and the period fromJanuary 1, 2019 toFebruary 7, 2019 (Predecessor), respectively. Higher depreciation and amortization for the six months endedJune 30, 2020 (Successor) compared to each of the prior year periods was primarily due to the impact of the partial period results reflected in each of the prior year periods as a result of the Take-Private Transaction. In addition, higher depreciation and amortization in each of the Successor periods was related to recognized intangible assets arising from the Take-Private Transaction. Depreciation and amortization decreased$6.6 million , or 2%, for the six months endedJune 30, 2020 , compared to the combined pro forma six months endedJune 30, 2019 . The decrease in depreciation and amortization was primarily as a result of the accelerating amortization method applied to the customer relationship and database intangible assets recognized in connection with the Take-Private Transaction. 58 -------------------------------------------------------------------------------- Table of Contents Restructuring Charge Restructuring charges were$6.8 million for the three months endedJune 30, 2020 (Successor), a decrease of$10.6 million , or 61%, compared to the three months endedJune 30, 2019 (Successor). Higher restructuring charges in the three months endedJune 30, 2019 (Successor) were a result of the restructuring plan management implemented after the Take-Private Transaction to remove duplicate headcount, reduce future operating expenses, and improve operational performance and profitability. We recorded restructuring charges of$11.3 million for the six months endedJune 30, 2020 (Successor),$35.9 million for the Successor period fromJanuary 1, 2019 toJune 30, 2019 (Successor), and$0.1 million for the Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 , respectively. Higher restructuring charges in the period fromJanuary 1, 2019 toJune 30, 2019 was as a result of the restructuring plan management implemented after the Take-Private Transaction to remove duplicate headcount, reduce future operating expenses, and improve operational performance and profitability. These initiatives have resulted in approximately$220 million of net annualized run-rate savings as ofJune 30, 2020 . See Note 4 to the unaudited condensed consolidated financial statements. Operating Income (Loss) Consolidated operating loss was$1.4 million for the three months endedJune 30, 2020 , an improvement of$7.7 million , or 85%, compared to the three months endedJune 30, 2019 (Successor). The increase was primarily due to higher revenue of$21.7 million in the current year period driven by the net impact of lower deferred revenue adjustments of$35.9 million , lower personnel and travel costs of approximately$14 million and higher capitalizable costs of approximately$8 million , partially offset by higher operating costs in the current year period primarily due to higher equity-based compensation of approximately$21 million related to stock options granted in connection with the IPO, higher data processing costs of approximately$8 million , and an infrastructure related one-time technology transition cost of approximately$8 million . Consolidated operating loss was$9.7 million ,$212.0 million and$11.6 million for the six months endedJune 30, 2020 (Successor), the Successor period fromJanuary 1, 2019 toJune 30, 2019 , and the Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 , respectively. Lower operating loss for the six months endedJune 30, 2020 compared to the period fromJanuary 1, 2019 toJune 30, 2019 was primarily due to Successor transaction costs of$147.4 million included in the prior year Successor period, higher restructuring charges of$24.6 million in the prior year period, and the net impact of partial period results reflected in the prior year period resulting from the Take-Private Transaction. Lower operating loss for the Successor six months endedJune 30, 2020 compared to the Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 was primarily due to the impact of partial period results and the Predecessor transaction costs of$52.0 million reflected in the prior year Predecessor period, partially offset by the higher depreciation and amortization costs of$255.8 million included in the current year period resulting from the recognized intangible assets in connection with the Take-Private Transaction. Consolidated operating loss for the six months endedJune 30, 2020 was$9.7 million compared to consolidated operating loss of$71.8 million for the combined pro forma six months endedJune 30, 2019 , an improvement of$62.1 million , or 86%. The increase was primarily due to increased revenues of$80.2 million during the six months endedJune 30, 2020 , due to the net impact of lower deferred revenue adjustments of$56.6 million , higher restructuring charge of$24.7 million in the combined pro forma six months endedJune 30, 2019 , and lower personnel and travel costs of approximately$29 million in the current year period primarily resulting from ongoing cost management efforts, partially offset by higher equity-based compensation of approximately$25 million related to stock options granted onJune 30, 2020 in connection with the IPO, increased technology costs of$16 million related to data processing and data acquisition costs, an infrastructure related one-time transition cost of approximately$8 million in the current year period and operating loss of$5.3 million related to the acquisition of Lattice.
Adjusted EBITDA and adjusted EBITDA margin by segment was as follows:
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Three-Month Period Six-Month Period
Combined
Pro Forma
Successor Predecessor Six Months
Three Months Three Months Period from Period from January Ended June
Ended June Ended June 30 , Six Months Ended January 1 to June 1 to February 7 , 30, 2019
30, 2020 2019 June 30, 2020 30, 2019 2019 (1)
North America :
Adjusted EBITDA $ 170.1 $ 175.1 $ 313.9 $ 246.6 $ 55.3 $ 301.9
Adjusted EBITDA margin 48.0 % 48.5 % 45.1 % 45.5 % 37.3 % 43.7 %
International:
Adjusted EBITDA $ 20.2 $ 27.5 $ 43.4 $ 30.3 $ 20.3 $ 50.6
Adjusted EBITDA margin 29.5 % 36.2 % 31.1 % 33.3 % 35.9 % 34.4 %
Corporate and Other:
Adjusted EBITDA $ (14.2) $ (54.1) $ (47.8) $ (87.8) $ (9.3) $ (113.1)
Consolidated total:
Adjusted EBITDA $ 176.1 $ 148.5 $ 309.5 $ 189.1 $ 66.3 $ 239.4
Adjusted EBITDA margin 41.9 % 37.2 % 37.9 % 33.0 % 32.4 % 31.4 %
(1) See further details discussed in notes to "GAAP Results," for the Pro Forma
Adjustments for the Six Months Ended June 30, 2019 included elsewhere within
Item 2.
Consolidated
Consolidated adjusted EBITDA was $176.1 million for the three months ended June
30, 2020 (Successor), an increase of $27.6 million , or 19%, compared to the
three months ended June 30, 2019 (Successor). Consolidated adjusted EBITDA
margin was 41.9% for the three months ended June 30, 2020 compared to 37.2% for
the three months ended June 30, 2019 , an improvement of 470 basis points. The
improvement in adjusted EBITDA was primarily due to the net impact of higher
revenue of $21.7 due to lower purchase accounting deferred revenue adjustments
of $35.9 million which had an impact of five percentage points on the year over
year margin improvement, and lower personnel and travel costs of approximately
$14 million , partially offset by higher data processing costs of approximately
$8 million , higher data acquisition of approximately $5 million and EBITDA loss
of $1.7 million from the acquisition of Lattice.
Consolidated adjusted EBITDA was $309.5 million , $189.1 million and $66.3
million for the six months ended June 30, 2020 (Successor), the period from
January 1, 2019 to June 30, 2019 (Successor), and the period from January 1,
2019 to February 7, 2019 (Predecessor), respectively. Higher adjusted EBITDA for
the six months ended June 30, 2020 (Successor) compared to each of the prior
year periods was primarily due to the impact of the partial period results
reflected in each of the prior year periods resulting from the Take-Private
Transaction.
Consolidated adjusted EBITDA was $309.5 million for the six months ended June
30, 2020 , compared to $239.4 million for the combined pro forma six months ended
June 30, 2019 , an increase of $70.1 million , or 29%. Consolidated adjusted
EBITDA margin was 37.9% for the six months ended June 30, 2020 compared to 31.4%
for the combined pro forma six months ended June 30, 2019 , an improvement of 650
basis points. The improvement in adjusted EBITDA was primarily due to higher
revenue of $80.2 million due to the net impact of lower purchase accounting
deferred revenue adjustments of $56.6 million (inclusive of pro forma deferred
revenue adjustment), which had an impact of five percentage points on the year
over year margin improvement. The remaining improvement was primarily due to
lower personnel and travel costs of approximately $29 million in the current
year period primarily resulting from ongoing cost management efforts, partially
offset by higher data processing and data acquisition costs of approximately $16
and adjusted EBITDA loss of $5.1 million attributable to the acquisition of
Lattice.
North America adjusted EBITDA decreased $5.0 million , or 3%, for the three
months ended June 30, 2020 (Successor), compared to the three months ended June
30, 2019 (Successor). Adjusted EBITDA margin decreased 50 basis points for the
three months ended June 30, 2020 (Successor) compared to the three months ended
June 30, 2019 (Successor). The decrease was primarily due to lower revenue of
$6.6 million in the three months ended June 30, 2020 .
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North America adjusted EBITDA increased$12.0 million , or 4%, for the six months endedJune 30, 2020 , compared to the combined pro forma six months endedJune 30, 2019 . Adjusted EBITDA margin increased 140 basis points for the six months endedJune 30, 2020 compared to the combined pro forma six months endedJune 30, 2019 . The improvement in both adjusted EBITDA and adjusted EBITDA margin was primarily due to higher revenue of$5.5 million in the six months endedJune 30, 2020 and lower net personnel related costs and professional fees of approximately$19 million primarily resulting from ongoing cost management efforts, partially offset by higher technology costs of$9 million related to data processing and data acquisition costs and EBITDA loss of$5.1 million attributable to the acquisition of Lattice. International Segment International adjusted EBITDA decreased$7.3 million , or 27%, for the three months endedJune 30, 2020 , compared to the three months endedJune 30, 2019 . Adjusted EBITDA margin decreased 670 basis points for the three months endedJune 30, 2020 compared to the three months endedJune 30, 2019 . The decrease was primarily due to lower revenue of$7.6 million in the three months endedJune 30, 2020 . International adjusted EBITDA decreased$7.2 million , or 14%, for the six months endedJune 30, 2020 , compared to the combined pro forma six months endedJune 30, 2019 . Adjusted EBITDA margin decreased 330 basis points for the six months endedJune 30, 2020 compared to the combined pro forma six months endedJune 30, 2019 . The decrease in both adjusted EBITDA and adjusted EBITDA margin was primarily due to lower revenue of$7.8 million in the six months endedJune 30, 2020 . Corporate and Other Corporate adjusted EBITDA improved$39.9 million , or 74%, for the three months endedJune 30, 2020 , compared to the three months endedJune 30, 2019 . The improvement was primarily due to the net impact of lower purchase accounting deferred revenue adjustments of$35.9 million , which had an impact of 49 percentage points on the year over year increase. Corporate adjusted EBITDA for the six months endedJune 30, 2020 improved by$65.3 million , or 58%, compared to the combined pro forma six months endedJune 30, 2019 . The improvement was primarily due to the net impact of lower purchase accounting deferred revenue adjustments of$56.6 million (inclusive of pro forma deferred revenue adjustment), which had an impact of 34 percentage points on the year over year increase. The remaining improvement was primarily attributable to lower personnel costs resulting from ongoing cost management efforts. Interest Income (Expense) - Net Interest income (expense) - net was as follows: Three-Month Period Six-Month Period Combined Pro Forma Successor Predecessor Six Months Three Months Three Months Period from January Ended June Ended June EndedJune 30 , Six Months Ended Period fromJanuary 1 to February 7 , 30, 2019 30, 2020 2019June 30, 2020 1 toJune 30, 2019 2019 (1) Interest income$ 0.2 $ 0.6 $ 0.5 $ 1.6 $ 0.3 $ 1.9 Interest expense (78.0) (86.0) (161.0) (135.0) (5.5) (170.2) Interest income (expense) - net$ (77.8) $ (85.4) $ (160.5) $ (133.4) $ (5.2) $ (168.3) (1) See further details discussed in notes to "GAAP Results," for the Pro Forma Adjustments for the Six Months EndedJune 30, 2019 included elsewhere within Item 2. Interest expense decreased$8.0 million for the Successor three months endedJune 30, 2020 compared to the Successor three months endedJune 30, 2019 primarily due to lower interest rates in the three months endedJune 30, 2020 . See Note 5 for further discussion. 61 -------------------------------------------------------------------------------- Table of Contents Interest income decreased$1.1 million for the Successor six months endedJune 30, 2020 compared to the Successor period fromJanuary 1, 2019 toJune 30, 2019 , primarily attributable to one-time interest income related to the settlement fund in connection with the Take-Private Transaction recorded in the prior year Successor period. Interest expense increased during each of the Successor six months endedJune 30, 2020 and the Successor period fromJanuary 1, 2019 toJune 30, 2019 , compared to the Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 . The increase was attributable to higher average amounts of debt outstanding. In addition, higher interest expense for the Successor six months endedJune 30, 2020 compared to each of the 2019 periods was primarily due to the impact of the partial period results reflected in each of the prior year periods resulting from the Take-Private Transaction. Interest expense decreased$9.2 million for the six months endedJune 30, 2020 , compared to the combined pro forma six months endedJune 30, 2019 primarily due to lower interest rates in the six months endedJune 30, 2020 . See Note 5 for further discussion. Other Income (Expense) - Net Other income (expense) - net was as follows: Three-Month Period Six-Month Period Combined Pro Forma Successor Predecessor Six Months Three Months Period from January Ended June Three Months Ended EndedJune 30 , Six Months Ended Period fromJanuary 1 to February 7 , 30, 2019June 30, 2020 2019June 30, 2020 1 toJune 30, 2019 2019 (1) Non-operating pension income (expense)$ 11.4 $ 10.1 $ 23.0 $ 15.7 $ (85.7) $ 19.6 Change in fair value of make-whole derivative liability (2) (102.6) - (32.8) - - - Partial debt redemption premium (30.8) - (30.8) - - - Miscellaneous other income (expense) - Net (0.7) (2.0) 7.9 (3.4) (0.3) (3.8) Other income (expense) - net$ (122.7) $ 8.1 $ (32.7) $ 12.3 $ (86.0) $ 15.8 (1) See further details discussed in notes to "GAAP Results," for the Pro Forma Adjustments for the Six Months EndedJune 30, 2019 included elsewhere within Item 2. (2) Related to the make-whole provision associated with the Series A Preferred Stock. See Note 17 to the unaudited condensed consolidated financial statements. Non-operating pension income (expense) was an income of$11.4 million for the three months endedJune 30, 2020 compared to$10.1 million for the three months endedJune 30, 2019 , an increase of$1.3 million , primarily due to lower interest costs in the current year period. Non-operating pension income (expense) was an income of$23.0 million for the Successor six months endedJune 30, 2020 , an income of$15.7 million for the Successor period fromJanuary 1, 2019 toJune 30, 2019 , and an expense of$85.7 million for the Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 . A one-time settlement charge of$85.8 million related to ourU.S. Non-Qualified plan was included in the Predecessor period fromJanuary 1, 2019 toFebruary 8, 2019 . Higher income for the Successor six months endedJune 30, 2020 and the Successor period fromJanuary 1, 2019 toJune 30, 2019 was also due to the elimination of actuarial loss amortization as a result of the application of purchase accounting in connection with the Take-Private Transaction. Excluding the impact of the one-time settlement charge and the actuarial loss amortization included in the Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 , both attributable to the Take-Private Transaction, non-operating pension income was$19.6 million for the combined pro forma six months endedJune 30, 2019 . The change in fair value of make-whole derivative liability relates to the valuation of a derivative bifurcated in accordance with GAAP from the Series A Preferred Stock that was issued inFebruary 2019 to finance the Take-Private Transaction. Beginning inNovember 2019 , we determined that there was a more than remote likelihood that the Series A Preferred Stock would become redeemable beforeNovember 8, 2021 . We recorded a loss of$102.6 million and$32.8 million in the Successor three-month and six-month periods endedJune 30, 2020 , respectively, to adjust the fair value of the make- 62 -------------------------------------------------------------------------------- Table of Contents whole derivative liability based on management's estimate of probability and timing of the triggering event associated with the make-whole derivative liability. The increase in miscellaneous other income (expense) - net of$1.3 million for the Successor three months endedJune 30, 2020 , compared to the Successor three months endedJune 30, 2019 , was primarily driven by higher foreign exchange gains in the current year period due to certain intercompany loan exposures no longer being hedged. The changes in miscellaneous other income (expense) - net of$11.3 million and$8.2 million for the Successor six months endedJune 30, 2020 , compared to the Successor period fromJanuary 1, 2019 toJune 30, 2019 and the Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 , respectively, were primarily driven by higher foreign exchange income in the current year period due to certain intercompany loan exposures no longer being hedged. Provision for Income Taxes In response to liquidity issues that businesses are facing as a result of the COVID-19 pandemic, the CARES Act was signed into law onMarch 27, 2020 by theU.S. government. The Act provides for a five-year carryback of federal net operating losses generated in tax years beginning in 2018, 2019, or 2020. In addition, the Act temporarily increases the deductible interest expense, for tax years beginning in 2019 and 2020. See further discussion below. The effective tax rate for the three months endedJune 30, 2020 (Successor) was 13.6%, reflecting a tax benefit of$27.5 million on a pre-tax loss of$201.9 million , compared to 26.7% for the three months endedJune 30, 2019 , reflecting a tax benefit of$23.1 million on a pre-tax loss of$86.4 million . The lower effective tax rate for the three months endedJune 30, 2020 compared to the prior year period was primarily due to the non-deductible expense associated with the fair value adjustment related to the Series A Preferred Stock make-whole derivative liability. The effective tax rate for the six months endedJune 30, 2020 (Successor) was 50.2%, reflecting a tax benefit of$101.8 million on a pre-tax loss of$202.9 million , compared to 18.0% for the period fromJanuary 1, 2019 toJune 30, 2019 (Successor), reflecting a tax benefit of$60.1 million on a pre-tax loss of$333.1 million , and 26.7% for the period fromJanuary 1, 2019 toFebruary 7, 2019 (Predecessor), reflecting a tax benefit of$27.5 million on a pre-tax loss of$102.8 million . The effective tax rate for the six months endedJune 30, 2020 (Successor) was positively impacted by the$53.7 million net benefit resulting from the enactment of the Act which allows for the carryback ofU.S. net operating losses arising in 2018, 2019 or 2020 to each of the five preceding years for which the corporate tax rate for certain years was 35% (periods prior to 2018), as compared to the current 21% tax rate. The aforementioned benefit was partially offset by the impact of non-deductible expense associated with the fair value adjustment related to the Series A Preferred Stock make-whole derivative liability. The effective rate for both the period fromJanuary 1, 2019 toJune 30, 2019 (Successor) and the period fromJanuary 1, 2019 toFebruary 7, 2019 (Predecessor), was negatively impacted by non-deductible transaction costs incurred as part of the Take-Private Transaction, partially offset by the excess tax benefit related to the acceleration of the vesting of equity-based awards in connection with the Take-Private Transaction for the periodJanuary 1, 2019 toFebruary 7, 2019 (Predecessor). Net Income (Loss) Net income (loss) attributable toDun & Bradstreet Holdings, Inc. was a net loss of$207.1 million and$94.0 million , for the Successor three months endedJune 30, 2020 and 2019, respectively. Higher loss of$113.1 million for the three months endedJune 30, 2020 (Successor) compared to the prior year period was primarily due to: •the adjustments of$102.6 million to the fair value of the make-whole derivative liability related to the Series A Preferred Stock; •call premium expense of$30.8 million for the partial redemption of our 10.250% Senior Unsecured Notes; and •higher equity-based compensation of approximately$21 million primarily due to options granted in connection with the IPO;
partially offset by
•lower net deferred revenue adjustment of
Net income (loss) attributable toDun & Bradstreet Holdings, Inc. (Successor) /The Dun & Bradstreet Corporation (Predecessor) was a net loss of$165.6 million ,$321.9 million and$75.6 million for the Successor six months endedJune 30, 2020 , the Successor period fromJanuary 1, 2019 toJune 30, 2019 , and the Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 , respectively. Lower net loss of$156.3 million for the Successor six months endedJune 30, 2020 , compared to the Successor period fromJanuary 1, 2019 toJune 30, 2019 , was primarily due to: 63
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•transaction costs of approximately$147 million incurred in connection with the Take-Private Transaction included in the 2019 Successor period; • higher income tax benefit of$41.7 million for the Successor six months endedJune 30, 2020 related to the CARES Act, •lower net deferred revenue adjustment of$40.6 million ; and •restructuring costs that were lower by$24.6 million in the Successor six months endedJune 30, 2020 ; partially offset by •an increase in the fair value of the make-whole derivative liability recorded in connection with the make-whole provision for the Series A Preferred Stock, resulting in a loss of$32.8 million in the Successor six months endedJune 30, 2020 ; •call premium expense of$30.8 million for the partial redemption of our 10.250% Senior Unsecured Notes; •higher equity-based compensation of approximately$25 million primarily due to options granted in connection with the IPO; and •the remaining change was primarily attributable to the partial period results reflected in the prior year Successor period fromJanuary 1, 2019 toJune 30, 2019 . Higher net loss of$90.0 million for the Successor six months endedJune 30, 2020 compared to the Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 was primarily driven by the net impact of the partial period results reflected in the prior year Predecessor period fromJanuary 1, 2019 toFebruary 7, 2019 resulting from the Take-Private Transaction, an increase in the fair value of the make-whole derivative liability recorded in connection with the make-whole provision for the Series A Preferred Stock, resulting in a loss of$32.8 million in the Successor six months endedJune 30, 2020 , call premium expense of$30.8 million for the partial redemption of our 10.250% Unsecured Senior Notes, partially offset by the pension settlement charge of$85.8 million recorded inJanuary 2019 (Predecessor), higher income tax benefit of$74.3 million for the Successor six months endedJune 30, 2020 , and transaction costs of$52.0 million incurred by the Predecessor attributable to the Take-Private Transaction included in the 2019 Predecessor period. Net income (loss) attributable toDun & Bradstreet Holdings, Inc. was a net loss of$165.6 million for the six months endedJune 30, 2020 , compared to net loss of$246.8 million for the combined pro forma six months endedJune 30, 2019 . The decrease in net loss of$81.2 million for the six months endedJune 30, 2020 was primarily due to: •lower net deferred revenue adjustment of$56.6 million (inclusive of pro forma deferred revenue adjustment); •higher income tax benefit of$61.4 million for the Successor six months endedJune 30, 2020 related to the CARES Act; •restructuring costs that were lower by$24.6 million in the Successor six months endedJune 30, 2020 ; •lower personnel costs and professional fees of approximately$29 million in the current year period primarily as a result of cost management effort;
partially offset by
•an increase in the fair value of the make-whole derivative liability recorded in connection with the make-whole provision for the Series A Preferred Stock, resulting in a loss of$32.8 million in the Successor six months endedJune 30, 2020 ; •call premium expense of$30.8 million for the partial redemption of our 10.250% Senior Unsecured Notes; and •higher option expense of approximately$25 million related to stock options granted onJune 30, 2020 in connection with the IPO. Adjusted Net Income and Adjusted Earnings Per Share Adjusted net income was$81.6 million for the three months endedJune 30, 2020 (Successor) compared to$44.7 million for the prior year period, an increase of$36.9 million , or 83%. Adjusted net earnings per share was$0.26 for the three months endedJune 30, 2020 compared to$0.14 for the prior year period, an increase of$0.12 , or 82%. The increase was primarily driven by the net impact of lower deferred revenue adjustment in the current year period and lower personnel and travel costs primarily driven by ongoing cost management, partially offset by higher technology costs primarily related to data processing and data acquisition costs discussed within the adjusted EBITDA and adjusted EBITDA margin section of the MD&A. Adjusted net income was$130.3 million for the six months endedJune 30, 2020 (Successor) compared to$69.3 million for the combined pro forma six months endedJune 30, 2019 , an increase of$61.0 million , or 88%. Adjusted net earnings per 64 -------------------------------------------------------------------------------- Table of Contents share was$0.41 in the six months endedJune 30, 2020 compared to$0.22 for the combined pro forma six months endedJune 30, 2019 , an increase of$0.19 , or 88%. The increase was primarily driven by the net impact of lower deferred revenue adjustment in the current year period and lower personnel and travel costs primarily driven by ongoing cost management, partially offset by higher technology costs primarily related to data processing and data acquisition costs discussed within the adjusted EBITDA and adjusted EBITDA margin section of the MD&A. 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 facilities. Our principal uses of liquidity are working capital, capital expenditures, debt service, dividend payments for Series A Preferred Stock (see further discussion below) 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, including restructuring charges, our capital investments, contractual obligations, interest payments and tax liabilities related to our distributed and undistributed foreign earnings. 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 New 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. OnJuly 6, 2020 , we completed an IPO and a concurrent private placement (see Note 18 for further discussion). We raised net proceeds of$2,249.6 million after deducting underwriting discounts and IPO related expenses. We used the remaining net proceeds to redeem all of our Series A Preferred Stock and repay 40%, or$300 million , of our 10.250% Senior Unsecured Notes, plus to pay fees and expenses related to the repayment and accrued interest. As a result, our debt to EBITDA ratio and ongoing debt costs are expected to be lower. OnJuly 9, 2020 , our credit rating was upgraded to B+ from B- by S&P Global with a positive outlook and onJuly 16, 2020 , Moody's upgraded our debt rating to a B2 from a B3. The recent COVID-19 global pandemic has caused disruptions in the economy and volatility in the financial markets, and considerable uncertainty regarding its duration and the speed of recovery. The extent of the impact of the COVID-19 global pandemic on our operations and financial performance will depend on the effects on our clients and vendors, which are uncertain at this time and cannot be predicted. Given the current economic condition, we have been carefully monitoring the COVID-19 global pandemic and its impact on our business including, but not limited to, implementing additional operational processes to monitor customer sales and collections, taking precautionary measures to ensure sufficient liquidity, including a proactive draw of$200 million on our New Revolving Facility to preserve cash flow flexibility at the onset of the pandemic, of which over$100 million has subsequently been repaid, and adjusting operations to ensure business continuity. While our productivity and financial performance for the six months endedJune 30, 2020 have not been impacted materially by the pandemic, the ultimate impact will be difficult to predict, and depends on, among many factors, the duration of the pandemic and its ultimate impact to our clients, vendors, and the financial markets. In response to liquidity issues that businesses are facing as a result of the COVID-19 pandemic, the CARES Act was signed into law onMarch 27, 2020 , by theU.S. government. Among many other reliefs, the Act provides assistance to businesses through the modification of rules related to net operating losses and interest expense deductions. Many of these modifications are designed to provide critical cash flow and liquidity to businesses during the COVID-19 pandemic, including allowing the amendment of prior tax returns to obtain tax refunds. The Act also allows for the deferral of 2020 employer FICA payroll taxes to 2021 and 2022 as well as delaying any federal tax payments dueApril 15, 2020 andJune 15, 2020 untilJuly 15, 2020 . The Company intends to utilize the relief opportunities provided by the Act. As a result of the application of the Act, the Company expects to realize a net income tax cash benefit of approximately$90 million . We have also deferred 2020 FICA payroll tax payments of approximately$12 million , with half due at the end of 2021 and the remaining half at the end of 2022. As ofJune 30, 2020 , we had cash and cash equivalents of$99.8 million , of which$87.2 million was held by our foreign operations. We intend to reinvest indefinitely all earnings post 2017 from ourChina andIndia subsidiaries. Cash held in ourChina andIndia operations was a total of$47.0 million as ofJune 30, 2020 . In connection with the Take-Private Transaction onFebruary 8, 2019 , we received equity funding of$3,076.8 million and entered into credit facility arrangements and issued notes, resulting in total borrowings of$4,043.0 million . The proceeds 65 -------------------------------------------------------------------------------- Table of Contents were used to (i) finance the consummation of the Take-Private Transaction, (ii) repay in full all outstanding indebtedness under the Prior Term Loan Facility and Prior Revolving Credit Facility, (iii) fund the redemption of the Predecessor senior notes and (iv) pay related fees, costs, premiums and expenses in connection with these transactions. OnJune 12, 2019 , in connection with the acquisition of Lattice, Star Parent issued capital call notices to its Class A and B unit owners to raise up to$100.0 million byJuly 15, 2019 . Star Parent received the total capital funding of$100.0 million during 2019 from the Class A and B unit owners. The funding was ultimately contributed toDun & Bradstreet as capital surplus. Sources and Uses of Cash Information about our cash flows, by category, is presented in the Consolidated Statements of Cash Flows. The following table summarizes our cash flows for the periods presented: Successor Predecessor Six Months Ended Period from January Period from January 1 June 30, 2020 1 to June 30, 2019 to February 7, 2019 Net cash provided by (used in) operating activities$ 114.4 $ (134.7) $ (65.4)
Net cash provided by (used in) investing activities (65.0)
(5,978.0) (5.3)
Net cash provided by (used in) financing activities (48.0)
6,310.8 96.9
Total cash provided during the period before the
effect of exchange rate changes $ 1.4 $ 198.1 $ 26.2
Cash Provided by (Used in) Operating Activities
Higher operating cash flows in the six months ended June 30, 2020 (Successor),
compared to the prior year period from January1, 2019 to June 30, 2019
(Successor) and the period from January 1, 2019 to February 7, 2019
(Predecessor), was primarily driven by the net impact of partial period results
reflected in each of the prior year periods and transaction cost payments and
pension settlement payments in connection with the Take-Private Transaction on
February 8, 2019 totaling approximately $197 million during the 2019 Successor
period and approximately $243 million during the 2019 Predecessor period. The
aforementioned higher increases were partially offset by increased interest
payments of approximately $62 million and $133 million , increased bonus payments
of approximately $49 million and $83 million , and increased tax payments of
approximately $5 million and $16 million , respectively, during the six months
ended June 30, 2020 , compared to the 2019 Successor period and 2019 Predecessor
period, respectively.
Cash Provided by (Used in) Investing Activities
Lower net cash used in investing activities for the six months ended June 30,
2020 (Successor), compared to the prior year period from January 1, 2019 to June
30, 2019 (Successor) was primarily driven by the net payment of $6,078 million
in the prior year Successor period to acquire the Predecessor company in
connection with the Take-Private Transaction, including payments to settle the
Predecessor line of credit and term loan.
Higher net cash used in investing activities for the six months ended June 30,
2020 (Successor), compared to the prior year period from January 1, 2019 to
February 7, 2019 (Predecessor) was primarily driven by the net payments of $15.8
million to acquire Orb and coAction in the current year period and higher
spending of approximately $44 million on capital expenditures and computer
software.
Cash Provided by (Used in) Financing Activities
The change in net cash used in financing activities during the six months ended
June 30, 2020 (Successor), compared to net cash provided by financing activities
in the prior year period from January 1, 2019 to June 30, 2019 (Successor) was
primarily related to the raising of equity and debt financing for the
Take-Private Transaction in the prior year period, partially offset by payments
to retire Predecessor Senior Notes in the prior year period and net borrowings
on the New Revolving Facility in the current year period.
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The change in net cash used in financing activities during the six months ended
June 30, 2020 (Successor), compared to net cash provided by financing activities
in the prior year period from January 1, 2019 to February 7, 2019 (Predecessor)
was primarily due to dividend payments of $64.1 million related to the Series A
Preferred Stock and the repayment of $63.0 million related to the New
Repatriation Bridge Facility in the current year period and lower net borrowings
on the New Revolving Facility in the current year period compared to net
borrowings on the Predecessor's credit facility in the prior year period.
Below is a summary of our borrowings as of June 30, 2020 and December 31, 2019 :
June 30, 2020 At December 31, 2019
Debt Issuance Debt Issuance
Costs and Costs and
Maturity Principal Amount Discount* Carrying Value Principal Amount Discount* Carrying Value
Debt Maturing Within One Year:
10.250% New Senior Unsecured
Notes $ 300.0 $ - $ 300.0 $ - $ - $ -
New Repatriation Bridge February 7, 2020
Facility - - - 63.0 0.1 62.9
New Term Loan Facility 25.3 - 25.3 19.0 - 19.0
Total short-term debt $ 325.3 $ - $ 325.3 $ 82.0 $ 0.1 $ 81.9
Debt Maturing After One Year:
New Term Loan Facility February 8, 2026 $ 2,498.4 $ 84.6 $ 2,413.8 $ 2,511.0 $ 98.3 $ 2,412.7
New Revolving Facility February 8, 2024 87.5 - 87.5 - - -
6.875% New Senior Secured August 15, 2026
Notes 700.0 14.8 685.2 700.0 15.8 684.2
10.250% New Senior Unsecured February 15, 2027
Notes 450.0 15.7 434.3 750.0 28.0 722.0
Total long-term debt $ 3,735.9 $ 115.1 $ 3,620.8 $ 3,961.0 $ 142.1 $ 3,818.9
Total debt $ 4,061.2 $ 115.1 $ 3,946.1 $ 4,043.0 $ 142.2 $ 3,900.8 New Senior Secured Credit Facilities
Borrowings under the New Senior Secured Credit Facilities bear interest at a rate per annum equal to an applicable margin over a LIBOR rate 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 New Senior Secured Credit Facilities: •As required by the credit agreement, beginningJune 30, 2020 , the principal amount of the New Term Loan Facility will begin 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 onFebruary 8, 2026 . The margin to LIBOR was 500 basis points initially. OnFebruary 10, 2020 , an amendment was made to the existing credit agreement, specifically related to the New Term Loan Facility, which reduced the margin to LIBOR to 400 basis points. Subsequent to the IPO transaction, the spread was further reduced by 25 basis points to 375 basis points. The interest rate associated with the New Term Loan Facility atJune 30, 2020 was 4.184% and atDecember 31, 2019 was 6.792%. See Note 5 for further discussion. •The New Revolving Facility provides for up to$400 million of revolving extensions of credit outstanding at any time until maturity onFebruary 8, 2024 . The margin to LIBOR is 350 basis points. Subsequent to the IPO transaction, the spread was reduced by 25 basis points to 325 basis points. The interest rate associated with the New Revolving Facility atJune 30, 2020 was 3.604%. •The New Repatriation Bridge Facility had a principal balance of$63 million and matured onFebruary 7, 2020 . The margin to LIBOR was 350 basis points. The interest rate associated with the Repatriation Bridge Facility atDecember 31, 2019 was 5.292%. The outstanding balance of the New Repatriation Bridge Facility was fully repaid inFebruary 2020 . 67 -------------------------------------------------------------------------------- Table of Contents In connection with the Take-Private Transaction, we repaid in full all outstanding indebtedness under the Predecessor Term Loan Facility and Revolving Credit Facility, and funded the redemption and discharge of the Predecessor senior notes. The New Senior Secured Credit Facilities and Successor senior notes contain certain covenants that limited our ability to enter into certain transactions. In addition, Successor facilities contain financial covenants requiring the maintenance of debt to EBITDA ratios which are defined in the respective facility credit agreements in effect. We were in compliance with the respective financial and non-financial covenants atJune 30, 2020 andDecember 31, 2019 . Tax Liability under the Tax Cuts and Jobs Act The enactment of the law commonly known as the Tax Cuts and Jobs Act (the "2017 Act") resulted in a significant impact on our financial statements. One of the key provisions in the 2017 Act was to impose a one-time mandatoryU.S. tax on accumulated undistributed foreign earnings as ofDecember 31, 2017 . The 2017 Act also allows us to remit our future earnings tothe United States without incurring additionalU.S. taxes. As ofJune 30, 2020 (Successor), our total tax liability associated with the 2017 Act was$57.8 million , of which$8.0 million was included in "Accrued Income Tax" and$49.8 million was included in "Other Non-Current Liabilities." As ofDecember 31, 2019 (Successor), our total tax liability associated with the 2017 Act was$60.2 million , of which$5.2 million was included in "Accrued Income Tax" and$55.0 million was included in "Other Non-Current Liabilities." Redeemable Preferred Stock Prior toJune 30, 2020 , the Company classified its Series A Preferred Stock as mezzanine equity because the instrument contained a redemption feature which was contingent upon certain events, the occurrence of which was not solely within the control of the Company. We have bifurcated embedded derivatives and assess fair value each reporting date. We recorded$102.6 million and$32.8 million within ''Other income (expense)- net,'' for the three and six months endedJune 30, 2020 , respectively, reflecting the adjustments to the fair value of the make-whole derivative liability. As ofJune 30, 2020 , we determined the fair value of the make-whole provision to be$205.2 million , reflected as ''Make-whole derivative liability'' within the condensed consolidated balance sheet as ofJune 30, 2020 . Upon the closing of the IPO onJuly 6, 2020 (see further discussion in Note 18), we have redeemed all of the outstanding Series A Preferred Stock as required by the Certificate of Designation. In addition, we made the total make-whole payments of$205.2 million . We also recorded accretion of$35.1 million and$36.1 million using the interest method for the three and six months endedJune 30, 2020 , respectively. As ofJune 30, 2020 , Series A Preferred Stock was fully accreted to the redeemable balance of$1,067.9 million and was classified as current liability. OnMay 14, 2020 ,March 4, 2020 andMay 31, 2019 , the board of directors ofDun & Bradstreet Holdings, Inc. declared a cash dividend of$30.51 per share to all holders of shares of Series A Preferred Stock, respectively. An aggregate amount of$32.1 million ,$32.0 million ,$10.7 million and$21.3 million was paid onJune 26, 2020 ,May 27, 2020 ,June 28, 2019 and onJune 19, 2019 , respectively. 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 and interest rate swaps discussed in Note 10 to the unaudited condensed consolidated financial statements.
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