DONNELLEY FINANCIAL SOLUTIONS, INC., 10-Q filed on 01 Nov 23
v3.23.3
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2023
Oct. 27, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2023  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q3  
Trading Symbol DFIN  
Entity Registrant Name Donnelley Financial Solutions, Inc.  
Entity Central Index Key 0001669811  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   29,107,640
Entity Shell Company false  
Title of 12(b) Security Common Stock (Par Value $0.01)  
Security Exchange Name NYSE  
Entity File Number 1-37728  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 36-4829638  
Entity Address, Address Line One 35 West Wacker Drive  
Entity Address, City or Town Chicago  
Entity Address, State or Province IL  
Entity Address, Postal Zip Code 60601  
City Area Code 800  
Local Phone Number 823-5304  
Document Quarterly Report true  
Document Transition Report false  
v3.23.3
Condensed Consolidated Statements of Operations (UNAUDITED) - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Total net sales $ 180.0 $ 188.7 $ 620.7 $ 665.9
Total cost of sales [1] 70.9 83.9 259.4 294.5
Selling, general and administrative expenses [1] 65.4 63.8 212.1 205.5
Depreciation and amortization 14.4 11.7 41.2 33.6
Restructuring, impairment and other charges, net (0.3) 2.6 8.4 4.6
Other operating income, net (0.2) 0.0 (0.6) (0.2)
Income from operations 29.8 26.7 100.2 127.9
Interest expense, net 4.1 2.3 12.2 5.9
Investment and other income, net (0.1) (2.8) (7.3) (3.3)
Earnings before income taxes 25.8 27.2 95.3 125.3
Income tax expense 7.7 8.0 23.7 33.7
Net earnings $ 18.1 $ 19.2 $ 71.6 $ 91.6
Net earnings per share:        
Basic $ 0.62 $ 0.64 $ 2.44 $ 2.93
Diluted $ 0.6 $ 0.62 $ 2.36 $ 2.81
Weighted average number of common shares outstanding:        
Basic 29.4 29.8 29.4 31.3
Diluted 30.3 30.9 30.4 32.6
Tech-enabled Services        
Total net sales $ 80.4 $ 87.4 $ 263.3 $ 312.4
Total cost of sales 29.3 35.3 99.6 113.2
Software Solutions        
Total net sales 73.2 69.5 219.0 210.9
Total cost of sales 25.9 29.0 81.2 85.1
Print and Distribution        
Total net sales 26.4 31.8 138.4 142.6
Total cost of sales $ 15.7 $ 19.6 $ 78.6 $ 96.2
[1] Exclusive of depreciation and amortization
v3.23.3
Condensed Consolidated Statements of Comprehensive Income (UNAUDITED) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Statement of Comprehensive Income [Abstract]        
Net earnings $ 18.1 $ 19.2 $ 71.6 $ 91.6
Other comprehensive income (loss), net of tax:        
Translation adjustments (1.0) (1.7) 0.0 (2.1)
Adjustment for net periodic pension and other postretirement benefits plans 0.1 0.5 0.5 1.8
Other comprehensive income (loss), net of tax (0.9) (1.2) 0.5 (0.3)
Comprehensive income $ 17.2 $ 18.0 $ 72.1 $ 91.3
v3.23.3
Condensed Consolidated Balance Sheets (UNAUDITED) - USD ($)
$ in Millions
Sep. 30, 2023
Dec. 31, 2022
ASSETS    
Cash and cash equivalents $ 11.7 $ 34.2
Receivables, less allowances for expected losses of $19.3 in 2023 (2022 - $17.1) 189.7 163.5
Prepaid expenses and other current assets 25.9 28.1
Assets held for sale 2.6 2.6
Total current assets 229.9 228.4
Property, plant and equipment, net 14.8 17.6
Operating lease right-of-use assets 23.7 33.3
Software, net 86.6 75.6
Goodwill 405.8 405.8
Other intangible assets, net 5.6 7.8
Deferred income taxes, net 43.3 33.4
Other noncurrent assets 29.6 26.4
Total assets 839.3 [1] 828.3
LIABILITIES    
Accounts payable 37.2 49.2
Operating lease liabilities 14.5 16.3
Accrued liabilities 145.1 159.3
Total current liabilities 196.8 224.8
Long-term debt 165.9 169.2
Deferred compensation liabilities 14.1 13.6
Pension and other postretirement benefits plans liabilities 40.5 42.9
Noncurrent operating lease liabilities 17.6 28.4
Other noncurrent liabilities 19.1 19.9
Total liabilities 454.0 498.8
Commitments and Contingencies (Note 7)
EQUITY    
Preferred stock, $0.01 par value Authorized: 1.0 shares; Issued: None 0.0 0.0
Common stock, $0.01 par value Authorized: 65.0 shares; Issued and outstanding: 37.9 shares and 29.1 shares in 2023 (2022 - 36.9 shares and 28.9 shares) 0.4 0.4
Treasury stock, at cost: 8.8 shares in 2023 (2022 - 8.0 shares) (257.2) (221.8)
Additional paid-in capital 299.3 280.2
Retained earnings 425.5 353.9
Accumulated other comprehensive loss (82.7) (83.2)
Total equity 385.3 329.5
Total liabilities and equity $ 839.3 $ 828.3
[1] Certain assets are recorded within a segment based on predominant usage, however, as they benefit more than one segment, the related operating expenses are allocated between segments.
v3.23.3
Condensed Consolidated Balance Sheets (UNAUDITED) (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Receivables, allowance for expected losses [1] $ 19.3 $ 17.1
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, authorized 1,000,000 1,000,000
Preferred stock, Issued 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, Authorized 65,000,000 65,000,000
Common stock, Issued 37,900,000 36,900,000
Common stock, Outstanding 29,100,000 28,900,000
Treasury stock, Shares 8,800,000 8,000,000
[1] As of September 30, 2023, the CECL reserve balance is comprised of a $18.7 million provision for accounts receivable and a $0.6 million provision for unbilled receivables and contract assets. As of December 31, 2022, the CECL reserve balance was comprised of a $16.5 million provision for accounts receivable and a $0.6 million provision for unbilled receivables and contract assets.
v3.23.3
Condensed Consolidated Statements of Cash Flows (UNAUDITED) - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
OPERATING ACTIVITIES    
Net earnings $ 71.6 $ 91.6
Adjustments to reconcile net earnings to net cash provided by operating activities:    
Depreciation and amortization 41.2 33.6
Provision for expected losses on accounts receivable 10.8 6.2
Share-based compensation expenses 17.1 13.9
Deferred income taxes (10.2) 0.4
Net pension plan income (0.5) (0.7)
Gain on investment in an equity security (6.9) 0.0
Amortization of right-of-use assets 9.5 12.1
Other 0.7 0.5
Changes in operating assets and liabilities:    
Accounts receivable, net (37.0) (20.5)
Prepaid expenses and other current assets 1.8 (3.3)
Accounts payable (13.8) 4.9
Income taxes payable and receivable 1.3 (1.7)
Accrued liabilities and other (22.7) (44.2)
Operating lease liabilities (12.3) (14.7)
Pension and other postretirement benefits plans contributions (1.4) (1.2)
Net cash provided by operating activities 49.2 76.9
INVESTING ACTIVITIES    
Capital expenditures (43.0) (39.4)
Proceeds from sale of investment in an equity security 9.9 0.0
Net cash used in investing activities (33.1) (39.4)
FINANCING ACTIVITIES    
Revolving facility borrowings 218.0 270.0
Payments on revolving facility borrowings (221.5) (202.5)
Treasury share repurchases (35.4) (150.0)
Proceeds from exercise of stock options 1.9 0.3
Finance lease payments (1.7) (1.4)
Net cash used in financing activities (38.7) (83.6)
Effect of exchange rate on cash and cash equivalents 0.1 2.4
Net decrease in cash and cash equivalents (22.5) (43.7)
Cash and cash equivalents at beginning of year 34.2 54.5
Cash and cash equivalents at end of period 11.7 10.8
Supplemental cash flow information:    
Income taxes paid (net of refunds) 32.4 34.4
Interest paid 12.8 4.9
Non-cash investing activities:    
Non-cash consideration from sale of investment in an equity security (Note 1) 2.9 0.0
Capitalized software included in accounts payable $ 1.7 $ 1.4
v3.23.3
Condensed Consolidated Statements of Changes in Stockholders' Equity (UNAUDITED) - USD ($)
shares in Millions, $ in Millions
Total
Common Stock
Treasury Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Balance at Dec. 31, 2021 $ 377.0 $ 0.4 $ (57.1) $ 260.6 $ 251.4 $ (78.3)
Balance (in shares) at Dec. 31, 2021   35.9 2.9      
Net earnings 91.6 $ 0.0 $ 0.0 0.0 91.6 0.0
Other comprehensive income (loss) (0.3) 0.0 0.0 0.0 0.0 (0.3)
Share-based compensation expense 13.9 0.0 0.0 13.9 0.0 0.0
Common stock repurchases (138.8) $ 0.0 $ (138.8) 0.0 0.0 0.0
Common stock repurchases, shares   0.0 4.3      
Issuance of share-based awards, net of withholdings and other (11.9) $ 0.0 $ (12.1) 0.2 0.0 0.0
Issuance of share-based awards, net of withholdings and other (in shares)   1.0 0.4      
Balance at Sep. 30, 2022 331.5 $ 0.4 $ (208.0) 274.7 343.0 (78.6)
Balance (in shares) at Sep. 30, 2022   36.9 7.6      
Balance at Jun. 30, 2022 341.4 $ 0.4 $ (175.6) 270.2 323.8 (77.4)
Balance (in shares) at Jun. 30, 2022   36.9 6.6      
Net earnings 19.2 $ 0.0 $ 0.0 0.0 19.2 0.0
Other comprehensive income (loss) (1.2) 0.0 0.0 0.0 0.0 (1.2)
Share-based compensation expense 4.4 0.0 0.0 4.4 0.0 0.0
Common stock repurchases (32.3) $ 0.0 $ (32.3) 0.0 0.0 0.0
Common stock repurchases, shares   0.0 1.0      
Issuance of share-based awards, net of withholdings and other 0.0 $ 0.0 $ (0.1) 0.1 0.0 0.0
Issuance of share-based awards, net of withholdings and other (in shares)   0.0 0.0      
Balance at Sep. 30, 2022 331.5 $ 0.4 $ (208.0) 274.7 343.0 (78.6)
Balance (in shares) at Sep. 30, 2022   36.9 7.6      
Balance at Dec. 31, 2022 $ 329.5 $ 0.4 $ (221.8) 280.2 353.9 (83.2)
Balance (in shares) at Dec. 31, 2022 36.9 36.9 8.0      
Net earnings $ 71.6 $ 0.0 $ 0.0 0.0 71.6 0.0
Other comprehensive income (loss) 0.5 0.0 0.0 0.0 0.0 0.5
Share-based compensation expense 17.1 0.0 0.0 17.1 0.0 0.0
Common stock repurchases (18.0) $ 0.0 $ 18.0 0.0 0.0 0.0
Common stock repurchases, shares   0.0 0.4      
Issuance of share-based awards, net of withholdings and other (15.4) $ 0.0 $ (17.4) 2.0 0.0 0.0
Issuance of share-based awards, net of withholdings and other (in shares)   1.0 0.4      
Balance at Sep. 30, 2023 $ 385.3 $ 0.4 $ (257.2) 299.3 425.5 (82.7)
Ending balance (in shares) at Sep. 30, 2023 29.1          
Balance (in shares) at Sep. 30, 2023 37.9 37.9 8.8      
Balance at Jun. 30, 2023 $ 376.0 $ 0.4 $ (242.3) 292.3 407.4 (81.8)
Balance (in shares) at Jun. 30, 2023   37.9 8.5      
Net earnings 18.1 $ 0.0 $ 0.0 0.0 18.1 0.0
Other comprehensive income (loss) (0.9) 0.0 0.0 0.0 0.0 (0.9)
Share-based compensation expense 6.1 0.0 0.0 6.1 0.0 0.0
Common stock repurchases (14.8) $ 0.0 $ (14.8) 0.0 0.0 0.0
Common stock repurchases, shares   0.0 0.3      
Issuance of share-based awards, net of withholdings and other 0.8 $ 0.0 $ (0.1) 0.9 0.0 0.0
Issuance of share-based awards, net of withholdings and other (in shares)   0.0 0.0      
Balance at Sep. 30, 2023 $ 385.3 $ 0.4 $ (257.2) $ 299.3 $ 425.5 $ (82.7)
Ending balance (in shares) at Sep. 30, 2023 29.1          
Balance (in shares) at Sep. 30, 2023 37.9 37.9 8.8      
v3.23.3
Overview, Basis of Presentation and Significant Accounting Policies
9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Overview, Basis of Presentation and Significant Accounting Policies

Note 1. Overview, Basis of Presentation and Significant Accounting Policies

Description of Business

DFIN is a leading global risk and compliance solutions company. The Company provides regulatory filing and deal solutions via its software, technology-enabled services and print and distribution solutions to public and private companies, mutual funds and other regulated investment firms, to serve its clients’ regulatory and compliance needs. DFIN helps its clients comply with applicable regulations where and how they want to work in a digital world, providing numerous solutions tailored to each client’s precise needs. The prevailing trend is toward clients choosing to utilize the Company’s software solutions, in conjunction with its tech-enabled services, to meet their document and filing needs, while at the same time shifting away from physical print and distribution of documents, except for cases where it is still regulatorily required or requested by investors.

The Company serves its clients’ regulatory and compliance needs throughout their respective life cycles. For its capital markets clients, the Company offers solutions that allow companies to comply with U.S. Securities and Exchange Commission (“SEC”) regulations including filing agent services, where applicable, digital document creation and online content management tools that support their corporate financial transactions and regulatory/financial reporting; solutions to facilitate clients’ communications with their investors; and virtual data rooms and other deal management solutions. For investment companies, including mutual fund, insurance-investment and alternative investment companies, the Company provides solutions for creating, compiling and filing regulatory communications as well as solutions for investors designed to improve the access to and accuracy of their investment information.

Services and Products

The Company separately reports its net sales and related cost of sales for its software solutions, tech-enabled services and print and distribution offerings. The Company’s software solutions consist of Venue® Virtual Data Room (“Venue”), ActiveDisclosure®, eBrevia and the Arc Suite® software platform (“Arc Suite”), among others. The Company’s tech-enabled services offerings consist of document composition, compliance-related SEC Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) filing services and transaction solutions. The Company’s print and distribution offerings primarily consist of conventional and digital printed products and related shipping.

Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of DFIN and all majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The financial data presented herein should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes included in the Company's latest Annual Report. In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Results of interim periods should not be considered indicative of the results for the full year.

Significant Accounting Policies

Use of Estimates—The preparation of financial statements in conformity with GAAP requires the extensive use of management’s estimates and assumptions that affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. The Company’s significant accounting policies and critical accounting estimates are disclosed in the Annual Report.

Allowances for Expected LossesTransactions affecting the current expected credit loss (“CECL”) reserve during the nine months ended September 30, 2023 and 2022 were as follows:

 

 

September 30,

 

 

 

2023

 

 

2022

 

Balance, beginning of year (a)

 

$

17.1

 

 

$

12.7

 

Provisions charged to expense

 

 

10.8

 

 

 

6.2

 

Write-offs, reclassifications and other

 

 

(8.6

)

 

 

(1.4

)

Balance, end of period (a)

 

$

19.3

 

 

$

17.5

 

 

(a)
As of September 30, 2023, the CECL reserve balance is comprised of a $18.7 million provision for accounts receivable and a $0.6 million provision for unbilled receivables and contract assets. As of December 31, 2022, the CECL reserve balance was comprised of a $16.5 million provision for accounts receivable and a $0.6 million provision for unbilled receivables and contract assets.

Assets Held for Sale—As of September 30, 2023 and December 31, 2022, the Company had land held for sale with a carrying value of $2.6 million. On August 30, 2022, the Company entered into an agreement to sell the land for $13.0 million. The closing of this transaction is subject to the buyer obtaining necessary entitlements and customary closing conditions and there is no assurance that the sale will be completed.

Property, Plant and Equipment, net—The components of the Company’s property, plant and equipment, net at September 30, 2023 and December 31, 2022 were as follows:

 

 

September 30, 2023

 

 

December 31, 2022

 

Land

 

$

0.3

 

 

$

0.3

 

Buildings

 

 

19.9

 

 

 

20.2

 

Machinery and equipment

 

 

68.1

 

 

 

66.8

 

 

 

 

88.3

 

 

 

87.3

 

Less: Accumulated depreciation

 

 

(73.5

)

 

 

(69.7

)

Total

 

$

14.8

 

 

$

17.6

 

Depreciation expense was $2.0 million and $1.7 million for the three months ended September 30, 2023 and 2022, respectively, and $5.8 million and $4.8 million for the nine months ended September 30, 2023 and 2022, respectively.

Software, net—Capitalized software development costs are amortized over their estimated useful life using the straight-line method, up to a maximum of three years. Amortization expense related to internally-developed software, excluding amortization expense related to other intangible assets, was $11.4 million and $9.8 million for the three months ended September 30, 2023 and 2022, respectively, and $33.2 million and $28.1 million for the nine months ended September 30, 2023 and 2022, respectively.

InvestmentsThe carrying value of the Company’s investments in equity securities was $5.5 million and $8.5 million at September 30, 2023 and December 31, 2022, respectively. The Company measures its equity securities that do not have a readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company performs an assessment on a quarterly basis to determine whether triggering events for impairment exist and to identify any observable price changes. During the three months ended September 30, 2023, there were no events or changes in circumstances that suggested an impairment or an observable price change. During the three and nine months ended September 30, 2022, the Company recorded an unrealized gain of $0.5 million resulting from an observable price change.

In March 2023, the Company sold an investment in an equity security. As a result of the sale, for the nine months ended September 30, 2023, the Company received proceeds of $11.9 million, including $9.0 million of cash and common stock of the acquiror. In May 2023, the Company sold another investment in an equity security and received proceeds of $0.9 million in cash, which approximated its carrying value. The sales resulted in a net realized gain of $6.9 million for the nine months ended September 30, 2023, which is included in investment and other income, net, on the Unaudited Condensed Consolidated Statements of Operations within Corporate.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update No. 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts, rather than at fair value. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company adopted the standard prospectively on January 1, 2023. The adoption of this standard did not have a material impact on the Company's Unaudited Condensed Consolidated Financial Statements.

v3.23.3
Revenue
9 Months Ended
Sep. 30, 2023
Revenue Recognition [Abstract]  
Revenue

Note 2. Revenue

Revenue Recognition

The Company manages highly-customized data and materials to enable filings with the SEC on behalf of its customers as well as performs eXtensible Business Reporting Language (“XBRL”) and other services. Clients are provided with EDGAR filing services, XBRL compliance services and translation, editing, interpreting, proof-reading and multilingual typesetting services, among other services. The Company provides software solutions to public and private companies, mutual funds and other regulated investment firms to serve their regulatory and compliance needs, including Venue, Arc Suite, ActiveDisclosure, among others, and provides digital document creation, online content management and print and distribution solutions.

Revenue is recognized upon transfer of control of promised services or products to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services or products. The Company’s services include software solutions and tech-enabled services whereas the Company’s products are comprised of print and distribution offerings. The Company’s arrangements with customers often include promises to transfer multiple services or products to a customer. Determining whether services and products are considered distinct performance obligations that should be accounted for separately requires significant judgment. Certain customer arrangements have multiple performance obligations as certain promises are both capable of being distinct and are distinct within the context of the contract. Other customer arrangements have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts, and therefore is not distinct. Revenue for the Company’s tech-enabled services, software solutions and print and distribution offerings is recognized either over time or at a point in time, as further disclosed in the Annual Report.

Disaggregation of Revenue

The following table disaggregates revenue between tech-enabled services, software solutions and print and distribution by reportable segment:

 

Three Months Ended September 30,

 

 

2023

 

 

2022

 

 

Tech-enabled Services

 

 

Software Solutions

 

 

Print and Distribution

 

 

Total

 

 

Tech-enabled Services

 

 

Software Solutions

 

 

Print and Distribution

 

 

Total

 

Capital Markets - Software Solutions

$

 

 

$

46.5

 

 

$

 

 

$

46.5

 

 

$

 

 

$

45.8

 

 

$

 

 

$

45.8

 

Capital Markets - Compliance and Communications Management

 

60.7

 

 

 

 

 

 

9.4

 

 

 

70.1

 

 

 

66.8

 

 

 

 

 

 

16.5

 

 

 

83.3

 

Investment Companies - Software Solutions

 

 

 

 

26.7

 

 

 

 

 

 

26.7

 

 

 

 

 

 

23.7

 

 

 

 

 

 

23.7

 

Investment Companies - Compliance and Communications Management

 

19.7

 

 

 

 

 

 

17.0

 

 

 

36.7

 

 

 

20.6

 

 

 

 

 

 

15.3

 

 

 

35.9

 

Total net sales

$

80.4

 

 

$

73.2

 

 

$

26.4

 

 

$

180.0

 

 

$

87.4

 

 

$

69.5

 

 

$

31.8

 

 

$

188.7

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

 

Tech-enabled Services

 

 

Software Solutions

 

 

Print and Distribution

 

 

Total

 

 

Tech-enabled Services

 

 

Software Solutions

 

 

Print and Distribution

 

 

Total

 

Capital Markets - Software Solutions

 

$

 

 

$

137.9

 

 

$

 

 

$

137.9

 

 

$

 

 

$

136.8

 

 

$

 

 

$

136.8

 

Capital Markets - Compliance and Communications Management

 

 

205.4

 

 

 

 

 

 

81.7

 

 

 

287.1

 

 

 

248.8

 

 

 

 

 

 

88.1

 

 

 

336.9

 

Investment Companies - Software Solutions

 

 

 

 

 

81.1

 

 

 

 

 

 

81.1

 

 

 

 

 

 

74.1

 

 

 

 

 

 

74.1

 

Investment Companies - Compliance and Communications Management

 

 

57.9

 

 

 

 

 

 

56.7

 

 

 

114.6

 

 

 

63.6

 

 

 

 

 

 

54.5

 

 

 

118.1

 

Total net sales

 

$

263.3

 

 

$

219.0

 

 

$

138.4

 

 

$

620.7

 

 

$

312.4

 

 

$

210.9

 

 

$

142.6

 

 

$

665.9

 

 

Unbilled Receivables and Contract Balances

 

The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in contract assets, unbilled receivables or contract liabilities. Contract assets represent revenue recognized for performance obligations completed before an unconditional right to payment exists and therefore invoicing has not yet occurred. The Company generally estimates contract assets based on the historical selling price adjusted for its current experience and expected resolution of the variable consideration of the completed performance obligation. When the Company's contracts contain variable consideration, the variable consideration is recognized only to the extent that it is probable that a significant revenue reversal will not occur in a future period. As a result, the estimated revenue and contract assets may be constrained until the uncertainty associated with the variable consideration is resolved, which generally occurs in less than one year. Determining whether there will be a significant revenue reversal in the future and the determination of the amount of the constraint requires significant judgment.

Contract assets were $19.9 million and $20.1 million at September 30, 2023 and December 31, 2022, respectively. Generally, the contract assets balance is impacted by the recognition of additional revenue, amounts invoiced to customers and changes in the level of constraint applied to variable consideration. Amounts recognized as revenue exceeded the estimates for performance obligations satisfied in previous periods by approximately $6.5 million and $15.5 million for the three months ended September 30, 2023 and 2022, respectively, and $20.2 million and $14.9 million for the nine months ended September 30, 2023 and 2022, respectively, primarily due to changes in the Company’s estimate of variable consideration and the application of the constraint.

Unbilled receivables are recorded when there is an unconditional right to payment and invoicing has not yet occurred. The Company estimates the value of unbilled receivables based on a combination of historical customer selling price and management’s assessment of realizable selling price. Unbilled receivables were $36.0 million and $33.2 million at September 30, 2023 and December 31, 2022, respectively. Unbilled receivables and contract assets are included in receivables, less allowances for expected losses on the Unaudited Condensed Consolidated Balance Sheets.

Most of the Company's contracts with significant remaining performance obligations have an initial expected duration of one year or less. As of September 30, 2023, the future estimated revenue related to unsatisfied or partially satisfied performance obligations under contracts with an original contractual term in excess of one year was approximately $140 million, of which approximately 48% is expected to be recognized as revenue over the succeeding twelve months, and the remainder recognized thereafter.

Contract liabilities consist of deferred revenue and progress billings, which are included in accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets. The Company recognized $6.3 million and $5.3 million of revenue during the three months ended September 30, 2023 and 2022, respectively, that was included in the deferred revenue balances at the beginning of the respective periods. The Company recognized $38.0 million and $31.4 million of revenue during the nine months ended September 30, 2023 and 2022, respectively, that was included in the deferred revenue balances at the beginning of the respective periods. Changes in contract liabilities were as follows:

 

 

September 30,

 

 

 

2023

 

 

2022

 

Balance, beginning of year

 

$

46.1

 

 

$

36.0

 

Deferral of revenue

 

 

121.3

 

 

 

119.2

 

Revenue recognized

 

 

(113.2

)

 

 

(103.9

)

Balance, end of period

 

$

54.2

 

 

$

51.3

 

v3.23.3
Goodwill and Other Intangible Assets
9 Months Ended
Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets, net

Note 3. Goodwill and Other Intangible Assets, net

GoodwillThe goodwill balances by reportable segment were as follows:

 

 

Gross book
value at
December 31,
2022

 

 

Accumulated
impairment
charges at
December 31,
2022

 

 

Net book
value at
December 31,
2022

 

 

Foreign
exchange and
other
adjustments

 

 

Net book
 value at
September 30,
2023

 

Capital Markets - Software Solutions

 

$

100.1

 

 

$

 

 

$

100.1

 

 

$

 

 

$

100.1

 

Capital Markets - Compliance and Communications Management

 

 

252.7

 

 

 

 

 

 

252.7

 

 

 

 

 

 

252.7

 

Investment Companies - Software Solutions

 

 

53.0

 

 

 

 

 

 

53.0

 

 

 

 

 

 

53.0

 

Investment Companies - Compliance and Communications Management

 

 

40.6

 

 

 

(40.6

)

 

 

 

 

 

 

 

 

 

Total

 

$

446.4

 

 

$

(40.6

)

 

$

405.8

 

 

$

 

 

$

405.8

 

Other Intangible Assets, netThe components of other intangible assets at September 30, 2023 and December 31, 2022 were as follows:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net Book
Value

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net Book
Value

 

Customer relationships

 

$

10.4

 

 

$

(4.8

)

 

$

5.6

 

 

$

10.4

 

 

$

(2.8

)

 

$

7.6

 

Trade name

 

 

1.0

 

 

 

(1.0

)

 

 

 

 

 

1.0

 

 

 

(0.8

)

 

 

0.2

 

Total other intangible assets

 

$

11.4

 

 

$

(5.8

)

 

$

5.6

 

 

$

11.4

 

 

$

(3.6

)

 

$

7.8

 

Prior to the second quarter of 2023, the customer relationships intangible asset was amortized over a useful life of 15 years. During the second quarter of 2023, the Company revised its estimate of the remaining useful life of its customer relationships intangible asset from eleven years to two years.

Amortization expense for other intangible assets was $1.0 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively, and $2.2 million and $0.7 million for the nine months ended September 30, 2023 and 2022, respectively. The weighted-average remaining useful life for the unamortized other intangible assets as of September 30, 2023 is approximately two years. The following table outlines the estimated annual amortization expense related to other intangible assets:

 

For the year ending December 31,

 

Amount

 

2023 (excluding the nine months ended September 30, 2023)

 

$

1.0

 

2024

 

 

3.7

 

2025

 

 

0.9

 

Total

 

$

5.6

 

v3.23.3
Leases
9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Leases

Note 4. Leases

The Company has operating leases for certain service centers, office space and equipment as well as finance leases primarily related to certain IT equipment. The Company made payments related to its operating and finance lease liabilities as follows:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Cash paid related to operating leases

 

$

4.4

 

 

$

5.6

 

 

$

13.3

 

 

$

16.3

 

Cash paid related to finance leases

 

$

0.5

 

 

$

0.5

 

 

$

1.7

 

 

$

1.4

 

The components of lease expense were as follows:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating lease expense:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease expense

 

$

3.0

 

 

$

4.4

 

 

$

10.2

 

 

$

13.2

 

Sublease income

 

 

(1.1

)

 

 

(1.2

)

 

 

(3.2

)

 

 

(3.3

)

Net operating lease expense

 

$

1.9

 

 

$

3.2

 

 

$

7.0

 

 

$

9.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease expense:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

$

0.5

 

 

$

0.5

 

 

$

1.7

 

 

$

1.4

 

Interest on lease liabilities

 

 

0.1

 

 

 

 

 

 

0.2

 

 

 

0.1

 

Total finance lease expense

 

$

0.6

 

 

$

0.5

 

 

$

1.9

 

 

$

1.5

 

The Company’s finance leases are presented on the Company’s Unaudited Condensed Consolidated Balance Sheets as follows:

 

 

 

September 30, 2023

 

 

December 31, 2022

 

Property, plant and equipment, net

 

$

7.6

 

 

$

7.1

 

 

 

 

 

 

 

 

Accrued liabilities

 

$

2.5

 

 

$

2.0

 

Other noncurrent liabilities

 

 

5.3

 

 

 

5.1

 

Total

 

$

7.8

 

 

$

7.1

 

 

Other information related to finance leases for the nine months ended September 30, 2023 and 2022 and as of September 30, 2023 and December 31, 2022 was as follows:

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Non-cash disclosure:

 

 

 

 

 

 

Increase in finance lease liabilities due to new right-of-use assets

 

$

2.5

 

 

$

0.9

 

 

 

September 30, 2023

 

 

December 31, 2022

 

Finance lease weighted averages:

 

 

 

 

 

Remaining lease term

3.2 years

 

 

3.4 years

 

Discount rate

 

3.5

%

 

 

2.5

%

v3.23.3
Restructuring, Impairment and Other Charges, net
9 Months Ended
Sep. 30, 2023
Restructuring and Related Activities [Abstract]  
Restructuring, Impairment and Other Charges, net

Note 5. Restructuring, Impairment and Other Charges, net

Restructuring, Impairment and Other Charges, net recognized in Results of Operations

The Company records restructuring charges associated with management-approved restructuring plans, which could include the elimination of job functions, closure or relocation of facilities, reorganization of operations, changes in management structure, workforce reductions or other actions. Restructuring charges may include ongoing and enhanced termination benefits related to employee separations, contract termination costs and other related costs associated with exit or disposal activities. Restructuring charges for employee terminations include management's estimate as to the timing and amount of severance and actual results could differ from estimates.

For the three months ended September 30, 2023 and 2022, the Company recorded the following restructuring, impairment and other charges, net by reportable segment:

 

 

Employee Terminations

 

 

Other Restructuring Charges

 

 

Impairment Charges

 

 

Other Charges

 

 

Total

 

Three Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Markets - Software Solutions

 

$

(0.5

)

 

$

 

 

$

 

 

$

 

 

$

(0.5

)

Capital Markets - Compliance and Communications Management

 

 

(0.2

)

 

 

0.1

 

 

 

0.1

 

 

 

0.1

 

 

 

0.1

 

Investment Companies - Software Solutions

 

 

(0.1

)

 

 

 

 

 

 

 

 

 

 

 

(0.1

)

Investment Companies - Compliance and Communications Management

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

0.1

 

Corporate

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

0.1