Dun & Bradstreet Holdings, Inc. (DNB) Earnings Call Transcript & Summary

Thanks, everyone, for attending. Good afternoon, everyone. I'm Ashish Sabadra, senior analyst at DB, covering business and information services company. I'm excited to host Anthony Jabbour, CEO of D&B; and Bryan Hipsher, CFO. So D&B went through a significant transformation as a private company on multiple different fronts, including organization, go-to-market strategy, technology, data and analytics. So we want to kick off the conversation with the discussion of the strategic changes.

So Anthony, maybe if we can start off with the go-to-market strategy. So D&B obviously has changed the sales approach and sales incentive in order to focus on multiyear contracts. Can you just talk about how that's helping drive more cross-sell opportunities? Or what other advantages have you seen?

Sure. Sure, Ashish, and thank you for having us. We're excited to be here. And really, in terms of looking at the transformation, like you said, there are many things that we did. And focusing on sales, there was a real significant change that we made there, and we can talk more about it later. Specifically, on the focus on multiyear contracts, we really thought it was important for a few reasons. One, in terms of naturally increasing price like having annual pricing escalators, it's a frictionless way of increasing price each year versus always having the conversation specifically about price. So it's a more, I'll say, subtle way of increasing price. And we've done that, like I said, in other companies that I've been in, and it's been very effective. But the other is, when you look at what we had before, the majority -- and our multiyear contracts right now, I know during the road show, we're in the mid-20% of our revenue. And right now, it's about 30% of our revenue is under multiyear contracts. So just to give you that perspective. When we look at it from an overall-relationship perspective, when most of the contracts are 1 year in duration, you no longer finish renewing 1 contract and a couple of months go by and it seems like you're starting the whole discussions to renew that whole contract all over again and just to go laterally, just to have the same amount of revenue that you just had before. And there's this constant negotiation always going on. Whereas when you have a multiyear contract, it gives you the ability to cross-sell more because, in the example of a client with a 1-year contract, they're forever posturing. It's just -- it's what they do. Whereas when you're together for 3 to 5 years, like, Ashish, we're going to be partners for 3 to 5 years, we have a whole bunch of other ways that we can help you grow revenue, expand margins, stay compliant. It's more natural to have those conversations. And so what we expect is by increasing the number of multiyear contracts we have, we'll see pricing go up because of that, and we'll also see cross-sell go up because of that.

That's very helpful. So yes, both pricing as well as cross-sell will benefit there. And we'll revisit some of the revenue drivers again. But just wanted to follow up on the sales organization. Have you made any changes? Any other changes to the sales organization? And any plans for hiring of more salespeople?

Well, we continue -- we made the -- what I'd say for sales but also for the majority of the company is that we concentrated all of our change. So we got in. We were very deliberate to do it at -- all at one time, to have that effect versus it drip on forever. And so the majority of the major transformations are done. But we're a company in this new world. To be successful, you're constantly changing, tweaking, adjusting, never staying still. And so in our sales organization, we are doing that. So we're continually changing our expectations of our sales organization. We'll adjust org structures in terms of achieving some additional sales focus areas, for example, that we might go after. If we think an org change would help, we'll tweak the org. So there's a constant, I'd say, evolution of the business. And as the needs change, changing sales with it. And probably, the -- and they're all changes that we anticipated making even before closing, right? So we came in with a phase 1, phase 2 and phase 3. And so we'll continue to do that. And my expectation is we absolutely will continue to hire more salespeople. We've got some good metrics in place, good dashboards in terms of tracking the results in what we're doing. And so the beauty of that is when you can track it and measure it, then you could also hire additionally because you see that it's all additive. So whereas before, we're kind of blind, I'd say, and you didn't know what changes we're affecting. Right now, we've got a lot more clarity on our dashboards so we can bring more on with and hold them more accountable to the results, increased sales results.

Yes. That's very helpful because I think it's just the good metrics or good dashboards that you have compared to the old, I guess, the prior D&B. And one question on the SME front. Can you just talk about the opportunity on the SME front, the products that you have, the sales strategy to attract that particular vast customer base?

Yes. We serve approximately 80,000 SMB clients out of the millions that exist, so we think that there's an opportunity there. And we have many, many SMBs coming to our websites and digital assets daily, looking for the credit signal, right? What's it look like? They need to get a D-U-N-S Number because they're starting up their new business or working with someone that insists they have a D-U-N-S Number. Or they're a supplier for a large organization that needs to be vetted through us. Or they want a loan or to get more credit, and they need to improve their credit. So there have been a lot of reasons why this SMB market has come to us. And historically, we've done nothing with it. And right now, we're rolling out a marketplace, which is an integrated web platform that provide these businesses with an introduction to all the services that we can offer them. And really, our expectations is we're going to get a flow here of SMB traffic. And I've had many conversations with CEOs of our other larger clients who are all trying to get to the same market as well. So I think that there could be an opportunity for us to have, on this integrated web platform, ways for other partners to maybe advertise or show the capability that they could offer other small business. And I think we can drive some revenue streams from that. But the thing I'm really excited about is we're not going to go after the SMB marketplace just with inside sales resources. We're going to do it that way, but also with this digital marketplace and be able to go faster and better than we had before.

That's great. That's great. And that definitely sounds like a really big opportunity, which was not addressed by the prior D&B management.

That's right.

Just maybe shifting to technology. Shifting to technology, the company has reduced a number of data centers and moved to this hybrid-cloud, multi-cloud approach. Can you just talk about your cloud strategy, where you are? And how should we think about the benefits from that growth strategy?

Sure. The world is moving to cloud, and there's a great promise there. And what I'd say is there -- there's also specific negotiating that you need to do with cloud providers and structure things so that where you get the benefits in the short term, you also don't lock yourself into the long term. And we've got very seasoned executives who have done this many times over. And so we're also going into it, not just as a me too, but as a strategic entrée into the cloud. And we're driving significant savings from consolidating our data centers, from moving to the cloud. And we're seeing significant returns in terms of platform stability, lower latency and obviously you see it on the cost-savings side as well. So from that perspective, you then look and say, "Are we going to move everything to 1 cloud provider?" And we really have a hybrid, multi-cloud approach and some private cloud, some public cloud. And about 70% of our infrastructure is run on, say, cloud technology. And it's an important area for us in terms of being able to put the right solutions in the right environment so that we can burst through data and find ways to really get the true value out of it versus more traditional compute-processing arrangements.

Yes. No, that's so true. And I think even with the cloud strategy, and then it also helps -- help you better, I guess. How does it help you on the data side? On the last earnings call, you called out [ Project Ascent ]. So I do want to focus on the [ Project Ascent ] first. Can you just talk about that [ Project Ascent ]? And how should we think about the benefit from that particular project?

Yes. They go hand in hand. Our move to the cloud, our move to improving our infrastructure and creating capabilities such as [ Project Ascent ] is really the -- the purpose of all of this is, and I hate saying it in a negative way, but it's so you can fail fast and you could fail cheaply and you can keep innovating and -- until you find a great solution. So if you look at the next wave of data, it's really alternative data. So we all have the traditional means. But there's new forms of alternative data, where if it's foot traffic, shipping traffic or digital signals like buyers' intent to purchase, there's all these sorts of alternative data sources, which we think could be very valuable for our clients. And so this really puts us in a position to bring on hundreds of data sources over the coming years and really be a lot more efficient in how we do it. So that's what we're really excited about. We're fortunate that we've got a great client base that can come to us with ideas, work with us, partner with us. We can lean on them in the example of an alternative data source. So we've got some clients come to -- approach us, asking us if we would do that for them because they're existing clients. And it's a lot easier if we go out and procure this alternative data from a vendor-risk perspective. They only deal with 1 provider. The fact that we have a D-U-N-S Number, we can simplify it and bring it all into them in a neat package is a huge advantage as well. So we've got these advantages that we're really just focused on executing against from a technology perspective, from a customer perspective, to maximize all these advantages as much as possible.

So that's -- again, that's great. So not only have you improved the breadth, depth and quality of the data but the alternative data will significantly expand the historical database. How do you think about monetizing that improved data set? Is it through pricing? Or is it more upsell, cross-sell opportunity or ability to sell into new customer base? Any color on that front?

Yes. It's a great question, Ashish, because I think it's going to manifest itself in each one of those examples. I think we can sell net new data and drive net new revenues. I think in some cases, we can improve the relationship that we have and lead our customers into this new area and therefore, improve the trust between us and therefore, improve the cross-sell ratio that we have. Or simply, it'd be a good reason for us to increase the price, and our clients understand why we're doing that. So I think there's a lot of ways that we can drive value out of doing this. And that's really what we've got in mind. The results we're seeing right now very much have the customer at the center of our strategy in ways that we can help them. And we're confident that, as we help them, it will help our overall financial performance, like it has many times before.

Yes, that's good. That's really helpful. And then maybe just focusing on the international data sources. We'll go into the international business later. But just on the data source front, the company had the WWN alliances, Worldwide Network alliances. How do you think about opportunity to further expand that or even collect the data in those local markets?

Well, international is an area where we are applying a lot more focus than had been applied in the past. We hired a seasoned executive, Neeraj Sahai, looking at these opportunities and how we can reshape the business and the go-to-market. And we had all the CEOs of the Worldwide Network partners in town just before the pandemic struck. So we had a recent meeting with them. And we went through all the ways that we can help each other grow together, in terms of the data quality improvements or the go-to-market improvements, partnership improvements, et cetera. And there are a number of them. And so as we look at all of them, all partners aren't operating at the same level. There are some that are operating great. They've got great quality, great go-to-market expertise, and they're great partners. And there's others who maybe aren't as strong. And so as we look at that whole market, there's an opportunity in terms of renewing the existing ones with, I'll say, more favorable terms that align to our growth strategy and other ones that are maybe more around acquisition of some or partnering with others. But really, what we're trying to do is increase the growth rate that we've had historically in the international market. We think there's a great opportunity there. And so like anything, you'll rarely hear me paint with a broad brush and say we're going to do it one way everywhere, treat all customers the same way. It's more understanding the uniqueness of it and making sure we're focused on what the real priority is.

That's great. And we will revisit the acquisition later and talk about the capital allocation later. But I do want to focus more on the international front. Particularly, can you talk about like localization of country-specific D&B offering or even taking the diffusion of IP, right? You have a lot of good products in the U.S. market. Which of those products are available in your international market? And how big is that opportunity as you move these products globally?

Well, we think that's a really big opportunity. And if you want to be in the international market, you've got to be in the international market, and you've got to bring your product into that market. And so I know we had talked previously in the past about having an English version of our software in China versus a Chinese version of it, and just some obvious changes. I know it's easy to just take the exact product and ship it. But localizing it by market obviously has more impact in terms of what we could expect from a revenue-growth perspective, and we've been very focused on it. Like I think I said in the past, I think we've launched more in the international market in this past year than probably done in 3 to 5 years previously. So we've had great success with launching D&B Credit; D&B Hoovers; we're rolling out key offerings like Direct+, which is our API solution; our Optimizer; or D&B Onboard, from a compliance perspective. So really, our approach here is, if we want to be in these markets -- we're seeing a great opportunity if we can prioritize that and bring them to market. And so like I said, by having an executive overseeing the international market, it's not losing focus within the company. And I'm really pleased with the progress that we're making on internationalizing our products to take advantage of that.

That's great. And then as we think about on the international front, can you just talk about your strategy for U.K., Ireland versus India and China? Obviously, very different in where the economies are and the growth profiles in those businesses, if you can just throw some more color on that front. And then how should we think about international growth over the longer term?

Sure. I'll have Bryan take the second part of that question on the growth, long term, just to stay consistent with what we're communicating. But I'd say, in the UKI versus the Asian marketplace, obviously UKI's -- it has more product. It had more product. The language issue is obviously not a concern, and it's been -- and it's a wholly owned market that we have versus having a joint-venture partner in Greater China. But what I'd say is -- and Asia. But what I'd say is the focus for us in the non-UKI international markets is bringing more product to bear. And in fact, actually, as I say that, we've increased the number of products that we've had in the UKI as well. So Lattice, for example, which we acquired not this past July, the July before, we had that in market at the end of last year in UKI, which, again, looking historically, it would have taken much, much longer for a new product to be localized, but it really is a priority. But more so, in Asia, there has been a lot more focus because there's a lot more product that wasn't localized that we can localize. And so we've made some significant changes as well with the general manager running the business and the leadership team. So we feel very good about how we're positioned in those markets right now. But Bryan, if you want to add anything in terms of the long-term growth that we're communicating?

Yes, sure. And Ashish, if you think about it, as Anthony said, the UKI is a little bit more mature from that perspective, specifically on the finance and risk side. And really, that's where we see international overall is it's -- we see the total split of North America versus international, 80-20. You see a similar split, actually, between finance and risk, and sales and marketing within those segments. And so where we have the opportunity, right, to really take advantage of growing enterprises that are not just surging domestically but internationally, we would expect the sales and marketing on a percentage basis to outpace finance and risk from that perspective. When we think about international then, overall, compared to North America, we would expect that to grow faster than North America, again, just because of its light penetration. And frankly, as Anthony said, it was not just an undermanaged asset, but it was really a very distant second thought from that perspective.

That's great. That's very helpful color, Bryan. And so maybe just a segue from the discussion, like, as Anthony mentioned, the Lattice product and the newly launched Analytics Studio, can you just talk about the adoption trend for Analytics Studio, what you've seen in the U.S. North American market? And then just opportunities for monetizing the analytics product, how do you charge for it? Is there incremental revenue opportunity by charging more for the product? Or does it also drive greater adoption of the data, thoughts on the analytics?