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

Got it. A big part of your turnaround and quite frankly, any [ information system's ] turnaround is kind of the new product pipeline, the innovation. And maybe -- just maybe one step behind, you need the technology firstly to enable that. So can you just talk to us about the technology transformation that has occurred? I think at the time of the IPO, you guys described it as probably 60% done. So where are we today? And what's the remaining components?

Sure. And so part of that big transformation, right, was, again, we talked a little bit about it, a really defined API strategy, right? We really went in and looked at our infrastructure and rationalized some legacy, I would say, terrestrial data centers and are now very cloud-based from that side of the equation; mostly, I would say, on the public cloud side and then a little bit still with Ensono and some of the providers from that side of the equation. So on that side, it really lays the foundation for acceleration in terms of just speed to development, the ability to have higher throughput because, again, when you have incremental data sets, it's really important to have the computing power and the ability to really handle those heavier loads. And so what I would say is we're definitely there from that side of the equation. As we continue to evolve on the tech side, I would say, it's really product focused, Manav. And so it's thinking about, okay, how do we integrate the solutions into more of a singular interface so our customers don't have to go into multiple places, right, to really accomplish what they're trying to accomplish in their day-to-day activities. We think about UI interfaces, UX interfaces. You think about workflow that sits behind it. That is certainly something that is really high priority because, again, that's something that is impactful, right, to the ultimate end user. I would also say that we continue to make incremental efforts on the data supply chain. So just how do you continue to get bigger, stronger, faster in terms of ingestion, in terms of matching in terms of just having that more real-time ability to reflect the ultimate state of an enterprise, whether that's updating profile information for a sales and marketing use case, intent information on a sales and marketing use case or whether that's a change in the financial profile or frankly, the ESG profile, right, of a supplier or a potential borrower from that side of the equation.

Got it. And maybe that's a good place to segue into kind of the new products, right? And so the first question is more -- if you look at the consumer credit bureaus, I mean, they talk about releasing 70 to 100 new products a year, and that drives that high single-digit growth that they deliver. Where are we in the D&B life cycle there? I mean I'm guessing it's early, but just some flavor of how many new products have you released and what's in the pipeline. Just any color there.

Yes. So I think number of new products is always an interesting one, right? We've talked about, for instance, the launching of products throughout the globe, right? And so I could tell you that we launched 16 versions of Finance Analytics, right, and so 16 new products rolled out in Bisnode. Is that 16 new products, right? Or is that 1 new product in 16 languages and 16 regions? So I'm always a little bit balanced in terms of saying like 70 new or 100 new or 10 new. But what I would say is that, to that point, what we had and what we've been able to do, I would say, that are a little bit in the not later innings but allowed us to accelerate a little bit on the international side was we could take existing domestic product, really internationalize it, and so that's some data elements or that's, frankly, local language capabilities, and roll those out into the markets. And so that's been really nice uptake from that perspective. In terms of, I would say, more kind of net new in North America but also global from that perspective, yes, it continues to bring things off of the conveyor belt. One of the pieces I would say that I'm pretty excited about and I think we're pretty excited about is in terms of ESG, right? It's a really natural extension of what we do on the commercial credit side and on the PAYDEX side. And so as you think and I think about it in my shop, right, bringing on a supplier. And so what do I want to know? I want to know their financial and their creditworthiness. That's really key. I want to know their regulatory compliance behaviors, right? I also want to know what their ESG profile is because, again, more and more, they're now part in a reflection of my core business. And so I need to make sure I can say, okay, how do they stack up from that perspective? And we're thinking about it, I would say, Manav, a little bit differently in terms of -- like the PAYDEX score is to a business or like a FICO score is to a consumer, it's consumer-specific, right? It's not how does Manav compare to Bryan, right? And then we kind of do a relative scoring from that perspective. This is taking, I would say, a set of variables that are very discrete and ranking how is Dun & Bradstreet stacked up on an individual basis, right? And so what's good about that is that I don't want to be compared to -- I don't want to use another public company name, but like a big industrial company that's had issues with like an oil spill or that's had issues with -- that's very different than Dun & Bradstreet or Equifax or TransUnion or Barclays, right? And so on that side of the equation, I think it's really interesting because we can take that snapshot and then we could also monitor it as it moves forward. That's another piece that you'll continue to see from us, is that continuous monitoring where you're doing a lot of the work in the underwriting upfront, but then it's how does that score continue to evolve over months, over years, over -- excuse me, over quarters, over years. And as that score shifts up and down, how do you treat them differently from a collections perspective, from how much reliance you put upon them in the supply chain, if you need to be looking for an alternative supplier because they are starting to step down in their environmental accountability. And so again, really, I use that as an example. I probably went a little bit longer on it. But I really think it's a big opportunity for us, and it's an exciting space, again, both domestically and internationally.

Got it. So you've publicly announced a few. You talked about ESG. There's like RevTech. You have the partnership with Plaid, a bunch of different things. Like realistically, how long does it -- they all sound like new, early stages. Like when will they start contributing to revenue growth?

Sure. And as you understand, it goes from inception to introduction, right, to growth and then maturity from that perspective. And so when we think about them, some of them can move a little bit faster, and we want to move a bit faster from that perspective. But we'll start to see -- I would say very little of that is flowing into 2021, right? A lot of the growth this year is generated off of better retention, right, better sales practices, GTM practices. We started to implement, right, some pricing in those multiyear contracts. And throughout the year as they hit through their first 12 months, it starts to step up from that side of the equation. And then a little bit of this where we had some products that are launched late last year and maybe early this year, that will have sales uptick, right, in the fourth quarter, but then that's what starts to build the base as it flows into 2022. And so what I would say is the things that are rolling out now, right, are more likely to get into the sales cycle, start to be sold this year. And then because of the subscription nature of the business, that kind of starts to stack on, and you'll see that flow through to 2022. And then as we roll more out in the later part of this year and into early '22, that will be back half of '22 into '23. So it's really about -- these products aren't built to say, "Hey, it's a one-shot kind of jump," right? They're really built to continue to stack on and take on more share within our current client base. But also, as you know, in the SMB spot, we've really gone in a different direction and in a different manner in terms of product pricing, packaging, data, right, and content for that side of the equation. And so part of that is -- again, a lot of these things are early stage, and it does take a little bit of time for them to build up. But we're seeing really, I would say, positive early momentum.

Got it. So when you take a look at kind of your full year guidance of 3% to 4% organic growth, can you just walk us through like is that the right base of where D&B is today? Or how much of it is easy comps from 2020? How much is moving pieces? Just help us flesh that out a bit.

Yes, sure. And so part of this is, as we get through really the back half of this year, we start to really get all of those kind of headwinds behind us. And that's why we talked about them, right, which was they were very, I would say, kind of boxed in, in nature. And so as they rolled off, they were quite finite. And so we kind of have worked through those, which is very helpful. So as we exit out of the back half of the year, that's what we're talking about, Manav, being really kind of the base recurring component that we're jumping off from into 2022.

Okay. And I guess in terms of the expectations, right, because I'm not sure you've noticed the stock price, but just what are people missing? I guess in your conversations like is -- should 3% to 4% have been a faster number? Or is that a little unreasonable this early in the game?

Yes. I mean if you look at where we are in the journey and frankly, how we've talked about it, right, through the process and what we saw internally, it was something that was going to evolve, right, over a time period. And so we talked about it, where we would be in the short term, where we'd be in the medium term and then where we thought we could get to in the longer term. And so it's playing out very much as we had expected. And so there aren't a whole lot of big kind of tailwinds, right? It's not a business where interest rates drop down and all of a sudden, we're going to get a mortgage tailwind, right, or people have to do employment checks and things like that. So this is a very defensive growth company in terms of very subscription, very recurring. Now it's starting to show its pricing power and really has the ability to expand, right, wallet share and frankly, into different markets with the assets that we have and the assets that we're building upon. So what I would say is that if you look at it and there was like how are we performing to kind of what we committed to and what the journey was going to be, I think it's very much in line from that perspective. And so are we clearly -- we think that the stock price isn't where it should be, right? But in the end, as we're executing and we're growing and we're accelerating from something that was, I would say -- well, you know this company very well, Manav. It was flat for a very long time. Starting to show growth and starting to show growth in a sustainable manner, that's what's really important to us, right? It's -- as we continue to progress into Q3, into Q4 and into Q1 of next year and so on and so forth, showing that revenue growth because the EBITDA margins, right, and the ability to show strong contribution margins and ultimately, the cash flow generation is very much that business. And so again, if anybody is missing those components, then -- they basically listen to you. And they should definitely feel free to reach out, and we can run through it because I think we're right where we expected to be. And frankly, we're excited about where we're going.

Got it. Fair enough. So maybe let's just talk about margins in the last 5 minutes here we have left. Obviously, as you said, in that transformational foundation period, you guys did a great job and got the margins right back up. Just talk about this year's margin guidance and what some of the moving pieces are. I think it sounded like people were a little disappointed with where it is, but perhaps a lot of that is Bisnode. But just what's going on there?

Yes. So Bisnode, as we bought that, right, and I think you -- we've talked about, post synergies, Bisnode is something like 7 or 8x, right? And so it's a really attractive acquisition. But part of what it had was its margins were sub where even our international business was from that perspective. And so that's what provided clearly the opportunity for roughly $40 million of synergies that would come out of specifically the Bisnode asset. A lot of that work is being done this year. There is some work to, as always, shore up, write some assets within there, whether it's cybersecurity, whether that's some legacy platform retirements, solution consolidation and sundowning, et cetera. And so most of that actual savings will flow through into the 2022 results, where very little of it is kind of hitting the P&L, I would say, in '21. In the core business, we talked about, as we grow, 50 to 100 bps of margin expansion, and we're right kind of squarely in the middle from that side of the equation. So we're continuing to expand margins, right, from that side of the equation. This year was kind of book ended where the first quarter and the fourth quarter were above our EBITDA growth ranges and then the second and third were a little bit below. And that had to do with the timing of some data acquisitions, some marketing expenses and things like that. And so it's never a perfect quarter after quarter after quarter after quarter. But when you look at it from an overall year perspective, we're very much pleased with the ability to continue to expand margins in that range without any specific, I would say, synergies flowing through.

Got it. And then just last question. I know historically, the fourth quarter was always the most critical quarter for D&B, and I know you've tried to kind of smooth that out a bit. But just -- maybe just some thoughts on how important that still remains or how we should think about that.

It still has a little bit, Manav, of seasonality from that perspective, not nearly what it was when I came in here. If I ever showed you a video of what -- December 31 sales, there's like paper flying all over the place. It looked like a movie. That's actually been a lot more contained and a lot more disciplined. Part of that is the multiyear contracts, right? And so that takes a lot of the relief off of some of those larger-scale deals that get pushed up to the end of the year. What you do have though is that, in that same vein, for instance, on the sales and marketing side, this is the time that, because our products have commitments, right, from a minimum perspective, some of those commitments as they're working throughout the year, the usage ends up a little bit higher in the fourth quarter. And it's a "use it or lose it" type of philosophy within a given year. And so as they start to think about, for instance, pipelining for next year and starting to send out their marketing materials, sales materials, that generally happens in the fourth quarter as they're coming out of their budgeting cycles. And so it's constricted, right? I mean you're seeing the ramp from that perspective. But that ramp is happening less of kind of Q4 sales or like Q4 onetime revenue like it used to be. And now it's starting to creep up because of the fact that we've sold things earlier in the year and now they're starting to waterfall in, right? Prices are starting to waterfall in -- new products are starting waterfall in increased sales. So when you sell something, for instance, in September, right, you're getting October, November, December. And then next year, you're getting, obviously, January, February, March, right? So that's really the cadence, and that's really the build that we've seen throughout the year. And so it still again has a little bit of usage -- a little bit of higher magnitude right in the fourth quarter. But definitely, it's vastly improved from where we started 2 years ago.

Got it. All right, Bryan. Look, we're just about out of time. So thank you so much for being here. Appreciate the comments. And thank everyone for joining as well.

Yes, Manav. It's a pleasure. Thanks so much, and look forward to the rest of the day.

Perfect.