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

Thanks for joining. I'm Ashish Sabadra. I cover business and info services companies at RBC. I'm excited to host Bryan, CFO of D&B. Bryan, thanks for joining.

Yes, Ashish. Thanks so much. Always my pleasure to join here each and every year, and so I look forward to the conversation.

Thank you. Thanks. I want to start off with the recent quarter. We saw a pretty material acceleration in growth, went to mid-single digit, 5% revenue growth, which is more in line with your mid- to long-term targets of 5% to 7%. Can you just talk about or discuss what drove that pretty material improvement in growth profile?

Yes. It's something, Ashish, that if you look at -- we've continued over almost 4 years now, if you can believe it, really transforming the business. And what we've always talked about is creating sustainable mid-single-digit growth and then obviously stepping it up into that 5% to 7% range. So a couple of things happened. One, it was the first quarter where some of the headwinds that we had inherited prior to taking over the business were finally fully out of the system, right? And so while we had said, hey, we're doing X if you back out Y. This time, there was no Y to back out, and you saw it really shine through from that perspective. So North America F&R was probably one that went from how to go from 1% to -- but that was one of the big pieces because one of the contracts was a government contract that sat within that. And so it coming out really exposed to what we had said, which was as of last kind of Q4, 90% of the revenues were already growing in that kind of 5% to 6% range. Now you've kind of weaned that last portion of that 10% down to something in the single-digit range, and the rest of the business is continuing to flow through. So nice momentum in third-party risk and supply chain risk management, strong durable growth in Master Data Management. International continues to progress very well. And so when you start looking in that holistic, I think, we feel really good about the fact that despite what appears to be a pretty difficult macro backdrop, our transformation and our acceleration has continued to progress on.

That's great. Before we talk about those growth drivers, I just wanted to talk about just quickly the turnaround. As you said, some of those businesses that were struggling a bit are now a much smaller piece of the business. So I just want to get that out. I was just wondering if you could talk about the turnaround and the Credibility, who were some of those -- and DataVision and some of the other legacy products.

Sure. And so when you look at it, look, we're always going to have a portfolio, right? And there's always going to be some that are smaller, that are declining. And that's what we've kind of wind it down to, right, is Credibility was the last one that kind of had inherited that FTC consent order and investigation. It got solved. Clearly, the renewals, auto renewals were challenged from that side. But we're now a little over a year from that perspective. We'll kind of lap it as we get through the end of this year. And then you start to see, I think, a little bit more normalization as we head forward from that perspective. Hoovers, right, was a bigger chunk of business. We spent some investment and put some weight behind that and turned it from what was a, I would say, a 4-year kind of decliner into something now that is breakeven to starting to grow a little bit, right, which in and of itself is great as we continue to build momentum there. And certainly, as the environment continues to improve, there's a nice upside potential in that product set. The other, DataVision and Visitor Intelligence, some of these little ones, they're $1 million here, $2 million there. So not big, but certainly, it's like, can you take the functionality that they have, invest it into an incremental enhancement into D&B Connect or into Hoovers and then kind of wind down that other platform and move on. We're always just very cognizant of kind of turning something off or selling something because the incremental EBITDA impact could be material from that perspective. And so I think, again, where we're at, we've kind of wound things down to a pretty manageable set. And now through our planning processes, through our kind of project -- product life cycle management, we'll deal with those as they come up. But it's really about focusing on the core areas of growth in MDM, in third-party supply chain risk management and really expanding from that perspective.

That's great. And that's a great segue into my next question around I was going to drill down further on the supply chain risk management that has had several quarters or rather several years of really strong growth, strong momentum. How do you think about the addressable market there? What's driving that momentum? Is that opportunity to -- how do you think about opportunity of not only selling into your existing customer base but also that being like a leader to further expand your addressable market?

Yes. I think it's been great. I mean if I go back to what it originally came out of, it was one of our largest, and it's the largest trade credit extender on the planet, right? And so if you Google that, you'll figure out who it is, an extremely large retailer that looks like Walmart. And so Walmart was a great example of has that big, complex vendor and supply chain organization. And so being able to extend what we were doing for them in the finance department into their vendor and supplier was a natural progression, right, and another leveraging of our core data cloud. And so obviously, as we continue to mature the product, industrialize that, it's something that really works in that we call it KYTP, know your third party. And so from that perspective, what started with the finance, went to reg and compliance is now extending into sustainability and social, right, backs up even on to the fraud side. And so while B2C fraud is always kind of the easiest and most lucrative and quickest to turn around, B2B fraud is something that's picking up more and more. And so protecting yourself in that environment and that third party is really critical. As we've expanded that in North America with our great $500 million businesses that are in the data cloud, those are the ones that are really fed into the automation process of not only underwriting but monitoring from that perspective. As we extend this into Europe, that's something that is really exciting. I was in Stockholm. I was just in Frankfurt and London as we talked about. And traditionally, we had sold our finance solutions. We've sold some sales and marketing products, but we hadn't gone very deep onto the supply chain risk management side. When I think about a country like Sweden, very industrial, very mechanistic from that side. And when you think about the impact of suppliers and supply chain and vendor management, it's big. And so I think there's going to be a great opportunity for us to continue that momentum and garner what I feel like is a growing TAM over the next 3, 4, 5, 10 years.

That's great. That's fantastic. Moving on to the next growth area, MDM, Master Data Management, that has consistently grown mid-single-digit plus. How do you think about the growth drivers there and your ability to -- how much room opportunity there is to further cross-sell that into your existing customer base, but also if you can talk about the new logos and pipeline there.

Yes. So again, really kind of a mission-critical, very sticky product from that perspective, so one that obviously takes a nice price on a year-over-year basis is in a lot of the multiyear contracts from that side. And then it creates this kind of exoskeleton for us to hang more and more alternative datasets off of, right? And so it's really critical as we embed it in our strategic customers. We've also kind of taken it into the Connect land, where midsized customers didn't need a PhD or a degree in engineering to actually operate the whole data mapping parent-child relationship. And so you had to remove a little bit of the bells and whistles and get it to be slightly less sophisticated but more approachable from that side from that mid-layer. The small end, it's probably never going to go down that far, right? But if I go back up into that strategic, it's really creating 2 things. One, that base master client record, golden thread master vendor record, which then can appropriate out to software platforms and into processes around our organization. The other thing, and I'm not going to jump forward into the gen AI conversation, which is an inevitability. It is a core of how you're going to run AI analytics, gen AI is having clean, responsibly sourced data upfront that then is repeatable and can propagate from that perspective. So it's very exciting. It's very interesting. I think if you saw, we just did a partnership with Databricks, right, where they're going to DUNSify the marketplace. And so all of that kind of pre-DUNSification just makes it that much more seamless, that much more frictionless to move these data elements into their lakehouses and again, drive powerful, connected, consistent analytics that are going to help their organizations be more efficient, more effective than they were in the past.

That's great. Just within sales and marketing, you also have an online marketing business, which has been growing at a double-digit pace. There were 2 acquisitions there, Eyeota and NetWise. I was just wondering if you can talk about that offering. How are those acquisitions come along?

Yes, they've been great. And so when I look at where -- we had a business called Audience Solutions upfront. Before -- I think before we got to Dun & Bradstreet, you kind of had to secretly try to innovate like in some back-office way where nobody saw your -- but it was cool because a small team in New York had start to build this Audience Solutions, which sounds like what it is, which was taking our offline data and starting to build some B2B audiences online that ended up propagating into firms like large telecoms, et cetera, because while traditional online advertising was done via B2C products, right, so you talked about like Nike shoes, Alexa heard it, and all of a sudden, it's starting to propagate Air Jordans on your website. Now you're starting to think about from a nonspecific to the person, but specific to the role and their kind of business profile and think about me. If I'm on the Wall Street Journal, you can sell a $5 ad in McDonald's and Burger King, whoever fighting in the background or you have Oracle, Workday, SAP fighting in the background to present a treasury workstation application to someone who looks like the CFO of a multibillion-dollar corporation, right? And so it's seen that evolution from that perspective. And that's where NetWise helped continue to build out our identity graph from that perspective. And then Eyeota is a nice ecosystem for kind of the distribution and organization that feeds into the demand and supply side platforms. And so there's kind of 6 steps as you think through the last being, obviously, the publisher from that perspective. But for us to play in that first region made a lot of sense. Demand side, supply side platforms, maybe not so much, but definitely continuing to drive the data off-line as well as it is online is the strategy from that perspective.

That's great. Shifting gears a bit, just moving on to international. You've seen some pretty strong momentum in international. International continues to grow much faster than the company average. And I was just wondering if you could talk about what's going on with UKI, which has been growing really well, Worldwide Network, but also the turnaround at Bisnode.

Yes. I think it's across the board, right? And so the good thing is, I think we're starting to narrow the gap in terms of the overall growth rate with the international side by North America continuing to progress and pick up. We had a bit of an advantage in terms of the growth percentage right on the gates because traditionally, international felt like to me where we were collecting the data, which was really key and important for our multinational customers. But we weren't driving localized product into those regions. By driving localized products in those regions, meaning we even took Hoovers, right? And that wasn't available in Germany, Austria, Switzerland in local language with the [ local data ] elements to make it relevant from that perspective. In doing so, in part why you see the vitality index as high as it is, is because we could do that relatively quickly, get it to market. And the uptake has been really nice from that perspective. Bisnode was a great example where they were already selling some of our D&B products, and we saw them growing faster than a lot of their legacy. But again, I don't know if we've gotten this for punishment, but going through that transition, right, of migrating products from one to the other. And it takes a discipline, and it takes experience. Neeraj has done this. We've done it many times. And so that migration has been great. They moved off of disparate legacy credit systems onto FA, right? They've moved -- starting to move off of disparate sales and marketing platforms on the Hoovers or D&B Connect, and that uplift you get from better product, also better pricing and mechanism from that side has really allowed us to continue to drive growth in those regions. So yes, I think we're very pleased with where the Bisnode transaction has and transformation has been. You remember, it was minus 2% I think organically, now 3%, 4%. A lot of potential, as I said, in the regions for Risk Analytics and [indiscernible] to go in there. And also at the same time, margins that were 12%, 13% and now in the 30-ish percent range. So very pleased with how things are going.

No, it definitely has been a great turnaround story. Can you also talk about Worldwide Network, how big that is? And what's the strategy for Worldwide Network going forward?

Yes. So on the Worldwide Network, we kind of broke it out in that international pie chart. So it's a chunk certainly of the international revenue, I think, around 15%, 20%, if I'm remembering correctly. But in essence, it's going well. We've renegotiated a lot of those agreements. There's some kind of core minimums that go through and then upside through product royalties when they're distributing our solutions throughout their regions. But it was something that, again, took some time and effort to make sure that the balance of who was really kind of driving the relationship. And certainly, that's evolved over the last 4 years. And look, there are circumstances where Bisnode was a great example, who is a Worldwide Network partner. And the valuation and the regions that we're in made sense for us to acquire it from that perspective. And so we're always kind of monitoring how those things evolve from that side. But I think right now, we're pleased with the step-ups in data quality, the step-ups in the relationship. The ability to drive our solutions through those regions has been very helpful.

That's great. A question that we're asking all the companies in the conference is just about the macro and what do you see from a macro perspective. And this is -- could be the demand environment across -- just because you have such a breadth of customers across all regions. I was wondering if you could comment on that front.

Yes. And before I go to the macro, actually, it triggered a thought, too, on the international side, Worldwide Network. I mean we own our data throughout the world, right, versus we're not a consolidator of data. And I think this is going to be an interesting point as things continue to evolve from, for instance, a gen AI perspective. Because as an owner of the data, we have control over where the data goes, how it goes, do we want to commercialize it, not commercialize it. As a consolidator, I think what's interesting is how do you deal with all of these kind of disparate contracts, disparate entities who actually own the data, and then ultimately, as it's feeding through into an application, where does that go? So we feel like the proprietary nature of the data, the ownership of the data, these are really important concepts as we're pushing forward from that perspective. On the macro, look, I think that we were pretty consistent from when we spoke in February, right, and guided that. We have these 2 competing forces, which is a pretty tough macro backdrop with our overall transformation. In that, I think we've achieved very strong results year-to-date and with the ability to raise kind of the midpoint of our guide up as we're heading into the end of the year. We're all good things from that perspective. We don't have the big cyclical drivers, mortgage rates go up or consumer spending goes down or bond issuance moves from that side that would change kind of volume levels from that perspective. Really, as I think about macro, it's more around kind of that second derivative effect, which is what are businesses' budgets, how are they thinking about the amount of approvals that it goes through within an organization. But the nice part that we're in is that as a data and analytics provider, we're always looking at use cases to drive efficiencies, right? We're always looking at if we're the backbone and that kind of exoskeleton, can we take other complementary datasets and convert them into ours, save our customer money. I mean it may eliminate another vendor out there, but that's kind of how things go in these environments. So overall, anybody who says they're completely unaffected, I think that's a little silly. But in the grand scheme of things, we're a business that is never going to get massive upswings, right, from tailwinds in the macro. But on the downside, it's the benefit of being a defensive growth asset with, I think, a lot more growth potential in front of us.