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

Yes. If you split it, sales acceleration, which was really Hoovers is another, call it, like $100-ish million from that perspective. And again, business went through, frankly, it needed UI refresh, needed data enhancement. And that's where, I would say, had always great, deep marketing research capabilities, great from a business perspective and account-based perspective. But the contact side was a place that we needed to catch up, right? And so we've done that, and you see the business kind of turn from what was, frankly, before we got kind of a perennial mid-single-digit decline into now a low single-digit grower. And there's pockets of differentiation, for instance, where we're introducing as a new solution throughout some of the European regions, it's growing double digits, right? So good balance from that side. Digital Marketing, we talked about already in that kind of $120 million, $130 million range, right, which is the other big chunk, I would say, of the Sales & Marketing business. And again, that has to do with like audience targeting, online B2B audiences. And so if you go from the perspective of a lot of consumer advertising occurs at the [indiscernible] level in terms of like Basware, both like English Premier League, right? And so then it's thinking about presenting us with an ad for a new kit or a new pair of shoes, right? From our perspective, we're looking at it in terms of the twist from -- this looks like the CFO of a multibillion dollar corporation. And therefore, when he's on the Wall Street Journal in the background, the Microsoft, the SAPs, the Workdays, the Oracles are competing to present a treasury workstation at, right, which is higher dollar, higher value, right? But you need a much more focused in understanding of who that individual is more from a business lens than you are from a consumer lens. And then the last, there's kind of, again, some smaller products that were just kind of legacy components, especially in Europe. These are maybe $30 million, $40 million, right, that tend to get migrated ultimately up into where we are with the core products that we already laid out.

Got it. And so just maybe going backwards. The Digital Marketing, you already kind of addressed in there, it seems like just a broader competitive marketplace. But on the Hoovers, the acceleration side, you talked about catching up on the contact database. So what number are you at there? Like how do you compare that now versus before?

Yes. I mean when we got here, I think we had roughly like -- and will differentiate because the contact database now is over like, I think, 200 million or 300 million, right? But that also includes what I would say are like the non-key decision makers within an organization. If we go to the key decision makers, it's grown from, I think it was like 7 million when we got there. And frankly, there were probably 3 million that had any type of relevance. Now it grew to like 30 million -- I think we're somewhere in the 40 million to 50 million range at this point.

And is that the area basically where you see ZoomInfo as your competitors? Just to clarify some confusion, if it's the entire Sales & Marketing business? Is it just this? Is it more than this?

It's really -- this is the area where a company like Zoominfo where we come across. When you think about the rest of it, the MDM, these are enterprise very deep, very ingrained relationships on that side. We don't come across, frankly, a whole lot of people at that level and definitely not more of the contact play in the sales kind of platform play from that side. That's really that, call it, 90 million to 100 million that's Hoovers.

Got it. And I think just in comparing Hoovers versus the competition there, like, I think, like you said, when you first came in, it was not in a good shape, right? And that allowed the competition to probably leap ahead a little bit. But what you -- you said it's growing low single digits now. Is that the expected growth rate? Or do you think you can play catch up versus competition?

Yes, I think over time -- look, I think -- and we're speaking right from my hand gestures, it probably won't be overly helpful. But like some of the things you've seen rapid growth and then you've also seen rapid deceleration, right? I think for us, we've really seen this kind of consistent growth in execution from that side, building upon the organic growth really each and every year since we've been here. So I think on Hoovers, there's some things that we're doing there, for instance, on the AI side. And so we're embedding an assistant within Hoovers to allow it to more, I would say, with natural language, ask the questions from that perspective, right? So if you say, "Hey, I'm interested in I'm building a new green server, right? I want companies that are 4,000 or more employees in Latin America that are -- have high sustainability practices, right? Now it's going in clearing against the data and coming back with generated outcomes from that perspective, they think is really powerful, right, in terms of usability and how it can evolve over the next few years. Another one in there that's even broader is the DNB at D&B, right? And this one is, I would say, on all of our data set. And really the ability just to ask questions and come back with immediate answers, the applicability is really broad from that perspective. And so for us, obviously, in the background too, we're setting things up in terms of how do we track the usage, right? What are the billing mechanisms, how do you allow for the Finance and Risk questions if we get in and say to Sales & Marketing because we differentiate that in terms of the commercial model. But these are the things where we're trying to apply AI and Gen AI in truly practical manners that can drive some real differentiation in the market.

Got it. Let's just shift to the Finance and Risk business, 60% of your revenues. And I would argue that's kind of the main area that investors have always been attracted to. So you already talked about the Dun's number being kind of the social security number globally, if you call it that. But just talk about the data that you have in the Finance and Risk business. How much of it is proprietary? What you've done since you took over to kind of enhance that?

Yes. I mean -- and again, it's a great point because 2 things: one, the Finance Solutions business very deeply embedded, right, very, very inelastic from that side. And then it kind of spawned off the third-party risk and compliance side. I think in terms of what we talked about too before, understanding the MDM portion of it, right, and how unique that is, and frankly, similar in terms of value and value proposition is really, I think, critical when you think about the whole pie right of what D&B is. But the data sources, obviously, we did a lot of work early in terms of infrastructure upgrades, right? And now we're in kind of the last stages of full kind of cloud migration, a lot on the data supply chain, right, in the data cloud, making sure that we can scale and make sure you ensure we can have throughput from that side. So when you look at the characteristics and the output, we went from about 315 million tons to now 530 million plus, right? Ultimate beneficial ownership data was 10 million. Now it's up to, I think, 100 million, 150 million, right. We brought in shipping data, right? It was a great asset that ended up having many more use cases, right, than we originally thought. And I know we're talking about the existing but moving us into capital markets, I think, in private credit and private company data, that's where the core of the asset lives, right? So while, of course, it has the typical public company data that's out there, it's really the private company data. So I think 120 million, 200 million private company financial statements, right? Private company data that's contributory in terms of their trade and their payables and receivables information that is coming from the largest Fortune 500, Fortune Global 1,000 throughout the world. When you come in and you want to be vendor to a really large retailer or you want to be a participant in the Google Play store or in the Apple App Store. You have to have a Dun, you have to have earning information, although that comes into us and only us from that perspective. So we use that, obviously, as the base. But of course, we're going out and some are contractual, right? So some of the data we get that is on energy consumption, right? We have an exclusive relationship with the provider, right? Some of them, of course, we use registries and we use public company data, right, that's available to supplement and complement. But again, that matching that, I would say, entity resolution and those algorithms that sit behind that, those are all proprietary from that perspective. So it's a really, I would say, overall unique and extremely proprietary data set in data cloud that allows us to do a lot of interesting things.

Got it. And so just kind of how we broke out Sales & Marketing to the different buckets. Can you just help within F&R, like what are the -- how would you break that business?

Yes, bigger chunk Finance Solutions, right? And again, very, I would say, embedded. In North America, it's more multiyear contracts with the price escalator and then we're really trying to upsell and cross-sell off of that, expanding the third-party risk and spanning in cap markets. On the international side, there is actually a good room to really Finance Analytics is kind of the flagship UI. It's also delivered, obviously, through API from that perspective too. But there's probably more room to add new logos, right, in terms of larger businesses in that space throughout Europe and Asia. Third-party risk and compliance, Dun grown, I think, double digits now for 13 of the last 14 quarters or 13 of the last 13, really around KYC, KYB, around supply chain risk management. And again, a nice complement in terms of sourcing, procurement, onboarding, monitoring, tends to be an extension of the CFO's office. So very, very germane, something that continues to grow and expand and what that underwriting process means in that it used to be financed, right? And it would say, okay, what's the financial stability of these vendors and suppliers that's coming on? Then it became regulatory and compliance. So you can imagine labor practices, environmental and fractions, these types of things are all really critical because your suppliers and vendors are an extension of your business. Well now things like social, right, understanding veteran-owned businesses, female-owned businesses, minority-owned businesses, et cetera, is really important, right, when you think about who you're doing business with and how you can continue to expand from that perspective. Sustainability, right, is another component. And so as we think about each of these pieces, we try to bring more and more value around that change to cyber, right? It's kind of the next component of the exposure a lot of times. The companies from a cyber perspective is when they have a third party that has a breach and then they end up coming in through that perspective. So we're trying to continue to innovate in that space and bring that risk profile to our customers.

Got it. And on the international side, you said new logo opportunity. Is that the Internet -- I guess it ties a little bit to a few different questions. So first, do you need more data on the international side to penetrate that further? And then just also remind us of the worldwide network and also your plan that you did the Bisnode acquisition after going public but then it's kind of stalled there?

Yes. So for instance, on the data side, I mean, look, we believe we have the best data on the planet, right, in Europe and in Asia, in depth and breadth in ownership, right, from that perspective. So while the worldwide network is kind of like a franchise there used to be a lot of them used to be part of Dun & Bradstreet. It's an exclusive one-to-one from that perspective, it feeds into our world-based file. And while we're buying that data, right, that data is ours, right? And we'll continue to be ours for the rest of until we decide not to it, right? If you look at the worldwide network and look, from a leverage perspective, when we came out, we were at 9x levered in the go private. Thankfully, I've got Dun & Bradstreet, so with my little kids, I slept like a baby, which was fine. But we used the IPO and then we subsequently continued to drive that down to, we expect to be about 3.5x by the end of the year. And as we migrate that down and continue to delever, I think as we think about opportunities in terms of M&A, there's clearly tuck-ins and things like that from that. But then there's some of the partners out there like Bisnode, that make a lot of sense, right? Controlling those markets, having a direct relationship with the customers, those are all things certainly that we think about. In terms of incremental data there, I mean we went -- give you a good example in Greater China, I think, from maybe 10 million businesses to now like 70 million businesses. And so when you're thinking about supply chain, you're thinking about partners from that region, it's really expanded from that perspective. And so I think we're in a great place there. It's really finishing up some of the migrations and then continuing to drive those localized solutions into the markets. And Neeraj and the team have done a great job accelerating the growth of that. I mean, before even the Bisnode, we were kind of growing high singles, low doubles. Bisnode was clearly something that was, I think, declining 2% organically, and now it's in mid-single digits, right? And so that's on a net basis also with some of these migrations that are occurring. So in a good spot, it's about continued execution and we've got to keep bringing new product, I would say, more so than even new data into those markets.

Got it. So on the capital allocation side, it sounds like you want to be in the low 3s and then the priority would be M&A over other forms of return.

Look, I would say on M&A, and we've discussed this too, the fact where it's trading. Like it's hard to find another business with the profile that we would have. So not doing buybacks would be difficult is what I would say. But outside of that, if things kind of get righted from that perspective and we're kind of trading in a valuation where we think is within a realm of reasonableness from our side, then I think M&A starts to be something that we can unlock a little bit more from that perspective. The dividend is kind of out there and we'll continue that from that perspective. But if I think organic growth, right, deleveraging the balance sheet and then it's kind of the buybacks and M&A as we go forward.

Got it. And then just one last question on the organic growth side, the 5% to 7% range that you're aspiring to, you're 4% today, it excluding the businesses. Just talk about how margins should progress maybe on the lower end of that spectrum?

Yes. I mean we've talked about like in that kind of 50 to 100 bps. I mean you've seen this year even in the first couple of quarters where we were a little over 4%, right? We were still in that 50, 70 bps, right, on a year-over-year basis. So on that side, look, the business has a great ability to continue to scale. And even this year, we were mindful that, look, there was some additional, call it, like $8 million, $10 million that we put back into AI, that we could have expanded margins a little bit more, but we're always trying to do things for the business that we're getting into that kind of continued mid-single digit and then starting to drive towards that higher single digits, there's a lot of contribution that comes from that, which gives us even more flexibility to invest in the future. So -- but I'd say in that general zone that kind of 50 to 100 bps is reasonable from that perspective.

Got it. Great. Well, we're almost out of time. So let's just end it there. Thank you so much, Bryan. I appreciate it.

absolutely. Thanks for the time, Manav.

Thank you everybody.