Dun & Bradstreet Holdings, Inc.

Good morning, my name is Takan and I will be your conference operator today. At this time, I would like to welcome everyone to Dun & Bradstreet's fourth quarter and full year 2020 conference hall. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. With that, I would now like to turn the call over to Deb McCann, Treasurer and Senior Vice President of Investor Relations and Corporate, FP&E. You may proceed.

Thank you. Good morning, everyone, and thank you for joining us for Dun & Bradstreet's Financial Results Conference call for the fourth quarter and full year ending December 31st, 2020. On the call today, we have Dun & Bradstreet CEO Anthony Jabbour and CFO Brian Hipscher. Before we begin, allow me to provide a disclaimer regarding forward-looking statements. This call, including the Q&A portion of the call, may include forward-looking statements related to the expected future results for our company and are therefore forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings. Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to the GAAP financial information, is provided in the press release and supplemental slide presentation. This conference call will be available for replay via webcast through Dun & Bradstreet's Investor Relations website at investor.dnb.com. With that, I'll now turn the call over to Anthony.

Thank you, Deb. Good morning, everyone, and thank you for joining us for our fourth quarter earnings call. I'd like to take some time today to discuss highlights from 2020 and our plans for 2021. 2020 was an incredible year for Dun & Bradstreet. In the midst of a challenging new environment, we're able to successfully complete our IPO, sign a definitive agreement to acquire BizNode, and continue to transform our business with significant enhancements to our technology, data, and analytics, which are ultimately laying the foundation for our ability to execute on our near and long-term growth strategies. Returning to the public markets last July was a major milestone for our company and allowed us to raise approximately $2.4 billion. The net IPO proceeds allowed us to pay down our entire preferred equity and 40% of both our secured and unsecured notes. This significantly improved our financial profile and is saving us more than $175 million of annual dividends and interest expense. With our lower leverage and increased cash flow, we now have significantly more financial flexibility to accelerate our growth strategy, both organically and inorganically. For example, we're able to execute a critical step in our international growth strategy, the acquisition of Dun & Bradstreet Worldwide Network member, BizNote, which was signed in October 2020 and closed on January 8th, 2021. The acquisition of BizNote significantly expands our footprint to additional territories that make up 40% of the GDP of Europe and are home to 50 of the global 500 companies. The combined business with nearly 250,000 clients collectively will now be able to provide mission critical solutions to an expanded European footprint with more local data, more local knowledge, and more streamlined delivery channels. As a global company, having local expertise and knowledge helps us to engage with clients of all sizes in the region and across the globe. to provide solutions and support necessary to meet their increasing demands. As we've now been operating the business for around a month, we're even more excited about the opportunity. The business came with a combination of Dun & Bradstreet products, along with some legacy disparate solutions. We will sundown the legacy solutions and invest in the development of our market-leading global platforms and localized solutions. We also have identified approximately $40 million in annualized run rate savings that we expect to have action by the end of 2022. Brian will provide incremental financial details, including our expectations for 2021 in his section. But overall, we already have strong momentum underway and look forward to updating you on our progress in the coming quarters. Now turning back to the fourth quarter in full year 2020, We delivered solid financial results in both the fourth quarter and full year 2020, despite known headwinds and a challenging macro environment. Fourth quarter revenues were up 1.8%, excluding the net benefit of the lower deferred revenue purchase accounting impact. Adjusting for the previously communicated headwinds, normalized revenues on a constant currency basis were up 3.5% for the fourth quarter and 3% for the full year. Total company revenue retention for the year was 96%, an increase of 70 basis points versus prior year, and we now have 36% of our business under multi-year contracts. Revenue retention for our strategic account segment for the year is 99.8%, which once again reinforces our position as a mission-critical provider to the largest businesses in the world. 2020 was certainly a challenging year in terms of businesses of all sizes navigating their way through a difficult environment. I'm proud of what we were able to accomplish in terms of retention and in some cases expansion, especially when you look at what we did with our strategic accounts. Building on the near 100% gross retention I just mentioned, we were able to grow our revenues with our strategic customers by 3% versus prior year. We also increased our multi-year business in the strategic channel by 11 percentage points to 67.5%. These multi-year contracts not only have built-in growth, they also create recurring revenue streams that allow us to continue to cross-sell additional solutions. A great example of this was with one of the top three wireless providers in the U.S. as they adopted a multi-year agreement with Master Data, Digital Marketing, and Global Analytics Solutions. Next, I'll talk about the significant progress we made in our government channel where we had a strong year with wins in the Department of Defense, the Federal Emergency Management Agency, and the Small Business Administration. And in the fourth quarter, we were able to secure a sole-sourced 16-month contract with two six-month options to further support the General Services Administration, or the GSA. As governments both domestically and globally look to grapple with the rapidly evolving environment, we are pleased to be able to assist such critical work through our unique and differentiated offerings. Moving on to our field sales accounts, we saw customers including one of the leading hedge funds in the world and an online brand management technology company renew at or slightly above prior year levels, which was reflective of the overall customer segment. These businesses, which range from $100,000 to $1 million of potential spend a year, were more impacted by the current adverse environment However, they maintain consistent spend with us given the criticality of the solutions we provide despite their overall budget limitations. We continue to have dialogue in terms of the adoption of incremental solutions as things begin to return to a more normalized environment and look forward to deepening our relationships going forward. Finally, our small and medium business accounts were an area that went through a significant evolution. We spent the later part of 2019 beginning to execute a digital strategy that shifts our reliance on direct mail campaigns and telephonic interactions to a more e-commerce centric interaction. While revenues from direct mail and telesales were down significantly versus prior year, we're able to partially offset those declines with digital sales up 53% over the prior year. We carry this momentum through the back half of 2020 and are excited about our progress in expanding upon our SMB digitization efforts, which I will discuss further in my 2021 operations section. From an international lens, as we continue to expand and improve our beneficial ownership data, we're able to secure a new contract with one of China's top four banks. This solution will help the bank manage and screen their client shareholders in order to meet anti-money laundering requirements in the Know Your Customer compliance process. In the UK, we expanded our business with a Fortune 500 online payments provider whose platforms are available in more than 200 markets around the world. They'll be using our modern API and cloud-based software as a service solutions globally to provide entity verification screening and monitor potential fraud. We also continue to grow our sales and marketing solutions internationally. A British multinational enterprise software firm, Sage Global Services, a market leader for integrated accounting, payroll, and payment systems, will be using our global data to assist with their sales and marketing efforts through cleansing and updating data within their CRM systems and assisting in account-based marketing efforts. As you can see, client engagement is strong, and we believe this momentum is a direct outcome of the substantial progress we've made in terms of our ongoing transformation that is producing higher quality, more modern, and scalable global solutions. In 2020, we invested approximately $115 million in capitalized software development, focused on enhancing and expanding our data supply chain, innovating new solutions, and modernizing our existing platforms by integration, enhanced user interfaces, and decreased latency. As we've discussed before, Project Ascent has been an important piece of our technology transformation as we continue to enhance and expand our ability to ingest and curate data, diversify our coverage of existing data, and expand access to a variety of alternative data sets. We also made significant progress in simplifying and scaling our infrastructure for further growth. Converging multiple existing legacy environments onto a common platform, primarily in the cloud, improves our stability and operating costs, and enables automation, continuous integration, and on-demand provisioning so our developers can deploy more rapidly into production. ultimately allowing us to scale quickly and efficiently. An example of taking an existing set of solutions, focusing on the modern offering, and connecting it to enhanced data supply chain is what we're doing with our DirectPlus API. All alternative data sets that come to Dun & Bradstreet are now ingested through Ascent and delivered by DirectPlus, providing our customers with the freshest, most complete, and accurate results which allows our customers to access the most up-to-date data and analytics available in our ecosystem. Over the next year, we will continue to load new data and begin migrating existing data sets to be curated through Ascent. These particular investments, along with all the new product innovations we rolled out in 2020, are creating the foundation for our future growth. And finally, as we invest in the business, we also continue to focus on efficiency. reflected in our improved EBITDA margins and annualized run rate cost savings to date of $241 million, which is up $16 million from the third quarter. This was achieved through a rationalization of our real estate footprint and net reduction from external providers as we expand our global capabilities and continued rationalization of our back office support structure. As I said, 2020 was an incredible year. Our team continued to make great strides in executing on our strategy, and we were well positioned for 2021 and beyond. Now turning to 2021, we will continue to focus on our transformation efforts as we look to leverage the work we did in 2020. One area I'd like to highlight is our new SMB digital platform, which will provide small and medium-sized businesses a one-stop shop and help to deepen our relationships with cross-sell opportunities, extend our reach to new customers, particularly small businesses, and increase our revenue from new channels, including self-service e-commerce. We have thousands of small businesses coming to our website each day for a whole host of reasons, including registering for a DUNS number, looking to improve their credit profile, or becoming a qualified supplier to a major corporation. We took multiple digital entry points and established a unified site that provides a single corridor for these businesses to not just access our products, but to gain access to a more expansive environment, including partner products designed specifically for small business. This helps us to grow our small-medium business sales, increase stickiness with current clients, and create partnership opportunities with our largest enterprise clients to bring new solutions and services to small business. As we look to our finance and risk and sales and marketing portfolios, we'll continue to launch new innovative capabilities throughout the year, And internationally, we'll continue to focus on launching new products in our respective markets through globalizing existing new North America solutions, introducing new offerings concurrently with North America, and launching specific local offerings. These solutions will largely leverage existing technology platforms and data supply chains, but be tailored for market users with local language, data, and feature requirements. 2020 was another year of remarkable transformation, and we are poised to accelerate growth in 2021. Our key priorities are to continue the transformation of our technology to scale for growth, deliver more to our clients digitally, expand our data and analytics capabilities, integrate BizNode, and grow both organically and inorganically as we look for new and better ways to serve our clients. We are excited for what's to come. And with that, I'll now turn the call over to Brian to discuss our financial results and outlook for 2021.