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spk06: Good morning and welcome to the Dunn and Bradstreet's third quarter 2021 conference call. As a reminder, today's call is being recorded and your participation implies consent to such a recording. At this time, all participants are in the listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, press star then zero on your telephone keypad. With that, I would like to turn the call over to Deb McCann, Treasurer and Senior Vice President of Investor Relations. You may proceed.
spk01: Thank you. Good morning, everyone, and thank you for joining us for Dun & Bradstreet's Financial Results Conference Call for the third quarter ending September 30th, 2021. On the call, 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.dmb.com. With that, I'll now turn the call over to Anthony.
spk10: Thank you, Deb. Good morning, everyone, and thank you for joining us for our third quarter earnings call. We are pleased to report strong third quarter results as revenues for the quarter grew 22% and EBITDA grew 12%. Progress in our core business continues to accelerate as reflected in our organic revenue growth of 4.1% or 3.7% excluding the impact of foreign currency. Increasing growth in North America complemented another solid quarter in our international segment due to strong retention rates, increased pricing, a growing share of wallet with our strategic clients, the addition of new logos, and the lessening of previously communicated headwinds. On top of that, the business acquisition is progressing very well with the integration going better than we originally expected. Both finance and risk and sales and marketing had solid growth in the quarter. Two bright spots in particular were our risk and our marketing solutions. Internal investments in our risk solutions over the past few years have strengthened our position and demand range high of supply chain and third-party risk management continue to be a point of focus for businesses throughout the world. On the marketing side, our online audience solutions business continues to see robust growth rates and we see a significant untapped opportunity in the online business-to-business marketing landscape. This led us to strengthen our position through the signing of definitive agreements to acquire IOTA and NetWise. I'll go into more detail as I expand upon our latest innovations, but these two complementary companies will extend their position further in the B2B online marketing value chain and build upon a business that has grown over 40% year-to-date. Overall, we continue to focus on expanding and enhancing our offering set through internal investments, strategic partnerships, and focused acquisitions. We are pleased with our increasing organic growth rate throughout this year and with the momentum we have entering the fourth quarter. We expect to drive progressively stronger growth in the fourth quarter versus prior year to establish a solid foundation for further acceleration into 2022. As we close out the year, our key priorities remain consistent. Innovate solutions and localize them globally. Increase our share of wallet with strategic clients. Approach and monetize the SMB space in new and innovative ways. And finally, integrate and accelerate the BizNode acquisition. The team has made great progress towards executing on these priorities, and I'll now share some highlights of those accomplishments before I turn the call over to Brian for more in-depth financial review. After that, we'll finish up by taking your questions. New product innovation continues to be our primary objective. I'm pleased with the focus and urgency with which our North American and international teams are operating. As we look to enhance existing solutions and add new capabilities, we've been able to leverage our incredible client base. We've established finance and risk and sales and marketing advisory boards to help guide our roadmap through direct input from senior decision makers or industry experts from leading enterprises throughout the world. For example, with our recent launch of ESG intelligence, we're able to focus our solution on individualized client scores as opposed to relative scores or indexes based on industry code or some other shared attribute. Listening to the needs of our clients encourage the more supply chain-focused use case that is very complementary to the risk and compliance scoring and workflow we have in the market today. We believe that an end-to-end workflow that incorporates financial, regulatory, compliance, and ESG underwriting through data and analytics is a powerful tool for the industry and are pleased with the feedback we've received from clients and prospects today. On the sales and marketing side, we continue to focus on building upon our strengths in master data management and online marketing, while simultaneously bolstering our sales solutions through expanded data, third-party integrations, and a more seamless UI UX experience. While the master data management and online marketing solutions make up the vast majority of our revenues in the segment, we believe there's a lot of potential for us to evolve our sales solution from a deep research tool to one that is more agile and able to deliver on our global contacts in a more simplistic and effective manner. We continue to streamline our offerings, expand upon our growing contact data coverage, and to integrate third-party data with our solutions to make campaign activation more efficient and effective. With limited downside and significant upside, I'm excited about where we are today and where our team is driving us as we make significant progress in capturing a piece of this growing market. Turning to our marketing solutions, this morning we announced the signing of IOTA, a fast-growing provider of audience targeting capability that enables the activation of online audience segments. IOTA's products extend our audience solutions business from being dependent on others for execution to being online and participating more fully in the B2B martech and adtech supply chain. We also entered into a definitive agreement to acquire Netwise, an industry-leading B2B online identity graph. Combined with the DUNS number in our existing offline data, this enriched offering will allow marketers to target B2B clients and prospects across every major online channel, individual device, or a marketing platform. Just as our clients rely on the DUNS number for position in their offline data, we're looking to provide the same level of confidence and consistency online as well. For marketers, this means they'll have assurance that their online audiences are targeting the right people and that they can reach them across every online channel. We are solving for the current audience shrinkage these marketers face today with the low match rates that plague this industry. This will enable clients to build upon the investments they've made into data management mastered on the DUNS number and more readily activate that data in social, search, and display advertising campaigns. Said simply, Dun & Bradstreet has the offline B2B targeting data, NetWise enables marketers to translate that data into online audiences, and IOTA syndicates it across the digital ecosystem. I'm excited about what we are doing both organically and through acquisition, and we are on the right track to take advantage of these growing markets related to how sales and marketing professionals are increasingly utilizing data and analytics in their business-to-business interactions. Moving on to key salesmen in the third quarter, we're pleased with the ongoing success we're having with our strategic clients, which includes renewal rates at nearly 100% and the addition of several new logos. As businesses face heightened pressure to meet regulatory requirements, prevent supply chain disruption, and protect brand equity, our risk and compliance capabilities are well positioned to assist our clients and prospects. For example, we want competitive new business with one of the largest global investment bank and financial services companies in the world who sought to expand automation opportunities for their onboarding and know-your-client processes. Our patented business verification process sets us apart from competitors, and our data provided the breadth and depth they required, particularly the beneficial ownership structures. We also signed new third-party risk and compliance business with a current client, one of the three largest aerospace companies in the world, to support the global trade compliance and corporate compliance efforts. Walmart renewed their multi-year agreement with us to support their supplier onboarding process, and we look forward to continuing this important strategic client partnership. We won new business with an existing client, a top German multinational banking and financial services company, to support this compliance verification and background checking needs. We are pleased with the ongoing growth of our third-party risk and compliance business across multiple industries and geographies. We're very pleased to announce a new business with one of the world's leading global microblogging and social media platforms. This multi-year deal supports their sales operation and client relationship management program as they recognize the value of our patented matching capabilities, the ability to integrate and automate capabilities, our global coverage, an extensive hierarchy data, and our sales and marketing data attributes. We also continue to make inroads with innovative technology companies such as DoorDash as they look to reduce the risk through improved credit and accounts receivable prioritization. DoorDash chose BNB for a comprehensive integrated portfolio monitoring and accounting compliance tools and the ability to manage financial risk in accounts of all sizes. On the international front, We collaborated with Siemens on a two-day datathon event where over 180 of their colleagues from around the world explored use cases in combination with the studio platform and AI technology to write a tangible solution for the most impactful use cases identified by business owners and analysts in the areas of risk, marketing, sales, and procurement. The event uncovered further Siemens business opportunities, and as a result, Siemens entered into an agreement leveraging Analytics Studio for sales and marketing. The access we acquired through our Bizno deal to strategic European Global 500 clients, such as the German bank mentioned earlier, and Siemens, is invaluable. And we continue to get in front of these new clients to support their businesses with our global solutions. Lastly, in Asia, we successfully renewed another important strategic client, Alibaba, who leverages our data to verify entities on its leading global e-commerce platform. Data is sourced through our data block solution, delivered by our Direct Plus API. Further, as a trusted partner to Alibaba, we're progressing a number of innovative growth initiatives, leveraging our global finance and risk solutions. This is an example of how Dun & Bradstreet is able to adapt and replicate our client success in North America to international markets and support the needs of some of the most sophisticated names in emerging markets. While we continue to demonstrate success with our strategic clients, we're also making progress in the small and mid-sized markets. I'm excited to announce that we recently signed an agreement with TransUnion to launch a proof of concept for a blended commercial credit score that in part is powered by TransUnion data. This score is the integration of consumer data from up to two business principles with our commercial data and additional data assets to enrich and enhance the decisioning process for our clients. The score is expected to be available in approximately 90% of all inquiries, and it's particularly important for our clients who lend to small businesses, including commercial banks, card issuers, and small business lending institutions. We believe our combined solution will increase our match rates, provide lift to our existing commercial scores, and deliver superior small business score that any single standalone commercial or consumer credit score could not accomplish. On the e-commerce front, we are seeing strong subscription numbers to our platforms, such as Dunn's Manager and Credit Signal, averaging over 1,100 new small business signups per day. While still small, e-commerce sales in the third quarter are up nearly 50% from prior year quarter. We also completed implementation of a modern online shopping cart to include internationalization with additional payment options with a United Kingdom and Ireland e-commerce product to launch shortly. These initiatives are all examples of our continued dedication to helping small businesses thrive. In our international segment, we continue to roll out localized solutions across our own and partner markets. In the third quarter, we delivered 10 product launches across Europe, Greater China, and the worldwide network partner markets. DataBlocks launched with partners in Europe, Asia, and Africa, and Finance Analytics launched in Latin America. These launches will be critical for driving product royalties in the future. We also launched RevUp and a beta version of ESG Intelligence in the UK, along with our local language hoovers offering in Greater China. These new international solutions, along with the many in North America we have discussed over the past few quarters, are allowing us to create a significant amount of new product revenue. For a total company, the new product vitality index, or the percentage of revenues from new products, was 8% in Q3 versus 2% in Q3 last year. We'll continue to drive more and more solutions into our markets around the world and look forward to updating you on our progress through the coming quarters. Lastly, we continue with the successful integration of BizNode with offline performance and synergy realization ahead of expectations. In the third quarter, we launched localized D&D Hoover solutions in five markets. We also enhanced BizNode's existing products, including adding B2B credit decisioning on BizNode's flagship risk-guarding credit platform. These solutions will enable us to execute our strategy of migrating clients off legacy offerings onto modern digital platforms, as well as attracting new clients. Regarding synergies, we are on track to achieve approximately $25 million in annualized net savings by year-end 2021, and remain on pace to achieve $40 million annualized of net savings by year-end 2022. Overall, I'm pleased with our continued progress in laying the foundation for accelerated sustainable growth throughout the remainder of 2021 and into 2022. With that, I'll now turn the call over to Brian to discuss our financial results and outlook for the remainder of 2021.
spk08: Thank you, Anthony, and good morning, everyone. Today, I will discuss our third quarter 2021 results and our outlook for the remainder of the year. Turning to slide one. On a gap basis, third quarter revenues were $542 million, an increase of 22%, both after and before the effect of foreign exchange, compared to the prior year quarter. This includes the net impact of the lower purchase accounting deferred revenue adjustment of $1 million and the net impact of the BizNote acquisition. Net income for the third quarter on a gap basis was $17 million, or a diluted earnings per share of 4%. compared to a net loss of $16 million for the prior year quarter. The improvement was primarily driven by higher prior year expenses related to the retirement of debt as part of the IPO, lower interest expense, and improvements in operating income. This was partially offset by favorable tax benefit adjustments related to the impact of the CARES Act recorded in the prior year period. Turning to slide two, I'll now discuss our adjusted results for the third quarter. Third quarter adjusted revenues for the total company were $542 million, an increase of 22%, both after and before the effect of foreign exchange. This year-over-year increase included 18 percentage points from the BizNote acquisition and a quarter of a percentage point from the impact of lower deferred revenue purchase accounting adjustments. Revenues on an organic constant currency basis were up 3.7%, driven by increased demand for our solutions in both our North America and international segments. Third quarter adjusted EBITDA for the total company was $220 million, an increase of $24 million, or 12%. The increase in EBITDA was primarily driven by the impact of BizNode and increased organic revenues, partially offset by the impact of higher data processing costs. Third quarter adjusted EBITDA margin was 40.7%. Third quarter adjusted net income was $123 million, or adjusted diluted earnings per share of 29 cents, an increase from $101 million, or 24 cents, in the third quarter of 2020. Turning now to slide three, I will now discuss the results for our two seconds, North America and international. In North America, revenues for the third quarter were $374 million, an increase of approximately 3% from prior year. Excluding the impact of foreign exchange and the BizNote acquisition, North America organic revenue increased $12 million or 3%. In finance and risk, revenues were $214 million, an increase of 4% or 3% before the effect of foreign exchange. Excluding the impact of foreign exchange and the BizNote acquisition, organic revenues increased $8 million, or 4%, primarily driven by strong double-digit growth in our risk solutions and solid single-digit growth in our finance solutions for new business and increased wallet share from existing customers. For sales and marketing, revenues were $160 million, an increase of $4 million, or 2%. While data sales and our marketing solutions had another solid quarter, the overall growth in sales and marketing was partially offset by $2 million from the data.com legacy partnership blind out. North America third quarter adjusted EBITDA was $186 million, an increase of $2 million, or 1%, primarily due to revenue growth, partially offset by higher data processing costs. Adjusted EBITDA margin for North America was 49.6%. Turning now to slide four. In our international segment, third quarter revenues increased 104% to $168 million, or 105% on a constant currency basis, primarily driven by the net impact from the acquisition of BizMode and growth in both finance and risk and sales and marketing solutions. Excluding the net impact of BizMode, international organic revenues before the effect of foreign exchange increased approximately 5%. Finance and risk revenues increased or $109 million, an increase of 61% both after and before the effect of foreign exchange, primarily due to the business acquisition. Organic revenue before the effect of foreign exchange grew 2% with growth across all markets, including higher revenues from our Asian markets, localized offerings in India, and growth from D&D credit in greater China, partially offset by elevated cross-border data sales in the prior year period. Sales and marketing revenues were $59 million, an increase of 300% or 307% before the effect of foreign exchange, primarily attributable to the BizNote acquisition. Organic revenues before the effect of foreign exchange grew 22%, including higher revenues from our UK and greater China markets, attributable to multiple recently launched products, higher data sales, as well as increased Worldline Network product royalties. Third quarter international adjusted EBITDA of $54 million increased $26 million, or 93%, versus third quarter 2020, primarily due to the bad impact of the BizNote acquisition, as well as organic revenue growth and lower data costs, partially offset by higher net personnel expense. Adjusted EBITDA margin was 32.2%. Turning to slide five, I'll now walk through our capital structure. At the end of September 30th, 2021, we had cash and cash equivalents of $234 million, which when combined with the full capacity of our $850 million revolving line of credit due 2025, represents total liquidity of approximately $1.1 billion. As of September 30th, total debt principal was $3,660 million, and our leverage ratio was 4.5 times on a gross basis and 4.2 times on a net basis. The credit facility senior secured net leverage was 3.5 times. Turning now to slide six. I'll now walk through our outlook for the remainder of 2021 in which we are maintaining our ranges for revenue and EBITDA and increasing our range for EPS. Adjusted revenues are expected to be in the range of $2,145 million to $2,175 million, an increase of approximately 23.5% to 25% compared to full-year 2020 adjusted revenues of $1,739 million. Revenues on an organic constant currency basis, and assuming that impact of lower deferred revenues, are expected to be in the range of 3% to 4.5% for the full year. Adjusted EBITDA is expected to be in the range of $840 million to $855 million, an increase of 18% to 20%. An adjusted EPS is expected to be between $1.06 to $1.09 versus our prior guidance for the high end of $1.02 to $1.06, primarily driven by improvements in our interest expense and depreciation outlooks. Additionally, modeling details underlying our outlook are as follows. We expect interest expense to be approximately $200 million versus our original $200 million to $210 million driven by lower LIBOR rates and less borrowing than anticipated. Depreciation and amortization expense of approximately $80 million, excluding incremental depreciation and amortization expense resulting from purchase accounting, versus our original approximately $90 million, primarily driven by lower business depreciation than anticipated. Adjusted effective tax rate of approximately 24%, weighted average shares outstanding of approximately $430 million. And for CapEx, we expect approximately $237 million, which accounts for the $77 million purchase of our new global headquarters in Jacksonville, Florida. And finally, With organic growth continuing to accelerate each quarter, we expect Q4 to be at or above the high end of our organic growth range versus at the high end of the range, which we discussed on our second quarter call. We look forward to closing out 2021 on a high note and heading into 2022 with positive momentum. With that, we're now happy to open up the call for questions. Operator, will you please open the line for Q&A?
spk06: Thank you, sir. At this time, if you would like to ask a question, simply press star then the number one on your telephone keypad. Your first question comes from the line of Hamza Mazzari of Jefferies.
spk05: Hi, this is Mario Cortolacci filling in for Hamza. Could you just give us an update and talk about how many SKUs you guys have currently product-wise? And give us a sense for how your products have pricing power versus others. And then maybe, is there any rationalization that you can do within your SKU count that could potentially give you even more pricing power going forward?
spk10: So, Mario, in terms of the number, excuse me, I don't have that off the top of my head, and we've got a number by each of the core lines of business and finance, risk, sales, and marketing, and then the international versions of them. you know, but a decent number of products covering the entire space that we're focused on, which is organizations globally covering, you know, the largest in the world to, you know, smaller SMB products. So a tough one to answer, but I'd say they feel really good about the product inventory that we have and how we're going to market with it. And certainly with a number of our products, we feel we have, you know, great pricing power with them. And in areas, you know, like we talked about this morning on the online marketing side, we are adding capability to further increase, you know, some of the pricing power that we have. So there are products that overlap. We talked about that, you know, with business acquisition, you know, as an example, and where we would, be leveraging some of the products both ways, and we'll continue to do that. We'll do it in a client-focused manner so that our clients are receptive to continuing to partner with us and work with us, and we'll migrate them over time, retaining the relationship, retaining the revenue, and on our side, finding more efficiency by any overlapping products.
spk05: Got it. And then just my follow-up is around like this marketing space and some of these acquisitions. Could you help us understand the competitive dynamic in the marketing space? And one of the credit bureaus is obviously getting a lot bigger in digital marketing. But I guess is this differentiated because it's more B2B or is there anything else to call out versus somebody like a trend junior or what they're doing? And then are there any other major competitors within this B2B marketing space?
spk10: Yeah, absolutely. Really what differentiates us from others who are in the space is that we are focused on B2B. And B2B is, you know, what's great in the B2B world in many regards is you can see the trends that have been successful in the B2C world and B2B tend to lag it. And so for us, we can see that the success here, you know, has been strong and there's a great opportunity in this space. And with everything that we have in terms of our DUMs number, our data, you know, the number of brands that we work with directly today versus having to go through an agency really sets us up, you know, with a great advantage in this space. And also, you know, as you look at just the value of an ad to a B2B marketer is much higher than it is to a B2C marketer. So having a restaurant putting up an ad for a hamburger has a certain amount of value compared to a B2B ad, you know, reaching out to a known business contact of an organization selling an ERP system as an example. So we see that the demand will be high for B2B because the price of a B2B ad will be more valuable than a B2C ad.
spk05: Great. Thank you very much.
spk10: Thank you.
spk06: Your next question comes from the line of Kevin McVeigh of Credit Suisse.
spk11: Great. Thanks so much. Hey, could you unpack a little bit the improvements in the organic growth Q3? And then it looks like you're going to see a real nice acceleration at the Q4 as well. Maybe how much of that is just better retention versus pricing versus new product? And then you talked about a vitality index of, I think, up to 8% versus 2% in Q3. How should we think about kind of a longer-term target for that, and is there any way to kind of triangulate that to what it can mean to organic growth? So I know there's a lot there, but really focused on kind of organic growth improvement Q3 to Q4, and then ultimately what the vitality index can mean for that.
spk08: Yeah, hey Kevin, thanks for the question. When we look at the organic acceleration throughout the year, you've seen it step up now sequentially from Q1 to Q2, now into Q3, and we expect that to continue into Q4. Anthony mentioned earlier, you know, pricing is certainly, you know, one component of that. We talked about, you know, as the renewals flow through and we start to see the 12-month, you know, peel off in the 13-month of a multi-year contract step up, we're seeing that, you know, acceleration into Q3 and Q4. Retention, we have a lot of focus and energy behind that. A lot of the improvements we're making from a data quality perspective, data consistency, expanding the data set into new and alternative data components, all of that is helping to drive a better customer experience from that side, which plays into retention, as you said. And then on the new product side, you know, we've had, as Anthony talked about, some really nice successes both in that, you know, marketing space, which is a subsegment of the overall sales and marketing, but really, you know, in that third-party risk and compliance side, we saw nice growth there where we're handling, you know, anything from the KYC of a large, you know, multinational investment bank to, We extended with Walmart from that perspective. So that's a space in a market that is very germane and very much growing. And we see that we're very well positioned to continue to drive acceleration in that area.
spk11: That's helpful. And then just on the two acquisitions, it seems like the growth is pretty strong relative to the core business. How should we think about that? Is there any impact on kind of the 21 guidance and then in terms of just numbers around that? And can you give us a sense of the size and just the growth rate overall?
spk08: Sure. Yeah, Kevin, thank you. And we literally, you know, we're just signing those and they'll close here, you know, relatively shortly, I would say, you know, one sooner in the next few weeks. Overall, we are paying about $165 million for one of them and about $69 million for the other. uh so that's that's kind of the purchase price from that perspective um we talked about the size of that you know marketing business uh and where it's at today i mean this this will not sense um you know a little bit more than double you know the size of that and so you know when we look at those you know growth rates uh and we look at the as anthony said the interconnectedness and what we can leverage from the duns number we're pretty excited about the the growth opportunity In terms of guidance, because we signed them, Kevin, and we haven't closed them, they are not included in the guidance ranges that we provided, and they certainly won't be included in the organic, right, just because of the acquisitive nature and the fact that, you know, we're backing those out generally for the first 12 months. Super helpful. Thanks again.
spk11: Thanks, Kevin.
spk06: Your next question comes from the line of Ashish Sabhadra of RBC Capital Markets.
spk04: Thanks for taking my question. So it looks like pretty strong progress, pretty solid progress on the BizNode integration. I was wondering, as you've owned BizNode for almost 10 months now, do you believe that there could be potential upside to the cost synergies And also from a revenue perspective, I was wondering if you could talk about the cross-selling success that you've had there. Thanks.
spk10: Sure. You know, on the progress, like I said, my prepared remarks, you know, we're already at $25 million annualized savings. Next year we'll get to $40 million of annualized savings. And, you know, First of all, I want to say I'm extremely proud of the team and the great work that they're doing from an operational execution perspective. During COVID, overseas, lots going on, lots of reasons for there to be operational hiccups, but the team's done a phenomenal job on the synergy side, on our client side, and driving value there. um so you know at this stage you know we feel pretty good about the synergy that we're going to get from it and our focus in the second part of your question sheesh is on the growth and that's where you know we'll look to continue to drive our our products into that client base we continue to see you know really nice momentum and receptivity uh from those clients and i think in parts it's how our teams are taking care of them through the transition um but but it's exciting to see uh you know I think if sales and marketing products are 12.5% increase, you know, year-over-year into that phase. So there's some really good momentum that we have overall with that acquisition, and I'm proud of the team executing it. That's great.
spk04: And maybe I was wondering if you could drill down further on the TransUnion partnership that you talked and your prepared remarks. How do you plan to go to market? How do you think about the addressable market there? And how do you think about the opportunity over the next three to five years? Thanks.
spk10: It's a really exciting opportunity for us, and I think for TransUnion as well, candidly. I won't speak for them, but in the S&P space, we're focused on, we've talked about this before, where the difference between a consumer credit report and our commercial at that end isn't the same gap as it is for larger businesses. But there's a difference in price between them. And so it had been an area where we've been not as strong. And so what I'm excited about this deal with what we're doing is where, again, we talked about a commitment that we're going to make at the very beginning. And what I hope you see is us continuing to do what we say we're going to do and focus on it. And we've not wavered on the SMB space in terms of the number of products that we're bringing to that space. and especially with this capability on the blended score, how it can help in that space by increasing match rates, how it can help increase our commercial score that we had, and how it can help give lift over just the consumer credit bureau score as well. So from that perspective, it really has the makings of a winner, and I'm excited about it. I'm excited how it can help our larger enterprise clients as well that focus on the space Because, you know, what I'd say is, you know, from a – again, you know, we're thoughtful here in terms of how we're describing it. It's a proof of concept. We've been, you know, doing analytics for, you know, a number of months right now. We feel good about the momentum. Otherwise, obviously, we wouldn't have introduced it on the call. But it's still early stages, and we want to be transparent with you in terms of, you know, what's coming, right, and where are we headed. So you see in the product vitality index score how we've increased – you know, new revenue contributions to the company, 8% versus two last year. So part of this is, you know, just continue to give you headlights into what we see coming next. And this certainly is one, you know, which is exciting for us and exciting for our clients. And, you know, as I mentioned, again, the prepared remarks, And we talked about our, you know, we've got phenomenal clients. We're very, very fortunate to have them. We're fortunate they participate in advisory boards. They're experts. You know, we've had a great opportunity to listen and partner with them. And what I'll say is the interest level is very high from those that we've talked about with this opportunity.
spk04: Thanks, Anthony. That was very helpful, Kala. Thank you. Thank you, Ashish.
spk06: Again, as a reminder, if you would like to ask a question, simply press star, then the number one on your telephone keypad. Your next question comes from the line of Andrew Jeffrey of Truist Securities.
spk09: Hi. Good morning. Appreciate you taking the questions. Anthony, I wanted to just spend a minute on sales and marketing, and it sounds like these acquisitions are you know, clear commitment to that space and enhancing your capabilities there. You know, can't help but note the relative outperformance rest of world. And I wonder if you just contrast perhaps some of the success you're having internationally with the relatively slower growth and maybe what is a more competitive market in the U.S. and how you think some of the success you've had, rest of world, do you think maybe perhaps in conjunction with recent M&A can accelerate the U.S. growth, whether there's some learnings you can bring to domestic markets?
spk10: Great question, Andrew. What I'd say overall, when you think of sales and marketing. And, you know, again, in the pure sales side where I know there's been some great growth announced in the quarter and in the space, there's our focus more traditionally is on the marketing side, the data side, you know, the APIs for our master data management around our DMS member. That's historically, I'd say, the nature of our business is versus selling to salespeople to enable sales success. And so when we look at what we're doing in this space and just the natural success we're having in our audience, targeting business, marketing business, the growth of 40%, we're leveraging a strength that we have with the data of all these businesses, global, the DUNS number, et cetera. And on the sales side, again, selling more, not to the end seller in many cases, but to researchers of the company. So if someone actually wanted to target someone and do a lot of in-depth research on them versus just identifying who the, you know, CTO is of a company to call on them, That's where we've been focusing. So as we look at sales and marketing more holistically, and again, as you look at the relative size of our clients, internationally we have more larger clients skewed versus in the U.S. we also have smaller clients. And so there's a difference there in terms of how the integration of our marketing and sales solutions would benefit a large enterprise client versus a smaller midsize client. And what we're doing is focusing on the marketing efforts, having a very thoughtful approach about marketing, owning the online data space, growing into account-based marketing, expanding into engagement and trigger events of keeping the relationship, and then having that lead into sales versus purely being just in sales. And that's what we're doing with You know, the relative size of our sales business, like we talked about, is a smaller part of that. The true sales selling to, you know, to sales executives, like you said, is a, you know, probably 90 to 100 million in revenue of our whole sales and marketing business. But it's an area where we're excited about because we see opportunity there, and we see more upside than downside there. in terms of how we can continue to enhance it with additional contacts, simplified user experience and interface, et cetera. And so that's why I think we're seeing the differences internationally versus domestically. core strength is here around the DUNS, around the data, how we're building muscle upon muscle with these acquisitions of really honing in on what we're really strong and great at. And then from that basis, moving more definitively into the sales, pure sales side.
spk09: So at the risk of overgeneralizing, is it safe to say that D&B sales and marketing initiatives are more as opposed to being sort of more CRM-oriented? I just want to make sure I can kind of wrap my head around it to go to market a little bit.
spk10: Well, I think it's going to target some of the data feeds, the CRM. So it's, you know, the lines blur a bit there. But what I'd certainly say is from an audience targeting solution perspective, We are, our foundation is data and marketing moving into sales. And like I said, if you take sales and you break it down, there's larger enterprise sales where, again, there's a lot more research and thought going into building campaigns versus you want to sell to every hospital and you want the CIO of every hospital. And it's that simple. We're going to continue to move more and more in that direction. Really what our focus, Andrew, is really solidifying the foundation of where we're strong And also continuing to create the DUNS number in a more and more meaningful way in the online world. So you see, obviously, the strength that we have with it in the offline world. And as we go online, really being able to take that, like there are a number of online IDs that have to get created along the process. This will enable us and our customers that have guns numbers and making it more relevant to be able to more easily market online. So that's what we're excited about. And that's why I said the focus is on that right now. Well, in the meantime, we continue to focus on the contacts, on all the things that we've talked about before from a pure selling perspective. You know, we've got a significant, we talked about having 30 million high-quality contacts by the end of this year. We're over that. We're at 31 million at the end of Q3. So the focus that we have of, you know, contacts and things that will benefit just general selling, we're absolutely continuing to move in that direction. And like I said, improving the UI, improving the integration of our marketing efforts. Really what we're doing with these acquisitions is really hardening a great capability in the leadership space that we have in the B2B world.
spk09: All right. Look forward to following your progress, Seth. It's really helpful.
spk10: I appreciate it. Thank you, Andrew.
spk06: Our next question comes from the line of Gary Bixby of Bank of America Securities.
spk07: Hey, guys. Good morning. Nice to see the organic revenue growth progress you made here. I wanted to ask about the portfolio in regards to growth. You talk about risk. I know it's small within F&R, but remains robust. This online B2B marketing growing rapidly. Is there a base of revenue there? Are some pockets of revenue that are declining and sort of drags on growth that these smaller parts of the portfolio are really having to outgrow? Or would it be more reasonable to say there's big pockets of legacy revenue within the company that just aren't growing and it strikes me the growth rates would be faster given all the optimism around new products and customer wins that you've talked about in some of these areas that are growing really well if everything else was you know growing as as well and maybe if you could just sort of size what part of the revenue base is really growing what part of if any is declining and what part is stable at this point thank you
spk08: Yeah, Gary, it's, you know, to your point, how we think about, you know, an attack, right, you know, our operational plans from that perspective. And so when you look at, you know, the overall, you know, finance and risk, right, you know, this quarter, you know, grew about 4% in North America. where you saw, you know, the primary growth and we've talked about it, you know, call it being, you know, roughly, you know, in the $100 million range, you know, that third party risk and compliance business. And so that's certainly been accelerating at like strong double digits. And when you kind of blend the finance solutions and then the lower end of the market, which was the legacy credibility business, that was one of the businesses, Gary, that we made a lot of strategic changes to, you know, in terms of sales practices, in terms of how we went to market there. And so that had been, you know, a bit of a headwind for us, you know, as we were kind of leading through late last year and into this year. And so what's good is as we continue to progress through, a lot of those changes, you know, are now under place. And so we're picking up from a place where the back door, as Anthony calls it, is being closed more and more from that perspective. On the sales and marketing side, If you flip onto that again, you have the master data management business, which is, you know, the largest component of that. Very strong, very sticky, you know, I would say grows, you know, similar to what, you know, for instance, the finance, you know, business grows from that side of the equation because it really kind of sits as that middle anchor layer in larger companies, you know, data lake strategies, et cetera. When you start to peel back the two components, you know, what Anthony was mentioning is that the sales business has been, you know, something that we've had to really improve since we got here. And so it's getting better, but certainly, you know, has been something that has been, you know, a bit of a headwind, you know, as we've progressed through, you know, since the privatization. The marketing business, as Anthony said, and to Andrew's point, smaller part of that business, we talked about it being roughly $30 million, but it is growing quite rapidly from that perspective. And so having more focus, more attention, adding the assets of NetWise and IOTA, uh we're trying to build again muscle on muscle and really you know take advantage of an accelerating market and one that traditionally has been focused on larger you know kind of b to c side this is very focused business to business and and when you think about you know approaching you know what dun and brad street right you know with our you know duns number and tying that to a digital id and then you know getting to brian hipster or anthony jabor the cfo ceo within that organization the advertisement for a multimillion dollar ERP or HRIS system is very different than, you know, the, the sofa, you know, that I, I mentioned, you know, last week and then, you know, showed up as an ad from that perspective. So, so again, you know, that's, that's kind of how we see, you know, the, the growth, you know, opportunities in certainly to, you know, hot places are, are in that third party risk and compliance and in online marketing.
spk07: Great, thanks. And then the follow-up, the new innovation, obviously it sounds like a lot of good things going on. Just at a high level, how much of the new products and innovation you've been doing is sort of replacing... stuff that when you got there wasn't of the quality it should be to win in the market versus new innovation that expands your capabilities and thus expands, you know, revenue opportunity, market opportunity. Is there still some of that we're fixing stuff that wasn't good enough or the pivot towards, Hey, this is really largely incremental and additive to our growth potential. You know, are you far along on that? I just, I haven't, I've heard you really discuss that since maybe around the IPO where you were still fixing a lot of stuff that wasn't done right. Thank you.
spk10: Yeah, I think that's a great question, Gary. And certainly we have examples in both buckets. And even products, you know, which were good, the markets continue to move and need to continue to, you know, to move with them and ideally move ahead of them. You know, certain clients are ready. Brian, do you have any quantification on that?
spk08: Yes. So, you know, Gary, from your perspective, what I would say, when I look at the components that are in that new product vitality index, you know, many of those things, like, for instance, on the analytics studio, right, or, you know, what we're doing in that, you know, digital marketing space are really net new opportunities, net new TAM. Anthony mentioned, you know, on the early side of what we're doing with um you know esg right again that's a new in essence kind of vertical you know that we're going into so you know net net new opportunity from that side uh in terms of you know some of the work we're doing from you know continuing to you know upgrade uh platforms whether it's you know ui ux and some of the you know sales spaces um whether that's in terms of just you know uh off of and, you know, really upgrading, right, the underlying structures of some of the, you know, platforms on the, you know, finance and risk side. That work is still ongoing. But, you know, the majority of those revenues from a new product perspective are, you know, net new versus, in essence, replacing, if that makes sense.
spk07: That's very helpful. Thank you. Thanks, Gary.
spk06: Your next question comes from the mind of Manav Patnik of Barclays.
spk03: Thank you. Good morning. Just on the TransUnion partnership, I just wanted to confirm, you know, I did remember seeing some press releases focused mostly on South Africa. So I just want to confirm this was something different and bigger. And also, if this was the first time, you know, D&B has partnered with a consumer credit bureau to do anything like this.
spk10: Sure. Thank you, Manav. Yeah, no, this is something larger. That was a previous deal that we've done with them together in South Africa. This one is domestically focused. And to my knowledge, I don't believe anything had ever been done with a consumer credit bureau before, and certainly not in recent history. So going back far enough, there might have been something, but certainly not in recent history. So that's what we're excited about. It's new capability in a market. Again, as we're looking at you know, where we're strong, where we're average, where we've got vulnerabilities, what are the things that we can do? This is something which helps in an area where we're vulnerable that we've talked with all of you about before, you know, from a competitive perspective. And it really puts us in a position of strength here. So, you know, we're excited about it.
spk03: Got it. Thank you. That's helpful. And then, you know, just broadly, you know, historically at least, probably still to a certain extent, the fourth quarter is always the you know, heavy loaded quarter for Dun & Bradstreet. I know you guys decided to change things up for the better. So I'm just trying to understand or get some help on how we should extrapolate, you know, let's just say the four and a half plus percent organic growth to end that in the fourth quarter and how we should think about that, you know, into 22.
spk08: Yeah, Manav, I think Anthony said it the right way, right? It sets a really nice foundation for us to continue to accelerate organic growth into 2022. And so obviously, as we finish out the year and we get into the Q4 earnings call, we'll provide formal guidance at that time. But Certainly, we're really pleased with the continued acceleration and the continued momentum we're building into that recurring organic revenue stream.
spk03: Got it. Thank you.
spk06: Your next question comes from the line of Kyle Peterson of Needham.
spk13: Hey, good morning, guys. Thanks for taking the questions. Just wanted to touch on the M&A outlook and pipeline. Obviously, you know, these two deals this morning seem like good fits. Are you guys ready and still looking for more deals, or should we expect some sort of a digestion and integration period for these two?
spk10: Kyle, what I'd say is, we're always looking for M&A that will help us and drive shareholder value. And, you know, the way we're organized, you know, our team can digest these ones. If we saw a great one pop up tomorrow, we'd go after it, you know, with vigor. And we've been active in the space we've looked at, you know, a number of companies, as you can imagine. And, you know, oftentimes the best, you know, strategic move you make is when you don't do something. And so, you know, we're pleased with the decisions we've made walking away from some deals. But we've been very thoughtful about what are the right types of acquisitions for us that would really benefit, you know, our clients and help accelerate our growth. And, you know, and that will continue. We're We'll have conversations today on other M&A opportunities.
spk13: Got it. That's helpful. And then I guess just a quick follow-up on the outlook to get on the interest expense. I guess the guidance implies that there's a little bit of a step up in 4Q compared to where we've been at over the first nine months of the year. Is there anything going on related to pre-funding some of this M&A that we should keep in mind, or is there just an element of conservatism or anything that we need to keep in mind for our models?
spk08: Yeah, so clearly, you know, we came out of the range of what our original guidance was, right? And so we, you know, we stepped that up. You know, certainly we think that, you know, we'll continue to perform well against, you know, expectations on that side. And certainly, you know, as we head into the end of this year, you're right, we'll use, you know, a little bit of, you know, cash in some of the revolver, right, to, you know, fund the two acquisitions. But really, as we lead into next year, obviously the other thing we have our eyes on is both the secured and unsecured notes that have the February 22 non-call period coming up. And so those are at $420 million at $6.875 and $450 million at $10.25 million. Obviously, you know, the market's in a very different place than it was almost two years ago when we put those in place. So all of those types of things we have our eyes on and we'll look to drive, obviously, first and foremost, you know, the operational results, but continue to see good opportunity in terms of some of the non-op items to enhance, you know, our overall earnings.
spk13: Great. That's helpful. Thanks, guys, this quarter. Thanks, Kyle. Thank you.
spk06: Your next question comes from the line of Andrew Steinerman of J.P. Morgan.
spk12: Hi. I wanted to talk a little bit about BizNode revenues. Of course, I see on slide six in the footnote that BizNode revenues are on track for 19% of 21%. So if you could just help us focus in on third quarter BizNode revenues. I know you're going to say that there's some like-for-like type situation, but my question is, you know, is BizNode revenues growing yet? And, Udo, when do you think kind of the pace of the BizNode revenue growth could pick up?
spk08: Andrew, thank you. Yeah, you know, as Anthony said, you know, this is a large scale, you know, transaction, obviously, you know, really complex in a pretty tough period. And the team's done a really nice job. And so when we look at kind of comparables. Last year, that business was declining, call it about a point and a half. This year, it's growing, call it somewhere around 2%. And so it is turned the corner, Andrew, from that perspective. The Nordics are having a good year from that perspective. And what we're seeing in, you know, what our original thesis was, was that the Dun & Bradstreet products are growing faster than the overall, you know, biz note. So they're certainly driving, you know, the majority of that growth. And Anthony even dropped, you know, as we brought some new products to bear in the sales and marketing relatively quickly, those are growing, you know, almost, you know, 12.5%. So small base, but of course showing, you know, good momentum from that perspective. Okay. Thank you. Mm-hmm.
spk06: Your next question comes from the line of George Tunnel of Goldman Sachs.
spk02: Hi, thanks. Good morning. You originally expected organic growth to be in the lower half of the three to four and a half percent range in the third quarter, and you outperformed that target. Can you elaborate on what drove the upside and if there was any pull forward from future quarters that impacted the growth?
spk08: Yeah, George, so no pull forward from that perspective. When we talked about, you know, in the prior call, we said that, you know, we were looking at kind of the middle, you know, or a little bit below the middle of the guidance range. And so, you know, we came in at, you know, the 3.7%. You know, certainly had good sales activities. You know, we've certainly seen not like a swing right on the usage side, but, you know, again, relatively in line with expectations. And, you know, really it was just a general, I would say, straightforward performance from that perspective. So pricing is flowing through. Sales are continuing to flow through and outpace overall revenue growth. And our retention has continued to improve. And so Anthony said it, our client engagement and the sentiment with our clients continues to improve and enhance. And, you know, those are all, you know, I would say,
spk02: positive indicators that you know we're doing the right things and i think the results are reflecting that got it that's helpful and and then as it relates to retention how much of the improvement is coming from your smb segment versus enterprise customers and um as you relate to smb can you provide uh examples of traction that you're seeing with smb focused new products uh your new smb portal and just provide a little bit extra detail there thanks
spk08: Sure. So maybe I'll open up with the retention numbers part, and then Anthony can talk a little bit about what we're doing with the product side. And so, again, we continue to, you know, we always focus on, you know, we call it muscle on muscle, right? So the strategic accounts have been nearly 100%, George, from that perspective. And so it's a large portion of our revenue, and, you know, the retention rates have been great. What we've seen is both improvements in the middle market customers, but also starting to see some improvements on that small side. So, you know, shifting from, you know, some more transactional to longer term. You know, our multi-year contracts, you know, continue to be in that, you know, roughly 50% range, a little bit, you know, below that. And then we're also, again, you know, really seeing and focusing on, you know, multiple products per rather than that kind of single, you know, product per that we were accustomed to on the small side. So, you know, maybe, Anthony, you can talk about what we're doing.
spk10: Yeah. You know, on the e-commerce side, we're excited about what we're doing. Again, that's a long play in terms of There's an article that Gardner talked about 43% of all B2B buyers preferred not speaking to a live person. So what that highlights is market more to them and give them e-commerce capabilities for them to actually make the purchases themselves. And the e-commerce initiative is one that's the long game for us in terms of building up more and more capability there and starting obviously with the SMB space. So we're excited with, you know, the number of additional subscribers that we have. You know, it's almost 40%, you know, over last year. We've created a lot of new product capability in that space as well, in addition to data sets, et cetera, that they can buy. But we've also launched, you know, our freemium to premium working model. So our clients being able to take our S&D client, take our product, test it, play with it, like it, then buy it. And, you know, that's worked out well. But really across the business, you know, in the, like I said, online marketing side, we have a RevUpNow capability that we've launched on our e-commerce site where, you know, SMBs can sign up inexpensively, try it out, get reports on what type of hits that they've been getting with the online marketing, who clicked on what ads, you know, et cetera. So we're going to continue to, you know, deliver more and more new capabilities and think about that space. And I hope what you're seeing is, you know, we're fulfilling, you know, that, and we continue to add more capabilities in that space to build it up further and further.
spk02: Got it. Very helpful. Thank you.
spk06: At this time, I'm showing no other questions. I will now turn the call back over to Anthony Jabour for closing remarks.
spk10: Thank you. As always, I'd like to thank my Dun & Bradstreet colleagues for their exceptional efforts to sustainably grow our business for the years to come, and to our great clients for their partnership and for their guidance. Thank you for your interest in Dun & Bradstreet for joining us on the call this morning. Hope you have a wonderful rest of the day.
spk06: This concludes today's conference call. Thank you for participating. You may now disconnect.
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