Dun & Bradstreet Holdings, Inc.

Good morning and welcome to Dun & Bradstreet's second quarter 2022 conference call. As a reminder, today's call is being recorded and your participation implies consent to such recording. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. With that, I would like to turn the call over to Ed Yen. You may proceed.

Thank you. Good morning, everyone, and thank you for joining us for Dun & Bradstreet's Financial Results Conference Call for the second quarter of 2022. On the call today, we have Dun & Bradstreet CEO Anthony Jabbour and CFO Brian Hipcher. 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 Donna Bradstreet's Investor Relations website at investor.dnb.com. With that, I'll now turn the call over to Anthony.

Thanks, Ed. Good morning, everyone, and thank you for joining us for our call today. I'll begin with an update on our second quarter results and then provide a general business overview, including some of the more strategic initiatives we have going on. Following my commentary, Brian will provide further details on our second quarter results and our outlook for the remainder of the year. After that, we'll open up the call for questions, and then I'll finish up with some closing comments. The second quarter of 2022 was another solid quarter of financial and operational execution. Adjusted revenues for the total company grew 3.1% or 6.3% before the effect of foreign currency. And revenues on an organic constant currency basis grew 3.7% for the second quarter. Despite an increasingly challenging macro environment, we continue to show the defensible growth nature of our company. With over 50% of our revenues under multi-year contracts, over 96% gross revenue retention, and over 95% recurring revenues and solutions that are deeply embedded within our customers' most critical workflows and technologies, we are in a privileged position to be able to weather these difficult markets and continue to execute upon both our near-term and long-term objectives. In fact, on July 28th, we announced a quarterly dividend of 5 cents, which will be the first quarter of our annual dividend of 20 cents per share per year. We continue to drive strong results through our transformation and acceleration efforts, and I'm pleased to be able to share a portion of those gains with our shareholders. From a segment perspective, organic constant currency growth in both North America and international was driven by demand for our finance and risk solutions as broader business and macro conditions continue to create a strong demand environment. Our 3.7% organic constant currency growth included a 1% negative impact from the conclusion of the GSA contract and continues to show our progress towards sustained mid-single-digit growth. As businesses throughout the world face deteriorating conditions, DMV stands as a trusted provider ready to deliver the mission-critical data and analytics that help our customers underwrite with confidence in times like these. Our finance business continues to be solid in North America and international, with growth driven through receiving incremental value for the enhancements we've made to our data, delivery, and technology platforms. As businesses look to tighten their credit and business lending underwriting standards, we believe that our solutions are uniquely positioned to help clients and prospects make better decisions when it matters the most. The same goes for our third-party and supply chain risk management business, which had another quarter of strong double-digit growth. These solutions are a natural progression to finance organizations throughout the globe as they look to meet the evolving demands of enhanced data-driven reviews on global third-party participants. We believe that in the coming years, third-party and supply chain risk management will continue to be a top priority for businesses, and we will continue to invest in data and software enhancements to meet this increasing demand. On the public sector front, While this quarter marked the completion of our direct relationship with the GSA, we continue to make significant inroads with several of the federal government agencies. Whether it's Food and Drug Administration, the Small Business Administration, the Department of Defense, or FEMA, U.S. federal government agencies continue to rely upon the DUNS number and the data and analytics that support their missions. And finally, with sales and marketing, we have made a significant progress this quarter on enhancing and upgrading our solutions in North America, while localizing and releasing international versions to our clients across Europe and Asia. For instance, our new localized version of Hoover's in Europe has achieved a near 50% increase in revenue versus prior year, Now, we believe there's ample greenfield opportunities to continue to accelerate growth over the coming quarters and years. This is yet another example of how we continue to prove out our thesis that as we bring new solutions to geographies, customer demand is high. In fact, the D&B solutions overall in Europe grew over 15% this quarter. With Europe continuing to localize new solutions and North America bringing incremental innovation to bear, I'm happy to report that we built upon our first quarter vitality index of 10%, with a second quarter vitality index score of 15%. While many companies are pulling back due to cyclical pressures, we are continuing to drive forward with our strategy, and I'm pleased with both our financial results and operational progress. As we continue to execute against our near-term objectives, our guiding strategic principles remain the same. Innovate solutions and localize them throughout the world. Increase our wallet share with strategic clients through expanded data sets and complementary solutions. Approach and monetize the small business channel in new and innovative ways. And continue to grow international in both our owned and worldwide network markets. On the innovation front, Our product, technology, data, and analytics teams were hard at work delivering some exciting enhancements to our existing solutions and bringing new solutions to market that will continue to drive the progress I just mentioned in our vitality index. With the latest release of our fraud suite, we've signed our first two client contracts, moved the solution from pilot to general release, and have a growing multi-million dollar pipeline for the second half of this year. We continue to see a strong demand for risk mitigation solutions as fraudulent activity has historically risen during periods of global economic distress. Prospects are looking for data-driven solutions to help sift through hundreds of thousands of transactions that could result in millions of dollars of losses if even one fraudulent transaction is missed. We believe that our B2B-based fraud suite can play a unique role in fending off this type of activity, and the early signs of our building pipeline are proof of that. On the sales and marketing front, we continue to make progress on laying the foundation for our accelerated growth in our sales solutions. We grew our business contact database to 441 million global contacts, including 41 million emails and 18 million direct dials, and released the new version of B&B Hoovers for small business. This solution is a lighter version aimed at delivering packets of contacts that can easily be activated through our clients' MarTech and SalesTech solutions and keeps clients coming back for more as each month new leads are generated. The solution is sold through both our inside sales and digital channels, which we believe is a more effective way for us to reach the tens of millions of SMB prospects that have been an untapped market for us to date. We also completed the integration of our audience solutions business, including the integration of the DUNS number throughout our enhanced business identity graph. With NetWise and IOTA growing over 20%, we continue to see big potential in the B2B digital marketing space over the coming years, and we'll look to capitalize on our strong momentum there. And the last one I'll touch on is the enhancements we've made to our ESG intelligence score. We now have detailed scores on 34 million companies in 39 markets throughout the globe. Again, at D&B, we want to make sure that when we score a business, it's informed through accurate and validated data versus modeling companies based on simple things like industry or geography. For instance, with the recent addition of businesses' consolidated utility bill data, we're able to calculate the carbon emissions of a public or private company at a level of granularity we believe is unparalleled in the industry. We continue to see strong engagement from our existing customer base and are pleased with not only the wins we have seen in the quarter, but the growing pipeline across several industry verticals. Moving on to sales, I'm pleased to report that the second quarter was another strong one for our strategic client segments in both North America and international. In North America, we won new business with Lendio, a modern lending platform that helps businesses get funding in a new and innovative way. Lendio will leverage our data to make offers to small businesses enabled by Lendio's loan marketplace. With the millions of small businesses that come to Dun & Bradstreet to understand, monitor, and potentially impact their business credit scores, many will take this step to get the funding they need quickly. Another way we are supporting the intelligent flow of capital is our expanded relationship with Goldman Sachs. Through our coverage and patented matching capabilities, we're able to link Goldman Sachs consumer credit card holders with their associated businesses to create a significant source of new commercial credit card prospects for Marcus by Goldman Sachs. On the renewal front, Wells Fargo, a client that has been with us for over 35 years, renewed a multi-year contract for our products and data to support several use cases across their business functions, including portfolio management and monitoring. Another significant multi-year contract renewal was with one of the largest payroll and human resources management companies in the world. Through the direct integration of some of our latest scores and analytics into their key platforms and work streams, we were able to automate the risk decisioning process upfront and then integrate financial health monitoring capabilities to mitigate the ongoing risk exposure going forward. In our D&B Europe market, we won new business with a Global 500 pharmaceutical company. The multi-year, seven-figure deal provides various products across risk, sales and marketing, including finance analytics and data blocks. We also won a multi-year, seven-figure master data and credit monitoring deal from a large Nordic telecom provider, displacing a significant global competitor. And finally, we began selling our D&B ESG intelligence solution in Europe and had some notable wins, including a deal with a large German metal processing company as they looked to further understand the ESG posture of their large and complicated supply chain. In the SMB channel, we continue to look for ways to enhance our offerings to small businesses through both our internal efforts along with strategic partnerships. One such partnership is our latest integration with Plaid. Through Plaid, businesses can provide permission to connect their business bank accounts directly to D&B and directly influence their business identity and scores. Even with a modest number of bank accounts connected right out of the gate, 90% of the companies that added banking information improved their risk assessment via delinquency score by up to 40 points. As the global economy slows, we look to assist clients and prospects with more timely and more accurate reflections of their business standing and hopefully allow them to access capital in a more efficient and effective manner. At the same time, we continue to progress with our blended score as multiple proofs of concepts are underway. As you can imagine, the testing process is a thorough one when it relates to the inclusion of a new underwriting score. but we are quite optimistic about the early results and the significant improvement in our ability to more broadly and more accurately score small and medium businesses today. We've also been focused on new ways to expand our reach and serve more of the SMB community. One example of this is how we're adapting to more seamlessly meet the needs of small businesses through our Embedded Credit Partner Program. The goal of this program is to continue to provide small businesses with credit access and education by embedding directly within products used every day in their flow of work, such as their business banking accounts or accounting software. Think about how a customer credit score are embedded in consumer banking apps, except we're doing it from the commercial side. We've offered this successfully to a few partners over the past year and have taken these learnings to scale the offering, allowing our customers themselves to become more holistic partners to small businesses. And finally, I want to share with you the fantastic progress we made in our international business. As we previously discussed, the migration of customers from legacy outdated products to our modern D&B solutions in Europe was a critical part of our acquisition of BizNote. And through disciplined execution, the D&B Europe team has now migrated over $50 million in cumulative revenues to our modern D&B platforms. This coordinated effort moved over 6,000 customers in the second quarter, which improved our vitality index and has put us in a better position to drive cross-sell efforts from our latest offerings versus legacy products. I want to congratulate our team on achieving the high bar we set out during the acquisition and recognize the operational execution that led to D&B's largest successful migration in the last 20 plus years. Overall, I'm very pleased with the way we're executing during the first half of 2022 and believe Dun & Bradstreet is uniquely positioned in the market due to our combination of high-quality revenues, increasing innovation, strong margins, solid balance sheet, and disciplined capital allocation. I look forward to continuing to report on our progress over the coming quarters, and with that, I'd like to now turn the call over to Brian to discuss our financial results for the second quarter in more detail and the outlook for the remainder of 2022.

Thank you, Anthony, and good morning, everyone. Today, I will discuss our second quarter results and our outlook for 2022. Turning to slide one. On a GAAP basis, second quarter revenues were $537 million, an increase of $16 million, or 3% compared to the prior year quarter, and 6% before the effect of foreign exchange. Net loss for the second quarter was $2 million, or a diluted loss per share of less than 1 cent compared to a net loss of $52 million for the prior year quarter, or a diluted loss per share of 12 cents. The decrease in net loss of $50 million for this quarter was primarily due to lower provision for income taxes and a reduction in interest expense. Turning to slide two, I'll now discuss our adjusted results for the second quarter. Second quarter adjusted revenues for the total company were $537 million, an increase of 3% or 6% before the effect of foreign exchange versus the prior year quarter. Revenues on an organic constant currency basis were up 3.7%. Second quarter adjusted EBITDA for the total company was $200 million, an increase of $2 million or 1%. The increase in EBITDA was primarily due to revenue growth from the underlying business, partially offset by investments leading to higher data and data processing costs, and $3 million from the impact of foreign exchange. Second quarter adjusted to EBITDA margin was 37%, a decrease of 90 basis points compared to the prior year quarter. Excluding the impact of acquisitions, adjusted EBITDA margin was 38.4%, or an increase of 30 basis points. Second quarter adjusted net income was $107 million, or adjusted diluted earnings per share of 25 cents, compared to $108 million, or 25 cents per share in the prior year quarter. Turning now to slide three, I'll now discuss the results for our two segments, North America and international. In North America, revenues for the second quarter were $381 million, an increase of 7%. Excluding the impact of foreign exchange and acquisitions, North America organic revenue increased 2.8%. In finance and risk, revenues were $209 million, an increase of 5%, primarily due to new business and higher customer spend in our third-party and supply chain risk management solutions, partially offset by lower revenues from the conclusion of the GSA contract at the end of April. In sales and marketing, revenues were $172 million, an increase of 9%. The growth was primarily driven by our marketing solutions, which includes IOTA and NetWise. North America's second quarter adjusted EBITDA was $161 million, a decrease of 4%, primarily due to investments leading to higher data and data processing fees, partially offset by organic revenue growth. Adjusted EBITDA margin for North America was 42%, or 44%, excluding the acquisitions. Turning to slide four. In our international segment, second quarter revenues were $156 million, a decrease of $8 million, or 5%, and an increase of 5% on a constant currency basis. Organic revenues on a constant currency basis increased 5.7%. Finance and risk revenues for the second quarter of 2022 were $102 million, a decrease of $2 million, or approximately 2%, and an increase of 7% on a constant currency basis. Growth was driven across all markets, including higher revenues from finance solutions in our UK market, higher cross-border data fees across our Worldwide Network Alliances, and increased API solution revenues in our European markets. Sales and marketing revenues for the second quarter of 2022 were $54 million, a decrease of $6 million, or 9%, and an increase of 2% on a constant currency basis. The increase was primarily driven by higher data sales in our UK market and higher product royalties from the Worldwide Network Alliances, partially offset by the divestiture of a B2C business in Germany. Second quarter international adjusted EBITDA was $46 million for the three months ended June 30, 2022, an increase of $4 million, or 9%, compared to the same period last year. The improvement in adjusted EBITDA was driven by revenue growth as well as the cost savings in Europe related to our business acquisition. Adjusted EBITDA margin was 30% for the three months ended June 30, 2022, a 380 basis point improvement versus the prior year. Now turning to slide five, I'll walk through our capital structure. As of June 30th, 2022, we had cash and cash equivalents of $210 million in total principal amount of debt of $3,783 million. We had $755 million available on our $850 million revolving credit facility as of June 30th, 2022. Our leverage ratio was 4.2 times on a net basis, and the credit facility senior secured net leverage ratio was 3.6 times. Turning now to slide 6, I'll now walk through our outlook for 2022. We continue to expect total adjusted revenues on a constant currency basis to increase 5% to 7%. We now expect adjusted revenues after the effect of foreign currency to be in the range of $2,225 million to $2,270 million, or an increase of approximately 2.5% to 4.5%. This update reflects a 2.5% headwind to revenue after the effect of foreign currency due primarily to the continued strengthening of the U.S. dollar versus the euro, Swedish krona, and the British pound. And in regards to our primary KPI, revenues on an organic constant currency basis are still expected to be in the range of 3% to 5% for the full year. Adjusted EBITDA is still expected to be in the range of $865 million to $905 million. And finally, with rising rates, we now expect interest expense to be in the range of $185 million to $195 million. and are now expecting adjusted EPS to be in the range of $1.10 to $1.17. Additional modeling details underlying our outlook are as follows. Depreciation amortization expense of approximately $90 million, excluding incremental depreciation amortization expense resulting from purchase accounting. Adjusted effective tax rate of approximately 24.5%. Weighted average diluted shares outstanding of approximately $430 million, In CapEx, we expect to be at the higher end of our $150 to $180 million range. The second quarter came in as expected, and we continue to see the remaining quarters growing on an organic constant currency basis as previously communicated. The acceleration in Q3 and then Q4 is being driven by our strong current and prior year sales, the impact of our pricing initiatives flowing through, and continued progress in our retention efforts. Adjusted EBITDA is also expected to ramp up in the third and fourth quarters as we annualize prior year investments in the first half of the year and see the contribution margins flow through from revenue growth in the second half, with only a slight impact of $6 million in the second half of the year from foreign exchange. As Anthony mentioned earlier, our execution in the first half of the year has been strong. and sets us up to continue to achieve our near-term objectives while staying on track with our longer-term goals. Despite a challenging macroeconomic backdrop, D&B has a mix of assets, financial profile, and a set of opportunities in front of us that puts us in a privileged position in the market and allows us to continue to build upon the significant progress we have made to date. With that, we're now happy to open up the call for questions.

Operator, will you please open the line for Q&A?

Thank you. If you'd like to register a question, kindly press the 1 followed by the 4 on your telephone keypad. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. Again, if you'd like to ask a question, please press the 1 followed by the 4 on your telephone keypad. And one moment please for the first question. Our first question comes from the line of Kyle Peterson with Needham. Please proceed with your question.

Hey, good morning, guys. Thanks for taking the questions. Just wanted to start, you know, particularly on your thoughts around capital allocation. You know, good to see, you know, the dividend, you know, get started up here. Just wanted to pick your brain on, you know, what made you guys, you know, choose, you know, the dividend over, you know, potential share repurchase and is it neither or situation or is there potentially room for both here?

Thank you, Kyle. Well, really, you know, the dividend we thought about, and as I mentioned on previous calls, capital allocation is always top of mind for us. It's always, you know, something that we discuss at our board meetings and obviously evaluate, you know, the world around us. And the dividend is a way for us to return value to our shareholders, which we thought, you know, made sense, obviously, and we felt very confident in our, you know, capabilities and delivery, you know, to be able to do that. But also we thought it would open up an ability to reach a larger set of potential shareholders. And lastly, you know, most of our peers pay a dividend. So that was the reason I'd say, you know, we chose to give a dividend because And the rest of the capital allocation, I'd say, is pretty much in line, right? You know, first and foremost, still, you know, focusing on investing for organic growth, you know, still looking for, you know, strategic M&A that we think will drive value for us, and obviously still focused on, you know, paying down our debt. You know, we And our goal is to get under four times by end of the year, beginning of next year. And we feel really good about the execution that way. So those are some of the reasons why we came up with the dividend and the rest of our priorities from a capital allocation perspective.

Understood. That makes sense. And I just wanted to follow up. have there been any changes in client conversations? And just given there's been some increased fears of a global recession here, whether it's downsizing of deals or cycles getting a little bit longer, dragged out, just wanted to see if you guys noticed any change in tone with clients.

Well, I'd say the largest part is a lot more engagement with our clients. So as there are fears of recession looming, the data quality matters the most. And obviously, you know, we're very strong in that regard. And so our clients are engaging with us deeply to really have access, you know, to the best insights out there for them to, like, you know, as you think about, you know, when there's risks, obviously recession, you know, creates risks for them. And us being in a position with the high-quality data that we have really puts us in a strong position with our clients to really help them at times like this. So I'd say it's been very positive for us. But certainly other areas where, if you think on our sales and marketing side, where we obviously don't help our clients in the same way during recession, we're seeing our I'd say our sales cycles lengthen a bit, not going away, but just going through maybe, you know, one extra step of, you know, approvals. But again, the types of, you know, capabilities that we're providing in the space are, you know, mission critical as well for them, right? It's a great return for them. It's all about, you know, everyone wants to be more effective, more efficient. leveraging their data is always at the core of that, and leveraging analytics helps them always be smarter. And so heading into a recession, whether it's on the defensive side with finance and risk or the offensive side with sales and marketing, you know, quality data is at the core of it, and that's what our focus is on. Makes sense.

Thanks, guys. Thanks, Kyle. Thanks, Kyle.

Our next question comes from the line of Hamza Mazari with Jefferies. Please proceed with your question.

Yes, hi. Good morning. You know, you had mentioned innovating and localizing solutions. I think you mentioned increased wallet share with new data sets, the SMB channel, and international. Maybe just frame for us which of these is further ahead? Where is there more opportunity? And I guess Just stepping back at a high level, what is missing for you to do consistent mid-single-digit organic growth sort of quarter in, quarter out? And so however you want to answer that question, I just mentioned some of the key sort of growth drivers you had mentioned in your prepared remarks.

Yeah, no, I appreciate it, Hamza. There's a focus, and I hope what you appreciate is you know, our consistency with our strategy with these four areas that we're focusing on because, you know, we've been very regimented in our approach here and in our discipline. And I'd say the, you know, the furthest along, you know, for us is, you know, probably our international expansion. We really believed early on that, you know, as we created a more focused accountability and and a new product capability that we could grow then. We're pleased with the results we're seeing there. We continue to execute well with our strategic clients. And I'd say on the innovation side, I'm very pleased with how we have the flywheel spinning right now. We've got lots of capability coming out. You're seeing it in a lot of the prepared remarks that we shared. But really across the board, I'm pleased with the momentum that we have. And on the SMB side, similarly, you know, there's a new area that we're trying to be a little more bold on in terms of how we go after that. And that is something where, you know, we look at it in two facets. You know, one facet, how can we drive more traffic to our e-commerce sites? That's where we think increasingly that's the ideal place to serve the SMBs and where they want to be served. And the other is how can we bring more and more capability to the SMB client base and help those small businesses, especially in times of a pending recession where we've got lots of capability that can help. I gave some examples earlier around Lendio where we can help give, you know, real-time credit approvals or with Plaid where we can have an SMB connect us to their commercial bank account for us to find ways to improve their credit scores and help them more. So, of those four, Like I said, that was probably the order of where we're furthest along in the order that I walked through. And I think in terms of mid-single-digit growth, that's really the journey that we're on. I mean, as you look at our performance in the second quarter, if you strip out the GSA, which was lost in 2018 and finally came off, that's a point of growth. We're in the high 4% growth rate. right now. So I feel really good about, you know, how the business is operating, like I said, financially and operationally. And maybe just one more thing I'll add to that is not just the actual quantity of revenue growth that we're having, but the quality of it. You know, we've been focusing on multi-year contracts. That doesn't help us in quarter, right? We've been focusing on migrating from older legacy applications to our new point of arrival ones. That doesn't help us in current quarter. you know, our vitality score and focus on driving more growth from new products. Most of this helps us as we improve the quality of our revenues. So I want to make sure that, you know, to highlight that for you, that the quantity is there and we've got confidence, but also the quality that we're focused on of our revenue and earnings on a go-forward basis.

That's very helpful. Just my follow-up question, I'll turn it over, is just on sales and marketing, you know, you mentioned kind of lengthening of the sales cycle. I guess, you know, when you look at sales and marketing, I know that business was pretty different in 2009, but when you look at this business, you know, maybe walk us through digital marketing, sales acceleration, and kind of the master contact data and just differences in those business lines so investors can kind of get a view of how discretionary each of those business lines are relative to each other. And so just any thoughts as to cyclicality of those particular lines of business.

Yeah, hey, Hamza, it's Brian. It's a great question, Juan. You know, we continue to to really drive upon. When you look at the overall, you know, revenue makeup, you know, over half of it is under master data management. And so that is something that is extremely sticky, very embedded within the software, within the workflow. So think about master client record, master vendor record. And so, again, very large piece, you know, growing, you know, kind of in that similar to the overall, you know, company's growth profile in that mid-singles. The sales component of it, again, we talked about that primarily being on the Hoover side. It's something that had been declining over a period of time. I think Anthony mentioned earlier our investments in contact assets, data assets, intent data, what we did from a UI UX perspective. And really now in a position to start to, you know, accelerate that off of a relatively small base, you know, call it $90 million-ish, with some, you know, adjustments and enhancement to our, you know, go-to-market strategy. So, again, on that side, I think, you know, in the environment, there's a lot more upside than certainly, you know, there is downside from that perspective. And then last, the marketing business. And that's where it's a combination of our audience solutions combined with now NetWise and IOTA. Anthony mentioned NetWise and IOTA growing over 20%. And so it's really the tip of the spear. And when you think about getting more efficient, doing more with less, You know, those are the things that, you know, when things tighten up from a marketing budget, a sales budget, you know, the ROI you get on the, you know, spend within, you know, that kind of MarTech data asset is very high. And so, again, we're at early stages from that perspective and expect to have, you know, greenfield and opportunity to continue to weather these times, you know, very well.

Yeah, if I could add to that as well, as we look going forward, where, again, in the sales and marketing space, you know, we anticipate, you know, a slightly longer sales cycle, but clearly our solution is resonating with the market. One of the other tailwinds that we have is a lot more capability that we're also introducing. So it's not the same. list of capabilities going into a slightly longer sales cycle, but more new capabilities in terms of individual products, as well as the integrated approach that we're taking across all of our sales and marketing solutions so that we can solve bigger problems for our clients and be more core to their operations.

Great. Thank you. Thanks, Hamza. Thanks, Hamza.

Our next question comes from the line of Andrew Jeffrey with Trusta Securities. Please proceed with your question.

Hey, guys. Good morning. It's Gus stepping on for Andrew. Just want to talk about the supply chain risk management as a vector of growth. Could you help us quantify the potential revenue contribution there as it develops and grows?

Yeah, so I'll start with, you know, kind of, you know, given the quantification, and then, you know, Anthony, you know, and I will kind of go back and forth on the opportunity around supply chain risk management and third-party risk management, which I think, from my perspective, is quite exciting. We talked about it being, you know, roughly $25 million a quarter. So think about that, you know, for your analyzed, you know, running over $100 million. It is something that, again, was tangential to what we were doing on the finance solution side, and it's a natural progression of underwriting. So really underwriting from a financial perspective, from a risk and compliance perspective, as you think about the next steps. including things like ESG and cyber security. It is something that we see a lot of runway, not just over the next few quarters, but frankly, over the next few years.

Yeah, all I'd add to that is that's a growing area that we don't see going away, but we see... You know, we're getting more and more core to our clients and anchored on them and working on solutions that can really benefit them, you know, such as ESG and these, you know, new early, you know, growth areas where what we can provide to them from a repeatable, measurable, you know, scoring capability can really help when you really understand, you know, the regulatory environment that they're going to be faced with. And, you know, with our access to private company data as well as public company, you know, like I mentioned, we have 34 million companies that we cover globally. And if you think there's 50,000, not quite 50,000 public companies. You know, the majority of what we're covering are private companies, and we think it's really unique, and we think the regulations will lean into that as well. So we really think that there's a big opportunity for us to continue to grow in this space very nicely and, you know, certainly are in the midst of lots of exciting conversations with our clients.

Great. Appreciate the call. My follow-up question is could you talk a little bit about the driving the cross on how that progression is going? And, yeah, just kind of talk about pricing for your products, your single environment, opportunity to take that off and whatnot.

Yeah, sure. You know, we're pleased with the cross sell and a key part of that as well, obviously, is why I talk about, you know, getting the flywheel of innovation spinning, because we want to create more and more capability to solve bigger and bigger problems for our clients. We want to integrate them. And so it's easily digestible, you know, by our clients and repeatable. And we're pleased with the cross sell results that we're seeing on the sales side and also on the manufacturing side of more capability. And from a pricing side, same thing. Like I said, we've talked about ways that we would increase pricing, you know, where it made sense. We've got it in our multi-year contracts, which is obviously a key area. We've increased pricing in our base products, obviously, due to the inflationary environment that we're in. And, you know, and I'd say, you know, more so we I always say with pricing, you have to earn the right for pricing, and I believe we are with our clients in terms of our capability, our deliveries, and the value that we're creating for them and how we're servicing them. We're earning the rights every day for that.

Great. Thank you. Thank you, Gus.

Our next question comes from the line of Anish Saradra with RBC Capital Markets. Please proceed with your question.

Hi, this is John filling in for Ashish. Congratulations on the strong innovation as well as the vitality index. It looks like it accelerated 15% a quarter. Could you talk more about how this translates into organic growth and maybe tie that into pricing perhaps? Could we see pricing go higher if, again, you said you earned the right to price, but could this go to, say, mid-single digits to high single digits in time once the products are reintroduced and new products are driven to market? Thanks.

Sure. Thanks for that, John. I'll start with the first part and let Brian talk about the second. But clearly, you know, we're pleased with, you know, the results that we're seeing here. And, you know, I'd say from a growth perspective, obviously it helps. From a pricing perspective, it helps as well. So having clients on our point of arrival products is beneficial in many ways. So if you think of a renewal coming up, would you want your clients on an older legacy system that you have or your latest and greatest? What would improve your odds of retention, right? Obviously, them being on your newest offering. And similarly, with our newest offering, that's where we'll have the ability to drive more cross-sells more seamlessly. So if you think of our point-of-arrival product with risk analytics, that's where we're cross-selling our ESG capability. And we want to move our clients to risk analytics so they can take advantage of some of the other new capabilities that we have. Secondly, when you look at pricing, again, the power of that is by having your clients getting the most benefit from you, which is what our point of arrival products are delivering, it just puts us in a great position as we're driving value for them for us to drive value from a pricing perspective as well.

Yeah, just what Anthony said, right? As we continue to bring new products to bear, but also as we continue to migrate, for instance, off of old legacy products onto the new, you know, DMV products, it puts us in a great position to continue to raise price. When we talk about the price impact on the revenue, that's blended across the board. And so when you think about where we were, for instance, in international, those biz node regions, we had a lot of heavy lifting in Neurogen team to get that 50 million off of what were really disparate and legacy products onto kind of our consolidated modern platforms. As you hit that, then the opportunity to raise price, and raise price, I would say, even above and beyond where we are today is certainly something that, you know, gives us a lot of confidence in doing so as we go forward.

Great. Thank you for the color. And for my quick follow-up, just as we model out organic growth in the second half of the year, it seems like it was originally guided to improve in the second half as compared to the first half. Is this still the expectation given the strong first half performance?

Yeah, if you look, you know, to our earlier comments, we talked about 4.5% right in the first quarter, you know, 3.7% in the second quarter. That included, you know, the point-ahead win, right? So pretty consistent growth in the first and second quarters. We're going to have, you know, the full, you know, impact of the GSA both in the third and fourth quarters, right? So think about three months versus two months in the second. But Yeah, if you look at, you know, that continued trajectory going from the second quarter to the third to the fourth, we would expect the third and the fourth to be accelerating off of, you know, the second quarter.

Great. Thank you.

Our next question comes from the line of Seth Weber with Wells Fargo Securities. Please proceed with your question. Thank you.

Hi, guys. Good morning. Thanks for taking the question. I had a question on the international margin, which came in a little bit light from what we are looking for. Was there anything that you would call out there? I mean, it did step down a bunch from the first quarter. Is there anything notable that weighed on international margin in the second quarter?

You know, not necessarily. Clearly, when we talk about the foreign exchange impact, that's all, you know, going to hit into the international business in particular. You know, so when you look at the impacts of revenue and flow through on the EBITDA side, so that was probably the primary differential between those two. You really started to see the dollar, you know, kind of take off, right, you know, from a strengthening perspective more in the second than the first. Overall, the business gets another kind of partial offset because of some of the shared services operations we have, for instance, in Ireland. They're supporting not just a small piece of international, but also the overall North America operation. And that's where when you kind of blend the two, it gets down to something more like call it, you know, a 19% or 20% impact, you know, on the revenue side. So when you look at the full year, you know, you're talking $60 million of revenue, but, you know, maybe $9 million of EBIT impact. So pretty muted.

Right. Okay. So is this kind of low 30% range? representative of what you think the full year will be. It seems like FX is getting worse. I'm just trying to understand the margin trajectory for the international segment for the rest of the year. Is this kind of representative or do you think it should get better from here?

Yeah, again, I think, you know, it will continue to improve. You know, so we continue to make the progress on the BizNode, you know, cost savings, you know, front two. We have that obviously flowed through with the revenues, you know, flowing through in the first quarter. We continue to make progress in the second quarter. Some of this migration effort was obviously a pretty heavy lift to get done, and I think $40 million out of the $50 million of the revenue that got migrated was done in the second quarter. So now that that's behind us, you can imagine lots of the expenses associated with those platforms, right? And those kind of, you know, sundowns and wind downs, you know, start to peel off. So again, when we talk about the first half versus the second half, you know, the second half, you'll just see more of the natural revenue contribution margins flow through. And then on top of that, in international, you'll see a little bit more of the cost savings from the integration flowing through also.

Okay, thanks. And then just as a follow-up, You know, I heard you mention there are some higher, I guess, data acquisition costs with some of these, you know, in support of some of these new subsegments and data adjacencies and things like that. Is that a material headwind to you guys, you know, to support things like supply chain and ESG, I guess? Or, you know, how should we think about the cost profile going forward just more broadly? Are these incremental costs going to continue to – you know, accelerate, or how should we think about, you know, as you grow these other businesses, is that going to be more of a cost headwind? Thanks.

Maybe I'll take that, Brian, then you could add on. I'd say from a data perspective, what we've seen here is that we've got a trevertrose of data, and as we add new additional data, the solution becomes, you know, broader and magnified. And, you know, as we've hired in ESG experts or fraud experts, you know, we've been able to acquire small amounts of, you know, data that we're talking about, but create a magnified impact from, you know, it's one plus one equaling five, you know, from that perspective. And I'd say... How we're leveraging it, you know, we're ingesting, you know, this alternate data, for example, once in our data lake and using it in multiple ways. So from an efficiency perspective, it makes a lot of sense. And having, you know, repeatability creates a lot of sense. So if you think of utility data as an example of alternative data, We leverage it in our credit underwriting. We leverage it in our fraud use cases. We leverage it with ESG and understanding consumption. Tends to use it for contact data as well. So there's lots of different use cases as this comes in. And that's why, as we've been making the investments in this space, we just have a high confidence about the return on the investments that we're making in these additional data assets.

Yeah. And again, we had a dynamic as we were heading into this year that we talked about in the first half of the year where we were laughing, you know, some of these investments that came in the back half of last year. And it was really just a dynamic of, you know, between, you know, those investments that we usually can absorb right with the natural kind of progression of the revenue growth. We had, you know, two things in there, right? One is the GSA contract, and obviously it was a contract that was with us for a long time and was, you know, relatively high-margin business, as you can imagine. And then secondly, the acquisitions of IOTA net-wise. you know, they came in again, higher growing, but, you know, subscale from a margin perspective. So this was just the kind of a confluence of events from that perspective. Again, the second half of the year, you'll see more of that, you know, normal kind of EBITDA expansion that we talked about on the revenue growth. And then as we go forward, you know, this was kind of the last, you know, component, the GSA component that was back from 2018 that, you know, we knew we were, you know, kind of walking into this year.

Got it. Okay, that's helpful, guys. Thank you very much. Thank you, Seth.

Our next question comes from the line of Manav Petnik with Barclays. Please proceed with your question.

Thank you. Brian, I was hoping you could just help us with, you know, the organic growth kind of cadence you gave for the total company, maybe just some nuances between international perhaps. I guess North America sounds like would follow that same pattern.

Yeah, so again, Manav, what we're seeing and we saw in the second quarter, for instance, on international, which was on an organic constant currency basis, Europe stepped up, right? So they grew about 3%, so the prior BizNote assets, and then the overall kind of rest of it grew roughly 9%, right? So really consistent with where we're going. And again, the more we get those components of the legacy revenue out. It gives the team the ability to continue to drive more cross-sell, up-sell on top of it, more price increases and things like that. So we'll continue to see the progression of the international business through the back half of the year. On, you know, North America, I think you said it right. It's pretty consistent, right, as we continue to grow. And we continue to layer on the price increases. We continue to layer on, you know, the prior sales, you know, folding into, you know, turning from sale into rev rec. And then obviously, you know, as we get into the fourth quarter, we've naturally seen it be, you know, the largest from a magnitude perspective, but also, you know, from a growth perspective.

Got it. And then, you know, maybe just remind us about IOTA and NetWise and kind of how they fit into this digital marketing strategy. Because if I heard you, I mean, you said they were growing 20%, and it sounded like you think they could maintain that growth even in a slowdown? Because, you know, from other marketing folk or whatever, we're already starting to see signs that, you know, things are slowing down for them.

Sure, I'll take that, Manav. Yeah, in our digital marketing space, again, it's an area where, there you know we anticipate you know continued growth in that area and like I said Overall, in sales and marketing, it's probably safe to say that the sales cycle will be elongated a bit. But it provides the ability to really isolate on who you want to target. So if you think of where marketing, you know, would be impacted, it would be maybe companies wanting to brand an arena and having, you know, more brand impression spend being cut back. But in this area, it's really identifying the audience, who specifically and how can you leverage the data to identify who you want to target and where is the ideal place to target them. And that's really the power of IOTA and NetWise. And again, when we talk about our integrated suite, we have a DUNS number. IOTA had a unique ID. NetWise had a unique ID. We want to take the DUNS number, make it an online DUNS number, a consistent one to really streamline the whole process. and make it simple for our clients to leverage these digital marketing channels. And so as we think of, you know, I'll say micro headwinds and tailwinds, right? Elongated sales cycle would be one thing. Us facilitating the solution and making it simpler through the integration and the new capability we think is a micro tailwind. So that's how we're really looking at the space right now and why we believe it will continue to grow as it has been growing.

Okay, thank you. Thank you.

Our last question comes from the line of Andrew Steinemann with JP Morgan. Please proceed with your question.

Hi, Brian. I'd like you to break out the second quarter organic constant currency revenue growth by the four sub-segments, you know, by GEO starting with North America when looking at the 2.8. I assume, you know, it's just IOTA and net-wise, so that would be sales and marketing. And then on international, I know we had a German divestiture. I just don't know how to break that out between F&R and sales and marketing when thinking about the 5.7% for international.

Sure. Andrew, the NetWise and IOTA are 100% in the sales and marketing business. In North America. So on that component, that's that, you know, side. In the German B2C business, that was a B2C marketing business. And so, again, on the international side, all on marketing. And I think that was, you know, a little over, you know, call it a million, you know, USD, right, for the quarter.

Right. So what would be the organic constant currency ready growth for North America and international sales and marketing?

So sales and marketing on the North America side was around 1%.

Okay. Thank you very much. Yep.

This does conclude our question and answer period. I will turn the call back over to you, Mr. DeBoer. Please proceed with closing remarks. Thank you.

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 their guidance. Thank you for your interest in Dun & Bradstreet and for joining us on the call. Hope you have a wonderful day.

This does conclude today's conference call. We thank you for your participation and ask that you kindly disconnect your lines. Have a good day, everyone.