Dun & Bradstreet Holdings, Inc.

Greetings and welcome to the Dunn and Bradstreet fourth quarter and full year 2022 earnings call. At this time, all participants are in 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sean Anthony, Investor Relations with Dun & Bradstreet. Thank you, and you may begin.

Thank you. Good morning, everyone, and thank you for joining us for Dun & Bradstreet's Financial Results Conference call for the fourth quarter and full year ending December 31, 2022. On the call today, we have Dun & Bradstreet CEO Anthony Jabbour and CFO Brian Hipscher. Before we begin, allow me to provide a disclaimer regarding forward-looking statements. This call, including the Q&A portion of the call, may include forward-looking statements related to the expected future results for our company and are therefore forward-looking statements. Our actual results may differ materially from the 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 the 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.

Thank you, Sean. Good morning, everyone, and thank you for joining us for our fourth quarter and full year 2022 earnings call. On today's call, I'll start with a brief overview of our fourth quarter and full year results, followed by a look back at some of our most significant accomplishments in 2022, a brief view into our plans for 2023, and finally, a preview of our upcoming investor day. After that, I'll pass the call over to Brian for an in-depth review of our results and to discuss our guidance expectations for 2023. We'll then open up the call for Q&A and finish up with a few closing comments. With that, let's get started. The fourth quarter was another quarter of solid progress as total company revenues grew 2.8% on a constant currency basis and organic revenues grew 2.2%. Our finance and risk solutions continue to perform well in both North America and international, with particular areas of strength, such as third-party and supply chain risk management solutions, that achieve double-digit growth for an eighth consecutive quarter. On the sales and marketing side, we continue to see acceleration through the end of November. However, in December, clients got a bit more conservative with their usage and spending levels. While master data management was solid in the quarter and IOTA and NetWise continued their strong performance, lower than expected volumes in December offset the growth we had previously seen. As companies grappled with the macro environment uncertainties exiting 2022, we didn't see the normal uplift we usually do with budget releases and heightened volumes as they prepared for their upcoming sales year. However, we believe this to be more of an anomaly and have been encouraged by volumes and sales activity beginning to resume to normal levels in January and into early February. Full-year revenues grew 5.6% on a constant currency basis and 3.5% organically. Organic growth for the full year accelerated 30 basis points over 2021, And when excluding the impact of the GSA contract, growth accelerated 120 basis points to 4.4%. Our international business grew 5.4% organically, driven by 6% growth in our localized finance and risk solutions. And while North America grew 3% organically overall, when excluding the government revenues, which make up about 5% of the segment, North America grew 5% and North America finance and risk grew 8%. With our transformation well underway and incremental progress towards sustainable mid-single-digit growth, I'm pleased with the continued progress we made throughout 2022. On the sales side, we finished the year with some key wins and renewals in North America and international. For example, in the fourth quarter, North America closed new business with a leading provider of online financial services and lending. This company is using our finance solutions data and analytics to underwrite small business loan applicants. They wanted to backtest hundreds of thousands of small business applications by using our data to optimize and modernize their analytics and underwriting process. We were also able to expand our relationship with Pepsi. They required greater visibility and transparency into their existing third-party relationships, as well as any new third parties they awarded business to. We provided an end-to-end onboarding, compliance, screening, and monitoring solution through our data blocks offering, which provides Pepsi with what we believe is an unmatched combination of breadth and depth of data delivered through an integrated, automated solution. Desley was a similar opportunity in that they were looking to monitor and expand their understanding of their large and complex supply chain. Through our risk analytics and data blocks offerings, Nestle is able to assess a more holistic and accurate risk profile of their vendors, including the evaluation of ESG and cyber risk elements. On the renewal front, we continue to show the stickiness and strength of our long-standing client relationships. Verizon, who has been a customer for 24 years, expanded their relationship with us through a multi-year agreement extension. With master data management underpinning much of what they do on the marketing analytics and sales operations side, we were able to bring incremental data and analytics via modern API delivery mechanisms. Verizon was one of many customers that extended and expanded their relationship in the fourth quarter, and we're very pleased with our continued strong retention rates and ability to expand with our largest customers in North America. Our international segment continued its strong sales performance for the year with a fourth quarter that included wins such as NatWest in the United Kingdom, Essity in Sweden, and a large social media platform in Asia. Similar to the trends we just spoke about in North America, NatWest added our Compliance Direct Plus API solution to bolster their risk and compliance underwriting. Essity, a larger consumer packaged goods company out of Stockholm, added DirectPlus master data management API capabilities to help cleanse, match, append, and organize their massive amount of customer files. This is an example of how master data management plays a critical role in an organization's ability to quickly update with reliable, organized, and up-to-date information. And as the social media platform continued to expand and mature, they added finance analytics and data blocks to enhance their credit underwriting processes. Many of these types of businesses start out as a pure B2C play, but as they evolve, they expand in B2B, and that is where we come in. In both North America and international, we continue to see strong retention rates and increased customer satisfaction, which is ultimately manifesting itself in accelerated revenue growth. To go along with the financial and sales execution, I'm also pleased with the significant operational progress we made this year as we continue to execute on our multi-year vision of transforming Dun & Bradstreet. In particular, I want to highlight the advancements we completed in terms of data and analytic enhancements, technological improvements, and product innovations. On the data and analytics front, we continued to make significant progress in our data breadth, depth, quality, and consistency. This year alone, we expanded our data cloud to 500 million businesses covered, an 8% increase versus the prior year. We expanded our key contact database to 58 million records, a 66% increase versus the prior year, and reduced client data discrepancy inquiries by over 50%. On the analytics side, our blended score saw a 15 to 20% lift in predictability, and we improved our match rates to 100% across three beta clients. We also acquired 250 additional data sources to strengthen our existing analytics and power our new ones, such as ESG intelligence. For instance, we curated and appended utility data, greenhouse emissions, and several other risk-related datasets to expand our public and private company ESG scores across 42 million companies in 176 global markets. And finally, we have mapped 20% of all supplier connections between customers and their suppliers globally, showing 68 million verified relationships. We believe that no other company has anything close to this level of insight, and we intend to continue to drive our leadership in this space to guide businesses in making more informed and real-time decisions on who they do business with and whether or not they should continue doing business with them on an ongoing basis. And while we look to bring more and more data sets into our proprietary cloud, the technology team has been hard at work simplifying our supply chain by reducing complexity by 30% and increasing data throughput by 10 times. Simultaneously, through the elimination and standardization of several legacy components, we're able to improve our data consistency by nearly 60%. The technology organization was also instrumental in supporting our product organization with the migration of nearly 17,000 clients across North America and international. While a majority of those came out of D&B Europe, we also migrated around 5,000 in the United States, and we continue to free the company of an excess of legacy apps. And while cleaning up legacy applications is important in setting a clear path going forward, We're also able to launch over 100 products in 2022. This range from brand new solutions in North America to localized offerings in our 20 plus own markets throughout Europe, the United Kingdom and Asia. Overall, through upgrade investments, new data sets, migrations and integrations, we continue to strengthen our solution set and we ended another year much stronger than we began it. Looking ahead to 2023, while we expect a challenging market backdrop overall, we continue to focus on the things we can control and execute against our strategic priorities. For the upcoming year, we plan to continue to optimize our solution set and maximize our ability to extract value from our current and future customers. With the significant investments we have made in technology, data, and product, we have confidence in our ability to garner incremental price where it makes sense and expand cross-sell, up-sell opportunities within our existing base. While the worsening economic backdrop will be more challenging for certain client segments, overall, we have a significant opportunity to drive growth within our existing client base and expect to do so throughout the year. We also have the opportunity to win new logos in both North America and international. In North America, we have some of the largest and most well-known businesses in the world. While there are a few more large and mega-sized prospects to add to our blue-chip client base, the real opportunity for us is to break into the small and micro business segment in a more meaningful way. Due to a variety of factors, including a worse than anticipated impact from the FTC consent order, We have yet to fully capitalize on the small and micro business opportunity. The legacy credibility business continued to be a headwind through the fourth quarter, which masked the positive momentum we've been building in our digital and other small business strategies. As we head into 2023, we expect to have less of an impact from the legacy credibility solutions, and we expect to see more of our new business investments flow through. On the international side, we have the opportunity to continue to land small and medium businesses, but the true list will come from the large and mega-sized prospects in those regions. In 2022, we won new business with names like Barclays, Volkswagen, Siemens, the Agriculture Bank of China, and Alibaba. We expect to continue to build on this momentum in 2023 as we orient our teams, products, and data sets to serve this segment. On the modernization and innovation front, we continue to expand upon our significantly improved vitality index. As I mentioned earlier, migration to modern solutions was a big theme in 2022, and that will continue in 2023. Beginning with D&B Europe, while we focus the majority of our efforts on migrating the legacy finance solutions to D&B Finance Analytics, We are now shifting gears to focus on migrating the remaining legacy point solutions across our sales and marketing and finance and risk portfolios in both Europe and the UKI. Simultaneously, we are enacting a similar program in North America as we continue to migrate clients onto our most modern solutions such as D&B Connect, D&B Direct Plus, Finance Analytics, and Risk Analytics. Through refining our implementation strategies in Europe, we're now able to deliver a much more streamlined and less invasive experience for our customers in all regions of the world, including our North American clients. And consequently, this will allow us to more easily deliver our latest innovations, such as fraud solutions, ESG scores and insights, supply chain linkage and illumination, and alternative data match and append. On top of the new solutions we developed and brought to market in 2022, we're also excited about the new innovations we plan to bring to market in 2023. We are focused on three primary areas for near-term innovation efforts. First and foremost, supply chain and third-party risk continues to be a significant area of interest for our clients and prospects. We have the opportunity to build upon our solution set today and provide even more robust solutions around the underwriting and monitoring of vendors and suppliers throughout the world. By deepening and broadening our data sets and delivering those through a comprehensive end-to-end integrated global platform, we can broaden our ability to solve new and evolving use cases that are being driven out of a shifting legal, regulatory, compliance and political landscape. We are well positioned to continue compounding growth in North America and the build out of our localized compliance solutions internationally, which only allow us to continue to accelerate growth in this fast and growing segment. We also continue to see the digitalization of our go to market as a key opportunity for our ability to accelerate and expand throughout the globe. In North America, we saw our digital sales increase materially as our e-commerce capabilities and simplified solution set resonated with small and medium businesses. A prime example of this was the introduction of the DUNS registered seal in North America. Originally a solution crafted for our Asian markets, the Dunn's Registered Seal is a sub-$1,000 entry solution that allows a small business the ability to show legitimacy and begin its journey to build out its maturing credit profile. The Registered Seal was a new North America solution that was introduced in Q4 of 2022, and we already have over $1 million in sales and a ramping pipeline. Similarly, light versions of Finance Analytics, Risk Guardian and the Nordics, Hoovers, and an ESG seal will be delivered throughout our own markets and the worldwide network to go after this customer segment and free up resources to go after enterprise accounts. We're also excited about the opportunity to further leverage our growing advantage in the B2B online digital advertising space. While B2C digital advertising has been maturing over the last five to ten years, B2B is just beginning to come into its own. So while B2C advertising is ebbing and flowing more with the overall economic conditions, B2B is still a growing opportunity and one that could show even more rapid growth in a more positive macro environment. Through our unique blend of assets, connections, and relationships, we'll continue to look to deepen our penetration with existing customers and look to educate and expand with the remainder of our client base and prospects alike. With tighter budgets and a more conservative approach to sales and marketing budgets in the near term, it will be imperative for our clients and prospects to get the most out of their investments. We believe that digital advertising delivered to the right audience on the right platforms with the right messaging will do just that. Overall, I'm extremely proud of our team's accomplishments this year. In 2022, we delivered mid-single-digit total revenue growth, accelerated organic revenue growth, and nearly 40% EBITDA margins, which is a remarkable improvement relative to where we were when we took the business over four years ago. We stayed focused on our mission and performed at a very high level despite a challenging market environment. We also continue to execute on our multi-year vision to transform Dun & Bradstreet, and I'm excited by our path and strategy to continue to accelerate revenue growth and expand margins over the next three to five years. With our investor day rapidly approaching, I look forward to having the opportunity to discuss our longer term growth prospects and the key investments in our core assets, along with new areas of strategic growth that we are looking to capitalize on. Through presentations with our presidents of North America and international, along with a fireside chat featuring our chief technology officer and chief data and analytics officer, I'm also excited for all of you to get some exposure to the team that is going to take us on the next leg of our journey together. In the end, our goal is for you to all walk away with an understanding of the successful execution of our transformation to date and why that should lead to a further acceleration in growth and profitability, which should ultimately manifest itself in a strengthened balance sheet and the ability to deliver significant shareholder value creation. With that, I'd now like to turn the call over to Brian to discuss our financial results for 2022 and outlook for 2023.

Thank you, Anthony, and good morning, everyone. Today, I will discuss our fourth quarter and full year 2022 results and then our outlook for 2023. Turning to slide one. On a GAAP basis, fourth quarter revenues were $595 million, a decrease of 1% compared to the prior year quarter, and an increase of 3% before the effect of foreign exchange. Net income for the fourth quarter was $23 million, or a diluted earnings per share of 5 cents, compared to a net loss of $12 million for the prior year quarter. The increase in net income of $35 million for this quarter was primarily due to lower non-operating costs related to debt extinguishment in the prior year period and a higher tax benefit in the current year quarter. For full year 2022, revenues were $2,225 million, an increase of 3% or 6% before the effect of foreign exchange. On a full year basis, net loss was $2 million, or a diluted loss per share of one cent, compared to a net loss of $72 million for the prior year period. Turning to slide two, I'll now discuss our adjusted results for the fourth quarter. Fourth quarter adjusted revenues for the total company were $595 million, a decrease of 1%, or an increase of 3% before the effect of foreign exchange. Excluding the impact of acquisitions and divestitures, revenues on an organic, constant currency basis were up 2.2%, driven primarily by increased demand, particularly in the international sector. Fourth quarter adjusted EBITDA for the total company was $250 million, an increase of $8 million, or 3%. Adjusted EBITDA for the quarter included a headwind of $6 million from the impact of foreign exchange, resulting from a strengthening U.S. dollar. The $14 million of underlying increase was driven by organic revenue growth and lower net personnel costs. Fourth quarter adjusted EBITDA margin was 42%, an increase of 150 basis points compared to the prior year quarter. Fourth quarter adjusted EBITDA income was $139 million, or adjusted earnings per share of 32 cents. compared to $142 million, or 33 cents, in the fourth quarter of 2021. This was primarily driven by higher interest expense and non-operating expenses, partially offset by higher adjusted EBITDA. Full-year adjusted revenues for the total company were $2,225 million, with an increase of 3%, or 6%, before the effect of foreign exchange, compared to 2021. Revenue growth before the effect of foreign exchange was driven by finance and risk solutions and the impact of IOTA and net-wise acquisitions, partially offset by the divestiture of our B2C business in Germany. Revenues on an organic constant currency basis were up 3.5% or 4.4% when excluding the impact of the GSA contract. Full-year adjusted EBITDA for the total company was $864 million, an increase of 2%. Higher adjusted EBITDA was primarily due to revenue growth from the underlying business and the impact of actual assistance, partially offset by investments leading to higher data and data processing costs and the impact of foreign exchange resulting from a strengthening U.S. dollar. Excluding the impact of foreign exchange, EBITDA was $878 million, or an increase of 4%. Full year adjusted EBITDA margin was 39%, a decrease of 20 basis points compared to the prior year, due to the impact of acquisitions. All year 2022 adjusted net income was $472 million, or adjusted diluted earnings per share of $1.10, compared to 2021 adjusted net income of $471 million, or $1.10 per share. Turning now to slide three, I will now discuss the results for our two segments, North America and International. In North America, revenues for the fourth quarter were $435 million, an increase of approximately 1% from prior year. Excluding the impact of foreign exchange and acquisitions, North America organic revenue grew 0.2%. In finance and risk, revenues were $231 million, an increase of $1 million, or less than 1%, due to growth in our finance and risk solutions, partially offset by declines in our government and credibility solutions. Moving the impact of our government solutions, finance and risk grew 5.2%. For sales and marketing, revenues were $204 million, an increase of $6 million, or 3%. Sales and marketing growth was driven by master data management and our digital marketing solutions. North America fourth quarter adjusted EBITDA was $215 million, an increase of $4 million, or 2%. primarily due to revenue growth and ongoing cost management efforts. Adjusted EBITDA margin for North America was 49%, an increase of 10 basis points from the prior year. Turning now to slide four, I will now discuss the four-year results for North America. In North America, revenues for 2022 were $1,587 million, an increase of $88 million, or 6% from prior year. North America revenues on our organic currency basis increased $40 million, or 2.7%. North America finance risk full-year revenues were $867 million, an increase of $32 million, or 4%, primarily attributable to new business and higher customer spend in our third-party risk and supply chain risk management solutions, partially offset by lower revenues from our government solutions. Excluding the impact of our government solutions, North America financial risk grew 8.4%. North America sales and marketing full-year revenues increased $56 million or 8% to $720 million. This was primarily driven by the full-year impact of our IOTA and NetWise acquisition. Full-year adjusted EBITDA for North America increased $3 million or less than 1% to $718 million, primarily due to higher revenues partially offset by investments leading to higher data and data processing costs. The whole year adjusted EBITDA margin for North America was 45%, a decrease of 250 bps compared to the prior year. Turning to slide five. In our international segment, fourth quarter revenues decreased 6% to $160 million, or an increase of 6% before the effect of foreign exchange. And organic revenues on a constant currency basis increased 7%. Finance and risk revenues were $106 million, a decrease of 4% or an increase of 7% before the effect of foreign exchange. All markets have positive underlying growth, including double-digit increases in our Asian-owned markets. We continue to see strong demand for our latest finance solutions, such as finance analytics, data blocks, and DirectPlus APIs. Sales and marketing revenues were $54 million, a decrease of 9% or an increase of 4% before the effect of foreign exchange. Excluding the impact of the divestiture of our B2C marketing business in Germany, sales and marketing growth of 8% was attributable to higher data and API solution sales in our United Kingdom market. Fourth quarter international adjusted EBITDA of $49 million increased $3 million or 7% versus fourth quarter 2021. The increase was driven by the underlying revenue growth, partially offset by foreign exchange loss, resulting from a strengthening U.S. dollar. Adjusted EBITDA margin was 31%, an increase of 350 basis points compared to prior year. Turning to slide six, in our international segment, full-year 2022 revenues were $638 million, a decrease of 5% or an increase of 5% before the effect of foreign exchange. International organic revenues increased $36 million, or 5.4%. International financial risk, full-year revenue of $419 million, decreased 3%, or a 6% increase before the effect of foreign exchange. The growth was driven by mid-single-digit growth across our worldwide network, United Kingdom, and European markets, along with double-digit growth in our Asian-owned markets. Our modern API and finance analytics grew nicely in both Europe and Asia, and the Worldwide Network contributed higher data and product loyalty sales. International sales and marketing full-year revenues of $218 million decreased 9% or an increase of 4% before the effect of foreign exchange, and the divestiture of our German B2C business, primarily from higher data sales in the UK, increased Worldwide Network product royalties. and increased API solution sales in Europe. Full year 2022 international adjusted EBITDA was $202 million, an increase of $8 million, or 4% versus 2021. The improvement in adjusted EBITDA was primarily due to revenue growth from the underlying business, partially offset by foreign exchange loss resulting from a strengthened U.S. dollar. Adjusted EBITDA margin was 32%, an increase of 280 basis points. Adjusted EBITDA for the corporate segment was a loss of $57 million, an improvement of $6 million, primarily attributable to lower personnel costs. Turning to slide 7, I'll now work through our capital structure. At the end of December 31, 2022, we had cash and cash equivalents of $208 million. which when combined with $800 million of capacity on our $850 million revolving line of credit through 2025, represents total liquidity of nearly $1,008 million. As of December 31st, 2022, total debt principal was $3,647 million, and our leverage ratio was 4.0 times on a net basis. In the credit facility, senior secured net leverage ratio was 3.4 times. We are pleased with our efforts throughout 2022 and in early 2023 to significantly reduce the cost of our debt. Around 2021 and 2022, we took multiple actions which reduced the cost of our debt. However, as the Fed continued to raise rates aggressively throughout the year, we ended the fourth quarter at $55 million in interest expense and a nearly $60 million a quarter run rate heading into 2023. As we continue to monitor the market for opportunities to optimize our debt structure, On February 2nd, 2023, we entered into a $1.5 billion swap for three years to fix our floating rate portion at 90% through March of 2024, at which point our billion-dollar swap rolls off and we come back to 60% fixed versus floating. Turning now to slide eight. I'll now walk through our outlook for 2023. Total revenues after the effect of foreign currency are expected to be in the range of $2,260 million to $2,300 million, or an increase of 1.6% to 3.4%. This includes an assumption of a headwind in the first three quarters of the year, partially offset by a tailwind in the fourth quarter due to the effect of foreign currency related to the expected variances between the U.S. dollar, euro, British pound, and Swedish krona. Revenues on an organic constant currency basis are expected to be in the range of 3% to 4.5% for the full year. It is important to note that the total and organic growth rates take into account the conclusion of the existing GSA contract at the end of April 2023. The impact to organic growth for the full year is a headwind of 30 basis points, with 110 basis point headwind in the first quarter. Adjusted EBITDA is expected to be in the range of $870 to $920 million. The adjusted EBITDA range also takes into account the conclusion of the GSA contract and a $5 million negative impact on the strengthening of the euro versus the U.S. dollar in comparison to the relative flatness of the British pound and Swedish krona. Adjusted EPS is expected to be in the range of $0.92 to $1. As described on slide 14 in our earnings presentation, we previously reported a non-cash pension gain or loss in our adjusted earnings results. Due to the nature of the line item being non-operational and non-cash, we have decided to exclude it from our 2023 adjusted net earnings results going forward with revisions to the prior periods to reflect the same adjustment for comparability purposes. Additional modeling details underline our outlook. are as follows. We expect interest expense to be approximately $240 million. Depreciation amortization expense of approximately $100 million, excluding incremental depreciation amortization expense resulting from purchase accounting. Adjusted effective tax rate of approximately 24%. Weighted average diluted shares outstanding of approximately $433 million. And for CapEx, we expect approximately $130 to $150 million of internally developed software and around $30 million of property plan equipment and purchase software. And while we don't give quarterly guidance, I did want to provide some color on how we expect the year to progress. With three months of impact from the GSA in the first quarter and one month in the second quarter, along with what we expect to be a slower environment for the first half, we expect the first quarter to be around the low end of our organic growth range and then second and third quarter to be closer to the midpoint. We then expect the fourth quarter to reflect a more normalized environment and therefore seeing revenues around the higher end of our range. While EBITDA margins are expected to slightly expand in the first quarter, the GSA impact, along with the quarter traditionally being our lowest of the year, will put it under our full year expected expansion of around 50 basis points. As we head into the second quarter and beyond, we would expect to be at or above the 50 basis point expansion. In conclusion, we are well positioned to capture the significant growth opportunities in front of us, and we expect to continue to accelerate our revenue growth in 2023 despite a challenging macro environment and the conclusion of the GSA headwind at the end of April. With improving profitability and cash flows, we will also focus on deleveraging the balance sheet and focusing capital allocation strategies on driving increased shareholder return. With that, we're now happy to open the call for your questions. Operator, will you please open up the line for Q&A?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on the telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for questions.

Our first question is from the line of Kevin McVeigh with Credit Suisse. Please go ahead.

Good morning. Hey, I don't know if this would be for Anthony or Brian, but just, hey, Brian, You started last year with kind of a wider range on the organic growth, I think 3% to 5%, and that eventually narrowed about 100 basis points. This year, it's a tighter range, kind of 3% to 4.5%. Can you maybe help us, you know, some of the puts and takes? And it was real good commentary on the GSA, but any other impacts to think about in terms of pricing or the impact in net-wise, IOTA, so on and so forth, just as we're thinking about that organic growth over the course of the year?

Yeah, sure, Kevin. Thanks for the question. And so, you know, as we think about it, certainly the first quarter is the most impacted by the GSA. We have three full months, and so it's about 110 BIP headwind, and then we have a month of that in the second quarter. So after you get through that, to the point you have, you know, the continued, you know, pricing power, right, in the base, you know, that we brought in. I think multi-year contracts have continued to be around 50 plus percent. North America pricing strategies have been implemented well, and we're starting to see that now on the international side. NetWise and IOTA continue their strength through the end of the year. And so they lapped in as organic in November and December. And so we'll see them, you know, throughout, 2023 from that comparison. And so really, it's about the continued progression into 2023 off of a good balance in 2022.

Great. And then just really good guidance in terms of specificity. Any way to think about free cash flow in 2023?

Yeah, so, you know, the headwind to free cash flow is obviously going to be the increase in interest expense from that side of the equation. But outside of that, a lot of the things that we've had in the past, some of the restructuring, some of the, you know, M&A costs, et cetera, are starting to fall away. So we'd expect an increase, you know, an improvement to free cash flow. And then clearly, you know, from a capital allocation perspective, You know, we'll be looking to invest in the business, as you see from the CapEx guidance, you know, that's coming down almost 25%. And so, you know, tightening up from that perspective, but continuing to focus on innovation. The dividend will continue to pay, and then it's going to come down to, you know, without some really attractive, I would say, you know, M&A target out there or something from that perspective, you know, we'll focus on deep leverage in the business. we're at about four times that leverage now. And certainly, you know, through this year, we'll have to get below four times and ultimately continue to drive that lower, you know, in the years to come.

Great. Thank you. Our next question is from the line of

Kyle Peterson with Needham & Company. Please go ahead.

Great. Good morning. Thanks, guys, for taking the questions. Just wanted to touch a little bit on the kind of slowdown in December that you guys talked about. Great to hear. It seems like things have kind of normalized and reversed course again, kind of year-to-date here. But was that slowdown pretty broad-based, or were there any kind of recurring themes or trends across whether it's verticals or geos that jumped out to you guys?

Sure, Kyle. Thanks for the question. Yeah, no, it was fairly isolated to our sales and marketing and primarily our master data management, which You know, as we said, as we look to, you know, to January and February, so far we saw the results snapping back to normal. So typically what happens at the end of the year, you know, people, you know, have a budget and they'll use it and, you know, prepare themselves for the following year. And I think, you know, on what happened last, with many companies, and you see it on many of the other earnings calls that you've been on, there's a real lockdown on not spending what budget was there, but bringing it back to the bottom line. I think that was the cause. But when we look at the full year, we're pleased really with the the momentum that we see, and also pointing to, you know, our master data management. It's really not tied to as much a sales event as clients who are already clients of ours and using the software, just not using it as much. And I think that's why we saw the quick snapback. in January. If it was a sales effort, it would take time to sell it, contract it, implement it, use it, bill it, and then see revenue from it. So that's where we feel, you know, good about it. And also just our overall strength in our SMS portfolio that we have. It's certainly stronger as we enter 23 than it was when we entered 2022. Got it.

That makes sense. And then just one quick kind of follow up for me, just thinking about as we kind of head into 23, at least on the organic kind of FX neutral growth outlook, how should we kind of think about the building blocks in between potential pricing, upsell and cross sell versus the addition of new logos as we head into the new year?

Yeah, you know, Kyle, from that side, I think, you know, our retention continued to be, you know, very strong and very high. So I think the fall year ended up again over 96%. And so the first you know, is continuing to leverage off of that. Price, you know, ended up as we exited the year getting closer to, you know, a couple points. And so when we think about, you know, progressing from that perspective into 2023, you know, that's kind of the first, you know, building block for us now, which used to not be, frankly, when we got in here. Neeraj has done a nice job, too, on the international side with a lot of the migrations and the integrations they went through in 2022 that set the foundation and the groundwork for, you know, the international businesses, the UKI, Europe to start to take price from that perspective. After that, it's really about a combination of the upsell, cross-sell. We have a couple of vintages of new solutions that we're certainly excited about, especially as it focuses in on supply chain and third-party risk and compliance. And so penetrating those into our large and existing client base, especially in North America, is important. On the new logo side for North America, certainly we've started to kind of turn the tide in terms of the digitalization and some of the new products we're introducing into the small and medium-sized businesses. But really, you know, throughout 2022, we were overcoming, you know, the tail end of that FTC order, which was something that frankly came out of, I think, 2016, 2017. So, you know, that side of it is really the mix we're looking to drive growth. And then on the international side, you know, frankly, the localization of new products. continuing to penetrate, you know, markets throughout Asia and Europe. And then, frankly, you know, they've done a nice job of getting some of those large and mega-sized clients that Dun & Bradstreet's known for. And so Anthony mentioned, you know, a list of those on the call. But, you know, continue to expand, you know, with the largest and most significant players, you know, in Europe and Asia is definitely our strategy as we go forward.

Yeah, the only thing I'll add to that is we really think about it as two forces, right? There's the, you know, macro, you know, force that's out there that's obviously affecting many companies. And then we have our positive transformational force, which is helping us fight through and having us control more of our destiny than just, you know, throwing it up into the wind and seeing where the macro environment takes us. And it's really a combination of those two that we, you know, overlaid here.

It's a really helpful color. Thanks, guys. Thanks, Kyle. Thank you.

Our next question is from the line of Andrew Jeffrey with True Security. Please go ahead.

Hi. Good morning. Appreciate you taking the question. Anthony, can you talk a little bit about, especially in the context of some of the more enterprise-focused wins that you've talked about, can you talk a little bit about I guess the pipeline and sales cycles in light of the macro environment, anything that's influencing your outlook in that regard?

Sure, Andrew. I'd say for the most part, you know, we continue to build momentum with clients, you know, in the enterprise space in a number of areas. You know, one is, you know, the number, well, first of all, just step back, just the continued improvement that we're making in the business in every facet of the business, technology, data, product, analytics, you know, client service, responsiveness, et cetera. Again, much stronger companies than we were just a year ago even. And where we're deeply entrenched in our enterprise accounts, they're highly referenceable. you know, incredibly sticky. And so we have the opportunity to, you know, to drive some of our new solutions into those accounts. New solutions such as ESG, for example, our risk analytics, some of the more modern updates where we've migrated clients onto from more legacy and point solutions. And I'd say, you know, as we continue to get more and more, you know, success in that space, it's helping on the new logo side. from an enterprise uh perspective in north america we have many right we've got a very large penetration uh of uh you know the largest enterprises in north america so for there it's continue to get the remaining ones but also drive more uh solution sales into those accounts broaden and deepen them and international where there's so much green field And we're bringing so much capability into those markets. Our leadership team is really doing a great job, you know, driving it into large enterprise clients there as well. And we just, you know, every quarter, you know, sign more and more exciting logos. Okay.

I appreciate that. And can you just drill down a little bit on pricing trends? It sounds like you're you're migrating some of the pricing rationalization from the U.S. to the rest of the world. Is that just sort of catch-up, or are we seeing pricing evolve around some of the new capabilities that you're talking about?

Yeah, I'd say for pricing, it's a couple things, Andrew. The first is just the general improvement we continue to make in the business in supporting our clients. You know, you earn the right, you know, for price there. But also, and probably more fundamentally, as we're migrating our clients from our legacy systems to our next generation systems, there's an opportunity there on the price side as well. And more so, in addition, I know you asked about price, but with them being on our modern platforms, there's an easier opportunity for us to cross-sell a module into it. So, for example, if a client's on risk analytics, which is our most modern version of the solution, they can, you know, they can acquire ESG data, which is one of the most used data sets, for example, in risk analytics. And it's easier for them to, you know, to buy, implement it, et cetera. So it's really a combination of the two. And as we, again, spend more time with clients and look at the value that we're driving for them, we believe that even in spite of this macro environment that's in front of us, we're providing real value and have support on the pricing side.

Appreciate it. Thank you. Thank you, Andrew. Thank you.

Thank you. Our next question is from the line of Mano Patnaik with Barclays. Please go ahead.

Thank you. My first question is, you know, just the top-line growth, I guess, 3%, 4.5%. Can you help us with, you know, kind of what do you expect between North America and international? And just to confirm, does the outlook assume a tougher backdrop like you saw in December, or are you assuming it's back to normal?

Yeah, Manav, what I would say is that, you know, as we looked into 2023, and I think you've heard this pretty consistently across the board, that, you know, we expect a tougher backdrop in 2023. And so certainly what we have, and we knew about, you know, the GSA right coming into it, The overall macro environment is one that, you know, we're just expecting to be, I would say, relatively challenging, you know, throughout 2023. And so as Anthony said, we're kind of balancing that, you know, potentially tougher, you know, macro environment overall with, you know, the transformation, the new innovation we're bringing from that perspective. If we look at North America versus international, you know, we're expecting international to grow, I would say, a little bit faster than North America, but not, you know, significantly more from that perspective. So I think more like, you know, a point, you know, from differential between the two segments.

Got it. And, you know, just a more bigger picture question, like how connected is finance and risk to sales and marketing today? you know, in terms of, you know, whether it's the data sharing, the technology, et cetera? Like, can they, you know, coexist separate from each other, or how tied up are they?

They're really... not tightly connected. And, you know, that's why, you know, we've kind of aggregated them the way we did. Finance risk is obviously from, you know, the use case we're solving for, for the executives we're selling to in a corporation. And sales and marketing, you know, obviously those two are lumped together. There's value, obviously, and some synergy in terms of, you know, the data that we have overall, such as, you know, from an MDM perspective, You know, having, you know, organizations key off the DUNS number, cleanse their data, enrich it, et cetera, the visibility that we have into all of these companies is incredibly powerful as well, right? So we talked about all the customer and supplier relationships that we have. I mean, it's incredibly impressive, I think. And so... Whether you use that for financial risk use cases or sales and marketing, that's kind of how we got in. But the two businesses are really, I'd say, fundamentally different from that perspective.

Got it. Thank you. Thanks, Manav.

Thank you. Our next question is from the line of Ashish Supatra with RBC Capitals. Please go ahead.

Hi, this is John Phelan for Ashish. Could you just touch on kind of the longer term road runway for supply chain, KYC, and maybe just also ESG and kind of what we're seeing today and really how much of these revenues do you expect to continue in 23 and how should we think about those things?

Well, Jonathan, those areas have been really great, successful drivers for us and will continue to be because you know, the demand for them continues to grow. So, you know, supply chain, you know, visibility and illumination is a key one. Know your customer. The bar continues to be elevated there. And we believe, you know, we've got the data and insights at such a deep level that we can provide differentiation. And, you know, with ESG, I know some think it may be a flash in the pan, but, you know, we believe it's here to stay. And it's going to continue. And so, like I said, you know, ESG is one of our most used, you know, data sets in our risk analytics, you know, portfolio. So we think those areas are really in demand. We think we have a real unique differentiation in them and are going to have a lot of success in the coming year and years selling ESG.

That's great. Thank you. And maybe just quickly touch on technology. Could you just mention what you were in and really how much of the heavy lifting has already been done and maybe just any other kind of preview given to the Upcoming Investor Day?

Sure. And look, I'm excited for us to have our Investor Day next week and for us to go into a lot more detail on all the improvements that we've made. You know, we have you know, really one of the world's most sophisticated data ingestion and modeling engines in Dun & Bradstreet. And the team has done a remarkable job continuing to improve it. I said in my prepared remarks, you know, simplifying it, speeding up 10 times with a 30% simplification. So it's really exciting to see what the team is doing that way. And, you know, And at Invest Radio, we'll go into a lot more detail around that to give you more color, not just on the technology, but also, you know, the data and the operations that go behind it and really give a good snapshot of where we are as a company, you know, versus where we were. You know, I'm really proud of the accomplishments of the team, and especially as we continue to grow and you know, organically and the foundation that we lay for ourselves every year. You know, when I look back at the beginning of last year, you know, I'm pleased that, you know, we stayed inside of our original guidance that we gave at the beginning of 2022. It was a very turbulent year. Not many companies stayed inside the range, so I was proud of how the team, you know, fought that way. And also, as I look at our, you know, our goal of getting to mid-single digits, If you look at 2022, we had 3.5% growth, you know, adjusted for the GSA at 4.4%. You know, we're knocking on the door of 5%. And I also look at it a different way as well, where if I look at the two, I'll say, you know, challenges that we took on when we took over the company with the GSA and the FTC order and our credibility business, You know, extracting those two areas, which is just under 10% of our total company revenue growth, we have 90% of revenues of our company growing at over mid-single digits. It's growing, you know, above 5%, almost 6% growth. So we've got 90% growing in that range we want. We've got another 10%. And the type of team that we have, you know, we've proven we knock things off the list, and we're focused on it. We'll knock these off the list as well.

Great, Collin. Thank you. Thank you.

Our next question is from the line of Andrew Sternemann with JP Morgan. Please go ahead.

Hi. I wanted to focus in on the fourth quarter North American financial risk growth, which decelerated from the third quarter. Both had, I assume, the same drag from the GSA contract. You could mention if the drag was different, but I want to know why the North American financial risk business decelerated in the fourth quarter year over year, and particularly if you could talk to something like client retention rate. Has client retention rate changed in North American risk? I know you talked a lot about renewals, but how has North American financial risk, or if you want to talk to overall client retention rate in 22 compared to the year before?

Yeah, Andrew, thanks. It really came down to the two pieces that actually Anthony just called out. And so when we look at the finance and risk business and kind of bifurcate it, Third-party risk and compliance of the supply chain continued to grow very strongly, right? And so we talked about another, you know, double-digit plus, you know, growth from that perspective. Finance solutions continued. And so think about that as like the finance solutions for medium and larger-sized businesses. Again, you know, has the pricing, multi-year contracts, so it's very consistent. Those two, you know, really high retention rates, really strong from that perspective. The S&B business, I mean, frankly, you know, as we progressed through and something that we saw with that, the FTC order and the impact from that perspective, especially on, you know, the renewal side, that, you know, impacted us. And so, you know, where originally when we went into the year, we had anticipated that, you know, starting to improve by the fourth quarter. As we progressed, we saw, I mean, it was still a continued decline, Andrew, in Q4. And then the drop, you know, from the government side was the GSA decline. It also, when we look at that government business, it has a mix of, you know, kind of ratable, renewable contracts. But then it has, you know, contracts with existing customers that have more flex in their spend in any given quarter. So it becomes more project-based from that perspective. So while we weren't losing customers from that side, we certainly had a few customers that, you know, had less project spend in the quarter. And that, you know, those were really the impacts of that finance and risk business. And so while the core, the finance solutions, the third-party risk and compliance, you know, continued to be strong, it was really, you know, those two elements of, you know, the legacy credibility and the government solution side that were the drag.

That makes sense. And the GSA drag was the same, right, fourth quarter and third quarter? Yeah.

GSA Drive was the same, and then, you know, there was some other, you know, business again that was not necessarily a customer that went away, but a customer that utilized less and spent less in the fourth quarter than they did on a prior year basis.

Thanks for the insight. Appreciate it. Of course.

Thank you. Our next question is from the line of George Tong with Goldman Sachs. Please go ahead.

All right. Thanks. Good morning. Your full-year organic revenue growth guidance of 3% to 4.5% is relatively wide. Can you elaborate on what macro and company-specific conditions would get you to the upper versus lower end of the guidance range?

Yeah, George, so, you know, it's a little tighter than last year. So, as Anthony said, we're always looking to improve the business from that side. As we go into any given year, we're looking at the range of outcomes from a macro perspective. Obviously, Manav mentioned earlier, we're looking at 2023 as a pretty challenging macro environment from that perspective. What could put us at, for instance, the higher end of the range, the adoption of some of the new solutions that we've driven from that perspective earlier in the year, a little bit better of an overall macro environment, budget and spending environment. Those things, while our revenue is not necessarily tied in the very short term to an immediate sale, clearly a sale earlier in the year allows for higher compounding you know from a radical revenue perspective as it grows throughout the year and so you know if we get some improving conditions and we see a little bit better penetration on the cross-sell upsell from our GTM strategies then you know certainly it could be you know towards the higher end When you look at the lower end, again, kind of what we saw from that perspective, it's where if some of the usage, right, or we see a little bit heavier churn, for instance, on the credibility side that's not made up from that perspective, those are the types of things that give you a little bit of variability in any given year. you know to anthony's point you know the place where we saw you know a a small amount of volatility in in december um is something that already in january and early february we've seen you know bounce back to more normalized levels so um we'll keep you know an eye on it from that perspective george but we always want to give that range of outcome knowing that while it's relatively you know tight from a dollar perspective um there is you know a little bit of flex Based off of some sales around the edges and then some usage.

Got it. That's helpful. You touched on how the slowdown in client spend in 4Q is mainly in sales and marketing. Can you provide your organic growth expectations for sales and marketing versus finance and risk for 2023? Sure.

Yeah, so overall, what I would say is that in North America, George, we're expecting, you know, finance and risk to grow a little bit faster than the sales and marketing side. And then, you know, in the international side, it's a little bit different. The international business is much more finance and risk oriented already. So I think it's about 80% of the revenues are finance and risk. And so that smaller base, while we're introducing new solutions into those markets, it's actually growing a little bit faster, right, than the finance and risk side. But if you're blending the two overall, I would say finance and risk for Dun & Bradstreet total is expected to outpace sales and marketing in 2023. Got it.

Thank you. Thank you.

That was the last question for the question and answer session. I would like to turn the floor back over to Anthony Jabbar for closing comments.

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 guidance. Thank you for your interest in Dun & Bradstreet, and we look forward to seeing many of you next week. Hopefully, have a wonderful rest of your day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.