Q2 2020 Dun & Bradstreet Holdings Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Dunham Bradstreet second quarter 2020 earnings Conference call.
This time, all participants are in a listen only mode.
After the speakers presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today Dead Mccann Treasure and senior Vice President of Investor Relations.
Thank you. Please go ahead.
Thank you good morning, everyone and thank you for joining us for Dun <unk> Bradstreet financial results conference call for the second quarter ending June Thirtyth 2020 on the call today, we have denim Bradstreet CEO Anthony's your bore and CFO Bryan Hipsher before we begin allow me to provide a disclaimer regarding forward looking statements.
This call, including the Q and 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.
Todays 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 denim bradstreet's investor relation.
<unk> web site at Investor that Dnbi Dotcom, Anthony will begin with an overview of denim bradstreet, followed by our second quarter highlights.
Hi, Andrew will then take you through her view of the financial before we proceed to Q anyway with that I'll now turn the call over to Anthony.
Thank you Deb good morning, everyone and thank you for joining us for first earnings call as a public company following our IPO in July.
It's great to meet many of you during the course of our IPO Roadshow, and we look forward to getting though many more view in the future.
Our recent IPO was a significant milestone for our organization, we're excited to be a public company once again.
Some of you may be new to our story I would like to spend a few minutes to take you through a brief overview of who we are and what we do the significant transformation we are undertaking.
The market opportunity, we see in front of us and the growth strategy. We have underway to continue our evolution of this great story company.
Please note that this overview will make todays call longer than what will be typical going forward.
I will then provide an overview of our recent progress and performance and the second quarter, and then turn the call over to Brian for financial review of the quarter, followed by our expectations for full year 2020.
Dun <unk> Bradstreet is a global provider of mission critical business Decisioning data and analytics.
Our strong and iconic brand has been relied upon per 179 years to health businesses grow and thrive through the power of data and analytics.
Through all phases of the business lifecycle, and then any macroeconomic environment.
We manage our business and report our financial results through two geographical segments.
North America, which includes the United States in Canada.
While international includes the United Kingdom, and Ireland, Greater China, India, as well as our worldwide network.
With those segments are the two solution sets that we provide financing risk solutions and sales and marketing solutions.
Through our financial risk solutions, we help our clients proactively manage through risk through our solutions that assist finance compliance and risk organizations to mitigate credit risk improved collections protect against compliance penalties along with a host of other use cases that drive increased efficiencies and help.
To lower risk exposure.
With our sales and marketing solutions, we assist our client sales and marketing organizations to find new markets, new segments, and ultimately new prospects in a more efficient and effective manner.
With the data and analytics, we provide we enable our clients to lower their cost of sales plus simultaneously, increasing ics closure rates by focusing on the higher profitability higher propensity prospects.
We believe Dun <unk> Bradstreet is unique company capable of driving significant and sustainable long term returns.
There are three factors that are key we believe to distinguish dun <unk> bradstreet globally.
First our data cloud comprised of the world's most comprehensive business decisioning data and insights.
Differentiated by the scale depth diversity and accuracy of are constantly expanding dataset.
It's covers more than 360 million global businesses.
We have the most comprehensive commercial data cloud in the world, allowing us to deliver analytics and insights into some of the most critical organizations worldwide that we believe no other company Ken.
Second the data cloud contain something no other company has.
The DUNS number the DUNS number is a nine digit identifier for corporate fingerprint of businesses. It creates a persistent single threaded connecting related business entities throughout the world.
Such as business relationships employees subsidiaries and more so our clients can form a holistic view of an enterprise.
Where are the only scale provider to possess both proprietary and curated public data from 17000 sources linked together by the DUNS number.
Finally, our data cloud and the DUNS number together fuel the solutions our clients use every day and are deeply embedded in our clients most critical workflows and technologies.
The payback score, which is like a FICO score for businesses is one example, it is widely relied upon as a measure of credit health for businesses and plays a key role and how finance organization make underwriting and credit terms decisioning.
We leverage all those factors to serve a broad set of clients across multiple industries and geographies.
We also have the ability to have a very comprehensive horizontal solution set well at the same time going deep into specific business verticals, where we can differentiate through unique data and analytic assets.
Today, we're doing business with clients in nearly all segments throughout the globe and we touch almost every size company in every type of industry.
Our diverse client base includes approximately 135000 customers, including 90% of the Fortune 500.
Now we have long standing relationships with some of the most recognizable brands in the world.
Over the course of our history, we have earned the privileged position of leadership and trust within the industries we serve.
However, an investor consortium led by Bill Foley identified an opportunity to unlock Dun <unk> bradstreet's potential.
In February 2019, this Investor consortium acquired Dun <unk> Bradstreet and immediately commenced the transformation to revitalize the business for a long term success.
We focused on five strategic initiatives that we believe we'll have done in brasserie to achieve its fullest potential.
First we realigned the leadership team and the organization.
We immediately reorganized into vertically aligned business units with dedicated and leverage cross functional support.
As a result 18 of the 19, most senior executives are new or in a new role.
We brought in talent with extensive experience in a proven track record of driving long term value creation.
Through transformation and growth initiatives.
We also identified and eliminated and effective head count and set performance goals.
Results count.
Today ours is a culture of accountability, we continue to optimize our organizational structure and bring on targeted talent to build other teams.
Second we optimize our go to market and client service, we aligned our salesforce based on segments solutions and geographical location.
We transformed our sales compensation structure to incentivize multiyear contracts and to drive new solution sales, which resulted in an 87% increase and multiyear contracts.
We continue to accelerate our focus on multiyear deals and increased penetration through cross selling and delivering new solutions to existing clients.
Third we are simplifying and scaling technology.
When we arrived at Dun <unk> Bradstreet, we found minimal technological innovation.
We immediately recognize that we required a strong foundational infrastructure in order to leverage modern cloud technologies that will allow us to scale and evolve our solutions more rapidly.
We also acted quickly to optimize the delivery of our solutions through modern apiay offerings, allowing clients to more efficiently and just started data into their existing business processes and technologies.
This is a critical elements of our transformation not only for growing revenue, but for driving cost savings and reduce risk as we continue to sunset legacy platforms and automate manual processes fourth we are expanding and enhancing data.
As we continue to strengthen our foundational infrastructure, the speed and quality with which we ingest match and deliver the data will greatly improve.
We're working diligently to do just that.
Ingestion brings together data curated from tens of thousands of sources, including new types of data and organizes it.
Getting this right is critical to the matching process, where the data elements are verified and matched with the correct entity as identified by its DUNS number.
We can't sell it unless we can match.
This is what makes our data meaningful and consumable for our clients, allowing them to integrated into the daily workflows.
In addition, we're incorporating new alternative datasets, such as foot traffic and digital signals to expand the breadth of companies covered and the depth of information we are able to provide clients.
Data accuracy and quality are crucial to maintaining the trust of our clients and we hold our team accountable to proactively track and address data issues before clients experienced them.
Finally, the last piece of our transformation strategy is strengthening our analytics and insights.
We have built new insights by incorporating physical digital and financial activities to address an increasing number of use cases.
In February we announced the availability of Dnbi analytic studio a cloud analytics platform that gives our clients access to alternative data sources, such as digital signals that can be incorporated into predictive models alongside traditional data to provide more sophisticated and accurate business insights.
The improvements were making an analytics are enabling us to create solutions that produce greater insight and more predictive results.
This type of insight is where the market is heading and what our clients need.
Overall these transformations have already led to a combination of efficiency and effectiveness gains part of which had been reflected in our annualized run rate cost savings to date of $220 million.
Which is up $14 million in the second quarter.
We continue to progress towards our revised target of $250 million and we'll continue to update you on our advancements in future calls.
While we are proud of our accomplishments to date, we recognize that there is still more to do to truly unlock our full potential.
We have a terrific opportunity in front of us the total addressable market across credit Decisioning governance compliance and risk.
As well as sales and marketing is large and is why we are enthusiastic not only about our current position, but where we can go over the next few years.
As we look ahead, our strategy is squarely aimed at driving sustainable growth and five key areas.
First is enhancing existing client relationships, we will continue to enhance and grow our strong client relationships through cross selling and upselling into more of our solutions.
Second is winning new clients and targeted markets.
We'll put our experience to our client base with new logos and expand in key markets, such as small and midsize businesses.
Third is developing innovative solutions, we will leverage our existing data and bring on new datasets to develop innovative solutions and expand the range of use cases for our clients.
Fourth is expanding our international presence there was a large untapped global market that provides opportunity to expand our international presence and deliver localized solutions to our clients to me global demand.
Finally, we will selectively pursue strategic acquisitions.
We are focused on organic growth first and foremost both certainly look for bolt on acquisitions that broaden their client base or further strengthen our solutions.
Overall, we continue to make significant progress in our transformation and look forward to updating you today and on future earnings calls.
As we continue to advance the ongoing work related to our technology and data enhancements and our acceleration of sustainable growth over the coming years.
With that as a backdrop I would like to now turn to this quarter's performance and strategic progress.
Overall this was a solid quarter that finished in line with our expectations.
The financial results, which Brian will discuss later in detail demonstrate that despite facing near term headwinds and the broader impacts of cobot 19, the core fundamentals of our business remains strong.
I'm pleased that in spite of this challenging macroeconomic environment. Our team has continued to execute on its strategic initiatives.
Now I'll provide an update on those strategic initiatives and the steady progress, we're making to transform Dun <unk> bradstreet.
The investments, we're making and technology data and analytics are key to laying the foundation for innovation and to bringing new solutions to market that meet our clients growing need for differentiation through utilization of data and analytics.
In the second quarter, we kicked off a key initiatives called project ascent.
Project ascent will allow us to speed data ingestion increased match rates and reduced latency across our data supply chain.
We are taking a thoughtful approach that were placed specific core components of the data supply chain over the next few years.
Currently the project is focused on leveraging our inherent data along with some of the assets and techniques, we acquired to the orbit intelligence acquisition.
Which allows us to build upon our foundational data and be more flexible and rapid and the ingestion phase of our processes.
We have made significant progress with project descent, and we look forward to its initial release of functionality and the fourth quarter of this year.
In support of the data supply chain work. We have also continued to make significant progress and rationalizing and industrializing, our underlying technology infrastructure.
As discussed in our transformation section earlier, we continued to drive savings through a datacenter consolidation strategy and I'm pleased to report that we're on track and showing significant returns in terms of platform stability and lower latency rates.
We continue to optimize the mix of private and public cloud resources and have increased our percentage of cloud utilization to over 70% of our overall infrastructure.
We believe that a modern infrastructure is the foundation for our ability to deliver the current solutions, we have today more consistently and efficiently while simultaneously, allowing us to bring on vastly more and different types of data to drive new solution innovation.
With the changes we've made to date, we've already begun to bring on new datasets in both our financial risk and sales and marketing solution sets.
On a financial risk side, we are ingesting foot traffic data and analytics to complement our more traditional datasets to help our clients increased to underwriting accuracy.
Our understanding the amount of foot traffic flowing into a certain business, an underwriter can better predict future sales and therefore make a more informed decision when issuing credit to potential loan Canada.
Also in the sales and marketing space, we've added an extremely valuable set of data related to buyer intent.
Dnbi buyer intent helps clients to more accurately predict their highest probability prospects to transact and therefore allows clients to more efficiently deploy their scare sales resource.
We believe we can provide clients a significant uplift in their topline performance by not only identifying the right businesses to focus on but the right individuals within the business will ultimately have the authority to transact.
By continuing to add non traditional datasets to our solutions. We are looking to drive continuous improvement in our analytics and help our clients increased the profitability and decrease the risk profile.
These significant transformations and technology and data become the foundation of our topline growth algorithm.
We are intent and increasing customer satisfaction and maintaining our impressive client retention rate in order to drive longer term contractual relationships.
We had significant renewals in the second quarter with clients in the private and public sectors globally.
Including a multinational delivery services company, a professional services firm in the United States in the United Kingdom, and a global credit insurer.
We were able to not only maintain the revenue with those clients.
But increase our revenues within through the cross sell enough sale of our solutions.
While our largest clients utilize our products across both finance and risk and sales and marketing overall, we currently have less than 5% of our clients using both solution sets and we're laser focused on increasing that number as it helps create deeper stickier relationships.
We also won new business, including a multinational financial services company, who turned to us to help manage their compliance verification process.
The National Food services client, who selected our sales and marketing solution to help identify opportunities for cross sell and improve retention.
And a five year program level contract with the United States Department of Defense.
From a new product perspective, I'd like to call out the release of our analytics studio solution.
Since at launch we have proof of concepts underway with 10 clients have recently signed a deal with the Fortune 500 financial software company, whose turn to Dnbi analytic studio Tantalize us client and product marketing strategy.
Dnbi analytic studio is an example of the greater value clients can realize with analytics and we look forward to onboarding more clients in the second half of this year.
Our sales and marketing business in June we released our next generation to account based marketing or a b M platform, which has new features and capabilities to help marketers engage and convert buyers with built in account based ads and account based engagement reporting and analytics.
Thanks are showing interest in our ATM platform and I look forward to sharing our progress in this space.
Along with our in House development, we're pleased to announce our latest acquisition collection is now fully integrated with co action. We are already in market with this new software solutions specializing in credit to cash workflows that help our clients streamline their collections processes.
Yes, we acquired the assets of collection in March we quickly began building a sales pipeline by looking for upsell opportunities within our finance solutions clients.
During the second quarter, we signed three deals and we expect this momentum will continue.
In summary, we are pleased with the progress of our ongoing business transformation. Our team has adapted seamlessly in the face of the current global pandemic and continues to work hard innovate and ultimately serve our clients during these challenging times.
We are excited about the opportunities that lie ahead, as we work to drive long term value and sustained growth.
Thank you for your time and continued support I'll now turn the call over to Brian to discuss our financial results for the quarter and guidance for the year.
Thank you Anthony and good morning, everyone.
Today, I'm going to discuss our second quarter 2020 results and then our full year guidance.
Turning to slide one.
On a GAAP basis second quarter revenues were $421 million, an increase of 5.4% or 5.6% on a constant currency basis compared to the prior year quarter.
This concludes the net impact of the lower purchase accounting deferred revenue adjustment of $36 million.
We had a net loss of $207 million for the second quarter or a diluted loss per share of 66 cents compared to a net loss of $94 million for the prior year quarter, primarily driven by expenses related to the redemption of the preferred stock and partial pay down of the senior unsecured note.
And higher equity based compensation costs.
This was partially offset by the net impact of the lower deferred revenue adjustment.
Turning to slide two I'll now discuss our adjusted results for the second quarter.
Second quarter adjusted revenues for the total company were $421 million, an increase of 5.4% or 5.6% on a constant currency basis.
The increase was driven by the lower purchase accounting deferred revenue adjustment of $36 million.
This increase was partially offset by known headwinds as previously communicated.
These headwinds were driven by a decision we made in the second half of 2019 to make structural changes within the legacy credibility business.
Lower royalty revenues from the wind down of the data Dotcom partnership.
And nonrecurring revenues in the worldwide network and our UK business.
The total impact of these known headwinds was $16 million.
Additionally, we saw some impact from cobot 19 that contributed to lower usage base revenues of approximately $6 million across the segment.
However, excluding these unique items revenues grew approximately 2% primarily from growth in our subscription based revenues.
Adjusted EBITDA for the total company was $176 million, an increase of 18.5% primarily driven by the lower purchase accounting deferred revenue adjustment reflected in the corporate segment.
This was partially offset by lower revenues adjustments Scott.
Net of reduced net personnel and travel expenses due to ongoing cost management efforts.
Adjusted EBITDA margin was 41.9%.
We had an adjusted net income of $82 million or adjusted diluted earnings per share of 26 cents.
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 second quarter decreased 1.8% to $354 million.
Finance and risks revenues decreased $7 million or 3.6%, 3.5% on a constant currency basis to $194 million.
The decrease was primarily driven by a decision we made in the second half of 2019 to make structural changes within the legacy credibility solutions.
And this represented approximately $6 million of the decreased revenue.
We also saw the impact of Kogan, 19, which contributed to lower usage revenues across our solutions of approximately $4 million.
These declines were partially offset by an increase in our subscription based revenues of approximately $3 million.
Sales and marketing revenues increased less than 1% $161 million. The increase was primarily due to revenues of $4.7 million from the acquisition of Latam, which was acquired at the beginning of third quarter 2019.
This was partially offset by lower royalty revenues of approximately $4 million from the data Dot com legacy partnership.
Adjusted EBITDA for North America.
Decreased $5 million or 2.8%, primarily due to lower revenues.
Adjusted EBITDA margin for North America was 48%.
Turning to slide four.
Our international segment second quarter revenues decreased 9.9% or 8.9% on a constant currency basis to $68 million.
Financing risk revenues declined $8 million to $56 million, excluding the approximate $1 million impact of foreign exchange. The remaining decrease was driven primarily by nonrecurring revenues in the worldwide network and our UK business approximately $6 million and the impact of cobot 19 on usage.
James.
Our owned Asian markets of approximately $2 million.
Sales and marketing revenues increased zero point $4 million to $13 million, driven primarily by increased product royalties from our worldwide network.
International adjusted EBITDA of $20.2 million decline versus Q2, 2019, primarily due to lower revenues with adjusted EBITDA margins of 29.5%.
Adjusted EBITDA for the corporate segment increased $39.9 million, primarily due to the net impact of lower purchase accounting deferred revenue adjustments of $36 million.
Turning to slide five I'll now walk through our capital structure.
At the end of June Thirtyth, 2020, we had cash and cash equivalents of $99.8 million.
Which when combined with our $313 million available borrowing capacity under our 400 million dollar revolving line of credit do 2024 represents total liquidity a more than $400 million.
Total debt principle as of June Thirtyth was 4060 $1 million and our leverage ratio was 5.6 times on a gross basis and 5.5 times on a net basis.
On July 620, 20, we completed the initial public offering and concurrent private placement, which raised net proceeds of $2.2 billion after deducting underwriting discounts and IPO related expenses.
We used the majority of these proceeds to redeem the full amount of preferred stock and 40% or $300 million of our senior unsecured notes.
As of today, our current debt principle.
3670, $4 million, consisting of 2520 $4 million of term loan.
$700 million of secured notes in $450 million of unsecured notes. In addition, we have approximately $600 million of cash and cash equivalents.
In conjunction with the IPO. We also had a 25 basis points stepped down to our term loan spread taking it from 400 basis points to 375 basis points.
This step down will save us approximately $6 million of annualized interest the revolver spread also reduced as a result of the step down from 350 basis points to 325 basis points.
Turning now to slide six.
I'll walk you through our updated outlook for full year 2020.
For the year.
Revenue on a constant currency basis is expected to be in the range of 1720 $9 million 1750 $9 million.
Adjusted EBITDA is expected to be in the range of $704 million to $724 million.
Revenue and adjusted EBITDA. Both include a negative 21 million dollar impact from deferred revenue purchase accounting in both the low and high ends of the range.
Adjusted EPS is expected to be in the range of 89 cents to 93 cents.
Again, adjusted EPS includes a negative four cents impact from deferred revenue purchase accounting in both the low and high ends up the range.
Additional modeling details underlying our outlook are as follows.
These estimates include an additional $2 million of public company cost per quarter with the largest component being corporate insurance.
We expect interest expense of approximately $265 million.
Depreciation and amortization expense of approximately $60 million, excluding incremental depreciation and amortization expense, resulting from purchase accounting.
Adjusted effective tax rate of approximately 24% weighted average shares outstanding of 367 million in.
And finally capex of approximately $120 million.
Although we do not provide quarterly by our guidance.
I want to provide you with some color how we expect to progress through the remainder of the year.
We expect adjusted revenues year over year in the third quarter to be flat to slightly down in the fourth quarter returning to growth.
The third quarter includes a shift in timing of revenues of fourth quarter related to a $4 million government contract that included some onsite deliverables that were delayed due to cope with 19 restrictions.
From an EBITDA perspective.
We would expect it to follow revenues and a similar pattern and therefore expect Q3 to be flat to slightly down in Q4 to be.
Overall, we're pleased with the progress we are making our transformation in the core performance of the business.
With that we're not happy to open the call for questions.
Operator will you. Please open up the line for QNX.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please standby will weaken pilots una roster.
And our first question comes from the line of Manav Patnaik from Barclays. Your line is open.
Thank you good morning.
Yes. My question I was excellent question is just around how we should think about it you product pipeline. What you guys had he will be you can junior dealer stock you don't 6200, new products you, Gary I know, it's a completely different business and so forth, but any in jonathan's Highgate to guide me as you guys used to talk about new products.
Pipelines for the coming years.
Sure Manav thing and good morning.
Yes, it's actually a really important question, you're asking in a real important initiative for us.
We've got it on everyone's.
Quarterly reviews in terms of having a constant flow of new innovative solutions that help our clients.
Grow revenue improved margins and stay compliant and it helps for a lot of reasons. Obviously it helps in terms of growing our revenues, but it also helps in terms of creating the stickiness of their relationships with our clients by selling more and doing more for them.
And it also that steady flow of innovation gives you know your frontline salespeople the energy and the passion to be in front of their clients more often sitting up straighter in a chairs.
No.
Sharing the excitement about what it is that we're doing that can help them and where you're off to a great start we launched as I mentioned in my prepared remarks, our analytics studio, which has a lot of growth tangents from it.
Our collection capability on.
On cash flows on the collection side with numerous cobot offerings that we really when deepen quickly and.
And it just doing a lot generally I'd say I can go on but ill.
Localizing, our sales and marketing solutions and parts of Asia that hadn't been done before us, having new products and capabilities in same product sorry, but in a new market for us to sell and grow and.
Very significant upgrade in account based marketing solutions that we recently launched so it's a great question very much top of mind for us and and very focused on it.
Got it and the interest the other one that had rolled around determine the around the M&A pipeline. Brian can you just saw on if the full point 7 million Robinson is the only inorganic contribution this quarter just even just some thoughts on how important the M&A pipeline was to revitalize interest.
Slowly.
Yeah, Manav, so I'll answer that one quickly and then kick it over to Anthony for the M&A pipeline, but the only other acquisitions were really or band in collaboration that were prior to Manav. They were really de minimis from that perspective. So a few hundred thousand dollars ultimately the way, we thought about where they were really.
Expansions of our product offerings. So both kinda early phase from that perspective, and frankly, even though its company you don't want to combine basis, where a drag on on EBITDA, but the way we saw them with more of a buy versus build scenario and may help accelerate some solutions that are going to create longer term recurring revenues, especially into sales and marketing space. So.
Modest was certainly the the most material from that perspective, and it actually locked down after this quarter.
Yes, I don't think I'd add to that would be the initial parts of these.
M&A transactions that we did recently was getting the flywheel turning on innovation, while we're in the process of transforming our technology, our data and analytics, having something in parallel for us to hit the ground running list and they'd like to their more product functionality type acquisitions versus.
Versus buying.
Revenue and certainly not buying EBITDA.
Thank you.
Thank you enough.
Thanks.
Next question comes from the line of Gary Bisbee from Bank of America. Your line is open.
Gary Bisbee your line is open.
Well move onto the next question. Our next question comes from the line of Hams that Missouri from Jefferies. Your line is open.
Hey, good morning, Thank you.
My first question is just on pricing and how you're thinking about your pricing model longer term and the reason I ask is you know there's been a quick turnaround you've cleaned up the prior dock you've invested a lot in Capex you know when you spoke about new products, a little earlier and wonder.
Look at the credit bureaus.
Pricing there tends to be a little bit lower then when you look at the information services universe.
And so just curious how you stack up and and and whether you think that that's an opportunity longer term I realize you have to fix the broader Doc fix the sales force.
Do their turn around and then pricing gums later or later on but just any thoughts around that.
Yeah, absolutely Hamzah. It's it's great question is one that we're focused on in terms of.
We look at you know all of that and really increasing the revenue per client prices certainly part of the cross selling and Upselling is a part of it as well, but from a pricing perspective, we do see that we have.
Very unique data and consoles unique problems and therefore, it's not as Commoditizes a solution and so it is something that we're looking at long term, we do think that.
As you can imagine across the whole universe that we serve their parts where.
I'd say, we're probably pricing fairly in parts, where we're probably not pricing fairly in terms that we could and should get more for the value that we're helping our clients create and we're looking through that Mike said Holistically, what we want to do always is grow the relationships with our clients and.
And for pricing perspective, I always want to make sure that.
You know, we give up the last dollar of price for example to cross sell additional capabilities and broaden the relationship and in terms of changing price. It takes a lot of things to occur right.
Customer service will benefit it cross selling more and having stickier relationships will benefit innovating new solutions and our client seeing us as a partner they have to be with.
I will improve it so we're very focused on all of those in addition to just the specifics of pricing.
Yeah, Great Hamzah, one thing I would add just structural way there too is as we enter into more of a multiyear contract, which is a real specific strategy from our perspective, one of things were building in at Bay, a systematic price escalator and so again, you know rather than having these kind of one your subscriptions that are renewing on annual basis.
We are building and more of a kind of three to four year deals right and again with a small price escalators, we add in law that kind of based functionality from that perspective, so again, making it more repeatable and consistent.
That's a that's very helpful. Then my follow up question, a I'll turn it over it is just on on the sales and marketing side.
I think historically youve classified that business is more all sense.
The defense versus the financing risk.
Just just if you go to give any high level thoughts how investors should think about how mission critical that offering is in and how how's that offerings is different than you know I think we have data and that was a different company backend all nine well you know that business in North America, and all 9009.
For signed or so organically.
All lines a long.
Hi, My goal, but maybe just help us understand how how's that business is mission critical and and and any thoughts there. Thank you.
Now onto another great question.
And like you said you know comparing it the DNA of our business is very different than what it was in 2009 and we're seeing it in the result, but we're very focused on broadening out the capabilities.
For our clients would take can be more efficient and how they.
Attract prospects and how they sell more to existing clients.
With a lower cost right. So if you look from a cobot perspective, we also feel that in a colder than post covered world, they're going to be less conferences less trade shows less ways of traditional selling taking place and so the importance of what we're doing in ways that we can help our client we really think.
Should be a tailwind for us and certainly.
We're a very different companies and we were in 2009, when we had.
Basic print campaigning capabilities and ours is much more sophisticated right now and much more valuable to our clients.
Great. Thank you so much.
Thank you Hamzah.
Our next question comes from the line of Gary Bisbee from Bank of America. Your line is open.
Gary Bisbee Bank of America. Your line is open.
You guys sorry.
Okay now we can go right.
Okay Alright.
Hi, I'm working without power and after the storm system.
We're just body so I apologize.
The.
First of all congratulations successfully mission of the IPO.
Hey, following what Bob a question around innovation.
One of the seems we.
We've seen others that have.
Its extensive and quality.
Do well over time, it's come up with new use cases to drive new revenue streams off of.
The extensive data you've got I guess.
No. It's early but where are you in the process.
You know sort of studying and trying to find new use cases, and and building, though this is their ups.
Oh opportunities that you think about mortgage data didnt really improved decisioning and other end markets and Macquarie.
Yes, I'm going to repeat the question and case, others couldn't hear and this is I.
I hope you're doing well Gary.
With the impact here, it's the new norm overall living in as well in day to day.
But.
It was really more around our there from an innovation prospective new use cases and revenue streams that we can get from at where are we in the journey and what I'd say is we have.
A lot of possibilities there and we've already started some of them. So if you look from an alternate data source perspective, we're doing a lot of really exciting work there on say foot traffic or.
And our sales and marketing perspective, getting digital signals, such as buyers intent intend to purchase and bringing those in integrating them to have another view of a situation for an underwriter for example to to see the foot traffic and have that integrated with our existing dataset and the power that we have here and where we have.
Got a lot of excitement is why we're implementing project a scent for us to bring on you know more than 100 alternative data sources over the next couple of years is really for us to create more use cases from it and having the ability of being able to match in linked to the DUNS number is incredibly powerful much more powerful then I realize prior to coming to Dunham Brad.
Great.
But it's a very powerful tool in terms of being able to bring new and unstructured sources of data in connecting it to a DUNS number two specific client and I think in this.
Complex world will be able to.
Yes, good source of that for our clients because we can make it easy for them to buy from us and so a very much is an area that we're looking at we're excited about and it's one candidly.
When we look from a a competition perspective or people asking us about competitors, we really look at.
Our game plan and we have high confidence in our game plan and that's what we're very focused on executing.
Our game plan, because we see lots of opportunities out here versus traditionally what were what we had been doing and so we've got a lot of energy behind that Gary and that's why you're seeing a lot of the investments in the infrastructure work.
We've got going on and that we talked about leading up to the Roche on the road show itself.
And then the follow up.
Typically with these information data services companies, when we see investment in upgrading infrastructure and driving innovation, but theres a period of significant investment followed by efficiency I know you've delivered meaningful cost savings, but what rich.
Strategy you need just spending is still under the long term performance that you're targeting thank you.
Sure.
I'll start and I'll pass it onto Brian you know.
We're not.
Well, we're not believers in doing one enormous project some monolithic project.
The track record across all of the history and industries is not a positive on ours is always one of Componentized nation, and adding capability. So such as product a sense, we're coming out immediately with that in terms of abilities that we're going to benefit from inc. starting in Q4 this year, but at the same time like I mentioned over.
The next couple of years, bringing on.
Over 100 alternative data sources, and really speeding up our ability to ingesting cure rate.
Unstructured data.
Much much faster than we can today so.
So it's really breaking it down that way and we've got that feel today, so you'll see our capital spend.
Increased from what it was historically, but no major.
Enormous steps that we've got to take so.
We'll probably finish this year.
About a 120 million of Capex and so we'll be relatively speaking on that type of.
Run rate focusing on bringing componentize capability across everything that is that we're focused on.
Versus one giant.
Like I said monolithic project that we're going to call out that isn't the billion range or anything like that but trying to want to add to that.
Yes, and I think you said it right, we've certainly stopped out the investment, especially investment and growth and that's where you've seen the capex numbers step up from something that was enough $30 million to $40 million range last year. We spent about 80 and this year, it's gonna be Im not you know, it's Anthony said around 100 to 120 million in so very focused again on on that.
Growth initiative, and certainly have made some significant progress. We're currently now about 70%.
Utilization from a cloud perspective, we think overtime that will shift you know probably close or something the 80% to 85%, but you know as we always think about the savings we do think about them on a net basis and so we have continued to make investment while simultaneously, creating those efficiencies within the organization.
[laughter].
Our next question comes from the line of Kevin Mcveigh from Credit Suisse. Your line is open.
Great. Thank you so much.
Regulations on the LTL, Hey, I wonder.
And can you Brian.
Maybe help us a frame kind it where we can choose shifts within you know kind of context or zero to 3% organic growth and then ultimately should get to that 3% to 6%.
It should we expect the junior retention in the business. It is just we're working on which of those milestones.
Sure Kevin Thank you.
Our retention is strong in Australia, I'll pass on to Brian.
It has been historically strong we saw in the corridor that we increased it about another half percent.
Already very high number so we're very pleased with the progress that.
We're making in terms of retention and not just retaining clients as part of the renewal, but increasing the relationship with them also at the same time so.
It's an area that like said, we've been very focused on and and again of all the initiatives that we have across this broad transformation oral impacting our ability to to retain much stronger.
Brian you want to yeah absolutely.
Kevin to Anthony's point retention is now running around that 96, and 97% from that perspective, what we see it that the strategic account level, it's nearly 100% really on an annual basis, where we're seeing the churn is that the SMB spots on some of those businesses, especially on the micro side, maybe this one year.
But don't the Max I mean, clearly were refilling that right with a number that approach us each and every year from that perspective and so.
It's a really strong base to operate off up enough Anthony side with the multiyear contracts and with some of the changes we've made and go to market you know weve been able to actually increase retention already up another half a point in the in the second quarter. This year.
It's very helpful. And then just in terms is not seen one of the keys is equal to the CD well is.
Good technology investments are there any kind of milestones you pointless to issue.
Kind of increased the past results will be definitely helps boost product innovation industry luggage some of that.
The technology investments across the enterprise.
I see in terms of milestones Kevin.
There are a number of them kind of throughout all the different initiatives that we have right. Now. So like says you don't want to as a major once we have with project ascent is Q4 will be one of the first in terms of us having some improved capabilities coming out of that project and then we've got very detailed project plans that will walk through the different milestones.
Across many of the initiatives.
I don't think Theres any.
Unless Brian you think of one like a milestone across the whole company of technology initiatives. There a number of projects and that are being measured.
Really with individual Accountabilities and.
And specific targets.
Yeah, Hi, Anthony I, I think Thats right and you know the way certainly we've approached it in the way that you Steven I think about it riders not a you know what rip out everything and replace at one time you know those those large kind of massive projects generally have a of really high failure rate from that perspective in.
So we've taken as Anthony said very component type approach and one of the first you know pieces of assigned to going live in a in the fourth quarter, but that's just the first of multiple phases, where we'll continue to take out you know one optimize specifically around the data supply chain. So.
That's really the way we're thinking about it.
Thank you.
Thank you Kevin.
And again, if he'd like to ask a question that star one on your telephone keypad. Our next question comes from the line of Seth Weber from RBC capital markets. Your line is open.
Hi, guys. Good morning, Thanks for taking my question.
Yeah, Theres been a there theres been a large turnover on your sales force I think the number or something like 30% can you just talked to where you feel like the salesforce is on a productivity level.
And you know just and relative to where you think you could get too. Thanks.
Sure. So thank you for the question Yeah ourselves, we went through a significant sales transformation.
Starting with.
I'd say is senior level leadership as well as individual sellers and we've been very pleased with the change in the progress that we're making that way.
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We've increased the number of multiyear contracts, which was an area that we're very focused on and it's increased even since the roadshow were up to vote approximately 30% of our revenues under multiyear contracts right. Now. So the team is doing a great job and extending relationships with our clients and and cross selling more.
Capability to them and a and sales as you know.
I'd say, we're business as usual and sales right now in that we went through the massive transformation within it and now we'll continue to tweak the dials on the dashboard as we want to see different results and will change.
We'll tweak York structure tweak incentive plans.
In a more steady state manner, they would expect but we're very pleased with the progress that we're making in that regard.
Okay. Thanks, and then just a follow up question on the the incremental cost cuts that you talked to here in the second quarter.
Any color as to where they occur again, just how how we should think about the pathway to the 250 million is that a.
Do you think that's a fiscal 2020 number or will that bleed into 2021. Thanks.
Sure. So the primary components of the 14 million a in the quarter were around actually the technology side and so we had some legacy third party arrangements with some outsource providers that.
We're really attractive from a pricing perspective and from a utilization perspective, and so we did a lot of work from on that side.
And were able to drive on some pretty significant savings from that perspective on the other components again, you know we're remaining around.
Again, some of the back office functions that were so rationalizing as we implement new kind of corporate software for all intents and purposes, and so I'm definitely heavier on the tax five for this quarter as we think about the remainder of the last kind of $30 million, it's really two prong and so as we talked about.
Obviously on some of those large scale infrastructure changes we've made in this evolution into the cloud has provided some pretty significant savings from that perspective, and so by the end of this year, we would expect kind of the phase two for that too.
To be completed and we would start to recognize the savings from from that and really 2021. The last component is where we look at our delivery and the automation and deliberate along with again, you know our right shoring and offshoring out of certain functions throughout the organization. So that's the.
The piece I would say that we had planned for later in Q4 some of the areas that we're looking out geographically are still struggling from a cold it perspective, so that could spill over into early very early part of 2021, but we were booked at that have a majority of 250 million annualized run rate savings complete by the end of this year.
Okay. Thank you very much guys appreciate it.
Thanks.
Our next question comes from the line of Ashish Sabadra from Deutsche Bank. Your line is open.
Hi, Thanks for taking my question. It's a question on they can actually market can you just talk about a anthony the timeline floor, creating order placed products was international market as well as diffusing diffusion of IP from the U.S. like for example rollout of analytics tool use in Yuchai Atlanta Nashville It. Thanks.
Oh, Thank you Ashish yeah, it's a really important.
Part of our strategy in terms of internationalizing or products and the teams done a great job with that.
Launch more.
Products International I'd say this past here than we have probably in last.
Five years.
Loosely speaking.
So it's an important area weve.
Because it's really it's just finding more shelf space.
For our existing products and we've got the right type of.
Tech technology talent and business leadership to really find which would be bigger wins for us in which markets and accelerating those plans. So that actually is a top priority for us I look forward to continuing to update you on our quarterly calls with the progress that we're making by region and byproduct.
That's very helpful. And then I think he has you called out friendship Das and I think that you're definitely helped the depth and quality <unk> data.
My question here was specifically in the themes and marketing side some of the misstep from the <unk> management team had a application and then maybe.
How does the project spend held chip.
I wish name in fact, when you go to market and help the key installs and lost share in that market any color on that front. Thanks.
Oh sure where we look at.
Again, our ability here in terms of you know executing against our game plan, we see how we're positioned we've got a very broad.
And deep capability in our sales and marketing solution set and to the extent that we can you continue to you know ingesting cure rate more and more data and match. It. We're excited about the use cases that we can drive from it such as like the buyer intent, which we just announced.
Recently.
Or is the account based marketing solution set that Weve recently made a significant upgrade on.
The.
We kind of look at everything running in parallel casino.
When we looked at the projects the milestones that we have.
Steve has a very detailed run brook across all the different initiatives and really with everything we're trying to do is not have something dependent on something else. So what all the things we can do in sales and marketing in parallel while we're working on project descent that puts us in a position too.
The leverage that scale of data ingestion and curious in matching so.
It's one where we are very excited about and we feel very good about our long term prospects with what we can do in this space and also.
Cross selling that into our existing client. They said were single digit percentage wise in terms of cross sell so when you look from Oh said hand perspective within our client base, there's a lot of opportunities for us to cross sell and my belief from every company I've worked in every industry is clients. If you can make their life simpler because they have.
The ones busy and you can bring a more capabilities and integrate and make it easy to do business everybody wants to do that and we're doing business with a lot of companies that it's on us to be able to make it easier and easier for them to expand the relationships with us including sales and marketing.
That's very helpful. Thanks, Thanks Anthony.
Thank you Ashish.
And our final question today will come from the line of Andrew Jeffrey from truly Securities. Your line is open.
Hey, Thank you good morning, I appreciate you squeezing me in here and Anthony.
Commenting on.
Cross sell efforts as soon as initiatives.
Wonder if you could maybe frame Bob.
Right.
Way into just kind of frame Bob.
Timing.
Would you think you're going to gain cross sell benefits there is a big.
Number one is that your largest customers use versus some of your larger strategic customers do you think there's a good cadence of cross selling uptake installation solutions. This year or is it more of a sort of 21 22.
Well I think with anything Andrew it's a it's going to grow over time. So you know we're like I said, we're still.
You know transforming the company and you know our cross sells are up.
And you know we feel you know.
Confident with how we're progressing in that regard and obviously it is tied to the previous questions as well on product innovation. So the more products. The more opportunities you have to cross sell so it all ties together and what I'd say is as time goes on and 21 22, we'll constantly being a stronger and stronger position.
In terms of cross selling but.
We've got a lot of product right now that is not being that had not been cross sold that we're focusing on and as we continue to create more new innovative solutions. We're excited about how that will strengthen our cross sell it it'll be.
Brian you want to add onto that.
I would agree if you look at the overall total number of clients right. It's only around you know fiveish percent riders that are really kind of cross sell across financing risk in sales and marketing and so where we see that deeper Andrew is in the strategic customers right. Now once you kind of get into the medium in the into larger size and especially.
As you go down it just wasn't in a up that kind of a historical effort from our perspective, so as Anthony that you know the bars relatively low so we've already started to see some benefits from from cross sell but really we will see that you know accelerate as the transformation continues to take hold at our.
Underlying assets in our delivery mechanisms et cetera become that much more acceptable.
Yeah, and maybe I'll add on a bit more some of the early cross sells you know has been with our apiay.
Solution set that Weve revitalized and the beauty of that is when the using eight guys. As we continue to add more a T.I.s. It makes for an easier and easier cross sell of using more of our capability. So I said with hopefully what you're seeing is with every one of these areas. We're focused on the holistic approach to how to solve a versus a singular approach.
Thanks.
Yes.
[noise], how many do you have time for another question. Our next question will come from a line of Bill Warmington from Wells Fargo. Your line is open.
Yes, I got a wire that you're right.
[laughter], where we are we apologize for you know what the opening and it's Anthony Fad. Our prepared remarks were a little longer. This time felt were happy to I get John.
Well, thank you very much I I wouldn't Wanna get away.
So [laughter] so a couple of a couple of quick questions and for your.
Maybe talk to talk a little bit about.
How the momentum on the new selling side was in July.
I would expect that you guys probably saw.
I'm pretty sure you know some improved momentum during the quarter, but I want to know how July was lucky.
Yeah. So.
Bill I think what we've seen if you know a bit of Oh, you know return I would tell you come to someone you know normalized levels from that perspective, and so we're still seeing they overall kind of broader impact of Kobe, we expect adding in the third and fourth quarters.
We talked about the impact on our revenues I'm. So we think about it or you know.
In a similar you know way for us for the you know the time being at least the remainder of this year.
Got it.
And then a I wanted to ask about the plans for moving down market into the small and midsize business.
Segment.
Product or salesforce changes pricing or anything like that.
Yeah, I know, there's significant changes that we've made there in terms of.
No.
From a a inside Salesforce you know we've.
Move that to our central valley location be closer with a larger population of our company and we've also had a major focus on our digital channels. So historically, what we had going on were.
You know a SMB businesses were coming to us to get at their credit builder score. So thousand over 1000, a day or coming to us where they're coming to us to get a DUNS number or they're coming because they want to be a supplier for a large organization and that needs to be vetted through us where they want alone and need to improve their credit they were coming off.
All across you know our company and we weren't really bringing it all together in an integrated way to then the uplift to cross sell and do more for them and so we're looking at ways from our digital channels, how we can.
Complement the selling that we've been doing.
With inside sales with a digital channel that will enable commerce and give many of these small medium businesses, which are self navigators stability for them to.
To see what we what we have to offer natural adjacencies for them to leverage from us. So we've had a very strong focus on that it won't be business as usual here for the SMB marketplace.
Got it all right well, thank you very much and again, congratulations on that making it out public.
Thank you so much bill thanks.
I would now like to turn the call over to Anthony Jabar for closing remarks.
Thank you Lisa.
In summary, we're pleased with our progress to transform Dun <unk> Bradstreet, our recent IPO the significant milestone for the company and we recognize is just another step forward as part of a longer journey.
We have a great company and we'll continue to be focused on maximizing shareholder value as well as client value as always I'd like to thank my Dun <unk> bradstreet colleagues for their exceptional efforts and our clients for the strong partnerships. Thank you for your interest in Dun <unk> Bradstreet and for joining us on the call today take care.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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