Q4 2020 Dun & Bradstreet Holdings Inc Earnings Call
Good morning, My name is put on and I will be your conference So quick thoughts on.
At this time I would like to welcome everyone to Dun <unk> Bradstreet's fourth quarter, yes.
'twenty 'twenty conference call.
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After the Speakers' remarks, there will be a question on I'm substation.
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I would now like to turn the call over to debt Mccann Treasurer, and senior Vice President of Investor Relations on Culprits F. E. N. Thank you you May proceed.
Thank you and good morning, everyone and thank you for joining us for Dun and Bradstreet financial results conference call for the fourth quarter and full year ending December 31, 2020 on the call today, we have done on Bradshaw CEO, Anthony Jabbour, and CFO Bryan Hipsher before we begin allow me to provide a disclaimer regarding forward looking statements this call, including the Q&A portion.
On the call May include forward looking statements related to the expected future results of our company and are therefore forward looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward looking statements are subject to are described in our earnings release and other SEC filings. Today's remarks will also include rack.
As to non-GAAP financial measure.
So on 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, you Dun and Bradstreet Investor Relations website at Investor Day, Dnb Dot com with that I'll now turn the call over to Anthony.
Thank you Deb good morning, everyone and thank you for joining us for our fourth quarter earnings call I would like to take some time today to discuss highlights from 2020 and our plans for 2021.
2020 was an incredible year for Dun <unk> bradstreet in the midst of a challenging new environment were able to successfully complete our IPO.
On a definitive agreement to acquire <unk> and continue to transform our business with significant enhancements to our technology data and analytics, which are ultimately laying the foundation for our ability to execute on our near and long term growth strategies.
Returning to the public markets last July was a major milestone for our company and allowed us to raise approximately $2 $4 billion day.
On net IPO proceeds allowed us to pay down our entire preferred equity and 40% of both our secured and unsecured notes.
This significantly improved our financial profile and are saving us more than $175 million of annual dividends and interest expense.
With our lower leverage and increase cash flow, we now have significantly more financial flexibility to accelerate our growth strategy, both organically and inorganically.
For example, we're able to execute a critical step in our international growth strategy. The acquisition of Dun <unk> Bradstreet worldwide network member base node, which was signed in October 2020, and closed on January eight 2021.
The acquisition of business significantly expands our footprint to additional territories that make up 40% of the GDP of Europe and are home to 50 of the global 500 companies.
The combined business with nearly 250000 clients collectively will now be able to provide mission critical solutions to an expanded European footprint with more local data more local knowledge and more streamlined delivery channels.
As a global company, having local expertise and knowledge helps us to engage with clients of all sizes in the region and across the globe to provide solutions and support necessary to meet their increasing demands.
As we've now been operating the business for around a month, we're even more excited about the opportunity.
The business came with a combination of Dun <unk> bradstreet products, along with some legacy disparate solutions.
We will Sunday on the legacy solutions and invest in the development of our market, leading global platforms and localized solutions.
We also have identified approximately $40 million in annualized run rate savings that we expect to have action by the end of 2022.
Brian will provide incremental financial details, including our expectations for 2021 in his section, but overall, we're already have strong momentum underway and look forward to updating you on our progress in the coming quarters.
Now turning back to the fourth quarter and full year 2020, we delivered solid financial results in both the fourth quarter and full year 2020, despite known headwinds and a challenging macro environment.
Fourth quarter revenues were up one 8%, excluding the net benefit of the lower deferred revenue purchase accounting impact adjusted.
Adjusting for the previously communicated headwinds normalized revenues on a constant currency basis were up three 5% for the fourth quarter and 3% for the full year.
Total company revenue retention for the year was 96% an increase of 70 basis points versus prior year, and we now have 36% of our business under multi year contracts.
Revenue retention for our strategic account segment for the year is 99, 8%, which once again reinforces our position as a mission critical provider to the largest businesses in the world.
2020 was certainly a challenging year in terms of businesses of all sizes navigating their way through a difficult environment.
I'm proud of what we were able to accomplish in terms of retention and in some cases expansion, especially when you look at what we did with our strategic accounts building on the near 100% gross retention I just mentioned, we're able to grow our revenues with our strategic customers by 3% versus prior year.
We also increased our multi year business and the strategic channel by 11 percentage points to 67, 5%. These.
These multi year contracts not only have built in growth. They also create recurring revenue streams that allow us to continue to cross sell additional solutions.
A great example of this was with one of the top three wireless providers in the U S. As they adopted a multi year agreement with master data digital marketing and global analytic solutions.
Next I'll talk about the significant progress we made in our government channel, where we had a strong year with wins in the department of defense, The Federal Emergency Management agency and the small business administration.
And then the fourth quarter were able to secure a sole sourced 16th month contract with two six month options to further support the general services administration or the GSA.
As governments, both domestically and globally look to grapple with the rapidly evolving environment. We are pleased to be able to assist such critical work through our unique and differentiated offerings.
Moving onto our field sales accounts, we saw customers, including one of the leading hedge funds in the world and an online brand management technology company renew at or slightly above prior year levels, which was reflective of the overall customer segment. These businesses, which range from 100000 to $1 million of potential.
Spend a year, we're more impacted by the current adverse environment. However, they maintained consistent spend with us given the criticality of the solutions, we provide despite their overall budget limitations.
We continue to have dialogue in terms of the adoption of incremental solutions as things begin to return to a more normalized environment and look forward to deepening our relationships going forward.
Finally, our small and medium business accounts were an area that went through a significant evolution. We spent the later part of 2019, beginning to execute a digital strategy that shifts our reliance on direct mail campaigns and telephonic interactions to a more E commerce centric interaction.
While revenues from direct mail on Tele sales were down significantly versus prior year were able to partially offset those declines with digital sales up 53% over the prior year. We carry this momentum through the back half of 2020 and are excited about our progress in expanding upon our F&B digitization efforts, which I will discuss further in my.
2021 operations section.
From an international lens as we continue to expand improve our beneficial ownership data, we're able to secure a new contract with one of China's top four banks.
This solution will help the bank managing screened their client shareholders in order to meet anti money laundering requirements and the know your customer compliance process.
In the U K, we expanded our business with a fortune 500 online payments provider, whose platforms are available on more than 200 markets around the world.
They will be using our modern API and cloud based software as a service solutions globally to provide entity verification screening and monitor potential fraud.
We also continue to grow our sales and marketing solutions internationally.
A British multinational enterprise software firm Sage Global services, a market leader for integrated accounting payroll and payment systems will be using our global data to assist with their sales and marketing efforts through cleansing and updating data within their CRM systems, and assisting and account based marketing efforts.
As you can see client engagement is strong and we believe this momentum is a direct outcome of the substantial progress. We've made in terms of our ongoing transformation that is producing higher quality more modern and scalable global solutions.
In 2020, we invested approximately $115 million in capitalized software development focused on enhancing and expanding our data supply chain innovating new solutions and modernizing our existing platforms by integration enhanced user interfaces and decreased latency.
As we've discussed before project ascent has been an important piece of our technology transformation as we continue to enhance and expand our ability to ingest and curate data <unk>.
Diversify our coverage of existing data and.
And expand access to a variety of alternative datasets.
We also made significant progress in simplifying and scaling our infrastructure for further growth converging.
Converging multiple existing legacy environments onto a common platform, primarily in the cloud and proves our stability in operating costs and enables automation continuous integration and on demand provisioning sort of developers can deploy more rapidly into production ultimately, allowing us to scale quickly and efficiently.
An example of taking an existing set of solutions focusing on the modern offering and connecting it to enhanced data supply chain is what we're doing with our direct plus API.
Alternative datasets are coming to Dun <unk> Bradstreet are now adjusted through ascent and delivered by direct plus providing our customers with the freshest, most complete and accurate results, which allows our customers to access the most up to date data and analytics available in our ecosystem.
Over the next year, we will continue to load new data and begin migrating existing datasets to be curated through a cent.
These particular investments along with all the new product innovations, we rolled out in 2020 are creating the foundation for our future growth.
And finally as we invest in the business. We also continue to focus on efficiency reflected in our improved EBITDA margins and annualized run rate cost savings to date of $241 million, which is up $16 million from the third quarter.
This was achieved through a rationalization of our real estate footprint, a net reduction from external providers as we expand our global capabilities and continued rationalization of our back office support structure.
As I said 2020 was an incredible year, our team continued to make great strides in executing on our strategy and we're well positioned for 2021 and beyond.
Now turning to 2021, we will continue to focus on our transformation efforts as we look to leverage the work we did in 2020.
One area I'd like to highlight is our new SMB digital platform, which will provide small and medium sized businesses, a one stop shop and helped to deepen our relationships with cross sell opportunities extend our reach to new customers, particularly small businesses and increase our revenue from new channels, including self service E Commerce.
We have thousands of small businesses coming to our website each day for a whole host of reasons, including registering for a dun's number looking to improve their credit profile or becoming a qualified supplier to a major corporation.
We took multiple digital entry points and established a unified site that provides a single corridor for these businesses to not just access our products, but to gain access to a more expansive environment, including partner products designed specifically for small business. This helps us to grow our small medium business sales increased stickiness with <unk>.
On clients and create partnership opportunities with our largest enterprise clients to bring new solutions and services to small business.
As we look to our finance and risk and sales and marketing portfolios will continue to launch new innovative capabilities throughout the year and internationally. We will continue to focus on launching new products in our respective markets through globalizing existing new North American solutions, introducing new offerings concurrently with North America.
And launching specific local offerings.
These solutions will largely leverage existing technology platforms and data supply chains, but be tailored for market users with local language data and future requirements.
2020 was another year of remarkable transformation and we are poised to accelerate growth in 2021 are.
Our key priorities are to continue the transformation of our technology to scale for growth deliver.
To deliver more to our clients digitally.
Spanned our data and analytics capabilities.
Integrate <unk>.
And grow both organically and Inorganically as we look for new and better ways to serve our clients. We are excited for what's to come and with that I'll now turn the call over to Brian to discuss our financial results and outlook for 2021.
Thank you Anthony and good morning, everyone.
I will discuss our fourth quarter and full year 2020 results and our outlook for 2021.
Turning to slide one on a GAAP basis fourth quarter revenue were $480 million, an increase of 11% or 10, 5% on a constant currency basis compared to the prior year quarter.
This includes the net impact of the lower purchase accounting deferred revenue adjustment of $39 million.
Net income for the fourth quarter on a GAAP basis was $7 million.
Hey, Bill.
Eluded income per share of <unk>.
Compared to a net loss of $263 million for the prior year quarter.
This was primarily driven by prior year's expense of $172 million.
Related to the make whole provision associated with the series a preferred stock which was redeemed as a result of the IPO.
Also the net impact of the lower deferred revenue adjustment of $39 million as.
As well as a higher non operating gain of approximately $24 million related to the fair value adjustment of a foreign currency.
Before I get to the full year results, let me clarify that comparison to full year 2019 are being compared to the combined pro forma results, which include the predecessor period prior to the prioritization the successor period post privatization and pro forma adjustments.
Give effect to the take private transaction.
It had occurred on January one 2019.
For revenue and adjusted EBITDA, the only pro forma adjustment was a $16 million reduction due to additional deferred revenue.
Net income contains several pro forma adjustments the details of which can be found in the schedules within the press release.
On a GAAP basis full year 2020 revenues were $1 $738 million.
An increase of 10% compared to 2019.
This concludes the net impact of the lower purchase accounting deferred revenue adjustment of $134 million and an international lag adjustment of $26 million, which had a combined 10 percentage point impact on year over year growth.
We had a full year net loss of $176 million or.
Diluted loss per share of <unk> 48.
Compared to a net loss of $599 million for the prior year.
Turning to slide two I will now discuss our adjusted results for the fourth quarter and full year.
Fourth quarter adjusted revenue for the total company or $480 million, an increase of 11% or 10, 5% on a constant currency basis. This increase includes the $39 million.
Net impact of lower deferred revenue purchase accounting adjustments, a nine percentage point impact on year over year growth.
This increase was partially offset by known headwinds as previously communicated.
These headwinds include lower usage revenues, primarily driven by the impact of COVID-19 of approximately $8 million lower.
Lower royalty revenues from the wind down of the data Dot com partnership of approximately $6 million a day.
Decision, we made in the second half of 2019 to make structural changes within legacy credibility solution of $1 million.
Partially offset by the shift of $4 million of government revenues from the third quarter.
The total net impact of these known headwinds is approximately $11 million.
Excluding these unique transitory items and the impact of currency the underlying revenues for the total company grew approximately three 5%.
Fourth quarter adjusted EBITDA for the total company was $209 million, an increase of $51 million or <unk>, 32%.
This increase includes the $39 million net impact of lower deferred revenue purchase accounting adjustments, a 26 percentage point impact on year over year growth.
<unk> of the improvement is primarily due to lower overall operating costs driven by ongoing cost management initiatives, including lower net personnel expenses, partially offset by increased public company costs.
Fourth quarter adjusted EBITDA margin was 43, 5%.
Fourth quarter, adjusted net income was $118 million on.
Our adjusted diluted earnings per share of <unk> 28.
An increase from fourth quarter 2019, adjusted net income of $51 5 million.
Full year adjusted revenues for the total company or 1730 $8 million.
An increase of 8% compared to 2019 adjusted revenues combined pro forma.
This increase includes the net impact of lower deferred revenue purchase accounting adjustment of $134 million.
Eight percentage point impact and known headwinds as previously communicated these.
These headwinds include lower usage revenues, primarily driven by the impact of COVID-19 of approximately $20 million lower royalty revenues from the wind down of the day to Dot com partnership of approximately $20 million on <unk>.
Vision, we made in the second half of 2019 to make structural changes within legacy credibility solutions of $11 million.
And worldwide network and nonrecurring revenues of $6 billion.
The total impact of these known headwinds was approximately $57 million.
Excluding these unique transitory items, along with the deferred revenue adjustment revenue on a constant currency basis grew approximately 3% primarily from growth in our subscription based revenues and our finance and risk solutions.
Full year adjusted EBITDA for the total company with $715 million.
An increase of 30%, primarily driven by a $134 million of lower purchase accounting deferred revenue adjustments reflected in the corporate segment, which has a 25 percentage point impact on the year over year growth.
Along with lower net personnel travel and marketing costs of approximately $55 million in the current year period, primarily resulting from ongoing cost management efforts, partially offset by increased technology costs of approximately $42 million.
Related to data processing and data acquisition costs.
Full year adjusted EBITDA margin was 41, 2% an increase of 670 basis points. The net impact from deferred revenue on an impact of five percentage points on the year over year margin improvement.
Full year 2020, adjusted net income was $350 million or adjusted diluted earnings per share of <unk> 95.
Compared to 2019, adjusted net income of $175 million. The increase was primarily driven by the net impact of lower deferred revenue adjustment in the current year lower personnel and travel costs, primarily driven by ongoing cost management and lower interest expense.
<unk> offset by higher technology costs, primarily related to data processing and acquisition costs.
Turning now to slide three.
I will now discuss the results of our two segments North America and internationally.
North America revenues for the fourth quarter increased 0.3% to $401 million.
Third quarter net headwinds of $11 million mentioned earlier all related to North America. Excluding these revenues underlying growth was approximately 3% driven by increased subscription based revenue.
Finance and risk fourth quarter revenues were $218 million, an increase of 0.4% driven by the share of a 4 million dollar government contracts from Q3 higher subscription based revenues, partially offset by known transient headwinds of $1 million from structural changes and credibility solution.
And $8 million and lower usage compared to an elevated Q4 2019, along with the impact of COVID-19.
North American sales and marketing fourth quarter revenues were $183 million.
An increase of zero, 2%.
The increase was primarily driven by higher revenues of approximately $8 million from our D&B direct ACI solutions, partially offset by lower royalty revenue of approximately $6 million from.
From the data Dot Com legacy partnership.
North America fourth quarter, adjusted EBITDA was $198 3 million and adjusted EBITDA margin for North America was 49, 5%.
Turning now to slide four I will now discuss full year results for North America.
In North America revenues for 2020.
1400, $60 million, excluding the net impact of $48 million of headwinds communicated $40 million related to data dot com $11 million related to the structural changes we made within our legacy credibility solutions and.
$17 million of lower usage, primarily related to COVID-19.
North America underlying revenues increased 3%.
North.
America financing risks.
Full year revenues were $811 million, an increase of $2 5 million or less than 1%.
The increase was primarily driven by higher subscription based revenue of approximately $30 million, partially offset by lower revenues of approximately $17 million of lower usage, primarily attributable to the impact of COVID-19, and lower revenues of approximately $11 million, primarily due to structural changes we made within our legacy credit quality.
Solutions.
North America sales and marketing full year revenue decreased $7 $3 million or 1% to $649 million. The decrease was primarily due to lower royalty revenues of approximately $20 million of a day to dot com legacy partnership.
Along with lower usage revenue across our sales and marketing solutions.
Fully due to the impact from COVID-19.
These transitory headwinds were offset by a net increase in revenue across our sales and marketing solutions are approximately $6 million.
Largely attributable to our D&B direct API solutions.
In addition revenue increased by $6 $5 million from the acquisition of wireless which was acquired at the beginning from the third quarter of 2013.
Full year adjusted EBITDA for North America increased to $696 million.
Primarily due to lower operating costs, resulting from ongoing cost management efforts drove lower net personnel expenses full.
Full year adjusted EBIT margin from North America was 47, 7% an increase of 60 basis points.
Turning to slide five.
In our international segment fourth quarter revenues increased 10% or 8% on a constant currency basis to $80 million Prime.
Primarily driven by growth in the worldwide network and United Kingdom.
Financial risks fourth quarter revenues were $64 million, an increase of 11% and an increase of 8% on a constant currency basis, primarily due to higher revenue of approximately $4 million from worldwide network alliances due to higher cross border data sales and higher revenue from risk solutions, and our U K market.
We're approximately $1 million.
Sales and marketing fourth quarter revenues were $16 million, an increase of 6% Canadian sub 4% on a constant currency basis.
Primarily attributable to higher revenue from API solutions, and our UK market of approximately $1 million.
Fourth quarter International adjusted EBITDA of $23 million increased 4% versus fourth quarter 2019, primarily due to higher revenues the adjusted EBITDA margin.
9%.
Turning to slide six.
On our international segment full year, 2020 revenues were $299 million, an increase of $6 $6 million or 2% or 1% on a constant currency basis, excluding $9 million from transitory headwinds 6 million from the worldwide network and our U K business $3 million from COVID-19.
<unk> International revenues grew approximately 5% on a constant currency basis.
International financial risk full year revenue of $244 million increased $9 million or 4% three percentage on a constant currency basis, primarily driven by higher revenue approximately $10 million from worldwide network due to higher cross border data sales.
Higher revenues of approximately $1 million.
From an increased sales of risk solutions, and the United Kingdom, and $2 million from our greater China market driven by solutions targeted at small businesses, partially offset by lower usage volumes in our Asian markets from approximately $2 million.
Primarily due to the impact from COVID-19, and transitory headwinds from the worldwide network in the UK on <unk>.
$6 million.
International sales and marketing full year revenues of $56 million decreased $2 million or 4% and 5% on a constant currency basis.
Excluding the positive impact from foreign exchange of <unk> 4 million decrease in revenue was driven primarily by lower product royalties from our worldwide network alliances from approximately $1 million and lower usage volume in our Asian market of approximately $1 million, primarily due to the impact of COVID-19.
Full year 2020 international adjusted EBITDA of $95 million decreased $4 million or 4% versus 2019 due to net revenue increases from solutions with incremental costs, including increased worldwide network data expenses.
Adjusted EBITDA margin was 31, 7%.
Fourth quarter adjusted EBITDA for the corporate segment increased $50 million, primarily due to the net impact of lower purchase accounting deferred revenue adjustments of $39 million.
EBITDA for the corporate segment for the full year 2020 improved by $160 million from 68% compared to prior year on a combined pro forma basis. The improvement was primarily due to the net impact of lower deferred revenue adjustments of $134 million and lower net personnel expense did.
Lower incentive based compensation.
Turning to slide seven I'll walk through our capital structure at the end of December 31, 2020, we had cash and cash equivalents of $354 million, which when combined with full capacity of our recently upsized to $850 million revolving line of credit to 2025.
Represents total liquidity of approximately $1 2 billion.
As of December 31, total debt principal was 3380 $1 million and our leverage ratio was four six times on a gross basis and four one times on a net basis. The credit facility senior secured net leverage ratio was three four times.
On January 27, 2021, we repriced our term loans with a 50 basis point lower spreads now at 325 basis points. This will save us approximately $14 million of annual interest.
We are happy with the progress we are making to deleverage our balance sheet and improve our credit ratings, allowing us more flexibility to further support our growth both organically and inorganically.
Regarding our January eight 2021 closing on the acquisition of business on the transaction close with combination of approximately $6 2 million newly issued shares of common stock of the company and a private placement and approximately $625 million of net cash.
Cash portion was funded with $300 million of incremental term loans and cash on the balance sheet.
Small amounts from our revolving credit facility, which has since been paid down.
Turning now to slide eight.
I'll now walk through our outlook for full year 2021.
<unk> revenues are expected to be in the range of 2140 $5 million to 2170 $5 million.
An increase of approximately $23, 5% to 25% compared to full year 2020, adjusted revenues up 1730 $8 million.
Adjusted EBITDA is expected to be in the range of $840 million to $855 million.
An increase of approximately $17 five to 19, 5% compared to full year 2020, adjusted EBITDA of $715 million.
Adjusted EPS is expected to be in the range of $1 <unk>.
The $1.06.
These estimates include the impact of this node with the combination of the two entities certain revenues and costs became internal transfers and are now being eliminated.
We are currently estimating $65 million of elimination that will be EBITDA neutral, but it does impact comparability to the prior revenues and expenses reported by business through <unk>.
Subsequent to the application of the visa elimination the incremental adjusted revenues will have a 19 point impact on the total full year growth, which includes the Sun valley of approximately $50 million and legacy solutions revenue that we expect to have fully run off by the end of 2022.
Additional modeling details underlying our outlook are as follows interest expense of $200 million to $210 million depreciation.
Depreciation and amortization expense of approximately $90 million.
Excluding incremental depreciation and amortization expense, resulting from purchase accounting.
Adjusted effective tax rate of approximately 24%.
Weighted average shares outstanding of approximately $430 million and finally capex of approximately $160 million.
Although we do not provide quarterly guidance I want to provide you with some color as to how we expect to progress throughout the year.
Excluding the deferred revenue adjustment of $17 4 million from Q1 2020, we are projecting adjusted revenue growth in the first quarter of 2021 to be at the low end of our guidance range as we work through the end of the day to Dot Com wind down and the impact of COVID-19.
As we enter the second quarter, we expect to be towards the middle line.
Of our guidance range with growth accelerating to the high end of our range into the fourth quarter due to the lack of prior year transitory headwinds.
The impact of contractual revenue increases and the ramp up of new solutions revenues.
For adjusted EBITDA, excluding the deferred revenue adjustment of $17 $4 million from Q1 2020, we are projecting adjusted EBITDA growth in the first quarter to be at the low end of our range at the annualized nation of cost savings from 2020 are partially offset with increased public company costs of approximately <unk>.
$4 million per quarter in the first half and $1 $5 million per quarter in the second half.
We expect the second and third quarters to be below the low end of the range in the fourth quarter to be above the high on the range of our guidance.
Overall, we are very pleased with the progress we made in 2020 related to our transformation and the underlying performance of the business and we are excited about our momentum heading into 2021.
With that we're now.
On the call for questions. Operator will you. Please open up the line for Q&A.
Thank you.
I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Pause for just a moment to compare to Q on aerostar.
Your first question comes from.
Worry of Jefferies. Your line is open.
Hey, good morning, Thank you.
My first question is largely around the.
The transactional piece of your business I.
I guess subscription component is maybe 85%.
Maybe talk about how youre thinking about the impact of a successful vaccine rollout on the transactional side of the business and whether that's sort of baked into your 2021 guidance.
Yes sure Hamzah. Thanks for the question.
You hit on right, it's 85% plus and growing as we continue to drive the increase in multiyear contract.
And we saw nice growth on the overall subscription base. This year, when we think about 2021 and the rollout and.
Starting to moderate from a COVID-19 perspective.
Q1, we're expecting growth still see a little bit of.
Volume pressure similar to what we saw in Q2 and Q3 as the year progresses, and we start to lap those comps in Q2 Q3 and Q4.
Thought about that and considered it no longer a headwind into 2021 plan.
Got it. Thank you and just my follow up question is just on pricing.
Could you maybe talk about when you expect to see pricing ramp in the business is it more of a two.
'twenty 'twenty two event or do we begin to see that later this year.
You've invested a lot on cleaning up the product.
The infrastructure as well.
And then you youre moving to multiyear contracts as well. So maybe you can layer that into the pricing discussion too. Thank you.
Sure Hamzah, it's Anthony.
Instead, we're focused obviously on.
Creating a structure that provides a fair exchange of value with our customers. Obviously for the service that we're offering them and Theres a number of things that we're doing so tremendous work across all areas of our business from a transformation perspective, improving the service, which gives us the right obviously to.
To increase price, we've signed multi year contracts with built in escalators, which helps provide that.
As well and so there's a lot of great work that's been going on in addition to.
Some detailed analysis.
Let's get to the heart of your question.
We're expecting over a percent of growth this year from pricing. So it is something that the work that we've been putting in last year.
Is getting traction and.
We're excited about where we're at with it.
Great. Thank you so much thank you I'm zone.
Your next question comes from Manav Patnaik of Barclays. Your line is open.
Thank you.
And then in terms of <unk> core performance I think 3% seems like the number that was consistent growth for Q <unk> flipped in total from day and North America I just wanted to confirm that those are.
Organic numbers and also perhaps what that organic number is embedded in your assumption for 2021.
Sure Yeah.
That's correct we lapped.
The lattice acquisition really in Q2 of 2020.
So in Q3 and Q4 those were clean organic numbers from our perspective.
Rolling into 2021.
We called out was that the growth range that we provided about 19 points is coming from from business from that perspective and so.
They would flow through each quarter.
We will lay out the.
Their results from that perspective.
Okay got it and just from a capex perspective, the $160 million.
From a little bit.
But perhaps.
And a chunk of that I was just hoping you could break that number down.
That's exactly right. So <unk> was included in that one off.
The core business is still going to be around call. It 120 $130 million.
And clearly we're continuing to do the bottoms up analysis that we have in the past there is no debt at that roughly $30 million.
As we continue to work through their run rate along with the transition, we're making from kind of a new modern product offerings that we're rolling out.
Okay, and if I could just follow up debt is debt can you is that most of that growth capex on maintenance Capex, how do you think of that.
Yes, a majority of vs. The vast majority of it is growth capex and so from a maintenance perspective, there's actually very little and we know manav have very little what I would call PP&E.
Because of our shift to the cloud.
So again most of that is internally developed software.
Kate it on either major enhancements to existing products or net new solutions.
Okay. Thank you.
Your next question comes from Gary Bisbee of Bank of America.
<unk>.
Hey, guys good morning a.
A couple of questions on on just note in the financial impact.
Brian You mentioned there was.
The $65 million of revenue I'm trying to remember what you what you called that just elimination due to the business can you provide a little more color on on that and also is there a deferred revenue write down or purchase accounting adjustment related to this acquisition or is that the only the AUM.
On a difference between the number you mentioned when you announced the acquisition and what's implied in the guidance here.
Yes, Gary that's right so starting with the second one there are.
Deferred revenue write downs from that perspective.
So I know, we have that concept coming out of the.
The privatization but.
With big node and some of the interpretation of some recent guidance for announcements.
There's not going to be a deferred revenue differential between.
The adjusted revenue that we show from that perspective, when we talk about the eliminations. Gary These are expenses and revenues on both sides.
The equation, Dnb and <unk> and <unk>.
Because they were a worldwide network partner.
Since we were selling some data to them they were selling data back to us.
There were no royalty arrangements right that were flowing through where they would sell products and then we would have a royalty coming back so that would be an expense for them.
But revenue to us and so when you combine the two entities. What we ended up where we end up doing is you eliminate both the revenue on the expense on each side of low lever ledger, and so that reduced revenue, but it also reduced expenses and so the EBITDA contribution that we had discussed didn't change it was just the magnitude.
On the reported revenue.
Can you give us a sense of what margin then is built in.
For the node that 19% revenue line.
Much profit is that or what margin.
Yes, so if you think about it Gary it's now kind of in the low twenties.
Okay, and then the follow up.
If I could.
Manav sort of got at this but if you take that 19% out on the one 5% impact from from Comping.
The deferred revenue write down a year ago. It looks like I don't know call. It three 5% to 4% sort of underlying revenue.
On that math, right and I think with the dollar weakness FX is probably a benefit to the business in 'twenty one.
Is it right to think the organic constant currency, maybe more like I don't know.
3% or something is that.
Is that right or is there something something else that's going on there. Thank you.
Yes, so Gary if you take it as you start with the 19 point as you side and then it's about a point from there.
In consideration of the.
On the.
Deferred revenue adjustment, primarily in the first quarter of last year and so.
As youre doing the math youre right its coming out to right around that.
Call It 335.
445%.
Okay. Thank you.
Your next question comes from Brett Huff of Stephens, Inc. Your line is open.
Thank you good morning, everybody hope everybody still safe.
Thank you Brad Youtube Youtube.
Two questions from me on.
Two different product lines, one is the the business information the Hoover's.
Product I know theres lots of competition out there and I know, we're investing a lot on that so if we could get an update on that and just talk about growth.
Kind of overall in 'twenty and then what is contributing to 'twenty one.
And then the same question on the SMB Credit Bureau here in the U S. You talked a little bit about that but wondering if you could kind of give us growth in 'twenty and kind of what we expect in 'twenty one.
Sure I'll start.
On both of them and Brian feel free to chime in on the Hoover side, we continue to make great progress on our contact data.
Obviously, we've got a great richness.
And our from a graphic data our parent child relationships that are really unmatched and from a contact data perspective, we're very pleased with we continue to.
We're very hard at building that out on.
On the contact side have almost five times as many high quality contacts as we had at the time of the privatization so.
On maybe some other color I would share as we've done some analysis at some of the.
On the Dun's number is that we're probably the most active and we're really really excited with the work that we're doing in the high hit rates on the high quality that we had.
For those so so we're excited obviously on that space and with the SMB.
Space as well as the portal that we're putting together is.
It's just really exciting for us and we think it's going to have us approaching the SMB marketplace differently than has been historically, alright, and therefore, we have different expectations than we've had historically.
It's really creating a.
Corridor for all these small medium businesses that are constantly coming to us on a daily basis as I said on my prepared remarks for a whole host of reasons done number.
Improving credit profiles or.
Wanted to be a supplier et cetera.
But by having more solutions that we're tailoring at the last call I talked about D&B connect product, which again.
It's a sign of creating more capabilities for this space. So it's saleable.
This.
Market segment, we're just excited with the partners that were bringing on to the portal as well with our SMB product type capabilities as well so it would be a richness of offerings that we have for that segment.
And the side benefit obviously as we're also deepening our relationships with our enterprise clients, who are putting products on to the portal. So we're just really excited really about the.
That we have in both of those areas Brad.
Great. Thank you.
Your next question comes from Jeff Silber from BMO capital markets. Your line is.
Thank you so much I think you mentioned that about 36% of your contracts are multi year.
Are most of your future deals multi year contracts and then just curious when clients are renewing or you're moving in that load as well. Thanks.
Sure.
Our direction from a sales perspective, our go to market shift really has been on multi year and.
So the short answer is yes, we're going to continue our push in that space.
It's not something that we would get to most companies don't get to 100% of all contracts being multi year. There's a series of contracts that are more short term in nature, but.
We're focused on getting to 40% and 50% and in continuing our efforts.
That way, both domestically and internationally it makes sense, obviously for us from a business perspective, but it makes sense as well if you connect the dots in terms of what we're offering our clients.
As they transform their business as they leverage more of our API solution set to now getting programmatically connected to a straight which takes effort on their part it creates a stickier relationship. So it also makes sense for them to want a multiyear contract until for all those reasons, we're pursuing that.
Okay, Great and my follow ups actually for Brian.
Looking at your guidance it looks like you're implying adjusted EBITDA margins to decline in 2021, you mentioned earlier that Theres node acquisition is a little bit of a lower margin business. I know this is tough to do but if you would take that out would we have seen margin expansion. This year roughly how much would have that Ben thanks.
Yeah, Jeff that's exactly right and so you have the lower margin business.
EBITDA coming through but from our perspective, we had talked about 50 to 100 bps of margin expansion from that perspective.
With this this would put us around call it.
70 ish plus.
Within the range from from that perspective so.
Expanding.
Towards the higher end of the.
They're kind of prior range, we've put out there.
Okay, Great. That's very helpful. Thanks, so much.
Your next question comes from George Tong of Goldman Sachs. Your line is open.
Hi, Thanks, Good morning, I wanted to dive deeper into the drivers of organic growth for 2021, if we focus on the North America segment can you, perhaps talk a little bit about trends that youre seeing with new sales retention rates and cross selling within ethanol and then whats within sales and marketing.
Sure George what we're what we're seeing there is.
Buildup. So first of all we're seeing continued improvement.
And our retention rates, which is positive from <unk>.
Organic growth perspective, and we're also seeing a.
Our traction developing with the new capabilities that we're bringing to market. So as we talked about we're very focused on creating new innovations that will drive growth and we've got a number of new products that.
That we had launched.
Last year, our risk analytics product, our analytic studio D&B connect our collection.
Et cetera.
And.
And so as those get traction with our clients and as we sell more we're excited about that and in 2021.
There are a number of things that we've got going on there as well, but the one I'm probably most excited about is the SMB portal that we've talked about and the possibilities of what that can do for us in the segment that had has not been our strongest segment compared to obviously, our larger client segment.
Got it that's helpful and then.
Just as a follow up can you talk about some of the top initiatives that you have around data and analytics as well as go to market debt that.
Do you have planned for 2021, just to be perhaps the top one or two that you expect to have the most contribution.
Top line growth I know you talked a little bit about the products just not just data and then sales and marketing.
Sure from.
From a data perspective, just a constant stream of work going on there as part of our transformation and no we don't spend.
Spend enough time.
Kind of talking about each of these things but.
We've covered.
Another 21 million businesses.
In the quarters, we're now at 421 businesses covered our contact data like I said is around.
23 million high quality.
Customer contacts.
We've on boarded we talked with project ascent that we're going to bring on.
Additional alternative data sources, we have already 16 of them that are fueling new analytics.
For our clients and also.
Working with them and they are in our analytics studio and co collaborating with them has been a very positive.
As far as our relationship.
And building on our business development.
And then the other one I'd probably highlight on the data side is expanding our global universe of.
Beneficial owners and so.
There we had significant increases as well so we've got a lot of great work, that's going on in the space.
As I said every time, we check back on on where we're at we're seeing meaningful progress.
Which gives us confidence that all the actions that we're taking the work that we're putting in is paying off.
Very helpful. Thank you.
Thank you.
Yes.
Your next question comes from Kevin Mcveigh of Credit Suisse. Your line is open.
Great. Thanks, so much.
Congrats on the 70 basis points retention improvement.
Can you help us understand kind of what drove that was it just more client satisfaction with a share of the data or just.
Changes in sales force within the thoughts around that and again very very good number one that we can expect going forward on that.
Thank you Kevin.
Yes.
A large part of it and we've talked about this on previous calls certainly is that doing all the right things by our client is going to translate to improved retention.
We've like I said transformed every part of our business and we're constantly transforming it more and more leveraging AI with our client services in terms of improving the quality of it and lowering the cost.
We talked about improvements in our data improvements in our technology. Our uptime has improved or latency has improved all the things that you look operationally across the business that you would see I mean nobody runs.
Obviously perfectly and so as we looked at everything we track it we've got a real Richard process in terms of coming back and continuing to measure the progress that we're making but.
I see the improvements in our data quality.
Amounts of data that we're bringing in the different types of data.
The new launches with our products right I think all of these things and.
Contribute to retention because everyone out there is looking for who can they partner with who can help them transform their business.
And I.
I think all these things really led to our confidence that our clients are getting and seeing from us.
We're excited about that and want to continue to build on that Kevin.
That makes a ton of sense, and then and on them.
Brian or Anthony you talked about.
Some statements from revenue.
No.
On January <unk>.
Quantify that and then what the margin impact would be on there that I would imagine probably low margin.
Core business results.
<unk>.
Yeah, I'll start and I'll pass it to Brian Yes, we are going to sunset. They had as you can imagine.
There are some revenue in the business that wasn't high quality revenue revenue. We are interested in that wasn't strategic it clearly made sense.
To do the acquisition, especially from a post synergy perspective, when you look at all the things that we are getting from the acquisition, but there are parts of it that.
Honestly, it would be a distraction and would impact.
Our growth and our margins and so we're sunsetting them probably over the next couple of years and looking to move to a more modern solutions, but Brian from a margin impact on it.
Kevin in my prepared remarks, we mentioned about $50 million of the legacy solutions would be winding down.
Anthony is that over the next call it.
Two years.
On that.
In essence is going to be replaced by some of the Dun <unk> Bradstreet products right and so as you can imagine.
When we're thinking about the overall synergy number being about $40 million. Some of that is going to come from the elimination of these of these legacy solutions and so the overall portfolio right.
A lot of opportunity to be consolidated under our finance and risk products, along with our sales and marketing products and so certainly we will look to that to be a contributing factor to that $40 million in synergies we're expecting.
Well thank you all.
Okay.
Your next question comes from Andrew <unk> of Jpmorgan. Your line is open. Thank you. Good morning, Brian you said that first quarter revenue cadence would be at the low end of the full year revenue range. If I heard it correctly. So I just wanted to make sure that you are saying that first quarter organic constant currency revenue.
We will be about 3%, including the drag from Covid day to dot com on credibility and if you could just also mentioned how much those residual drags will be in the first quarter.
Sure Andrew So if we look at kind of backing out based on out as you said this quarter. We grew call. It one 5% constant currency about one 8% FX and so we would expect first quarter to look a little bit better than that right and so.
In that in that similar pattern from the two impacts that are really remaining in the first quarter or the last portion of the day to dot com.
Roll down and then Covid impact that we would expect to be non is higher than Q4, but more similar to Q2 Q3, so call each of those.
$506 million a piece thank you.
Okay.
Did you find some strength I would now like to turn the call back over to Anthony Jabbour for closing remarks.
Thank you.
In summary, we're pleased with the progress to continue to transform Dun <unk> Bradstreet we've made.
We are a great company and we will continue to be focused on maximizing shareholder value as always I'd like to thank my Dun <unk> bradstreet colleagues for their exceptional efforts and our clients for the strong relationships and partnerships. Thank you for your interest in Dun <unk> Bradstreet and for joining us on the call today.
This concludes today's conference call you may now disconnect.
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