Q3 2021 Dun & Bradstreet Holdings Inc Earnings Call
Good morning, and welcome to the Dun and Bradstreet third quarter 2021 conference call.
As a reminder, today's call is being recorded and your participation implies consent to such a recording.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation if.
If anyone should require operate assistance during the conference Press Star then zero on your telephone keypad with that I would like to turn the call over to them Mccann Treasurer and senior Vice President of Investor Relations. You May proceed. Thank you. Good morning, everyone and thank you for joining us for dinner Brad.
The Street's financial results conference call for the third quarter ending September 30th 2021 on the call, we have Dunn and Bradstreet C. E O Anthonys, you bore and CFO, Brian Hipsher before we begin allow me to provide a disclaimer regarding forward looking statements. This call, including the Q&A portion of the call May include forward looking statements related to the expected future is.
Belts for our company and are therefore forward looking statements are actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward looking statements are subject to are described in our earnings release and other SEC filings. Today's remarks will also include references to non-GAAP financial measures additional information.
Asian, 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 Relations website at Investor Dot D. M. B 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 a third quarter earnings call.
We are pleased to report strong food holder resolved as revenue for the quarter grew 22% and EBITDA grew 12%.
And your core business continues to accelerate as reflected in our organic revenue growth of 4.1% or 3.7%, excluding the impact of foreign currency.
Increasing growth in North America complimented another solid quarter and or international segment due to strong retention rates increased pricing a grown share of wallet with a strategic clients. The addition of new logos and the lessening of previously communicated headwinds.
On top of that the business with acquisition is progressing very well with the integration doing better than we originally expected.
Will finance and risk until the marketing and solid growth in the corner.
Two bright spots in particular, where a risk in our marketing solutions.
Internal investments and our resolutions over the past few years have strengthen our position and demand rains, hi, Ah supply chain third party risk management continue the appoint a focus for businesses throughout the world.
On the marketing side, our online audience solutions business continues to see robust growth rate and we see a significant untapped opportunity and your online business to business marketing landscape.
This led us to strengthen our position to the Sun give definitive agreement to acquire a yoda and that was.
I'll go into more detail as I expand upon our latest innovations, but these two complementary companies will extend their position further and to be to be online marketing value chain and build upon a business that has grown over 40% here today.
Overall, we continue to focus on expanding and enhancing our offerings through internal investments strategic partnerships and focused acquisitions, where.
We are pleased with the increasing organic growth rate throat, this year and with the momentum we have entering the fourth quarter.
We expect to drive progressively stronger growth in the fourth quarter versus prior year to establish a solid foundation for further acceleration into 2022.
As we close out the year are key priorities remained consistent.
<unk> solutions and localized I'm globally.
Increase our share of wallet with strategic clients.
Approach and monetize B S M b space, new and innovative ways.
And finally integrate and accelerate the Biz note acquisition.
The team has made great progress towards executing on these priority and I'll know sure. Some highlights of those accomplishments before I turn the call over to Brian for more in depth financial review.
After that will finish up by taking your questions.
New product innovation continues to be our primary objective.
I'm pleased with the focus and urgency with which are North American and international teams are operating.
As we look to enhance existing solutions and add that new capabilities, we've been able to leverage our incredible client base.
We've established finance and risk in sales and marketing advisory boards to help guide a roadmap through direct input from senior decision makers or industry experts from leading enterprises throughout the world.
For example, with our recent launch a V. S. T intelligence, we're able to focus our solution on individualized client scores.
Posted a relative scores or indexes based on industry code or some other shared attribute.
Listening to the needs of our clients encouraged him more supply chain focus use case that is very complimentary to the risk and compliance scoring and workflow we have in the market today.
We believe that and enter and workflows that incorporates financial.
Regulatory compliance and E. S G underwriting through data and analytics is a powerful tool for the industry and are pleased with the feedback we've received from clients and prospects today.
Well I'm, a sales and marketing side, we continue to focus on building upon our strengths and master data management and online marketing.
While simultaneously bolstering our sales solutions to expand the data third party integrations and a more seamless you you ex experience.
Well, the master data management and online marketing solutions make up the vast majority of our revenues and the segment. We believe there's a lot of potential for us to evolve our sales solution from a deep research tool to one is more agile enable to deliver on our global contacts and a more simplistic and effective manner.
We continue to streamline our offerings expand upon her growing contact data coverage and to integrate third party data with our solutions to make campaign activation more efficient and effective.
With limited downside insignificant upside I'm excited about where we are today, where our team is driving us as we make significant progress and capturing a piece of this growing market.
Turning to our marketing solutions. This morning, we announced the signing of Iota fast growing provider of audience targeting capability that enables the activation of online audience segments.
My oldest products extender audience solutions business from being dependent on others for execution to being online and participating more fully in the b b martek and that tech supply chain.
We also entered into a definitive agreement to acquire net wise and.
An industry, leading be to be online identity grass.
Combined with the DUNS number and our existing offline data. This enriched offering will allow marketers to target <unk> clients and prospects across every major online channel individual device or marketing platform.
Just as our clients rely on the DUNS number for position and their offline data. We're looking to provide the same level of confidence and consistency online as well.
For marketers. This means they will have assurance that their online audiences are targeting the right people and that they can reach them across every online channel.
We are solving for the current audience shrinkage. These marketers face today with a low match rates that plagued this industry.
This will enable clients to build upon your investments they've made into data management mastered on the DUNS number and more readily activate that data and social search and display advertising campaigns.
That simply done.
Dunn and Bradstreet has the offline be targeting data <unk>.
Why is enables marketers to translate that data into online audiences and I owe to syndicated across the digital ecosystem.
I'm excited about what we were doing both organically and through acquisition and we've we're on the right track to take advantage of these growing markets related to how sales and marketing professionals are increasingly utilizing data and analytics and their business to business interactions.
Moving on to key salesman in the third quarter. We're pleased with the ongoing success, we're having with our strategic client which include renewal rates and nearly 100 per cent and the addition of several new logos.
As businesses face heightened pressure to meet regulatory requirements prevent supply chain disruption and protect brand equity a risk and compliance capabilities are well positioned to assist our clients and prospects.
For example, we want competitive new business with one of the largest global investment Bank and financial services companies in the world, who sought to expand automation opportunities for their onboarding and know your client processes.
Our patented business verification process sets us apart from competitors in our data provided the breadth and depth they required.
Particularly the beneficial ownership structures.
We also saw new third party risks in compliance business with the current client one of the three largest aerospace companies in the world to support the global trade complaints and corporate <unk> compliance efforts.
Walmart renewed their multi year agreement with us to support their supplier Onboarding process and we look forward to continuing this important strategic partnership.
We won new business with an existing client I talk to him and multinational banking and financial services company to support there's compliance verification and background checking needs.
We are pleased with the ongoing growth of a third party risk and compliance business across multiple industries and geographies.
We're very pleased to announce new business with one of the world's leading global microblogging and social media platforms. This multiyear deal supports their sales operation and client relationship management program as they recognize the value of our patented matching capabilities the ability to integrate and automate capability.
Our global coverage and extensive higher fee data and our sales and marketing data atrophies.
We also continue to make inroads with innovative technology companies such as door dash as they look to reduce the risk through improved credit and accounts receivable privatisation.
George S chose dnb for a comprehensive integrated portfolio monitoring and accounting compliance tools and the ability to manage financial risks and accounts of all sizes.
On the international front, we collaborated with Siemens under two day data phone event, where over 180 of their colleagues from around the world explored use cases in combination with the studio platform and AI technology drive a tangible solutions to the most impact will use cases identified by business owners and analysts.
And the areas of risk marketing sales and procurement.
Event on coverage further Siemens business opportunities and as a result, Siemens entered into an agreement leveraging analytics studio for sales and marketing.
The access we acquired through a business deal two strategic European Global 500 clients such as the German Bank mentioned earlier and Siemens is invaluable and we continue to get in front of these new clients to support their businesses with our global solutions.
Lastly in Asia, we successfully renewed another important strategic client Alibaba, who leverages, our data to verify entities honest, leading global E Commerce platform.
Data source Joy data blocks solution delivered by our direct plus APR.
Further as a trusted partner tally Barbour, we're progressing a number of innovative growth initiatives, leveraging our global finance and resolutions.
This is an example of how Dunn and Bradstreet is able to adapt and replicate or find success in North America to international markets and support the needs of some of the most sophisticated names in emerging markets.
While we continue to demonstrate success with our strategic clients were also making progress in the small and midsize markets.
I'm excited to announce that we recently signed an agreement with Transunion to launch a proof of concept for a blended commercial credit score that in part is powered by Transunion data.
This score is the integration of consumer data from up to two business principles with our commercial data and additional data assets to enrich and enhance the decisioning process for our clients.
The score is expected to be available in approximately 90% of all inquiries and is particularly important for our clients, who learned to small businesses, including commercial banks card issuers in small business lending institutions.
We believe our combined solution will increase our matrix provide lipitor existing commercial scores and deliver superior small business score that any single standalone commercial or consumer credit score could not accomplish.
On the E Commerce front, we're seeing strong subscription numbers to our platforms, such as DUNS manager and credit signal, averaging over 1100, new small business sign ups per day.
While still small e-commerce sales in the third quarter are up nearly 50% from prior year quarter.
We also completed implementation of a modern online shopping cart to include internationalization with additional payment options with a United Kingdom, and Ireland E Commerce product to long short.
These initiatives are all examples of our continued dedication to helping small businesses thrive.
And our international segment, we continue to roll out localized solutions across our own and partner markets.
In the third quarter, we deliver 10 product launches across Europe, greater China in a worldwide network partner markets.
Data blocks launch with partners in Europe, Asia, and Africa, and Finance analytics launched in Latin America.
These launches will be critical for driving product royalties in the future.
We also launched wrap up in a beta version of ESG intelligence and the UK along with the local language hoovers offering greater China.
These new international solutions, along with the many in North America, we have discussed over the past few quarters, allowing us to create a significant amount of new product revenue.
Her total company the new product by tell the index.
For the percentage of revenues from new products with 8% in Q3 versus 2% in Q3 last year.
We will continue to drive more and more solutions into our markets around the world and look forward to updating you on our progress through is coming quarters.
Lastly, we continue with the successful integration of business, the topline performance and synergy realization ahead of expectations.
And the third quarter, we launched localized D&B hoovers solution and five markets.
We also enhanced his nose existing products, including adding BTB credit Decisioning on business, it's flagship regarding credit platform piece.
These solutions will enable us to execute our strategy of migrating clients off legacy offerings onto modern digital platforms as well as attract new clients.
Regarding synergies we are on track to achieve approximately $25 million an annualized net savings by year end 2021, and remain on pace to achieve $40 million annualized of net saving a year and 2022.
Overall I am pleased with our continued progress in laying the foundation for accelerated sustainable growth throughout the remainder of 2021 and into 2022 with that I will now turn the call over to Brian to discuss our financial results and outlook for the remainder of 2021.
Thank you Anthony and good morning, everyone. Today, I will discuss our third quarter of 2021 results and our outlook for the remainder of the year turning to five one on a gap basis third quarter revenues were $542 million, an increase of 22% both after and before the effect of foreign exchange compared to the prior year.
Quarter. This includes the net impact of the lower purchase accounting deferred revenue adjustment of $1 million and the net impact of the Biz note acquisition.
Net income for the third quarter on a gap basis with $17 million or diluted earnings per share a four cents compared to a net loss of $16 million for the prior year quarter. The improvement was primarily driven by higher prior year expenses related to the retirement at that as part of the IPO lower.
Interest expense and improvements in operating income this was partially offset by favourable tax benefit adjustments related to the impact of the cares Act recorded in the prior year period.
Turning to <unk> I will now discuss our adjusted results for the third quarter.
Third quarter adjusted revenues for the total company, where $542 million, an increase of 22% both after and before the effective foreign exchange. This year over year increase included 18 percentage points from the <unk> acquisition and a quarter of a percentage point from the impact of lower deferred revenue purchase accounting.
Adjustments.
Revenues on inorganic constant currency basis, we're up three 7% driven by increased demand for our solutions and both are North America and international segments.
Third quarter adjusted EBITDA for the total company was $220 million, an increase of $24 million or 12%. The increase in EBITDA was primarily driven by the impact of this note and increased organic revenues, partially offset by the impact of higher data processing costs.
Third quarter adjusted that you've been a margin was 47%.
Third quarter, adjusted net income was $123 million or adjusted diluted earnings per share of 29 cents, an increase from $101 million or 24 sons in the third quarter of 2020.
Turning now to slide three.
I will now discuss the results for our two seconds North America and international.
In North America revenues for the third quarter, where $374 million, an increase of approximately 3% from prior year, excluding the impact of foreign exchange and the bit about acquisition North America organic revenue increased $12 million or 3%.
And finance and risk revenues or $214 million, an increase of 4% or 3% before the effect of foreign exchange, excluding the impact of foreign exchange in the Biz note acquisition organic revenues increased $8 million or 4%, primarily driven by strong double digit growth in our risk of evolution.
<unk> and solid single digit growth and our finance solutions from new business and increased wallet chair from existing customers.
For sales and marketing revenues were $160 million, an increase of $4 million or 2% while data sales in our marketing solutions had another solid quarter. The overall growth in sales and marketing was partially offset by $2 million from the data Dot com legacy partnership wipe out.
North America third quarter, adjusted EBITDA was $186 million, an increase of $2 million or 1%, primarily due to revenue growth, partially offset by higher data processing costs adjusted that you've been a margin for North America was 49.6%.
Turning now to slide four and our international segment third quarter revenues increased 104% to $168 million for 105% on a constant currency basis, primarily driven by the net impact from the acquisition of Bismarck and growth in both financial risk and sales and marketing solutions.
Excluding the net impact of business international organic revenues before the effect of foreign exchange increased approximately 5%.
Financial risk revenues were $109 million, an increase of 61% of after and before the effect of foreign exchange, primarily due to the business acquisition.
Organic revenue before the effect of foreign exchange grew 2% with growth across all markets, including higher revenues from our Asian market localized offerings in India and growth from D&B credit in greater China, partially offset by elevated cross border data sales in the prior year period.
Elephant marketing revenues or $59 million, an increase of 300 per cent are 307 per cent before the effect of foreign exchange, primarily attributable to the business of acquisition.
Organic revenues before the effect of foreign exchange grew 22%, including higher revenues from our UK in greater China markets attributable to multiple recently launched products higher data sales as well as increased worldwide network product royalties.
Third quarter International adjusted EBITDA of $54 million increased $26 million or 93% versus third quarter of 2020, primarily due to the net impact of the <unk> acquisition as well as organic revenue growth and lower data costs, partially offset by higher than that personnel expenses.
Adjusted EBITDA margin was 32.2%.
Turning to five five I'll know I'll walk through our capital structure at the end of September 30th 2021 word cash and cash equivalents of $234 million, which when combined with the full capacity of our $850 million revolving line of credit through 2025 represents total liquidity of approximately one.
$1 billion as of September 30th total that principle was 3600 $60 million in our leverage ratio was four five times on a gross basis and for two times on that basis. The credit facility senior secured not leverage with three five times.
Turning now to five six I'll know I'll walk through our outlook for the remainder of 2021 in which we are maintaining our wages for revenue and EBITDA and increasing our range for EPS.
Adjusted 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 of 1730 $9 million.
Revenues on an organic constant currency basis, and explain that impact of lower deferred revenues are expected to be in the range of 3% to 4.5% for the full year.
Adjusted EBITDA is expected to be in the range of $840 million to $855 million, an increase of 18% to 20%.
And adjusted EPS is expected to be between $1.06 to one dollar nonsense versus our prior guidance for the high end of $1.02 to one dollar and six cents, primarily driven by improvements in our interest expense and depreciation outlooks.
Additionally, modeling details underlying our outlook are as follows we expect interest expense can be approximately $200 million versus our original $200 million to $210 million driven by lower LIBOR rates and less borrowing then dissipated dipped.
Depreciation and amortization expense of approximately $80 million, excluding incremental depreciation and amortization expense, resulting from purchase accounting.
Versus our original approximately $90 million, primarily driven by lower business depreciation many anticipated.
Adjusted effects of tax rate of approximately 24% wait.
[noise] weighted average shares outstanding of approximately $430 million and for Capex, we expect approximately $237 million, which accounts for the $77 million purchase of our new global headquarters in Jacksonville, Florida.
And finally with organic growth continuing to accelerate each quarter, we expect queue for it to be at or above the high end of our organic growth rage.
Verses at the high end of the range, which we discussed on our second quarter call.
We look forward to closing out 2021 on a high note and heading into 2022 with positive momentum.
With that we're now happy to open up the call for questions. Operator will you. Please open the lie for Q&A.
Thank you Sir.
At this time, if you would like to ask a question simply press Star then a number one on your telephone keypad.
First question comes from the line of Hamzah Massari of Jefferies.
Hi, This is my record of Laci filling in for homes.
Could you just give us an updated and can talk about how many skews you guys have currently product wise.
Give us a sense for how all your products have pricing power versus others and then maybe it is there any rationalization that you can do within your SKU count.
That that could potentially give you even more pricing power going forward.
So Mario in terms of the number of excuse I don't have it on top of my head and I've got a number by.
Each of the core lines of business.
And.
Finance risk sales and marketing and then the international versions of them, but.
But.
A decent number of products covering the entire space that we're focused on which is organizations globally covering the largest in the world to smaller snd product. So.
Tough one to answer, but I would say that I feel really good about the product inventory that we have and how we're going to market with it and certainly with a number of our products until we have great pricing power with them and in areas like you talked about this morning on the online marketing side.
We are adding capability to eat to further increase the pricing power that we have so.
There are products that that overlap and we talked about that with the <unk> acquisition as an example, and where we would be leveraging some of the products both ways and we will continue to to do that will do in the client focused manner. So that.
Our clients are receptive to continuing to partner with us and work with us and will migrate them over time.
Retaining the relationship contained revenue and on our side.
Finding more efficiency by any overlapping products.
Got it and then just my follow up is around like this this this market space and somebody that physicians could you help us understand.
Additive dynamic in the marketing space and.
One of the credit bureaus, obviously getting off bigger a digital marketing.
But I guess, it's just this is this differentiate it because it's more <unk> to be or is there anything else to call out versus somebody like a trade union or what they're doing and then are there any other major competitors within Mississippi to be marketing space.
Yeah, absolutely really what differentiates us from others, who are in the space is that we are focused on b b and B is what's great and the BBB world in many regards as you can see the trends that have been successful in would be to seaworld and BTB tend to lag it and so for US we can see that the success.
Us here.
Has been strong and there's a great opportunity in this space and with everything that we have in terms of our DUNS number or data you know the the number of brands that we work with directly today versus having to go through an agency really sets us up.
With a great advantage in this space and also as you look at the just the the the value of an AD to be to be marketer is much higher than it is to be to see marketer. So having a restaurant putting up an AD for a hamburger at a certain undervalued compared to appear to be at reaching out to a known business contact a an order.
Innovation, selling and ERP system as an example, so we see that the demand will be high for me to be because the price of the <unk> would be more valuable than to be to see yet.
Great. Thank you very much.
Thank you.
Your next question comes from the line of Kevin Mcvey of Credit Suisse.
Great. Thanks, so much pain could you unpack a little bit the improvement in the organic growth two three and then it looks like you're going to see a real nice acceleration it to queue for as well.
Maybe how much of that is just better retention versus pricing versus new product and then.
You talked about a vitality index of I think up to 8% verses, 2% in Q3, how should we think about kind of a longer term target for that is there any way to kind of triangulate that taught it can meet organic growth. So I know, there's a lot there, but really focused on kind of organic growth improvement Q3, two four and then <unk>.
<unk>, what the vitality index can mean for that.
Yeah, Hey, Kevin Thanks for the question, where do you look up your panic acceleration throughout the year, you've seen it stop off now sequentially from Q want to queue to know and to Q3, and we expect that to continue into cure for.
Anthony mentioned earlier pricing is certainly one component of that we talked about you know as the renewals flow through and we start to see the 12th month peeled off and a 13 month of a multiyear contract stuff up worse being that acceleration into Q3, and Q4 retention we have a lot of.
Focused on energy behind that a lot of improvements, we're making from a data quality perspective did a consistency expanding the dataset into new and an alternative data components. All of that is helping to drive a better customer experience from that side, which plays into retention as you said and then on the new product.
Five we've had is Anthony talked about some really nice success was both in that marketing space, which is a sub segment of the overall sales and marketing, but really in that third party risks in compliance side. We saw nice growth. There. We're we're handling you know anything from the K Y B a large.
LT National investment Bank, two we extended with with Walmart from that perspective. So that's a space you know in a market that is very germane and very much growing and we see that we're very well positioned to continue to drive acceleration and you know that that area.
That's helpful. And then just on the two acquisitions. It seems like the growth this is pretty pretty pretty strong relative to the core business. How should we think about that is there any impact on kind of the 21 guidance and then in terms of just numbers around that and can you give us a sense of the size and just the growth rate overall.
Sure Yeah, Kevin Thank you and and we literally were just signing those and they'll close here you know relatively shortly I would say one sooner and in the next few weeks overall, we are paying about 165 million for one of them in about call at 69 million for the other.
So that's that's kind of the purchase price from that perspective, we talked about the size of that marketing business.
And where it got today I mean this this one essence, you know a little bit more than double the size of that and so when we look at those growth rates and we look at the is Anthony said, the interconnectedness and what we can leverage from the guns number we're pretty excited about the the growth opportunity.
In terms of guidance, because we sign them, Kevin and we haven't closed them. They are not included in the guidance ranges that we provided and they certainly won't be included in the organic right just because of the acquisitive nature and the fact that we're back in those out generally for a bathroom is out for the first 12 months.
Super helpful. Thanks again.
Thanks, Kevin.
Your next question comes from the line of Ashish Sabedra of RBC capital markets.
Thanks for taking my question. So it looks like pretty strong probably pretty solid progress on the <unk> integration I was wondering as a few one does not for almost 10 months now.
Do you believe that that could be potential upsides to the cost synergies and also from did you have any perspective I was wondering if you could talk about the cross selling success that you've had desk. Thanks.
Sure on the the progress like I said my prepared remarks nowhere already at 25 million annualized savings next year, we'll get to $40 million a annualized savings and.
First of all I'm Gonna say extremely proud of the team is a great work that they're that they're doing from an operational execution perspective journey.
During COVID-19.
You know overseas.
Lots going on lots of reasons for work.
You know they're to be operational hook, a split the team has done a phenomenal job on the synergy side on our clients side and driving value there. So.
So at this stage, we feel pretty good about dissynergies that we're going to get from it and are focused into second part of your question. She says on the growth and that's where we will look to continue to drive our our products into that client base. We continue to see you know really nice momentum and receptivity from those clients and I think in <unk>.
Hard to tell our teams are taken care of them through the transition.
But but it's exciting to see.
I think a sales and marketing products for 12 and a half.
Percent increase year over year into that base. So so there's some really good momentum that we have overall with that acquisition and makes them proud of the team executing it.
That's great and maybe I was wondering if you could turn down further onto Crunch Union partnership that you talk to any of <unk>. How do you plan to go to market. How do you think about the addressable market there and how do you think about the <unk> or the next two to five years. Thanks.
No. It's it's a really exciting opportunity for.
For us to take for Transunion, as well candidly I won't speak for them, but in the the SMP space. We're focused on we've talked about this before where.
You know the difference between a consumer credit Bureau report in our commercial at that and isn't the same gap as <unk> as it is for larger businesses.
But there's a difference in price between them and so it had been an area, where we've been you know not as strong and so.
<unk>, what I'm excited about this deal with.
With what we're doing is we're again, we we talked about a commitment that we're gonna make at the very beginning and what I Hope you see is us continuing to do what we say, we're going to do and focus on it and we have not wavered on the SMB space in terms of the number of products that will bring to that space and especially with this capability on the.
[noise] blended score how how it can help and that's faced by increasing match rate how can help increase our commercial score that we had and how it can help give list over just to consumer credit Bureau.
Score as well so from that perspective, it really has the makings of a winter and I'm excited about it and excited how we can help our larger enterprise clients as well that focus on the space.
Because.
What I would I would say is from.
From a again.
Thoughtful here in terms of Howard describing and it's a proof of concept we've been doing in Lititz for a number of months right now we feel good about the momentum otherwise obviously you wouldn't have introduced it on the call, but it's still early stages and we want to be transparent with you in terms of.
What what's coming right and where are we headed so you see in the product by tell the index score Bill we've increased.
New revenue contributions to the company, 8% versus two last year. So part of this is just continued to give you headlights into what we see coming next and this certainly is one.
As exciting for us and exciting for our clients and.
Mentioned and again the prepared remarks, and we talked about our we've got phenomenal clients were very very fortunate to have some fortunate that participate in advisory boards. There are experts, we've had a great opportunity to listen and partner with them and and what I will say is the interest level is very high from those that we've talked to.
<unk> <unk>.
With this opportunity.
10 sent to me that was very helpful. Thank you.
Thank you <unk>.
Again as a reminder, if you would like to ask a question simply press Star then a number one on your telephone keypad. Your next question comes from the line of <unk> Jeffery of Truth Securities.
Hi, Good morning, I appreciate you taking the questions.
Anthony I wanted to just spend a minute on sales and marketing and it sounds like these acquisitions or.
Yeah clear commitment to to that space and enhancing your capabilities there.
Can't help but note the the relative outperformance rest of world and I Wonder if you could just contrast, perhaps some of the success, you're having internationally with the relatively slower growth and maybe what is a more competitive market in the U S and and how you think.
Some of the <unk>. The success you've had rest of world do you think maybe perhaps in conjunction with recent M&A can can accelerate the.
D U S growth, whether there's some learning as you can bring to domestic markets.
<unk>.
That's a great question Andrew [noise].
What I would say overall, when you think of sales and marketing and again into pure sales side, where.
I know there's been some great growth.
In the quarter and in the space.
There's our focus more traditionally is on the marketing side the data side.
The a P i's for our master data management around our DUNS number that's historically I'd say the the the nature of our business versus selling two salespeople to enable sales success.
And so when we look at.
What we're doing in this space.
And just the natural success, we are having in our audience targeting a business marketing business.
The growth of 40%.
We're leveraging of strength that we have with the date of all these businesses global that DUNS number et cetera, and on the sales side again, selling more not to the and seller in many cases, but to researchers of the company. So it's done Nebraska wanted to target someone and do a lot of.
In depth research on them.
Versus just identifying who the.
C T O is up a company to call on them.
That's where we've been focusing so as we look at sales and marketing more holistically.
And again as you look at the relative size of our clients internationally, we have more larger clients cute versus in the U S. We also have smaller plants and so there's a difference there in terms of how the integration of our marketing and sales solutions would benefit a large enterprise client versus a.
A a smaller midsize.
Client.
And what we're doing is focusing on the marketing efforts, having a we've got a very thoughtful approach about.
Marketing only me online data space growing into account based marketing expanding into engagement and trigger events is keeping the relationship.
And.
And then having that lead into sales versus purely being just in sales and that's what we're doing with.
The relative size of our our our sales business like we talked about is a smaller part of SMS like the true sales selling too.
You know to sales executives like you said as a.
Probably $90 million to $100 million in revenue of our whole sales and marketing business.
And but it's an area, where we're excited about because we see opportunities there and we see more upside and downside in terms of how we can continue to enhance it with additional contacts simplified user experience an interface et cetera, and so that's why I think we're.
We're seeing the differences internationally versus domestically what our core strength is here around the DUNS around the date of the hour.
Building muscle upon muscle with these acquisitions of really honing in on what we're really strong and great and then from that basis moving more definitively into the sales pierceall side.
So if the risk of over.
Generalizing.
Is it safe to say that the dnb sales and marketing issues or more.
<unk> data intensive as opposed to being sort of more C. R. M oriented I just wanted to make sure I can kind of wrap my head around it or to go to market a little bit.
Well I think it's going to talk to some of the data feeds the CRM. So it's.
The lines blurb it there, but would I would certainly say is from a an audience targeting solution.
We are our our foundation is data and marketing moving into sales.
And and like I said, if you take sales and you break it down.
There's larger enterprise sales, where again, there's a lot more research and.
Thought going into building campaigns versus you know you want to sell to every hospital and you want the CIO of every hospital and and it's not that simple we're going to continue to move more and more in that direction, but really what our focus Andrew is is really solidifying the foundation of where.
Strong and also continuing to to create.
The DUNS number and a more and more meaningful way in the online world. So you see obviously the strength that we have with it in the offline world and as we go online really being able to take that done like the number of online ideas that have to get creative along the process. This will enable us and our customers that have.
DUNS numbers, and making it more relevant to be able to more easily.
<unk> online so.
That's what we're excited about and that's why like so the focus is on that right now well in the meantime, we continue to focus on the contacts on all the things that we've talked about before from appear selling perspective.
<unk>.
We've got a significant we talked about having 30 million high quality contacted by the end of this year.
Over that we're at 31 million at the end of Q3. So the focus that we have of uhm contacts and things are have been such as general selling were absolutely continuing to move in that direction.
And like I said, improving the Eli improving the integration of our marketing efforts.
Really what we're doing with these acquisitions there'll be hardening of great capability and the leadership space that we happen to be to be able to.
Alright look forward to following your progress that's really helpful.
I appreciate it thank God.
Your next question comes on the line of Gary Bixby of Bank of America Securities.
Hey, guys. Good morning, nice to see the organic growth revenue rose from progress you made here.
So I wanted to ask about the portfolio in regards to grow if you need to talk about risk I know, it's small within FMR, but remains robust this online be to be marketing growing rapidly.
<unk> or is there a base of revenue there are some pockets of revenue better declining and sort of drags on growth that these smaller parts of the portfolio really having to outgrow or or or would it be more reasonable say theirs.
Big pockets of legacy.
Revenue within the company that just aren't growing and it it strikes me the growth rate should be faster given all the optimism around new products and customer wins that you've talked about and some of these areas that are growing.
Really well if everything else was growing as well and maybe if you could just sort of size what part of the revenue basis really growing what part if any is declining and what part is stable at this point.
<unk>.
Yeah, Gary It's a it's you know to your point, how we think about you know an an attack right you know our operational plans from from that perspective, and so when you look at you know the overall finance and risk right. You know this quarter you know grew about 4% in North America, where you saw the primary grow up in.
And we've talked about it you know call it call. It being you know roughly you know on the 100 million dollar range that third party redskin compliance business and so that's certainly been accelerating like strong double Jonas Uhm and when <unk> you you're kind of blending the finance solutions and then the lower end of the market, which was the legacy credibility business.
That was one of the business. So scary that we made a lot of strategic changes too you know in terms of sales practices in terms of time, we went to market there and so that'd been you know a bit of a had one for US you know as we were kind of lead them through it late last year and into this year and so what what's good is as we continue to progress through a lot of those changes.
And you know how now under place and so we're picking up from a place where the back doors Anthony cause it you know as as being closed more and more from that perspective.
On the sales and marketing sod if.
If you pull up onto that again, you have the master data management business, which is the largest component of that very strong very sticky you know I would say grows similar to what you know for instance, the finance business grows from that side of the equation because it really kind of fits add that middle anchor layer in larger companies.
Date of Lake strategies et cetera, when you start to Peel back the two components, what Anthony was mentioned and is that the sales business has been something that we've had to really improve since we've got here and so it's getting better but certainly you know has been something that has been a bit of a hard one you know as we <unk>.
Dress through since the privatisation the marketing business is Anthony sat into Andrew's point smaller part of that business, we talked about it being roughly $30 million, but it is growing quite rapidly from that perspective, and so having more focus more attention, adding the assets of not wife, an iota we're <unk>.
Trying to build again muscle or muscle and really take advantage of an accelerated market and one that traditionally has been focused on larger kind of beta seaside. This is very focused business to business and when you think about approaching what dun and Bradstreet right you know with our DUNS number in time.
Not to a digital I D and then getting to Brian Hipsher, Anthony <unk> C. F O C E O within that organization the advertisements for a multimillion dollar E. R. P. R. H R. I S system is very different than you know the the sofa you know that I I mentioned last week and then shut up.
I as in half from that perspective. So so again you know that's that's kind of how we see you know the the growth opportunities and certainly too Hot places are are are not third party risks in compliance and then online marketing.
Great. Thanks, and then the follow up you know the.
The the new new innovation or the obviously that sounds like a lot of good things going on <unk> just at a high level, how much of of the new products and innovation you've been doing is sort of replacing.
Stuff that when you got there wasn't of the quality it should be to win in the market versus new innovation that expands your capabilities and thus expands revenue opportunity market opportunity is there still some of that or fiction stuff that wasn't good enough or does the pivot towards hey, this is really largely incremental.
<unk>, an additive to our growth potential or are you far along on that I just I haven't.
Heard you really discuss that since maybe around the ikea or you're still fixing a lot of stuff that wasn't done right. Thank you.
And I think that's a great question Garrett certainly we have exam.
Examples in both buckets.
And even products, you know, which were which were good at the markets continue to move need to continue to.
To to move with them and ideally move ahead of them. So your clients are ready.
Ryan.
Do you have any quantification on that.
Yes, So you know Gary from from your perspective, what I would say when I look at the components that are in that new product vitality index. Many of those things like for instance on the analytic studio right or you know.
What we're doing and and that digital marketing space are really net new opportunities and that new Tam Uhm Anthony mentioned on the early side of what we're doing with you know ESG right again, that's a new in essence kind of vertical you know that we're going into so net net new opportunity from that side in terms of.
Some of the work we're doing from continuing to upgrade platforms, whether it's you why you ask and some of <unk>.
Sales spaces, whether that's in terms of just you know converting off oven and really upgrading right. The underline on structures of some of the platforms on finance or <unk> that work is still ongoing but you know the the majority of those revenues from a new product person.
<unk> are you know net new versus versus an essence, replacing if that makes sense.
That's very helpful. Thank you.
Thanks, Gary.
Your next question comes from the mine Manav Pattanaik of Barclays.
Thank you good morning, just on the French Union partnership I, just wanted to consult I mean, I I did remember seeing some press release business focused mostly in South Africa. So I just want to confirm this was something different and bigger and I'll say. It. This was the first time you Dnb has pockmark with a consumer called the <unk>.
To do anything like this.
Sure. Thank you <unk> Yeah. No. This is something larger that was an a previous deal that we've done with them together in South Africa. This one is domestically focused and to my knowledge. It I know I I don't believe anything had ever been done with a.
A a credit Bureau, before and certainly not in recent history Uhm, so going back far enough there might have been some things, but certainly not in recent history Uhm. So that's where we're excited about it it's new capability in a market.
Again as we're looking at.
Where we're strong wherever average where we got vulnerabilities what are the things that we can do this is something which helps in an area, where we were vulnerable that we've talked with all of you about before get it from a competitive perspective, and it really puts us in a position of strength here. So we're excited about it.
Got it. Thank you that's helpful and then just broadly.
Historically, a cheese and probably still just doesn't extend the fourth quarter is always be.
Heavy loaded quarter for Dunn and Bradstreet I know you guys have tried to change things up for the better. So I'm just trying to understand I'll I'll get some help on how we should extrapolating I'll just pay a bill.
Five plus percent organic go with you and that in the fourth quarter and how we should think about that into 22.
Yeah, <unk> I think you know Anthony said it the right way right. It's that's a really nice foundation for us to continue to accelerate organic growth into 2022, and so obviously you know as we finished off a year and we get into the the queue for you know earnings call will provide formal guy.
So at that time, but certainly you know where we're really pleased with the continued acceleration and then continued momentum we're building into that you know <unk> recurring organic revenue stream.
Got it thank you.
Your next question comes from the line of Carl Pettersson of Needham.
Hey, good morning, guys. Thanks for taking the questions just wanted to touch on the M&A outlook of pipeline I'll see nuts. These two deals. This morning seemed like good fats are you guys ready and still looking for for more deals or should we expect some kind of Ah Ah digestion.
And then integration period for these two.
Okay.
What would I would say is we're always looking for M&A that will help us and drive shareholder value and the way. We're organized our team can digest. These ones. If we saw a great one pop up tomorrow, we'd go after it with bigger and we've been active in the space we've looked at.
A number of companies as you can imagine and oftentimes the best you know strategic Moviemakers, when you don't do something and so we're pleased with the decisions we've made walking away from some deals.
But we've been very thoughtful about what are the right types of acquisitions for us that would really benefit.
Our clients and and help accelerate our growth and and that that will continue.
We're both conversations today on other M&A opportunities.
Got it that's that's helpful. And then it's just a quick follow up uhm on the outlook ups going on the interest expense I guess like the guidance implies that there is a little bit of a step up in <unk> compared to where we've been at uhm over the first nine months of the year is there anything.
Going on related to like pretty funding some of the sermon a that we should we should keep in mind or is there just said an element of conservative for conservatism or anything that we need to kind of keep in mind for a models.
Yeah. So so clearly you know we we came out of the range of about our original guidance was right and so we you know we step that up certainly we think that will continue to perform well against you know expectations on on that side and certainly as we head into the end of this year you're right.
We'll use you know a little bit of cash and some of the revolver right to from the the two acquisitions.
But really as we lead into next year, obviously, the other thing we have our eyes on as the both the secured and unsecured notes that have you know the February 22, non call period coming up and so those are at $420 million six <unk> seven five a $450 million a ton and a quarter.
Obviously, the market's been a very different place than it was almost two years ago. When when we put those in place. So all of those types of things we have our eyes on in and we'll look to drive obviously first and foremost the operational results, but continue to see a good opportunity in terms of some of the non up items to enhance.
You know our overall earnings.
Great. That's helpful. Thanks, Gus this quarter.
Thanks, Thank you.
Your next question comes from the line of Andrew Steinman of J P. Morgan Hi, I wanted to talk a little bit about this node revenue, which of course, they could I see I'd fly at six in the footnote that business revenues are on track for 19% of 21 I shall if you could just help us focus in on on third quarter, There's no revenues.
No you're going to say that there is some like for like type situation. But my question is is this note revenues growing yet and when do you think kind of a pain of that there's no revenue growth could pick up.
Hey, Andrea. Thank you Yeah. You know is Anthony said you know this is a large scale you know transaction. Obviously, you know really complex in a pretty tough period and and the team has done a really nice job and so when we look at kind of comparable.
Last year that business was declining you know call. It about a point behalf. This year you know, it's growing call it somewhere around two per cent and so it is you know turn the corner Andrew from that perspective. The Nordics are are having a a good year from that perspective, and what were seen and and you know what our original thesis was was that.
The Dun and Bradstreet part ox are growing faster than the overall, there's nowt. So there's certainly driving you know the majority of that growth and Anthony even drop you know as we brought some new products to bear in the sales and marketing relatively quickly those are growing almost 12.5%. So small baseball but of course, showing you know good moment.
I'm from that perspective, okay. Thank you.
Mhm, Thanks, Andrew and next your next question comes from the line of Georgetown of Goldman Sachs.
Hi, Thanks, good morning.
You originally expected organic growth to be in the lower half of the 3% to 4.5% range in the third quarter and you outperform that target can you elaborate on what drove the upside and if there was any pull forward from future quarters that impacted the groups.
Yeah, George So so no pull forward from from that perspective, when we talked about you know on the prior call was we said that you know we were looking I kind of the middle you know a little bit below the middle of the the guidance range and so we came in you know the 3.7% you know certainly had.
Good sales activities, we certainly saying not like a swing right on the usage side, but you know again relatively in line with expectations.
And you know really it was just a a general I would say straightforward performance from that perspective, so pricings flowing through sales are continuing to flow through and and outpace overall revenue growth and our retention is as continue to improve and so Anthony sat at our client engagement and the sentiment with our <unk>.
<unk> continues to improve and enhance and you know those are all with you know I would say positive indicators that you know we're doing the right things and and I think the results are reflecting that.
Got it that's helpful and and then as it relates to retention how how much would be improvement is coming from your S. M B segment versus enterprise customers and as it relates to S. M. B can you provide examples of trash that you see with S. M. B focused new products your new S. M B port.
<unk> and just prevent a little bit of extra details there.
Sure. So maybe I'll open up with the the the retention numbers part and then Anthony can talk a little bit about what we're doing with the product side.
And so again, we continue to you know we always focus on you know we call muscle and muscle arrived so the strategic accounts have them nearly 100 per cent George from that perspective, and so it's a large portion of our revenue and you know the retention rates have been great. What we've seen is both improvements in in the middle Uhm market custom.
<unk>, but also starting to see some improvements on that on that small side. So you know shipping from you know some more transactional to longer term you know our multiyear contracts you know continue to be in that you know roughly 50% range a little bit below that and then we're also again.
You know really seen and and focusing on you know multiple products per rather than that kind of a single product. Her that we were accustomed to on the on the small side. So you know it may be Anthony you can talk about what we're doing yeah, yeah on the estimates I.
E. Commerce is we're excited about what we're doing again, that's a long play in terms of.
There was a an article terrorist Gardner talked about 43% of all be to be byers preferred not speaking to a live person. So you know.
You know what that highlights is [noise] market more to them and get them e-commerce capabilities for them to actually make the purchases themselves and the sea Commerce initiative is one that you know that that's the long game for us in terms of building up more and more capability, there and starting obviously with the S. M B C.
Space. So we're excited with the number of additional subscribers that we have you know, it's almost 40% over last year, we've created a lot of new product capability in that space as well in addition to datasets et cetera that they can buy but we've also launched are free.
Liam to premium working model, so or punch being able to take our SMB take our product test it play with it like it then buy it and now that's worked out well, but I'm really across the business. Even you know in the it looks at all my marketing side, we have a Rev. Wrap up now capability W launched an e-commerce site, where S. M b.
You can sign up inexpensively try it I'll get reports on what type of hits that they've been getting with the online marketing hooked on what ads et cetera. So we're going to continue to you know.
Deliver more and more new capabilities and think about that space and and I hope what you're seeing is we're we're fulfilling you know that and we continue to add more capabilities in that space to build it up further and further.
Got it very helpful. Thank you.
Hi, Thank you time I'm sure I'm showing no other questions I will now turn the call back over to Anthony Jabbar for closing remarks.
Thank you as always I'd like to thank my Dunn and Bradstreet colleagues for their exceptional efforts to sustainably grow our business for the years to come into our great clients for their partnership and for their guidance. Thank you for your interest in Dunn and Bradstreet for joining us on the call. This morning Hope you have a wonderful rest of your day.
This concludes today's conference call. Thank you for participating you may now disconnect.