Q2 2022 Dun & Bradstreet Holdings Inc Earnings Call
Good morning, and welcome to Diamond Bradstreet's second quarter 2022 Conference call. As a reminder, today's call is being recorded and your participation implies consent to such recording at this time all participants are in a listen only mode. A brief question answer session will follow the formal.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad with that I would like to turn the call over to Ed Yuen You May proceed.
Thank you good morning, everyone and thank you for joining us for Dun <unk> Bradstreet <unk> financial results conference call for the second quarter of 2022 on the call today, we have Dun <unk> Bradstreet 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 of the call May include forward looking statements related to the expected future results.
For our company and are therefore forward looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward looking statements are subject to are described in our earnings release and other SEC filings. Today's remarks will also include references to non-GAAP financial measures additional information, including reconciliation between non-GAAP financial information to the GAAP financial information.
Commission is provided in the press release and supplemental slide presentation. This conference call will be available for replay via webcast through <unk> Investor Relations website at Investor <unk>, D&B Dot com with that I'll now turn the call over to Anthony.
Thanks, Ed Good morning, everyone and thank you for joining us for our call today I'll begin with an update on our second quarter results and then provide a general business overview, including some of the more strategic initiatives, we have going on Paul.
During my commentary, Brian will provide further details on our second quarter results.
And our outlook for the remainder of the year.
After that we'll open up the call for questions and then I'll finish up with some closing comments.
The second quarter of 2022 was another solid quarter of financial and operational execution adjusted.
Adjusted revenues for the total company grew three 1% or six 3% before the effect of foreign currency.
And revenues on an organic constant currency basis grew three 7% for the second quarter.
Despite an increasingly challenging macro environment, we continue to show the defensible growth nature of our company.
With over 50% of our revenues under multi year contracts over 96% gross revenue retention and over 95% recurring revenues and solutions that are deeply embedded within our customers' most critical workflows and technologies.
We are in a privileged position to be able to weather these difficult markets and continue to execute upon both our near term and long term objectives.
In fact on July 28, we announced a quarterly dividend of <unk>, which will be the first quarter of our annual dividend of <unk> 20 per share per year.
We continue to drive strong results through our transformation and acceleration efforts and I am pleased to be able to share a portion of those gains with our shareholders.
From a segment perspective organic constant currency growth in both North America and international was driven by demand for our finance and risk solutions as broader business and macro conditions continue to create a strong demand environment.
Our three 7% organic constant currency growth included a 1% negative impact from the conclusion of the GSA contract and continues to show our progress towards sustained mid single digit growth.
As businesses throughout the world face deteriorating conditions D&B stands as a trusted provider ready to deliver the mission critical data and analytics that help our customers underwrite with confidence in times like these.
Our finance business continues to be solid in North America, and international with growth driven through receiving incremental value to the enhancements, we've made to our data delivery and technology platforms.
Businesses look to tighten their credit and business lending underwriting standards. We believe that our solutions are uniquely positioned to help clients and prospects make better decisions when it matters. The most.
The same goes for our third party and supply chain risk management business, which had another quarter of strong double digit growth. These solutions are a natural progression to finance organizations throughout the globe as they look to meet the evolving demands of enhanced data driven reviews on global third party participants.
We believe that in the coming years third party and supply chain risk management will continue to be a top priority for businesses and we will continue to invest in data and software enhancements to meet this increasing demand.
On the public sector front.
This quarter marked the completion of our direct relationship with the GSA, we continue to make significant inroads with several of the federal government agencies.
Whether it's food and drug administration, the small business administration, the department of defense or FEMA U.
U S. Federal government agencies continue to rely upon the dun's number and the data and analytics that support their missions.
And finally with sales and marketing we have made a significant progress this quarter on enhancing and upgrading our solutions in North America, while localizing and releasing international versions to our clients across Europe and Asia.
For instance, our new localized version of Hoover's in Europe has achieved a near 50% increase in revenue versus prior year and we believe there is ample greenfield opportunities to continue to accelerate growth over the coming quarters and years.
This is yet. Another example of how we continue to prove out our thesis that as we bring new solutions to geographies customer demand is high.
In fact, the D&B solutions overall in Europe grew over 15% this quarter.
With Europe , continuing to localize new solutions in North America, bringing incremental innovation to bear Im happy to report that we built upon our first quarter vitality index of 10% with the second quarter vitality index score of 15%.
While many companies are pulling back due to cyclical pressures, we are continuing to drive forward with our strategy and I'm pleased with both our financial results and operational progress.
As we continue to execute against our near term objectives are guiding strategic principles remain the same.
Innovate solutions and localize them throughout the world.
To increase our wallet share with strategic clients through expanded datasets and complementary solutions.
Approach and monetize the small business channel and new and innovative ways and.
<unk> continued to grow international and both our owned and worldwide network markets.
On the innovation front, our product technology data and analytics teams are hard at work delivering some exciting enhancements to our existing solutions and bringing new solutions to market that will continue to drive the progress I, just mentioned and our vitality index.
With the latest release of our fraud suite, we've signed our first two client contracts.
This solution from pilot to general release and have a growing multimillion dollars pipeline for the second half of this year.
We continue to see a strong demand for risk mitigation solutions as fraudulent activity has historically risen during periods of global economic distress.
Prospects are looking for data driven solutions to help sift through hundreds of thousands of transactions that could result in millions of dollars of losses, if even one project and transaction is missed.
We believe that our <unk> based fraud suite can play a unique role in fending off this type of activity and the early signs of our building pipeline are proof of that.
On the sales and marketing front, we continue to make progress on laying the foundation for accelerated growth in our sales solutions.
We grew our business contact database to $441 million global contacts, including 41 million E mails and $18 million direct dials and released a new version of D&B Hoover's for small business.
This solution is a lighter version aimed at delivering packets of contacts that can easily be activated through our clients Martech and sales tech solutions and keeps clients coming back for more as each month new leads are generated.
The solution is sold through both our inside sales and digital channels, which we believe is a more effective way for us to reach the tens of millions of SMB prospects that have been an untapped market for us to date.
We also completed the integration of our audience solutions business, including the integration of the dun's number throughout our enhanced business identity graph.
With net wise Nio to growing over 20%, we continue to see big potential and the BW digital marketing space over the coming years, and we will look to capitalize on our strong momentum there.
And the last one I'll touch on is the enhancements we've made to our ESG intelligence score.
We now have detailed scores on 34 million companies in 39 markets throughout the globe.
Again at D&B, we wanted to make sure that when we score business, it's informed through accurate and validated data versus modeling companies based on simple things like industry or geography.
For instance, with the recent addition of businesses consolidated utility Bill data, we're able to calculate the carbon emissions of a public or private company at a level of granularity. We believe is unparalleled in the industry.
We continue to see strong engagement from our existing customer base and are pleased with not only the wins, we have seen in the quarter, but the growing pipeline across several industry verticals.
Moving on to sales I am pleased to report that the second quarter was another strong one for our strategic client segments in both North America and international and.
In North America, we won new business with <unk>.
A modern lending platform that helps businesses get funding in new and innovative way lend.
<unk> will leverage our data to make offers to small businesses enabled by <unk> loan marketplace.
With millions of small businesses that come to Dun <unk> bradstreet to understand monitor and potentially impact their business credit scores.
We will take the step to get the funding they need quickly.
Another way, we are supporting the intelligent flow of capital is our expanded relationship with Goldman Sachs.
Through our coverage and patented matching capabilities, we're able to link Goldman Sachs consumer credit card holders with their associated businesses to create a significant source of new commercial credit card prospects for Marcus by Goldman Sachs.
On the renewal front Wells Fargo, a client that has been with us for over 35 years renewed a multiyear contract for our products and data to support several use cases across their business functions, including portfolio management and monitoring.
Another significant multi year contract renewal with one of the largest payroll and human resources management companies in the world.
Through the direct integration of some of our latest scores and analytics into their key platforms and work streams, we are able to automate the risk decisioning process upfront and then integrate financial health monitoring capabilities to mitigate the ongoing risk exposure going forward.
And our D&B Europe market, we won new business with a global 500 pharmaceutical company. The multi year seven figure deal provides various products across risk sales and marketing, including finance analytics and data blocks.
We also won a multi year seven figure master data and credit monitoring deal from a large Nordic telecom provider displacing a significant global competitor.
And finally, we began selling our D&B ESG intelligence solutions in Europe and had some notable wins, including a deal with a large German metal processing company as they look to further understand the ESG posture of their large and complicated supply chain.
In the SMB channel, we continue to look for ways to enhance our offerings to small businesses through both our internal efforts along with strategic partnerships.
One such partnership is our latest integration with Plaid.
Through Plaid businesses can provide permission.
Our business bank accounts directly to the E&P and directly influence their business identity and scores.
Even with a modest number of bank accounts connected right out of the gate.
90% of the companies that added banking information improve the risk assessment by delinquency score by up to 40 points.
As the global economy slows, we look to assist clients and prospects with more timely and more accurate reflections of their business standing and hopefully allow them to access capital in a more efficient and effective manner.
At the same time, we continue to progress with our blended score as multiple proofs of concepts are underway.
As you can imagine the testing process is a thorough one when it relates to the inclusion of a new underwriting score, but we are quite optimistic about the early results and the significant improvement in our ability to more broadly and more accurately score small and medium businesses today.
We've also been focused on new ways to expand our reach and serve more of the SMB community.
One example of this is how we are adapting to more seamlessly meet the needs of small businesses through our embedded credit partner program.
The goal of this program is to continue to provide small businesses with credit access and education by embedding directly within products used every day and their flow of work.
Such as their business banking accounts or accounting software.
Think about how a customer credit score are embedded in consumer banking apps.
We're doing it from the commercial side.
We've offered this successfully to a few partners over the past year and have taken these learnings to scale, the offering, allowing our customers themselves to become more holistic partners to small businesses.
And finally I wanted to share with you the fantastic progress we've made in our international business.
As we've previously discussed the migration of customers from legacy outdated products to our modern D&B solutions in Europe was a critical part of our acquisition of Biz node.
And through disciplined execution. The D&B Europe team has now migrated over $50 million in cumulative revenues to a modern dnb platforms.
This coordinated effort moved over 6000 customers in the second quarter, which improved our vitality index and has put us in a better position to drive cross sell efforts from our latest offerings versus legacy products.
I want to congratulate our team on achieving the high bar, we set out during the acquisition and recognize the operational execution that led to Dnb's largest successful migration in the last 20 plus years.
Overall I'm very pleased with the way we are executing during the first half of 2022 and believe Dun <unk> Bradstreet is uniquely positioned in the market due to our combination of high quality revenues, increasing innovation strong margins solid balance sheet and disciplined capital allocation.
I look forward to continuing to report on our progress over the coming quarters and with that I'd like to now turn the call over to Brian to discuss our financial results for the second quarter in more detail and the outlook for the remainder of 2022.
Thank you Anthony and good morning, everyone today, I will discuss our second quarter results and our outlook for 2022.
Turning to slide one on a GAAP basis second quarter revenues were $537 million, an increase of $16 million.
Or 3% compared to the prior year quarter, and 6% before the effect of foreign exchange.
Net loss for the second quarter was $2 million.
Or a diluted loss per share of less than one times compared to a net loss of $52 million for the prior year quarter or a diluted loss per share of <unk> 12.
The decrease in net loss of $50 million for this quarter was primarily due to lower provision for income taxes and a reduction in interest expense.
Turning to slide two I will now discuss our adjusted results for the second quarter.
Second quarter adjusted revenue for the total company were $537 million.
An increase of 3% or 6% before the impact of foreign exchange versus the prior year quarter revenues on an organic constant currency basis were up three 7%.
Second quarter adjusted EBITDA for the total company was $200 million.
An increase of $2 million or 1% the increase in EBITDA was primarily due to revenue growth from the underlying business, partially offset by investments leading to higher data and data processing costs and $3 million from the impact of foreign exchange.
Second quarter adjusted EBITDA margin was 37% a decrease of 90 basis points compared to the prior year quarter, excluding the impact of acquisition adjusted EBITDA margin was 38, 4% or an increase of 30 basis points.
Second quarter, adjusted net income was $107 million.
Our adjusted diluted earnings per share of <unk> 25.
Compared to $108 million.
<unk> 25 per share in the prior year quarter.
Turning now to slide three I will now discuss the results for our two segments North America and international.
North America revenues for the second quarter were $381 million.
An increase of 7%.
Excluding the impact of foreign exchange and acquisition North America organic revenue increased two 8%.
And finance and risk revenues were $209 million, an increase of 5%, primarily due to new business and higher customer spend and our third party and supply chain risk management solutions, partially offset by lower revenues from the conclusion of the GSA contract at the end of April .
And sales and marketing revenues were $172 million, an increase of 9%. The growth was primarily driven by our marketing solutions, which includes iota and that wise.
North America second quarter, adjusted EBITDA was $161 million, a decrease of 4% primarily due to investments leading to higher data and data processing fees, partially offset by organic revenue growth adjusted EBITDA margin for North America was 42% or 44% excluding the acquisition.
Turning to slide four in our international segment second quarter revenues were $156 million.
A decrease of $8 million or 5% and an increase of 5% on a constant currency basis organic revenues on a constant currency basis increased five 7%.
Finance and risk revenues for the second quarter of 2022 or $102 million.
A decrease of $2 million or approximately 2% and an increase of 7% on a constant currency basis.
<unk> been across all markets, including higher revenue from finance solutions, and our UK market higher cross border data fees across our worldwide network alliances.
And increased API solution revenues in our European markets.
Sales and marketing revenues for the second quarter of 2022 were $54 million, a decrease of $6 million or 9% and an increase of 2% on a constant currency basis.
Increase was primarily driven by higher data sales in our U K market and higher product royalties from a worldwide network alliances, partially offset by the divestiture of a b to C business in Germany.
Second quarter International adjusted EBITDA was $46 million for the three months ended June 32022, an increase of $4 million or 9% compared to the same period last year. The improvement in adjusted EBITDA was driven by revenue growth as well as the cost savings in Europe related to our business are accurate.
<unk>.
EBITDA margin was 30% for the three months ended June 32022, a 380 basis point improvement versus the prior year.
Now turning to slide five.
I'll walk through our capital structure.
As of June 32 points here, we had cash and cash equivalents of $210 million and total principal amount of debt of 3780 $3 million, we had $755 million available on our $850 million revolving credit facility as of June 32022.
Our leverage ratio was four two times on a net basis and the credit facility senior secured net leverage ratio was three six times.
Turning now to <unk>.
Now I'll walk through our outlook for 2022, we.
We continue to expect total adjusted revenue on a constant currency basis to increase 5% to 7%.
We now expect adjusted revenues after the effect of foreign currency to be in the range up to 225 million.
To 2000 $270 million.
Or an increase of approximately two 5% to four 5%. This update reflects a two 5% headwind to revenue after the effect of foreign currency due primarily to the continued strengthening of the us dollar versus the euro Swedish krona and the British pound.
And in regards to our primary Kpis revenues on an organic constant currency basis are still expected to be in the range of 3% to 5% for the full year. Adjusted EBITDA is still expected to be in the range of 865 million to $905 million and finally with rising rates.
We now expect interest expense to be in the range of $185 million to $195 million and are now expecting adjusted EPS to be in the range of $1 10 to $1 17.
Additional modeling details underlying our outlook are as follows depreciation and amortization expense of approximately $90 million, excluding incremental depreciation and amortization expense, resulting from purchase accounting.
Adjusted effective tax rate of approximately 24, 5%.
Weighted average diluted shares outstanding of approximately $430 million and Capex, we expect to be at the higher end of our $150 million to $180 million range.
The second quarter came in as expected and we continue to see the remaining quarters growing on an organic constant currency basis as previously communicated the.
The acceleration in Q3, and then Q4 is being driven by our strong current and prior year sales the impact of our pricing initiatives flowing through and continued progress in our retention efforts.
And EBITDA is also expected to ramp up in the third and fourth quarters as we annualized prior year investments in the first half of the year and see the contribution margin flow through from revenue growth in the second half.
With only a slight impact of $6 million in the second half of the year from foreign exchange.
As Anthony mentioned earlier, our execution in the first half of the year has been strong and sets us up to continue to achieve our near term objectives, while staying on track with our longer term goals. Despite a challenging macroeconomic backdrop dnb has the mix of assets financial profile and a set of opportunity.
In front of us that puts us in a privileged position in the market and allows us to continue to build upon the significant progress. We have made to date with that we're now happy to open up the call for questions. Operator will you. Please open the line for Q&A.
Thank you if you'd like to register a question kindly press. The one followed by the four on your telephone Keypad, you will hear three telecom technology request. If your question has been answered and you would like to withdraw your registration. Please press the one followed by the Street.
If you'd like to ask a question. Please press the one followed by the four on your telephone keypad and one moment. Please for the first question.
Okay.
Our first question comes from the line of Kyle Peterson with Needham. Please proceed with your question.
Hey, good morning, guys. Thanks for taking the questions.
Just wanted to start you know, particularly on your thoughts around capital allocation.
Good to see the dividend.
And get started up here.
Just wanted to pick your brain on what made you guys choose the dividend over potential share repurchase and is it an either or situation or is there potentially room here.
Thank you Kyle.
Well really the dividend we thought about it as I mentioned on previous calls capital allocation is always top of mind for us it's always.
That we discussed at our board meetings and obviously evaluate.
World around us and the dividend as a way for us to return value to our shareholders.
Todd.
Makes sense, obviously, and we felt very confident in our capabilities.
And delivery to be able to do that but also that we thought would open up an ability to reach a larger set of potential shareholders.
And lastly, you know most of our peers pay a dividend. So that was the reason I would say.
We chose to.
To give a dividend.
And the rest of the capital allocation I would say is pretty much in line first.
First and foremost.
Focusing on investing for organic growth.
Im still looking for.
Strategic M&A that we think will drive value for us and.
And obviously, you're still focused on.
Paying down our debt.
Yeah.
And our goal is to get under four times by end of the year beginning of next year. So we feel really good about the execution that way. So those are some of the reasons.
Why.
We kept the dividend than the rest of our priorities from a capital allocation perspective.
Understood that makes sense and just wanted to.
A follow up.
There have been any changes in client conversations.
And just given there's been some increased scale.
<unk> of the global recession here.
It's downsizing deals or cycle is getting a little bit longer dragged out just wanted to see if you guys noticed any change in tone with clients.
Well the.
I would say.
The largest part is.
A lot more engagement with our clients. So as there are fears of recession looming.
The data quality matters, the most and obviously.
Very strong in that regard and so our clients are engaging with us deeply to really have access to the best insights out there for them too.
As you think about.
When theres risks, obviously recession creates risks for them.
And us being in a position with a high quality data that we have really puts us in a strong position with our clients to really help them at times like this so I'd say, it's been very positive for us.
Certainly other areas, where if you think on our sales and marketing side.
Sure.
Don't help our clients in the same way during recession.
We're seeing our I'd say our sales cycles.
Lengthened a bit not not going away, but just going through maybe one extra step of.
Approvals.
But again the types of capabilities that we're providing in the space are.
Mission critical as well for them.
Great return for them its all about it everyone wants to be more effective more efficient.
Leveraging their data is always at the core of that and leveraging analytics.
Helps them always be smarter and so heading into a recession, whether it's on the defensive side with financial risk or the offensive side with sales and marketing.
Quality data is at the core of it and that's what our focus is on.
Thanks, guys.
Thanks, Kevin.
Our next question comes from the line of Hamzah <unk> with Jefferies. Please proceed with your question.
Yes, hi, good morning.
You had mentioned.
<unk> and localizing solutions I think you mentioned increase wallet share with new data sets.
<unk> channel and international.
Maybe just frame for us.
Which of these is further ahead, where is there more opportunity and I guess just stepping back at a high level.
What is missing for you to do consistent mid single digit organic growth sort of quarter end quarter out.
And so however, you want to answer that question I, just I just mentioned some of the key sort of growth drivers you had mentioned in your prepared remarks.
Yes, no I appreciate it.
<unk>.
Focus and I hope that you appreciate is.
Our consistency with our strategy with these four areas that we're focusing on because we have been very regimented and our approach here and our discipline and I'd say the.
Furthest along for Us is.
Our international <unk>.
Spansion, we really believed early onset.
As we created a more focused accountability.
Our new product capability that we could grow then we're pleased with the results. We're seeing there we continue to execute well with our strategic clients.
And I'd say on the innovation side I'm very pleased with how we have the flywheel spinning right now we've got lots of capability coming out youre seeing it in a.
A lot of the prepared remarks that we shared but it's really across the board I'm.
I'm pleased with the momentum that we have.
And on the SMB side Similarly.
There is a new area that we're trying to be a little more bolt on in terms of how we go after that.
And that is something where we look at it in two facets one facet how can we drive more traffic to our E. Commerce sites, that's where we think increasingly thats the ideal place to serve the smbs and where they want to be served and the other is how can we bring more and more capability to the SMB.
Our client base and help help those small businesses, especially in times of a pending recession, where we've got lots of capability that can help in that.
Some examples earlier around blend deal, where we can help give.
Real time credit approvals or with planet, where we can.
We will have.
Having F&B connect us to their commercial bank account for us to find ways to improve their credit scores and help them more so.
So if those four.
Like I said that was probably the order of where we're furthest along in the order that I walked through and I think in terms of mid single digit growth. That's really the journey that we're on I mean as you look at.
<unk>.
Our performance in the second quarter, if you strip out the GSA, which was launched in 2018, and finally came off that's a point of growth.
The 4% growth rate right.
Right now so.
So I feel really good about how the business is operating like I said financially and operationally.
And maybe just.
One more thing I'll add to that is not just the actual.
Quantity of revenue growth that we're having but the quality of it we've been focusing on multi year contracts that doesn't help us in quarter right. We've been focusing on migrating from older legacy applications to our new point of arrival ones that doesn't help us in current quarter.
Our vitality score and focus on driving more growth from new products.
Most of this helps us as we.
Improve the quality of our revenues, so I want to make sure that.
To highlight that for you.
The quantity is there we've got confidence, but also the quality that we're focused on of our revenue and earnings on a go forward basis.
That's very helpful. Just my follow up question I'll turn it over.
Just on sales and marketing you mentioned kind of lengthening of the sales cycle.
Yes, when you look at sales and marketing.
I know that business was pretty different.
Nine.
But when you look at this business, maybe walk us through digital marketing sales acceleration and kind of the master contact data.
Differences in those business lines, so investors can kind of get a view of how.
How discretionary each of those business lines are relative to each other.
And so just any thoughts as to the cyclicality of those particular lines of business.
Hey, Brian .
It's a great question and one we continue to do.
It really drive upon when you look at the overall revenue make up over half of it is under Master data management and so that is something that is extremely sticky very embedded within the software within the workflow. So think about master Fiat record Master Blender of record.
And so again very large piece growing kind of in that similar to the overall company's profile growth profile in that mid singles.
The sales component of it again, we talked about that primarily being on the Hoover side, it's something that had been declining over a period of time I think Anthony mentioned earlier our investments in.
Contact assets data access intent data.
We did from a UI UX perspective, and really now in a position to start to accelerate that off of a relatively small base call it $90 million.
<unk>.
Adjustments and enhancements to our go to market strategy.
And on that side I think.
The environment, there's a lot more upside.
And then certainly there is downside from that perspective.
And then lastly, the marketing business and that's where it's a combination of our audience solutions.
Combined with Metlife an iota.
Anthony mentioned that why isn't out of growing over 20% and so it's really the tip of the spear and when you think about.
Getting more efficient in doing more with less.
So the thing that.
When things tighten up from a marketing budget or sales budget.
The ROI you get all my spend within that kind of Mark Tac.
Data outside is very high and so again, we're at early stages from that perspective, and expect to have greenfield an opportunity into the <unk>.
Whether these times very well.
Yes, if I could add to that as well as we look going forward.
Again in the sales and marketing space.
We anticipate slightly.
Slightly longer sales cycle, but but clearly our solution is resonating with the market one of the other tailwind that we have is a lot more capability that we're also introducing so it's not the same.
A list of capabilities going into slightly longer sales cycle, but more new capabilities in terms of individual products.
As well as the integrated approach that we're taking across all of our sales and marketing solutions. So that we can solve bigger problems for our clients and be more core to their operations.
Great. Thank you.
Thanks, Amit.
Okay.
Yeah.
Our next question comes from the line of Andrew Jeffrey with Truth Jessa. Please proceed with your question.
Hey, guys. Good morning discussed stepping on for Andrew.
I just wanted to talk about the supply chain risk management is a vector of growth could you help us quantify the potential revenue contribution there.
As it develops and grows.
Yes, so I'll start with kind of given the quantification and then Anthony.
Kind of going back and forth on that.
Opportunity around supply chain risk management, and third party risk management, which I think from my perspective, it's quite exciting we've.
We've talked about it being roughly $25 million a quarter. So think about that for your annualized run in over $100 million.
It is something that again was tangential to what we were doing on the finance solution side and it's a natural progression of underwriting right. So really underwriting from a financial perspective from a risk and compliance perspective, as you think about that.
The next steps.
Including things like ESG and cyber security.
It is something that we see a lot of runway not just over the next few quarters, but frankly over the next few years.
Yes.
To add to that is.
That's a growing area that we don't see going away, but we see.
We're getting more and more core to our clients and anchored on them and working on solutions that can really benefit them.
Such as ESG and these new early.
Growth areas, where we can provide to them from a repeatable measurable scoring capability can really helping you really understand the regulatory environment that theyre going to be faced with and with our access to.
Private company data as well as public company.
I mentioned, we have 34 million companies that we cover.
Globally, and if you think Theres 50 not.
Not quite 50000 public companies the majority of it recovering are private companies and we think it's really unique and we think the regulations will lean into that as well. So we really think that there's a big opportunity for us to continue to grow in this space very nicely and certainly are in the midst lots of exciting conversations with our clients.
Great I appreciate the color my follow up question is could you talk a little bit about the driving of the cross sell how that progression is going.
And just kind of talk about pricing for your products, you're seeing the environment.
And I think that all that went up.
Yes sure.
Pleased with the cross sell and a key part of that as well obviously it is why I talk about getting the flywheel of innovation spending because we want to create more and more capability to solve the bigger and bigger.
For our clients, we want to integrate them.
And so it's easily digestible by our clients and repeatable and we're pleased with the cross sell the results that we're seeing on the sales side and also on the manufacturing side of more capability.
From a pricing side same thing like you said, we've talked about ways that we would.
Increased pricing, where it made sense, we've got it in our multiyear contracts, which is obviously a key area.
We've increased pricing in our base products, obviously due to the inflationary environment that we're in and.
And I'd say more so.
I always say this price and you have to earn the right for.
Core pricing and I believe we are with our clients in terms of our capability our deliveries.
And the value that we're creating for them and how we're servicing them well.
We're earning the right to everyday for that.
Great. Thank you.
Thank you guys.
Our next question comes from the line of NIS <unk> with RBC capital markets. Please proceed with your question.
Hi, This is John filling in for Ashish congratulations on the strong.
Innovation as well as the vitality index it looks like it accelerated 15% in the quarter could you talk more about how this translates into organic growth and maybe tie that into pricing, perhaps could we see pricing go higher.
Again, you said you earn the right to price, but could this go say mid single digits to high single just as in time once the products are reintroduced in new products.
<unk> market. Thanks.
Sure Thanks for that John .
Ill start with the first part and then Brian talk about the second, but but but clearly we're pleased with that.
The results that we're seeing here.
And.
I would say from a growth perspective, obviously it helps from a.
Pricing perspective, it helps as well so having clients on our.
Point of arrival products is beneficial.
In many ways. So if you think of a renewal coming up would you launch your clients on an older legacy system that you have or your latest and greatest what would improve your odds of retention obviously pending on your.
Your newest.
Offering and similarly, with our newest offering that's where we will have the ability to drive more cross sells more seamlessly. So if you think of our point of arrival product with risk analytics, that's where we're cross selling our ESG capability and we want to move our clients to risk analytics. So they could take advantage of some of the other new capabilities.
We have.
And secondly, when you look at pricing.
Again, the power of that is by having your clients getting the most benefit from you which is what our point of arrival products are delivering.
It just puts us in a great position.
As we're driving value for them for us to drive value from a pricing perspective as well.
Yes, just what Anthony said right.
As we continue to bring new products to bear, but also as we continue to migrate for instance.
Half of all legacy products onto the new Dnb products. It puts us in a great position to continue to raise price when we talk about the price impact on the revenue that's blended across the board and so when you think about where we were for instance in international.
There has been a big node region, we had a lot of heavy lifting in neurology team to get that 50 million off of what were really the spirit and legacy products onto our consolidated modern platforms. As you get that then the opportunity to raise price.
And raise price I would say even above and beyond where we are today is certainly something that gives us a lot of.
Confidence in doing so as we go forward.
Great. Thank you for the color and for my quick follow up just as we model out organic growth in the second half of the year. It seems like it was.
Originally guided to improve in the second half as compared to the first half is that still the expectation given the strong first half performance.
Yes, if you look.
Our earlier comments, we talked about four 5% right in the first quarter three 7% in the second quarter.
That included the point of headwind right, so pretty consistent growth in the first and second quarters, we're going to have the full impact.
The GSA both in the third and fourth quarters right. So think about three months versus versus two months in the second but yes. If you look at that continued trajectory going from the second quarter to the third to the fourth we would expect the third and the fourth to be accelerating off of that.
The second quarter.
Great. Thank you.
Our next question comes from the line of Seth Weber with Wells Fargo Securities. Please proceed with your question.
Hi, guys. Good morning, Thanks for taking the question.
I had a question on the international margin, which came in a little bit from what were looking for was there anything.
That you would call out there I mean, it did step down a bunch from the first quarter or is there anything notable there.
That weighed on international margin in the second quarter.
Hey, Scott not necessarily clearly.
When we talk about the foreign exchange impact.
That's all going to hit into the international business in particular.
So when you look at the impact of revenue and flow through on the EBITDA.
That was probably the primary differential between those two you're really starting to see the dollar kind of.
Hey, Paul right from a strengthening perspective more than the second than the first.
Overall, the business gets another kind of partial offset because of some of our shared services operations. We have for instance in Ireland.
<unk> not just a small piece of international but also the overall North America operation and that's for when you kind of blend the two it gets down to something more like call. It.
19% or 20% impact.
On the on the revenue side. So when you look at the full year, you're talking $60 million of revenue.
Maybe $9 million of EBIT impact so pretty muted.
Right. Okay. So is this kind of low 30% range representative of what you think the full year will be assuming it seems like FX is getting worse.
I'm just trying to understand the margin sure.
Factory for the International segment rest of the year or is this kind of representative or do you think it should get better from here.
Yes.
I think it will continue to improve.
So we continue to make progress on the business.
Cost savings front too.
We have that obviously follow up with the revenue flowing through in the first quarter. We continue to make progress in the second quarter. Some of this migration effort was obviously, a pretty heavy lift to get done and I think $40 million under the $50 million of the revenue migrated we've got in the second quarter. So now that thats behind US you can imagine.
Lots of the expenses associated with those platforms right and those kind of fund balance of wind down.
To start to Peel off so again, when we talk about the first half versus second half the second half, you'll just see more of the natural revenue.
Contribution margin flow through.
And then on top of that in international I'm going to stay a little bit more about the cost savings from the integration.
Going through also.
Okay. Thanks, and then just as a follow up.
I heard you mentioned there were some higher I guess data acquisition costs.
With some of these in support of some of these new new sub segments and data Adjacencies and things like that is that a material headwind to you guys to support things like supply chain and ESG, I guess or how.
How should we think about the cost profile going forward just more broadly are the.
Are these incremental cost is going to continue to do.
Accelerate or.
How should we think about as you grow. These other businesses is that going to be more of a cost headwind.
Maybe I'll take that Brian and then you can add on.
From a data perspective, what we've seen here is that we have.
Got a treasure trove of data and.
And as we add new additional data the solution becomes.
Broader and magnified.
And as we've hired in ESG experts or fraud experts.
We've been able to acquire smaller amounts of data that we're talking about but create a magnified impact from its one plus one equaling five.
From that perspective, and I would say, how we are leveraging it. We're ingesting. This alternate data for example, once in our data lake and using it in multiple ways. So from an efficiency perspective, it makes a lot of sense.
And.
And having.
Repeat ability.
Creates a lot of sense. So if you think of.
Utility data as an example of alternative data.
Leveraging our credit underwriting.
Leveraging our fraud use cases leverage it with ESG and understanding consumption.
Tend to use it for contact data as well so theres lots of different use cases as this comes in and Thats why.
We've been making the investments in this space, we just have a high confidence about the return on the investments that we're making in these additional data assets.
Yes, and again, we added dynamic as we're heading into this year that we talked about in the first half of the year, where we were lapping some of these investments that came.
Back half of last year and it was really just a dynamic of.
Between those investments that we usually can absorb right with the natural kind of progression.
Revenue growth.
We had two things in there right one is the GSA.
And obviously with our.
Our contract with us for a long time and was relatively high margin business. So as you can imagine and then secondly, the acquisitions of Io.
They came in again higher drawing by sub scale from a margin perspective. So this was just kind of a confluence of events from that perspective again in the second half of the year Youll see more of that normal kind of EBITDA expansion that we talked about on the revenue growth and then as we go forward.
This was kind of the last component that Jeff a component that was back from 2018.
We knew we were kind of walking into this year.
Got it Okay. That's helpful guys. Thank you very much.
Thank you Seth.
Our next question comes from the line of Manav Patnaik with Barclays. Please proceed with your question.
Thank you.
Brian I was hoping you could just help us with.
Organic growth kind of AT&T gave for the total company, maybe just some nuances between international perhaps I guess North America. It sounds like it would follow that same pattern.
Yeah, So again.
Manav, what we're seeing and we saw in the second quarter for instance, international which was.
On a core organic constant currency basis.
Europe stepped up Brian So they grew about 3%.
<unk> assets and then the overall kind of rest of it grew.
Roughly 9% right, so really consistent with where were going and again, but more we get those components.
Components of.
The legacy revenue.
Dave.
The team the ability to continue to drive more cross sell upsell on top of that more price increases and things like that so we will continue to see the progression of the above.
Our international business through the back half of the year.
Tom.
Yes.
North America, I think you've got it right, it's pretty consistent right as we continue to grow.
And we continue to layer on that the price increases we continue to layer on the prior sales folding into turning from sailing into Rev. Rack and then obviously as we get into the fourth quarter. We've naturally seen it'd be the largest from a magnitude perspective, but also from a growth perspective.
Got it and then.
Maybe if you remind us about Iowa, net wise and kind of how these fit into this.