Q2 2023 Dun & Bradstreet Holdings Inc Earnings Call
[music].
Good morning, ladies and gentlemen, uncle country of Dun <unk> Bradstreet's second quarter earnings call. At this time all lines, saying these can only mode. Following the presentation, we will conduct a question and answer session.
If at any time during this call jewelry Gravimeter assistance. Please press star zero for the operator.
This call is being recorded on Thursday August three I would now like to turn the conference over to Shannon, Anthony Vice President corporate financial planning and analysis.
Please go ahead.
Thank you good morning, everyone and thank you for joining us for dinner Bradstreet's financial results conference call for the second quarter of 2023 on.
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 of 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 a reconciliation between non-GAAP financial information to the GAAP financial information is provided in the press release and supplemental slide presentation.
The conference call will be available for replay via webcast through denim Bradstreet's Investor Relations website at Investor got D&B Dot com.
With that I'll now turn the call over to Anthony.
Thank you Sean.
Everyone and thank you for joining us for our second quarter 2023 earnings call.
On today's call I'll start with a brief overview of our second quarter results, followed by an update on our operational activities and progress towards our strategic initiatives.
After that I will pass the call over to Brian for an in depth review of our results and to discuss our expectations for the remainder of 2023.
Well, then open up the call for Q&A and I'll finish up with a few closing comments.
With that let's get started.
We are very pleased with our second quarter results, which continued to demonstrate the progress we are making in nearly every facet of our business were.
We are building upon our strength and resiliency in both our North America and international segments through enhancing and expanding our world class proprietary datasets solving.
Solving new use cases for our clients with modernized solutions and rapidly and responsibly beginning to leverage the latest generative AI tools to accelerate our already rapid pace of innovation.
We delivered three 9% revenue growth on an organic constant currency basis.
Along with maintaining best in class margins as businesses throughout the world turned to us as a mission critical partner that can assist them in accelerating growth expanding margin and improving their overall risk profiles.
Let's now turn to the progress we're making in our two segments and then I'll follow up with the latest on our AI initiatives.
Beginning with North America, we continued to drive strong results across our core solution portfolio.
While we delivered two 8% growth overall.
Finance solutions third party supply chain risk management, and our sales and marketing solutions grew five 5%.
Finance solutions, and third party risk and compliance offerings continued to deliver resilient growth by offering mission critical solutions that help clients weave their way through the increasingly complex business environment.
Finance solutions is achieving continued growth through delivering incremental value throughout the contract period as well as providing a jumping off point for upsell and cross sell strategies.
As we continue to successfully migrate clients to our most modern solutions, we're seeing strong retention rates and deeper integration of our solutions into our clients' business and technological workflows.
Our risk solutions had another great quarter as businesses continue to search for ways to automate and optimize the onboarding monitoring and managing the third party supplier networks.
We continue to be the trusted provider of choice for.
For end to end business risk monitoring.
We also saw significant interest across our fraud financial regulatory compliance climate and sustainability suite of solutions.
As businesses are being impacted through local laws regulations or overall increased corporate responsibility demands our risk analytics platform and related data and analytic solutions are rightly positioned to capitalize on these favorable market dynamics.
And before I move on to our sales and marketing solutions I want to touch on the latest developments to our own ESG story.
At D&B. It has always been a core value of ours to be a trusted and responsible provider.
In doing so we are committed to running a socially responsible business that balances growing shareholder returns with sustainable practices and strong governance principles.
We just completed our annual ESG report and I'm proud of what we are delivering today and what we have in store for the future.
We recently formalized our commitment to ESG through a series of environmental social and governance pledges.
And I'm proud to be part of a company that is focused on doing things the right way.
Turning to our North American sales and marketing solutions, we saw another strong quarter of five 4% growth driven by our master data management and digital marketing solutions.
Clients and prospects are looking to drive profitable growth through the use of data analytics and artificial intelligence driven workflows.
Our product technology and data and analytic teams have been working tirelessly to bring high propensity automated solutions to bear and it's showing through in our expanding pipeline.
As we continue to invest and innovate in sales and marketing and finance and risk we see a strong uptake of our new solutions, which further supports our now 25% vitality index in North America.
Throughout the quarter, we continued to rollout new solutions deliver significant enhancements to existing platforms and expand upon our strategic partnerships.
On the new solution side, we launched the dun's registered seal in North America with direct integration into our D&B business Directory.
If you recall the dun's registered seal is one of our most successful products in the Asian market and allows small businesses to promote themselves as a legitimate entity with a sound financial and regulatory profile.
And with millions of businesses throughout North America looking to differentiate themselves as a vendor supplier our bar of capital. We are providing the initial version of the seal as a way to physically and digitally represent themselves in a manner that both consumers and commercial enterprises can rely upon.
We also enhanced our supply chain risk analytics to include tier and supplier visualization.
The tier and visualization allows enhanced stability to math and interpret our multi tier supply chain towards numerous components and represents a step function change in supply chain management by.
By providing a new level of detail and insight that was simply not possible before.
Companies that have this end to your visibility, we'll gain a competitive advantage in terms of cost management responsiveness and operational performance.
On the strategic partnership front, we began to open the door for monetization of our data and analytics solutions through data marketplaces.
Most recently, we built upon our deepening relationship with Google by making our D&B datasets and products available in the Google cloud data marketplace.
I am proud that we're the first company to populate the Google data marketplace.
It easier for our clients to access and utilize these critical solutions.
While also helping to provide a frictionless procurement process for clients to consume these valuable assets.
And along with other strategic partnerships, such as IBM, Microsoft Amazon data bricks and Snowflake, we are working across the spectrum of providers to allow our clients an agnostic approach to data access and software tools, including the expanding array of artificial intelligence capabilities.
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Unique and proprietary data and analytics has continued to be the key differentiator in the ability to drive increased performance for our clients.
The more user friendly the information is for our clients. The more we are able to land and expand with new clients and prospects.
We are also supporting our clients to create increased transparency and consistency in the onboarding of new suppliers.
Another initiative launched in the quarter is that Google now requires businesses coming on to Google play to have a dun's number.
This requirement has worked very well for some other major technology and retail clients of ours and so.
Simultaneously has been a great way for us to further broaden the number of small businesses that come to our front door.
As we continue to progress on the operational and innovation side. We're also seeing strength on the North American sales front.
Retention rates were strong up 60 basis points versus prior year, and new business wins and the software vertical for examples of the continued demand for our solutions across both finance and risk and sales and marketing.
Beginning with Citibank were able to take a long term existing customer and help them solve new and Germain use cases, and the financial risk space with one of our most recent alternative data assets.
Through the delivery of our shipping data assets matched with our global corporate family tree, we're able to drive predictive analytics to solve use cases around supply chain risk assessment enhanced credit risk insight and overall global market trend analysis.
I also want to mention how we're supporting xylem.
A water technology provider that supports operations and 150 countries throughout the world.
They look to create a world that is more water secure and sustainable we are able to help them run their financial operations with greater efficiency and overall effectiveness.
Through expanding our existing relationship to a multiyear agreement, we are delivering customer onboarding and global credit risk assessments through finance analytics, and API solutions and supported with digital modernization vendor management and global integration efforts.
While the financial risk solutions continue to build strong momentum the sales and marketing side is making excellent strides as well.
We are pleased to reignite our relationship with one of the top five software and technology companies in the world.
We signed a multiyear deal with us to support their initiatives around a data and analytics driven approach to sales operations and planning.
Through a combination of our data blocks analytics studio Hoover's and API based solutions.
<unk> is powering their ability to drive insightful and educated territory analysis and planning alongside <unk> based approach to ensure that not only is it business as strong opportunity in the pipeline.
We have the financial and operational wherewithal to be a viable and sound client for the years to come.
Another example is our recent multi year, new wind with <unk>, a leader in the E human and contract lifecycle management software space.
Through D&B connect Hoover's and our API solutions, we are supporting the build out of an enterprise wide Master data management solution to support their account management and sales efforts.
Through our unmatched business data cloud and industry, leading matching capabilities, we offer clients the ongoing cleansing matching pending enhancing and monitoring they need to make informed decisions at the most critical points in the customer journey.
While these are but a handful of examples of what we're doing on the North American sales front needless to say Im very pleased with the progress we are making and the continued strength and landing and expanding upon our exceptional client base.
Now turning to our international segment, we saw another quarter of strong organic growth at six 5%.
All regions performed well.
Our Asian markets grew mid teens in the quarter with high single digit performance from the United Kingdom and worldwide network and Europe growing.
5% organically.
We continue to see strong penetration of new localized products launched across Europe , including Hoover's finance analytics and newer Apis.
This drove a 500 basis points sequential increase in our vitality index to 33%.
We saw healthy demand across both finance and risk and sales and marketing offerings, particularly within risk and compliance solutions.
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Through our continued focus on enhancing our customer experience and creating a unified approach across our own networks I'm very pleased with the continued strength we are showing in our international segment.
On the sales front, we had another strong quarter, including delivering double digit sales growth from enterprise accounts, which is a key focus of our strategy internationally.
Retention remained healthy improving to 94% and we added a few more key names to our growing roster and successfully cross sold and up sold solutions to leading multinational clients.
Both <unk> one of the largest steel manufacturers in Europe signed a multiyear deal for a data block solution to facilitate their sales and marketing Master data management strategy.
MDM continues to be a very hot area in Europe , and especially with large industrials and manufacturers trying to get their arms around the highly complex and fragmented supply chain and customer population.
In the U K, we added a multiyear deal with IW Chi or international workplace group, the worlds third largest office space provider.
Through a third party screening data and monitoring delivered via API, we are supporting their <unk> efforts and ensuring that not only the initial underwriting, but the ongoing viability of their suppliers as well instrumented.
We also saw a host of large multi year renewals, including the likes of bear BSF and the agriculture Bank of China execute as we continue to provide our mission critical solutions to them. During these trying economic times.
And similar to what I've said about North America I am very very pleased with the ongoing progress we have made year to date and even more so with the basis on which we are setting ourselves up for accelerated growth over the coming years.
And I can't talk about accelerating growth in the coming years without touching on the D&B Dot AI labs.
Abe our framework and platform to leverage generative artificial intelligence to its maximum potential.
And Thats aid.
Lower case.
B E.
For one of our most esteemed former colleagues President Abraham Lincoln.
We chose <unk> to represent our brand because of what we stand for and what President Lincoln stood for.
Honesty transparency responsibility and a forward thinking mindset.
These principles are a perfect fit for how we are approaching this awesome new evolution.
And managing through a multi provider hybrid AI solution manner. We are very excited about what our assets can provide when exponentially enhanced through the significant technological breakthroughs.
Beginning with our decades of vast proprietary longitudinal data analytics and derive solutions, we are incrementally leveraging machine learning and large language models to create accurate timely and contextualize information to deliver use case tailored solutions for our clients.
For instance, with the Dnb Dot AI labs, we are allowing clients to safely and responsibly co developed groundbreaking solutions tailored to their specific industry and business process needs.
In a recent client webinar, we demo three solutions, where a client could interact extract and verify insights from extensive sets of documents through simple questions.
<unk> data into human readable form that was not possible before and see the power of our flexible AI agent in conjunction with our existing match and linkage capabilities to take a highly complex business use case to make it possible for alignment to solve.
If you haven't seen the webinar I highly encourage you to head to our IR site, where it is posted in the news section.
With the ability to leverage our proprietary data and analytics, coupled with our clients first party and other third party data powered by aid we believe that this could be the next big step for us in terms of our ability to accelerate value.
Now while the rush to AI commercialization is one that must be acted upon with urgency. We believe it is one that should be acted upon with responsibility and trust at the same time.
Our products and services at D&B are underpinned by unrivaled structured invalidated proprietary data that is accurate timely validated organized clean and ultimately contextualized.
With full interpret ability and an expansive data lineage deep subject matter expertise and analytics.
And our security legal compliance and ethical framework in place, we can drive exponentially advanced capabilities for our clients that reduced the risk of hallucinations and other misleading outcomes that can arise if not careful.
Through our initial client engagements, including our D&B dot AI client webinar from last month.
We are engaging with some of the world's largest and most sophisticated businesses to begin commercializing upon this immense opportunity.
At D&B, we are excited about our ability to drive opportunities for our clients and prospects to grow revenues enhanced profits and reduce risk through a combination of our data and analytics powered by Abe.
Overall, we delivered a strong quarter financial results disciplined operational execution and excellent strategic progress.
I am very pleased with the progress year to date, and we will continue to focus on sustainable growth innovating with urgency and allocating our capital and resources in an efficient and effective manner to continue on our multi year journey of increased organic growth enhanced profitability and a strengthened balance sheet.
So with that I'd now like to 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 2023.
Thank you Anthony and good morning, everyone. Today, I will discuss our second quarter 2023 results and provide an update on our guidance for the remainder of the year.
Turning to slide one on.
On a GAAP basis second quarter revenues were $555 million, an increase of $17 million or 3% compared to the prior year and 4% before the effect of foreign exchange.
Net loss for the quarter was $19 million.
Or a diluted loss per share of <unk>.
Compared to a net loss of $2 million for the prior year quarter.
Turning to slide two I will now discuss our adjusted results for the second quarter.
Second quarter revenue for the total company were $555 million, an increase of 3% or 4% before the effect of foreign exchange.
Revenues on an organic constant currency basis were up three 9% driven by increased demand in both our North America and international segments.
Second quarter adjusted EBITDA for the total company was $206 million, an increase of 3% compared to the prior year quarter and adjusted EBITDA margin was 37, 2%.
The increase in adjusted EBITDA was primarily due to higher revenue growth.
An increase of 5% this.
This increase was driven primarily by growth in our master data management and digital marketing solutions.
North America second quarter, adjusted EBITDA was $173 million and adjusted EBITDA margin was 44% an increase of 200 basis points from prior year, primarily due to revenue growth and lower costs related to personnel facilities and professional fees, partially offset by higher day.
The acquisition and data processing costs.
Turning to slide four in our international segment second quarter revenues for $163 million, an increase of $7 million or 5% and an increase of 6% before the effect of foreign exchange.
<unk> revenues increased six 5%.
Finance and risk revenues for the second quarter were $108 million, an increase of $6 million or approximately 6% and an increase of 7% before the effect of foreign exchange there.
There was positive contribution from all markets Europe , and Asia Pacific growth was driven by finance analytics and API solutions. The worldwide network alliances was due to higher cross border data fees and growth in our United Kingdom market came from third party risk and compliance solutions as well as finance analytics.
Sales and marketing revenues for the second quarter of 2023 or $55 million, an increase of $1 million or 2% and an increase of 4% before the effect of foreign exchange, excluding the impact of the divestiture of our German business the consumer business in the second quarter of 2022 organic Rev.
<unk> increased 5%, primarily due to higher revenues from the United Kingdom, and Europe , including strong growth from new and localized solutions like Dun <unk> Bradstreet Hoover's.
International second quarter, adjusted EBITDA was $49 million, an increase of $3 million or 6%, primarily due to revenue growth from the underlying business, partially offset by higher personnel costs and foreign exchange losses, resulting from a strengthening U S. Dollar adjusted EBITDA margin was 30%.
<unk>, an increase of 30 basis points compared to the prior year.
Turning to slide five.
I'll now walk through our capital structure.
As of June 32023.
We had cash and cash equivalents $261 million and total principal amount of debt of $3 $699 million.
The 3690 $9 million in principle is made up of $460 million of unsecured notes at 5%, which mature in 2029.
Term loans of 2660 $6 million at Sofer, plus CSA, plus 325 that matures in 2026.
Subsequently repriced, the sofa, plus CSA plus 300.
As of July 25, 2023, and then repriced again on July 31, 2023 to silver plus CSA plus $2 75 in conjunction with a pricing step down associated with our Moody's corporate family rating upgrade to be won.
$454 million at Sofa, plus 325 that matures in 2029 that also repriced the sofa plus 300 as of July 31, 2023 and association with the Moody's upgrade.
And borrowings of $119 million under our revolver.
The $2 $7 billion term loan has a $1 billion floating to fixed swap effective through March 2024 at 0.4% and a $1 5 billion floating to fixed swap, which expires February 2026 at three 6% to 95%.
The $454 million term loan has $250 million swap.
From floating to fixed through February 2025 at 162, 9%.
We also have three cross currency swaps at $125 million each that settlement in July of 2020 for 2025 and 2026.
Currently we are 87% of our debt is either fixed or hedged.
We had $731 million available on our $850 million revolving credit facility as of June 32023.
Overall, our weighted average interest rate was 566% as of June 32023.
Our leverage ratio was four <unk> times on a net basis and the credit facility senior secured net leverage ratio was three four times.
Turning now to slide six.
I'll now walk through our updated outlook for 2023.
We now expect total revenues after the effect of foreign currency to be in the range of 2000 $280 million to 2000 and $320 million or an increase of approximately $2 five to four 3%.
This includes an updated assumption related to the effect of foreign currency and the expected variances between the U S dollar Euro British pound and Swedish krona.
Revenues on an organic constant currency basis are still expected to be in the range of 3% to four 5% for the full year.
As previously discussed it is important to note that the total and organic growth rates take into account the conclusion of the existing GSA contract at the end of April 2022.
The net impact of organic growth for the full year as a headwind of 30 basis points.
Adjusted EBITDA is now expected to be in the range of $875 million to $915 million.
The adjusted EBIT range also takes into account the conclusion that GSA contract.
And a $5 million negative impact from the strengthening of the euro versus the US dollar in comparison to the relative flatness of the British pound and Swedish krona.
Adjusted EPS is now expected to be in the range of <unk> 92.
To $1 <unk>.
Additional modeling details underlying our outlook are as follows we now expect adjusted interest expense to be approximately $230 million depreciation and amortization expense of approximately $110 million to $115 million, excluding incremental depreciation and amortization expense, resulting from purchase accounting.
And adjusted effective tax rate of approximately 22, 5% weighted.
Weighted average diluted shares outstanding of approximately $433 million.
And for Capex, we still expect approximately $130 million to $150 million of internally developed software and around $30 million of property plant and equipment and other purchase software.
Overall, while the second quarter was a bit stronger than planned we expect the remaining quarters to be consistent with our original guidance and perform as previously communicated.
In conclusion, we are well positioned to capture the significant growth opportunities in front of us and we are pleased with the performance through the first half of the year with improving profitability and cash flows. We will continue to prioritize deleveraging the balance sheet and focusing capital allocation strategies on driving increased shareholder returns with.
That we're now happy to open up the call for questions. Operator will you. Please open up the line for Q&A.
Thank you.
And gentlemen, we will now begin the question and answer session.
Should you have a question please press star one.
To withdraw your question. Please press star two.
Your questions will be bolt in there that they are received.
If you are using a speaker phone please lift the handset before pressing any keys.
One moment. Please for your first question.
Your first question comes from young Mahoney from Wells Fargo.
Please go ahead.
John filling in for Seth just a quick question. It seems like there's been a resell rationing growth could you just explain what youre seeing in terms of the current selling environment, especially on the sales and marketing side. It seems like you had a kind of.
Broad based pickup in both.
Kind of Master data management as well as the digital solutions, but just with the backdrop of a potential add recession in the back half of the year. How are you seeing the current.
Thanks. Thank.
Thank you John .
First of all I'd say that.
Things are looking pretty much like we thought they would at the beginning of the year when we when we guided.
Two forces going on here Theres, one the macro force and the other one is our transformational force of the business as we continue to improve it.
And really I'd say from a.
Sales cycle.
It lengthens a couple of days contracts a couple of days for the most part it's been pretty steady for us and and we expect it to be pretty consistent to the back half of the year as well.
But certainly the disc.
The solutions that we're offering a very mission critical and the sales and marketing space and so.
They are stickier than.
You might expect and I think that also helps with the consistent.
Both that we're seeing in that business.
That's great. Thank you and then maybe just following up on the mission Criticality point I believe you had 25% vitality in North America, and 33 internationally, but how should we think about those kind of translating into higher growth as well as potentially higher structural pricing.
Yes, no. It's a great question and I appreciate you asking it on the vitality side because.
Like I said on calls previously it takes a tremendous amount of work from our team in terms of the number one building the new modern solution.
There have been many initiatives across the industry where.
The new modern solution never sees the light of day or if it does the migration suffered to some degree and companies are stranded with multiple products.
Does one go forward one so you know I'm very proud of the work our team has done in building the capability and working with clients and migrating them and like I said again previous age.
For a stronger relationship.
In Italy to sell add on modules can certainly add strength to our pricing capabilities. So you.
We're in great shape that way and.
We're going to continue staying the course.
Great color. Thanks, Scott.
Thank you John .
Thank you.
Your next question comes from Kyle <unk> from Nissan.
Go ahead.
Great. Thanks, guys. Good morning, I wanted to touch a little bit on the guide, particularly the FX neutral revenue growth, maybe some of the different drivers that could push you either towards the higher the lower ends and the outlook I mean, it seems like you guys were a little bit closer to the higher end. This.
Quarter, despite still having about a months' of of the GSA headwind. So just wanted to get a little more color on.
How much conservatism you guys have.
Baked in there for the second half and what some of the puts and takes.
Yes, Karl Thanks.
Ultimately as as Anthony said, we're really pleased with the year to date performance from that perspective.
As we've talked about right.
The overall year as it shapes up having that second and third quarter looking relatively in line and consistent from.
More towards the middle range of our of the guide and then the fourth quarter starting to go towards the higher end from that perspective, so again.
First quarter very much in line second quarter in a little bit better than expected, but we just wanted to make sure. We're.
Being thoughtful right with the the range that we've laid out and look we know that you know things that could drive us towards the higher end.
The range Youre going to be more sales coming in a little sooner than expected.
The usage right picking up and going over and above but again.
They're all around the fringes and why we give a range versus a point estimate.
Okay.
No on the AI opportunity.
Some good color you guys gave in the prepared remarks, but I just wanted to see how you guys are thinking about some of these opportunities.
In the near to medium term.
Whether it's on the revenue side or the efficiency and cost side, I guess, where do you see the biggest near term applications in terms of having a potential financial impacts on the business.
What kind of with the launch of <unk> Dot AI labs.
Really are a real foot, we've been working with generative AI previously.
And so you know.
Certain aspects of our data collection, we've been bringing in and leveraging some of that.
But.
But our focus right now he is with our clients and the commercial aspects for it and that's why we wanted to set up a lab environment, where he can both come in to a safe place, you'll hear us over and over on hitting on the responsible part and even in choosing the name Abe.
But being responsible our clients are really excited about the opportunities of generative AI and large language models and at the same time cautious and concerned right Mike.
Many are and so we want to create a safe place where you can collaborate together in a responsible way that's the trusted brand that we have at Dun <unk> Bradstreet, and where we're going to be focusing on initially youre right. There will be opportunities to drive revenue acceleration as we find ways to help our clients more.
There also be ways for us to be more efficient and.
And we'll be focusing on both of them what we wanted to get out of the gates first was.
An external focus with our clients to engage them for them to start working with us on these important initiatives.
Because we just thought that was.
More important to be out in front of this and and really helping leading our clients through it.
That's helpful. Thanks, guys.
Thanks Kyle.
Your next question comes from Heather <unk> from Bank of America.
I'm sorry, it looks like.
You stopped any more here.
Next question comes from.
Stefan anymore from Jefferies. Please go ahead.
Let me speak to the next one maybe.
Sure.
Oh I apologize can you hear me now.
During our February I'm, sorry, good morning.
Well I mean, you think I'd be and have that down by now but yes.
Are you continuing to see nice.
You continue to see nice strength in international markets, particularly in Europe , too, though it doesn't seem like it in your results, but are you seeing any macro pressures in any of these markets.
In the international segment specifically.
Yes.
So I'd say for the most part we're.
We've got a really seasoned team leading our international business.
And I'd say for the most part.
We see the opportunities are in front.
We've been thoughtful in terms of any of the headwinds but.
But some of the core we just again, that's why I talk often about what our macro forces affecting everything and then what are our Dun <unk> bradstreet transformational forces affecting because it's powerful so if you think of our international business. We've launched you know.
100 products in localized in our in our international markets, which is really helping offset.
Headwinds that we'd see and some of the areas like Master data management and third party risk.
They are really global.
Strong demand from our travels over there as well meeting with clients.
Internationally there.
They're really red Hot.
Priorities, there as well so I'd say for the most part that.
Every business has.
You know headwinds tailwind.
In the international space, We've got a lot more opportunity I would say that when we have downside risk.
Great No I really appreciate the color and then.
Looking at your ear, almost 4% organic growth for the quarter could you just breakout what the split was between a pricing cross selling new logos and how you kind of expect that to play out the balance of the year you know maybe any additional pricing commentary as you think out over the next 12 months. Thank you.
Yeah sure I think one part D. Then start with is we continue to have a really strong gross retention I think in North America was actually up.
About.
50, 60 bps in the quarter and so you know Anthony has talked for a long time you know the first thing you do is call. It the back door and that's that vitality index reflection that the investments we've been making the.
The continued engagement from our sales force and so that piece again is really solid and then when you think about the stop stops here, you're absolutely right price.
Previously it was something that wasn't a big impact in our work now talking it approaching 2%.
And starting to accelerate as we stack these renewals on in growth on throughout the year and then the remainder is really a mix of I'd say cross sell and up sell.
With a little bit of new product, but certainly when we look at the the vitality index. When we look at the migrations. These are all the components, both North America and in international that are contributing to the accelerated growth.
Got it really appreciate it thank you.
Thank you Stephanie Thanks Beth.
Thank you. Your next question comes from Heather Ralsky from microphone Marika. Please go ahead.
Hey back end, sorry about that before and I was hoping you could talk about your North America finance and risk segment stripping out GSA.
You called out strength in in.
Third party risk and supply chain.
You also talked about some softness in public sector and small business solution can you talk about where youre seeing areas of strength in some of the softness as well and kind of your expectations for how the year is going to progress.
Sure Heather.
I would say overall from a.
The core businesses that we have in North America.
Are performing well right so in.
In an off time to try and be very transparent with you as to you know what the underlying engine is producing and so our core finance and our third party risk and supply chain risk or sales and marketing is growing about five 5%.
And so that's where we've been.
I'm very pleased with it and.
And similar to what I shared I think it was on our Q4 earnings call about the two areas, where its pulling back the growth in it and public sector and it's in the legacy credibility business.
And in both of them.
We're very focused on turning around those businesses.
We've made a.
I'd say a lot of progress on the public sector side.
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We expect to see.
A turnaround overall in that business.
And on the coming quarters and on the credibility side.
We've got a pretty aggressive transformation in place really following the consent order that we inherited when we took over the company.
It is a very different approach to the space and we're very excited about what it can do for us. So at a high level, that's really what's going on we're seeing a lot of great growth in the core parts of our business you.
Like I said 90.
Plus percent of the business is growing you know in the range that we guided to midterm at our Investor day six months ago.
And again as we focus on these two businesses. In addition to a lot of the other work we have going on with innovations migrations and now the new generative AI initiatives on top of it.
It's really what our focus is here.
Thank you and then as a follow up with regards to the margin outlook can you just help us think through potential cadence for.
For the back half <unk> versus <unk>.
Yeah, Heather if we kind of look at it you'll see continued EBITDA growth in both the third quarter and fourth quarter I'd say on the margin side, you know the fourth quarter from just a percentage basis will be where you see.
A little bit more expansion than where we would see in the third quarter.
And some of this is coming in we had about 2 million of headwind from the FX side in the second quarter. We also had.
The mix of the GSA revenues coming off.
And some of the other newer revenues coming on.
At a strong contribution margin, but just not as high as what the GSA was previously and then the final if you look in the corporate segment, we had a little bit higher.
Performance space incentive comp in the second quarter than we did in the previous year and so those things start to.
Normalized right in thick year progresses, and that's the way we would think about the fourth quarter stepping up from the third quarter and again, a third being even better than it was the second quarter of us.
Great. Thank you that's helpful.
Thank you Ed.
Thank you. Your next question comes from Andrew <unk> from Jpmorgan. Please go ahead.
Hi, Anthony I'd like to know how Hoover's did in the second quarter and that product has been revitalized and wanted to know how you feel like Hoover's is doing competitively with <unk> professional contacts versus other providers out there.
Sure. Thanks, Andrew Yeah, our Hoover's business like you said that was an area that was in radiation and declining.
Quite a bit and we've got it too I would say.
A more breakeven pace, where it's not a headwind on the business.
And we're still seeing it operate at that level right now.
We saw some minor.
In a pullback of licenses, but you know for the most part the businesses performing like it has for the last couple.
Couple of quarters.
Overall, I think we're really pleased with the progress we're making in that in that Uber space and how we're aggressively going to market there.
Thank you.
Thank you. Your next question comes from Manav Patnaik from Barclays. Please go ahead.
Thank you I just had a follow up on that.
Second half expectations, particularly the fourth quarter.
Typically our biggest quarter I know you've tried to kind of reduce the reliance Dave, but just talk a little bit about the visibility there and just remind us how much of that.
In business day ends up being transactional versus typically recurring.
Yes, so manav. It's it is the largest we kind of have those bookends right and certainly <unk>.
Moderated the magnitude of them, meaning that first quarter from the magnitudes generally about the smaller serai second or third relatively somewhere and then the fourth is a little bit higher just due to the nature of it.
Some of the deliveries that take place and some of it would be activity that takes place during the quarter. You remember last year, we had a little bit in around the fringes on some of the delivery timing of master data management.
And won't be Comping that obviously, you know as we go into the fourth quarter. This year, but the visibility for this business is quite high right and so when we think about the amount.
Daily ratable subscription revenue that you are talking about 75 plus percent.
On deliveries right, which can be kind of semiannual quarterly brought our annual deliveries, they're guaranteed Brian in that time period.
And then you have some some usage on the fringes again, where may be pulled down in different months Ray ban in a 12 month period all of that is captured so when I think about this business and even in the in the fourth quarter visibility is is is quite strong.
And quite high.
Got it and then just one quick follow up like competitively have you seen any changes.
Across your segments, but more in particular on the finance side.
Not really manav.
And like I said, there's a lot of competitors out there, obviously, it's very competitive marketplace, but.
As we really focus on our game plan and executing well against it.
Really our best strategy in what's proving to be most effective for us.
We're working with our clients closely we're listening we're servicing them well getting great ideas. Our teams are working really well together.
Building new capabilities in servicing the client and.
And that's what we think is obviously really important from that perspective so.
Look there's certainly.
Is a lot of competition out there and we all have to work hard for the business that we have in.
Again, I'd say like the rest of our business most of our futures in our control versus in a macro environment or versus what other competitors are doing I feel strongly that it's in our control. If we work hard stay focused we're going to have.
Outcome.
Got it thank you.
Thank you.
Thank you. Your next question comes from George Tong from Goldman Sachs. Please go ahead.
Alright, thanks, good morning.
In the North America Finance and risk business, you talked about the public sector in SMB trends can you elaborate on how those trends progressed over the course of the quarter and what you're assuming in the second half where the those trends should be stable or whether we should see some improvement.
Yeah, Hey, George it's Brian so.
We've gotten out of the headwind from the GSA and so that was a component of what we saw in the second quarter in terms of then.
Turning to turn sales into revenue.
Anthony said, we would expect that the public sector to gradually start to improve through through the second half.
The credibility side, that's one where we're lapping that that consent order and there's a bit of tail right from some of the impacts on the revenue side. So again as I would expect that to improve.
So.
When you think about that same theme applied in on the risk side of the equation. The third parties the supply chain risk management, it's really critical and it's critical from so many different components right financial stability regulatory and compliance stability.
Just overall I would say, yes, Jay and sustainable practices right. All of these are creating this broader view of the types of companies that you're using as vendors suppliers and the types of companies that you are going out to sell too. So both of those dramatic I would say our.
Partially driven by an evolution in this overall macro uncertainty.
Yes, the only thing I would add to that is yes, we continue to penetrate enterprise accounts.
Worthwhile listen to them offer a lot more capability that we now have in markets and that's really I'd say the cost for the greater lift there versus.
Just price increase or something like that.
Got it very helpful. Thank you.
Thank you George.
Thank you thank you ladies and gentlemen.
As a reminder, should you have questions. Please press star one.
Your next question comes from Craig Huber from Huber Research Partners. Please go ahead.
Great. Thank you I got a broad question here for you since the take private transaction early 2019, you guys have obviously.
Moved Heaven and Earth here to help transform the company here and so I'm curious versus your original five year plan for the company what inning do you guys. Thank you and right now, especially with what you were originally planning to do here.
Okay, great. Thanks for the question.
A long time ago.
I'd say, we're very much on track and we're very confident with where we're headed.
So.
Initially.
On the IPO, we talked about growing from zero to 3% and then.
For a period of time, and then from 3% to 6%.
And three years later, you know where.
You know above the first range into the second one in six months ago at our Investor Day, we guided to mid term range of 5% to 7%.
You know where the company is heading and so I'd say, we're very confident of.
You know being where we thought we would be and again when we talk about the durability of this business.
Again, it just continues to give me and our team confidence and the <unk>.
All of this business and the March that were on in terms of really getting all the growth that that we possibly can with this business.
And my last question, if I could ask you guys had a pretty cautious view I recall coming into the year on the macro environment and stuff I'm just curious.
Is it for playing out in your mind or is it feel better out there the macro environment like in North America versus what you might have thought coming into the year, it's about the same or worse.
Yeah, it's always hard at the beginning of the year to talk about the macro environment is going to be.
For the coming year.
And what I said.
We looked at in two buckets right what would the macro do and what will our ongoing transformation provide us to fight any negative macro headwinds and <unk>.
And to a large degree I feel like the macro is sort of operating in the range that we thought it would.
But Brian gave any other comments you'd add on macro no I think Craig as we've talked about right, it's pretty consistent with our original expectations and played out that way and so.
For the remainder of the year, but it's one of the benefits of having the connectivity with the customers. The insights that we have the data right informs our thinking right and how we plan and so certainly we always think about.
You say drinking your own Champagne right and so that was certainly something that that's in a play down and it allowed us to plan and execute appropriately.
Thank you.
There are no further questions at this time.
Now I'll turn the call over to Anthony Jabbour, Mr. Joe where you can continue.
Thank you Sergio as always I'd like to thank my Dun <unk> Bradstreet colleagues for their exceptional efforts to sustainably grow our business for years to come into our great clients for their partnership and guidance. Thank you for your interest in denim Bradstreet and have a wonderful rest of your day.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines. Thank you.
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