Q3 2023 Dun & Bradstreet Holdings Inc Earnings Call
Hello, and welcome to the Dun and Bradstreet third quarter 'twenty twenty-three earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero. After today's presentation, there will be an opportunity to ask questions.
To ask a question you May Press Star then one on your Touchtone phone. Please note. This event is being recorded I would like now to turn the conference over to Shawn Anthony <unk>, Vice President Corporate F. P. N. A please go ahead.
Yeah.
Thank you and good morning, everyone and thank you for joining us for Dun and Bradstreet financial results conference call for the third quarter of 2023.
On the call today, we have dinner 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 statement.
Our actual results may differ materially from our projections due to a number of risks and uncertainties.
The risks and uncertainties. The 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 Dun <unk> Bradstreet's Investor Relations website at Investor <unk>, Dnb Dot com with that I'll now turn the call over to Anthony.
Thank you Sean good morning, everyone and thank you for joining us for our third quarter 2023 earnings call on.
On today's call will start with a brief overview of our third quarter results, followed by an update on our operational activities and progress towards our strategic initiatives.
After that I'll pass the call over to Brian for an in depth review of our financial results and to discuss our expectations for the remainder of 2023.
We'll then open up the call for questions and then I'll finish up with a few closing comments.
With that let's get started.
We delivered a strong third quarter financial results and operational execution.
Organic constant currency revenue growth of four 8%.
Adjusted EBIT growth of five 6% and 40% EBITDA margins, we continue to show both acceleration and durability in the quarter.
North America and international continue to capitalize on the need for businesses to better leverage data and analytics and driving both financial and operational improvements, which has only been further magnified by the advancements of generative AI solutions.
We are at the forefront of the application of AI to business and we are excited about how clients and prospects are coming to us for guidance and support and implementing this groundbreaking technology.
With our data is the backbone for some of the largest and most sophisticated companies throughout the world. We're uniquely positioned to help them achieve their goals of increasing revenues driving down costs and mitigating risk.
As a reminder, we are collaborating with our clients and our D&B Dot AI labs, and we'll be launching new products under our <unk> brand.
We're also focused internally on ways that this technology can improve our own operational efficiency and act as client zero and the development of future commercial offerings.
I don't believe there's been a time in our recent history in which our proprietary data analytics and platform solutions have had more potential and I'm very excited about the progress, we're making and the pace at which we are operating.
With that in mind, let's dig into what we delivered in the third quarter across both our North American and international segments, and then I'll follow up with the latest on our strategic initiatives.
Beginning with North America revenues grew four 5% in the quarter.
Our finance and risk solutions grew 5% driven by strong double digit growth in risk.
Consistent growth in finance solutions, and this being the first quarter with no year over year impact from the GSA.
Sales and marketing also grew 4% driven by mid single digit growth in our master data management solutions.
Finding 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 an increasingly complex and volatile business environment.
Finance solutions continued its steady growth delivering incremental value throughout the contract period as well as providing a great client base to upsell and cross sell additional capabilities.
We continue to see strong retention rates and are working with our clients to integrate and deliver our solutions even deeper into the most mission critical applications and processes within our customers' ERP.
<unk> and other finance related workflows.
Our risk solutions had another excellent quarter as businesses continue to search for ways to automate and optimize the onboarding monitoring and management of the third party supplier networks.
Whether it's the SEC, bringing increased cyber security disclosure requirements, the state of California, adding incremental ESG and supply chain reporting regulations or Europe's increased adoption of sustainability requirements businesses are being forced to understand and report on a more detailed level of who they are a partner.
During and doing business with.
With one of the world's most comprehensive global risk solutions, we're continuing to capitalize on the increasing demand for know your customer know your supplier and in general I know your third party solutions and we will continue to invest in accelerating these assets over the coming years.
Turning to our sales and marketing solutions, we saw another solid quarter of 4% growth driven by our master data management and sales and marketing data solution sales.
Our sales and marketing business is anchored by our MDM solution and therefore, it doesn't experience the same dynamics that other sales and marketing providers have out in the market.
In both good times and bad highly curated organized and rapidly accessible data is critical.
With our ability to deliver economies of scale to the upsell and cross sell of our complementary solution sets, we are well positioned to defensively grow our enhanced set of sales and marketing solutions through leveraging our unique positioning with our MDM offerings.
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 in the SMB space, we launched the Dnb Concierge service, which allows for the contribution of other proprietary datasets that provide prospects and existing clients the opportunity to create a more holistic picture of their financial profile, and therefore provide themselves and even better.
Opportunity to access much needed capital to establish or grow their business is.
This product was launched ahead of schedule and is already outselling our legacy <unk> product.
It is another great example of our ability to be nimble and execute with urgency.
Operator: Hello and welcome to the Dun & Brad Street 3rd quarter 2023 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signally conference specialist by pressing the star key followed by zero.
We also brought together a bevy of existing solutions and our new credit insights product that will allow small businesses to have a unified buying experience our products and services that support them on each step of the growth journey.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, do you may press star then one on your touch tone phone. Please note this event is being recorded.
We also continued to drive new and modified solutions and our most rapidly growing areas.
For example, in third party risk and compliance we released compliance intelligence.
Sean Anthony: I would like now to turn the conference over to Sean Anthony, Vice President Corporate FPNA. Please go ahead.
Know your third party monitoring and compliance decision, making solution driven by Dun <unk> Bradstreet's AI powered data.
Sean Anthony: Thank you, good morning everyone and thank you for joining us for Dun & Brad Street's financial results conference call for the 3rd quarter of 2023. On the call today we have Dun & Brad Street CEO Anthony Jabbour and CFO Bryan Hipsher.
And Master data management, we continued to expand our new Dnb connect essentials launch and product that takes the power of MDM, but it simplifies it for mid market utilization, allowing smaller companies to leverage a simplified user interface, but pre wired algorithms that companies can use right out of the box.
Sean Anthony: 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 risk and uncertainties of forward looking statements are subject to our described in our earnings release and other SEC filings.
Yeah.
As we continue to invest in innovative sales and marketing and then finance and risk we see a strong uptake of our new solutions, which further supports our now 26% vitality index in North America.
In addition to the Gen AI initiatives I mentioned upfront, we also announced at our recent global client conference and expanded partnership with IBM.
Sean Anthony: Today's remarks will also include references to non-gap financial measures. Additional information, including the reconciliation between non-gap financial information to the gap financial information is provided in the press release and supplemental slide presentation.
Together, we will be building and launching new products based on the integration of DMV data and IBM Watson ex.
This new go to market will be a part of Ibm's consulting engagements to embed these new capabilities directly into the solutions are joined clients used today as part of their daily workflows.
As announced at our conference. The first use cases include foundational entity resolution for any commercial use case, and a new task procurement capability for supply chain risk mitigation.
Sean Anthony: The conference call will be available for replay via webcast through Dun & Brad Street's investor relations website at investor.dmb.com.
Sean Anthony: With that, I'll now turn the call over to Anthony. Thank you, Sean.
We're excited about bringing together the power of Watson X and Abe to solve business issues that will ultimately unlock significant value for our clients.
Moving on to North American sales, we continued to show resilient growth, which is supportive of our continued acceleration into 2024 and beyond.
Anthony Jabbour: Good morning, everyone, and thank you for joining us for our 3rd quarter 2023 earnings call. On today's call, I'll start with a brief overview of our 3rd quarter results followed by an update on our operational activities and progress towards our strategic initiatives. After that, I'll pass call over to Bryan for an in-depth review of our financial results and to discuss our expectations for the remainder of 2023. We'll then open up the call for questions and then I'll finish up with a few closing comments.
Overall, our portfolio of solutions is once again proving to not only be mission critical in times of uncertainty, but a strategic path forward, so that clients and prospects have the ability to drive a more efficient and effective operation through data and analytic driven processes improvements <unk> automation.
Anthony Jabbour: With that, let's get started. We delivered a strong 3rd quarter of financial results and operational execution with organic constant currency revenue growth of 4.8%. Adjusted EBITDA growth of 5.6% and 40% EBITDA margins. We continued to show both acceleration and durability in the quarter. North America and international continue to capitalize on the need for businesses to better leverage data and analytics and driving both financial and operational improvements, which is only being further magnified by the advancements of generative AI solutions.
We set out on our strategy four years ago to build not only a growing business, but a sustainably growing business.
I am pleased with the durability that we have built in that time and with 55% of our North American revenues under multi year contracts and 53% overall, we continue to progress towards our goal of 60% in the midterm.
Anthony Jabbour: We're at the forefront of the application of Gen AI to business and we are excited about how clients and prospects are coming to us for guidance and support and implementing this groundbreaking technology. With our data as the backbone for some of the largest and most sophisticated companies throughout the world, we're uniquely positioned to help them achieve their goals of increasing revenues, driving down costs and mitigating risks. As a reminder, we are collaborating with our clients in our dnb.ai labs and we'll be launching new products under our aid brand.
And not only are we increasing our total amount of revenues under multiyear contracts. We're also seeing the tenure increase.
For instance, in the third quarter, we saw the number of four year plus deals increased 16% versus the prior year period.
This lengthening of contracts is directly proportional to our clients' growing trust and confidence to Dun <unk> Bradstreet is apartments.
With over 96% retention rates and a vitality index of 26%, we continue to strengthen our base position with existing customers.
Anthony Jabbour: We're also focused internally on ways that this technology can improve our own operational efficiency and act as client zero in the development of future commercial offerings. I don't believe there's been a time in our recent history in which our proprietary data, analytics and platform solutions have had more potential and I'm very excited about the progress we are making and the pace at which we are operating.
In addition, with the introduction of innovative new solutions, we are better able to expand with existing clients and convert new prospects as we broaden our addressable market.
On the land and expand front Coface a worldwide leader in credit insurance business information and accounts receivable management extended their nearly 25 year relationship with us through a multiyear deal that migrate them to a modern data block solution and creates an opportunity for them to further increase their volumes.
Anthony Jabbour: With that in mind, let's dig into what we delivered in the third quarter across both our North American and international segments and then we'll follow up with the latest on our strategic initiatives. Beginning with North America, revenues grew 4.5 percent in the quarter. Our finance and risk solutions grew 5 percent driven by strong double-digit growth and risk, consistent growth in finance solutions and this being the first quarter with no year-over-year impact from the GSA.
While creating economies of scale throughout their credit insurance underwriting operations.
From an SMB perspective, we continue to expand our marketplace with the addition of <unk> International's on deck.
And <unk> continues to look for new and innovative ways to drive increased small business loan origination.
Through a combination of our D&B mobile applications and F&B advertising capabilities, we're able to drive a significant increase in leads to on deck to a captive audience of millions of businesses that come through the dnb ecosystem, each and every year.
Anthony Jabbour: Sales and marketing also grew 4 percent driven by mid-single digit growth in our master data management solutions. Finance solutions and third-party risk and compliance offerings continue to deliver resilient growth by offering mission critical solutions that help clients weave their way through increasingly complex and volatile business environment. Finance solutions continued its steady growth through delivering incremental value throughout the contract period as well as providing a great client base to upsell and cross-sell additional capabilities.
And finally, we also had a significant expansion with the department of defense.
Our client continues to invest in supply chain risk mitigation and foreign investment assessment, enabling further discovery of potential vulnerabilities identification of industrial based risk and ultimately supporting the administration's objective to fortify and strengthen our nation's security.
Anthony Jabbour: We continue to see strong retention rates and are working with our clients to integrate and deliver our solutions even deeper into the most mission critical applications and processes within our customers ERP, AR and other finance-related workflows. Our risk solutions had another excellent quarter as businesses continue to surge for ways to automate and optimize the onboarding, monitoring and management of the third-party supplier networks. Whether it's the SEC bringing increased cybersecurity disclosure requirements, the state of California adding incremental ESG and supply chain reporting regulations, or Europe's increased adoption of sustainability requirements, businesses are being forced to understand and report on a more detailed level of who they are partnering and doing business with.
Whether it's in sales and marketing finance and risk public sector or private I'm very pleased with the progress we're making across our North American segment and the team is laser focused on closing out the year and maintaining our positive momentum as we head into 2024.
Now turning to our international segment, we saw another quarter of strong organic growth of five 8% as all regions drove positive growth, including high single digits across U K Asia and worldwide network markets.
While Europe grew greater than 3% and is up 4% year to date.
Improvement from levels, when we acquired the business less than three years ago.
We continue to focus on our localization of existing solutions, and driving new innovations and our own and Ww and markets.
Anthony Jabbour: With one of the world's most comprehensive global risk solutions, we are continuing to capitalize on the increasing demand for know your customer, know your supplier, and in general know your third-party solutions. Now we will continue to invest in accelerating these assets over the coming years. Turning to our sales and marketing solutions, we saw another solid quarter of 4% growth driven by our master data management and sales and marketing data solution sales.
Most recently, we launched the compliance intelligence module and risk analytics.
Expanded our ESG registered seal and additional Ww end markets.
And enhanced the Hoover's platform with audience builder and launched in Central Europe.
We continue to see excellent uptake in our new solutions and our vitality index reflected this progress with its rise to 34%.
Anthony Jabbour: Our sales and marketing business is anchored by our MDM solution and therefore doesn't experience the same dynamics that other sales and marketing providers have out in the market. In both good times and bad, highly curated, organized and rapidly accessible data is critical, with our ability to deliver economies of scale through the up sale and cross sale of our complementary solution sets, we are well positioned to defensively grow our enhanced set of sales and marketing solutions through leveraging our unique positioning with our MDM offerings.
We plan to continue to steadily execute our balance of migrations and the introduction of localized solutions to drive further sustainable growth across our global regions.
We are very pleased with the consistent operational execution by our international team.
On the sales front, we had another strong quarter.
Enterprise accounts remain a key focus of our strategy and sales growth in this channel is up double digits through the first three quarters.
Retention remained healthy in the third quarter, and 93% and we added a few more key names to our growing roster of top tier multinational clients.
Anthony Jabbour: Throughout the quarter, we continue to roll out new solutions, deliver significant enhancements to existing platforms, and expand upon our strategic partnerships. On the new solution side in the S&B space, we launched the DNB Concierge Service, which allows for the contribution of other proprietary data sets that provide prospects and existing clients the opportunity to create a more holistic picture of their financial profile and therefore provide themselves an even better opportunity to access much needed capital to establish or grow their business.
Beginning with a significant new business win we are excited to welcome Munich Our E.
Two our D&B client portfolio.
We sold a combined solution across both finance and risk and sales and marketing and <unk>.
The value of our end to end solution connected by the dun's ecosystem ended up becoming a very compelling offering.
We're also able to support Siemens energy with an MDM solution that allows them to cleanse and curate data from several of the acquired companies that built up some inconsistency over time.
Anthony Jabbour: This product was launched ahead of schedule and is already outselling our legacy concierge product. It is another great example of our ability to be nimble and execute with urgency. We also brought together a bevy of existing solutions in our new credit insights product that will allow small businesses to have a unified buying experience of products and services that supports them on each step of their growth journey. We also continue to drive new and modified solutions in our most rapidly growing areas.
Another land and expand win in Asia was Hong Kong export credit Insurance Corporation, we deepened our relationship with the addition of credit decision data blocks that allow them to more efficiently manage the financial underwriting of clients, they're handling throughout the region.
Again these are about a handful of examples of strong wins in the quarter and there are many others that continue to provide additional proof points of the strengthening of our global solutions data and go to market team.
Anthony Jabbour: For example, in third-party risk and compliance, we release compliance intelligence. I know your third-party monitoring and compliance decision-making solution driven by Dunham Bradstreet's AI Power Data. In Master Data Management, we continue to expand our new DNB Connect Essentials launch and product that takes the power of NDM, but it simplifies it from mid-market utilization, allowing smaller companies to leverage a simplified user interface with pre-wired algorithms that companies can use right out of the box. As we continue to invest and innovate in sales and marketing and in finance and risk, we see a strong uptake of our new solutions which further supports our now 26% by tally index in North America.
Whether it's improving our data quality and coverage.
Migrating and upgrading our infrastructure and back office systems through cloud migration and system enhancements.
Adding new clients are coming to market with leading partners like IBM and Google We continue on our path of executing against our strategic vision and delivering strong and improving financial results along the way.
As we've said before and proven out over time D&B is a defensible growth asset with significant upside from our merchant opportunities such as the Gen AI Revolution.
And we will continue to focus our capital and energy on driving accelerated growth delighting, our clients and delivering significant shareholder value.
Anthony Jabbour: In addition to the Gen AI initiatives I mentioned up front, we also announced that a recent global client conference and expanded partnership with IBM. Together, we will be building and launching new products based on the integration of DNB data and IBM Watson X. This new go-to-market will be a part of IBM's consulting engagements to embed these new capabilities directly into the solutions our joint clients use today as part of their daily workflows.
With that I'd now like to turn the call over to Brian to discuss our financial results for the third quarter in more detail and the outlook for the remainder of 2023.
Thank you Anthony and good morning, everyone. Today, I will discuss our third quarter 2023 results and provide an update on our guidance for the remainder of the year.
Turning to slide one on a GAAP basis third quarter revenues were $589 million, an increase of $32 million or 6% compared to the prior year and 5% before the effect of foreign exchange net income for the third quarter was $4 million or diluted earnings per share.
Anthony Jabbour: As announced at our conference, the first use cases include foundational entity resolution for any commercial use case and a new ask procurement capability for supply chain risk mitigation. We are excited about bringing together the power of Watson X and Ape to solve business issues that will ultimately unlock significant value for our clients. Moving on to North American sales, we continue to show resilient growth which is supportive of our continued acceleration into 2024 and beyond.
Of one <unk> compared to net earnings of $8 million for the prior year quarter.
Turning to slide two now.
I'll now discuss our adjusted results for the third quarter.
Third quarter revenues for the total company were $589 million, an increase of 6% or four 8% on a constant currency basis, driven by increased growth in their underlying business and the positive impact of foreign exchange.
Anthony Jabbour: Overall, our portfolio solutions is once again proving to not only be mission critical in times of uncertainty but a strategic path forward so that clients and prospects have the ability to drive a more efficient and effective operation through data and analytic driven processes, improvements, and or automation. We settled on a strategy four years ago to build not only a growing business, but a sustainably growing business. I'm pleased with the durability that we have built in that time, and with 55% of our North American revenues under multi-year contracts, and 53% overall, we continue to progress towards our goal of 60% in the midterm.
Third quarter adjusted EBITDA for the total company was $235 million, an increase of 6% compared to prior year quarter and an adjusted EBITDA margin of 40% the.
The increase in adjusted EBITDA was driven by organic revenue growth contribution higher.
Higher performance based incentive compensation, along with the negative impact of foreign exchange.
Third quarter adjusted net income was $116 million for adjusted diluted earnings per share of 27.
The increase in adjusted net income was primarily attributable to higher adjusted EBITDA and higher tax benefit partially offset by higher depreciation and amortization interest expense and higher foreign exchange loss in the current year quarter.
Anthony Jabbour: We're also seeing the 10-year increase. For instance, in the third quarter, we saw the number of four-year plus deals increased 16% versus the prior year period. This lengthening of contracts is directly proportional to our clients growing trust and confidence in Dun & Brad Street as a partner. With over 96% retention rates and a vitality index of 26%, we continue to strengthen our base position with existing customers. In addition, with the introduction of innovative new solutions, we are better able to expand with existing clients and convert new prospects as we broaden our addressable market.
Turning now to slide three I will now discuss the results for our two segments North America and in international.
In North America revenue for the third quarter were $421 million, an increase of 4% or four 5% on a constant currency basis.
Finance and risk revenues were $235 million, an increase of 5%. This was primarily due to double digit growth in our third party supply chain risk management and single digit growth in finance solutions, which were partially offset by lower revenues from our legacy credibility solutions.
Anthony Jabbour: On the land and expand front, Kofas, a worldwide leader, in credit insurance, business information, and accounts receivable management, extended their nearly 25-year relationship with us through a multi-year deal that migrates them to our modern data block solutions, and creates an opportunity for them to further increase their volumes while creating economies of scale throughout their credit insurance underwriting operations. From an SMB perspective, we continue to expand our marketplace with the addition of ANOVA International's on-deck.
Sales and marketing revenues were $186 million, an increase of 4%. This increase was primarily driven by 5% growth from our master data management solutions and higher sales and marketing data sales.
North America third quarter, adjusted EBITDA was $196 million, an increase of 4% with an adjusted EBITDA margin of 46%.
A decrease of 30 basis points from the prior year.
Anthony Jabbour: ANOVA continues to look for new and innovative ways to drive increased small business loan origination. Through a combination of our DMV mobile applications and SMV advertising capabilities, we're able to drive a significant increase in leads to on-deck to a captive audience of millions of businesses that come through the DMV ecosystem. And finally, we also had a significant expansion with the Department of Defense. Our client continues to invest in supply chain risk mitigation and foreign investment assessment, enabling further discovery of potential vulnerabilities, identification of industrial based risk, and ultimately supporting the administration's objective to fortify and strengthen our nation's security.
The increase in adjusted EBITDA was primarily due to revenue growth, partially offset by higher costs from data acquisition and processing costs related to our revenue growth and the negative impact of foreign exchange associated with our centralized European technology came.
Turning to slide four in our international segment third quarter revenues were $167 million, an increase of 9% or five 8% on a constant currency basis.
Finance and risk revenues for the third quarter of 2023 or $114 million, an increase of 11% and an increase of 7% before the effect of foreign exchange.
There was a positive contribution from all markets Europe, and Asia Pacific growth was driven by finance analytics and API solutions.
Anthony Jabbour: Whether it's in sales and marketing, finance and risk, public sector, or private, I'm very pleased with the progress we're making across our North American segment, and the team is laser focused on closing of the year and maintaining our positive momentum as we head into 2024. Now, turning to our international segment, we saw another quarter of strong organic growth at 5.8%. As all regions drove positive growth, including high single digits across UK, Asia, and worldwide network markets.
Ww and alliances was due to higher cross border data fees and growth from our UK market came from third party risk and compliance solutions as well as finance analytics.
Sales and marketing revenues for the third quarter of 2023 were $53 million, an increase of 6% and an increase of 2% before the impact of foreign exchange, primarily due to higher revenue from UK and Europe, driven by higher data sales delivered via our latest API solution.
Anthony Jabbour: While Europe grew greater than 3% and is up 4% year-to-date, a marked improvement from levels when we acquired the business less than three years ago. We continue to focus on a localization of existing solutions and driving new innovations in our own NWWN Marks. We launched the Compliance Intelligence Module in Risk Analytics, expanded our ESG-registered SEAL in additional WWN markets, and enhanced the Hoover's platform with Audience Builder and launched in central Europe.
International third quarter, adjusted EBITDA was $56 million, an increase of 8% with an adjusted EBITDA margin of 33% a decrease of 60 basis points from the prior year.
The increase in adjusted EBITDA was primarily due to organic revenue growth from the underlying business.
Turning to slide five I'll now walk through our capital structure.
As of September 32023, we had cash and cash equivalents of $230 million and total principal amount of debt of 3680 $6 million.
Anthony Jabbour: We continue to see excellent uptake in our new solutions and our vitality index reflected this progress with its rise to 34%. We plan to continue to steadily execute a balance of migrations and the introduction of localized solutions to drive further sustainable growth across our global regions. We are very pleased with the consistent operational execution by our international team.
The 3680 $6 million in principle is made up of $460 million of unsecured notes at 5%, which mature in 2029 term loans of 2650 $9 million at Sofa, plus CSI, plus 275 that matures in 2026 $453 million so far.
Plus 300 that matures in 2029 and borrowings of $150 million under our revolver the.
Anthony Jabbour: On the sales front, we had another strong quarter. Enterprise accounts remain a key focus of our strategy, and sales growth in this channel is up double digits through the first three quarters. Retention remained healthy in the third quarter at 93%. And we added a few more key names to our growing roster of top-tier multinational clients. Beginning with a significant new business win, we are excited to welcome Munich RE to our DMV client portfolio.
The $2 $7 billion term loan has a $1 billion floating to fixed swap effective through March 2025 at three to one 4%, which was extended from the previous maturity date of March 2024.
And a $1 5 billion floating FX swap, which expires February 2026 at three 695%.
Anthony Jabbour: We sold a combined solution across both finance and risk and sales and marketing in which the value of our end-to-end solution connected by the DUNS ecosystem ended up becoming a very compelling offering. We are also able to support humans' energy with an MDM solution that allows them to cleanse and curate data from several of the required companies that built up some inconsistencies over time. Another land and expand win in Asia was Hong Kong export credit insurance corporation.
The $453 million term loan has $250 million swapped from floating to fixed through February 2025, or 162, 9%. We also have three cross currency swaps at a $125 million each that settle in July of 2024, 25% in 2020.
Currently 87% of our debt is either fixed or hedged and will remain that way through 2024.
We had $735 million available on our $850 million revolving credit facility as of September 32023.
Anthony Jabbour: We deepened our relationship with the addition of credit decision data blocks that allow them to more efficiently manage the financial underwriting of clients they are handling throughout the region. Again, these are about a handful of examples of strong wins in the quarter. And there were many others that continued to provide additional proof points of the strengthening of our global solutions data and go to marketing. Whether it's improving our data quality and coverage, migrating and upgrading our infrastructure and back-office systems through cloud migration and system enhancements, adding new clients, or coming to market with leading partners like IBM and Google, we continue on our path of executing against our strategic vision and delivering strong and improving financial results along the way.
Overall, our weighted average interest rate was 587% as of September 32023.
Our leverage ratio was three nine 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.
Now I'll walk through our outlook for 2023, we expect total revenues after the effect of foreign currency to pay in the range of 2000 $280 million for 2000, and $320 million or an increase of approximately two 5% 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.
Anthony Jabbour: As we've said before and proven out over time, D&B is a defensible growth asset, the significant upside from emergent opportunities such as the Gen AI revolution. And we will continue to focus our capital and energy on driving accelerated growth, delighting our clients and delivering significant shareholder value.
Revenues on an organic constant currency basis are now expected to be in the range of 375% to 425% for the full year.
Adjusted EBITDA is now expected to be in the range of $880 million to $910 million the.
Bryan Hipsher: With that, I'd now like to turn the call over to Brian to discuss our financial results for the third quarter in more detail and the outlook for the remainder of 2023. Thank you Anthony and good morning everyone. Today, I would discuss our third quarter 2023 results and provide an update on our guidance for the remainder of the year. Turning to 5-1, on a gap basis, third quarter revenues were $589 million, an increase of $32 million, or 6% compared to the prior year, and 5% before the effect of foreign exchange. Net income for the third quarter was $4 million, or a deluded earnings per share of one cent, compared to net earnings of $8 million for the prior year quarter.
The adjusted EBIT range takes into account a $5 million negative impact from the strengthening of the euro versus the U S. Dollar in comparison to the relative flatness of the British pound and Swedish krona.
Bryan Hipsher: Turning to side two, I'll now discuss our adjusted results for the third quarter. Third quarter revenues for the total company were $589 million, an increase at 6% or 4.8% on a constant currency basis, driven by increased growth in the underlying business and the positive impact of foreign exchange. Third quarter adjusted EBITDA for the total company was $235 million, an increase of 6% compared to prior year quarter and an adjusted EBITDA margin of 40%.
Bryan Hipsher: The increase in adjusted EBITDA was driven by organic revenue growth contribution, higher performance based incentive compensation, along with the negative impact of foreign exchange. Third quarter adjusted income was $115 million for adjusted deluded earnings per share of 27 cents. The increase in adjusted income was primarily attributable to higher adjusted EBITDA and higher tax benefit, partially offset by higher depreciation and amazement, higher interest expense, and higher foreign exchange loss in the current year quarter.
Since the beginning of the year are ongoing transformation and what we always expected to be a pretty challenging macro environment overall.
And yet Ah defensible and resilient solutions, allowing us to do with very few are doing which is delivering in Q3 and raising up the mid point of our full year revenue guidance as.
Is Anthony said earlier, we're well positioned to capture the significant growth opportunities in front of us and we are very pleased with the performance here today.
Bryan Hipsher: Turning now to 5.3, I'll now discuss the results for our two segments, North America and International. In North America revenues for the third quarter were $421 million, an increase of 4% or 4.5% on a constant currency basis. Finance and risk revenues were $235 million, an increase of 5%, this was primarily due to double digit growth in our third party and supply chain risk management and single digit growth in finance solutions, which were partially offset by lower revenues from our legacy credibility solutions.
With improving profitability Cashbox, we will continue to prioritise deleveraging the balance sheet further below the 3.9 times, we are today and focusing capital allocation strategies on driving increase 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.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speaker phone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too at this time, we will pause momentarily to assemble our roster.
Bryan Hipsher: Sales and marketing revenues were $186 million, an increase of 4%, this increase was primarily driven by 5% growth from our master data management solutions and higher sales and marketing data sales. North America third quarter adjusted EBITDA was $196 million, an increase of 4% with an adjusted EBITDA margin of 46%, a decrease of 30 basis points from the prior year. The increase in adjusted EBITDA was primarily due to revenue growth, partially offset by higher costs from data acquisition and processing costs related to our revenue growth, and the negative impact of foreign exchange associated with our centralized European technology team.
Our first question comes from Andrew Trefry of true of Securities. Please go ahead.
Hi, Good morning, I appreciate you taking the question.
Nice to see the improved results.
Anthony.
<unk>, what lots of good stuff going in the the top of the funnel sounds like new wins and and longer contracts and even some some new government business.
Can you talk a little bit about maybe what's coming out of the bottom end because it sounds to me like given the vitality index, an accelerated new salads, and so forth, we should be looking at pretty.
Bryan Hipsher: Turning to slide 4, in our international segment, third quarter revenues were $167 million, an increase of 9%, or 5.8% on a constant currency basis. Finance and risk revenues for the third quarter of 2023 were $114 million, an increase of 11%, and an increase of 7% before the effect of foreign exchange. There was positive contribution from all markets. Europe and Asia Pacific growth was driven by finance analytics and API solutions. WWN alliances was due to higher cross-border data fees, and growth from our UK market came from third-party risk and compliance solutions, as well as finance analytics.
Pretty nice organic revenue growth acceleration next year sort of macro notwithstanding so just trying to understand maybe some of the puts and takes.
Yeah sure Andrew and thank you for the question.
We're certainly excited about the momentum you know that we are building and and obviously for next year you know, we'll get into that you know in February.
You know, we got for the year and.
And there are certainly other factors, there's there's macro factors out there, but really what we're focused on and what I'm trying to ensure you know my colleagues. They're focused on are are the things that we control.
And and we see it across all aspects of the business. You know, we're we're moving very quickly where I'd say with our.
Bryan Hipsher: Sales and Marketing Revenues for the third quarter of 2023 were $53 million dollars, an increase of 6%, and an increase of 2% before the effect of foreign exchange. Primarily due to higher revenue from UK in Europe, driven by higher data sales, delivered via our latest API solution. International third quarter adjusted EBITDA was $56 million dollars, an increase of 8% within an adjusted EBITDA margin of 33%, a decrease of 60 basis points from the prior year. The increase in adjusted EBITDA was primarily due to organic revenue growth from the underlying business.
Our clients, you know the relationships and never been stronger than ever been longer.
The the the types of innovations that were coming out with you know I'm constantly you know impressed with the speed at which were running at.
So I do feel really good about the things that we control and and like I've always said you know.
There's a macro effect out there that's affecting many companies and the force of our transformation. The force of the great work by my colleagues.
Bryan Hipsher: Turning to $5.5, I'll now walk through our capital structure. As of September 30th to 2023, we had cash and cash equivalents of $230 million dollars in total principal amount of debt of $3,686 million dollars. The $3,686 million dollars in principal is made up of 460 millions of unsecured notes at 5% which mature in 2029. Term loans of 2,659 million at SOFR plus CSA plus 275, then mature in 2026, 453 million at SOFR plus 300, then mature in 2029 and borrowings of $150 million dollars under our revolver.
Is it really helping offset that so though that's what's kind of coming out at the bottom of my to Andrew is just you know a macro force offsetting against a a transformational forced her.
Okay. That's really helpful look forward to hearing more about 24 in February thanks.
Thank you Andrea.
Our next question comes from John Mazon E of Wells Fargo. Please go ahead.
Hi, Thanks for taking my question, maybe just a follow up on that one just given the.
Just client demand for longer contracts I believe more of these kind of for your plus contracts could you just talk about really kind of the demand for maybe further sent out as well as just continued progress to that 60 per cent target on multi year and really just could you speak to kind of the desire for kind of.
Bryan Hipsher: The $2.7 billion term loan has a billion dollar floating to fixed swap effective through March 2025 at 3.214%, which was extended from the previous maturity date of March 2024 and a $1.5 billion floating to fixed swap which expires February 2026 at 3.695%. The $453 million term loan has $250 million swapped from floating to fixed through February 2025 at 1.629%. We also have three cross currency swaps at $125 million each that settle in July of 2024, 25 and 2026.
A single source of truth or just.
Credibility of the D M V data and more uncertain times. Thanks.
Thank you John Yeah, certainly we're excited with you know number one that we.
We chose the strategy four years ago, I mean, it it takes work, obviously extending contracts and and obviously building the trust and proving that Europe, a partner for a longterm contract <unk>.
And what I take from our clients perspective is.
They are very please and the date is mattering more and more so if you think of.
Bryan Hipsher: Currently 87% of our debt is either fixed or hedged and it will remain that way through 2024. We had $735 million dollars available on our $850 million dollar evolving credit facility as of September 30, 2023. Overall our weighted average interest rate was 5.87% as of September 30, 2023. Our leverage ratio was 3.9 times on a net basis and the credit facility senior secured net leverage ratio was 3.4 times.
If you think of Master data management, right, which were incredibly strong and because you know our dance number the linkages. The data coverage that we have the quality of the data are master data management skills all of them they've never been more important than now and you know.
At the beginning of generative AI solutions that are being created.
So I think that in addition to the trust. So we we focused before president by and talked about responsible a or anyone else. We're first in terms of.
Bryan Hipsher: Turning now to side 6, I'll now walk through our outlook for 2023. We expect total revenues after the effect of foreign currency to being the range of $2,280 million to $2,320 million or an increase of approximately 2.5% to 4.3%. This includes an updated assumption related to the effect of foreign currency and the expected variances between the US dollar, Euro, British pound and Swedish Revenues on an organic constant currency basis are now expected to be in the range of 3.75% to 4.25% for the full year.
You know driving a responsible AI approach our clients Trust US you know we had thousands of our client conference and it covered a lot around generative AI and they're looking to us.
Also in terms of how to deploy it so I think when they look forward and they see all this exciting technology that can really help enable their businesses.
They look at US as we've got you know really high quality.
Data.
Capabilities around generative AI and were thoughtful and we're trusted partner. So I think all those come together and they're helping us with these longer term contracts and again, these and a really strong client relationships.
Bryan Hipsher: Adjusted EBITDA is now expected to be in the range of $880 million to 910 million dollars. The adjusted EBITDA range takes into account 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 adjusted EPS is now expected to be in the range of 95 cents to $1. Additional modeling details underlying our outlook are as follows. We now expect adjusted interest expense to be approximately 230 million dollars.
That's a great color. Thank you maybe just a quick follow up looking at kind of the four Q jumping off point, it's kind of a assuming a.
Handle on the actual O C C growth how should we think about kind of 24 as we break it down into kind of pricing versus penetration a new logo was just kind of high level thoughts will be appreciate if possible. Thanks.
Yeah sure and is Anthony said, you know, we're looking to to obviously finish out the year strong.
Build on the momentum into 2024, which will get on and go through in detail in February.
Bryan Hipsher: Depreciation and amortization expense of approximately 115 to 120 million dollars, excluding incremental depreciation and amortization expense resulting from purchase accounting. An adjusted effective tax rate of approximately 19 to 20%, weighted average deluded shares on standing of approximately 433 million. And for CAPEX, we still expect approximately 130 to 150 million dollars of internally developed software and 30 million dollars of property plant and equipment in purchase software.
The key components and why are we sat on a strategy of pushing towards multiyear contracts again, Jonathan you remember we were less than 20 per cent of our revenues were under multiyear contract somebody started now it's up over 53 per cent embedded in that too is natural price escalators and so when you look at this year being closer to.
Two roughly two per cent of a price contributing from that perspective stepping up.
North of that as we head into 2024, you know that kind of base book of business. Those base price increases are are really you know one of the things that give us continued confidence and you know really allow us to set on that path of continued acceleration of organic growth that we've got on.
Bryan Hipsher: Overall, we delivered better than expected results and especially organic revenue growth in Q3 and have tightened and or raised our ranges for the year. Employed in that is a Q4 expected to be at or around the midpoint of our updated guidance for organic revenue growth with excellent EBITDA and better than communicated EPS delivered, which takes into account the two factors we've discussed since the beginning of the year. Our ongoing transformation and what we always expected to be a pretty challenging macro environment overall.
Great color. Thanks again.
The next question comes from Andrew Steinman of J P. Morgan. Please go ahead.
Hi. This is Alex has on for Andrew Steinman want to turn to the balance sheet real quick and maybe what your ear. Adjusted interest expense implies can you remind us is that an adjusted net interest expense guidance of $230 million or gross and should we take the interest rate that or.
Bryan Hipsher: In the end, our defensible and resilient solutions are allowing us to do what very few are doing, which is delivering in Q3 and raising up the midpoint of our full year revenue guidance. As Anthony said earlier, we're well positioned to capture the significant growth opportunities in front of us and we are very pleased with the performance year today. With improving profitability in cash flows, we will continue to prioritize deleverging the balance sheet further below the 3.9 times we are today and focusing capital allocation strategies on driving increased shareholder returns.
That's implied four four Q as sort of what you'll be going forward now that you'll you've refinance the the.
The the rate swap. Thank you so much.
Yeah sure Alex So it is suggested on on that basis, and so from that perspective, I think that is a pretty good run rate. We did the blend and expand on the billion dollar hedging the quarter, which push that out from what was originally March 24 day to a March 20th 25, and so when you think about you know hiring through <unk>.
Operator: With that, we're now happy to open up the call for questions.
Operator: Operator, will you please open up the line for Q&A? We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Last year, where it kind of rates, where they are projected to be that's gonna leave us in a in a pretty consistent position from that perspective.
Thank you.
The next question comes from Manav put ninth of Barclays.
Hi, Good morning. This is running Kennedy offer them at all thank you for taking my questions. One of your sales and marketing competitors talked about a still challenged environment with sales and renewal cycles go on at two one Q24 is likely to remain tough could you. Please expand upon what you're seeing an S.
Andrew Dreffrey: Our first question comes from Andrew Dreffrey of Truist Securities. Please go ahead. Hi. Good morning. Appreciate you taking the question. Nice to see the improved results. Anthony, the lots of good stuff going in the top of the funnel sounds like new wins and longer contracts and even some new government business.
In addition to the prepared remarks, but also overall you know and how much of your renewal decor occur and four Q1, Q and how heavy or new sales in these quarters to as well please.
Anthony Jabbour: Can you talk a little bit about maybe what's coming out of the bottom and because it sounds to me like given the vitality index and accelerated new sales and so forth, we should be looking at pretty nice organic revenue growth acceleration next year, sort of macro notwithstanding. So just trying to understand maybe some of the puts in case. Thanks. Yeah, sure, Andrew, thank you for the question. We're certainly excited about the momentum that we are building, and obviously for next year, we'll get into that February, when we guide for the year, and there are certainly other factors, there's macro factors out there, but really what we're focused on and what I'm trying to ensure my colleagues are focused on are the things that we control, and we see it across all aspects of the business.
Sure what I'd say overall is you know from a sales and marketing perspective.
A large portion of that is our master data management, <unk>, which is you know less impacted.
Macro conditions and so.
So I I'm, not sure which of the competitors probably on the sales acceleration side, where a softer market and we seen some of that as well our our sales acceleration business, where you know against larger enterprise clients shrinking their salesforce had less seats.
Anthony Jabbour: You know, we're moving very quickly, I'd say with our clients, the relationships have never been stronger and never been longer, the types of innovations that we're coming out with. I'm constantly impressed with the speed at which we're running at, and so I do feel really good about the things that we control, and like I've always said, there's a macro effect out there that's affecting many companies, and the force of our transformation, the force of the great work about my colleagues is really helping offset that, so that's what's kind of coming out the bottom, I'd say Andrew is just, you know, a macro force offsetting against a transformational force here.
And but again that businesses lesson, you know 100 million in annual revenues. So it's a smaller part of our sales and marketing business compared to our master data management and.
So I'm not sure if that answers your question or not.
Yes, Okay. Thank you and then as as a follow up please.
A lot of commentary obviously on January I and the potential there. In addition to the recently hosted a 10 a I K.
Could you help us quantify or give some contact cement when and how we should see some benefits of this strategy in the numbers from a revenue in a cost standpoint, and then any further commentary on one should expect to see benefits from the IBM partnership.
Sure.
I think I'd, probably cover them off at the same <unk> in general and I B M.
You know and it says always has a case uhm the hype always comes before the revenue and we're all certainly you know dealing with the hype right now it's everywhere that you turn and it's very much.
Andrew Dreffrey: Okay, that's really helpful. Look forward to hearing more about 24 in February. Thanks. Thank you, Andrew.
On everyone's mind, you know that things that we do believe that this is more than height and that it is going to materialize and we've been determined to be first and moving very quickly whether it's with you know reaching out to our clients first and having a <unk>.
John Mazzoni: Our next question comes from John Mazzoni of Wells Hargo. Please go ahead. All right, thanks for taking my question.
John Mazzoni: Maybe just to follow up on that one, just given the just client demand for longer contracts, I believe more of these kind of four-year-plus contracts, could you just talk about really kind of the demand for maybe further send it out as well as just continued progress to that 60% target on multi-year, and really just could you speak to kind of desire for kind of a single source of truth or just the kind of credibility of the DNB data and more uncertain times. Thanks.
[noise] says with live demo showing them examples of it bleeding them teaching them.
<unk> you know, obviously working with many of the industry partners.
In this space. It's one that we have a high degree of confidence in that it's going to to be material to our revenues and earnings as well as our clients abilities and so.
I'd say if you look at what we're doing with you know some of the examples.
John Mazzoni: I thank you, John. Yeah, certainly we're excited with, you know, number one that we chose this strategy four years ago. I mean, it takes work, obviously, extending contracts, and obviously building the trust and proving that you're a partner for a long-term contract. And what I say from our client's perspective is they are very pleased and the data is mattering more and more. So if you think of if you think of master data management, right, which were incredibly strong, and because, you know, our Dunn's number, the linkages, the data coverage that we have, the quality of the data, our master data management skills, all of them, they've never been more important than now, you know, at the beginning of, you know, generative AI solutions that are being created.
They're they're real like I said, there's a massive amount of opportunity.
But it's it's difficult at this stage I say to quantify you know what the contributions will be.
Other than I'd say, we have a team of highly expert.
And skilled.
Executives, who have been in the industry for awhile and we all share a high degree of confidence that it will be material.
We've worked very closely with our clients.
They're they're like I said leaning in with US looking to us and we look at the the advantage that we have with really the the proprietary nature of our data and think of it you know we all we all talk about generative AI it tends to be around chat T. P. T in writing an essay.
For a student there's no money in that it's money when it gets to businesses and when you have to identify those businesses.
John Mazzoni: And so I think that in addition to the trust, so we focused, you know, before President Biden talked about responsible AI or anyone else, we were first in terms of, you know, driving a responsible AI approach. Our clients trust us, you know, we had thousands that are client conference and it covered a lot around generative AI. And they're looking to us also in terms of how to deploy it. So I think when they look forward and they see all this exciting technology that can really help enable their businesses, they look at us as we've got, you know, really high quality, you know, data.
That's just a you know space, it's our absolute sweet spot and so and I I think the industry really recognizes us being very strong there. So I'm sorry, I can't give you specifics at this state other than specifics and the confidence level that we all have here that it's going to be material.
Got it helpful. Nonetheless, thank you.
Thank you.
The next question comes from George Tongue from Goldman Sachs. Please go ahead.
Alright, Thanks, good morning in the international sales and marketing business organic revenue growth is currently in the low single digits, it's a little bit slower than some of the other segments and geographies can talk a little bit about what you're seeing there and if the lowered grocers structural in nature or whether you see it as well.
John Mazzoni: Ape of Middle East, Around, Generative AI, and we're thoughtful and we're a trusted partner. So I think all those come together and they're helping us with these longer term contracts and again, these really strong client relationships.
John Mazzoni: That's great color. Thank you.
Cyclically driven.
John Mazzoni: Maybe just a quick follow up looking at kind of the four huge jumping off point. It's kind of us to mean the four handle on the actual OCC growth. How should we think about kind of 24 as we break it down? And then to kind of pricing versus penetration and new logos, just kind of high level thoughts to be appreciative possible. Thanks. Yeah, sure. And as Anthony said, you know, we're looking to obviously finish out, you know, the year's strong and build up momentum into 2024, which we'll get on and go through in detail in February.
Yeah, Hey, George Thanks for the the question I think you know as you say.
Overall, our sales and marketing businesses continue to perform very well in international in particular, we've gone through a kind of a series of some pretty big our product migrations from that side and so you saw his first focus on you know the financial risk Ah component, which is much bigger from a magnitude perspective.
So we're working through the sales and marketing for instance in the third quarter. There are some legacy explosions for instance in the Scandinavian Regents that.
John Mazzoni: You know, one of the key components and why we set on the strategy of, you know, pushing towards multi your contracts again. John, I think you remember we were less than 20% of our revenues for under multi your contracts and we started now it's up over 53%. In that too is natural price escalators. And so, you know, when you look at this year being closer to, you know, roughly 2% of price contributing from that perspective, you know, stepping up, you know, north of that as we had in 2020 for, you know, that kind of based book of business.
We're a little bit more I would say a challenge from that perspective, but that being said you know if we're working through the migrations, we're working through the upgrade or see a nice I'll pay for instance in Hoover's, they're starting to roll out you know some MBM solutions and those region, we actually expect the sales and marketing internationally.
Pick up in the fourth quarter and certainly into 2024, so it's a little bit of that continued evolution there, but certainly you know see see some some good momentum going forward.
John Mazzoni: Those base, you know, price increases are really, you know, one of the things that give us continued confidence and, you know, really allow us to set on that path of continued acceleration of organic growth that we've been on.
Got it that's helpful.
And then you mentioned seeing higher data costs, and the quarter and having that impact margin performance can you talk a little bit about some of the trends with data <unk> and our current pricing within D. M. B is helping to offset that.
John Mazzoni: Great color. Thanks again.
Alexander Hess: The next question comes from Andrew Steinerman of JP Morgan. Please go ahead. Hi, this is Alex Hess on for Andrew Steinerman. I want to turn to the balance sheet real quick and maybe you're you're adjusted interest expense implies.
Sure and George if we step back and kind of look at the quarter. The first thing I would say is you know when you ask out.
The impact of a foreign exchange, we actually increased about 40 bits on a on a quarter over quarter basis from EBIT margin perspective, the other side, we have really plain and their wives because of our instead of base performance based compensation.
Bryan Hipsher: Can you remind us is that an adjusted net interest expense guidance of 230 million or gross and should we take the interest rate that's that's implied for 4Q as sort of what you'll be going forward now that you'll you've refinanced the the the rate swap. Thank you so much. Yeah, sure Alex. So it is adjusted on a net basis. And so from that perspective, I think, you know, that is a pretty good run rate.
A little bit higher it was about $3 million iron the quarter this year versus last.
Which you know I think I have an hour degree is a good thing from that perspective really knows date of course are just a function of some of the revenue growth on the clock side and so not been you know out of the ordinary there you know like I said, we frankly expanded margins when you called.
Bryan Hipsher: We did the blended extend on the billion dollar hedge in the quarter, which pushed that out from what was originally March 24 day to a March 20 25. And so when you think about, you know, heading through next year, you know, it's kind of rates where they're projected to be that's going to leave us in a pretty consistent position from that perspective. Thank you.
Currency confidant and then it was a little bit of outperformance space inside of combat was.
Was included in the quarter all Sir.
Got it very helpful. Thank you.
Again, if you have a question. Please press Star then one.
Our next question comes from Craig Cooper of Huber Research Partners. Please go ahead.
Ronan Kennedy: The next question comes from Minov Petnaik of Barclays. Hi, good morning. This is Ronan Kennedy on for Minov. Thank you for taking my questions. One of your sales and marketing competitors talked about a still challenged environment where sales and the news cycle is going up to 1Q 24 is likely to remain tough.
Yes. Good morning, Thanks for taking my questions.
You guys have obviously done a herculean job the last four years with all the transformation stuff because I've put in place. My question to you is in two segments North American International can you just give me a sense of how much revenue in each segment is left to fix in your mind.
Ronan Kennedy: Could you please expand upon what you're seeing in SNM in addition to the paired March, but also overall, you know, and how much of your renewals occur in 4Q 1Q and how heavy are new sales in these quarters to as well, please. Sure. What I'd say overall is, you know, from a sales marketing perspective, a large portion of that is our master data management, which is, you know, less impacted, you know, by macro conditions.
With just a ballpark in each segment. This is my first question.
Alright, Thanks for the question Craig.
What I would say I don't know if I you know categorize it that way I I'd mentioned you.
You know previous calls when we excluded.
Take a couple of businesses public.
Public sector, and our credibility business that the overall growth rate of our company was 5.8%.
And <unk> and I think right now if we looked at.
At a results today.
Today, and you know public sector. Obviously, you know had improved and turned and we're aggressively working on credibility like we shared with a new launches of our new capabilities, there, but looking at that headland we'd be at around the same 5.8% overall is.
Ronan Kennedy: And so I'm not sure, you know, which of the competitors it was probably on the sales acceleration side where the software market. And we've seen some of that as well on our sales acceleration business where, you know, again, larger enterprise clients shrinking their sales force had less feeds. And, but again, that business is less than, you know, 100 million in annual revenues. So it's a smaller part of our sales marketing business compared to our master data management. And so I'm not sure if that answers your question or not. Yes. Okay. Thank you.
Any so it's really I'd say, our focus overall as a company is our credibility business and.
Yeah. So if I was to move to quantify it I'd I'd say, it's kind of in that range.
Brown would you yeah, no I think that's all right Craig you know as we've gotten through you know a lot of the transformation efforts cetera. These last four years you know, it's really you know the the legacy credibility solutions right that were a bit of a drag in the quarter N Heroes. Anthony said, we're doing things differently, we're bringing new solutions to bear there, but that's certainly something.
Anthony Jabbour: And then as a follow-up, please. A lot of commentary, obviously, on Gen AI and potential there in addition to the recently hosted a Gen AI day. Could you help us quantify or give some context around when and how we should see some benefits of the strategy and the numbers, you know, from a revenue and a cost standpoint. And then any further commentary on when we should expect to see benefits from the IBM partnership.
And you know that we're looking to work through you know through the coming quarters and after we had into you know 24, and then on the international side again, <unk> and I'm. The same had on a herculean effort Baer right with what we did with the UK I known markets, but also the integration of a business from that perspective.
Anthony Jabbour: Sure. I think I probably cover them off at the same Gen AI in general and IBM. You know, I think as always is a case. The hype always comes before the revenue. And we're all certainly, you know, dealing with the hype right now. It's everywhere that you turn. And it's very much, you know, on everyone's mind. You know, that thing said we do believe that this is more than height and that it is going to materialize.
So I would say some revenues in that portfolio about our legacy and will look to upgrade and evolve but you know again there you know that's pretty common within a portfolio right you're constantly growing innovating right sunny down and so we're going through that cycle, but really probably the the biggest component that Anthony mentioned is.
You know getting that small business credibility in North America on track.
Then a bigger picture question. When you guys think about the macro environment here in the U S. Do you feel like it's getting better worse or about the same and I realized.
Anthony Jabbour: And we've been determined to be first and moving very quickly, whether it's with, you know, reaching out to our clients first and having WebExas with live demo showing them examples of it, leading them, teaching them, you know, obviously working with many of the industry partners in this space. It's one that we have a high degree of confidence in that it's going to be material, you know, to our revenues and earnings as well as our clients' abilities.
In the Middle East has happened in recent weeks it might come up that answer, but how do you sort of feel the Mac was doing no better worse or about the same.
Well, it's interesting Craig we've.
We survey our clients, who you know in a very official way and and it's September the the business optimism was higher.
And and so you know what's interesting is we looked at you know October tends to be not a great month for stocks and you know how a company's stock is performing effects you know their optimism in some ways, but when you look at the underlying data and so from our perspective of D. N D.
Anthony Jabbour: And so, you know, I'd say if you look at what we're doing with, you know, some of the examples, they're real, like I said, there's a massive amount of opportunity. But it's difficult at this stage, I say, to quantify, you know, what the contributions will be other than I'd say we have a team of highly expert and skilled executives who've been in the industry for a while. And we all share a high degree of confidence that it will be material.
We have phenomenal insight into businesses because it's the core of what we do and overall like I said, there was a bump up and optimism as early as September and I know it doesn't feel that way right now so again as we look at the macro environment.
You know again, I I keep pointing back to our team. We don't spend you know a lot of time on that candidly, we really try and spend all our time on what can we do what do we control we control the speed at which you know, we're improving our company, helping our clients and and.
Anthony Jabbour: We worked very closely with our clients. They're like I said, leaning in with us looking to us. And we look at the advantage that we have with really the proprietary nature of our data and think of it, you know, we all talk about generative AI. It tends to be around chat GPT and writing an essay for a student. There's no money in that. It's money when it gets to businesses. And when you have to identify those businesses, you know, that's just, you know, space that's our absolute sweet spot.
Until I I, just wanted to add that.
Element to it as well, which is the macro will be the macro.
Our job is to grow the company grow earnings.
If I could ask one more please your small and medium.
Business clients what percent roughly of your overall revenue should represent what's the growth rate there ballpark.
Anthony Jabbour: And so, I think the industry really recognizes us being very strong there. So, I'm sure I can't give you, you know, specifics at this stage other than, you know, specifics in the confidence level that we all have here that it's going to be material. I got it helpful nonetheless. Thank you.
Yeah, So Greg I think we pulled the phone and and some of the Investor Didact, but if you look at it you know on the North America side, you know it's it's.
Some are roughly around.
Call it.
$130 million of revenue and that's primarily credibility side, we have a mix you know when you get into the international component and one of the key I would say strategic components for the team over there to continue to expand with the enterprise client. So you look at a business like Munich.
George Tong: The next question comes from George Tong from Goldman Sachs. Please go ahead. Hi, thanks. Good morning. In the international sales and marketing business, organic revenue growth is currently in the low single digits. It's a little bit slower than some of the other segments and geographies. You can talk a little bit about what you're seeing there. And if the lower growth is structural in nature, or whether you see it as really cyclically driven.
<unk> look at it obviously, Siemens et cetera, you know we've done a really nice job are continuing to expand our base of our customers not only from a size perspective from <unk>.
Diversity prospective on industry verticals and so part of the reason I think you see the durability of the business is we're not overweight at the sectors were not overweight at the sizes of clients and and certainly I think that comes through in a defensible grow back that we've continued to shop.
George Tong: Yeah, George, thanks for the question. I think, you know, as you've seen overall, you know, our sales and marketing, you know, business has continued to perform very well. In, you know, international in particular, you know, we've gone through a kind of a series of some pretty big product migrations from that side. And so you saw us first focus on, you know, the finance and risk component, which is the much bigger from a magnitude perspective.
Great. Thank you.
George Tong: You know, as we're working through the sales and marketing, for instance, in the third quarter, there are some legacy solutions, for instance, in the Scandinavian regions that, you know, we're a little bit more, I would say, challenge from that perspective, but that being said, you know, as we're working through, you know, the migrations, we're working through the upgrades. We're seeing nice uptake, for instance, and hoovers or starting to roll out, you know, some MDM solutions in those regions, we actually, you know, expect the sales and marketing internationally to pick up in the fourth quarter and certainly into 2024.
This concludes our question and answer session I would like to turn the conference back over to Mr. Anthony cheaper for any closing remarks.
Thank you as always I'd like to thank my Dunn and Bradstreet colleagues for their exceptional efforts to sustainably grow our business for the years to come into our great clients for the partnership and guidance. Thank you for your interest in Dunn and Bradstreet Hope you have a wonderful rest of your day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
George Tong: So it's a little bit of that, you know, continued evolution there. But certainly, you know, see some good momentum going forward. Got it. That's helpful. And then you mentioned seeing higher data costs in the quarter and having that impact margin performance. Can you talk a little bit about some of the trends with data costs and how current pricing within B and B is helping to offset that? Sure. And George, if we step back and kind of look at the quarter, you know, the first thing I would say is, you know, when you exhale the impact of a foreign exchange, we actually increased about 40 bits on a quarter of a quarter basis from even a margin perspective.
George Tong: The other side we had really plain in there was because of our incentive based performance based compensation, we had a little bit higher. It's about, you know, $3 million higher in the quarter this year versus last, which, you know, I think Anthony, I would agree, is a good thing from that perspective, really those data costs are just a function of, you know, some of the revenue growth on the clock side. And so nothing, you know, out of the ordinary there, you know, like I said, we frankly, you know, expanded margins when you hold our currency constant and then it was a little bit of a performance based incentive comp that, you know, was included in the quarter also. Got it. Very helpful. Thank you. Again, if you have a question, please press star, then one.
Craig Hoover: Our next question comes from Craig Hoover of Huber Research Partners.
Anthony Jabbour: Please go ahead. Yes, good morning. Thanks for taking my questions. You guys have obviously done a Herculean job the last four years and all that transformation stuff you guys have put in place. Please. My question to you is in your two segments, North America International, can you sort of give me a sense of how much revenue in each segment is left to fix in your mind? Just sort of ballpark in each segment. That's my first question.
Bryan Hipsher: Thanks for the question, Craig. You know, what I'd say, I don't know if I categorize it that way. I'd mentioned, you know, previous calls when we excluded a couple of businesses. Public sector and our credibility business that the overall growth rate of our company was 5.8%. And I think right now, if we looked at our results today and public sector, obviously, you know, had improved and turned and we're aggressively working on credibility, like we shared with the new launches of our new capabilities there.
Bryan Hipsher: But looking at that, headland, we'd be at the end of the day. You know, around the same, you know, 5.8% overall as a company. So it's really it's our focus, you know, overall as a company is our credibility business. And yeah. So if I have to move to quantify that, I'd say it's kind of in that range. Brian, would you add anything?
Bryan Hipsher: Yeah, no, I think that's all right, Craig. You know, as we've gotten through, you know, a lot of the transformation efforts has set over these last four years. You know, it's really, you know, the legacy credibility solutions ride that were a bit of a drag in the quarter. And, you know, as Anthony said, we're doing things differently. We're bringing new solutions to bear there. But that's certainly something, you know, that we're looking to work through, you know, through the coming quarters and as we head into, you know, 24.
Bryan Hipsher: And then on the international side, again, you know, near edge and end of the theme had done a hurricane effort there, right with what we did with the UKI and owned markets, but also, you know, the integration of business from that perspective. So, you know, there's still I would say some revenues in that portfolio that are legacy and will look to upgrade and evolve. But, you know, again, there, you know, that's pretty common within a portfolio, right?
Bryan Hipsher: You're constantly growing, innovating, right? You know, it's funding down. And so we're going through that cycle, but really probably the biggest component that Anthony mentioned is, you know, grinning that, you know, small business credibility in North America on track.
Anthony Jabbour: Then a bigger picture question. When you guys think about the macro environment here in the US, do you feel like it's getting better worse or about the same? I realized something in the Middle East has happened in recent weeks. It might come up any answer, but how do you sort of feel the Mac was doing better worse or about the same? Well, it's interesting Craig. We've, you know, we survey our clients, you know, in a very official way and, and in September, the business optimism was higher.
Anthony Jabbour: And, and so, you know, what's interesting is we look at October tends to be not a great month for stocks and, you know, how companies stock is, you know, performing effects, you know, their optimism in some ways. But when you look at the underlying data, and so from our perspective at DMV, we have phenomenal insight into businesses, because it's the core of what we do. And overall, like I said, there is a bump up in optimism as early as September.
Anthony Jabbour: And I know it doesn't feel that way right now. So, again, as we look at the macro environment, you know, again, I keep pointing back to our team. We don't spend, you know, a lot of time on that candidly. We really spend all our time on what can we do? What do we control? We control the speed at which, you know, we're improving our company, helping our clients. And so, I just want to add that element to it as well, which is the macro will be the macro. Our job is, you know, to grow the company, grow earnings.
Bryan Hipsher: I could ask one more please, you're small and medium business clients, what percent roughly of your overall revenues that they represent, which is the growth rate there, it's ballpark? Craig Huber, I think we pulled the sound in some of the investor-day decks, but if you look at it on the North America side, it's somewhere roughly around, call it 130-million dollars of revenue, and that's that primarily credibility side, we have a mix when you get into the international component, and one of the key, I would say strategic components for the team over there is to continue to expand with enterprise clients, so if you look at a business like Munich RE, look at Siemens, we've done a really nice job of continuing to expand our base of customers, not only from a size perspective, but from a diversity perspective on industry verticals, and so part of the reason I think you see the durability of the business is we're not overweighted to sectors, we're not overweighted to sizes of clients, and certainly I think that comes through in the defensible growth that we've continued to show.
Craig Hoover: Great, thank you.
Anthony Jabbour: This concludes our question and answer session, I would like to turn the conference back over to Mr. Anthony Jibur for any closing remarks. Thank you. As always, I'd like to thank my Dunn and Bradstreet colleagues for their exceptional efforts to sustainably grow our business for the years to come and to our great clients for the partnership and guidance.
Anthony Jabbour: Thank you for your interest in Dunn and Bradstreet, I hope you have a wonderful rest of your day.
Operator: The conference is now concluded, thank you for attending today's presentation, you may now disconnect.