Q3 2024 Dun & Bradstreet Holdings Inc Earnings Call
Speaker Change: [inaudible]
Speaker Change: Today and welcome to the Dunn and Bradford 3rd quarter 2024 earnings conference call. All participants will be in listen only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: and I'm going to ask you a question.
Speaker Change: to ask a question, you may press star, then one on your telephone keypad.
Speaker Change: To withdraw your question, please bestower than to. Please note, this event is being recorded. I would now like to turn the conference over to Sean Anthony, Vice President of FPNA and Investor Relations. Please go ahead.
Sean Anthony: Thank you. Good morning everyone and thank you for joining us for Dunnabraastree's financial results conference call for the third quarter of 2024. On the call today we have Dunnabraastree CEO, Anthony Jabbour and CFO Brian Hipsher.
Speaker Change: will begin with an overview of our third quarter results and then pass it over to Bryan for an in-depth financial review. We will then finish up with Q&A in a few closing remarks.
Speaker Change: 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.
Speaker Change: Our actual results may differ materially from our projections due to a number of risks and uncertainties.
Speaker Change: The risk and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings.
Speaker Change: Today's remarks will also include references to non-GAAP financial measures. Additional information including the reconciliation between non-GAAP financial information to the GAAP financial information is provided in the press release and supplemental slide presentation.
Speaker Change: The conference call will be available for replay via webcast through Dun & Bradstreet's Investor Relations website at investor.dnb.com.
Speaker Change: With that, I'll now turn the call over to Anthony.
Anthony Jabbour: Thank you, Sean. Good morning, everyone, and thank you for joining us for our third quarter earnings call. Overall, we delivered another solid quarter on both the top and bottom lines.
Anthony Jabbour: As we got at the beginning of the year, there was some timing in North America between on-delivery and readily recognized revenues in the third quarter, and I am pleased to report that we delivered organic revenue growth of 3.4% overall, which is slightly above expectations.
Anthony Jabbour: While International continued its consistent delivery of mid to high single-digit organic revenue growth of 5% this quarter, North America came in at 3% largely due to the timing I mentioned up front.
Anthony Jabbour: On the profit side, we expanded margin 60 basis points and improved free cash flow conversion to nearly 50%.
Anthony Jabbour: We also enacted our planned reduction in capitalized software development spend at the end of September and through the actions taken, and as a result, expect to see lower capitalized software expenditures of around $15 million on an annualized basis.
Anthony Jabbour: We are coming off an elevated investment period and expect to move towards our medium-term target spend of 6-7% of revenues on an annual basis.
Anthony Jabbour: And finally, before moving on to some exciting things happening with new innovations, strategic partnerships, and client successes, I want to take a moment to update everyone on the inbound interest we received late this summer.
Anthony Jabbour: We've been working with our advisor to evaluate inquiries from both strategic and financial acquirers.
Anthony Jabbour: While I will not comment on the status of any particular engagement, the team is spending a significant amount of time conducting in-person meetings, holding additional functional due diligence sessions,
Anthony Jabbour: providing detailed responses to the interested parties, and will continue to be responsive and thoughtful in all of our interactions on behalf of our shareholders.
Anthony Jabbour: Our DMV team continues to impress me, and I would like to thank them for their focus on delivering the quarter, executing the capital reduction, and being responsive to the interest we are currently receiving.
Anthony Jabbour: And if all of that wasn't enough, we also continue to innovate for our clients.
Anthony Jabbour: I'll start off with the release of ChatD&V, our patent-pending generative AI assistant.
Anthony Jabbour: Chat D&D surfaces knowledge across the company's data blocks, delivering actionable insights to its users, ranging from prospecting to company due diligence.
Anthony Jabbour: Users can ask questions in conversational language, and it has the intelligence to access and analyze the underlying data to deliver the most relevant and accurate output.
Anthony Jabbour: ChatDNB is fueled by our Dun & Bradstreet Data Cloud, which is renowned for the breadth, depth, and quality of private company data it possesses.
Anthony Jabbour: And it will also be able to incorporate additional client first-party data, creating the ability to accurately answer questions posed on both private and public companies within seconds.
Anthony Jabbour: Our Autonomous Gen AI agents show their work, the data sources, and lineage in ChatDMV, allowing users to have confidence in the quality and accuracy of the information presented.
Anthony Jabbour: We launched ChatD&D internally with over 1,000 colleagues for testing and quality checks before releasing it to dozens of clients and partners in our early adopter program.
Anthony Jabbour: These clients shared feedback and insights into how they are using ChatDMD and the benefits of this new assistant in their daily jobs.
Anthony Jabbour: Results were encouraging and centered around the speed at which data can be accessed, the broad amount of information that is available to query, and the summarization of vast amounts of information in a format that is easy to use, track, and trust.
Anthony Jabbour: Chad T&D is an exciting evolution for our company and we look forward to discussing its progress and expansion in the quarters to come.
Anthony Jabbour: We announced two exciting partnerships this quarter. The first with London Stock Exchange Group, or LSEG, and the second with Intercontinental Exchange, or ICE.
Anthony Jabbour: With LSEG, we are forming a strategic collaboration to broaden access to private market information.
Anthony Jabbour: The combination of LSAC's capital markets data, including deals, private equity, news, and research
Anthony Jabbour: with our trusted private market data providing visibility on officers and directors, ownership insights, and financial information for millions of companies globally.
Anthony Jabbour: will enable investment in capital market firms to drive better data-driven financial assessments and decisions.
Anthony Jabbour: Our GUNS number will now be available to LSEG's WorkSpaces large customer community and therefore increase its reach into the capital markets as a new and expanding vertical.
Anthony Jabbour: Using the DUNS number as the key to unlock data about a business, LSEG's workspace users will be able to easily search for private company data and download the data to improve mapping, discoverability, and interoperability of content on the global public and private companies.
Anthony Jabbour: The DUNS number provides linkage across business relationships, employees, and subsidiaries, enabling users of LSEG Workspace to gain a better view of an enterprise's corporate structure, ownership, and financial health.
Anthony Jabbour: The collaboration with LSEG marks a new era in providing technology power transparency to private company analysis.
Speaker Change: With the exponential growth of private markets, Dun & Bradstreet plays a critical role providing clarity and insights to help investors manage risk and discover new investment opportunities.
Speaker Change: We also partnered with ICE to launch a new climate risk data offering covering private and public companies globally. The new service will be designed to provide transition risk data, including greenhouse gas scope 1, 2, and 3, and physical risk data on tens of millions of companies.
Speaker Change: This will be one of the broadest climate data offerings available on the market.
Speaker Change: By combining our business intelligence, supply chain, and asset location data with ICE's geospatial and climate capabilities, and then leveraging ICE's distribution channels, this new service will offer the broader investment community a single source of climate data.
Speaker Change: This new data solution will become part of ICE Climate, which provides data and analytics that help quantify investment impacts posed by transition and physical climate risks, such as extreme weather events.
Speaker Change: These are two great examples of how we are picking our spots and partnering with world-class organizations to bring incremental value to these markets.
Speaker Change: While each of our partnerships are limited in terms of the magnitude of data, scope and specificity of use case, we continue to balance our time to market and longer term opportunities to drive maximum value creation.
Speaker Change: Before turning the call over to Brian, I wanted to touch on a few updates on the commercial side.
Speaker Change: North America continued to deliver consistent revenue retention of 97% while driving a 32% vitality index.
Speaker Change: Clients and prospects buying behaviors were generally consistent with the first two quarters of the year as businesses balanced mixed macroeconomic signals in an impending presidential election.
Speaker Change: Now, while business spending remains disciplined more broadly and sales cycles have lengthened, there were some examples of exciting wins in the quarter.
Speaker Change: The first is with one of the largest banks in the world that expanded their relationship with us by double digits.
Speaker Change: The client leverages our data and analytics within their commercial card and business banking portfolio. Two areas that are growing at a rapid clip for them.
Speaker Change: By leveraging our matching and SVFE attributes, the client is making more effective and efficient credit line decisioning and we look forward to supporting them with their current efforts and their future strategies focused on the leveraging of generative AI solutions.
Speaker Change: We also had a strong multi-year win with one of the world's largest life insurance companies. The continued improvements in our data and solutions earned us the right to extend a four-year agreement and implement a mid-single-digit pricing increase.
Speaker Change: They use a bundled set of solutions that are heavily integrated into the customer's platforms and workflow, which allowed a new set of incoming stakeholders to realize the value we are providing across their organization.
Speaker Change: And before moving on to the international side, I wanted to mention our expanded relationship with Tamr.
Speaker Change: Our relationship with Tamr expanded through the leveraging of our newly launched consumer marketing data to analytically improve match outcomes for customer-focused data management solutions.
Speaker Change: Ultimately, we are working together to improve data stewardship and act as a front-end for cleaner consumer data sets that drive better business outcomes in sales and marketing use cases related to consumer-to-consumer and consumer-to- business matched records.
Speaker Change: Turning to international, the team continued on with their strategy of winning with the largest and most strategic players in the regions.
Speaker Change: with a retention rate of 93% and vitality index of 35%.
Speaker Change: The team is focused on completing our legacy solution migration efforts while balancing upsell and the addition of new client logos.
Speaker Change: Beginning with IKEA, they expanded our existing relationship with our data block supplier risk solution by adding more markets to master their data supply chain.
Speaker Change: IKEA is a great example of our ability to land and expand the customer through the expansion of data elements, geographies, and number of businesses covered.
Speaker Change: In the United Kingdom, we had our largest-ever sale of Hoovers in our international segment. The cross-sell was a five-year, multimillion-dollar expansion, adding to numerous other finance and risk products being utilized by the client.
Speaker Change: And finally, in Germany, we secured a contract with international distribution and service company Chessen & Jessen to provide data and analytics to support their financial risk, master data management, and compliance activities.
Speaker Change: These renewals, expansions, and new wins across our segments are just a handful of examples of how we continue to deliver increased value across our clients' most critical use cases.
Speaker Change: As I said earlier, I'm very proud of the team's execution this quarter and throughout 2024. We look forward to closing out the year and heading into 2025 with another year of significant progress under our belts.
Speaker Change: I'd now like to turn the call over to Brian to discuss our financials in more detail and give a quick update on our outlook for the remainder of the year.
Brian Hipsher: Thank you, Anthony, and good morning, everyone. Turning to slide one, on a gap basis, third quarter revenues were $609 million, an increase of 3.5% compared to the prior year quarter and an increase of 3.2% before the effect of foreign exchange.
Brian Hipsher: Net income for the third quarter was $3 million, or a diluted earnings per share of $0.01, compared to net income of $4 million for the prior year quarter.
Brian Hipsher: The $1 million decrease in net earnings for the three months ended September 30, 2024, compared to the prior year quarter, was primarily due to a lower tax benefit and higher amortization loss related to the interest rate swap amendment completed in the third quarter of 2023.
Brian Hipsher: This was partially offset by higher operating income and lower miscellaneous non-operating expenses, primarily driven by lower fees related to our senior credit facility.
Speaker Change: Turning to slide 2, I'll now discuss our adjusted results for the third quarter.
Speaker Change: Third quarter revenues for the total company were $609 million, an increase of 3.5% compared to the prior year quarter and an increase of 3.2% before the effect of foreign exchange.
Speaker Change: The increase was attributable to growth in the underlying business and the positive impact of foreign exchange partially offset by the impact of the divestiture of a business-to-consumer business in Finland in the fourth quarter of 2023.
Speaker Change: excluding the impact of the divestiture and the positive impact of foreign exchange total organic revenue increased 3.4 percent reflecting growth across both of our segments
Speaker Change: Third quarter adjusted EBITDA for the total company was $247 million, an increase of $12 million or 5%. This was primarily due to revenue growth, partially offset by associated personnel and data acquisition costs.
Speaker Change: Third quarter adjusted EBITDA margin was 41%, an increase of 60 basis points compared to the prior year quarter.
Speaker Change: Third quarter adjusted income was $116 million or adjusted earnings per share of $0.27 compared to $116.2 million or $0.27 per share in the third quarter of 2023.
Speaker Change: The slight decrease in adjustment income was primarily attributable to higher tax expense and higher depreciation amortization, partially offset by higher adjusted EBITDA and lower interest expense in the current year flow.
Speaker Change: Turning now to slide three.
Speaker Change: Due to a net increase in revenue across our third-party risk and supply chain management, partially offset by decreased revenues from our finance solutions, due in part to the timing of revenues shifting from on delivery to routable.
Speaker Change: For sales and marketing, revenues were $195 million, an increase of $8 million or 5% before the effect of foreign exchange. Sales and marketing growth was due to higher revenue from our master data management solutions, partially offset by decreased revenues from our digital marketing solutions.
Speaker Change: And while our digital marketing solutions declined in the quarter, they improved sequentially and as expected versus the first half of 2024.
Speaker Change: North America third quarter adjusted EBITDA was $208 million, an increase of $12 million or 6%, and North America's EBITDA margin was 48%, an increase of 160 basis points from the prior year quarter.
Speaker Change: This was primarily due to revenue growth and lower net personnel costs. Part of sales fell by higher cloud infrastructure costs and data acquisition costs.
Speaker Change: Turning to slide four.
Speaker Change: In our international segment, third quarter revenues increased 5.7% to $177 million, or an increase of 4.7% before the effect of foreign exchange, and an increase of 5.1% on an organic, constant currency basis.
Speaker Change: Finance and Risk Revenues were $122 million.
Speaker Change: an increase of 7% or an increase of 6% before the effect of foreign exchange.
Speaker Change: All markets contributed to the growth, including strong contributions from newer API solutions across our own markets and third-party risk and compliance solutions in Europe. A worldwide network alliance has also had increased revenue due to higher product royalties.
Speaker Change: Sales and marketing revenues were $55 million, an increase of 3%, or an increase of 1% before the effect of foreign exchange.
Speaker Change: On an organic basis, revenues grew 2.4 percent, primarily due to higher product loyalty revenues from our worldwide network alliances and continued demand for our master data management solution.
Speaker Change: International third quarter adjusted EBITDA was $59 million, an increase of $4 million or 7%, and an international adjusted EBITDA margin.
Speaker Change: was 34%, an increase of 30 basis points from the prior year quarter. The increase in adjusted EBITDA was primarily due to revenue growth from the underlying business, partially offset by higher personnel and data acquisition costs, and foreign exchange loss.
Speaker Change: Thank you.
Speaker Change: Turn to slide 5.
Speaker Change: Slide five contains the details of our capital structure as of quarter end.
Speaker Change: At the end of September 30, 2024, we had cash and cash equivalents of $289 million in total principal amount of debt of $3,681 million with a weighted average interest rate of 6.0%.
Speaker Change: Currently, 87% of our debt is either fixed or hedged, and as of September 30, 2024, we have $717 million available on our $850 million revolving credit facility.
Speaker Change: Our leverage ratio was 3.7 times on a net basis, and the credit facility senior secured net leverage ratio was 3.2 times.
Speaker Change: We continue to expect to be around 3.5 times on a net basis by the end of this year as we continue to migrate down towards our medium term range of 3 to 3.25 times in 2025.
Speaker Change: to manage our floating rate exposure ahead of...
Speaker Change: The $1,250 million of swaps that have matured during the first quarter of 2025, we executed $600 million of forward-starting interest rate swaps, $350 million at 3.229% and $250 million at 3.24%.
Speaker Change: These become effective at the end of March of 2025 and mature in March of 2028.
Speaker Change: Additionally, we terminated $1 billion in swaps with maturity in February 2026 and entered into a new $1 billion swap with a March 2028 maturity at a rate of 3.2463%.
Speaker Change: In regards to our share repurchase program, we did not execute any share repurchases in the third quarter due to the ongoing process related to the inbound interest we received earlier this year.
Speaker Change: Year-to-date, we repurchased 961,360 shares of Dun & Bradstreet Common Sock for $9.3 million. Net of accrued excise tax at an average price of $9.71 per share.
Speaker Change: We currently have over 9 million shares remaining under our existing buyback authorization.
Speaker Change: And now turning to slide six. Our outlook for 2024 is as follows.
Speaker Change: This includes an assumption of a modest tailwind in the fourth quarter.
Speaker Change: Due to the effect of foreign currency related to the expected variances between the US dollar, euro, British pound, and Swedish krona.
Speaker Change: Adjusted EBITDA continues to be expected in the range of $930 to $950 million dollars. And adjusted EPS is expected to continue to be in the range of $1 to $1.04.
Speaker Change: Additional modeling details underline our outlook are as follows. We now expect interest expense to be approximately $215 million.
Speaker Change: Depreciation and amortization expense is now expected to be in a range of 130 to 140 million dollars, excluding incremental depreciation and amortization expense resulting from purchase accounting.
Speaker Change: adjusted effective tax rate of approximately 22 to 23 percent, weighted average delimited shares outstanding of approximately 436 million.
Speaker Change: And for CapEx, we continue to expect approximately $150 million to $160 million of internally developed software and $45 million of property plant equipment and purchase software if capitalized spend begins to moderate throughout the second half of the year.
Speaker Change: And finally, with the height level of investment beginning to evade, we continue to anticipate operating free cash flow conversion as a percentage of adjusted net income, excluding the impact of the AR securitization to improve versus the prior year as previously discussed.
Speaker Change: The team is pushing hard to finish out the year as strong as possible and preparing for another year of improvement in 2025.
Speaker Change: With that, we're now happy to open the call for questions. Operator, will you please open up the line for Q&A?
Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker Change: The first question comes from Kyle Peterson with Needham. Please go ahead.
Kyle Peterson: Great. Thanks, guys. Good morning. Appreciate you taking the question. I just wanted to start off on the digital marketing business. It does sound like there was some
Kyle Peterson: Sequential improvement there, which is good to hear. I know there's some typically some seasonal benefit as kind of the year goes but
Kyle Peterson: I just wanted to see how that performed, both relative to expectations and any expectations for that business that you can share for the fourth quarter would be really helpful.
Speaker Change: Sure, thanks Scott for the question, Sean Anthony. Yeah, we saw the digital marketing...
Sean Anthony: was still a headwind in the quarter, but a much smaller headwind from the first two quarters of the year, kind of as we expected, and I'd say throughout the quarter we saw strength.
Sean Anthony: You know, on the previous call, we're very focused, obviously, on digital marketing and credibility and removing those hazards from the business.
Speaker Change: Yeah, Kyle, if you look at it, you know, this is the quarter that, you know, it had gone from, you know, double-digit declines really starting, you know, late last year and throughout the early part of this year. As we're getting through some of those comps and specialists and in the Q4, Joy saw that this quarter was in the low single digits, right, from a decline perspective.
Speaker Change: And again, expect that to continue to improve into the fourth quarter.
Kyle Peterson: Got it. That's very helpful. And I guess just kind of switching gears a little bit on the balance sheet, I know kind of third quarter in a row net leverage has been about flat. I know it's probably...
Kyle Peterson: coming down but you know decimals and rounding and stuff but um you know just wanted to see I think you guys had mentioned earlier this year kind of expectations to get to you know three and a half turns on a net basis but by your end is that still you know within sight uh you know based on on the current guide um or how you guys kind of thinking about
Kyle Peterson: de-leveraging the balance sheet from here.
Speaker Change: Yeah, Kyle, you're exactly right, you know, it's
Speaker Change: It's borderline right from a rounding perspective, but if you look for a full year where we expect to be, we expect to be right around that three and a half times.
Speaker Change: And then as we head into next year, obviously, we'll get, you know, formal guidance and plans and all that kind of shaped up for our February call. But, you know, the intention is to drive down towards that three, three and a quarter, you know, throughout 2025. And that's going to be a mix of, again, you know, increasing, keep it up, but also, you know, beginning to bring down, you know, just the growth levels too.
Speaker Change: Got it. Thanks for the color and for taking my questions. Nice results.
Speaker Change: Thank you, Kyle.
Speaker Change: The next question comes from Faiza Awar with Deutsche Bank. Please go ahead.
Faiza Awar: Yes, hi, thank you. I wanted to ask about the strategic discussions that you've been having. I appreciated your commentary there. I'm curious if you're exploring, if you can give us any more color around the credibility business.
Faiza Awar: and sort of what are some of the factors around that and if you're considering, you know, sort of splitting that business separately or, you know, any other color there would be helpful.
Speaker Change: So five, a question on the larger process and specifically on credibility in terms of you know looking at how we would handle our divestment, that was the question.
Speaker Change: I'll answer the second part first, you know, from a credibility perspective, obviously we're focused on the larger, you know, conversations around, you know,
Speaker Change: You know, the full company and those conversations and meetings that are taking place more so than, you know, a smaller...
Speaker Change: you know, divestiture. Like I said, it is something that we will do but all of our energy is really going to the main
Speaker Change: for your time.
Speaker Change: So it's not out of the woods, it's not incremental to where we want to be from an organic perspective. Again, if you look at that trailing 12 months of the 90% of the revenue streams, they're still right around that 6%.
Speaker Change: And that includes, obviously, this third quarter, where it was certainly lower because of some of the timing that we missed out up front. So, I think we're in the same phase where we're continuing to monitor, continue to look to improve the business, but again, committed to evaluating things.
Speaker Change: Stay tuned, you know, later this year.
Speaker Change: Okay, that's really helpful. And then just you mentioned the collaborations with ALFREG and ICE around the capital markets business.
Speaker Change: I'm curious if there's any, you know, numbers that you'd be willing to put around that.
Speaker Change: When might you start to see some benefits accrue there and maybe, you know, some color on how the partnership works, sort of is it usage-based, is it a, you know, fixed fee base? Again, more color there would be helpful.
Speaker Change: Yeah, so I'll let Anthony talk a little bit about, you know, the partnership and how we think about, you know, capital markets and, you know, private, you know, company data in general. But if you think about these two, and Anthony mentioned it, we're very, I would say, mindful of, you know, selecting, you know, partners like in Outside, like in ICE.
Speaker Change: building a very specific use case and really you know starting to monetize our capabilities. You know we we have you know long-standing commercial relationships actually with both of them But in this case if you think about you know the the true power of this it would be you know a red shirt
Speaker Change: We're happy to be here.
Speaker Change: as we move forward from that perspective. So, you know, that's really, you know, the concept when we form into, like, an alliance, you know, in this case, would be, you know, to really generate the incremental upside from, you know, the selling of a combined solution.
Speaker Change: Yeah, and maybe what I'd add is, you know, it's serendipitous, you know, the amount of time, the money, the effort that we've spent enhancing, you know, the private company data assets for the traditional use cases here has really put us in an advantageous position.
Speaker Change: I think for the coming wave of private market activity, same with generous AI. And as we look into capital markets or private markets, we really don't have any amazing private market solution.
Speaker Change: Today, we're a large sales force focused on that space.
Speaker Change: We're building them over time, but in the short term we're picking select partners that we can really begin seeding the market with our number and our unique data and we're excited about these partnerships.
Speaker Change: You know, they're great organizations and we're looking forward to a great project with them in these spaces.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you. Bye.
Speaker Change: The next question comes from Andrew Steinerman with J.P. Morgan. Please go ahead.
Speaker Change: Hi, this is Alex Hess on for Andrew. Hope everybody's well today. I want to start with the finance solutions call out. And if you could give us some color on maybe how that business is trending from an underlying basis, that would be helpful. You know, the XV contract transitions.
Speaker Change: Yeah, Alex, thanks for the question. It's, you know, the core, you know, finance solutions, I would say, you know, it's a little bit split between North America and international, and the international side really continues to form well, you know, as we go through the transitions.
Speaker Change: and migrations from some of those legacy applications on to JAR Modern FA and then a lot of delivery mechanisms around JAR data block solutions.
Speaker Change: You've seen really nice kind of mid-single-digit growth within the international region of finance out of the United States.
Speaker Change: In North America, you know...
Speaker Change: You know that it's a big talk about the revenue stream.
Speaker Change: very emphatic within organizations, you know, really sets the foundation for a lot of those relationships.
Speaker Change: or someone on our side, and so we used it as a springboard to really expand and out-sell into those third-party business clients, which is growing double digits.
Speaker Change: And so while, you know, the core finance solutions in that low single-digit, you know, consistent growth on that side, it really acts as a platform to really land and then expand off of it from that perspective. That's been our strategy in North America.
Speaker Change: Yeah, that's super helpful. And then just a couple, you know, maintenance questions from us. When you say, when you indicate full year revenues at the low single digits, sorry, at the low end of the guide, you know, there's a large variation for what that might imply for 4Q. You know, do you still expect 4Q performance to be above the...
Speaker Change: I'm asking the exit rate question, and then can you tell us what the receivables draw on the facility was in 4Q as well?
Speaker Change: Sure, so I'll start with the kind of, you know, range shot equation. So, you know, what we saw, you know, Alex was, you know, the third quarter obviously came in a little bit better than expected. You know, the same way where sometimes we have a little bit of, you know, timing, you know.
Speaker Change: go against us. This time it actually, you know, was a little bit positive on that side and so we were mindful into the fourth quarter.
Speaker Change: you know, kind of balancing that in our expectations, right, for the year. So, I would say where originally, you know, we had laid out the cadence for that, that's how they place it to be a little bit above. If you're kind of doing the math for the lower end, you know, you're not necessarily above the high end of the range anymore.
Speaker Change: If we're looking at the AR securitization, we actually paid back $9.6 million in the quarter.
Speaker Change: Thank you.
Speaker Change: The next question comes from Manu Patnaik with Barclays. Please go ahead.
Speaker Change: Good morning. This is Brendan on from Monmouth. I also want to follow up and touch on the North America finance solutions.
Speaker Change: And I just want to better understand the delivery timing impact. I mean, you called it out previously, but growth did seem to come in a little better than you expected. So, given the fiscal year is still at the low end, was it just that some of that revenue did end up shifting in the Q3 versus what you previously expected compared to Q4?
Speaker Change: Yeah, so Brendan, thanks for the question. Again, we're really kind of split hairs a little bit, you know, from that perspective. But, you know, what I would say is if you think about, you know, that finance solution,
Speaker Change: So when we expand it to a new cross-market
Speaker Change: There are times where the deliberate portion of that happens.
Speaker Change: A little bit more up front, especially when you're laying the baseline, you know, for an underwriting model and you're laying the baseline, for a new analytic from that perspective, especially when you're doing, you know, risky underwriting from that side.
Speaker Change: And that has evolved again, as we've said, you know, the annual revenues, you know, in some circumstances don't shift that much. But, you know, it's just how it gets recognized, you know, throughout the year. And that was really the shift that we were discussing from that perspective.
Speaker Change: Again, when we look at, you know, specifically into, you know, that FNR group, you know, a little bit, you know, better from that side, again, we continue to see, you know, very strong growth in our third-party participants.
Speaker Change: So things like supply chain risk management, you know, know your third party. Those are very germane topics I would say both in North America and also throughout a lot of nice growth on the international side. And so you know those are the types of things that ended up maybe being a little bit better than what we expected.
Speaker Change: Okay, then just a quick update on credibility. Just how that did during the quarter and relative to your expectation.
Speaker Change: grew very slightly this quarter. So, again, a positive, I would say, trajectory from that perspective. So, in-line was, I think, where we thought it would be. And then, maybe, Anthony, if you want to touch on some of the things we're doing.
Speaker Change: You know that will teach you to evolve that business and how we think about how to go forward.
Anthony Jabbour: Sure. So we talked before about launching what we just called money back guarantee where as we work with clients and if you give us one of four pieces of information it's the bank account, credit card statement, taxes
Anthony Jabbour: permission to pull Consumer Bureau Lend-Bet score with our Business Bureau score. Each of them has a significant increase in credit ratings based on the model that we've done in our labs.
Anthony Jabbour: And so with that, we had launched that in mid-July, I think we talked about in the previous call, and we're seeing significant growth in that space, because from a client perspective, it's a money-back guarantee. If we don't prove your credit, you don't pay, or you get your money back, sorry.
Anthony Jabbour: and also in a worst case scenario where they didn't deserve to have their credit rating improved.
Anthony Jabbour: We now have a lot more information and data about that private company. And again, it's just an example as we think about knowing how to grow the business or how to take exhaust data and make it relevant to get more and more information on these private companies.
Anthony Jabbour: which as you see is really, you know, being lucky or serendipity, but...
Anthony Jabbour: Building up the richness of this private company data is very beneficial for our future.
Anthony Jabbour: Thank you.
Speaker Change: Thank you, Brendan.
Speaker Change: The next question comes from Craig Huber with Huber Research Partners. Please go ahead.
Craig Huber: Thank you. Anthony, I wanted to ask you, what's your opinion right now of the macro environment in North America? How are you feeling about that right now versus how you were feeling, say, a year ago? Thank you.
Anthony Jabbour: Thank you, Craig. Hi, Tate.
Anthony Jabbour: Aloha.
Anthony Jabbour: Many of our peers have reported and I think the landscape
Speaker Change: fairly similar across, you know, many of the many of the peers and
Speaker Change: And we see that as well in terms of, and compared to a year ago.
Speaker Change: I think it's pretty consistent with what we saw last year, so quarter to quarter we see a slight lengthening in the sales cycle right now and candidly as we look internally, is that because of just the market?
Speaker Change: It's because we're in the middle of a process.
Speaker Change: You know, that certainly doesn't help on your sales cycle when you're in the middle of a process, as you can imagine.
Speaker Change: And again, I'm really proud of the team to push through that, but I'd say it's fairly consistent with what it's been.
Speaker Change: And I've always believed here we've got, you know, more ability to grow based on what we do and what we own versus what happens in the macro environment. So I think we've been able to, you know, to weather it fairly well over this past year and I feel the same going forward.
Speaker Change: Thank you for that. And Brian, if I could just ask you, maybe I missed this, but what did you say how the revenues did with credibility? I think you said prior quarters was down roughly 10 percent, but I missed what you said there on the current quarter. And I'm also curious, how is your patients
Speaker Change: the executives, yourselves.
Speaker Change: with that business and the marketing business right now given
Speaker Change: The problems you guys have been having for the last year plus here, what's your patience level right now? A question was asked about this earlier too, but just your patience here to keep that business as part of Dun & Bradstreet as opposed to selling it or shutting down that end of the marketing effort that you have.
Speaker Change: I'll answer, Craig. You know, Brian said it was low single-digit growth in credibility in this quarter, which was obviously positive.
Speaker Change: So the second part of your question in terms of what's our patience, you know...
Speaker Change: On the second quarter call I talked about, you know, our patients, we've made a lot of changes in both businesses. We're going to monitor them through the year to see how, you know, they perform. We've seen significant uptake in the credibility business. I talked about the money-back guarantee in our concierge service.
Speaker Change: on the digital marketing side, we're seeing that that one is something that's more macro focused, and we've seen a return of spend there in the market. And, you know, again, we're continuing to monitor it.
Speaker Change: Our focus so right now really is on the sale of the full company right like those are all the conversations that were ran and and they're extremely time consuming
Speaker Change: and they're very...
Speaker Change: Like I said, my prepared remarks, you know, we went through an FTE reduction related to our capitalized software, right? And that's always difficult, no matter what organization you're in, you know, to do that. And then the inquiries that are coming in, you know, from a number of companies.
Speaker Change: At the lower level, you've got the risk of water cooler type conversation, which we don't see. And at the senior level, they're involved actually in the process, right? Helping answer all the questions, all the diligence. And so again,
Speaker Change: I'm very proud of the team in terms of how they're staying focused on the task at hand and not giving in to the distraction.
Speaker Change: You know, from our perspective, we have urgency in everything that we do here, and we have urgency around, you know, remediating both of those businesses, but the overwhelming, you know, I take priority right now because of the full process that we're in.
Speaker Change: Great, thank you.
Craig Huber: Thank you, Craig.
Speaker Change: Thanks for watching!
Speaker Change: The next question comes from Ashish Sabhadra with RBC, please go ahead.
Speaker Change: Hey, good morning everyone. This is Will Chee on Hershey's Kamadra. Appreciate you taking our question.
Speaker Change: Really great to hear kind of that early feedback on chat D&D, maybe a bit of a two-parter on that. How has the kind of early benefits been internally from kind of an operational efficiency standpoint that you guys are seeing?
Speaker Change: Then also externally, maybe if you could give some color, just the general pace of rollout that you're expecting for these types of initiatives. You know, is it relatively fast to market or more of a gradual kind of teaching slash assimilation type cadence? Thank you.
Speaker Change: Yeah, that's a great question. I appreciate it. I'll chat with you. We're very excited about it, as I talked about, you know, for a lot of reasons.
Speaker Change: the feedback that we've been receiving.
Speaker Change: It was just really, you know, an overwhelming type of time.
Speaker Change: One of my emails here, from one of our clients, it's a fantastic tool, saves a lot of time if you're chatting BNB in my day-to-day tasks. The time it takes to summarize a small business goes from 10 to 15 minutes to seconds.
Speaker Change: We have other ones that, you know, that just go on and on about something normally taking hours that's done in minutes. So it's a really big time saver. It's very positive. We're seeing the benefits of it internally as well as we do work.
Speaker Change: So I'd say the response has been better than we expected, you know, from our ITERA pilot.
Many of them are asking if they can give us their first-party client later.
Speaker Change: https://www.youtube.com
Speaker Change: With us hosting that data, I think three things happen. One, we have a much secure relationship with that client.
2. We drive revenue, obviously. We drive more revenue from that relationship by hosting their data and working with them. And 3. It drives more collaboration with that client.
Speaker Change: Right, which we can create and innovate more and more new ideas. So it's really off to a great start and like I said
Speaker Change: we could be more excited about it. So we'll see how things pan out. What we started with is really enabling our clients to use it.
Speaker Change: without a charge. And so really what they'll do is they'll drive up their usage of our data, which is where we get paid, because what we want to do is really widen the tent and get everyone in it.
and really understand all the possible things we can do.
Speaker Change: And then we'll figure out how specifically we want to charge, what's the most efficient way to do it, or do you want to include it and have more price increases for the relationship in general. But it's been a winner for us so far out of the gates, and like I said, I'm really proud of the team.
Speaker Change: and their ability to focus on this. So many other things are going on.
Great, thank you very much.
Speaker Change: Thank you.
and Sean Anthony Jabbour. Thank you.
Speaker Change: Once again, if you have a question, please press star, then Y. The next question comes from George Tom with Goldman Sachs. Please go ahead.
Hi, thanks, good morning. You mentioned that client spending remains disciplined and sales cycles have lengthened in the quarter. Can you discuss what internal initiatives or external market conditions you would need to see for these trends to begin to improve?
George, I'd say a couple of things.
Speaker Change: and there could be different buckets. I said one bucket I think is the process that we're in and you know some of the additional questions from clients some wait-and-see as to what happens in this process.
If we think about ChatDB as an example, there's, you know, real efficiency gain there. So at times of having a tighter budget, this is exactly the thing that you need and exactly
I'd say we've priced it without an incremental charge initially where our clients can adopt it and and do more and engage more with us.
Speaker Change: The other is as we look at clients that have many data providers
We're approaching them about consolidating all their vendors into one, one being us, and saving money and having the best data that's available. So there's a number of things that...
We're focused on doing here to help with the macro environment and, like I said, what I'm proud of the team is that they don't look at the macro as
You know as an excuser always looking at ways to to push through it and so those be the things I think I focus on. Brian, do you have anything?
Yeah, and George, I think certainly, you know, we talked about one thing, you know, that that policy play strive was the Fed, you know, took their first step, right, in the 50-day rate cut, right? So that was definitely, you know, on the upside, a positive move, right, from that perspective. So, but we're going to get through a presidential election, right? We're going to continue to see economic data come out, but that's going to continue to, you know, move towards, I mean, a longer term terminal, you know, that both believes, you
Mike Hipsher, Sean Anthony, Anthony Jabbour
Got it. That's helpful. And then you're expecting organic revenue growth in 4Q to accelerate toward the high end of the four-year guidance range, maybe not above the range, but toward the higher end. Can you talk about whether that 4Q growth rate is a reasonable starting point for organic growth in 2025, or whether there are other factors that could perhaps
alter growth rates next year that might cause it to deviate from what you're going to expect in 4Q.
So George, if you look at it, clearly we'll get through the end of the year. Q4 is always the time for us to close out. A lot of sales, a lot of renewals, etc., from that perspective. And so we'll clearly issue formal guidance.
Speaker Change: February
as we go through and talk about perspective. You know, we've said it before, like the quarter's not always a perfect, you know, no quarter of the year is a perfect kind of jumping off point, but if you think about, you know, how we've talked about, you know, our progression right into our medium-term guidance branches.
You know, we've talked about, you know, getting things resolved around, you know, some of the 10% of the business that, you know, hasn't been necessarily performing.
Speaker Change: and Joe. Relative to the other 90%. I mean those are all the things that, you know, as we think about, you know, transitioning from 24 into 25, you know, and continuing to improve the business, right? You know, that's how we think about it versus any given quarter kind of being.
So that's the jump start point from that perspective.
Got it. Very helpful. Thank you.
Thanks, George.
This concludes the question and answer session. I would like to turn the conference back over to Anthony Jabbour for any closing remarks. Please go ahead.
Thank you. As always, I'd like to thank my Dun & Bradstreet colleagues for all their efforts in growing this great business, our great clients who help us with their partnership and guidance, and for all of you for your interest in Dun & Bradstreet. I hope you have a wonderful rest of your day.
This concludes today's conference call. Thank you for attending today's presentation. You may now disconnect.
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