Dun & Bradstreet Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 31, 2024

There are 11 speakers on the call.

Operator

Good day, and welcome to the Dun and Bradstreet Third Quarter 20 24 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Sean Anthony, Vice President of FP and A and Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you. Good morning, everyone, and thank you for joining us for Dun and Bradstreet's financial results conference call for the Q3 of 2024. On the call today, we have Dun and Bradstreet's CEO, Anthony Jabbour and CFO, Brian Huebscher. Anthony will begin with an overview of our Q3 results and then pass it over to Brian for an in-depth financial review. We will then finish up with Q and A and a few closing remarks.

Speaker 1

Before we begin, allow me to provide a disclaimer regarding forward looking statements. This call, including the Q and A portion of the call, may include forward looking statements related to the expected future results for our company and are therefore forward looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward looking statements are subject to are described in our earnings release and other SEC filings. Today's remarks will also include references to non GAAP financial measures.

Speaker 1

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. The conference call will be available for replay via webcast through Dun and Bradstreet's Investor Relations website at investor. Dmb.com. With that, I'll now turn the call over to Anthony. Thank you, Sean.

Speaker 1

Good morning, everyone, and thank you for joining us for our Q3 earnings call. Overall, we delivered another solid quarter on both the top and bottom lines. As we guided beginning of the year, there was some timing in North America between on delivery and ratably recognized revenues in the Q3. And I'm pleased to report that we delivered organic revenue growth of 3.4% overall, which is slightly above expectations. 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 upfront.

Speaker 1

On the profit side, we expanded margin 60 basis points and improved free cash flow conversion to nearly 50%. 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 $15,000,000 on an annualized basis.

Speaker 2

We are

Speaker 1

coming off an elevated investment period and expect to move towards our medium term target spend of 6% to 7% of revenues on an annual basis. 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. We've been working with our advisor to evaluate inquiries from both strategic and financial acquirers. While we'll 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, providing detailed responses to the interested parties and we'll continue to be responsive and thoughtful in all of our interactions on behalf of our shareholders. Our D and B team continues to impress me and I would like to thank them for the focus on delivering the quarter, executing the capital reduction and being responsive to the interest we are currently receiving.

Speaker 1

And if all of that wasn't enough, we also continue to innovate for our clients. I'll start off with the release of ChatDnV, our patent pending generative AI assistant. ChatDnV surfaces knowledge across the company's data blocks, delivering actionable insights to its users ranging from prospecting to company due diligence. 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. ChatD and B is fueled by our Dun and Bradstreet data cloud, which is renowned for the breadth, depth and quality of private company data it possesses.

Speaker 1

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. Our autonomous Gen AI agents show their work, the data sources and lineage in ChatDnB, allowing users to have confidence in the quality and accuracy of the information presented. We launched ChatDnB 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. These clients shared feedback and insights into how they are using ChatDnB and the benefits of this new assistant in their daily jobs. 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.

Speaker 1

ChatDnD is an exciting evolution for our company and we look forward to discussing its progress and expansion in the quarters to come. We announced 2 exciting partnerships this quarter. The first with London Stock Exchange Group or LSEG and the second with Intercontinental Exchange or ICE. With LSEG, we are forming strategic collaboration to broaden access to private market information. The combination of LSEG's capital markets data, including deals, private equity, news and research with our trusted private market data providing visibility on officers and directors, ownership insights and financial information for millions of companies globally will enable investment in capital market firms to drive better data driven financial assessments and decisions.

Speaker 1

Our DUNS 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. Using the DUNS number as the key ton lock 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. 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. The collaboration with LSEG marks a new era in providing technology power transparency to private company analysis. With the exponential growth of private markets, Dun and Bradstreet plays a critical role providing clarity and insights to help investors manage risk and discover new investment opportunities.

Speaker 1

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, 23 and physical risk data on tens of millions of companies. This will be one of the broadest climate data offerings available on the market. 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. 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 1

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. 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. Before turning the call over to Brian, I wanted to touch on a few updates on the commercial side. North America continued to deliver consistent revenue retention of 97%, while driving a 32% vitality index. Clients and prospects buying behaviors were generally consistent with the 1st 2 quarters of the year as businesses balance mixed macroeconomic signals and an impending presidential election.

Speaker 1

And while business spending remains disciplined more broadly and sales cycles have lengthened, there were some examples of exciting wins in the quarter. The first is with 1 of the largest banks in the world that expanded their relationship with us by double digits. 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. By leveraging our matching and SBFE 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. We also had a strong multiyear win with 1 of the world's largest life insurance companies.

Speaker 1

The continued improvements in our data and solutions earned us the right to extend a full year agreement and implement a mid single digit pricing increase. They use a bundled set of solutions that are heavily integrated into the customers' platforms and workflow, which allowed a new set of incoming stakeholders to realize the value we are providing across their organization. And before moving on to the international side, I wanted to mention our expanded relationship with Tamr. 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. Ultimately, we are working together to improve data stewardship and act as a front end for cleaner consumer datasets that drive better business outcomes in sales and marketing use cases related to consumer to consumer and consumer to business matched records.

Speaker 1

Turning to international, The team continued on with their strategy of winning with the largest and most strategic players in the regions. With a retention rate of 93% and vitality index of 35%, the team is focused on completing our legacy solution migration efforts while balancing upsell and the addition of new client logos. Beginning with IKEA, they expanded our existing relationship with our data block supplier solution by adding more markets to master their data supply chain. IKEA is a great example of our ability to land and expand with the customer through the expansion of data elements, geographies and number of businesses covered. In the United Kingdom, we had our largest ever sale of Hoovers in our International segment.

Speaker 1

The cross sell was a 5 year multimillion dollar expansion adding to numerous other finance and risk products being utilized by the client. And finally, in Germany, we secured a contract with international distribution and service company, Jossen and Jessen to provide data and analytics to support their financial risk, master data management and compliance activities. These renewals, expansions and new wins across our segments are just a handful of example of how we continue to deliver increased value across our clients' most critical use cases. 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 1

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.

Speaker 2

Thank you, Anthony, and good morning, everyone. Turning to Slide 1. On a GAAP basis, 3rd quarter revenues were $609,000,000 an increase of 3.5% compared to the prior year quarter and an increase of 3.2% before the effect of foreign exchange. Net income for the Q3 was $3,000,000 or diluted earnings per share of $0.01 compared to net income of $4,000,000 for the prior year quarter. The $1,000,000 decrease in net earnings for the 3 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 Q3 of 2023.

Speaker 2

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. Turning to Slide 2. I'll now discuss our adjusted results for the Q3. 3rd quarter revenues for the total company were $609,000,000 an increase of 3.5% compared to the prior year quarter and an increase of 3.2% before the effect of foreign exchange. The increase was attributable to growth in the underlying business and the positive impact of foreign exchange, partially offset by the impact of a divestiture of a business to consumer business in Finland in the Q4 of 2023.

Speaker 2

Excluding the impact of the divestiture and the positive impact of foreign exchange, total organic revenue increased 3.4%, reflecting growth across both of our segments. 3rd quarter adjusted EBITDA for the total company was $247,000,000 an increase of $12,000,000 or 5%. This was primarily due to revenue growth, partially offset by associated personnel and data acquisition costs. 3rd quarter adjusted EBITDA margin was 41%, an increase of 60 basis points compared to the prior year quarter. 3rd quarter adjusted net income was $116,000,000 or adjusted earnings per share of $0.27 compared to $116,200,000

Speaker 3

or

Speaker 2

$0.27 per share in the Q3 of 2023. The slight decrease in adjusted income was primarily attributable to higher tax expense and higher depreciation and amortization, partially offset by higher adjusted EBITDA and lower interest expense in the current year quarter. Turning now to Slide 3. I'll now discuss the results for our 2 segments, North America and International. In North America, revenues for the Q3 were $433,000,000 an increase of 2.6% from prior year quarter and 2.7% on an organic constant currency basis.

Speaker 2

In Finance and Risk, revenues were $238,000,000 an increase of $3,000,000 or 1%, due to a net increase in revenue across our 3rd 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 ratable. For sales and marketing, revenues were $195,000,000 an increase of $8,000,000 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. And while our digital marketing solutions declined in the quarter, they improved sequentially and as expected versus the first half of twenty twenty four. North America 3rd quarter adjusted EBITDA was $208,000,000 an increase of $12,000,000 or 6% and North America EBITDA margin was 48%, an increase of 160 basis points from the prior year quarter.

Speaker 2

This was primarily due to revenue growth and lower net personnel costs, partially offset by higher cloud infrastructure costs and data acquisition costs. Turning to Slide 4. In our International segment, 3rd quarter revenues increased 5.7 percent to $177,000,000 or an increase of 4.7% before the effect of foreign exchange and an increase of 5.1% on an organic constant currency basis. Financial risk revenues were $122,000,000 an increase of 7% or an increase of 6% before the effect of foreign exchange. 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.

Speaker 2

Our worldwide network alliance has also had increased revenue due to higher product royalties. Sales and marketing revenues were $55,000,000 an increase of 3% or an increase of 1% before the effect of foreign exchange. On an organic basis, revenues grew 2.4%, primarily due to higher product royalty revenues from our worldwide network alliances and continued demand for our master data management solution. International third quarter adjusted EBITDA was $59,000,000 an increase of $4,000,000 or 7 percent and international adjusted EBITDA margin was 34%, an increase of 30 basis points from the prior year quarter. 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 2

Turning to Slide 5. Slide 5 contains the details of our capital structure as of quarter end. At the end of September 30, 2024, we had cash and cash equivalents of $289,000,000 and total principal amount of debt of $3,681,000,000 with a weighted average interest rate of 6.0 percent. Currently, 87% of our debt is either fixed or hedged. And as of September 30, 2024, we had $770,000,000 available on our $850,000,000 revolving credit facility.

Speaker 2

Our leverage ratio was 3.7x on a net basis and the credit facility senior secured net leverage ratio was 3.2x. We continue to expect to be around 3.5x on a net basis by the end of this year as we continue to migrate down towards our medium term range of 3x to 3.25x in 2025. To manage our floating rate exposure, ahead of the $12.50 million of swaps that have matured during the Q1 of 2025, we executed $600,000,000 of forward starting interest rate swaps, $350,000,000 at 3.229 percent and $250,000,000 at 3.24%. These become effective at the end of March of 2025 and mature in March of 2028. Additionally, we terminated $1,000,000,000 in swaps with maturity in February of 2026 and entered into a new $1,000,000,000 swap with a March 2028 maturity at a rate of 3.2463%.

Speaker 2

In regards to our share repurchase program, we did not execute any share repurchases in the Q3 due to the ongoing process related to the inbound interest we received earlier this year. Year to date, we repurchased 961,360 shares of Dun and Bradstreet common stock for $9,300,000 net of accrued excise tax at an average price of $9.71 per share. We currently have over 9,000,000 shares remaining under our existing buyback authorization. And now turning to Slide 6. Our outlook for 2024 is as follows.

Speaker 2

Total revenues after the effect of foreign currency continue to be expected at the low end of our previously communicated range of $2,400,000,000 to $2,440,000,000 or an increase of approximately 3.7 percent to 5.4 percent. This includes an assumption of a modest tailwind in the Q4 due to the effect of foreign currency related to the expected variances between the U. S. Dollar, euro, British pound and Swedish krona. Revenues on an organic constant currency basis continue to be expected at the low end of our previously communicated range of 4.1% to 5.1% for the full year.

Speaker 2

Adjusted EBITDA continues to be expected in the range of $930,000,000 to $950,000,000 And adjusted EPS is expected to continue to be in the range of $1 to $1.04 Additional modeling details underlying our outlook are as follows. We now expect interest expense to be approximately $215,000,000 Depreciation and amortization expense is now expected to be in a range of $130,000,000 to $140,000,000 excluding incremental depreciation and amortization expense resulting from purchase accounting. Adjusted effective tax rate of approximately 22% to 23%, weighted average diluted shares outstanding of approximately 436,000,000. And for CapEx, we continue to expect approximately $150,000,000 to $160,000,000 of internally developed software and $45,000,000 of property, plant and equipment and purchase software as capitalized spend begins to moderate throughout the second half of the year. And finally, with the heightened level of investment beginning to abate, 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 2

The team is pushing hard to finish out the year as strong as possible and preparing for another year of improvement in 2025. With that, we're now happy to open the call for questions. Operator, will you please open up the line for Q and A?

Operator

Thank you. We will now begin the question and answer session. The first question comes from Kyle Peterson with Needham. Please go ahead.

Speaker 4

Great. Thanks guys. Good morning. Appreciate you taking the question. Just wanted to start off on the digital marketing business.

Speaker 4

It does sound like there was some sequential improvement there, which is good to hear. I know there's some typically some seasonal benefit as kind of the year goes. But just wanted to see how that performed both relative to expectations and any expectations for that business that you can share for the Q4 would be really helpful.

Speaker 5

Sure. Thanks, Kyle, for the question. It's Anthony. Yes, we saw the digital marketing was still a headwind in the quarter, but a much smaller headwind from the 1st 2 quarters of the year, kind of as we expected. And I'd say throughout the quarter we saw strength.

Speaker 5

It's strengthening throughout the quarter. So we feel good in terms of the progress that we're making and that it lines up to our expectations. And what I mentioned on the previous call, we're very focused obviously on digital marketing and credibility in removing those segments from the business.

Speaker 2

Yes, Kyle, if you look at it, this is the quarter that it has gone from kind of double digit declines really starting late last year and throughout the early part of this year. As we get through some of those comps and especially kind of in Q4, Joey saw this quarter was in the low single digits, right from a decline perspective. And again, expect that to continue to improve into the 4th quarter.

Speaker 4

Got it. That's very helpful. And I guess just switching gears a little bit on the balance sheet. I know it's kind of Q3 in a row net leverage has been about flat. I know it's probably coming down, but decimals and rounding and stuff.

Speaker 4

But just want to see, I think you guys had mentioned earlier this year kind of expectations to get to 3.5 turns on a net basis by year end. Is that still within sight based on the current guide? Or how are you guys kind of thinking about deleveraging the balance sheet from here?

Speaker 2

Yes. Kyle, you're exactly right. It's borderline right from a rounding perspective. But if you look forward to full year where we expect to be, we expect to be right around that 3.5 times. And then as we head into next year, obviously, we'll get formal guidance and plans and all that kind of shaped up for our February call.

Speaker 2

But the intention is to drive down towards that 3, 3 in the quarter throughout 2025. And that's going to be a mix of again decreasing EBITDA, but also beginning to break down just the gross

Speaker 4

Got it. Thanks for the color and for taking my questions. Nice results.

Speaker 5

Thank you, Kyle.

Operator

The next question comes from Faiza Alba with Deutsche Bank. Please go ahead.

Speaker 6

Yes. Hi. Thank you. I wanted to ask about the strategic discussions that you've been having. I appreciated your commentary there.

Speaker 6

I'm curious if you're exploring, if you can give us any more color around the credibility business and sort of what are some of the factors around that and if you're considering sort of splitting that business separately or any other color there would be helpful?

Speaker 5

So Faiza, the question on the larger process and specifically on credibility in terms of looking at how we would handle our divest at least the question. From a I'll answer the second part first. From a credibility perspective, obviously, we're focused on the larger conversations around the full company and those conversations and meetings that are taking place more so than a smaller divestiture. Like I said, it is something that we will do, but all of our energy is really going to the main transaction at the moment.

Speaker 2

And Faiza, to the point, if anything, on the last call, certainly, I think we're getting further away from some of that direct impact from the customer. This quarter, it actually incredibly showed some slight growth. So it's not out in 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% revenue streams, they're still right around 6%.

Speaker 2

And that includes obviously the Q3 where it was certainly lower because of some of the timing that we missed out upfront. 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 and making

Speaker 5

some decisions later this year.

Speaker 6

Okay. That's really helpful. And then just you mentioned the collaborations with Alta again, AIS around the Capital Markets business. I'm curious if there's any numbers that you'd be willing to put around that? When might you start to see some benefits accrue there?

Speaker 6

And maybe some color on how the partnership works sort of as a usage base, is it a fixed fee base? Again, more color there would be helpful.

Speaker 2

Yes. So I'll let Anthony talk a little bit about the partnership and how we think about capital markets and private company data in general. But if you think about these 2 and Anthony mentioned that we're very, I would think, mindful of selecting partners like in outside, like in ICE, building a very specific use case and really starting to monetize off of both of our capabilities. We have long standing commercial relationships actually with both of them. But in this case, if you think about the true power of this, it would be a rev share between the 2 entities as we move forward from that perspective.

Speaker 2

So that's really the concept when we form into like an alliance in this case would be to really generate the incremental upside from the selling of the combined solution on a more bigger.

Speaker 5

Yes. And maybe what I'd add is serendipitous the amount of time, the money, effort that we spend enhancing the private company data assets for the traditional use cases here has really put us in an advantageous position, I'd say, for the coming wave of private market activity, same with Generative AI. And as we look into capital markets or private markets, we really don't have any amazing private market solutions today for a large sales force focused on that space. We'll build them over time. But in the short term, we're picking select partners who could really begin seeding the market with their guns number and our unique data.

Speaker 5

And we're excited about these partnerships. They're great organizations and we're looking forward to a great product with them in these spaces.

Speaker 6

Great. Thank you so much.

Speaker 5

Thank you, Faiza.

Operator

The next question comes from Andrew Steinerman with JPMorgan. Please go ahead.

Speaker 7

Hi, this is Alex Hess on for Andrew. Hope everybody is 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, ex fee contract transitions?

Speaker 2

Yes, Alex. Thanks for the question. It's the core finance solutions, I would say, is a little bit slow between North America and international. On the international side really continues to fall well as we've gone through the transitions and migrations from some of those legacy applications on to our modern FA and then our modern delivery mechanisms around our data block solutions. You see really nice kind of mid single digit growth within the international region on the finance side of the equation.

Speaker 2

In North America, you know that it's a big chunk of the revenue stream, very embedded within organizations, really sets the foundation for a lot of those relationships on the F and R side. And so we've used it as a springboard to really expand and upsell into those 3rd party risk clients, which is growing double digits. And so while the core finance solutions that connect low single digit, 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 7

Yes. That's super helpful. And then just a couple maintenance questions from us. When you say at when you indicate full year revenues at the low single digits sorry, at the low end of the guide, there's a large variation for what that might imply for 4Q. Do you still expect 4Q performance to be above the range?

Speaker 7

So I'm asking the exit year question the exit rate question. And then can you tell us what the receivables draw on the facility was in 4Q as well? Excuse me.

Speaker 2

Sure. So I'll start with the kind of range of the equation. So what we saw, Alex, was the Q3 obviously came in a little bit better than expected. The same way where sometimes we have a little bit of timing go against this time it actually was a little bit positive from that side. And so we were mindful into the Q4 kind of balancing that in our expectations right for the year.

Speaker 2

So I would say where originally we have laid out the case for that that side of the equation to be a little bit above. If you're kind of doing the math with the lower end, you're not necessarily above the high end of the range anymore. If we're looking at the AR securitization, we actually paid back it was $9,600,000 in the quarter.

Speaker 5

Thank you.

Operator

The next question comes from Manav Patnaik with Barclays. Please go ahead.

Speaker 8

Good morning. This is Brendan on for Manav. I also want to follow-up and touch on the North America Finance Solutions. And just wanted 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.

Speaker 8

So given the fiscal year still at the low end, was it just that some of that revenue did end up shifting into Q3 versus what you previously expected compared to Q4?

Speaker 2

Yes. So Brandon, thanks for the question. Again, we're really kind of split hairs a little bit from that perspective. But what I would say is, if you think about that finance solutions, when we expanded to a new customer, a new solution, there are times where the delivery portion of that happens a little bit more upfront, especially when you're laying the baseline for an underlying model and you're laying the baseline for a new analytic from that perspective, especially when you're doing risk underwriting from that side. And then as it evolves, again, as we said, the annual revenues, in some circumstances, don't shift that much.

Speaker 2

But it's just how it gets recognized throughout the year and that was really the shift that we were discussing from that perspective. Again, when we look at specifically into that F and R group a little bit feel better from that side again. We continue to see very strong growth in our 3rd party risk clients. So things like supply chain risk management, know your 3rd party, those are very germane topics I would say both in North America and also drove a lot of nice growth on the international side. And so those are the types of things that ended up maybe being a little bit better than what we had expected.

Speaker 8

Okay. And then just a quick update on credibility, just how that did during the quarter and relative to your expectation?

Speaker 2

Yes. So we said that credibility would kind of grew from the back half of the year. We thought it would get close to breakeven and actually grew very slightly this quarter. So again, a positive, I would say, trajectory from that perspective. So in line with I think where we thought it would be.

Speaker 2

And then maybe Anthony, if you want touch on some of the things we're doing that we'll continue to evolve that business and

Speaker 5

how we think about our growth market. Yes, sure. So we talked before about launching what we just call money back guarantee where as we work with clients, say if you give us one of 4 pieces of information, it's the bank account, credit card statement, taxes, permission to pull Consumer Bureau, lend that score with our Business Bureau score. Each of them has a significant increase in credit ratings, right, based on the model that we've done in our labs. And so with that, we had launched that in mid July.

Speaker 5

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. And also on a worst case scenario where it didn't deserve to have the credit rating improved. We now have a lot more information and data about that private company.

Speaker 5

Again, it's just an example as we think about not only 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, which as you see is really, that's why most of us being lucky or serendipity. But building out the richness of this private company data is really beneficial for our future.

Speaker 2

Thank you.

Speaker 5

Thank you, Brendan.

Operator

The next question comes from Craig Huber with Huber Research Partners. Please go ahead.

Speaker 9

Thank you. Anthony, I wanted to ask you, what's your opinion right now with 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.

Speaker 5

Yes. Thank you, Craig. I'd say, many of our peers have reported and I think the excuse me, the landscape is fairly similar across many of the peers. And we see that as well in terms of and compared to a year ago, 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.

Speaker 5

And candidly, as we look internally, is that because of just the market? Is it because we're in the middle of a process? That certainly doesn't help your sales cycle when you're in the middle of a process as you can imagine. 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 5

And I've always believed here we've got 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 weather it fairly well this past year and I feel the same going forward.

Speaker 9

And then 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 it was down roughly 10%, but I missed what you said there on the current quarter. And also curious, how is your patience, the executives yourselves with that business and the marketing business right now given the problems you guys have been having for the last year plus here? I mean, what's your patience level right now?

Speaker 9

The question was asked about this earlier too, but I mean, just your patience here to keep that business as part of Dun and Bradstreet as opposed to selling it or shutting down that and or the marketing effort that you have?

Speaker 5

I'll answer it Craig. Brad said it was low single digit growth in credibility in this quarter, which was obviously positive. So the second part of your question in terms of what's our patients, on the Q2 call I talked about our patients. We've made a lot of changes in both businesses. We're going to monitor them through the year to see how they perform.

Speaker 5

Like I said, we've seen significant uptake in the credibility business. I talked about the money back guarantee in our concierge service, the significant improvement there. On the digital marketing side, we're seeing that one is something that's more macro focused. And we've seen a return of spend there in the market. And again, we're continuing to monitor it.

Speaker 5

Our focus so right now really is on the sale of the full company, right? Like those are all the conversations that we're in and they're extremely time consuming and they're very like I said in my prepared remarks, we went through an FTE reduction related to our capitalized software, right? And that's always difficult no matter what organization you're in to do that. And then the inquiries that are coming in from a number of companies. At the lower level you've got the risk of water cooler type conversation, which we don't see.

Speaker 5

And at the senior level they're involved actually in the process, right, helping answer all the questions and all the diligence. And so again, I'm very proud of the team in terms of how they're staying focused on the task at hand and not giving into the distraction. So from our perspective, we have urgency in everything that we do here and we have urgency around remediating both of those businesses. But the overwhelming, I'd say, priority right now is the full process that we're in.

Speaker 9

Great. Thank you.

Speaker 3

Thank you, Craig.

Operator

The next question comes from Ashish Sabadra with RBC. Please go ahead.

Speaker 3

Hey, good morning, everyone. This is Will Qi on for Ashish Sabadra. Appreciate you taking our question. Really great to hear kind of that early feedback on ChatDnB, maybe a bit of a 2 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 3

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? Is it relatively fast to market or more of a gradual kind of teaching simulation type cadence? Thank you.

Speaker 5

Yes. That's a great question. I appreciate it. I'll chat, Tavy. We're very excited about it, as I talked about, for a lot of reasons.

Speaker 5

The feedback that we've been receiving was just really overwhelming. I do both one of my e mails here from one of our clients. It's a fantastic tool, saves a lot of time. I use Checkatrade, DMV in my day to day tasks. The time it takes to summarize a small business goes from 10 to 15 minutes to seconds.

Speaker 5

We have other ones that just go on and on, but something normally taking hours that's done in minutes. So it's a really big time saver. It's very positive. We're seeing that the benefits of it internally as well as we do work. But the part that so I'd say the response has been better than we expected from our Itera pilot.

Speaker 5

And then there's other aspects of it which we really didn't see coming. And so many of the clients like I said, we've been over a couple dozen clients in the pilot. Many of them are asking if they can give us their 1st party client data. And so the power of that is we have obviously our data, we have their other 1st party data that they add to it. And now with us posting that data, we think 3 things happen.

Speaker 5

1, 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, right, which we can create and innovate more and more new ideas. So it's really off to a great start.

Speaker 5

And like I said, we couldn't 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 without a charge. And so really what it'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 test and get everyone in it and really understand all the possible things we can do.

Speaker 5

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 aggressive price increases with the relationship in general. But it's been a winner for us so far out of the gates. And like I said,

Speaker 2

I'm really proud of the

Speaker 5

team and their ability to focus on this and so many other things that are going on.

Speaker 3

Great. Thank you very much.

Speaker 5

Thank you.

Operator

The next question comes from George Tong with Goldman Sachs. Please go ahead.

Speaker 10

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?

Speaker 5

This is George. I'd say a couple of things. So and there could be different buckets. I said one bucket I think is the process that we're in and some of the additional questions from clients some wait and see as to what happens in this process. I'd say internally what we can do is really continue to drive our so if we think about ChatDnB as an example, there's real efficiency gain there.

Speaker 5

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 do more and engage more with us. The other is as we look at clients that have many data providers, we're approaching them about consolidating all their vendors into 1, one being us and saving money, 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 an excuse. We're always looking at ways to push through it.

Speaker 5

And so those would be the things I think that I focus on. Brian, do you have anything?

Speaker 2

Yes. And George, I think certainly we talked about one thing that I was placed on was the Fed took the first step right in the 50 day rate cut, right? So that was definitely on the opposite side 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 move towards, I think, a longer term terminal that both believe 2,750, So all those things as you get a little bit more clarity and less ambiguity, they help, I think, ease into better buying decisions, touching up those sales cycles and real from this environment.

Speaker 10

Got it. That's helpful. And then you're expecting organic revenue growth in 4Q to accelerate toward

Speaker 4

the high end

Speaker 10

of the full 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 rate next year that might cause it to deviate from what you're going to expect in 4Q?

Speaker 2

Yes. This is George. If you look at it, clearly, we'll get through the end of the year. Q4 is always a time for us to close out, right, a lot of sales, a lot of renewals, etcetera, from that perspective. And so we'll clearly issue formal guidance in February as we get out of earnings call from that perspective.

Speaker 2

We've said it before, like the quarter is not always a perfect no quarter in the year is a perfect kind of jumping off point. But if you think about how we've talked about our progression right into our medium term guidance ranges, we've talked about getting things resolved around some of the 10% of the business that hasn't been necessarily performing relative to the other 90%. I mean those are all the things that as we think about transitioning from 20 points to 25 and continuing to improve the business, right. So that's how we think about it versus any given quarter kind of being the jumping off point from that perspective.

Speaker 10

Got it. Very helpful. Thank you.

Speaker 5

Thanks, George.

Operator

This concludes the question and answer session. I would like to turn the conference back over to Anthony Jafoor for any closing remarks. Please go ahead.

Speaker 5

Thank you. As always, I'd like to thank my Dun and Bradstreet colleagues for all their efforts in growing this great business, our great clients who help us with the partnership and guidance and for all of you for your interest in Dun and Bradstreet. I hope you have a wonderful rest of your day.

Operator

This concludes today's conference call. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
Dun & Bradstreet Q3 2024
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