Dun & Bradstreet - Q1 2023
May 4, 2023
Transcript
Speaker 0
Morning, ladies and gentlemen, and welcome to the Dun and Bradstreet First Quarter 2023 Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, May 4, 2023. I would now like to turn the conference over to Sean Anthony, VP, Corporate FP and A.
Please go ahead. Thank you. Good morning, everyone, and thank you for joining us for Dun and Bradstreet's financial results conference call for the Q1 of 2023. On the call today, we have Dun and Bradstreet's CEO, Anthony Jabbour and CFO, Brian Huebscher. 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 and uncertainties. The risks and uncertainties that forward looking statements are subject to are described in our earnings release and other SEC filings. Today's remarks will also include references to non GAAP financial measures. Additional information, including the Reconciliation between non GAAP financial information to the GAAP financial information is provided in the press release and supplemental slide presentation. This conference call will be available for replay via Dun and Bradstreet's Investor Relations website at investor.
Dmb.com. With that, I'll now turn the call over to Anthony.
Speaker 1
Thank you, Sean. Good morning, everyone, and thank you for joining us for our Q1 2023 earnings call. On today's call, I'll start with a brief overview of our Q1 results, followed by an update on our operational activities and progress towards our strategic initiatives. After that, I'll pass the call over to Brian for an in-depth review of our results and to discuss our expectations for the remainder of 2023. We'll then open up the call for Q and A and I'll finish up with a few closing comments.
With that, let's get started. Our first quarter results demonstrate the continued progress we are making and the strength and resiliency of our business model throughout the world. We exceeded our communicated expectations by delivering 3.2% revenue growth on an organic constant currency basis as customers and prospects continue to rely on DNB's mission critical solutions to help them navigate this challenging business environment. Beginning with North America, we grew just over 2% despite this being the final quarter that included the impact from 3 full months of the GSA contract expiration. Excluding the impact of the GSA, North America revenues grew 4% with solid performance in both our Finance and Risk and Sales and Marketing solutions.
On the Finance and Risk side, Our risk solutions drove high teens growth as companies continue to look at ways of driving a more real time AI driven approach to assessing and monitoring the 3rd party and supply chain exposure. As we continue to expand the magnitude of our existing data and add new and alternative datasets to further extend our offerings into areas such as fraud, cybersecurity, climate and ESG, We're positioning ourselves to land and expand through a variety of use cases within clients' risk, compliance and underwriting departments. For example, we recently expanded our ESG rankings data coverage across public and private companies from 42,000,000 to 74,000,000 in 185 countries, reflecting the latest Sustainability Accounting Board Standards. This expansion further strengthens Dun and Bradstreet's position in the ESG space as organizations seek to make sustainable decisions with confidence. We are also bringing in new real time financial data sets into our data cloud.
An example of this It's payments transaction data that allows us to blend near term transactional behavior with longer term trends, creating a unique perspective on the financial profile of an entity in ways that have never been done before. These new analytics are enhancing our proprietary data cloud and through the use of our latest artificial intelligence driven algorithms, We are further extending our leadership position in the decisioning of commercial credit and embedding ourselves even more deeply into the most mission critical Finance Decisioning Workflows. Finance Solutions continue to have strong retention rates and is benefiting from the impact of price increases as we look to optimize our contracting and pricing structures. Overall, our Finance and Risk Solutions in North America grew 2.5%, excluding the GSA impact, which is right in line with our expectations for the start of the year. Within North America sales and marketing, We are seeing continued progress in our financial results from the ongoing transformation and investments in the solution set.
We delivered over 5% organic growth in the quarter, driven by our master data management and digital marketing solutions. Improvements to solutions like Hoover's have driven retention rates from the 70s to nearly 90%, turning them from headwinds to tailwinds and are allowing the benefits of our transformation efforts to be realized in our financial results. As we continue to resolve a shrinking group of legacy underperforming assets in our portfolio, it allows us to show the true We have been building in our sales and marketing suite. We also continue to innovate new solutions, which further support our now 20% vitality index in North America. In the Q1, we launched a mid market version of DNB Connect That includes a self guided user interface, which brings most of the benefits of Master Data Management to medium and smaller sized companies with limited tech complexity.
CMB Compliance Intelligence Engine, which created smart workflow integration to seamlessly onboard and monitor third parties from cradle to grave. And we are launching our SMB Navigate portal, which builds upon the foundational improvements to our SMB ecosystem, such as the website consolidation and shopping cart enhancements we have made over Whether it be our partnership with Lendio, allowing SMBs access to capital in a quick and efficient manner, Improve the visibility into their commercial credit profile through connectivity into Plaid or our latest partnership with Accelerate Tax that helps small business garner tax credits and incentives. We are committed to working hard to assist small businesses become big businesses. On the North American sales front, we saw examples of our momentum in both finance and risk and sales and marketing. On the finance and risk side, we had a strong quarter of expanded renewals and new solutions up sales.
1 of our largest and most tenured customers, an American based multinational technology company signed another multi year renewal. This company is a great example of a sophisticated global firm that utilizes our DUNS and hierarchy master data management capabilities as a keystone for their finance and risk and sales and marketing solutions throughout their organization. While other providers attempted to compete based solely on price, our differentiated solutions, data and analytics clearly won out. We saw a similar outcome with 1 of the largest automotive manufacturers in the world. Like many auto manufacturers, they face the need to invest significant capital into the electronic vehicle market, while simultaneously balancing the financial challenges arising from a global economic downturn.
With the mandate to reduce third party spend, Their procurement organization explored ways to reduce their spend with us just as they would with the rest of their vendor relationships. However, due to the criticality and value we deliver, they ultimately concluded that these scoping services would have a direct negative impact on their operations and ultimately decided to maintain and expand the relationship. Through our master data management capabilities powered by the DUNS number, We allow companies like them and tens of thousands of others to operate during all economic cycles. Now turning to our International segment, we saw another quarter of solid 5.5 percent organic growth in the quarter. Our vitality index increased to 28% in the quarter and with all markets growing at or above our internal expectations.
We saw the United Kingdom and Ireland produced just under 10% growth in the quarter as demand for our modern finance and risk solutions remained elevated. We also saw continued steady improvement in Europe as the business grew 4% in the quarter with balanced growth across the region. Asia came in with low single digit performance, which was expected as the market is dealing with some hangover from the lockdown impact in 2022 that affected 2022 sales and 2023 revenues. As the year progresses and sales pick up, We expect to see the revenues flow through and acceleration in those regions to complement the strength in our UKI and Europe markets. Overall, the performance is on track and we continue to see the benefits of the disciplined investments in our international markets.
On the sales front, the International segment continues to focus on landing and expanding more and more enterprise clients in the regions. Deutsche Bank, one of the largest financial institutions in Germany, added a compliance solution to their portfolio that is allowing them to better understand their 3rd party This is just one example of what we saw throughout the quarter in terms of strong demand for these solutions. The Cabinet Office of England engaged us for our compliance data blocks APIs. Public sector entities like the Cabinet Office also have the need to understand who they are doing business with and how the linkage to certain individuals, entities or countries could impact the way they view potential risk with doing business with said companies. We also saw another strategic win with a top 4 bank in China.
This new data driven win was a direct takeaway from a legacy provider and continues to show how our data, solutions and go to market improvements are driving expansion with the largest and most complex organizations in the region. Along with the ongoing results and sales executions, We continue to focus on progressing against the strategic initiatives we laid out during our Investor Day earlier this year. On the technology side, we have made significant progress to start off the year. For instance, on the infrastructure side, We migrated one of our largest and most complex sales and marketing applications to our Google Cloud infrastructure. This migration has been underway for months and culminated in a near seamless transition that has resulted in significant improvements to the application's performance, throughput and stability.
We also made significant progress in terms of our ongoing modernization efforts by reducing our reliance on mainframe hardware by 50%. We have significantly reduced our use of mainframe applications and have a clear path to bringing that down to 0 over the next 2 years. These are just a few examples of the many ongoing initiatives we have underway, which reflect our continued discipline, commitment and execution to making the changes necessary to support the long term and sustainable change at EMB. We also made significant enhancements to our data supply chain through architectural enhancement as well as cloud migration efforts that led to a 50% reduction in processing latency. And while we are continuing to strengthen our foundation, We're also using cutting edge advancements to extend and expand our analytics capabilities.
In terms of linkage and matching, We have the most advanced business to business capabilities in the world. To further extend that lead, we're now leveraging GPT to drive enhancements in our global matching processes, which create efficiencies and in some cases incremental advancements in our match rates. We also have 3 proof of concepts in place related to new business discovery, new contact discovery and employment counts for private businesses throughout the globe. It's early stages now, but through taking a measured approach, We can leverage the power of our unrivaled proprietary business to business dataset combined with GPT and other artificial intelligence advancement to drive more and more value to our customers and prospects. I'll look to update you on all these advancements and the others on future calls.
But in the meantime, know we are hard at work at driving innovation and acceleration each and every day at Dun and Bradstreet. Overall, we're off to a great start to the year, and I'm very pleased with the progress we've made to date. Our ongoing transformational efforts Have helped to offset a more difficult macroeconomic backdrop. We have capitalized on the strong demand for our solutions, drove strong sales traction, maintained excellent profitability and delivered another quarter of solid financial results. With that, I'd now like to turn the call over to Brian to discuss Our financial results for the Q1 in more detail and the outlook for the remainder of 2023.
Speaker 2
Thank you, Anthony, and good morning, everyone. Today, I will discuss our Q1 2023 results and provide an update on our guidance for the remainder of the year. Turning to Slide 1. On a GAAP basis, 1st quarter revenues were $540,000,000 an increase of $4,000,000 or 1% compared to the prior year and 3% before the effect of foreign exchange. Net loss for the Q1 was $34,000,000 for a diluted loss per share of $0.08 compared to a net loss of $31,000,000 for the prior year quarter.
Turning to Slide 2. I'll now discuss our adjusted results for the Q1. 1st quarter revenues for the total company were $540,000,000 an increase of 1% or 3% before the effect of foreign exchange. Revenues on an organic constant currency basis were up 3.2%, driven primarily by increased demand in both our North America and international segments. 1st quarter adjusted EBITDA for the total company was $190,000,000 or flat to the prior year quarter and adjusted EBITDA margin was 35%.
Higher earnings from the increase in organic revenues Was offset by the impact of foreign exchange, which resulted in a $4,000,000 headwind to EBITDA for the quarter. 1st quarter adjusted net income was $81,000,000 or adjusted diluted earnings per share of $0.19 down primarily from the prior year due to increased interest expense. 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 Q1 were $375,000,000 an increase of 2% or 2.2% on an on a constant currency basis.
In Finance and Risk, revenues were $201,000,000 or flat as double digit growth in our 3rd party Supply Chain Risk Management Solutions were offset by the impact of the GSA contract expiration in April of 2022 and lower revenues in our legacy credibility solutions. In sales and marketing, revenues were $174,000,000 an increase of 5%. This was driven primarily by growth in our master data management and digital marketing solutions. North America first Quarter adjusted EBITDA was $151,000,000 and adjusted EBITDA margin was 40%, a decrease of 150 bps from the prior year due primarily to the margin impact caused by the lower revenues from the expiration of the GSA contract. Turning to Slide 4.
In our International segment, 1st quarter revenues were $166,000,000 A decrease of $3,000,000 or 2% and an increase of 5% before the effect of foreign exchange. Organic revenues on a constant currency basis Increased 5.5 percent. Finance and risk revenues for the Q1 of 2023 were $111,000,000 an increase of $2,000,000 or approximately 2% and an increase of 7% before the effect of foreign exchange. There was positive contribution from all markets. European growth was driven by finance analytics and API solutions.
The worldwide network alliances was due to higher cross border data fees and growth from our United Kingdom markets Came from 3rd party in Supply Chain Risk Management, along with compliance solutions as well as finance analytics. Sales and marketing revenues for the Q1 of 2023 were $55,000,000 a decrease of $5,000,000 or 8% and a decrease of 1% before the effect of foreign exchange. Excluding the impact of the divestiture of our German business to consumer business, In the Q2 of 2022, organic revenues increased 2%, primarily due to higher revenues from our U. K. Market driven by higher data sales.
International 1st quarter adjusted EBITDA was $56,000,000 an increase of $1,000,000 or 1%, primarily due to revenue growth from the underlying business, partially offset by higher foreign exchange losses resulting from a strengthening U. S. Dollar. Adjusted EBITDA margin was 34%, an increase of 100 bps compared to the prior year. Turning to Slide 5.
I'll now walk through our capital structure. As of March 31, 2023, We had cash and cash equivalents of $204,000,000 and total principal amount of debt of 3,643,000
Speaker 0
The $3,643,000
Speaker 2
in principle is made up of $460,000,000 of unsecured notes at 5%, which mature in 2029. Term loans of $2,673,000,000 are LIBOR plus 325 That matures in 2026, dollars 455,000,000 at SOFR plus 3.25 that matures in 2029 and borrowings of $55,000,000 under our revolver. The LIBOR based term loan has a $1,000,000,000 floating to fixed swap effective through March of 2024 at 0.467 percent and a $1,500,000,000 floating to fix Swap, which expires February 2026 at 3.695 percent. The SOFR base term loan has a $250,000,000 swap For floating to fixed through February 2025 at 1.629 percent. We also have 3 cross currency swaps $125,000,000 each that settle in July of 2024, 2025 and 2026.
We are currently either fixed or hedged at 88%. We had $795,000,000 available on our $850,000,000 revolving credit facility as of March 31, 2023. Overall, our weighted average interest rate was 5.63 percent as of March 1, 2023. Our leverage ratio was 4.0x on a net basis and the credit facility senior secured net leverage ratio was 3.5 times. Turning now to Slide 6.
I'll now walk through our outlook for 2023. We continue to expect total revenues after the effect of foreign currency to be in the range of $2,260,000,000 to $2,300,000,000 or an increase of approximately 1.6 to 3.4%. This includes an assumption of a headwind in the 1st 3 quarters of the year, partially offset by a tailwind in the 4th due to the effect of foreign currency related to the expected variances between the U. S. Dollar, euro, British pound Revenues on an organic constant currency basis are expected to be in the range of 3% 4.5% for the full year.
As previously discussed, it is important to note that the total and organic growth range Take into account the conclusion of the existing GSA contract at the end of April 2022. The net impact to organic growth The full year is a headwind of 30 basis points, with 110 basis points headwind realized in the Q1. Adjusted EBITDA is expected to be in the range of $870,000,000 to $920,000,000 The adjusted EBITDA range also takes into account the conclusion that the GSA contract and a $5,000,000 negative impact From the strengthening of the euro versus the U. S. Dollar in comparison to the relative flatness of the British pound and Swedish kroner.
Adjusted EPS is expected to be in the range of $0.92 to $1 Additional modeling details underlying our outlook are as follows. We continue to expect interest expense to be approximately $240,000,000 depreciation and amortization expense of approximately $100,000,000 excluding incremental depreciation and amortization expense resulting from purchase accounting. Adjusted effective tax rate of 24%. Weighted average diluted shares outstanding of approximately 433,000,000 And for CapEx, we expect approximately $130,000,000 to $150,000,000 of internally developed software and about $30,000,000 of property, plant and equipment and purchased software. Overall, as we monitor the macro backdrop, it remains consistent with what we anticipated in our original guidance and we expect it and we continue to expect the remaining quarters to perform as previously communicated.
In conclusion, we are well positioned to capture the significant growth opportunities in front of us, and we expect to continue to accelerate revenue growth in 2023 despite a challenging overall environment and the conclusion of the GSA headwind at the end of April. With improving profitability and cash flows, We will also focus on deleveraging the balance sheet and focusing capital allocation strategies on driving increased shareholder returns. With that, we're now happy to open up the call for questions. Operator, will you please open up the line for Q and A?
Speaker 3
Thank you. Ladies and gentlemen, we will now begin the question and answer session. One moment please for your first question. Your first question comes from Seth Weber, Wells Fargo. Seth, please go ahead.
Speaker 4
Hi. This is John filling in for Seth. Thanks for the great color. Could you just maybe give us Some more information on kind of the generative AI and what you're seeing in terms of GPT, just in terms of how we could think about kind of a longer term Kind of realization of the database and the DUNS number just with the enhanced linking and matching capabilities as well as any other potential opportunities? Thanks.
Speaker 1
No, it's a great question, John. And there's obviously a lot of noise about that in the market right now. And there's a lot that we're doing with it currently with our linking and matching on a global basis. And we're seeing efficiencies with that as I shared in my opening comments. We're also doing a number of proof of concepts like I talked about and really leveraging this great technology.
The part
Speaker 0
I want to really highlight,
Speaker 1
fair one, I think it's really Important and people asked me this before. The advantage that we have is we have a lot of proprietary data that we've had for many, many years and trended data and data we manufacture insights that we have. And So for us, we have the ability to bring the GPT inside our firewalls, so to speak, and really leverage the technology around our proprietary data. For companies out there that are just accessing public record databases, ChatCPT can do that as well. And there's not really a differentiation in the space that we have because of like the vast proprietary data lake that we have.
So it's an exciting time certainly from a technology perspective And our teams added and actually worked on the previous version of GPT in our contact Titling segment within our sales and marketing business. So we've been at it for a while. As you'd imagine, we've got dozens and dozens of Patents around linking and matching, it's an area that we're really, really strong at.
Speaker 4
That's great color. Thank you. And maybe also just sticking on the topic of kind of leveraging the data itself, could you talk more about the supply chain as well as the durability of those revenues given the Partnership with ICE and kind of using the KYC, KYV and supply chain within kind of a climate risk offering is unique. How much more runway is there In the overall system? Thank you.
Speaker 1
Yes. We continue to see really strong growth in our risk business and we have For many quarters in a row and we anticipate that we will continue to going forward. It's a very topical Subject and our capabilities are very deep and very broad in that space. And so We're constantly looking at additional insights to help drive the risk of supply chain. I talked about our ESG GE coverage increasing dramatically.
That's one of the most sought after data sets in our risk analytics business. But as you can imagine, we're constantly looking to drive more and more ways that we can leverage data, acquire data, create new analytics That really helps lower the risk threshold for our clients out there.
Speaker 4
Great color. Thank you, Ken.
Speaker 1
Thank you, John.
Speaker 2
Thank
Speaker 3
you. Your next question comes from Kyle Peterson, Needham. Kyle, please go ahead.
Speaker 5
Great. Thanks, guys. Good morning and appreciate you taking the questions. Just wanted to touch on, I know in December, it seems like you guys had some kind of volume pressure when there was kind of increased macro Uncertainty, have you guys seen any of that either anytime in March or in April kind of in So some of the regional banking kind of crisis and volatility or is everything just kind of continued relatively unabated?
Speaker 1
Yes, Kyle. On the actual Master Data Management volume That we saw the blip in December, it was a blip. Early in the year, we saw it recovering. We continue to see it recovering. Our Wholesales and Marketing business grew organically over 5% and that was one of the areas where it was a tailwind for our growth in that segment.
So we feel really good about that. I'd say on our on the regional bank side in terms of What's going on? That's an area that we have very, very low exposure to. I'd say low single digit percentage of our revenue In that space, we're certainly calling on them with the crisis that's underway. I mean, I'm really proud of our team, how They see a need or crisis and run to it and we're certainly running hard to the regional bank and larger community banks.
That's a segment that typically is focused on commercial businesses and banking. If you think the largest banks in the world have an ability to reach Consumers and credit unions with their tax advantage can reach consumer members there. That regional larger community bank space tends to focus on commercial. And so We've created a lot of new analytic insights that would help improve their underwriting and help identify the risk of what they currently have outstanding, Whether it's our blended score, where we're taking our credit information on the business coupled with the Consumer scores and giving a unique perspective or our work with Plaid that we talked about integrating into the banking accounts and seeing it at a More detailed level and really help assessing the risks that these regional banks have out there right now. But We see it more as an opportunity versus a concern at this stage.
Got it.
Speaker 5
That's really helpful. And then maybe just a follow-up, Any sales and marketing business internationally, has there been any macro pressure On demand in that business or are the headwinds purely from the divestiture of the business in Germany?
Speaker 1
Well, certainly the divestiture in Germany was the key headwind that It was in a space that was really commoditized, not at the heart of what we do and want to focus on as a company and it's been a really good Move for us, I think, from that perspective. But overall, we're excited as we create lots of new capabilities and bring them into our international markets At a faster rate than has ever been done here ever, we're excited about the opportunities in front of us.
Speaker 5
Makes sense. Thanks guys. Nice quarter.
Speaker 1
Thank you, Kyle.
Speaker 3
Thank you. Your next question comes from Andrew Jeffrey, Truist. Andrew, please go ahead.
Speaker 6
Hi, good morning, guys. It's Gus stepping on for Andrew. Just want to talk a little bit on the changes in retention you're How can we move that across the portfolio into other applications? And just talk a little bit on the cyclical impact you're seeing on MDM demand? Seems discretionary marketing is under pressure.
Thanks.
Speaker 1
So the first question is on the improvements that we've made in Hoover's, how we see that Cross, the other parts of our business, when we look we had talked about Hoovers before as being something in need of improvement and that's what we've been working on. Like we had shared previously, it was in the range of $90,000,000 to $100,000,000 in revenues. And again, with the broad transformation that we had underway, This team has been very focused on the big rocks, small rocks, pebbles and sand as they're filling that proverbial jar. And as we worked our way to it, I'm really pleased with the progress that we've been making there. Lots of our businesses, our master data management is very strong.
It's not in need of improvement. What we've been doing there is really adding More and more capabilities like the ones I've mentioned in terms of being able to take that capability more mid market, down market, where we can create a user interface makes it easier to work with it. When we think about our digital marketing, very strong. So you see what's going on in the broader market around ads and marketing and this business has been growing very well for us because we're at the front end of With our programmatic advertising and our digital marketing, we're at the front end of really leveraging the great data we have to make the ads Very, very targeted. And so that's an area that I believe we'll continue to do well at.
We do have like we've talked about some Portfolio $50,000,000 to $75,000,000 scattered of smaller assets that we'll look at transforming and If the juice isn't worth the squeeze divesting of, but like I said, as we've gone through the big Parts of our transformation, it's really around now getting to these smaller ones and putting attention and addressing them. And like I said, we're excited because we'll either transform them and there'll be tailwinds for us Or will the best women not have the headwinds affecting us?
Speaker 6
Great. Appreciate all the great color. Thank you. And could you also talk a little bit on rest of world pricing actions there? Can you talk a little bit how the enterprise sales cycle is doing in pipeline?
Thanks.
Speaker 2
Yes. Gus, I would say, across the board, pricing is something that we continue to use as a lever of growth. On the international side, as you remember, when we took over the Bisnode acquisition, there were a lot of kind of legacy and disparate applications that Niraj and the team spent a lot of time and effort last year migrating them. As we migrate them onto the latest and greatest solutions, Again, clearly a better level of customer engagement, customer satisfaction. And so as those are coming up for renewal, we're applying the same methodology of Taking a price increase, expanding our multiyear contracts and really starting to see the benefits from that perspective too.
So Similar, I would say playbook that we ran where to Anthony's point earlier, a lot of the migration, a lot of the Underlying foundational work we were doing may not have instantaneous impact, but where you see it is Better retention rates, you see it in better ability to take price and it's the same thing we're seeing in international right now.
Speaker 6
Great. Thanks for taking my questions, guys. Thanks, guys. Thanks, guys.
Speaker 3
Thank you. Your next question comes from Heather Balsky, Bank of America. Heather, please go ahead.
Speaker 7
Hi. Thank you for taking my question. I'm on a train right now, so hopefully you can hear me. I'm just I'd like to touch on the AI question again. I'd love to hear from you guys, why you think an upstart can't just take AI, scrape the web And do what you do.
What are your in that regard, what is your competitive mode? Thank you.
Speaker 1
Sure, Heather. The real big differentiator is that we have proprietary data that cannot be scraped and we're not exposing it externally so that it can be scraped. So if anything, we have again more upside than downside Because we're leveraging this technology ourselves to create more efficiency, identify new insights for our clients and owning it and driving it. There are other low cost providers out there that really scrape the web. They scrape Public registries, for example, and scrape what's publicly available.
And yes, a startup leveraging GPT could do that and it could compete in that space. But for us, the big differentiator we have and why we've been so sticky Is the proprietary data and that is really the biggest differentiator.
Speaker 7
Great. Thank you. Appreciate it.
Speaker 1
Thank you, Heather.
Speaker 3
Thank you. Your next question comes from Stephanie Moore, Jefferies. Stephanie, please go ahead.
Speaker 0
Hi, this is Hans on for Stephanie. Thanks for taking my question. On the 3.2% organic growth number. Could you just break out what the split was between pricing, cross sell and new logo wins? And how you kind of expect that split to kind of
Speaker 2
Yes, Hans, thanks for the question. We've talked about this year, for instance, With retention rates holding in the high 90s, right? So we've talked about the mid in that 96%, 97%. They were very strong and consistent within the Q1. So it really starts there.
I think Anthony uses the terminology closing the back door. And you heard what we did with movers, what we continue to do with the solution sets is really strong from that perspective. So When we think about price this year, it moving from starting to approach roughly 2%, right, is the expectation, Right, for 2023. And again, that's kind of blending in some of these new pricing initiatives that we're dropping in, right. And as the Renewals come up throughout the year.
You'll see that 12 month flip over into the price increase and that will continue to contribute more and more throughout the back half. On the cross sell, upsell, a lot of the deals that we were doing last year, In the Q3, Q4, etcetera, those are flowing through. And so as we build up each and every year, it's really a waterfall from that perspective. So overall, again, nice driver from price, continued expansion from A net revenue perspective with the cross sell and upsell, and then it's been really continuing to close that back door and allowing the New innovations in the new solutions to shine through that's been driving the growth. I think we mentioned we had $5,500,000 the almost $6,000,000 in the Q1 from the GSA that drops to 2 right in April of the Q2.
And then we've lapped that and are kind of moving on from that perspective. So Again, really good start to the year and look to continue to progress as the year progresses.
Speaker 0
Got it. That's helpful. And then, I guess, what percent of revenues are under long term contracts? Know you guys have seen some good improvement there over the years, but just for the quarter, if you could remind us what that was?
Speaker 2
Yes. So multiyear contracts we talked about are now over 50%. So I think it's this quarter exactly about 53%. Yes.
Speaker 1
And what we're seeing, Hanh, is clients wanting to sign up for longer term. So Our 4 year contracts that we've been signing right now are even up significant. I think they're up strong double digits. So really it's a great indicator for us that our clients really see us as a strategic partner, want to stay with us, do more with us over a longer period of time. And so again, the great thing is over that 4 year longer period now, we have more time to cross sell and up sell new capabilities and help them versus constantly revisiting the renewal conversation.
All while helping to get pricing escalators.
Speaker 0
Yes. Got it. Thank you.
Speaker 3
Thank you. Your next question comes from Andrew Steinerman, JPMorgan, Andrew, please go ahead. I apologize. Your next question is actually from Faiza Alwy, Deutsche Bank. Faiza, please go ahead.
Speaker 8
Yes. Hi. Thank you and good morning. So I wanted to follow-up on a couple of things. One is, The divestitures that you sort of alluded to, I know you made one divestiture in Germany.
Talk to us more about what we should expect from here? How are you approaching These divestiture decisions, what's the timing of this and maybe dimensionalize maybe what percentage of your business is I don't know if on notice is the right phrase, but a bit more color would be helpful there.
Speaker 2
Hey Faiza, sure. As Anthony said, we kind of look at all these things as boulders, rocks, Pebbles and sand, right? And so we're now moved through a lot of the boulders and rocks and there's probably Around kind of $50,000,000 $75,000,000 of these assets that are Headwinds for all intents and purposes. And so what we're looking at similar to what we looked at Hoover's is, okay, 1st and foremost, the best outcome for us is to transform, Right. Take it from a headwind to a tailwind through some investment, through some modernization, etcetera.
But if we look at something and it's not strategic or it's we said the juice is not worth the squeeze, then that's where would come into play. We're always mindful in terms of divestiture and certainly of sundowning or shutting off an application Is that we do run a quite leveraged data cloud, a very leveraged infrastructure. And we want to make sure that the cost And the EBITDA impact and the revenue impact is going to be commensurate with what it will be doing from the revenue side. So again, these are products that Maybe are in the range of $10,000,000 $15,000,000 the largest being maybe $25,000,000 $30,000,000 But it's a very kind of small contained set from that perspective that we're just evaluating in terms of Is it worth the investment to an attention to transform? Or is it something that we could kind of easily offload, Take the cash from that perspective and then use it to deleverage or allocate capital otherwise appropriately.
Speaker 8
Great. That's very helpful. And then as a follow-up, I wanted to get a sense of what you're seeing from your Small Business customers, I know you have large exposure to those types of customers and a pretty big penetration opportunity, But curious how things are trending with your current customers that maybe fit that bucket?
Speaker 1
Well, certainly in the small business area, that's a group in a segment that is You hear many companies mostly concerned about that segment, how they'll perform in this macro environment that we're in and that we're arguably heading into. And for us, the growing majority of our revenues are around enterprise clients versus small. What I'd say with the SMB base and what I'd say broadly for all of Dun and Bradstreet is There's a headwind that's out there and there's a tailwind that we have with our transformation that we have underway. And the force from our transformation is helping significantly with the macro And again, on a company basis, you've seen lots of companies struggle in this environment and we continue to grow and accelerate our growth year over year. And a lot of it is our transformation.
Similarly with small business, that's what's going on. There are headwinds out there with them certainly, but we've launched A lot of new capabilities in the space, we've talked about some of the partnerships that we had in my prepared remarks for us to help small businesses become stronger. We've seen significant growth in our e commerce 5, which is really tailored towards this SMB segment, we have 2,500,000 subscribers to our DUNS manager, our credit products, 21% increase over last year and over 25% 5 year CAGR. So There's a lot of good work that we have going on as part of our transformation and how we're focused on that segment and growing it to help offset the macro environment. So it's an area obviously that we got close attention to, Like I said, in this macro environment, but again, we've got a lot of conviction in how we can help in that space and that's where we're putting a lot of effort.
Speaker 8
Great. Thank you so much.
Speaker 5
Thank you, Faiza.
Speaker 3
Thank you. Your next question comes from Andrew Steinerman, JPMorgan. Andrew, please go ahead.
Speaker 5
Hi, Anthony. I heard your encouraging comments earlier on Hoover's. I was hoping you could just talk a little bit more about it. Specifically, How quickly is Hoover's growing revenues this year? That's one.
And my second question is, how does Hoover's U. S. Professional contact database coverage compared to its top competitor.
Speaker 1
Sure, Andrew. Thank you. What I'd say is On the Hoover's perspective, I'll take the first part, Brian, you could discuss the revenue growth. But lots of great improvement in a couple of areas. One is in terms of our capability and we've created Different versions of Hoover to create a Hoover's essential, for example, to be a smaller targeted approach to hit that SMB segment size that we're just talking about is another example there.
But our the quality of our data has improved We've talked on calls about dramatic increases in coverage and quality and it's an area that, like I said, we're very focused on, But also a very focused approach in our go to market. So having dedicated sellers really focusing on that And also tying in our other capabilities that we have such as our credit and risk, right. So like we said, especially heading into again, If you're always cognizant of the environment that you're in or heading into, in this one, there will be businesses that will struggle. Do you want to spend a lot Sales resources selling into a company like that are not. That's an area where we can help obviously with Our clients being even more focused with their time that they spend here.
And I'd say on the coverage side, That's always a moving target, Andrew, and how we compare it to others in the industry and everyone always talks about that. What I'd say is with particular decision makers At companies, our coverage is outstanding. So, no one compares to us on a business coverage. So identifying if there's a business out there that meets The need of what you're selling and then working down from there, say Canada will have contacts in this business.
Speaker 9
We've got a lot of
Speaker 1
confidence in the quality of our data, business coverage, key contacts, direct dials, emails, etcetera. And like I said, it's a hard one to compare. You get lots of different data points. But what I feel is this significant improvement that we're seeing clearly is a direct result for the improvements and the strength that we have in our data. Got it.
Speaker 2
Yes. And Andrew, in terms of growth right now, this is a, as you know, quite well a solution set that was actually Signing for years. And so for us, part of the story is it's now turning to, I would say, low singles growth at this point, But with some really nice momentum as we see the sales build up in the ARR building faster than that, that we expect for it to continue to accelerate throughout the year. And so again, really great progress. And another component for us strategically as we came into the organization was like, We had some really nice assets in here.
And if we can just get some of these ones that are underperforming, turn them around or even just to get them to neutral, Right. It allows the rest of the components to really shine through whether that's 3rd party risk or master's name management, etcetera. And then the opportunity for U verse to continue to grow and expand and really take off over the next few years is certainly there. So Again, really positive momentum and a lot of great work done by the team. Okay.
Thank you very much. Thank you, Andrew.
Speaker 3
Thank you. Your next question comes from Ashish Sabadra, RBC Capital Markets. Ashish, please go ahead.
Speaker 10
Thanks for taking my question. I just wanted to focus on the North America S and R business. That business grew 5% in 4th quarter excluding the government Solution. So my question there was, is the 2.5% in the Q1 comparable to 5% or are there some more headwinds on the government solution, which are weighing On the F and R business and if it's possible to provide that growth profile for F and R excluding the government solution? Thanks.
Yes.
Speaker 2
Ashish, sure. If you look at the 2 components, 1, the GSA It's about, I said, dollars 5,500,000 $6,000,000 in the Q1. That in of itself is going to weigh heavier on a percentage basis, because the Q1 for us is always the lowest from a magnitude perspective. And then the other component is, if you remember, we're Lapping some of the headwinds from the legacy credibility business. And so that was another kind of couple $1,000,000 that was in the quarter also.
And so those two components were really offsetting the growth that we were seeing. As Anthony said, teens growth in the risk business And then kind of low singles on the Finance Solutions side. So when we look at that overall, you're talking Closer to being more in the 4% ish range, right, than you were the flat when you think about The two pieces that were driving that, which were mainly the GSA side, but also a little bit of that credibility, which was impacted by the Consent order from last April.
Speaker 10
That's very helpful color. And maybe just a quick question on the European business or the Legacy, this note, I was just wondering if you can comment on the progress of migrating all the legacy applications to the DNB. And then obviously, there was a reference to the large financial institution when in Germany was that also on the new applications that you've introduced in the European market. Thanks.
Speaker 1
Sure. Yes. Thanks, Ashish. Really, really proud of the great work our team there is doing with the European markets and lots of migration work Underway there, they migrated thousands and thousands of clients and you see it in the vitality index, right. It's just Almost 28%.
And as you know, the vitality index, they don't keep creeping up to get to 100 eventually because It's the last 4 years of new solutions. And so having a score that ranges is really exciting. And the team there is focusing on larger enterprise clients, like growing with the winners. And Our penetration into large device is with our newest offerings that we're bringing to market. And it just gives us, like I said, Number 1, a more modern solution for us to sell into, which helps us with our renewals.
It helps us It's modularized, so it's easy to sell components within those suites, the finance analytics or risk analytics, for example, adding a component to it to Make it more easy for our clients to buy and digest and integrate and implement the solution. So I couldn't be more proud of really and our vitality index in North America was over 20% as well. So a lot of great work, like I said on previous calls. I'll say unsung work in some ways where you do a lot of effort migrating to a new solution where there's not an immediate bump in revenue, But you put yourself in a great position to grow and we're seeing obviously lots of green shoots from that growth, from having longer relationships with our clients, etcetera, so.
Speaker 10
That's great color. Thank you.
Speaker 1
Thank you, Ashish.
Speaker 3
Thank you. Your next question comes from George Tong, Goldman Sachs. George, please go ahead.
Speaker 9
Hi, thanks. Good morning. You maintained your 2023 organic revenue growth guide of 3% to 4.5%, which is a relatively wide range. You now have 1 quarter of Under your belt, where in the range do you think you're currently tracking toward given current momentum in the business?
Speaker 2
Hey, George. I think we talked about really being consistent in terms of our expectations since Really the earnings call back in February, we had anticipated, I think, a pretty Challenging macro backdrop from that perspective when we gave the range. And so as you think about the 3% to 4.5%, that kind of 1 point Spread. That was something that again had already taken into account largely what we thought the macro conditions would be. So Very consistent from that perspective and look forward to continuing to execute against our plans.
Speaker 9
Okay, got it. Related to that prior question, can you elaborate on the overall Selling environment that you're seeing, including the state of client budgets and sales cycles, as well as how the selling environment changed Over the course of the quarter?
Speaker 1
Sure, George. It's interesting. Overall, I'd say it's pretty Common, pretty stable. We had talked about lengthening of sales cycle shrinking. In Q1, we saw it shrinking a little actually And then later in the quarter, lengthening a bit, but overall about the same.
So it's one where really wouldn't highlight any of the small Nuances. And again, I feel the transformation force that we have It's very different. So of all the companies out there that have been running perfectly, there's a macro force that hits them and it slows it down. And for us, we hadn't been running perfectly, right? We had an imperfect company that we're focused on making perfect.
And the force that we see from our transformation, it helps us to offset a lot of the headwinds It helps us to offset a lot of the headwinds that are out there in terms of budgets and sales cycles. But having More solutions, having structure in our contracts that helps from a growth perspective, new capabilities that can help our clients. As I shared in our prepared remarks, we've had clients that came said, hey, I need to cut my budget. And as they work through it with us, The scoping or taking any of the services would hurt them more than if they didn't do it. And so we've just got some really great mission critical Capabilities that we're really partnering well with our clients, we're servicing our clients better than we've ever serviced them, adding more value and capability.
And That's where I've asked our team just to stay focused on is not the macro environment. What can we do every day to help our clients be better? And it's resulting in positive growth where I think otherwise it'd be more challenged.
Speaker 9
Very helpful. Thank you.
Speaker 2
Thank you, Tore. Thanks, Tore.
Speaker 3
Thank you. Your next question comes from Kevin McVeigh, Credit Suisse. Kevin, please go ahead.
Speaker 10
Great. Thanks so much. Hey, Anthony, maybe taking the other side of that or Brian, are you seeing anything in terms of Incremental demand from the infrastructure stimulus that's starting to surface in terms of maybe client activity that you call out?
Speaker 2
Yes. So Kevin, I think what we're Seeing is just a continued focus on the things that we thought it would be, right? So on the financial risk side, I mean, that large European entity went into a supply chain and third party risk product, right. Seeing strong brand for master Data management, right, really understanding what the risk exposure is, really taking this time. But sometimes when things are flying 100 miles Down the highway that you don't actually start to think about, okay, what's your longer term data strategy?
Because look, that is a critical thing as we move forward, right? Lot of these advancements in technology, a lot of these advancements in AI, etcetera, they're all great, but like if you don't have the proper data, Right. And the proper proprietary data especially, that feed into it, those are just kind of empty shells. And so for us, We're definitely seeing businesses get savvy and smart in terms of wanting to have strong MDM tools, wanting to have Strong analytics on both the finance and risk and sales and marketing side. Sales and marketing side, Kevin, what we're seeing is that, that kind of, I guess they called Spray and pray, right, is not necessarily an advantageous Strategy during the time period where they have to be more focused, they have to have higher returns.
So things like our audiences, our data sets up That feed into these online and other digital means from an advertising perspective, We're quite strong from that perspective and you see that in the high single digit growth that we talked about in those solutions. So Yes. I think overall, it's one of those things that we're kind of balancing, as Anthony would say, some of these macro Challenges with our ongoing transformation and that's what's leading us to continue to be able to progress and accelerate our growth in 2023.
Speaker 10
Seems like it's coming together at the right time for sure.
Speaker 3
Okay. Thank you. There are no further questions at this time. I would now like to turn the call over to Anthony Jabbour for closing remarks.
Speaker 1
Thank you. As always, I'd like to thank my Dun and Bradstreet colleagues for their exceptional efforts in helping us be stronger and stronger every day. And like to thank our great clients for the partnership and guidance. Thank you for your interest in Dun and Bradstreet, and have a wonderful rest of your day.
Speaker 3
Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect