Dun & Bradstreet reported GAAP revenue up 6% year over year, after the effect of foreign exchange (up 7% before the effect of foreign exchange). As Adjusted revenue up 5% year over year, both before and after the effect of foreign exchange, and organic revenue up 2% year over year.
“I’m very pleased with our execution in the quarter which enabled us to close a couple of large new business deals earlier than expected and exceed our revenue growth expectations,” said Bob Carrigan, CEO of Dun & Bradstreet. “We continue to see good growth from some of our newer offerings and continue to make progress against our growth strategy.”
Deferred revenue for the Company as of June 30, 2016 was $630.5 million, up 5% year over year; Americas was $541.8 million, up 7% year over year and Non-Americas was $88.7 million, down 4% year over year. After adjusting for the effect of foreign exchange and the impacts of the write-down of deferred revenue due to purchase accounting, total Company deferred revenue was up 3% compared to last year; Americas was up 4% and Non-Americas was down 2%. Committed sales through Alliance partners would have added one point of growth to total Company and Americas deferred revenue.
Second Quarter 2016 Segment Results
Americas
- GAAP revenue of $329.1 million, up 9% year over year both after and before the effect of foreign exchange; As Adjusted revenueof $329.6 million, up 7% year over year both after and before the effect of foreign exchange; organic revenue increased 2%;
- GAAP operating income of $83.7 million, up 24% year over year; As Adjusted operating income of $90.8 million, up 17% year over year.
Non-Americas
- GAAP revenue, As Adjusted revenue, and organic revenue of $69.7 million, down 4% year over year after the effect of foreign exchange (down 1% before the effect of foreign exchange);
- GAAP operating incomeof $14.2 million, down 24% year over year. As Adjusted operating income of $14.5 million, down 22% year over year. The operating income decline was driven primarily by the decline in revenue.
Activates Partnership Model in Latin America and Benelux Regions
Dun & Bradstreet today announced it is shifting its businesses based in the Latin America and Benelux regions to a Worldwide Network (WWN) partner model by entering into definitive agreements to divest the domestic operations in those regions. These developments are in support of Dun & Bradstreet’s global data strategy and customer-centric approach built on having the best data in every market, whether by Dun & Bradstreet direct ownership or through a WWN partner.
CB Alliance, a current Dun & Bradstreet WWN partner and owner of Dun & Bradstreet Israel, has agreed to acquire Dun & Bradstreet domestic businesses in the Latin America region. Separately, we are selling our domestic businesses in the Benelux region to a financial investor in the process of closing on the acquisition of Altares, our current WWN partner in France. Altares, a leading enterprise data company, will then operate the Benelux businesses. Both partners have agreed to invest in local data quality and solution innovation, while leveraging key Dun & Bradstreet brand assets.
“We’re optimizing our overall global strategy,” said Bob Carrigan, CEO, Dun & Bradstreet. “By leaning into a business model that has a proven track record of success around the world, we’ll not only provide customers with the best local data and expertise, but we’ll exercise the full potential and agility of our business model – comprised of owned, JVs and partner markets – to improve the execution of our growth objectives.”
Both transactions include long-term commercial agreements that provide our partners with access to key Dun & Bradstreet assets, including global data, brand usage, consulting and technology services. The aggregate value of both deals, inclusive of upfront consideration of $39 million and ongoing fees, is in excess of $200 million. Both transactions are expected to close by the end of September and are subject to ordinary closing conditions.
The transactions are expected to be accretive to operating income and EPS in 2016 and 2017. Upon closing the transactions, Dun & Bradstreet expects to record a non-cash GAAP loss of approximately $88 million, driven entirely by accumulated currency translation.
Organic revenue growth is not impacted by the transactions. Dun & Bradstreet provides organic revenue, which is defined as total revenue less Acquisition revenue (revenues from acquired companies for one year post acquisition) and Net Divested revenue (historical revenues from divested businesses net of ongoing future revenue streams). The Company believes organic revenue growth is a helpful measure of the underlying performance of its operations.
In connection with the announced divestitures of the domestic operations of the Benelux and Latin America operations, total revenue on an annual basis is expected to decrease by $33 million – representing the portion of revenues generated in these markets that will not recur. For the balance of fiscal year 2016, the projected impact to total revenue is estimated to be approximately $6 million.
See attached Schedule 7 for additional details regarding revenue post divestiture.
Full Year 2016 Guidance
- As Adjusted organic revenue growth unchanged at 1.5% to 3.5%, before the effect of foreign exchange;
- As Adjusted total revenue growth unchanged at 4% to 6%, before the effect of foreign exchange;
Accrual for Legal Matters
During the second quarter of 2016, Dun & Bradstreet accrued a net, aggregate amount of $26 million in connection with two previously disclosed outstanding legal matters. The first matter relates to a litigation alleging violations of the Telephone Consumer Protection Act for which we have reached a settlement in principle, although no agreement has been finalized. The second matter relates to the ongoing investigation by the Securities & Exchange Commission and the Department of Justice of past actions in our China operations. The amount accrued for this matter relates only to a possible disgorgement in connection with the SEC’s investigation, although no agreement has been finalized, and additional amounts may result should either the SEC or the DOJ seek to impose additional fines or penalties. The $26 million accrual for these matters impacted GAAP operating income and GAAP diluted earnings per share in the second quarter.
