Dun & Bradstreet Earnings Call Nuggets: Front-Weighted Investment and Daas Opportunity
Andrew Steinerman – JPMC: I wanted to ask about how much of the investment (of course), so these are the new product investments, the new analytics investment is front-loaded into the first half of the year. You’re kind enough to give how much investment it was here separately in the data supply chain in the first quarter, but I’m asking about how much investments are there in the other areas that are front-weighted?
Richard H. Veldran – SVP and CFO: Sure. Let me take that Andrew. Let me first take it up to the full year, and then let me bring it back into the quarter, because I think that will give you the most visibility to it. As we mentioned in the last call and the call just now, the first half of the year, there is a couple of dynamics going on and you’ve got the daily supply chain, you also got the higher level investment versus last year, but you also have re-engineering that ramp over the course of the year. So from a full year standpoint, you can expect the negative three to negative six. We expected the first half to be down in the low double digits and that’s what you see. Versus last year, if you go back into our spending pattern, we really began to ramp up investment in the second half. So we didn’t have that much investments relatively speaking in the first half of the year. So that’s why you see the big spike in the first half and then it will level out to a degree going forward.
Andrew Steinerman – JPMC: I’m asking if you’d be willing to be asked specific in dollar terms a very specific and …
Richard H. Veldran – SVP and CFO: Let me give it to you this way. If you take our overall cost increase in North America in the first half, we were up about $14 million. About $6 million of that was due to the data supply chain; the rest of that was much higher investment, partially offset by reengineering. Then as you go forward, the investment will come down a little bit and reengineering will go up and you will get an expansion in the margin. I won’t give you specific numbers but that’s the pattern…
Andrew Steinerman – JPMC: Rich, what should we use for share count to consider the guidance?
Richard H. Veldran – SVP and CFO: Yeah, so we ended the quarter at (39.947). So hopefully that can help you with your modeling.
Andrew Steinerman – JPMC: Right, so to get to the 8% to 11% you could use that number, 8% to 11% EPS growth?
Richard H. Veldran – SVP and CFO: So that’s where we ended. For the full year, I am not going to give you guidance on specifically what we’ll spend this year. As you know, we will complete our program $1 billion by mid-2014 as we’ve said, but I never talk about specific strategies with any given quarter.
Andrew Steinerman – JPMC: Right. But just to be clear, Rich, the 8% to 11% EPS growth assumes additional share buyback, right?
Richard H. Veldran – SVP and CFO: Of course.
Shlomo Rosenbaum – Stifel Nicolaus: Good morning, Sara. I will miss our calls every quarter over here.
Sara Mathew – Chairman and CEO: Well, that makes two of us. So we have time right now. Thank you. I appreciate it.
Shlomo Rosenbaum – Stifel Nicolaus: Sir, can you talk a little bit more about some of the initiatives you started a few years ago that we talked about every quarter of the pipeline for DaaS and the salesforce.com relationship. It seems that you guys are starting to innovate it a little bit faster of a clip at least form the amount of new products that you’re talking about. I just want to see how some of the older ones are gaining traction?
Sara Mathew – Chairman and CEO: Sure. I’m going to have Josh take data as a service, which we continue to believe as a very exciting opportunity…
Josh Peirez – President, Global Product, Marketing, and Innovation: Shlomo, based on the uptick we’re seeing on the D&B Direct, D&B 360 and our alliances we’re still very excited about the DaaS opportunity. We believe the strategy represents more than $100 million in revenue for us, even though it will take longer than we originally anticipated. We expect to reach that level in about three years and we’re about halfway there on sales now. So, these are ratable, you’ll see that ramp over time. We see Daas is a great way for us to serve new market needs for our world class insight in data and for us to be embedded in the workflows of our customers. So, we continue to see that opportunity exactly as we’ve laid it out and we are gaining very good traction on that.
Shlomo Rosenbaum – Stifel Nicolaus: So, if I take them collectively you’re right now at a run rate of $50 million in revenue on that.
Josh Peirez – President, Global Product, Marketing, and Innovation: In sales.
Shlomo Rosenbaum – Stifel Nicolaus: In sales, so the difference between the sales and revenue is how many quarters?
Josh Peirez – President, Global Product, Marketing, and Innovation: So these are generally ratable sales they take 12 months to flow-through. So the sales numbers are the number for this year.
Sara Mathew – Chairman and CEO: The simplifying assumption, Shlomo is $100 million of revenue it’s even throughout the year would be about $100 million of sales it’s evenly throughout the year without any seasonality would be about $50 million of revenue. So you get about half of it, because I’m assuming evenly over the course of the year. That’s the way to think about it. It will take a while.
Shlomo Rosenbaum – Stifel Nicolaus: I’m going to pursue that further off the call. Could you also talk about the deferred revenue we had a number, most of last year, I think the deferred revenue was down you finally had – it looked like two quarters where it’s flat. Does it take about four quarters for the North American RMS to catch up to that…
Sara Mathew – Chairman and CEO: That would be about right, because deferred includes both RMS and it also includes Hoover. So it includes all of our subscription products not just DNBi, non-DNBi Hoover. And that in totality, there is a small amount of our marketing products that are also deferred, but that is – you have that about right.
Shlomo Rosenbaum – Stifel Nicolaus: And then I want to go back to a question that Andrew was asking to make sure that I understand it correctly. He said that expenses were up $14 million year-over-year in the first quarter of which $6 million was the MaxCV supply chain and more than the rest was the investment but some of it was offset by reengineering, is that the way to think of it.
Richard H. Veldran – SVP and CFO: Correct, the only other element I’d add is obviously you have other normal cost increases that reengineering helps us. There are things like, to give an example, pension is up $2 million in the first quarter this year, because pension expense tends to go up year-over-year, given the current environment around interest rate, but that is generally correct.
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