Dun & Bradstreet (DNB)

Q2 2011 Earnings Call

July 29, 2011 8:00 am ET

Executives

Richard Veldran - Chief Financial Officer

Manny Conti -

Kathy Guinnessey - Leader, Treasury and IR

Sara Mathew - Chairman, Chief Executive Officer and President

Byron Vielehr - Head of Strategic Technology Investment and President of North America Operations

Analysts

Michael Meltz - JP Morgan Chase & Co

William Warmington - Raymond James & Associates, Inc.

Daniel Leben - Robert W. Baird & Co. Incorporated

Carter Malloy - Stephens Inc.

Peter Appert - Piper Jaffray Companies

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.

Manav Patnaik - Lehman Brothers

Presentation

Operator

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» Dun & Bradstreet Q2 2010 Earnings Call Transcript

Good morning, and welcome to D&B's 2011 Second Quarter Teleconference. This conference is being recorded at the request of D&B. If you have any objections, you may disconnect at this time. [Operator Instructions] I would now like to turn the call over to Ms. Kathy Guinnessey, Leader, Treasury and Investor Relations. Ms. Guinnessey, you may begin.

Kathy Guinnessey

Thank you. Good morning, everyone, and thank you for joining us today. With me on the call this morning are Sara Mathew, our Chairman and Chief Executive Officer; and Rich Veldran, our Chief Financial Officer. In addition, Byron Vielehr, our President of North America; and Manny Conti, our President of International and Chief Administrative Officer will be available to handle any questions you have.

Here's what you can expect on the call this morning. In a moment, Sara will open the call with a brief overview of our second quarter results and an update on our Strategic Technology Investment. Next, Rich will discuss our second quarter performance in more detail, and then Sara will close with a review of our outlook for the remainder of the year. Then Sara, Rich, Byron, Manny and I will take your questions.

To help our analysts and investors understand how we view the business, our remarks this morning will include forward-looking statements. Our Form 10-K and 10-Q filings, as well as the earnings release we issued yesterday, highlight a number of important risk factors that could cause our actual results to differ from these forward-looking statements. These documents are available on the Investor Relations section of our website, and we encourage you to review the material. We undertake no obligation to update any forward-looking statements.

During our call today, we will be discussing a number of non-GAAP financial measures as that's how we manage the business. For example, when we discuss revenue growth, we'll be referring to the non-GAAP measure, core revenue growth before the effect of foreign exchange, unless otherwise noted. When we discuss operating income, operating margin and EPS, these will all be on a non-GAAP basis before noncore gains and charges. A reconciliation between these and other non-GAAP financial measures and the most directly comparable GAAP measure can be found in the schedules to our earnings release. They can also be found in the supplemental reconciliation schedule that we post on the Investor Relations section of our website. Later today, you will also find a transcript of this call on our Investor Relations site.

With that, I'll now turn the call over to Sara Mathew. Sara?

Sara Mathew

Thanks, Kathy, and good morning, everyone. Thank you for joining us. Before I begin, I'd like to take a moment and welcome Rich, Byron and Manny, who are with me on the call today in their new roles. As a reminder, we announced several management changes last month. Byron and Manny now lead execution in North America and International, and Josh Peirez has assumed responsibility for Global Product Marketing and Innovation. These changes are designed to strengthen execution, accelerate innovation and drive sustainable top line growth and shareholder value.

And with that, let me quickly cover our second quarter results. Core revenue grew 6%; operating income grew 2%; EPS was up 10 percent. And we generated $188 million of free cash flow in the first half of the year. Overall, the second quarter played out mostly as expected. International was in line with expectations, and North America was slightly below, due primarily to the sun setting of legacy products, which I will discuss in a moment. We remain on pace to meet guidance for 2011, and Rich will take you through the details on the quarter in just a moment.

Now let me provide an update on our Strategic Technology Investment, which we began early in 2010. We are now about halfway through this project, and we continue to make excellent progress. As a reminder, there were 3 key components of this program: first, a rebuild of the data supply chain to achieve near real-time data; second, a web service layer to facilitate easy access to this data at a much lower cost to innovate; and finally, the migration of customers to newer higher performing platforms while shutting down our legacy systems.

Regarding the data supply chain, we made the decision late in 2010 to insource the build, which is proving to be a very good call. The project is on schedule, and we currently have an unannounced test of real-time data in a couple of products to test the scalability and stability of our new supply chain. The test confirms our ability to deliver real-time data on demand, and we are on track for a mid-2012 cutover to 100% real-time data access across all D&B products.

In addition, our proprietary data collection process has vastly accelerated the identification of new businesses, and we achieved an important milestone in July. We now have 200 million records in our database as compared to 158 million when we started the project in 2010. And that's an increase of 27%. Customers are noticing these improvements, and we expect further improvement when we deliver real-time data across the board in 2012.

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