Dun & Bradstreet Corp. (
reported first-quarter 2014 earnings of $1.55 per share that
surged 14.0% from the year-ago quarter and comfortably beat the
Zacks Consensus Estimate by 24 cents. The beat reflects
better-than-expected operating results driven by strong growth in
Revenues (including divestiture of $0.1 million) remained almost
flat on a year-over-year basis at $381.9 million, which missed
the Zacks Consensus Estimate of $385.0 million. Core revenues
(excluding divested business) remained almost flat year over year
at $381.8 million.
North America disappointed in the quarter, as core revenues
declined 1.5% from the year-ago quarter. Risk Management
Solutions - North America revenues declined 1.6% year over year
while Sales & Marketing solutions - North America fell 1.3%
from the year-ago quarter.
Revenues from DNBi subscription plan in North America declined
4.0%, while non-DNBi subscription plans plunged 9.0% from the
year-ago quarter. This was partially offset by 7.0% revenue
increase in Projects and Other Risk Management Solutions.
Sales & Marketing solutions - traditional revenues declined
6.0% from the year-ago quarter, partially offset by 2.0% revenue
growth in VAPS.
D&B's International business segment performed well in the
quarter, with revenues increasing 6.0% year over year, driven by
9.0% revenue growth in Europe & Other International markets
and 2.0% growth in Asia-Pacific.
Risk Management Solutions - International revenues increased 6.0%
year over year, while Sales & Marketing solutions -
International were up 8.0% from the year-ago quarter.
Overall, core revenues from Risk Management Solutions increased a
modest 0.8% year over year. However, revenues from Sales &
Marketing solutions remained almost flat with the year-ago
Total operating costs as a percentage of revenues increased 120
basis points (bps) from the year-ago quarter, driven by higher
operating expense (up 50 bps) and selling & administration
expense (up 130 bps), which fully offset a lower depreciation
& amortization expense (down 60 bps).
Segment operating margin (prior to corporate expenses) contracted
50 bps to 26.4% in last quarter. North America - operating margin
plunged 240 bps primarily due to lower revenues. However,
International - operating margin expanded 530 bps driven by
strong growth in both Asia-Pacific and Europe & Other
International market operating margins.
Overall, operating margin declined 120 bps from the year-ago
quarter to 22.9%, due to modest revenue base and higher operating
expenses in the quarter.
Net income on a GAAP basis was $85.3 million or $2.26 per share
compared with $52.9 million or $1.29 per share in the year-ago
quarter. Including restructuring charges ($3.4 million), legal
and other professional Fees and shut-down (Costs) recoveries
related to matters in China ($0.2 million), effect of legacy tax
matters ($30.7 million) and after-tax impact ($27.1 million),
non-GAAP net income was $58.2 million.
Balance Sheet & Cash Flow
D&B ended the quarter with $268.3 million in cash and cash
equivalents, up from $235.9 million in the previous quarter.
Total debt was $1.51 billion versus $1.52 billion at the end of
the preceding quarter.
During the quarter, D&B repurchased 0.8 million shares for
$85.0 million under its discretionary repurchase program. Free
cash flow was $148.5 million in the first quarter.
D&B announced that it has acquired cloud-based analytics and
business intelligence provider Indicee. However, the company did
not reveal the terms of the transaction. Indicee develops apps
that can be used to analyze sales and Salesforce chatter. The
company has a strong clientele that includes the likes of
Maxim Integrated (
Most recently, D&B acquired the social data matching business
of Fliptop, which maintains database comprising unstructured data
by aggregating social data and public web. It then makes use of
data science to extract information from these unstructured data.
D&B reiterated full-year 2014 outlook. Core revenues are
expected to remain almost flat or increase 3.0% before the effect
of foreign exchange. However, operating income is expected to
decline 5.0% to 9.0%, before non-core gains and charges.
Earnings per share are expected to decline 1.0% to 5.0%, before
non-core gains and charges. Free cash flow is expected to be in
the range of $250.0 to $280.0 million for the full year.
We believe that D&B's high-margin business model, strong
international growth potential, international growth
opportunities, strategic investments, partnerships, accretive
cloud-based acquisitions and aggressive share buyback will drive
We believe that partnerships with the likes of
, SugarCRM and FirstRain will help the company to expand its
data-as-a-service model, which in turn will boost top-line
growth. We also expect the company to pursue strategic
acquisition that will boost its position in cloud-based
However, weak guidance remains a concern. Increasing competition
from companies such as
Equifax Inc. (
will continue to hurt growth in revenues and profitability in
2014. Moreover, higher debt level remains a concern.
Currently, D&B has a Zacks Rank #3 (Hold).
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