Dun & Bradstreet Holdings, Inc.

Moat: 3/5

Understandability: 2/5

Balance Sheet Health: 4/5

Dun & Bradstreet Holdings, Inc. (DNB) is a global provider of business data and analytics, offering insights and solutions across various sectors through data, AI, and technology platforms.

Investor Relations Previous Earnings Calls

The moat, understandability, and balance sheet health scores reflect a conservative evaluation to ensure a margin of safety in any assessment.

Business Overview: Dun & Bradstreet operates in the business information services industry, offering data analytics, AI-powered insights, and various solutions to companies globally. Their services primarily include:

Data and Analytics: DNB provides data and analytical insights into risk, finance, marketing, and sales, aiding businesses in their decision-making processes.
Data-Driven Solutions: They offer solutions that help companies manage risk, improve customer relationships, and enhance revenue growth. This includes risk assessment, trade credit reports, and supply chain insights.
Technology Platform: DNB uses AI to create new solutions. They leverage their technology and information to help clients make smart, data-driven decisions, focusing on the quality of their data and their client relationships. They are now working towards transforming their operations via a singular platform that is able to seamlessly provide data for clients.
Global Reach: The company has a global reach and has operations spanning across North America, the UK, Europe, China, India and other international markets.

Revenue Distribution: DNB reports its revenue using two segments:

North America: Finance & Risk and Sales & Marketing data, analytics and insights in the United States and Canada.
International: Finance & Risk and Sales & Marketing data, analytics and insights largely in the UK, Europe, Greater China, India, and indirectly throughout WWM alliance.

Industry Trends and Competitive Landscape:

The business information services industry is characterized by increasing demand for data-driven insights. Clients require more sophisticated and granular data to stay competitive in the current landscape.
Competitively, the industry is becoming more fragmented, with larger players attempting to acquire smaller ones. However, most players are primarily focusing on improving data analytics capabilities and their client relationships.
Companies face risks from rising operational costs, technological disruptions, and data security.
Competitors include global giants and smaller niche companies.
DNB has been focusing on improving organic revenue growth to keep its profitability intact and has been making acquisitions.

What Makes DNB Different:

Global Commercial Data Cloud: DNB claims to be the largest global commercial database in the world, containing information on over 500 million businesses globally.
AI Powered Data Analytics: They are focusing on utilizing AI technology to deliver more valuable insights to clients.
Integrated Data: DNB’s strength lies in the scale, scope, and coverage of its data, which it is aiming to deliver through its new single platform. They also attempt to incorporate customer data and partner data on top of its own data.
Proprietary Analytics and Business Information: DNB’s history of collecting and analyzing business data allows the company to provide insights, credit scores and business information that can be hard to get otherwise.
Long History: DNB’s long history of operations has enabled the company to establish strong processes.

Financials (In Depth):

DNB’s revenue for the first six months of 2023 was reported at $1.19 billion, with 3% growth compared to the previous year, when accounting for constant currency changes.
Adjusted EBITDA margin came in at 33.7% which is down about 500 points year over year, which is mainly due to an increase in operating expenses. Adjusted EBITDA came in at $402 million in Q2, and $241.8 million in Q1. Management notes that this change is largely due to a negative impact of changes to the amortization of certain products
Net income was reported at $107 million (adjusted) and a loss of $0.31 per share for Q2.
DNB has guided for a 2% revenue growth year over year in 2023.
They are focusing on cutting costs, and are expecting to achieve at least $100 million worth of annual cost savings by the end of 2024.
Free Cash Flow for Q2 and Q1 was reported as $191 million and $108 million respectively.

Recent Controversies/Concerns

DNB is currently facing headwinds in the macroeconomic climate, causing uncertainty among its clients.
They are seeing some weakness in new sales conversions in certain markets
The company is also seeing a slowdown in the tech sector, which is resulting in lower revenues for related products.
They have faced increased costs related to investments in their tech platform and integrations. Management is actively working on cutting costs by focusing on automation, improving efficiency, and reducing the workforce.
DNB has faced negative impacts from foreign currency exchange rates, especially with the strength of the U.S. Dollar.
While management is optimistic about the company’s long-term prospects and its recent cost-cutting initiatives, they also note it is too early to see substantial impacts in their results.
DNB has been facing increased competition, and as a result, companies are now looking at a wider variety of solutions which they did not use to consider before the past few years. To combat this, they are focusing on innovation and acquisitions.
The company also has a complex global legal structure, that will require further action and changes to keep their operations in compliance with regulations.

Moat Analysis: DNB’s moat is moderately strong. It stems from a few factors:

Brand Reputation: A long-established brand in the business information and risk-assessment industry, DNB has built a trusted reputation which can be very hard to compete with.
Proprietary Data and Analytics: They possess a massive and growing database of business data, which is very difficult to replicate. They have also invested significantly into building data-analytics models that provide better insights for clients.
Network Effect: Their data platform and business solutions attract both information providers and seekers, creating a strong moat based on the network effect. However, DNB’s network effect is not as pronounced as many platform businesses.
Switching Costs: DNB’s services are deeply integrated with client workflows creating significant switching costs. A client has to migrate a lot of their internal information and processes if they want to switch to a competitor. This is also combined with the implicit risk that their data may get compromised.

However, their moat is not a clear 5/5. This is because:

There are some niche areas where data quality is low
Their brand value is diminished in sectors outside of their core areas.
The industry is undergoing significant changes due to tech disruption, which is difficult to navigate.
The company still needs to finish integrating their platform completely and prove that it is as valuable as expected.
DNB has to be careful not to become complacent as competitors are moving towards better integrated offerings.
Competitors can copy DNB products and offer similar services.
Their business operations are also complex and that reduces management effectiveness.

Thus I am assigning DNB a moat rating of 3 out of 5.

Understandability: DNB’s business model is complex, involving a wide array of services in diverse sectors. Its financial reporting is also difficult to comprehend for a lay investor. The company’s use of technology and data analytics further adds to the difficulty in fully understanding the details of how it works. The company’s reliance on acquisitions to grow the business also adds another layer of complexity to the business operations and makes understanding the company more difficult. Thus, DNB’s understandability is rated as a 2 out of 5.

Balance Sheet Health: DNB has a reasonably strong balance sheet, with total assets of $13 billion and total liabilities of $10.7 billion. Long-term debt is relatively large at $5.8 billion and they have $1.3 in cash and cash equivalents. They also have around $7 billion worth of goodwill and intangibles. They do generate a decent free cash flow to be able to repay their debt. The company is working on reducing its debt, and are using the extra cash to repurchase shares, and they also intend to continue focusing on buy-backs. As such, DNB’s balance sheet is healthy. Thus, I am giving DNB a balance sheet health score of 4 out of 5.