Dun & Bradstreet Holdings, Inc.
Q1 2013 Earnings Call Transcript

Published: 3 May 2013

[Operator:]

Good morning, and welcome to D&B's 2013 First 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; Rich Veldran, Chief Financial Officer; Byron Vielehr, President of International; Manny Conti, President of North America; and Josh Peirez, our President of Global Product, Marketing and Innovation. Here is what you can expect on the call today. First, Sara will provide an overview of the first quarter results and an update on our 2013 expectations. Then, Rich will go into the quarter in more detail. Sara will then come back on and discuss our succession plans as laid out in our announcement this morning. After that, we will open the call for 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 non-core gains and charges. You can find the reconciliation between these and other non-GAAP financial measures and the most directly comparable GAAP measure in the schedules to our earnings release. They can also be found in a supplemental reconciliation schedule that we post on the Investor Relations section of our website. Later today, you'll also find a transcript of this call on our Investor Relations site. I want to call your attention to some changes we made to how we manage and report our business, which are reflected in our press release schedule. As you know, we have reported revenue for Risk Management, Sales & Marketing and Internet Solutions in the past. Now when discussing our Risk Management results in North America, we will talk in further detail regarding DNBi's subscription revenue, non-DNBi subscription revenue and projects and other RMS revenue. We're now reporting these results on Schedule 3 of our press release in place of RMS traditional and value-added solutions, which are no longer relevant measures of the Risk business. We'll not go into this level of detail in international right away, as the amounts are not yet large enough to be meaningful. In addition, we are now reporting our Internet Solutions business as part of our traditional Sales & Marketing Solutions with all 3 of our geographic segments since both traditional S&MS and Hoover's solutions are used by customers largely for sales prospecting and the drivers of their performance are similar. We made these changes based on feedback from many of you regarding our external reporting metrics, and we hope you find them helpful. To help you adjust your models, later this morning, we will post a 5-year historic financial module with the reclassified -- model with the reclassified revenue results on the Investor Relations section of our website. Now with that, I'll turn the call over to Sara Mathew. Sara?

[Sara Mathew:]

Thank you, Kathy, and good morning, everyone. Last night, we reported our first quarter results

[Richard H. Veldran:]

Thank you, Sara, and good morning, everyone. This morning, I'm going to take you through our revenue and earnings before turning the call back over to Sara for our closing remarks. As Sara mentioned, our performance for the first part of year is taking shape about as we expected. Our top line growth is being impacted by the weak sales trends experienced last year in North America and the difficult macroeconomic environment in Europe. Both of these issues were factored into our 2013 guidance and are the basis for our expectation of a weaker first half followed by a stronger second half. With that as a backdrop, let me turn to our first quarter results. Total company core revenue for the quarter was $381 million, down 1% and in line with our expectations. North America, which represents 74% of core revenue, and international, which represents 26% of revenue, were each down 1%. Within North America, RMS declined 2% in the first quarter, which is an improvement from the 4% decline in 2012 and in line with our expectation. Overall, we continue to expect RMS to be down slightly for the full year. As we mentioned last quarter, due to the ratable nature of RMS revenue, we expect results to continue to be down in the first half of the year, with a gradual improvement in the second half as we benefit from the launch of our new analytic tools and as we gain traction with our other new products. Now let me break RMS down. RMS overall represents 59% of North America revenue. DNBi, which represents 64% of total RMS revenue, was down 1% in the quarter, in line with our expectations. Last quarter, we said that we expect DNBi to be down about a full point for the full year and return to positive growth in 2014 as customers realize the benefit of improved foundational data and more predictive scores. DNBi retention remains in the low-90% range, with price lifts in the low- to mid-single digits. As we said last quarter, we are taking steps to stabilize DNBi by improving execution and bringing more value to the table. Late in 2012, we began packaging Portfolio Risk Manager, or PRM, into the core DNBi solution rather than selling it as a standalone module. By embedding this solution within DNBi, it becomes a less discretionary purchase. This strategy is working in the marketplace, and we are seeing sequential improvement on our underlying sales trends as this bundled solution gains traction. Non-DNBi subscription, which represents 9% of total RMS revenue, declined 10% in the quarter as we continue to see customers remain cautious with their spending. The final component, projects and other RMS solutions, declined 3%, a slight improvement from the 4% decline in 2012. Customer feedback on our new products, DNBi, D&B Direct and Compliance Check has been very positive, and our pipeline is growing. Revenue from these products is recognized when customers use the solution and as such, we expect to see a pickup as the year progresses. Let me turn now to Sales & Marketing Solutions, which represents 41% of North America revenue. Revenue was up 2% during the first quarter as strong growth in our new products and other value-added solutions offset weakness in our traditional S&MS products. Traditional, which is 40% of S&MS revenue, was down 10% in the quarter. Within traditional, the decline was primarily due to declines in our educational marketing business due to tight school budgets during 2012 and the Internet Solutions business. Underlying trends in educational marketing are improving, so we expect better revenue as the year progresses. Regarding Internet, as we discussed with you last quarter, we expect revenue in 2013 to be down in the high-single digits due to weakness in 2012 as Hoover's customers, primarily small businesses, continue to tightly manage their spending. This has been factored into our full year guidance. Value-added solutions, representing 60% of S&MS revenue, had strong growth again this quarter, up 11%. Growth was fueled by our Data-as-a-Service solution for CRM systems that continues to gain traction and contributed 7 points of the total S&MS VAS growth during the quarter. We are also continuing to see solid growth from Optimizer as customers look to us for identity resolution to improve the effectiveness of their marketing campaign. Looking forward, as we said last quarter, we expect the revenue trajectory in North America to improve in 2013, with a weak first half offset by improvements in the second half. We expect the second quarter revenue to be slightly better than the first quarter and to return to growth in the second half of the year. North America deferred revenue for the first quarter was flat on a reported basis and up 1% normalized for the timing of large deals. As we told you last quarter, since a large portion of our revenue is recognized over time, our deferred revenue will grow as the underlying business gains momentum. Now let me turn to international, which represents 26% of our revenue. Core revenue declined 1% during the quarter, which was slightly lower than our expectation. Europe and other, which represents 58% of total international revenue, declined 2% during the quarter primarily due to tough macroeconomic conditions that are driving longer sales cycles. While we expect business conditions to remain tough, we expect revenue to improve over the course of the year due to the size and quality of our growing pipeline. Moving to Asia Pacific, which represents 42% of international, first quarter revenue was flat. We anniversary the challenges in China in the second quarter, when we expect this region to return to growth. Now let me turn to profitability. Total company operating income declined 13% in the first quarter, which was in line with the expectations that we laid out for the first half. As we mentioned in our last call, we expect low-double digit decline in operating income during the first half, followed by low-single digit growth in the second half, for a full year decline of 3% to 6%. The first half-second half split is primarily driven by 3 things

[Sara Mathew:]

Thank you, Rich. So in summary, our first quarter results were in line with expectations and the year is playing out as we anticipated. We expect our top line trajectory to improve in the second half of the year as our innovative new products gain traction in the market. Our guidance for the year is therefore unchanged. We continue to expect revenue growth of 0% to 3%, a decline in operating income between minus 6% and minus 3%, EPS growth of 8% to 11% and free cash flow between $270 million and $300 million. Before I open the call for questions, I'd like to say a few words about the announcement we made this morning regarding succession planning at D&B. As you would expect, succession planning has always been an important priority for D&B's board. Since I was named CEO, the board and I have had regular discussions regarding succession. And as is our practice, we want to be as open as possible with the investment community and all of our stakeholders. As laid out in the announcement, I have informed the board of my intention to retire by May 2014. This gives us plenty of time to plan for an orderly change in leadership. This timeline is consistent with my expectation to stay in the CEO role for 3 to 5 years. With MaxCV build behind us, I believe the company is in a much stronger position to accelerate innovation and drive sustainable top line growth. As such, this is the right time to begin planning for new leadership for the next phase of D&B's growth. The board has hired Spencer Stuart to lead the process of identifying a new CEO, and we will consider both internal and external candidates. I'm sure you will have many questions, and I thought I'd proactively address a few of them upfront. First, you may ask why are we making changes now. Let me remind you, that this is just an announcement and I will be here until we have a successful transition. We wanted to be open with you about my decision as well as the supporting process and timeline. I also want to emphasize that it will be business as usual right through the transition. D&B's 2013 commitments are my commitments. And as we just discussed, we are confident in our ability to deliver guidance for the year. Second, you may wonder if I have doubts about the future of the company. Nothing could be further from the truth. I believe in what we are doing and that the best is yet to come. My team and I look forward to discussing these exciting new possibilities with you at Investor Day in July. And finally, you may ask why are we looking outside. Well, we believe this is a best practice from a governance standpoint. We want to make sure we have the best possible candidate running this great company and that could be someone from the internal team or an external candidate. The succession planning process will ensure we make the right decision. And with that, we'd like to open up the call for your questions. Operator, could you open the lines, please?

[Operator:]

[Operator Instructions] The first question does come from Andrew Steinerman with JPMC.

[Andrew C. Steinerman:]

I wanted to ask about how much of the investment cost, so these are the new product investments, the new analytics investment, is front-loaded into the first half of the year? You were kind enough to give how much investment there was, 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.

[Sara Mathew:]

Sure. Rich?

[Richard H. Veldran:]

Yes, let me take that, Andrew. And let me first take it up to the full year and then let me bring it back into the quarter because I think that'll give you the most visibility to it. As we mentioned in the last call and then on the call just now, the first half of the year, there's a couple of dynamics going on. You've got the data supply chain. You've also got the higher-level investment versus last year. But you also have reengineering that will ramp over the course of the year. So from a full-year standpoint, you can expect negative 3 to negative 6. 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 begin to ramp up investment in the second half. So we didn't have that much investment, 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 C. Steinerman:]

Right. I'm asking if you'd be willing to be as specific -- in dollar terms, be very specific in...

[Richard H. Veldran:]

Yes, let me give it to you this way. If you take our overall cost increase in North America in the first half, the -- 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. And then as you go forward, the investment will come down a little bit and reengineering will go up and you'll get an expansion of margin. I won't give you specific numbers, but that's the pattern.

[Andrew C. Steinerman:]

Great. And Rich, what should we use for share count to consider the guidance?

[Richard H. Veldran:]

Yes, so we ended the quarter at 39 947 [ph] , so hopefully, that can help you with your modeling.

[Andrew C. Steinerman:]

Right. So to get to the 8% to 11%, you could use that number, 8% to 11% EPS growth?

[Richard H. Veldran:]

So that's where we ended for the full year. I'm not going to give you guidance on specifically what we'll spend this year. As you know, we will complete our program, the $1 billion, by mid-'14 as we've said, but I never talk about specific strategies with any given quarter.

[Andrew C. Steinerman:]

Right. But just to be clear, Rich, the 8% to 11% EPS growth assumes additional share buyback, right?

[Richard H. Veldran:]

Of course.

[Operator:]

Your next question comes from Shlomo Rosenbaum with Stifel.

[Shlomo H. Rosenbaum:]

Sara, I will miss our calls every quarter over here, and...

[Sara Mathew:]

Well that makes 2 of us. But we have time right now.

[Shlomo H. Rosenbaum:]

I wish you well.

[Sara Mathew:]

Thank you, I appreciate it.

[Shlomo H. Rosenbaum:]

Sara, can you talk a little bit more about some of the initiatives you started a few years ago that we talk about every quarter, the pipeline for DaaS and the Salesforce.com relationship? It seems like you guys are starting to innovate at a little bit faster of a clip, at least from 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:]

Sure. I'm going to have Josh take Data-as-a-Service, which we continue to believe is a very exciting opportunity.

[Joshua L. Peirez:]

Shlomo, based on the uptake we're seeing on D&B Direct, D&B360 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 3 years, and we're about halfway there on sales now. So you'll -- these are all ratable. You'll see that ramp over time. We see DaaS as 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 H. Rosenbaum:]

So if I take them collectively, you're, right now, at a run rate of $50 million in revenue on that?

[Joshua L. Peirez:]

In sales.

[Shlomo H. Rosenbaum:]

In sales. So the difference in sales and revenues is how many quarters?

[Joshua L. Peirez:]

So these are generally ratable sales. They take 12 months to flow through. So the sales number is the number for this year.

[Sara Mathew:]

The simplifying assumption, Shlomo, is $100 million of revenue, if even throughout the year, would be about -- I mean, $100 million of sales if -- evenly throughout the year, without any seasonality, would be about $50 million of revenue. And so you get about half of it because I'm assuming evenly split over the course of the year. That's the way to think about it. They take a while.

[Shlomo H. Rosenbaum:]

Okay. 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 a -- it looked like 2 quarters where it's flat. Does it take about 4 quarters for that to -- for the North American RMS to catch up to that?

[Sara Mathew:]

That would be about right, because deferred includes both RMS and it also includes Hoover's. So it includes all of our subscription products, not just -- so the DNBi, non-DNBi, Hoover's. And that, in totality, there's a small amount of our marketing products that are also deferred. But that is -- you have that about right.

[Shlomo H. Rosenbaum:]

Okay. And then I want to go back to a question that Andrew was asking to make sure that I understand it correctly. You said that there -- the 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:]

Correct. The only other element I'd add is, obviously, you have other normal cost increases that reengineering helps us, so things like -- let me give an example. Pension is up $2 million in the first quarter of this year, because pension expense tends to go up year-over-year given the current environment around interest rates. But that is generally correct.

[Operator:]

The next question comes from Carter Malloy with Stephens Inc.

[Carter Malloy:]

So Sara, on the retirement, are you moving on to another gig? Or is this it for you?

[Sara Mathew:]

No, I'm not leaving right now. My other gig is really right here until we get this company moving forward. So remember, we just are initiating succession planning.

[Carter Malloy:]

Understood. And again, on the timing, and I guess I wasn't aware of your 3- to 5-year plan as CEO. But given that MaxCV is now done and the company's now looking at new products in acceleration, why leave a year from today? Why not stick around and see some of the success of that?

[Sara Mathew:]

Candidly, Carter, there is never a good time for a CEO to retire. I believe this is as good as any. I think the MaxCV build is complete. The acceleration and innovation is beginning. You are right, that you are starting to see ramp of new ideas from D&B, and you're going to hear a lot more about this at Investor Day. So I believe the right time to start planning for the next phase of our growth is right now and to ensure that I am here through the transition so we have a successful handoff, because I continue to believe this is a great company with enormous assets. And I think the best is yet to come, so it's the right thing to do.

[Carter Malloy:]

Okay. And then Rich, on the -- is there any help you can give us on the North American profits in terms of how much be allocated to RMS? In other words, should we assume that RMS is a slightly more profitable or a much more profitable business? Just trying to think of flow-through margins, if we're going to get to growth at that business, what the impact will be overall.

[Richard H. Veldran:]

Yes, we don't really break it out for one reason. The primary driver of cost within those businesses is the technology cost, the database and all of those things feed all of our product. I will tell you, though, as we move more towards a Data-as-a-Service, and right now that's more focused in the Sales & Marketing space, that product line becomes very profitable, especially if you sell it through third parties, say, in the Salesforce.com, where we don't bear the selling expense and we don't bear the product development. So you can see that shift towards more profitability as we move further and further towards DaaS.

[Carter Malloy:]

Okay. But right now, you'd say that they're fairly even? Or...

[Richard H. Veldran:]

Yes, [indiscernible] to differentiate in the current world, correct.

[Sara Mathew:]

Carter, if I could just add one more piece of perspective. We built the infrastructure and think of it as a vessel. Now our intent is to fill that vessel with better, different types of data and then power it with analytics on top. So that's what we mean by big insight, and we're going to talk a lot more about this at Investor Day. And we really look forward to sharing these with you in terms of what we see as the future for D&B.

[Operator:]

The next question comes from Jeff Meuler with Baird.

[Jeffrey P. Meuler:]

I was wondering, could you just kind of characterize your conversation that you've been having recently with the product dev team? And what are they saying about innovating kind of on the new platforms, the new web service layer? Is it kind of a learning curve that they need to work up? Are they excited about it? Just how would you characterize those conversations thus far?

[Sara Mathew:]

Okay. So let me start by just talking about what we mean by foundational data and analytics and the role our product plays. Web service layers allow us to innovate the data [ph], that is correct. But beyond that, we have to fill what we have built, the infrastructure, with better and new types of data. So you should think about innovation coming from multiple sources, and the multiple sources will be on the data itself, which is analytics. And I'm going to, in a minute, ask Josh to talk about how -- the reframing of RMS with these new analytical solutions I talked about, what's different about that. The product team is very closely involved, but you should also remember I have a very large data and analytics team and we have been building our bench. Those are some of the investments we've made to expand the analytics effort so we could actually serve new customer needs. And I'm going to have Josh if -- talk a little bit about the product and the data analytics because he leads both those areas.

[Joshua L. Peirez:]

Thanks, Sara. So my teams are extremely excited. They have had a lot of pent-up demand, frankly, to be able to bring to market some of these great solutions we're seeing now. And we have a lot more ideas and things that are working -- that we're working on and things that are in the pipeline to come out over the course of the next 12 to 18 months as well. So you have seen the ramp start, now you're seeing that ramp start on the data and analytics side. But you'll see it from us both on the product side using the web services layer, products like Compliance Check, products like our D&B360 and D&B Direct products, as well as other DaaS solutions that we've been working on. And then on the data and analytics side, you really are seeing us use a combination of previously untapped data in our own database, along with new sources of data we've identified that have highly predictive attributes. I can't show the specific data sets for competitive reasons, but we're very excited about what we're seeing there in terms of our ability to provide actionable foresight to our customers. And we're aggressively testing new data sets now, along with significant amounts of commercial activity that we see every day, and then layering the analytics on top of that to turn the big data we have into big insight, and it's something we are very, very excited about, and then delivering that through world-class products that are state-of-the-art in terms of the development capability. So it's something that we see great potential in.

[Jeffrey P. Meuler:]

Okay. And can you talk a little bit more about the go-to-market strategy? And Sara obviously threw out a lot of stats on the effectiveness of the new solutions. How much of this is premium price offerings? And then, what should we think about when we think about kind of the monetization curve? At what point does that really take off?

[Sara Mathew:]

I heard about 3 questions in there, and I'm going to just cover them one at a time and then hand it off to my team. So remember, go-to-market strategy, the way we go to market, you're seeing a pivot in terms of customer centricity. I'm going to ask Manny to talk about how we have verticalized our sales force in order to actually get more customer-centric in the way we go to market. So Manny, do you want to talk a little bit about that?

[Emanuele A. Conti:]

Yes, sure. So we think about our customers in 3 broad segments. You have our smaller customers, you have mid-sized companies and large. And clearly, on the large side, we've made some pivots earlier this year in which we're now organizing around specific verticals, because as you can imagine, the analytics that we want to bring to those customers is very specific to their industries and their needs. And we have some very exciting pilots that we've been initiating to prove out of value propositions that Sara was mentioning in her prepared remarks. So that's how we're organized on a -- from a go-to-market perspective.

[Sara Mathew:]

Yes. So that was the way some of these pilots and the customer centricity is moving. The sales organization is working hand in glove with the data, analytics and product organization, and that integrated approach is a shift. Your 2 other questions, one was around the proved pricing. Are we premium? We've always been a premium provider. And how do we monetize these new solutions? I'm going to ask Josh to cover that.

[Joshua L. Peirez:]

Thanks, Sara. Yes, so it's early in our deployment of these new solutions, but we do see analytics as central to turning our RMS business around. We are now segmenting the types of risks our customers face, and we're able to service the broad needs of our customers with these highly targeted analytical tools. Initially, our focus is with our largest customers, where we see the greatest upside due to our ability to help them solve their very complex needs. In some cases, we'll be monetizing through higher capture rates, which are a combination of price lifts and retention. That would be in the case of DNBi, for example. In other cases, the analytics are sold as an add-on to new products, like Compliance Check, or on a standalone basis. You'll generally see the revenue spread across our RMS solution set. There will also be benefits in the Sales & Marketing Solutions set as we help with prospecting and refinement of tools around increasing sales. So as we expect to be in market late in the second quarter, the revenue benefits will start to be seen in the second half of this year, ramping into the future.

[Jeffrey P. Meuler:]

That's helpful. Just on the premium pricing, Sara, I understand that your offerings have always been premiums relative to the competition. I guess I was trying to compare these new solutions, which you obviously laid out a lot of effectiveness and ROI for clients on, but how much of a premium should we think about them being relative to your, D&B's, legacy solutions?

[Sara Mathew:]

They will definitely be a premium. It's competitively sensitive. So just remember, many of these are totally new use cases. So the D&B Total Loss Predictor, predicting the incident of first default, there is no product that actually can do that. If you think about the Viability Rating -- and we'll talk a lot more about this on the Investor Day. There are others as well. We -- I just talked about the pilots, and they're only going to market in the second half. Once they are in market, we'll be able to share price lifts more broadly, but you should think premium to our current solutions. But the reality is it serves a different use case than the current solution, especially viability and total loss.

[Operator:]

The next question comes from Peter Appert with Piper Jaffray.

[Peter P. Appert:]

Sara, you outlined a lot of interesting product offerings at the start of your call, things like the Viability Rating. I think one of the challenges for investors is translating that into financial performance and thinking about how that impacts you from a revenue growth standpoint, what the scale of the opportunities are. So can you give us any quantification around that?

[Sara Mathew:]

Well, I can tell you I'm confident in the guidance range, as we just shared with you. And at this point in time, I would stop there. And Peter, we can probably give you much more color around what we are doing at Investor Day in July. We felt this was the right time to talk to you about the future. My team and I will be there where we actually can lay out the future beyond just 2013 as we see it. So that would be the best time.

[Peter P. Appert:]

Okay. But how about just this little preview then. You spent the last several years in terms of this reinvestment process and then you're pretty far along, obviously, in it now. And I'm wondering how you're thinking about longer-term revenue growth outlook for the business now that this is behind you.

[Sara Mathew:]

Well, in terms of where I am, I believe -- I am bullish about the future, and I continue to believe that this is a company that can grow and grow significantly and that we have just tapped the surface of the opportunity. I believe data and the ability to actually understand how to use data to solve a variety of use cases and new problems is what's going to drive our growth. Now beyond that, Peter, I know this may not be a completely satisfying answer, I want you to wait until Investor Day. It's just a few months away, and we can give you all the details and lay it out so that you can actually model it. But the investment pieces for D&B, I think, is unchanged. I have the same aspiration that I've shared with you before. I recognize it took a little bit longer, but you're just starting to see the beginning of great things and more to come in the years ahead.

[Peter P. Appert:]

I thought Rich's comment in terms of the relative profitability of the DaaS product was interesting. And I wonder what the implications of the evolution and the mix more broadly might be from a margin and profitability standpoint.

[Sara Mathew:]

Right. And we will touch on these on Investor Day, and then, you can actually then do your modeling based on assumptions. DaaS is growing very fast. So if you look at value-added solutions, which I think were up 11%, about 7 points was due to Data-as-a-Service. So remember, that is just one application of Data-as-a-Service. There are many, many more we can just choose to deploy, and that's really what we're going to -- you're going to see more of us doing. Over the next -- in the next 12 to 18 months, you will see more from us.

[Peter P. Appert:]

All right. Let me ask you one last thing, then, on the current environment. Every quarter, Sara, you've addressed the issue of competitive dynamics, which is top of mind, I know, also for investors. It seems like some of the competitors in the Risk business have become more active in the last 12 to 18 months. What are you seeing from your seat?

[Sara Mathew:]

I think as the market leader, it is our job to set the agenda, and what we're doing is we're changing the agenda. We had an innovation called DNBi that worked really well for a period of time. Now you have competition copying that. We are shifting and changing the game. We believe risk has to be segmented. There are many more decisions customers have to make, and that's really the way we are going after the market. Competition, I believe, is -- has always been there, that's how they make us better. In some ways, I would say, the competitive dynamic really forced us to rethink our strategy and our approach. I believe the competition will stay competitive, that is the environment that we are in. But long term, I would say only D&B has a set of data, a set of analytical capabilities and now, with the heavy lifting behind us on the MaxCV build, we are actually unleashing capacity as well within the team to innovate and drive future growth. So our job is really to be so much better than the competition, customers don't even ask about the competition. We want to be pervasive in every commercial decision, Risk, Sales & Marketing and several others, which we will talk about in Investor Day.

[Operator:]

The next question comes from Manav Patnaik with Barclays.

[Manav Patnaik:]

Sara, well, I guess, congratulations for, I guess, being able to retire. So that's a good thing. The first question just sort of a follow-up from Peter's is, in terms of the selling strategy for these new analytical tools you talked about at the beginning of the call, are those going to be sold as add-on modules? Or is it a completely different product? Just trying to get a sense of what the go-to-market strategy is. Just -- I guess, just given -- the optimism sounded something like what you guys talked about when you released PRM and that didn't end up working. So I was just trying to distinguish what's different here.

[Sara Mathew:]

Well, first I want to answer your last question about PRM didn't work so well. I'm going to ask Manny to just talk about Q1 for PRM and what we're seeing, and then we'll come back and handle your monetization question.

[Emanuele A. Conti:]

Yes. Sure. Manav, so just regarding PRM, as we discussed in our call, just the last call, we discussed that we were going to change our go to market. Clearly, PRM was not scaling up as quickly as we wanted to in the beginning part of last year. So what we ended up doing is instead of making PRM sold separately, it looked discretionary to our customers, we bundled it with the core DNBi platform. And we did that late in Q4, and did see an uptick in Q1. So we are encouraged that, that tactic is working, and we expect it to ramp throughout the rest of the year.

[Sara Mathew:]

Let me ask Josh to talk about how we're going to monetize these new scores.

[Joshua L. Peirez:]

Yes. Manav, I think that we are going to be monetizing the scores primarily through both embedding and existing products, where we expect to see retention rates and price lifts improve, as well as through add-ons. But I wouldn't think of it as a module. In these cases, the add-ons are related to packets that we deliver through DaaS-like solutions where we're able to just include these additional models that improve the results that a customer is receiving for use cases that they want in terms of the analytics. And along with that, it pulls through data sales, so it allows us to actually have more of the data sales that occur that you're seeing in our results today. And that will vary based on the segment of customer that we're talking about. So for our larger customers, where the sales are very customized today, that's where you'll see these sort of add-on sales occur and we will see the data pull-throughs occur. When you're talking about our smaller customers who are using Hoover's or using DNBi, it's going to be included in the product they buy. These tools, when they go live, will be included in DNBi, and they'll be able to benefit from these great tools in their product. And we expect retention in sales -- same-store sales to go up as a result.

[Manav Patnaik:]

Okay. And I mean just on the retention, so it seems like from Rich's commentary that the low-90s retention was sort of what is being -- or what you guys have been talking about for a while. Am I misreading when you said that the pricing was low- to mid-single digits, when I think, in the past, you've been more around the commentary of mid-single digits? Is there something going on there?

[Emanuele A. Conti:]

Yes, sure. Let me speak to pricing as it relates to DNBi, because that's probably the best place to talk about pricing. So as a reminder, when we launched MaxCV, we paused innovation on the DNBi platform. And as a result, we did see pricing compression and pressure on that platform over the last -- quite frankly, over the last several quarters. Now that we are -- MaxCV is mostly behind us and we are now adding more innovation to that platform and our other products, our goal is to increase our competitive advantage and moat so that we can create more value for customers and begin to rebuild that premium. Related to retention, Just so you know, as we look to Q1, we're encouraged by many of the actions, from an execution perspective, that we put into place. We did see an uptick in retention in Q1, and that's something that we expect to continue as the year unfolds.

[Richard H. Veldran:]

Yes. And just for clarity, Manav, when we talk to you about numbers externally we do a trailing 12 months. So what Manny is referring to is actually the quarter 1 actually better than our trailing 12 month and uptick from that. So we feel really good about what we're seeing. But we share with you trailing 12.

[Manav Patnaik:]

Okay, got it. And last question just on the DaaS, specifically on D&B360, I guess, the different partnerships you have with the different CRMs. I was just wondering if you guys could give any color on what the update is, firstly, with the Salesforce.com relationship, if you can throw out the numbers there, and also what your strategy or progress has been with the other partnerships you have with the other ones like Microsoft, Oracle, et cetera.

[Sara Mathew:]

Richard?

[Richard H. Veldran:]

Sure, Manav. I would say that, as we discussed in the script, 7 points of the S&MS VAS growth came from our Data-as-a-Service solution in the CRM space. So that is Salesforce, along with Microsoft, Oracle, SAP, driving those 7 points. We are opening a new market like CRM with the DaaS solutions. We do see upside in other new markets where we're launching like in the master data management space, where we've also put product in market over the last 6 months. So we are very excited there. I'm not going to break down Salesforce versus the other alliances we have in the space, but Salesforce is the largest piece of that 7 points.

[Operator:]

There are no other questions in the queue at this time.

[Sara Mathew:]

Thank you. I want to, once again, thank everybody on the call. We're going to hang up now, and we look forward to seeing you in Investor Day in July. Thank you, everybody.

[Operator:]

Thank you for your participation in today's conference call. The call has concluded. You may go ahead and disconnect at this time.