Download - Delivering The Blueprint For Growth
1
Delivering The Blueprint For Growth
July 20, 2004
2
Forward-Looking and Cautionary Statements
This presentation contains projections of future results and other forward-looking statements that involve a number of trends, risks and uncertainties and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The following important factors could cause actual results to differ materially from those projected in such forward-looking statements.
Demand for D&B’s products is subject to intense competition, changes in customer preferences and, to a lesser extent, economic conditions which impact customer behavior. The Company’s results are also dependent upon its continued ability to: reallocate expenses to invest for growth through its financial flexibility program; invest in its database and maintain its reputation for providing reliable data; execute on its plan to improve the business model of its International segment and thereby improve its global data quality while realizing improved financial performance in that segment; rely on its customers’ belief in the value of the DUNSRight™ quality process as a key driver of revenue growth; manage employee satisfaction and maintain its global expertise as it implements its financial flexibility program; protect against damage or interruptions affecting its database or its data centers; develop new products or enhance existing ones to meet customer needs.
The Company is also subject to the effects of foreign economies, exchange rate fluctuations and U.S. and foreign legislative or regulatory requirements. Its results are also dependent upon the availability of data from its database and the ability of its strategic partners to fulfill their contractual obligations to satisfy the Company’s customers and promote and protect the D&B brand. In addition, the Company’s ability to repurchase shares is subject to market conditions, including trading volume in the Company’s stock. Developments in any of these areas could cause actual results to differ materially from those that have been or may be projected.
In addition, the Company’s projection for free cash flow in 2004 is dependent upon the Company’s ability to generate revenue, the Company’s collection processes, customer payment patterns and the amount and timing of payments related to tax matters and legal proceedings involving the Company as more fully described in the Company’s 2004 1st Quarter Form 10-Q.
For a more detailed discussion of the trends, risks and uncertainties that may affect D&B’s operating and financial results and its ability to achieve the financial objectives discussed in this presentation, readers should review the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, including the section entitled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”),” and the subsection entitled “Trends, Risks and Uncertainties” in the MD&A. Copies of the Company’s Annual Report on Form 10-K and 2004 1st Quarter Form 10-Q are available on its web site at www.dnb.com and on the SEC’s web site at www.sec.gov. D&B cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statements.
3
Non-GAAP Financial Measures
This presentation contains certain non-GAAP financial measures, including core revenue before the effect of foreign exchange, organic core revenue growth, operating income and diluted earnings per share before non-core gains and charges, and free cash flow.
We define core revenue as total revenue less the revenue of divested businesses. We analyze core revenue growth before the effect of foreign exchange. We also separate and analyze core revenue growth before the effect of foreign exchange among two components, organic core revenue growth and core revenue growth from acquisitions. We define non-core gains and charges as restructuring charges (whether recurring or non-recurring) and certain other items we consider do not reflect our underlying business performance. We define free cash flow as net cash provided by operating activities minus capital expenditures and additions to computer software and other intangibles. We believe these measures are useful because they reflect how we manage and evaluate the performance of our business, they provide an important insight into the underlying health of our business and they are the primary indicators management uses as a basis for the planning and forecasting of future periods and for compensation purposes. Please see D&B’s Form 8-K dated and filed on July 19, 2004 with the Securities Exchange Commission for additional discussion of how the Company defines these measures, why it uses them and why it believes they provide useful information to investors.
Except for our revenue growth aspirations which are provided only on a non-GAAP basis because we are unable to predict the future movements of foreign exchange rates or potential business model changes, the most directly comparable GAAP measure and reconciliation between each non-GAAP measure and the comparable GAAP measure can be found in the Appendix to this presentation. Our revenue growth results and aspiration are provided only on a non-GAAP basis, or as core revenue growth before the effect of foreign exchange, unless otherwise noted. In addition, all references to operating income and diluted earnings per share growth results and aspirations are before non-core gains and charges, unless otherwise noted.
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5
Yesterday, we announced strong Q2 revenue and earnings results…
D&B Announces Strong Second Quarter Resultsand Raises 2004 Core Revenue Guidance
PR
ES
S R
ELE
AS
E
6
8
11
9
7
2
76
7
…which represents our third consecutive quarter of strong organic revenue growth
2004
Total growth
3Q 4Q2003
1Q 2Q
D&B Quarterly Revenue GrowthPercent
Organic growth
7
We also continue to deliver strong EPS growth
2004 3Q 4Q
2003 1Q 2Q
D&B Quarterly EPS GrowthPercent
22
1820
17
8
EPS
Revenue growth
Guidance
6 - 8%
$2.94 - $2.99
For a reconciliation to the most comparable GAAP measure, see appendix.
For 2004, we increased our revenue guidance to
6% to 8% and confirmed our EPS guidance
9
Today, we’ll show you how we are transforming D&B and laying the foundation to create even more shareholder value in 2005-2007
Allan:We have accomplished a lot and there’s even more ahead
Steve:We are confident we will deliver our 7% to 9% revenue growth aspiration
Greg:We will continue to drive growth and profitability in our International business
Sara:We are confident we will grow margins by 100+ basis points and continue to deliver EPS in the mid to upper teens
10
Let’s start by looking back at the progress we’ve made since our journey began four years ago
Become a Growth Company with an
Important Presence on the Web
11
We said we would transform D&B from an under-performing company to a high-performing company
From Under-PerformingOrganization with Under-Leveraged
Assets
ToHigh-PerformingGrowth Company
Delivering ConsistentReturns to Shareholders
12
EPS Growth 10%
Revenue Growth 3%Operating Income Growth 10%
And that we would achieve this without sacrificing earnings
From Under-PerformingOrganization with Under-Leveraged
Assets
ToHigh-PerformingGrowth Company
Delivering ConsistentReturns to Shareholders
13
EPS Growth 10%
Revenue Growth 3%
Operating Income Growth 10%
2003 Results
Oct. 2000Commitment
We are doing that and even more
5%
13%
18%
14
Revenue Delivered Over the Web Majority
2004 YTDOct. 2000
Commitment
We also achieved our Web revenue aspiration and continue to focus on delivering even more
80%
15
Our progress is driven by our Blueprint for Growth strategy, which serves as the roadmap for our transformation
16
We are turning our Winning Culture, Brand and Flexible Business Model into powerful competitive advantages
17
Let’s start with a review of our Winning Culture, which powers our strategy
18
We know that our focus on building a Winning Culture through improved leadership is making a difference
19
We have more than 5,000 team members engaged in driving our success
Survey participation 98%
20
Our team understands and has confidence in our strategic direction
Survey participation 98%
Understand our Blueprint 87%
Confidence in our Blueprint 75%
21
We are world-class at taking ownership to become better leaders
Survey participation 98%
Understand our Blueprint 87%
Confidence in our Blueprint 75%
Taking steps to improve leadership 92%
22
And we know that when our customers win, D&B and our shareholders win
Survey participation 98%
Understand our Blueprint 87%
Confidence in our Blueprint 75%
Understand my role in enabling customers to Decide with Confidence 91%
Taking steps to improve leadership 92%
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Survey participation 98%
Understand our Blueprint 87%
Confidence in our Blueprint 75%
Understand my role in enabling customers to Decide with Confidence 91%
Through our investments in building a Winning Culture, we are creating a company of great leaders focused on driving our success
Taking steps to improve leadership 92%
24
We are also unlocking the value of one of our most under-leveraged assets – our Brand
25
When we launched our Blueprint for Growth strategy, the D&B Brand was highly recognized, but its value was built on being a data provider
Data Provider
26
To unlock the value of our Brand, we first repositioned it as one that enables customers to make confident business decisions…
Data Provider
A confident business decision
experience
27
…and created one powerful visual representation of the value we provide to our customers…
28
…and we go to market with one compelling value proposition – our DUNSRightTM quality process
GlobalData
Collection1
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Information
Quality Assurance
D-U-N-S®
Number3
D&BGlobal
Database
29
In addition to our Culture and our Brand, we are also transforming our Business Model to fund growth and create value for shareholders
30
Annualized Savings Derived from Financial Flexibility$ Millions (Annualized)
807570
130
80
2000 2004E2001 2002 2003Year Announced
And we’ve done this year after year…
Before any restructuring charges and transition costs and before any reallocation of spending
31
… which has been a key contributor to margin improvements
2000 2001 2002 2003
Operating MarginPercent
23.3
19.917.1
22.5
32
By establishing a foundation built on our Brand, our Business Model and our Culture, we are driving growth and creating value
33
Last year, we communicated our aspiration to deliver 7% to 9% sustainable revenue growth by 2005-2007 and continue to deliver strong EPS
2005-2007Aspiration
EPS Growth Mid to upper teens
Revenue Growth 7-9%
34
EPS Growth Mid to upper teens
Revenue Growth 7-9%
2004 Guidance
6-8%
2005-2007Aspiration
And we are making great progress toward this aspiration in 2004
16-18%
35
As shareholders, you have seen the results of delivering on our Blueprint for Growth strategy
36
We expect our EPS will have doubled in the last four years
EPS$ per share
1.47
2.94 - 2.99
2000 2004E
37
We expect our free cash flow will have grown considerably…
Free Cash Flow$ Millions
2000 2004E
135*
230 - 245
*2000 free cash flow has been adjusted for the one-time tax payment to the IRS related to the utilization of capital losses 1989-1990. See appendix for reconciliation of free cash flow.
38
…which will enable us to repurchase $485 million of shares
2001 2002 2003 2004E
Share Repurchase$ Millions
200
100
85
100
39
Our stock price performance has begun to reflect these results
D&B 209%
S&P 400 9%In
dexe
d C
hart
50
100
150
200
250
300
350
9/29
/00
12/2
9/00
3/29
/01
6/29
/01
9/29
/01
12/2
9/01
3/29
/02
6/29
/02
9/29
/02
12/2
9/02
3/29
/03
6/29
/03
9/29
/03
12/2
9/03
3/29
/04
S&P 500 -23%
Shareholder Return$ Millions
7/15
/04
40
We believe our strategy has even more potentialto deliver greater value to our customers and drive sustainable growth for D&B
41
As a result, we have evolved our Aspiration to reflect our intensified focus on our customers’ success
To be the most trustedsource of business insight
so our customers can decide with confidence
42
Now, let’s show you how our strategy will drive sustainable revenue growth going forward
Allan:We have accomplished a lot and there’s even more ahead
Steve:We are confident we will deliver our 7% to 9% revenue growth aspiration
Greg:We will continue to drive growth and profitability in our International business
Sara:We are confident we will grow margins by 100+ basis points and continue to deliver EPS in the mid to upper teens
43
We are making progress toward achieving our 7% to 9% revenue growth aspiration
Revenue GrowthPercent
2001 2002 2003 2004 YTD
8
53
1
44
75
25
2003 Revenue by GeographyPercent
North America
International
Before we review our progress, let’s provide an overview of the key revenue sources, first from a geographic perspective…
45
…and then by customer solution set
2003 Revenue by SolutionPercent
Risk Management
Sales & Marketing
E-Business
Supply Management
28
6732
46Winning Culture is at the foundation of these priorities
1. Build the brand of D&B around the DUNSRightTM quality process
2. Grow RMS by 3-5% annually
3. Grow S&MS by 4-7% annually
4. Grow SMS by 15-20% annually
5. Acquire or develop a 5th product line
6. Grow E-Business to consistently deliver 1 point per year
7. Implement a financially flexible business model
Driving our progress has been our focus on seven strategic priorities
47
GlobalData
Collection1
Quality Information
Our first strategic priority is to build the Brand around DUNSRightTM– our unique value proposition
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Assurance
D-U-N-S®
Number3
D&BGlobal
Database
48
Our DUNSRightTM quality process powers all our Customer Solution Sets
DUNSRightTM
GlobalData
Collection1
Quality Information
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Assurance
D-U-N-SNumber®
3
D&BGlobal
Database
49
Should I extend credit to this new customer?
What credit limit should I set?
Will this customer pay me on time?
What is my total credit risk exposure?
Should I change my credit policies?
How can I proactively manage my cash flow?
Our second priority, Risk Management Solutions (RMS), helps our customers increase profitability while mitigating risk
50
We’ve extracted more value from our DUNSRightTM
quality process
We’ve implementeda new risk management subscriptionplan
Our RMS revenue has grown recently afteryears of marginal performance
2001 2003
RMS Revenue GrowthPercent
1 1
7
3
2002 2004 YTD
51
Who are my best customers?
How can I find prospects that look like my best customers?
How can I exploit untapped opportunities with my existing customers?
How can I allocate sales force resources to my revenue growth potential?
Our third priority, Sales & Marketing Solutions (S&MS), helps customers grow their businesses faster
52
While our S&MS business has grown, it has been inconsistent as a result of product mix changes and environmental factors
Opportunities from investing in our sales force are gaining traction
DUNSRightTM investments in ‘Super 7’ are also aiding our growth
S&MS Revenue GrowthPercent
2001 2004 YTD
1
8
1
2002 2003
6
53
Our next priority, Supply Management Solutions (SMS), helps our customers generate new and recurring savings in their supply base
How much do I spend on purchasing?
How much businessdo I do with each supplier?
How can I minimize my purchasing costs?
How can I avoid supply chain disruption?
How can I know which suppliers are also customers?
How can I find suppliers to help achieve my corporate diversity objectives?
54
We are increasing our sales pipeline
We are improving product delivery to increase customer satisfaction and renewal rates
Our SMS business, which has been a strong area for us, is off to a poor start this year
18
- 2 - 5
16
2001
2004 YTD
SMS Revenue GrowthPercent
2002 2003
55
What are the prospect’s key business priorities?
How does the prospect’s business compare to my customers?
How does the prospect compete to win in their industry?
Who are the key senior level decision makers?
How do I build a strong relationship with them?
Our E-Business Solutions help customers convert prospects to clients faster
56
Leveraged the power of DUNSRightTM to double the size of Hoover’s database
Our priority to grow E-Business continues to deliver very good results
3Q 4Q 1Q 2Q
2003 2004
1Q
E-Business RevenueMillions
2Q
3
8 810 11 12
57
And finally, we continue to explore opportunities to acquire or develop a 5th product line that leverages our DUNSRightTM quality process
Selective Acquisitions
Enterprise Risk & Compliance
Predictive Analytics
58
As we’ve said, we’re making good progress by focusing on our strategic priorities
Winning Culture is at the foundation of these priorities
1. Build the brand of D&B around the DUNSRightTM quality process
2. Grow RMS by 3-5% annually
3. Grow S&MS by 4-7% annually
4. Grow SMS by 15-20% annually
5. Acquire or develop a 5th product line
6. Grow E-Business to consistently deliver 1 point per year
7. Implement a financially flexible business model
59
As we look forward, we see three fundamental factors that give us confidence that we can deliver our 7% to 9% revenue growth aspiration
The marketplace needs what we provide andthe opportunity to provide more is profound
Our unique competitive advantage in DUNSRightTM enables us to meet more of our customers’ needs
The continued implementation of ourBlueprint for Growth strategy1
3
2
60
First, the foundation we’ve built on our Culture, our Brand and our Flexible Business Model will fuel our growth
61
Mitigate risk, increase cash flow and drive increased profitability
Increase revenue from new and existing customers
Identify purchasing savings and ensure compliance within their supply base
Second, we fulfill fundamentally essential needs that are critical to the health of our customers’ businesses, in good times and in bad
We enable customers
to:
62
Marketplace
In addition to fulfilling essential needs for our customers, a profound growth opportunity exists in the marketplace
63
Let’s look at our view of the marketplace one step at a time, beginning with our own business
D&B Revenue
External Spend
64
We add to this our direct competitors’ share of the B2B marketplace
D&B Revenue
Competitors’RevenueExternal
Spend
65
And we also view the B2B marketplace through the lens of what our customers spend against their own internal processes
Internal Spend
External Spend
Customers’ Internal Spend
D&B Revenue
Competitors’Revenue
66
We believe that by leading with our new Aspiration, we will unlock this profound opportunity existing in our customers’ internal spend
To be the most trustedsource of business insight
so our customers can decide with confidence
67
The third fundamental factor giving us confidence about revenue growth is DUNSRightTM _ our unique competitive advantage
GlobalData
Collection1
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Information
Quality Assurance
D-U-N-S®
Number3
D&BGlobal
Database
68
Through the first DUNSRightTM driver – Global Data Collection – we bring together data from a variety of sources worldwide for our customers
GlobalData
Collection1
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Information
Quality Assurance
D-U-N-S®
Number3
D&BGlobal
Database
69
We collect the most complete data about business entities globally
Public Records and Government Registries 100+ million records Suits, liens, judgments and bankruptcy filings Business registrations
Payment and Financial Data 600+ million trade records updated annually Public company financials
Direct Investigations, News and Media 100+ million phone calls annually to businesses Top news providers Merger/Acquisitions
D&B Global Database
• 86 million businesses• Over 200 countries
Over 1 Million Daily Updates
D&B D-U-N-S® Number
70
As companies look for growth outside the U.S., our Global Data Collection gives them the most comprehensive view of worldwide prospects
D&BGlobal
Database
A High-Tech Multinational Company
ChinaUK
JapanGermanyCanadaFranceBrazil
Global Prospects
71
As global data changes so quickly, DUNSRightTM
helps customers keep their portfolios up to date
In the next 24 hours:
8,640 businesses will have a suit, lien or judgment filed against them
5,760 business addresses will change
2,680 leadership (CEO, CFO, etc.) changes will occur
480 businesses will fail
D&BGlobal
Database
Customer’s File
72
Our second driver - Entity Matching - enables customers to gain a single, more accurate view of their customers
GlobalData
Collection1
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Information
Quality Assurance
D-U-N-S®
Number3
D&BGlobal
Database
73
A global chemical company needed to consolidate 400,000 records from 30 legacy systems to better manage their portfolio of customers and suppliers
30 Regional Legacy Systems
One Global
ERP System
74
We applied our DUNSRightTM Entity Matching process to their portfolio
ABC, Inc123 Elm St.Bethlehem, PA 18025(SIC) 5411-02Chuck Smith, President
CS ManufacturingP.O. Box 111Bethlehem, PA 18055(SIC) 5411-02Chuck Smith, President610 882-7600
Charles Smith 123 Elm St.Bethlehem, PA 18025(SIC) 5541-99215 882-7600
D&B D-U-N-S Number:12-345-6780ABC, Inc+ CS ManufacturingP.O. Box 111Bethlehem, PA 18055123 Elm St.Bethlehem, PA 18025(SICs) 5411 0202, 5541 9901Charles Smith, President610 882-7600
1
1
3
2
75
As a result, DUNSRightTM determined there were only 100,000 unique customers and suppliers in their portfolio
400,000 records in global ERP
system
100,000 unique
D-U-N-S ® Number records
GlobalData
Collection1
Quality Information
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Assurance
D-U-N-SNumber®
3
D&BGlobal
Database
76
Entity Matching also enables our customers togain a better understanding of their unique customer relationships
A High-Tech Multinational Company
D&BGlobal
DatabasePortugal
Netherlands
Italy
Spain 76% are
unique customer relationships
24% are duplicate records
250,000 total records
77
D&BGlobal
Database
The D-U-N-S® Number allows customers to rely on a unique publicly recognized identification system
GlobalData
Collection1
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Information
Quality Assurance
D-U-N-S®
Number3
78
Digital Equipment CorpDUNS: 00-103-8066Started 1957Maynard, MAAcquired by Compaq Computer in 1998
Tandem ComputerDUNS: 06-910-1152Started 1974Cupertino, CAAcquired by Compaq Computer in 1997
Compaq ComputerDUNS: 00-389-7733Started 1982Houston, TXAcquired by Hewlett – Packard in 2002
Hewlett-Packard CompanyDUNS: 00-912-2532Started 1939Palo Alto, CA
Compaq ComputerOperating as a Subsidiary of Hewlett-Packard CompanyDUNS: 00-389-7733Started 2002Houston, TX
Compaq subsidiary dissolved in April 2004
Today
With our D-U-N-S® Number, we track businesses through their life cycle, including all of the changes that occur over time
Hewlett-Packard CompanyDUNS: 00-912-2532Started 1939Palo Alto, CA
79
D&BGlobal
Database
Corporate Linkage provides customers with a total view of corporate risk and growth opportunity
GlobalData
Collection1
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Information
Quality Assurance
D-U-N-S®
Number3
80
Without DUNSRightTM, companies typically identify their customers based on the assumption that they are separate and unrelated
Customer 2Advanced Elastomer
Systems SABrussels, Belgium
Customer 3Kuen Falca SRL
Merano, Italy
Customer 1Mobil
PetrochemicalSales & SupplyCorporation NV
Zaventem, Belgium
Customer 4Esso
Portuguesa, LDALisbon, Portugal
A High-Tech Multinational Company
81
Customer 2DUNS 76-531-3887Advanced Elastomer
Systems SABrussels, Belgium
(Subsidiary)
DUNS 00-121-3214Exxon Mobil CorporationIrving, TX
USA(Global Ultimate)
Customer 4DUNS 44-900-2096
EssoPortuguesa, LDALisbon, Portugal
(Subsidiary)
Our Corporate Linkage capability reveals previously unseen relationships so our customers know who their customers really are
Customer 3DUNS 43-753-0165
Kuen Falca SRLMerano, Italy(Subsidiary)
Customer 1DUNS 77-473-4461Mobil Petrochemical
Sales & SupplyCorporation NV
Zaventem, Belgium(Single location)
Not relatedto Exxon Mobil
Corporation
82
Corporate Linkage also reveals our customers’ entire corporate family relationships, exposing them to significant new growth opportunities…
DUNS 76-531-3887Advanced Elastomer
Systems SABrussels, Belgium
(Subsidiary)
2,429 more branchlocations under the
1st levelsubsidiaries
DUNS 00-121-3214Exxon Mobil CorporationIrving, TX
USA(Global Ultimate)
1 morebranch of Advanced
Elastomer SA
4 more branchesof Esso
Portuguesa, LDA
645 more directbranches of Exxon MobilCorporation
New Growth
Opportunities
DUNS 43-753-0165Kuen Falca SRL
MeranoItaly
(Subsidiary)
63 moresubsidiaries
OfExxon MobilCorporation
DUNS 44-900-2096Esso
Portuguesa, LDA Lisbon, Portugal
(Subsidiary)
83
…and helping them determine whether members of these families are also their suppliers, which directly affects their negotiating leverage
DUNS 44-900-2096Esso
Portuguesa, LDA Lisbon, Portugal
(Subsidiary)
DUNS 76-531-3887Advanced Elastomer
Systems SABrussels, Belgium
(Subsidiary)
5 additionalsubsidiaries
OfExxon MobilCorporation
DUNS 00-121-3214Exxon Mobil CorporationIrving, TX
USA(Global Ultimate)
9 more branches
Exxon MobileCorporation
DUNS 42-840-6078Esso
Italiana SPARome, Italy
DUNS 43-753-0165Kuen Falca SRL
MeranoItaly
(Subsidiary)
OnProcurement
Files
84
D&BGlobal
Database
Predictive Indicators provide our customers with insight into the likelihood a business will perform in a specific way in the future
GlobalData
Collection1
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Information
Quality Assurance
D-U-N-S®
Number3
85
Through Predictive Indicators, we can use our DUNSRightTM quality process to enable customers to make better, more informed decisions
Better Decisions
Descriptive Ratings Predictive Scores Demand Estimators
Customer’s File
D&BPredictive Indicators
Accept/Reject Pricing Targeting
86
With this new insight, our customers can customize their marketing strategies and improve response rates…
Without D&B
With D&B Response Model
0.86
1.42Response RatePercent
A Large Financial Services Company
87
...and identify lower-risk prospects most likely to meet our customers’ credit evaluation criteria
Without D&B
With D&B Approval Model
27
42Approval RatePercent
88
D&BGlobal
Database
These five drivers demonstrate how the power of DUNSRightTM enables us to meet our customers’ needs and drive sustainable growth
GlobalData
Collection1
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Information
Quality Assurance
D-U-N-S®
Number3
89
These fundamental factors drive our confidence that we will achieve our revenue growth aspiration
The marketplace needs what we provide andthe opportunity to provide more is profound
Our unique competitive advantage in DUNSRightTM enables us to meet more of our customers’ needs
The continued implementation of ourBlueprint for Growth strategy1
3
2
90
7 - 9%
E-Business Solutions
Risk Management Solutions
Supply Management Solutions
Sales & Marketing Solutions
2005 - 2007
5th Product Line
Looking forward, we feel confident we can leverage these factors to deliver our 7% to 9%revenue growth aspiration
Profound Market Opportunity
DUNSRightTM
Quality Process
Our Blueprint for Growth
3
2
1
91
Looking at it by customer solution, we expect our RMS business to grow 3% to 5% annually
2001 2003
RMS Revenue GrowthPercent
1 1
7
3
2002 2004 YTD
3 - 5% annually
92
We expect our S&MS business to grow 4% to 7% annually
S&MS Revenue GrowthPercent
2001 2004 YTD
1
8
1
2002 2003
6 4 - 7% annually
93
And, we expect our SMS business to grow 15% to 20% annually
18
- 2 - 5
16
2001
2004 YTD
SMS Revenue GrowthPercent
2002 2003
15 - 20% annually
94
In addition to our current business, we expect our E-Business to drive continued growth
E-Business Revenue$ Millions
One point of growth
3Q 4Q 1Q 2Q
2003 2004
1Q 2Q
3
8 810 11 12
95
We believe our 5th product line, powered by DUNSRightTM, will be a source of growth
Enterprise Risk & Compliance
Predictive Analytics
Acquisitions
One point of growth
96
We feel confident that this portfolio of customer solutions will deliver our 7% to 9% sustainable revenue growth aspiration
Profound Market Opportunity
DUNSRightTM
Quality Process
Our Blueprint for Growth
3
2
1
2005 - 2007
7 - 9%
E-Business Solutions
Risk Management Solutions
Supply Management Solutions
Sales & Marketing Solutions
5th Product Line 1.0Points
1.0Points
1.0Points
2.0 - 3.0Points
2.0 - 3.0Points
97
Now, let’s show you how we are transforming our International business, which is one of the drivers of our sustainable growth
Allan:We have accomplished a lot and there’s even more ahead
Steve:We are confident we will deliver our 7% to 9% revenue growth aspiration
Greg:We will continue to drive growth and profitability in our International business
Sara:We are confident we will grow margins by 100+ basis points and continue to deliver EPS in the mid to upper teens
98
When we launched the Blueprint for Growth strategy, our International business was underperforming
Not growing
Unprofitable and requiring cash
No distinctive value proposition
No focused strategy
99
68
32
2000 Revenue by GeographyPercent
North America
International
At that time, International represented about one third of D&B revenue and was in decline
100
International was also losing money and negatively impacting overall profitability
2000 Operating MarginPercent
North America
30
-2
International
101
Our International operations consisted of full ownership of 34 self-contained, independent businesses around the globe…
102
…which undermined our value proposition for our global customers
Uneven data quality in certain geographies
Inconsistent product implementation market to market
Lack of a global customer strategy
103
To improve our performance, we created a new strategy for International
We then focused on establishing leading competitive positions in each major market by enhancing our DUNSRightTM quality process, either by
Direct Ownership Partnerships
We focused on International as one organization, rather than as 34 independent businesses1
2
104
Our first step was to focus on International as one organization, rather than independent businesses
Manage common functions holistically
Focus sales and marketing functions locally
Consolidate infrastructure
105
– Enhanced DUNSRightTM
quality process
– Leading RMS provider
– Leading S&MS provider
– Potential to grow both
We define a leading competitive position as
We then focused on establishing leading competitive positions in each major market
106
– Direct ownership
- or -
– Establishing strategic partnerships
We determined that we could achieve this leading competitive position by either direct ownership or establishing partnerships
We will achieve a leading competitive position by
– Enhanced DUNSRightTM
quality process
– Leading RMS provider
– Leading S&MS provider
– Potential to grow both
We define a leading competitive position as
107
– Enhanced DUNSRightTM
quality process
– Leading RMS provider
– Leading S&MS provider
– Potential to grow both
We define a leading competitive position as
We are now focused in those direct ownership markets where we either have or can achieve a leading competitive position
In Europe: Italy
UK
Benelux
108
Japan Australia New Zealand Malaysia Thailand
Korea Singapore
Israel Sweden Denmark Norway Finland
India / Pakistan / Middle East Germany Austria Switzerland Poland Hungary Czech Republic Spain Portugal
In other markets, we have established partnerships with strong players locally that are able to enhance our DUNSRightTM quality process
2001 2002 2003 2004 YTD
Announced yesterday
109
Our strategy for International is delivering strong results
Enhanced DUNSRightTM
globally
Improved revenue growth
Improved profitability
Establish leading competitivepositions either throughownership or partnership
Focus on International asone business1
2
110
D&BGlobal
Database
We are enhancing the drivers of our DUNSRightTM quality process
GlobalData
Collection1
EntityMatching
2
CorporateLinkage
4
PredictiveIndicators
5
Quality Information
Quality Assurance
D-U-N-S®
Number3
111
Growth of International DatabaseMillions of Records
40
53
2000 2004 YTD
We have increased our International database, which enhances our DUNSRightTM Global Data Coverage
112
Our strategic partnerships, such as the one in Japan, have enabled us to expand the breadth of our database coverage
Partnership with TSR in Japan
240,000Records on JapaneseBusinesses
D&BGlobal
Database
D&BGlobal
Database
2,000,000Records on JapaneseBusinesses
D&BGlobal
Database
113
While others, such as our partnership in the Nordic region, enhance the depth of coverage
Bonnier
Best S&MS Database in
Nordics
D&BGlobal
Database
D&BGlobal
Database
114
We are investing in other DUNSRightTM enhancements to improve the quality of our information, such as our acquisitions in Italy
DataHouse
Italian Real Estate Information
D&BGlobal
Database
D&BGlobal
Database
115
Our International strategy has greatly expanded our DUNSRightTM Corporate Linkage capabilities
Number of Priority Corporate Linkage Relationships
2,000
5,000
2000 2004 YTD
116
As a result of this focused strategy, we are driving improved revenue growth in our International business
International Revenue GrowthPercent
2
8
5
2003 2004 YTD20012000
-12
2002
117
-2
6
1214
2000 2001 2002 2003
International has also generated significant improvements in operating margins
International MarginPercent
118
We are transforming our international business and making it a key contributor to overall growth and profitability
Enhancing our DUNSRightTM quality process
Creating a platform for sustainable revenue growth
Becoming a key contributor to profitability
Creating shareholder value
119
Now, let’s show you how our business model fuels our sustainability in revenue growth and powers our ability to consistently deliver EPS
Allan:We have accomplished a lot and there’s even more ahead
Steve:We are confident we will deliver our 7% to 9% revenue growth aspiration
Greg:We will continue to drive growth and profitability in our International business
Sara:We are confident we will grow margins by 100+ basis points and continue to deliver EPS in the mid to upper teens
120
We have made good progress on our seventh strategic priority – implementing a financially flexible business model
Winning Culture is at the foundation of these priorities
1. Build the brand of D&B around the DUNSRightTM quality process
2. Grow RMS by 3-5% annually
3. Grow S&MS by 4-7% annually
4. Grow SMS by 15-20% annually
5. Acquire or develop a 5th product line
6. Grow E-Business to consistently deliver 1 point per year
7. Implement a financially flexible business model
121
A critical step in transforming D&B was creating a financially flexible model to fund growth and create value for shareholders
122
Total Costs
When we began our transformation, the challenge was to change our fixed cost mindset
123
Flexible
Not Flexible
~$1 billion
Today, we view almost every dollar that we spend as flexible
124
We accomplish this through a process we call continuous reengineering
Eliminate redundancies
Standardize processes
Consolidate activities
Automate manual processes
Outsource or offshore
Eliminate Standardize Consolidate Automate/ Migrate toWeb Outsource
125
This process of continuous reengineering has enabled us to generate significant flexibility year after year
Annualized Savings Derived from Financial Flexibility$ Millions (Annualized)
807570
130
80
2000 2004E2001 2002 2003Year Announced
Before any restructuring charges and transition costs and before any reallocation of spending
126
Available for Investment
(~60%)
Increase EPS
(~20%)
One-time Transition
Costs (~20%)
Cost base100%
The savings generated through continuous reengineering are reinvested in the business or returned to shareholders
FF savings
127
Available for Investment
(~60%)
Increase EPS
(~20%)
One-time Transition
Costs (~20%)
Reinvested in the business,
subject to future reengineering
(~80%)
Since the bulk of these savings go back into the business as investments…
FF savings
128
…they become subject to future reengineering
One-time Transition
Costs (~20%)
Available for Investment
(~60%)
Increase EPS
(~20%)
Reinvested in the business,
subject to future reengineering
(~80%)
FF savings
129
In 2000, our infrastructure consisted of 3 global data centers and multiple in-country mini data centers
Eliminate Standardize Consolidate Automate/ Migrate toWeb Outsource
3 global data centersMultiple in-country mini data centers
450 full-time employees$120 million annual costAll capital spend by D&B
2000
130
Eliminate Standardize Consolidate Automate/ Migrate toWeb Outsource
Today, our infrastructure consists of no data centers and few in-country mini data centers and we reduced our investment in this process
No global data centersFew in-country mini data centers
50 full-time employees$65 million annual costNo capital spend by D&B
2004
Eliminate Standardize Consolidate Automate/ Migrate toWeb Outsource
3 global data centersMultiple in-country mini data centers
450 full-time employees$120 million annual costAll capital spend by D&B
2000
Eliminate Standardize Consolidate Automate/ Migrate toWeb OutsourceEliminate Standardize Consolidate Automate/ Migrate toWeb OutsourceEliminate Standardize Consolidate Automate/ Migrate toWeb Outsource
131
Generated ~$44 million of funds to
be reinvested(~80% of $55
million)
Through this process, we generated $55 million in savings which we were able to reinvest in the business to drive growth
Returned ~$11 million to shareholders in EPS(~20% of $55 million)
FF savings($55 million)
132
And, we continue to reengineer our data center operations to generate additional financial flexibility savings in 2005
Continue to eliminate and standardize processes
Renegotiate agreements with current vendors
Consolidate vendor base
Re-bid existing outsourcing contracts
133
In 2000, our Corporate Linkage quality was inconsistent
Eliminate Standardize Consolidate Automate/ Migrate toWeb Outsource
Inconsistent manual processes
2,000 priority relationships locally maintained
37- day M&A update cycle
2000
134
Eliminate Standardize Consolidate Automate/ Migrate toWeb Outsource
Over the past four years, we’ve made significantimprovements in the consistency of our Corporate Linkage quality
Eliminate Standardize Consolidate Automate/ Migrate toWeb OutsourceEliminate Standardize Consolidate Automate/ Migrate toWeb OutsourceEliminate Standardize Consolidate Automate/ Migrate toWeb Outsource
Standardized and automated processes
5,000 priority relationships centrally maintained
12- day M&A update cycle
2004Inconsistent manual processes
2,000 priority relationships locally maintained
37- day M&A update cycle
2000
Eliminate Standardize Consolidate Automate/ Migrate toWeb OutsourceEliminate Standardize Consolidate Automate/ Migrate toWeb Outsource
135
This process of continuous reengineering enables us to grow revenue at a faster rate than costs, resulting in margin improvements
2001
Operating MarginPercent
2000 2002 2003
17
23
136
In addition to margin improvement, we have also increased free cash flow through fundamental changes in our infrastructure
Continuous reengineering reduces infrastructure inefficiencies
Leveraging partners in key markets
Continued outsourcing of capital intensive activities
Less capital is required to run same operations
No capital required in partnerships markets
Outsourcing partners absorb future capital expense requirements
137
We have improved the capital efficiency of our business model
Capital Expenses as a Percent of RevenuePercent
4 4
2
2001 2002 20032000
5
138
We have also improved our discipline around working capital management
Days of Sales OutstandingDays
90
2001 2002 2003
89 85 81
2000
139
This strong cash flow has allowed us to fund value-creating acquisitions and repurchase shares
Acquisitions Share Repurchases
2001-2004 YTD
$154M $373M
2001-2004 YTD
140
Our financially flexible model will continue to drive substantial shareholder value
Margin improvement
100+ basispoints
Generate Savings
Grow Revenue
Increasingcash
EPSmid to
upper teens
141
142
Appendix
143
Reconciliation of Non-GAAP to GAAP Measures
Reconciliation of Core and Organic Revenue Growth Data
144
Reconciliation of Non-GAAP to GAAP Measures
Reconciliation of Product Line Revenue Growth Data
145
Reconciliation of Non-GAAP to GAAP Measures
Reconciliation of International Revenue Growth Data
146
Reconciliation of Non-GAAP to GAAP Measures
Reconciliation of Free Cash Flow Data
147
Reconciliation of Non-GAAP to GAAP Measures
Reconciliation of Operating Income Data
148
Reconciliation of Non-GAAP to GAAP Measures
Reconciliation of Diluted EPS Data