Oct 29, 2014
Executives
Kathleen Guinnessey - Corporate Treasurer and Investor Relations Robert Carrigan - President, Chief Executive Officer and Director Richard Veldran - Chief Financial Officer Joshua Peirez - Chief Operating Officer
Analysts
Manav Patnaik - Barclays Andrew Steinerman - JPMorgan Shlomo Rosenbaum - Stifel Jeff Mueller - Baird John Crowther - Piper Jaffray Brett Huff - Stephens, Inc. Andre Benjamin - Goldman Sachs
Operator
Good morning, and welcome to Dun & Bradstreet's 2014 third quarter teleconference. (Operator Instructions) I would now like to turn the call over to Ms.
Kathy Guinnessey, Treasurer and Investor Relations Officer. Ms.
Guinnessey, you may begin.
Kathleen Guinnessey
Thank you, Brad. Good morning, everyone, and thank you for joining us today.
With me on the call this morning are Bob Carrigan, our President and Chief Executive Officer; Rich Veldran, our Chief Financial Officer; and Josh Peirez, our Chief Operating Officer. Here's what you can expect on the call.
Following my brief remarks, Bob will talk about progress on our strategy, and then Rich will take you through the financial performance in the quarter, and after that we'll 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 those forward-looking statements. These documents are available on the Investor Relations section of our website, and we encourage you to review this 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 will be referring to the non-GAAP measure core revenue growth before the effect of foreign exchange, unless otherwise noted. And 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 a reconciliation between these and other non-GAAP financial measures and the most directly comparable GAAP measures in the schedules to our earnings release. They can also be found in the supplemental reconciliation schedule that we post on the Investor Relations section of our website.
Later today, you will also find a transcript of this call on our Investor Relations site. With that, I'll now turn the call over to Bob Carrigan.
Bob?
Robert Carrigan
Thank you, Kathy. Good morning, and thanks to all of you for joining us today.
Last night we reported that our revenue grew 1% in the third quarter. This marks our fourth consecutive quarter of revenue growth, and we're on track to deliver our full year guidance.
We're making great strides in executing our strategy and we are building momentum. Let me tell you what you can expect today.
First, I will update you on some notable progress against our strategy, and then Rich will talk about our third quarter results in more detail. After that, we'll open up the call for your questions.
As a reminder, I came here to drive profitable and sustainable topline growth, and we have a five-point strategy to deliver that growth. Our focus is around content, modern delivery of that content, globalizing the business and revitalizing our culture and brand.
Today, I am going to highlight some noteworthy achievements during the quarter in a couple of the strategy focused areas. When we laid out our strategy, we talked about how data and insight were becoming increasingly important to businesses, and we said that the wins were moving in our direction.
In the past month, there were several big technology and software industry events that validated this point. Oracle, Salesforce.com and Gartner, all just held their annual conferences and their themes were similar.
The convergence of mobile, analytics and the cloud are driving the future of business, and data is the crucial element that underlies the seismic shift in how businesses will operate. Customers expect to have access to data and insights wherever they do work, whether it's on their desktops or with their mobile devices, and they want it available across their enterprises, especially when it's embedded in their workflow.
Dun & Bradstreet is positioned right in the middle of these emerging trends. Increasingly, we are making our content pervasive.
And consistent with modern delivery, we are finding the best ways to get our content to customers, whether we are dealing with our own large strategic customers, who want our data and analytics in their own proprietary applications or through alliance partners, who are delivering best-in-class applications to their customers; our content will be right there, where and when they need it. Now, you're starting to see a lot of companies out there talking about providing analytics to customers.
In most of these offerings they sale algorithms that companies can use with their own data. What D&B does in this space is unique.
What sets us apart is that our analytics use our foundational D&B data that is derived from our database of 240 million businesses around the globe. We marry that data with our customers own data and even other third-party data in our proprietary analytic models to help our customers get a richer, more predictive view of a company.
In other words, the one-two punch we provide is unique foundational data combined with proprietary analytics. So whether you are looking to go deeper into your existing customer base, we're trying to find new prospects.
It's likely they are going to be in our database. And we can help you identify those companies that are most likely to buy, safe to do business with or likely to even exist next year.
In recent weeks we've announced several steps in our alliances strategy that further our goal of making our data and analytics pervasive. Oracle and Salesforce have each just announced new cloud-based offerings, putting more customer processes, applications and analytics in the cloud, and D&B content will be right there.
First, we entered into a new relationship with Oracle that spans their largest cloud platforms. More specifically D&B data will be natively available within their newly announced Data-as-a-Service for business offerings, including marketing, sales, human resources and social relationship management.
This deal takes our alliances' strategy beyond CRM and allows Oracle customers who access multiple Software-as-a-Service or SaaS platforms to have our data available in those applications. We've also announced two new initiatives to broaden delivery of our proprietary analytics.
The first is an analytics for everyone offering and the second provides more sophisticated analytics for larger strategic customers. At its Dreamforce conference a few weeks ago, Salesforce announced Wave, the Salesforce Analytics Cloud.
Wave will allow its customers to deliver real-time data and analytics from any source to any of their employees' devices and Dun & Bradstreet will be in that ecosystem. With this new offering, we'll deliver analytics directly into the hands of the end-users rather than just the data scientist.
As we said, when we launched our strategy, customers need to be able to derive insight from the massive data available to them. And that is a big part of the value we provide for companies.
We expect this new move by Salesforce putting analytics in the cloud to broaden the reach of D&B's proprietary analytics by making it easier to access from the Salesforce platform. The second analytics initiative is a partnership with Lattice Engines, a leading platform for marketing and sales analytics used by big enterprises like Dell, SunTrust, PayPal and Seagate.
Through our alliance, we will deliver our proprietary marketing analytics native in the Lattice Engines platform. This combination of their platform and our analytics makes this a powerful proposition.
We can now easily deploy our most advance new marketing analytics to our more sophisticated customers through a best-in-class platform. All of these premier providers want to have D&B data and analytics available in their platform, because we have the most comprehensive globally consistent data in the B2B space, all organized around the DUNS Number, the global standard for business identification.
And these partners provide a great way to put our unique asset into platforms that make our data and analytics more useful to customers. So we're pretty excited about our progress in modernizing delivery to alliances.
Another place we are making progress on modern delivery is with DNBi, which has been a critical focus area for me. As we told you on prior calls, we are completely rebuilding DNBi in the cloud.
And since acquiring Indicee at the end of April, we have acted with urgency. We are on track to have a working prototype of the new DNBi by the end of the year, which has been a pretty big undertaking.
I'm really pleased with how we're delivering on, what I would say is, an aggressive timeline and we expect to have a staged rollout next year. This is a big product and we're going to be thoughtful about our deployment strategy, but we are very excited about expanding DNBi globally via the cloud.
Another area of focus has been improving execution in our direct sales channel to drive growth. As you know, at the beginning of the year, I created the new role of Chief Sales Officer, a global function that replaced separate North America and international precedence.
Mark Geneste took on that role earlier in the year and since then we've taken several important steps to improve our global sales results. We've rebound the sales leadership team, bringing in new talent in key roles.
We've hired new heads of global accounts, sales execution, Europe and the Americas, an expanded role that includes both North and Latin America. We have also moved customer service into the sales organization under Mark.
This will allow us to manage our customer relationships more effectively and efficiently, while freeing up more sales people to pursue new business, whether it's selling more to existing clients or bringing in brand new customers. Transforming a sales force in the company our size is a multiyear journey, but we are already seeing good progress.
We put more rigor around the sales process, and now more of our sales teams are hitting their numbers with more regularity. You can see evidence of this in our reported revenue results.
We made changes to our compensation plan in 2014 to raise the bar on performance. And we're currently in the midst of completely redesigning our next-generation compensation plans for 2015 to ensure we drive even more new customer growth and improved penetration of existing accounts, while maintaining our high renewal rates.
Now, let me switch gears and talk about our investments. As we said last quarter, we expected the pace of investment to pick up in the back half of the year and it has.
In 2014, we are investing across three categories: first, investment in content to drive global consistency; second, investment in secure modern delivery; and third, a mix of investment in innovation, modernizing the brand and globalizing the sales force. In the third quarter, our investment spending was spread pretty evenly across these categories.
Our content investments are enabling development and deployment of our globally consistent scores. We are also increasing our capacity and flexibility, so we can deliver Data-as-a-Service or DaaS to alliance partners in a secure fashion.
In last quarter, we announced that we had engaged the Creative Agency Droga5 to help modernize the Dun & Bradstreet brand. We are now deeply involved in modernizing our brand purpose, our company values as well as our creative look and feel, which you can expect to see early next year.
Still we continue to have a lot going on, but we're energized to see that we're moving the needle on the topline, while implementing positive changes throughout the organization to drive long-term growth. We are currently deep into our planning for next and we'll have a lot more to share with you as we complete that process.
Finally, we're planning for an Investor Day, late in the first quarter of next year, after you and we get through yearend earnings season. We look forward to sharing the date with you, once our plans have finalized.
I'll now turn the call over to Rich to talk about the quarter. Rich?
Richard Veldran
Thank you, Bob. As Bob said, we just posted our fourth consecutive quarter of revenue growth.
And it's clear that we're starting to build some momentum, with each quarter growing at a faster rate than the year before. And we're driving growth through the areas that are strategically important to us, like alliances and modern delivery mechanism like DaaS.
North America with 73% of our revenue was flat for the quarter. RMS grew 1% with a decline in DNBi more than offset by strength in projects and other risk management solutions.
Our projects and other risk solutions were up 11%, driven by key strategic areas that we expect to drive a long-term growth; compliance, supply, and our DaaS solution, D&B Direct. Together, these areas contributed 5 points to total RMS growth.
As expected and consistent with recent trends, DNBi revenue was down 4%, while retention remains in the low-90s, and we continue to get low-single digit price lift; we're not offsetting natural attrition with new growth. As Bob said, we're continuing to make good progress on developing our cloud-based DNBi platform.
In the meantime, we're not standing still. We're developing DNBi tools to help our customer make faster credit decisions.
We have added mobile alerts and online credit applications to the current platform. And early next year, we'll launch a new feature Credit Check for DNBi customers, who also use Salesforce.com.
Credit Check will allow sales people to get automated credit approval directly through their CRM. These are early steps to make DNBi more integrated across our customers' enterprise and customers can expect to see more of it, as we move DNBi to the cloud.
In sales and marketing, revenue was down 1% in the quarter. Traditional products, which represent about a-third of S&MS, were down 7% similar to previous quarters this year.
Value-added solutions, which represent the other two-thirds of S&MS were up 3% in the quarter with strong growth from DaaS products, including alliances adding 3 points of growth to total S&MS in the quarter. As we've said before, growth in our project-oriented VAPS business can be a bit lumpy quarter-to-quarter given the nature and size of these contracts, as you saw last quarter, when the VAPS was up 17%.
On a year-to-date basis, value-added solutions were up strong 7%. We feel good about our pipeline of business and we expect these solutions to be a big driver of growth for us going forward.
North America deferred revenue was down about 4% in the quarter. This does not reflect committed sales to our alliances and some contract timing, that combined would have added about 4 points to the total balance.
So the underlying trend is about the same as it's been all year. Stepping back, and as Bob mentioned earlier, one of the keys to our future success in an area that we're very focused upon is enhancing our overall sales execution.
And we're beginning to see some good progress this year with all of our major channels showing growth so far, except our small business telesales channel. We're taking steps to improve execution in this area as well, improving tools, training and marketing support.
In international, which represents 27% of revenue, revenue grew 2%, driven by a strong 5% increase in Asia-Pacific, where we had growth from all three major markets. Turning to profitability.
As expected, operating income was down 16% in the quarter entirely due to the stepped up pace of investment under the $70 million to $80 million investment program that we announced at the beginning of the year. We have invested a little over 60% of the total year-to-date and are on track to invest the remainder in the fourth quarter.
Given the seasonality of our business with the fourth quarter being a much higher revenue quarter than the third, we expect operating income to moderate to a mid-single digit decline in the fourth quarter. EPS declined 8% in the third quarter to $1.85 a share.
The decline was due to lower operating income, partially offset by the impact of share repurchases and the lower tax rate. During the quarter, we repurchased the remaining $20 million under our $1 billion share repurchase program.
Our tax rate was 30% in the quarter and we expect the full year tax rate to be about 32%. Turning to the balance sheet.
We ended the quarter with $1.6 billion of debt, and year-to-date we've generated $238 million of free cash flow. So all-in-all, the quarter was about as expected.
And we're on track to deliver a full year guidance of revenue of flat to up 3%; an operating income decline of 5% to 9%; EPS down 1% to 5%; and free cash flow of $250 million to $280 million. With that I'll now open up the call for your questions.
Operator
(Operator Instructions) Our first question will come from Manav Patnaik of Barclays.
Manav Patnaik - Barclays
Just the first question around the alliances strategy. So, first, can you remind us when you say, Rich, when you mentioned, there is sort of DaaS alliances added, the 3 points of growth.
What's included in that? Is that just the CRM alliances or is there more than that?
Richard Veldran
Look, right now, when we talk about that, it's primarily today the Salesforce alliance, right. We do have other alliances, as you know, that we've been signing up and they will certainly add to that overtime.
But the bulk of it today is really the Salesforce relationship, because that is of course the oldest and one that's progressed the most.
Manav Patnaik - Barclays
And then, Bob just around the new sort of announcements at Salesforce.com, it seems like you're going to have a broader reach. Is that coming at a lower price point?
Just trying to understand if that expand sort of the addressful opportunity that you guys had previously with Salesforce.com.
Robert Carrigan
Look, we are really pleased to be a part of Salesforce, exciting new initiative in analytics space. It's really too soon to discuss details.
They just announced the solution and we're obviously working with them. The good news is we're right there.
We were a part of their demos. We're really excited about bringing our analytics to a broader audience and the potential that that holds.
Manav Patnaik - Barclays
And then, just the last question, I think you had mentioned the improvement in sales productivity and you can see that in the numbers. I was just curious, if you could expand that a little bit more in terms of which specific line items you were referring to?
We are seeing that productivity through your reported numbers.
Robert Carrigan
Look, overall, we're pleased that we are showing our fourth consecutive quarter of growth. And look, we're pleased, but not satisfied, right.
Obviously, we have a growth strategy here and we have ambition to grow the business significantly. But when you look at where a lot of our growth happened around our alliances, in lot of our larger and midsized accounts, we're pretty excited and the validation, that we're headed in the right direction.
Overall, our sales execution is certainly improved. There is a new energy here.
As I said, we've aligned the compensation plans more in target with where we're headed. And we're starting to see more of our reps hitting their goals.
And look, it's early days. We've got a new team in place.
We've hired some new leaders. We've promoted some of our stars to more senior position.
But we're pretty excited that while we make these changes, we're showing some early momentum in growing revenue.
Operator
Our next question comes from Andrew Steinerman of JPMorgan.
Andrew Steinerman - JPMorgan
I wanted to ask how Optimizer did in the quarter. I remember in second quarter, there were some timing benefit from Optimizer.
So if you could give us a sense of how Optimizer did in the third quarter and maybe year-to-date?
Richard Veldran
Let me take that, Andrew. And as we did mentioned on the second quarter, it's a project-oriented business.
It does tend to bounce around. Historically, we've seen the least growth in that particular business in the third quarter.
I think most people are really gearing up and you'll see the big spikes happen in the fourth. So in the quarter itself that particular product was down about $4 million, so almost 10% in that particular line item.
Although project business was up, so net-net our overall project business in the VAPS arena, outside the DaaS alliances was slightly down, but really have no big consequence. On a year-to-date basis, the Optimizer is still up.
Andrew Steinerman - JPMorgan
And do you feel like Optimizer is a good product right now? Is there any product evolution going on specifically with Optimizer?
Joshua Peirez
So we continue to believe Optimizer is a strong product for us. It has a strong value proposition, particularly up market with our strategic account.
As Rich said, Q3 is always a pretty light quarter for us on this product, and so pretty much within our expectations. We continue to enhance the product.
The main way that the product is enhanced is with better data. So the more that we're able to provide better matching capability, connect more information to our customers' files when they send them to us, we're actually able to give them higher value in return.
So we do expect to continue to see this as a growth driver growing forward, and we will also be able to share some future plans around the product in the next call.
Operator
Our next question comes from Shlomo Rosenbaum of Stifel.
Shlomo Rosenbaum - Stifel
I want to dive in a little bit more into some of the commentary about seeing traction on the sales. Last quarter we saw a lot of traction in the sales and marketing VAPS.
In this quarter, we saw them in the RMS project-related revenue. Both of these areas seem to have a lot more project business.
Can you just talk a little bit about where we should expect growth? Should we expect the projects in RMS to continue to be strong or is it basically going to just be bumpy between the two of them, and sometimes one will be up more, sometimes they'll both be up, sometimes they'll both be down.
In other words, the way that you guys are attacking the market right now in some of the projects, you see it's kind of changing the nature of the business, or is it just kind of early innings in the turnaround, and this is kind of how we're seeing it manifest itself, if you could just give us some color there?
Richard Veldran
This is Rich. Why don't I start and then maybe I'll ask Bob to comment a little bit from his perspective.
But I mean, I'd say, there's a couple of things. As you know, a big part of the strategy is geared towards large customers.
And when you approach the large customers, a lot of it's really about solutions selling, so going in there and trying to serve their multiple needs. So you will see a little bit of bumpiness quarter-to-quarter between whether risk is a focus one quarter or whether it's sales and marketing, because customers need all of their needs solved.
And the largest customers we're building very strong relationships with and getting in there and solving a variety of those needs. I do still believe that in the intermediate term, you're still going to see the sales and marketing business grow a little faster than the risk business.
You have a bigger drag in the overall risk business right now with D&B as we talked about. We're taking steps to address that, but that one does take a little bit longer.
So you're going to see the bigger bulk of the growth at least in the intermediate term out of sales and marketing. Let me see if Bob has any other?
Robert Carrigan
Yes, Rich, I think you covered most of it. Look, our strategy, we're going much deeper with some of the largest accounts that we do business with, 90% of the Fortune 500 or so.
But our goal is to go deeper and find new ways to do business with them, and find new projects and help them as they are trying to solve their business problems using data. And so it is a bit lumpy, but we're encouraged by what we're seeing.
And as we go deeper with these accounts, you can expect to see, I think what Rich said is correct, certainly on the sales and marketing side where we're seeing data being used more and more to help engage with customers. Our customers using data to help, find profitable segments and make sure that they are engaging in the right way with their customers at the critical area of opportunity for us, and we expect to grow in that arena.
Shlomo Rosenbaum - Stifel
And can you just go over what the 11% growth in projects in RMS; I believe you talked about 5% being from three areas. Can you give us a little more detail in some of the other parts of it?
Joshua Peirez
When we look at the RMS project solutions line, is where we said we saw the 11% growth within that particular category. That was driven primarily by our Compliance Solutions, the supply area and D&B Direct, and it kind of harkens back to your last question as well.
On the RMS side, those are the things we see as growth drivers at this time. And they contributed 5 points of growth to the RMS line.
In total it was 11% growth within the VAPS, the projects line. So that's where there may have been confusion from you, because the 11% --
Shlomo Rosenbaum - Stifel
So it was all the growth that was from those things, it wasn't something else. That you're referring to the overall unit, I understand that.
Just the nature of the way that you guys are attacking the market right now is deferred revenue really an area on the balance sheet to be focusing on, because the projects don't really go that much into deferred revenue, and they don't really stay there for very long. So is that really a good gauge anymore in terms of looking at how the business is progressing?
Robert Carrigan
Look, it's less useful, certainly, because a lot of the newer solutions tend to be, some are ratable assets, some are usage-based, some things are -- obviously, there's a lot of project business. But also as we move in more and more towards an alliance strategy, as you saw with the Salesforce number that we have adjusted for overtime, we don't hold those committed relationships on our balance sheet, so it's less of an indicator.
We'll continue to report on it, because there is some value in it, but it's less of a perfect leading indicator.
Shlomo Rosenbaum - Stifel
And I'm just going to leave up with the last thing, if you can give us some color in terms of letting the sales force run industry verticals, where you started the year, where you are now, and where you hope to be in say a year from now?
Robert Carrigan
So we've identified a number of high opportunity verticals. And look, our goal is to graduate more and more accounts into these verticals, because we have domain expertise there, we have customized solutions, we have knowledgeable sales people that are highly consultative.
We are very much in the process of moving accounts in. We want to make sure that we handle these accounts properly and we do the right hand-offs.
We've already moved a bunch in. And look, our goal is to move them into verticals and then the next stage of graduation is to globalize these accounts to the extent that there is an opportunity to expand into markets beyond the markets that we're working with them in.
So that strategy is in full force right now and we're very much in progress, and I'm pleased with where we are. And we're going to continue to move accounts into these verticals, because we see we get a lot of leverage when we do that.
Operator
Our next caller is from Jeff Mueller of Baird.
Jeff Mueller - Baird
So I know it's your policy to, as long as you're operating within the annual guidance, to just kind of maintain it, but obviously it doesn't make it overly helpful, as we try to come up with Q4. In the past you guys have talked about Q4 being a faster revenue growth quarter, because you have greater seasonal mix of some of the revenue line streams that are faster growing right now.
And then, Bob, you're talking about building momentum. Should we expect to see a similar dynamic this Q4 in terms of faster growth?
Robert Carrigan
That is our expectation. Typically our Q4 is when the biggest project business comes in and those tend to have growth in them and that is our expectation.
Jeff Mueller - Baird
And then it sounds like some of you were out at Dreamforce. Can you just talk about how Data.com was featured differently maybe this year at Dreamforce than in years past?
I don't know if it's an area that increased emphasis? And then just based on years past, do you typically see good sales of Data.com in the months, weeks or months following Dreamforce conference?
Robert Carrigan
Yes, look, Dreamforce was a terrific event. And it was actually the first time I had attended, having been in this role now, just about a year.
I have to say, I was really just so delighted by our presence and the Data.com presence at the event. We had lots of our executives in speaking roles there on stage.
We had our own booth. We were featured prominently in the Data.com booth.
And I saw a lots of great traffic going through the halls of that convention and lots of folks expressing interest in those solutions. And then certainly with the Wave announcements and us being part of that ecosystem that only added to some of the sizzle around that.
So I was really delighted with the mention of Dun & Bradstreet and their involvement with Dreamforce. And look, it just points to how successful that relationship is and when you marry our great content in a best-in-class application that Salesforce provides leveraging a lot of their sales channels and their platforms just really goes to show the tremendous success that can be derived from such a winning partnership.
Jeff Mueller - Baird
I think next year they should let you play the banjo instead having this Bruno Mars guy. And then just finally, on Q4 it sounded a little bit different from what I remember in terms of the EBIT comment.
Just to be clear, you guys now saying mid-single digit decline year-over-year in EBIT and Q4 initiative spend will be higher than Q3, because in the past I thought you said Q3 and Q4 similar and a low-to-mid single-digit decline.
Richard Veldran
Yes. This is Rich.
That is correct. $2 million bucks really moved into the fourth quarter from the third, what we expected.
We originally thought it would evenly split in terms of investment. A little bit more of it is skewed to the fourth quarter, so we've just adjusted for that, still within guidance.
Operator
Our next question comes from Peter Appert of Piper Jaffray.
John Crowther - Piper Jaffray
You've got John Crowther on for Peter. First question, obviously you guys have talked a lot about the three areas of spend being content, modernizing delivery and start refreshing the brand.
Lot of good detail on the delivery, and obviously it sounds like we're going to get some updates on the brands next year. Just wondering, maybe if you can talk a little bit more, I don't know if I missed it, but just about what you're seeing from a return on your investment in content and data here over the first part of the stepped up investment spend.
Robert Carrigan
So content is at the core of what we do. That's on our data and analytics and obviously that's a significant part of our investment roadmap.
We have improved our data quality. We're seeing typical improvements, 40% in terms of the predictiveness of some of the scores of the analytics that we have created.
We have secured some new data sources around social and we've certainly -- we're starting to step up our investment to improve our global consistency. So all these things take a bit of time and will manifest themselves, because they're getting in -- it will run through a lot of products and the deliverables that we have for our customers, but we have a very detailed roadmap against our content investment and we're very pleased where we are with that.
We're definitely hitting our milestones and really our customers are starting to feel the benefit and see the benefit of our improved data quality.
John Crowther - Piper Jaffrey
And then just the last question, kind of hit on the Q4 guidance, being a little bit difficult maintaining overall guidance. Just wondering obviously there's a step-up in the Q4 tax rate to get to the 32% full year number.
But just wondering if there is any other items below the line that we should be thinking about in Q4. It seems like I'm having a little bit of difficult time getting to the EPS guidance, given the performance so far on operating income year-to-date.
Robert Carrigan
Nothing extraordinarily different. As the other element you could think of is share repurchase, which was pretty heavy in the beginning of the year.
And obviously, we've dialed that back as of last quarter, right, which we'll begin to see is not as much help from a share count standpoint on your EPS calc. And then again you will see the tax rate pop up a little bit.
It's been a little lower than our full-year for the year, because we had a couple of one-time tax items that have helped us in the first part of the year.
John Crowther - Piper Jaffrey
And then just lastly on that share repurchase. Any updates in terms of priorities for capital planning going forward.
Obviously, in the near term here investment seems like the top source, but wondering if you can give any update there.
Robert Carrigan
There is no change in priority. Our primary focus is investing in the strategy.
Next, around M&A, where it supports the strategy. And then, obviously, we will get track record of returning free cash to shareholders, but that's our priority has not changed.
Operator
Our next question comes from Brett Huff of Stephens, Inc.
Brett Huff - Stephens, Inc.
I have two questions. One is, can you talk a little bit more about the new partnerships or alliances that you mentioned.
I think you touched on them briefly. And I guess specifically, when you think about the economics of those new partnerships that you're selling your data through, are those materially different than the Salesforce.com type economics?
And then number two, on that, can you give us a sense of the addressable market that you think is out there through those partners? And then I have a follow-up as well.
Robert Carrigan
So when you think about our alliances strategy we have three general models. First, our partner builds the solution, our content is natively integrated in that solution, and then it's sold by our partner and we leverage their customer relationships.
Not the nature of that kind of deals we have, let's say, Data.com or Sugar, Oracle and Wave. The second model is our partner builds the solution, our content is natively integrated, and we sell the customer directly.
And so the Lattice Engines partnership that we announced is actually going to be sold through our most important large strategic customers, by our direct sales team. And then third we have relationships, where we license our content partners for use in specific use cases.
For instance, we have an arrangement where our data distributed for a specific compliance obligations around FATCA, the foreign account tax compliance regulation. So we have three general models, and so our alliances fit into those general construct.
So whenever we engage with a potential partner, we consider all the options. We try to structure relationship that best meets the needs of the customers, while leveraging the core respective strength of us and our partner.
Brett Huff - Stephens, Inc.
And then my follow-up is, on the data modernization part of the spend. I think a lot of that -- I understand the distribution strategy of kind of going to cloud to allow sort of borderless access to the data.
And part of is my unfamiliarity with how the data, the core credit data differs domestically versus internationally, as you bring the international data up to higher standards or more like the U.S. data, what does that involve?
And given that you've partnered a lot with people internationally, who is kind of paying for that additional data robustness? And at the end of the day, who kind of owns that data robustness and how does that data improvement work?
Robert Carrigan
Look, we're making investments and improving our foundational and firmographic data outside of the U.S., its part of our current roadmap. We're pretty dominant on a global basis and in the aggregate.
But look, in some of the markets, especially some of the emerging markets, we want to make sure that we have the same coverage that we have in core market like the U.S. So a lot of our investments are to make sure that we have similar foundational coverage in the most important markets, especially as we consider new use cases.
And you asked me a question about the addressable market earlier as well, we'll identify the market opportunities that's north of $20 billion. And we've seen some progress we've made in the areas say, compliance, supply, management is also an area.
And in lot of those areas, they want transparency into businesses and entities in emerging markets, where they have vast supply chains and they have increasing compliance in even a global world. So for us, to be able to execute on those use cases, we need to make sure that we have consistent quality in all the markets in which we serve, and that is our ambition and that's our goal with our investment plan.
Operator
Our next question comes from Andre Benjamin of Goldman Sachs.
Andre Benjamin - Goldman Sachs
I know you're currently working on the 2015 plan and the Analyst Day for next year. So this maybe a little bit premature.
But I was wondering, as you are investing more and same products rollout and getting a feedback from customers, if you have any updated thoughts on sequential EBITDA margins. I'm just thinking, you're increasing investment and you're adding more value, but you're also cutting cost elsewhere.
So is flat the next couple of years probably the right way to think about it or should we actually start to model in some expansion?
Robert Carrigan
Andre as you know, we're not in a position to give guidance on that right now. We're in full execution mode on our strategy.
We're deep in our planning right now for next year. And we look forward to sharing our guidance for the next year.
And we're excited about having the Investor Day, where we can either way share with you some of our more detailed plans.
Operator
Our next question will be from Shlomo Rosenbaum of Stifel.
Shlomo Rosenbaum - Stifel
Just two follow-up questions. Number one, Rich, can you just give us a range on the tax rate for next quarter, so we just are not fumbling around on that?
Richard Veldran
It will be in the mid-30%, if that will help you with your modeling.
Shlomo Rosenbaum - Stifel
And then, can you also discuss what was the growth in Asia RMS? Can you go into some detail as to what drove that?
That looked like the kind of growth that you guys would like to see in the rest of the company and see what are the successes over there?
Richard Veldran
Yes, a couple of things. It's a relatively small business in the scope I think.
So any given quarter you can have a little bit of a pop. But we've actually seen some reasonable strength in risk products in China as well as in India and Australia.
So all three of those markets, we're focused on risk this year. And they're all for this quarter were quite strong.
Shlomo Rosenbaum - Stifel
Are we almost done with the China issues over there in terms of just getting through and that not being an overhang any more in terms of internally having to deal with that?
Robert Carrigan
Well, look, we did shut down that one business unit a couple of years back. It was more of a consumer business, which didn't make sense for us to be in from a strategic standpoint anyway.
In terms of operations, things are going fine. You will have these ongoing work with the FCPA and the government piece of that, that just takes time, and we expect that to continue for a while.
But in terms of the operations on the ground, things are running pretty smooth.
Operator
And at this time, we have no further questions.
Kathleen Guinnessey
Thank you, Brad. All right.
Everyone thank you for joining us today. And we look forward to talking to you after we finish the year.
Operator
Thank you for your participation on today's conference call. At this time, all parties may disconnect.