May 5, 2015
Executives
Kathleen Guinnessey - Treasurer and Investor Relations Officer Robert P. Carrigan - President, Chief Executive Officer & Director Richard H.
Veldran - Chief Financial Officer & Senior Vice President Joshua L. Peirez - Chief Operating Officer
Analysts
Peter P. Appert - Piper Jaffray & Co (Broker) Shlomo H.
Rosenbaum - Stifel, Nicolaus & Co., Inc. Andrew Charles Steinerman - JPMorgan Securities LLC Jeff P.
Meuler - Robert W. Baird & Co., Inc.
(Broker) Manav Shiv Patnaik - Barclays Capital, Inc. Andre Benjamin - Goldman Sachs & Co.
William Arthur Warmington - Wells Fargo Securities LLC James Rutherford - Stephens, Inc.
Operator
Good morning, and welcome to Dun & Bradstreet's 2015 First Quarter Teleconference. This conference is being recorded at the request of Dun & Bradstreet.
If you have any objections, you may disconnect at this time. All participants will be in a listen-only mode until the question-and-answer session of the call.
I would now like to turn over the call to Ms. Kathy Guinnessey, Treasurer and Investor Relations Officer.
Ms. Guinnessey, you may begin.
Kathleen Guinnessey - Treasurer and Investor Relations Officer
Thank you. Good morning, everyone, and thanks 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. Following my brief remarks, Bob will talk about our first quarter results and the acquisition we announced last week.
Rich will then take you through the financial performance in the quarter and our outlook for the rest of the year. After that, we'll open the call for your questions.
As you can see from our press release schedules, we've made a few changes to our reporting. We've modified our segments and enhanced our revenue categories to more closely tie to our strategy and how we've been talking about the business for the past 15 months or so.
Let me take you through the changes. First, we're now reporting our segments as Americas, which is the U.S., Canada, and Latin America, and Non-Americas, which is the rest of the world.
This is not a big change from prior reporting. We've just moved Latin America from the prior Europe and Other segment into the Americas and combined Europe and Asia-Pacific into one segment.
The new Americas segment is approximately 75% of 2014 revenue and Non-Americas was the remaining 25%. Second, below the segment level, we continue to report on revenue by the primary use cases of our data and analytics: Risk Management solutions and Sales and Marketing solutions.
But we've changed the categories below these use cases. Under Risk Management, we're now reporting revenue for Trade Credit solutions, which includes DNBi and all other products that help customers assess payment risk, which has been the biggest part of our risk business historically.
We're also reporting revenue for Other Enterprise Risk Management, which includes other use cases including compliance and supplies. We believe there's a big untapped market opportunity for Other Enterprise Risk Management and you'll now be able to track our progress in this space.
We will also continue to provide a supplemental schedule with DNBi results. Under Sales and Marketing, we're now reporting revenue for Traditional Prospecting Solutions, which is Hoover's and our educational marketing business, MDR; and Advanced Marketing Solutions, which includes our more sophisticated marketing offerings like Optimizer, NetProspex and our Alliances including CRM.
Finally, we'll also provide in the supplemental schedules showing revenue from our direct sales channels and revenue from Alliances and other Partners, as Alliances are becoming a growing part of our results and are key to our strategy. To help you with modeling, the Investor Relations section of our website has our results in the new format by quarter for 2012 through 2014, which you can download.
So 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 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, which we call as adjusted results, as that's how we're managing the business. For example, when we discuss revenue growth, we'll be referring to the non-GAAP measure revenue growth as adjusted, which is revenue adjusted to eliminate the effect on revenue due to the purchase accounting, fair value adjustments to deferred revenue, and before the effect of foreign exchange.
When we discuss operating income, operating margin, and EPS, these will all by on a non-GAAP basis, which we call as adjusted. When we discuss free cash flow, this will be on a non-GAAP basis excluding the impact of legacy tax matters, potential regulatory fines associated with the ongoing China investigations, and potential payments for legal and other matters.
And you can find the reconciliation between this 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.
We do not provide guidance on a GAAP basis because we're unable to predict with reasonable certainty the future movement of foreign exchange rates or the future impact of non-core gains and charges, acquisitions and divestiture related fees, and purchase accounting for fair value adjustments to deferred revenue. These items are uncertain and will depend on several factors including industry conditions that could be material to D&B's results computed in accordance with GAAP.
Later today, you'll also find a transcript of our prepared remarks on our Investor Relations site. With that, I'll now turn the call over to Bob Carrigan.
Bob?
Robert P. Carrigan - President, Chief Executive Officer & Director
Thank you, Kathy, and good morning. I'm glad you're able to join us this morning as we have lots going on in the business that we're going to talk about.
I'm also pleased to announce that we're going to hold an Investor Day event on June 15 in New York City, where we can share more details about where we are headed as we execute on our strategy. So save the date and more details will be coming shortly.
Now in my comments, I'm first going to talk about our results for the quarter, and then spend most of my remarks discussing the acquisition we announced last week. Rich will go into more details of the quarter as well as the financial impact of the acquisition in his remarks.
Last night we reported that operating income was down 11% and EPS was down 14%, both as expected. If you remember, when we laid out our expectations for 2015, we said that results in the first half of the year would also be lower than the second half due to the timing of investments and also due to timing of revenue growth, which is more back-end weighted.
Our revenue grew 1% in the quarter, which was about 1% lower than we expected. We've talked in the past about how the timing of large contracts can skew our quarterly results.
This year we had a multi-million dollar government contract signed during the first quarter for a six-month term compared with a 12-month term last year. Most of this revenue is recognized at the beginning of the contract term, so the shift hurt our first quarter revenue by about a point.
We expect to sign the other half of that contract in the third quarter. Other than this timing issue, I'm pleased with where we are against our plans and am feeling really good about how things are progressing.
Everything I'm seeing makes me feel confident that we are on track to deliver our guidance for the year. And I'm happy to say we're continuing to make good progress on our key strategic initiatives.
During the first quarter, we introduced a new modernized expression of our brand, including a new logo, which you can see on our website, and our new brand purpose, which is: Dun & Bradstreet grows the most valuable relationships in business by uncovering truth and meaning from data. This new brand purpose gets to the idea that Dun & Bradstreet's proprietary data enables customers to grow in new ways in a world where data is being used in their critical decision-making every day.
Our data helps our customers build their most valuable relationships, whether it's with their customers, prospects, suppliers or partners. The feedback from our customers to the modernized brand has been fantastic.
They really love it. We're also building out our global accounts team, having now staffed up about three quarters of the team.
We've been able to attract some great talent and we are already establishing new C-level relationships with some of the largest multinational companies in the world; and we're having constructive discussions about growing our relationships with them, which is critical to our global strategy. Regarding sales, absence of timing issues we had in the quarter with the large government contract, we are seeing growth from the customer channels we expected.
Large, strategic customers and verticals are growing, and we are building pipeline in our global accounts team, and Alliances also continue to grow. However, we still see a drag in our small business channel.
As we said last quarter, small business was the only major channel that did not grow last year, and its decline accelerated a bit in the first quarter of this year. So perhaps now is a good time to talk about the acquisition we announced last week and how we expect it to accelerate a turnaround in our small to mid-sized customer channel.
Last week, we announced an agreement to acquire Dun & Bradstreet Credibility Corporation for $320 million. We are extremely pleased with this transaction, which we believe will really help us accelerate our strategy.
Sales in our small business channel, which represent approximately 20% of sales in the Americas segment, declined 4% in 2014 and over 5% in the first quarter of this year. The small business channel has historically been tough for us.
It has seen the most new competitors enter the market in recent years. We've been more successful in our large enterprise and Alliances channels, with products and an approach tailored to larger customers.
Dun & Bradstreet Credibility Corp., or to shorten it, Credibility, has been very successful in the small to mid, or SMB space, because they go to market with products that specifically address the needs of SMB customers, needs that are significantly different than those of our larger customers. For example, large customers are managing a portfolio of risk with thousands of customers.
Many small businesses live in a world where one payment default could put them out of business. With Credibility, we can see what it takes to succeed in this space.
Their approach is the same outside-in approach that we took with our larger strategic accounts and verticals: tailoring products and their sales approach to meet the SMB customers' needs. Now we could have done this ourselves, but we believe that would be a multi-year process and it would require significant investment.
And importantly, we believe there's a significant opportunity to help small to mid businesses now. There are almost 28 million small and mid-sized businesses in the U.S.
that are finally beginning to recover from the so-called Great Recession, and they are gaining access to capital and beginning to grow again, and we want to grow with them. So we were faced with the classic build or buy decision and we chose to buy.
We're making a strategic investment to turn small business around quickly, which helps accelerate our overall strategy for Dun & Bradstreet. And not only does Credibility have the capabilities needed to win with SMB customers, they also share our brand and use our world-class data.
When I said we chose to buy, in fact we are buying back a business we once owned because Credibility is what became of our Self-Awareness Solutions or Credit-on-Self business that we sold in 2010. Credit-on-Self Solutions were designed to help customers understand what their own credit profile looks like, compared with Credit-on-Others, which is the core business proposition of Dun & Bradstreet's Trade Credit solution.
We sold the Credit-on-Self business to a private equity firm and became the data supplier to the new company. We were paid a percentage of revenue for the data, as well as a royalty for use of the Dun & Bradstreet name.
To-date, we've received over $130 million in connection with that arrangement. But the business we are buying in 2015 is very different than the business we sold in 2010.
The new owners brought in a new management team with an impressive track record in the small business space, and Credibility flourished. The business was declining at a double-digit rate in 2010 and the new team turned the business around in the very first year and has the same strong growth ever since.
Credibility's management team, led by CEO Jeff Stibel, has done an outstanding job in transforming what was Dun & Bradstreet's legacy Credit-on-Self business into a double-digit growth business in the SMB arena. They've also invested heavily in the business since buying it.
These investments were in new platforms and telecenter technologies, as well as in sales training and product development; all acutely focused on the new needs of the SMB market. We're very excited that Jeff and his team are now eager to bring that expertise to a bigger stage.
So what's so different about Credibility, and why do we want them as part of Dun & Bradstreet? In addition to a very strong and culturally compatible team, they understand that the SMB customer needs three things: first, products designed to suit their unique needs; second, an educational, nurturing sales approach that builds a lasting relationship with the customer that grows as they grow; and third, marketing directed specifically to SMB customers.
They've built technology infrastructure and product development capabilities in the cloud to scale and develop new products to meet the needs of small businesses. In fact, we think we can leverage their platform to accelerate our cloud strategy for small and mid-sized businesses.
In addition, they've built an integrated sales and service platform that allows the sales team to help small businesses solve multiple needs and upsell them to new solutions over time as their business grows. They've also developed new products aimed at the unique needs of SMB customers.
For example, they've introduced an online directory with web pages that have details of the U.S. businesses in the Dun & Bradstreet database.
Customers can confirm the information on the web page and pay to have it appear in Credibility's directory. This allows potential new customers to find those companies as they do web searches on services like Yelp, Yahoo!, and Google; thanks to Credibility's directory.
We're excited about leveraging Credibility's platform and products because we will now have more to offer our existing SMB customers; and the opportunity goes both ways. As part of Dun & Bradstreet, they will now be able to offer Credit-on-Other solutions, like DNBi, as well as Sales and Marketing tools, like Hoover's, that will help small businesses find new prospects, which is a key need of growing businesses.
One of the strong points that Credibility has demonstrated over the last five years is its ability to attract new customers, directly and through partnership; and they've doubled the size of their business since they took it over from us. Dun & Bradstreet has world-class retention and very loyal customers, but we've struggled to bring in enough new SMB customers, so we're naturally excited to see Credibility's successful formula apply to our existing small business sales channel.
With this acquisition, we expect to solve two key challenges in our current SMB business: having a sales and product offering that's 100% focused on the needs of small and mid-sized customers; and bringing new customers into Dun & Bradstreet. So what will all of this look like?
We plan to merge our current small business channel into Credibility's business and create a new division called Dun & Bradstreet Emerging Businesses. To give you some perspective, the new division will represent about 25% of revenue in the Americas segment.
The new division will be run by Jeff and his management team from Credibility, who've a proven outstanding track record of growing relationships with SMB customers. This is the same team that put Web.com on the map and turned it into an incredibly valuable company.
Dun & Bradstreet Emerging Businesses is a new name, but, most important, is a new integrated approach to the SMB market. We're forming a new division to specifically address the needs of small and mid-sized businesses with sales, marketing, and products, all focused on that customer segment.
As I said, the new division will go beyond Credit-on-Self products and offer a full suite of products from Credit-on-Self, to Credit-on-Others, to marketing solutions, to help the prosper and grow the most valuable relationships. We're also going to move the Hoover's product under Jeff and his team.
Hoover's is predominantly used by small businesses; and we believe they can take what is already a good product with strong brand recognition and tailor it to better suit the needs of smaller growing businesses. All-in-all, we believe that having Credibility's proven sales engine able to offer our credit and Sales and Marketing solutions will be a winning combination.
In terms of operations and locations, Jeff and his team will continue to be based in Malibu, California, with operations in Arizona, North Carolina and Pennsylvania. So we don't expect relocation or real estate-related expenses.
We are putting product development, marketing and sales in one integrated division to ensure that we are 100% focused on meeting the needs of SMBs. So with the new Dun & Bradstreet we have clear strategies against Alliances, large strategic enterprises, and now small and mid-sized companies, all under the same brand and powered by our world-class data and analytics.
The new Emerging Businesses division will report to our Chief Operating Officer, Josh Peirez, to ensure that we have everything aligned with our broader strategies for data, product development and technology. In closing, I'd like to leave you with three key takeaways on this acquisition.
One, it's a great asset. It has the best technology, sales force and management, all with the experience and focus required to be successful in the SMB space.
We're buying a finely-tuned SMB engine. Two, its growth rate is exceptionally strong.
They've shown how to grow rapidly and profitably in the competitive small-business channel by understanding and meeting the unique needs of small to mid-sized businesses. Three, this acquisition will help accelerate our strategy for Dun & Bradstreet overall in delivering sustainable growth under one brand umbrella.
We believe this acquisition accelerates our growth strategy for about a quarter of our Americas segment revenue. And given its profitable growth profile, we expect to begin to reap the benefits of the acquisition right away.
I hope you share our enthusiasm for the acquisition, and I welcome the 650 people of Credibility to Dun & Bradstreet Emerging Businesses. I look forward to telling you more about this and our broader strategy at the Dun & Bradstreet Investor Day on June 15.
I will now turn the call over to Rich, who will discuss our first quarter results in further detail. Rich?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Thank you, Bob, and good morning, everyone. I'm going to take you through three things today.
First, I'll discuss our results for the quarter; second, I'll talk about the new acquisition and what it adds to our financial results; and third, I'll update you on our guidance for the rest of the year. Total company revenue for the quarter was $376.8 million, up 1%.
The Americas segment represented about 75% of our revenue at $281.5 million in the quarter and was roughly flat to last year. The timing shift of the large government deal, that Bob discussed, hurt the Americas by about one point in the quarter and shows up in both risk, product categories.
This timing shift is responsible for half of the 3% decline in risk overall; and the rest was primarily due to DNBi. DNBi was down 1% during the quarter, a 2.5 point improvement over the 4% rate of decline that we saw in 2014.
Pricing continue to be in the low-single digits, but overall sales and retention picked up a bit. We also had one large customer convert from another RMS product to DNBi in order to take advantage of the advanced functionality that DNBi offers, adding almost a point to DNBi's growth in the quarter.
We're encouraged with the improvement in DNBi and expect its performance to be better than last year, although still down for the year. Other enterprise Risk Management was down 1%.
As we've noted in the past, the revenue in Other Enterprise Risk includes usage-based products and some project spending and can be lumpy from quarter to quarter. Compliance and supply showed good growth in the quarter, but that was offset by timing, including the government contract that I discussed a moment ago.
Sales and marketing revenue increased 5% in the quarter. Traditional prospecting represented about a quarter of S&MS revenues and was down 5% due to declines in Hoover's.
Advanced marketing solutions, the remaining three-quarters of S&MS, was up a strong 9%. A little more than half of this growth was from NetProspex, which we acquired in early January.
The rest of the increase was due to continued strong growth in our DaaS/CRM Alliances. We also saw nice growth in our other marketing products that are aimed at helping our customers identify the best new prospects to help their businesses grow.
However, that growth was offset by declines in other third-party Alliances. If you recall, in addition to our newer CRM Alliances, we have relationships with other third-party providers, and one of our Alliance partners lost a customer, which in turn lowered our revenue from that partner by about $2 million in the quarter.
We knew about this going into the year and it's factored into our 2015 guidance, but it did cause a drag in Advanced Marketing Solutions in the quarter. Deferred revenue in the Americas was down about 1% in the quarter before the effect of foreign exchange.
This does not reflect committed sales through Alliances that would have added about two points to the total balance. Overall, we're pleased with how we're progressing against our plans for the year in the Americas segment.
We expect to recover the lost revenue from the government timing shift later in the year, and we're getting growth from the key strategic products that we expect to drive growth as we progress on our strategy, including compliance, supply, and our DaaS solutions, including our CRM Alliances, and our new Professional Contact solutions that came with the NetProspex acquisition. These strategic products, in total, contributed over three points of growth to the Americas in the quarter.
In the Non-Americas segment, we had revenue of $95.3 million, which represented 25% of our revenue in the quarter. Non-Americas revenue increased 3%, which was consistent with our expectations and also with our recent performance.
Turning to profitability, operating income was down 11% in the quarter, which was in line with our expectations. As expected, foreign exchange hurt operating income by about two points in the quarter.
EPS was down 14%, again in line with expectations. EPS declined more than operating income because our tax rate was very low last year.
We had a large tax benefit a year ago due to the release of reserves related to closed audit periods. Now let me talk about the financial aspects of the Credibility acquisition and how we expect it to impact our results in 2015.
As Bob said, Credibility has doubled their revenue since 2010, reaching $135 million last year. Their 2014 sales growth was in the mid to high-single digits, and we're excited to bring their expertise to Dun & Bradstreet to help accelerate our strategy.
They've also been profitable, with an EBITDA margin approaching 20%. In 2015, we expect the addition of Credibility to add about four points to our revenue guidance, assuming that the transaction closes in mid-May.
The four-point contribution represents 7.5 months of revenue and is net of the $20 million annualized royalty revenue that we would have received when Credibility was independent. We expect the acquisition to add three points of growth (25:32) to our operating income in 2015, but we expect about a point of integration expense.
So net-net, the acquisition is expected to contribute two points to operating income. And finally, we expect EPS and free cash flow to be neutral, since the increased operating income is offset by higher interest expense to fund the acquisition.
Our plan is to use cash on hand and a revolving credit facility to fund the acquisition when we close, and then to access the capital markets to issue longer-term debt shortly thereafter. We've been clear that we're committed to maintaining an investment-grade rating, and that is still the case.
We have very strong free cash flow generation, which we will use to reduce debt in the near-term. We're targeting total debt to EBITDA at a level that will ensure at a minimum that we maintain our current debt ratings.
So in closing, I want to reiterate that we're on track to deliver our original guidance on the underlying business. If the Credibility acquisition closes as expected in mid-May, we will adjust our full-year guidance for 2015 as follows: revenue growth guidance will go from 2% to 5% to our new expectation of 6% to 9%, including the four points of contribution from Credibility; operating income guidance would go from minus 2% to plus 2% to flat to 4%; and as I said, EPS guidance would remain at minus 3% to plus 1%; and free cash flow is also unchanged at $255 million to $285 million.
With that, we'll now open up the call for your questions.
Operator
Thank you. At this time we will begin the question-and-answer session.
First question comes from Peter Appert with Piper Jaffray.
Peter P. Appert - Piper Jaffray & Co (Broker)
Thanks. Good morning.
Robert P. Carrigan - President, Chief Executive Officer & Director
Hey, Peter.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Hey, Peter
Peter P. Appert - Piper Jaffray & Co (Broker)
So, Bob, this is more big picture rather than specifically about the quarter, but you've talked about, I think, getting back to mid-single digit revenue growth over the next couple of years and it's difficult for us outsiders to see the progress in the context of the lumpiness quarter to quarter. So I'm wondering how you're feeling about that target and timeframe to get there?
Robert P. Carrigan - President, Chief Executive Officer & Director
Yeah. Thanks, Peter.
Look, I'm feeling pretty good about the strategy overall. Obviously, a lot of our revenue this year is back-end weighted.
But when I look at all elements of the strategy, we're making great progress. And I'm particularly excited about addressing what was the single biggest drag on our revenue and our desire to get to that mid-single digit growth, and that was our performance in the small business channel, which has been a challenge for us.
And with the Credibility acquisition, we feel that we're bringing in the capabilities to help us get to that objective. Now we've addressed Alliances, our large strategic strategy and then, of course, our small business now with this acquisition.
So I'm really excited about where we're going and the progress we're making.
Peter P. Appert - Piper Jaffray & Co (Broker)
Do you think, therefore, with the addition of DBCC, we could anticipate something close to mid-single digit revenue growth in 2016?
Robert P. Carrigan - President, Chief Executive Officer & Director
Yes. We are absolutely on track for that and all of this is intended to help us get there.
Operator
Next question comes from Shlomo Rosenbaum with Stifel.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
Hi, good morning.
Robert P. Carrigan - President, Chief Executive Officer & Director
Hi, Shlomo.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
Thank you very much for taking my questions. And I'm familiar with the management team of Credibility and they're a very good management team and a very good product set.
It seems to me that just the business on its own would weed this acquisition to be kind of a solid hit. And if you retain the management team for an extended period of time, this would be a home run.
Do you have any thoughts as to ability to retain them? And then also a follow-up, I want to talk about if there's any ability for the acquisition to help with the DNBi sales as well.
Robert P. Carrigan - President, Chief Executive Officer & Director
Right. Well, thanks for the question.
I'm really excited about bringing this new team in. As you said, they are a fantastic team with a proven track record in the SMB stakes.
We have an earn-out that's built into the agreement, a $30 million earn-out, with sales and profitability targets that would really help us create lots of tremendous value for us and for the Credibility team that will be running the business. So the earn-out is one of the reasons why I think they're going to be very excited to help us execute on the strategy.
Secondly, we are combining the entirety of our small business assets at Dun & Bradstreet into this Emerging Businesses division, which Jeff Stibel and his team will oversee. And so that's a pretty exciting proposition for them.
So they get to continue to run the business that they've done very well, but now have access to lots of other products to be able to offer a broader suite of solution to customers. And the other thing is, as we've gotten to know these guys, we have lots of similarities in our culture.
Obviously, they know and love our brand; and we love the innovation mindset of that team. And we're really excited about having them as part of our business; and I'm very optimistic about a long-term relationship with these guys.
Operator
Next question comes from Andrew Steinerman with JPMorgan.
Andrew Charles Steinerman - JPMorgan Securities LLC
Hi. It's Andrew.
I wanted to ask about a comment that was made last conference call about first-half profitability on an operating income basis being down about 10% because of strategic investments. And so before the Credibility acquisition, Rich, is this still the case?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yes, it is still the case. Obviously, we lost a little bit of revenue on the government deal, right.
That's moved to the second half. So I'd call it more in the 10% to 12% range.
But, yeah, it's still around there.
Andrew Charles Steinerman - JPMorgan Securities LLC
Right. And could you give us the level of strategic investment in 2015?
We know that builds on top of the $80 million that was spent in 2014.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. And I'll frame it for you.
It gets somewhat difficult to continue to track year-over-year, but let me give you it in kind of the high-level numbers. Overall, we've got an additional about, well I'll call it, a net $40 million increase year-over-year that's comprised of two pieces.
There's about $60 million of new investment, right? And then of the $80 million from last year, only about $60 million stayed in the base.
So about $20 million of it was non-recurring. So net-net, it's up about $40 million from investments; and it's pretty much in the same type of buckets that we talked about last year, all of the things that are driving the strategy.
Andrew Charles Steinerman - JPMorgan Securities LLC
Perfect. Thank you.
Operator
Next question comes from Jeff Meuler with Baird.
Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker)
Yes. Thank you.
I wanted to ask a follow-up on Peter's question. I believe that you said mid single-digit organic growth in 2016 on the last call.
So I just want to verify that that was based on the assets that you had at the time? It was not contemplated on buying faster-growing assets like Credibility Corp.
or others; and that that would be additive to kind of that prior target, is that correct?
Robert P. Carrigan - President, Chief Executive Officer & Director
Yes. I can confirm that.
Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker)
Okay. And then can you maybe talk about the drivers of Optimizer growth and how big of a market that can be?
And I know layering on the NetProspex data can kind of help you create new similar products, but how much of this is new customers? How much of this is better hits on your databases?
Just if you could help us understand the growth drivers of Optimizer and how big that product could be for you?
Joshua L. Peirez - Chief Operating Officer
Yeah. Hey, Jeff.
It's Josh. I'll start and then Rich can give you some of the specifics on the numbers.
But Optimizer's growth drivers are primarily around new customers and growth with existing customers, both. So when we get growth with an existing customer you may look at it as a price list, but really what's happening is we're able to deliver them more data both in terms of numbers of records that they're requesting, as well as the number of data elements that we're providing to them.
So when you think about the core Optimizer product, it provides the ability to match somebody's data against the Dun & Bradstreet database to provide them with the cleansing service against the data they have that might be wrong relative to information we have in our database, as well as for us to append additional data fields that they may not have while at the time they've provided their file to us. So when we're able to provide additional fields of value, more records back to them and higher match rates, that naturally improves the ability to get revenue from an individual customer and it is an area where we do have the ability to sell to many more customers.
It's not as high a penetration rate as, for example, a DNBi might be. And then as you mentioned the Optimizer for Contacts products, something we really have just launched this quarter more broadly within our sales force, where we have the opportunity to now to take that same proposition for the people who run businesses and allow that type of a cleansing, matching, and appending service.
And we're very bullish on the potential there because the people at (35:19) businesses is actually a data element that churns more quickly, which gives us real value to give to customers because they do see that data become inaccurate on a much more rapid rate than they would underlying information about companies.
Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker)
Thanks, Josh. And then one more for me.
Can you just help reconcile the comment about the accelerating declines in the small business channel with the improved rate of contraction in DNBi? Is this all Hoover's, or was DNBi better for medium-sized businesses, softer for small businesses, or are there other products...
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yes. So overall, yes, DNBi did get a little bit better, as you know.
Some of it was really just a shift, right? We did have a customer do a conversion.
But we do feel better about the underlying retention and sales rate. So that's good.
Where we see the biggest strength with DNBi is in larger customers that use it. Because remember, it crosses the spectrum.
There's a big chunk of small customers that use it, but there are also mid-sized and larger customers that actually use it. That tends to be stronger.
The weakness in DNBi has really been in the small business arena; and that's where we're actually hoping that we'll start to get a churn over time.
Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker)
Okay.
Joshua L. Peirez - Chief Operating Officer
And I think just to jump onto that, Jeff, and also link to Shlomo's question. We do expect Jeff and his team as they join to be responsible for the sales of the DNBi product to the SMB segment; and we are expecting them to be able to help turn that performance.
Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker)
Got it. Thank you, guys.
Operator
Next question comes from Manav Patnaik with Barclays.
Robert P. Carrigan - President, Chief Executive Officer & Director
Hey, Manav.
Manav Shiv Patnaik - Barclays Capital, Inc.
Yeah. Good morning, guys.
I just had a question around the M&A strategy? So I think earlier on you guys have talked about doing small tech capability type deals, and now you guys have done two fairly large deals at least for D&B.
So just wondering going forward what we should be expecting. And then just specific to Credibility Corp., just wondering if you could give us a history of how long you were looking at buying back the assets and whether the lawsuit had any influence to it?
Robert P. Carrigan - President, Chief Executive Officer & Director
Yeah. This is Bob.
So with regard to our overall M&A strategy, we've been consistent in saying that we are looking at acquisitions that will accelerate our strategy and help us generate sustained organic growth; and we think the Credibility acquisition will do just that. And so that is the lens through which we look at this.
And when I announced the strategy about 15 months ago, I said that we would need an integrated sales and service approach to address the needs of all of our customers. And when I look at the SMB market, that's exactly what Credibility brings.
So they have the expertise; and combining our assets together with what they bring gives us a great opportunity to serve this segment. So I think it really rounds out the strategy, and we're very consistent with everything we've said about M&A.
And then the second question I believe was around, you asked about the lawsuit. Obviously, this will put the legal disputes between our companies behind us.
But again that wasn't the reason why we did this. The driving factor was to improve our performance in the SMB channel as part of our overall growth strategy.
And, again, we think the deal will accelerate our efforts.
Manav Shiv Patnaik - Barclays Capital, Inc.
Okay. Fair enough.
And just real quickly for Rich, what percentage of your revenues is government? Like, what exposure do you have there?
Like, is this something we should expect regularly? Just give us some exposure there.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. We definitely don't disclose the business with the government, but I will say it's sizable enough that in any given quarter you can see some lumpiness.
And as you've followed us for a while, you've seen many quarters that bounce around. We typically sign the contract, but we're not always in control over the timing of when they happen.
Manav Shiv Patnaik - Barclays Capital, Inc.
Okay. Thank you, guys.
Operator
Next question comes from Andre Benjamin with Goldman Sachs.
Robert P. Carrigan - President, Chief Executive Officer & Director
Hey, Andre.
Andre Benjamin - Goldman Sachs & Co.
Hi, good morning. I first wanted to ask about the beta testing of the DNBi Cloud Solution.
I wanted to hear a little bit how it's going and reconfirm that the plan to roll that out internationally at the end of the year is still on track.
Joshua L. Peirez - Chief Operating Officer
Hey, Andre. It's Josh.
We're testing the prototype solution with customers and we remain on track for a stage launch outside of the U.S. later this year.
We've not provided the timetable on the U.S. roll out.
I know you didn't ask about that. But in the meantime we are continuing to enhance the existing solution through incremental features that we've previously discussed, like mobile alerts, online application, automated approval functionality for sales folks within their CRM system; and we feel good that the underlying performance of DNBi is showing some slight improvement over 2014.
Obviously, we have our sights set much higher; and we think the addition of the Emerging Businesses team focused on an integrated sales and service model can help. And we also believe the rollout of the global DNBi Solution will help.
Andre Benjamin - Goldman Sachs & Co.
Thanks. And I know – I don't believe you've announced anything, but I guess any updated color on how you're thinking about the prospects for additional alliances in the Risk Management space?
I know the KPMG one announced last quarter was the first.
Joshua L. Peirez - Chief Operating Officer
Yeah. Thanks, Andre.
We have not announced any and obviously we will be happy to tell you about them when we have them to announce. But we do expect to be able to give you a more detailed description of our Alliance strategy and where we're going at Investor Day, and the pipeline is very strong for these partnerships.
Andre Benjamin - Goldman Sachs & Co.
Thank you.
Operator
Next question comes from Bill Warmington with Wells Fargo.
Robert P. Carrigan - President, Chief Executive Officer & Director
Morning, Bill.
William Arthur Warmington - Wells Fargo Securities LLC
Morning, everyone. So a question for you on how much contribution there was in the quarter from NetProspex; just trying to get to the organic constant currency growth.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. So it was about a point of our overall growth was from the NetProspex acquisition, so around about $4 million.
William Arthur Warmington - Wells Fargo Securities LLC
Okay, excellent. And then you talked about issuing some new long-term debt.
Just wanted to get a sense, what's the leverage going to be on the close of the deal, assuming it happens as expected, and then the target leverage you have and the timeframe to reach it afterwards?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. So it's a couple things.
Obviously, each of the rating agencies calculates debt to EBITDA differently, so we factor that into – as we think about it. But if you just strictly go on our debt to our core EBITDA, today we're a little over three.
We'll move into the high threes after the deal. We've obviously talked to the rating agencies.
They understand the plan. Our target is to get down to below three again.
We think that's a good, comfortable place to be. With increasing EBITDA, as well as with the amount of cash that we've generated at the company, we're comfortable that we can do that in relatively short to intermediate term order and then have some flexibility again.
William Arthur Warmington - Wells Fargo Securities LLC
Like 12 months to 18 months?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Think about it. We generate almost $300 million a year in cash, right...
William Arthur Warmington - Wells Fargo Securities LLC
Yeah.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
...and we're expecting to grow EBITDA. So, yeah, you get there in a quick enough order.
William Arthur Warmington - Wells Fargo Securities LLC
On Credibility, they've had obvious success in terms of selling the Credit-on-Self product. And with D&B though, on the Credit-on-Others product, it seems like one of the biggest challenges in that lower segment of the market is a high price sensitivity.
And the guys like Experian and CreditRiskMonitor and Cortera have been underpricing and that's been able to pull some of that volume. How do you address that issue?
Joshua L. Peirez - Chief Operating Officer
Hey, Bill. It's Josh.
So, first, it's important to note the deal hasn't closed yet, so we're continuing to move forward with everything we've laid out in our current plans and our current guidance. But post-close, Jeff and his team running the Emerging Businesses division will be responsible for the sales of all our products to that customer segment.
And I want to note that they've made a lot of investment in their technology, their product development organizations, and they've built their products on cloud-based systems. So our expectation is that they'll be able to deliver the Credit-on-Self solutions through this platform and there could be opportunities for them to also develop new credit-based offerings on the platform to serve the SMB customer segment.
We also think their base of Credit-on-Self and Credibility customers is an attractive prospect universe for upgrades to broader credit solutions like a DNBi. So when we look at the opportunity here, it's not about being able to necessarily compete or price within the same prospect universe that (44:43) playing in.
We actually see them having the ability to really generate MCA (44:47) with the customer set they have. And they've shown a great track record in being an MCA (44:55) engine and that's where we expect them to be able to drive growth in other credit solutions.
William Arthur Warmington - Wells Fargo Securities LLC
Got it. And then on the positive side with Credibility, they've been growing at double digits or near double digits.
On the negative side, there have been some complaints about Credibility's aggressive sales tactics. And so my question is, can you sustain that double-digit growth rate with the operation now back in D&B?
Robert P. Carrigan - President, Chief Executive Officer & Director
Yeah. This is Bob.
They've been able to generate lots of new customers. They've basically doubled the business.
And so they've got many, many happy customers. And so when we look at how they've approached dealing with small business customers with products that are tuned to their needs, and then their selling approach which is more of an education-first, a nurturing sales approach; when you layer that in also with the other solutions we'll be able to offer in Sales and Marketing and Credit-on-Others, they're going to really have a terrific proposition for small business customers.
And so we're really excited about the potential to get on a growth path with their approach, their integrated approach, the way they market to customers, and the way that they help educate and then bring them into buying more and more solutions. So feeling really good about that.
William Arthur Warmington - Wells Fargo Securities LLC
Well, thank you for the insight.
Robert P. Carrigan - President, Chief Executive Officer & Director
Sure.
Operator
Next question comes from Brett Huff with Stephens.
James Rutherford - Stephens, Inc.
Hey. This is James Rutherford in for Brett.
I was just curious, on the Hoover's business, what benefit do you expect from the addition of Credibility Corp. and will that business grow this year?
And just what will Jeff and his team do to reinvigorate that business? Thanks.
Joshua L. Peirez - Chief Operating Officer
Sure. It's Josh.
So we haven't given specific expectations for Hoover's for the year. However, what we've done is we've given Jeff's team responsibility for the overall Hoover's product.
It's a product where we've had very little investment planned for this year as well as last year. We've put very little investment into the product.
And we think that Jeff and his team can really invest much in the way they did when they purchased the business from us almost five years ago in really revamping the product, the go-to-market approach for the SMB customer segment, how they actually market and sell those solutions to customers. We think that it's a wonderful opportunity with a real focus and understanding of customers in this segment to provide them with a tool that will help them to find their best new customers to grow their business; and it's something that Jeff and his team are really excited to own.
The product does service some of our enterprise customers as well. So we will, of course, make sure that they are serviced well.
But the primary reason for Hoover's decline over the last couple of years has been driven by the SMB customer churn. And we think that, again, the ability to get more new customer acquisition, as Jeff and his team have proven to be very skilled at doing, as well as to improve the churn rates and the ARPU, so the amount per customer, are really three levers that we expect his team to be able to drive on Hoover's.
And as Bob said in his prepared remarks, we expect them to have a very quick near-term impact on the overall business. And the two biggest products in that channel are Hoover's and DNBi, so we obviously expect them to be able to impact those in short order.
James Rutherford - Stephens, Inc.
Okay. Thanks.
And then on the Other Enterprise Risk Management sub-segment, I'm just digging in on that quickly, it declined just a little bit. I understand that it's a lumpy business, but I was wondering how much of the contract, the government contract, affected that and what growth kind of would have been excluding that?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. The government contract was a bit of it.
It was only around a point or so in that. It was more in the other arena.
It just tends to be as lumpy as we mentioned, so it's more the timing of the other revenues in that segment. The compliance and supply actually were pretty nice growers in the quarter.
They were just offset by the lumpiness.
James Rutherford - Stephens, Inc.
Great. Thank you.
Operator
The next question comes from Shlomo Rosenbaum with Stifel.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
Hi. Thanks for letting me back in for a few more questions.
Can you, Rich, talk a little bit about the Alliances & Partners revenue in the Americas? It was down almost 3%.
What's going on behind that? That's typically more of the growth area for you guys.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. The biggest thing was really the anomaly of that one deal that we lost through our more legacy part of the business.
That was about seven points overall. So actually it would have been into the mid-single-digit growth without it.
We actually expect that to be a really strong grower over the year, probably in the double-digit range is what we're looking at.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
And then, this is a question for Bob. Just as an operational stand point, can you talk about a little bit of kind of maybe a guidepost or something that you can point to during the quarter or you can kind of point just some of the incremental progress and the turnaround?
We have the acquisitions, we have some of the kind of qualitative, but is there something you can point to straight out and say, hey, we made improvement in these areas indicating that the turnaround is happening or progressing?
Robert P. Carrigan - President, Chief Executive Officer & Director
Yeah. So I think the most direct and obvious thing is we had about three points of growth from new products that we've introduced.
We reintroduced or we modernized our brand, which was a very big event here with our customers. We continue to bring in top talent and promote some of our stars internally.
We're doing a lot in the talent development area, building out our global accounts team. We have about 75% of our global business directors hired; and we're seeing really nice growth among our large strategic customers.
So we're making lots of progress again, new products, talent, our brand. There's definitely a new spring in our step over here.
And, look, we've been busy with bringing in some capabilities through M&A with NetProspex and Credibility that will really help round out our overall strategy. So lots going on and I am very pleased with where we are.
And I'm really looking forward to June 15. This will be the chance during our Investor Day for me and my team to kind of give you much more of an update and to show you a bit more about what we've been up to and allow for a lot more interaction and questions.
So I'm excited about June 15. So save the date.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay. Thanks.
If I could just sneak in a housekeeping, what was the $1.4 million of other income? Was it primarily interest expense or was there anything else in there?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
No. Actually we have a partner that we have about a 10% ownership stake in that sold the business; and that was our share of the business.
So it showed up in other income. That was the primary piece.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay, great. Thanks.
Operator
And we have no further questions.
Kathleen Guinnessey - Treasurer and Investor Relations Officer
All right, great. Well, thank you everyone for joining us this morning.
And we really look forward to seeing you on June 15 at our Investor Day.
Operator
Thank you for your participation in today's conference. Please disconnect at this time.