May 10, 2016
Executives
Kathleen M. Guinnessey - Treasurer and Investor Relations Officer Robert P.
Carrigan - Chief Executive Officer & Director Richard H. Veldran - Chief Financial Officer & Senior Vice President Joshua L.
Peirez - President and Chief Operating Officer
Analysts
Jeff P. Meuler - Robert W.
Baird & Co., Inc. (Broker) Peter P.
Appert - Piper Jaffray & Co. (Broker) Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Andre Benjamin - Goldman Sachs & Co. Manav Patnaik - Barclays Capital, Inc.
William A. Warmington - Wells Fargo Securities LLC Judah Sokel - JPMorgan Securities LLC
Operator
Good morning, and welcome to Dun & Bradsteet's 2016 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 like to turn the call over to Ms. Kathy Guinnessey, Treasurer and investor Relations Officer.
Ms. Guinnessey, you may begin.
Kathleen M. Guinnessey - Treasurer and Investor Relations Officer
Thank you. Good morning, everyone, and thank you for joining us today.
With me on the call this morning are Bob Carrigan, our Chief Executive Officer; Rich Veldran, our Chief Financial Officer; and Josh Peirez, our President and Chief Operating Officer. Here's what you can expect on the call today.
Following my brief remarks, Bob will provide an overview of our first quarter results and an update on our strategy. Then, Rich will come on and take you through the highlights of the quarter.
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 these forward-looking statements. These documents are available on the Investor Relations section of our website, and we encourage you to review the material.
We undertake no obligation to update any forward-looking statements. Now, from time-to-time, we speak about deferred revenue.
As a reminder, deferred revenue is a liability that refers to revenue that has not yet been earned and represents products and services that are ode to our customers. As the products or services are delivered over time, it is recognized as revenue in the income statement.
Deferred revenue is important to management because it provides insight into the health of our future revenues. When we refer to the change in deferred revenue, we mean before foreign exchange and acquisitions unless otherwise noted.
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 manage 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 purchase accounting fair value adjustments to deferred revenue and also before the effect of foreign exchange.
When we discuss operating income, operating margin and EPS, these will all be on a non-GAAP basis, which we call As Adjusted. Additionally, our As Adjusted results exclude the results of discontinued operations.
When we discuss free cash flow, this will be on a non-GAAP basis, excluding the impact of any legacy tax matters, potential regulatory fines associated with the ongoing China investigation, and potential payments for legal and other matters. You can find the reconciliation between these and other non-GAAP financial measures and the most directly comparable GAAP measures in the schedule 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, acquisition and divestiture related expenses, and purchase accounting fair value adjustments to deferred revenue.
These items are uncertain and will depend on several factors, including industry conditions, and could be material to Dun & Bradstreet's results computed in accordance with GAAP. Later today, you will find a transcript of our prepared remarks on our Investor Relations site.
With that, I'll now turn the call over to Bob Carrigan.
Robert P. Carrigan - Chief Executive Officer & Director
Well, good morning, everyone, and thank you, Kathy. This morning, I'm going to address our first quarter results and provide an update on our overall business.
I'm pleased to report that our first quarter results were a little better than we expected. On our call in February, we told you that we expected organic revenue to be slightly down to flat for the quarter, due to the timing of several large contracts that shifted to later in the year.
In fact, organic revenue for the first quarter was flat, which was at the high end of our expectations, and overall company revenue was up 7%. You might recall that we said that operating income could be down by as much as the mid-teens as we continue to invest in our strategy.
Instead, operating income came in much better than expected, down 4%. This improved performance was due to the organic revenue performance and some costs shifting between the first and second quarters.
So we feel good about the first quarter, and 2016 is starting out about as we expected. We are on track to deliver our guidance for the year, revenue growth between 4% and 6%, operating income between flat and up 4%, EPS between minus 3% and plus 2%, and free cash flow of $255 million to $285 million.
And with that, I'll give you an update about what's been going on in the business at Dun & Bradstreet. Last quarter, I spoke with you at length about all of the execution changes we undertook toward the end of 2015 and early this year to improve sales performance.
Specifically, we elevated Josh Peirez to the role of President and Chief Operating Officer last fall, and we put all customer-facing operations under him to unlock the full potential of our multi-channel sales organization. Coming into this year, we changed the compensation structure in our sales force to incent new business development for every sales rep.
We also restructured the organization to reduce friction and to make sure our salespeople and alliance partners are all selling the same way, leaving the option of how to buy up to our customers. We made some key personnel changes to upgrade our sales force and we made structural changes to remove layers and align incentives to drive new growth.
This represents a lot of change in a short amount of time, and I'm pleased to say that we're starting to see a higher level of cooperation between our direct, alliances and emerging businesses channels, and customers are benefiting from our multi-channel approach to the market. We are also seeing successes in product areas where we have focused our strategy.
Let me talk to you a little bit about a few key areas. Back in January, we launched our new cloud-based credit decisioning tool, D&B Credit.
And early reception has been good. We're seeing customers begin to upgrade to the new platform from DNBi and we're getting nice pricing lifts on those conversions.
We have also started to bring in new customers. It is still very early and as we said on our last call, we don't expect to see any real movement on the revenue line until late in the year.
One of the key benefits of launching a cloud-based platform was our ability to upgrade the product easily. We are adding new functionality and putting out new releases every few weeks.
The other big benefit of the cloud is our ability to have a truly global platform. D&B Credit is currently available in the U.S.
and Canada, and we are on track to bring it to Europe this summer. In other areas of risk management, we saw nice growth in our supplier risk solutions.
Supplier risk is an area where the global reach of our data gives us a unique advantage meeting new customer needs. By leveraging our core capabilities like linkage and identity resolution, we help companies monitor downstream supplier risk.
The job of a Chief Procurement Officer is changing significantly. Their responsibilities were historically focused on optimizing their supplier base, and we help them monitor financial risk and supplier diversity.
We provide a deeper understanding of who their suppliers are and give them negotiating leverage, and we help manage the multiple layers of their supply chain to identify concentration risk. But the CPO's role has expanded to managing larger strategic risks including preventing business interruption and protecting and enhancing their company's brand and values.
Our supplier risk solutions help customers manage this full spectrum of risks. Today, CPOs have a fast-growing need in what we call responsible business analytics, to help them guard against regulatory and reputational risks.
We help them as they comply with government diversity requirements and monitor global band entity lists, as well as meeting their social responsibility commitments like funding suppliers with sustainable business practices and meeting best-in-class ethics standards. Further, the nature of a globalizing economy has magnified newer risks throughout the supply process.
One area where we have recently focused is human trafficking. Nearly 21 million people are victims of forced labor around the world, generating an estimated $150 billion in illegal profit every year according to the International Labor Organization.
Millions of businesses around the world have accepted the responsibility to shine a bright light on human trafficking and ensure the ethical procurement of goods and services. But doing this is a challenge.
To help companies address the risk, we have taken our existing global proprietary content and leveraged public data from the U.S. State Department and Labor Department to create an index to assess a company's risk of being associated with goods and services potentially tied to human trafficking.
Dun & Bradstreet's Human Trafficking index is an innovative new use case for our data that fills a need for our customers to address supply chain risks while also helping them to be responsible corporate citizens. And it's a great example of how we leverage our company linkage capabilities through the Dun's number to create an integrated view of companies and how they're all connected, which is really important to understand for a modern procurement manager.
Now, let me shift over to sales and marketing, and specifically, the digital advertising market. I've spoken in the past about the trend we are seeing in this marketplace where marketers are employing more science than art to engage with new and existing customers.
We are seeing companies leveraging digital capabilities and data to drive sales and marketing effectiveness. In fact, the B2B digital ad targeting and real-time personalization market has grown to about $10 billion.
Within this area is programmatic advertising. Marketers are using data to target their audience more effectively, and this is a trend that's moving quite aggressively in the B2B arena.
Dun & Bradstreet's products in the space, which we call Dun & Bradstreet Audience Solutions are really starting to gain traction, as global businesses turn to programmatic advertising to attract new customers. Marketers have long relied on Dun & Bradstreet for the best company data to manage their customer information and to target prospects.
As marketing moves to digital, marketers need company data optimized for the digital world. The company data alone is not enough.
That's because companies don't surf the Internet, read an e-mail or answer a sales call, people do. We are working to make sure that our customers can access data that tells them what companies to target, and just as importantly, the right people at those companies to engage with.
That's where our professional contact data comes in. Our acquisition of NetProspex is paying off in this area, allowing us to meet a clear need in the marketplace.
We are working to onboard our data to move it from offline sources to online solutions, to deliver our data in new ways to help our customers identify online target companies most likely to buy their products and services. Our contact data, coupled with our company data, onboarded for the digital world and matched to online cookies helps our customers get their advertising in front of the right target and the right decision maker, at that target, at the right time.
And by organizing around the Dun's number, our customers can finally connect their offline customer management data with their online advertising campaigns, creating that vital bridge between ad tech and marketing tech. Armed with this complementary company and contact data, we have built nearly 300 unique audiences or segments that our customers can use to target their sales and marketing programs.
These segments are built off of a variety of anonymized attributes from basic data such as company size, revenue, industry or job function to more advanced insights such as propensity to buy certain products or even the viability to qualify for a loan or company credit card. Our multi-channel sales strategy is a real advantage in reaching customers with Dun & Bradstreet Audience Solutions.
Through our alliances channel, we've made our standard customer segment available on the most popular ad tech and data management platforms from Oracle, Adobe, Google, Xaxis and Nielsen. Our customers can access the data through the platforms that they are accustomed to using without any need for direct involvement from our sales team.
And we also offer our customers the ability to create bespoke segments through our global direct sales channel for a more specific customized targeting. Our supplier risk and audience targeting solutions are great examples of our strategy in action.
We're taking our crown jewel assets and core capabilities and bringing new use cases to market to help our customers deal with new challenges in a rapidly changing global marketplace. While we are pleased with the traction we're building in these areas, there are areas where we want to do better.
Specifically, our business in Europe was weaker than expected in the quarter. Over the past few quarters, we have talked about the positive momentum we are getting in the compliance space in Europe and that continues.
Our pipeline is strong and considerably higher than at this time last year. However, the sales cycle for compliance products is proving to be longer than we anticipated.
In most of these cases, we have essentially sold the product and the commercial terms, if the regulatory and legal issues our customers face internally, that is taking the extra time. As you know, the regulatory environment in financial institutions has become much more complex.
Ultimately, we expect to get these deals closed as the end user is anxious to get rolling, but getting through their internal approval process is causing near-term delay. So in summary, when I look at the entirety of our business, we had a good quarter relative to our expectations and we're starting the year off on the right foot.
More importantly, I'm pleased with the changes we've made to our organizational structure and the early traction on innovative new use cases for our data. The decisions we've made have us on course to deliver our full year guidance.
I will now turn the call over to Rich Veldran who will discuss our first quarter results in further detail. Rich?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Thanks, Bob, and good morning, everyone. As Bob said, our first quarter results were at the high end of our expectations.
As we said on our last call, we expected first quarter organic revenue to be flat to slightly down due to the timing of some large contracts. We delivered flat organic revenue and 7% growth in total revenue.
Our Americas segment had revenue of $310 million, which represented 82% of revenue in the quarter. Total revenue was up 10%, and organic revenue was up 1%.
Within the Americas, risk management was up 13% in the first quarter due to the inorganic contribution from Credibility Corp. Organic RMS revenue was down slightly, as strong revenue growth in other enterprise risk was offset by declines in trade credit.
Other enterprise risk grew 77% in the quarter. As a reminder, the inorganic, Credit-on-Self revenue from Credibility Corp.
is in this category. Organic revenue in other enterprise risk was also strong due to growth in the low-teens.
The organic performance was driven by supply management solutions and our data-as-a-service solution, D&B Direct for Risk. Trade credit was down 1% in the quarter.
DNBi declined 3%, which was a little worse than last year, although the primary reason for this difference was some shift in customer spending between DNBi and other trade credit solutions. The results in overall trade credit were consistent with our performance last year.
Sales and Marketing revenue was up 7% in the quarter, with more than half of that growth organic. Advanced Marketing Solutions was up 5%, both on an organic and at total basis.
As a reminder, we acquired NetProspex in the beginning of January last year, so results are now in the organic base. Revenue from NetProspex, alliances and Audience Solutions drove the growth.
Prospecting Solutions grew 13% during the quarter, due to the inorganic contribution from Credibility Corp. Organic revenue in Prospecting was down slightly, primarily due to decline in Hoover's and MDR.
Shifting to non-Americas, revenue was $68 million in the first quarter, which represented 18% of revenue for the company. Non-Americas' revenue declined 5% in the quarter.
There were two primary reasons for the decline. First, we decided to end our relationship with a competitor in Europe who is buying our data.
As we've talked about before, we have some long-standing contracts with companies that have become competitors over time, and we've decided not to continue to sell data to one of them. The second reason for the decline was due to a few large projects that helped drive growth in the quarter last year that were not repeated this year.
Project revenue can be lumpy and due to the size of these contracts, can swing results from quarter-to-quarter. Deferred revenue was up 1% for the company, before acquisitions and the impact of foreign exchange.
In the Americas, deferred revenue increased 2%, and that does not include committed sales with our alliance partners that would have added another point to the balance. Turning to profitability, operating income in the quarter was down 4%, which was better than we expected due to the organic revenue coming in at the high end of our expected range and the timing of some spending that shifted between the first and the second quarters.
EPS declined 9% in the quarter to $1.18 per share. EPS was impacted by lower operating income and higher interest expense, partially offset by a lower tax rate in the quarter.
In 2015, our full year tax rate was 31.7%, and we expect the rate in 2016 to be about the same. We generated free cash flow of $115 million during the quarter.
Free cash flow was impacted by higher cash restructuring payments during the quarter that were related to actions that we took in the second half of 2015, as well as higher interest expense and CapEx, all of which was factored into our full year guidance. Turning to the balance sheet, we ended the quarter with $1.7 billion of debt, including about $1 billion of fixed rate senior notes and $700 million of floating rate debt.
Our cash balance was $366 million for net debt of approximately $1.4 billion. So overall, we started the year pretty much as expected, with some shifts between first quarter and second quarter operating expenses.
As with previous years, we expect the second half of the year to be stronger than the first. For the second quarter, we expect the growth rate for organic revenue and operating income to be about the same as the first quarter, before a nice acceleration in the second half.
And as Bob said, we are on track to deliver our full year guidance. We'll now open up the call for your questions.
Operator?
Operator
Your first question comes from the line of Jeff Meuler from RW Baird. Jeff, your line is now open.
Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker)
Yeah. Thanks.
Just first a clarifying question. Are you saying organic revenue and operating income about the same on a year-over-year basis as Q1 and Q2?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yes, that's about the same. That is correct.
Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker)
Okay. Thanks.
And then, the partner in Europe, I guess, anything else you can say about that? I'm talking about the competitor that was buying data that you're discontinuing the relationship.
Was this factored into the original guidance range? I guess, why now?
How long do you think it takes you to kind of backfill that with better organic results because you're competitively stronger, et cetera?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. I'll take the first part, which is your question about the guidance range.
So yes, that was factored into our guidance range. Let me ask Josh to talk a little bit about the situation and how we're thinking about them.
Joshua L. Peirez - President and Chief Operating Officer
Hey, Jeff. When we got started on this a couple years ago, we did look at the portfolio review and really look at where we are able to be most competitive and have the most success in selling our data.
We identified a few areas, primarily in Europe, where we had long-standing arrangements with competitors and wanted to end those. And you saw some of that effect last year on some of those decisions that we made as well.
And this one was something we knew about well in advance of setting our plan and our guidance and plan for, but in the quarter, it does have an effect.
Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker)
Okay. And then, on D&B Credit, is that included in the DNBi minus 3% for the quarter?
And if you could just generally talk about what's the selling motion for D&B Credit, especially for an upgrade to an existing customer, and what's the implementation look like for them?
Joshua L. Peirez - President and Chief Operating Officer
Sure. Hey, Jeff.
It's Josh. So let me start with the selling motions.
We launched a product at the end of January, as you know, and we've been rolling the product out through a series of free trials in Q1 and also through upgrades with customers who had renewals coming up where we thought that they were a good candidate for us as first movers on to the product. So it's something where we can approach both new customers and existing for an upgrade.
We had sales of the offering from both upgrading customers as well as in the new customer acquisition space, so far this year. We're pleased with the customer feedback.
It's been very positive. And we continue to release on the product every three weeks, adding functionality and planning for a rollout in Europe in the summertime.
We have a good pipeline for the product. And the emerging business segment, in particular, where we think there's a sweet spot for the current version of the product is just ramping up their sales this month.
So we expect to see even more traction on that beginning late in the second quarter. So we're very encouraged, but it's still the early days.
And given the ratable nature of the product, we don't expect to see material impact until very late this year, which gets to your question: there's a non-material impact from D&B Credit in the DNBi numbers in the quarter.
Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker)
Okay. Thanks, Josh.
Operator
Your next question comes from the line of Peter Appert from Piper Jaffray. Peter, your line is now open.
Peter P. Appert - Piper Jaffray & Co. (Broker)
Thanks. Good morning.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Morning, Peter.
Peter P. Appert - Piper Jaffray & Co. (Broker)
Bob or Josh, can you talk about the economic implications then of the shift from DNBi to D&B Cloud. Do you have a thought in terms of average price lift you might see as the result of the conversion?
Robert P. Carrigan - Chief Executive Officer & Director
Yeah. Hey.
It's Bob. Look, as I said, we're just getting going with the launch, and the goal is to get an upgrade from our customers.
And we're seeing a nice pricing lift from those early customers that are moving from DNBi to D&B Credit. So again, we've rolled out in parts of North America.
We've got our emerging businesses group really starting in earnest just last week really kicking off and then we'll be in Europe by the summer, and our ambition is to absolutely delight our customers with this new cloud-based version. But it is a little too early to tell as we get going here exactly how successful we'll be in getting folks to continue with the price lift that we're seeing with some of the early customers.
But that certainly is our ambition, and we're seeing some really good positive response from our customers in this area. And so, we're really excited to have this in the marketplace.
And it's really great for increasing our competitiveness and just giving a fresh, modern, global solution for our customers.
Peter P. Appert - Piper Jaffray & Co. (Broker)
Okay. Thanks, Bob.
Rich, the shift in expenses from 1Q to 2Q, could you give us some further granularity on that? And you then went on to say that the – I think you said the second quarter growth dynamic is going to be similar to the first quarter.
So it doesn't seem like the shift in cost is necessarily having a significant impact on 2Q results. Do I have that right?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Well, yeah. Here's the story, Peter.
It's probably about $5 million, I'd say, of cost that shifted out of the first quarter into the second quarter. We expected the first quarter to be weaker, you may recall, coming in, so it improved to the detriment to a degree of the second quarter.
And really, all of it was stuff we planned on spending during the course of the year. Some of the investment spending took a little longer, because it sometimes does, but we expect it to hit in Q2.
We also tightened the belt in a couple of areas, but we will spend that money in the second quarter. So nothing really changes if I take it up to the full year.
Peter P. Appert - Piper Jaffray & Co. (Broker)
Got it. Understood.
And then I'm just wondering, given the – you sounded – Bob, you sounded pretty upbeat in terms of your starting commentary. I'm wondering given your upbeat view and the first quarter outperformance, maybe at this point you're more comfortable with the higher end of the guidance range.
Robert P. Carrigan - Chief Executive Officer & Director
Good try there.
Peter P. Appert - Piper Jaffray & Co. (Broker)
That's a trick question.
Robert P. Carrigan - Chief Executive Officer & Director
Yeah. Look, we're feeling good.
We certainly are reaffirming our guidance for the year. Look, I'm excited about some of the newer use cases taking hold.
I'm excited about the changes we've made in the organization as we continue to optimize it for serving our customers across multiple channels. And so, I certainly see us achieving our guidance metrics for the year.
And I am confident about that.
Peter P. Appert - Piper Jaffray & Co. (Broker)
Okay. Great.
Thanks, Bob.
Robert P. Carrigan - Chief Executive Officer & Director
Sure.
Operator
Your next question comes from the line of Shlomo Rosenbaum from Stifel. Shlomo, your line is now open.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Good morning. Thank you for taking the question.
Robert P. Carrigan - Chief Executive Officer & Director
Hi, Shlomo.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Hey, Shlomo.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Hey. Can you go over the commentary on 2Q?
I just did not get it clearly about exactly what you're signaling? Is the growth year-over-year the same as it was in 1Q or you're talking about being flat year-over-year?
If you can just go over those comments.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. So this is Rich.
If you look at our first quarter, we had a flat organic, right, and we had 4% decline in op income, around that range, so flattish in Q2, right, and op income, a little bit down, right, that's what we'd tell you. So similar as we saw in the first quarter.
The real acceleration will happen in the back half of the year as it usually does. But as you know, we also had some contracts that shifted out of the first quarter, but actually, a lot of that comes into the second half of the year as well.
So all the more reason that the second half will be a lot stronger this year.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay. Thanks.
And then, other enterprise risk management in the Americas region, you talked about some supplier risk over there. Is that the kind of thing that it's a seasonal thing, was that something that you're expecting?
It was just really strong, and I'm just trying to understand, is this, hey, something where you guys have gotten traction and you're off to the races? How should I be thinking about that?
Joshua L. Peirez - President and Chief Operating Officer
Hey, Shlomo. It's Josh.
I think that we're excited around a lot of our use cases and suppliers. One of them is we identify when we talked about setting up our different lines of business and one of them being around supply.
The needs of our customers in the space are growing, so we're well positioned to provide that to them. This can show up ratably.
It can also show up as projects where a customer needs to do a full check against the supplier base. So it can be lumpy, but it is something that we're excited about the growth potential, and we do expect it to be a grower for us.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
So is that the kind of thing that there's a big pipeline and we should expect that there should be good growth in each of the quarters of this year? I'm just trying to get underlying what's work and what's not in the business.
Joshua L. Peirez - President and Chief Operating Officer
Right. So yes, Shlomo, we do have a good pipeline.
We do expect it to be a grower for us year-over-year. But in any given quarter, there can be some variability.
So I can't give you the quarter-to-quarter answer, but overall, we do expect it to be a driver of growth.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay. Great.
And then, in each quarter of last year, there was a commentary that alliances would have added two points to the deferred revenue growth. And then, this quarter, we're hearing the commentaries that alliances would have added 1.2 points deferred revenue growth.
Can you just comment on what's going on over there with alliance sales?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Sure. This is Rich.
Couple things in play. One, obviously, the base is getting larger, so the contribution on the aggregate gets a little bit reduced by that.
But the reality is it's 0.2 point difference. It was slightly under 1.5% this year, which rounds to 1%, but a little bit over 1.5% last year, which rounded to 2%.
So it's essentially a non-change.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay. So is there any difference in the cadence of those sales or are there more things (31:36)?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. I mean couple of things.
We're seeing – if you take up to the higher level of alliances, some of the newer alliances contribute to deferred; some don't. So for instance, if you look at Audience Solutions, that does not contribute to the deferred, because you book the revenue on that as it goes.
So it really does depend on the nature of the alliance. If you go to our Americas alliance growth in the first quarter, as you'll see in our release, it was up 28%.
Very, very strong. Some of it's in deferred, some of it's not.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Got it. Okay.
And then, if we think out over the course of the year for the D&B Credit, the Cloud Solution. If we look out and you have success over there, should we expect that DNBi line to have accelerating declines as you start migrating them or how should we be thinking about this?
Joshua L. Peirez - President and Chief Operating Officer
Hi, Shlomo. It's Josh.
I think first, you should think of the trade credit line as a whole as the best indicator of the health of our core trade credit business. And right now, we're consistent year-over-year for the first quarter.
As we accelerate into back half, to be honest, we are looking as we grow that exactly where those revenues will go, and Rich could have more commentary, but you should see the overall trade credit line get healthier later in the year.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. I mean quite frankly, we haven't decided yet.
It may make sense for us to just combine trade credit and just give you color or commentary on the moving pieces, because it will be a lot harder to actually track at the client in DNBi, and then, in a lift in the new trade credit solutions. So we may just go to reporting total trade credit, but we haven't made that decision yet.
We wanted to do what's easiest and best for you to understand the business as we go forward.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay. And I was just going to squeeze one more in.
In the emerging businesses, can you just talk a little bit about the growth of the Credibility business that you bought? And also, the impact that it's had on Hoover's in the last two quarters or three quarters?
You talked about it being helpful to Hoover's. We're still seeing declines in Hoover's.
I know it's your pretty big task, given the trajectory that business was on. But maybe you can give us a little color around both of those items.
Robert P. Carrigan - Chief Executive Officer & Director
Yeah, Shlomo. It's Bob.
Look, emerging businesses is doing quite well. It had a good quarter.
And in fact, we've moved some of the inside sales activity in Europe. We've added to the portfolio of responsibility for emerging businesses.
So that was an area that has also been in some decline. And so, we like what we see from emerging businesses what they're doing in the Americas.
And so, they've taken on even more responsibility in Europe. And again, we just are getting going with D&B Credit, with that important channel.
And with regard to Hoover's, that's an area where we haven't frankly quite addressed the core product reimagination, so to speak. We haven't redeveloped that yet.
It's on our roadmap. We've obviously got – D&B Credit was a critical priority and we want to focus to get that right, given the size there.
We have done some innovation around adding concierge services to Hoover's. So we're innovating around the edges of that, but we haven't addressed the core product as of yet.
But that's on the roadmap and we'll get there.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Great. Thank you so much.
Robert P. Carrigan - Chief Executive Officer & Director
Sure.
Operator
Your next question comes from the line of Andre Benjamin from Goldman Sachs. Andre, your line is now open.
Andre Benjamin - Goldman Sachs & Co.
Thank you. Good morning.
Robert P. Carrigan - Chief Executive Officer & Director
Good morning, Andre.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Hey, Andre.
Andre Benjamin - Goldman Sachs & Co.
My first question really just on Europe. I know that's the area that you have focused on turning around in terms of execution in the past.
You touched on some of the reasons for the deceleration and international organic growth being kind of one-time in nature, as well as the end of the data relationships. So I was just wondering if you can help us kind of compartmentalize how large the one-time piece is versus the customer relationship versus maybe other things, so we can figure out how (35:58) that business?
Robert P. Carrigan - Chief Executive Officer & Director
Yeah. Hi Andre.
It's Bob. So look, there were a couple of factors at play.
As we said, we did make the strategic decision to not renew a deal with a company that has become a competitor over time in the market and that carries some short-term pain, but it was the right move for us over the long term. We also had a couple of big projects in Q1 2015 that were one-time in nature and made the comp a little tougher.
We have a pretty healthy pipeline around our compliance offerings, particularly in the area of FATCA, but those deals have been a little slower to close due to the regulatory and legal scrutiny that we talked about. I referred in my last answer to the inside sales channel in Europe which has also had some compression.
And so, moving that into emerging businesses, I think, will, hopefully, be the antidote there and help us to get that back to a place of growth. So look, we – it's a mix of some one-time things, but we do need to execute better and I made this very much a key area of focus.
It remains a priority for us. And all those things together, we've a real focus around this to get that – to get Europe on track.
Andre Benjamin - Goldman Sachs & Co.
You said the relationships with competitors was something started evaluating sometime ago and started to kind of really pushing through renegotiating some of those deals, I guess, last year. Are there any other material ones that we should be mindful of that could end up being a short-term impact on numbers?
Robert P. Carrigan - Chief Executive Officer & Director
Nothing material that I could see on the horizon. Look, we're trying to get more competitive in the market.
This is all part helping our game and improving our performance. And we felt like we're confident enough that we could make this move which, again, is the right move for the long term.
But I don't see any other big competitors that we're working with in the near term that we're going to have to deal with in this regard.
Andre Benjamin - Goldman Sachs & Co.
A last quick one. If you could maybe talk a little bit about the level of contribution to both revenue and growth from the alliances that are focused on sales and marketing versus those that are not I know the (38:28) latter was an area of focus to continue to add some alliances over the last couple of quarters.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. I'd say the bulk of the contribution really on the quarter was still in sales and marketing.
We have some alliances in the compliance space. Those are taking a little bit longer as we talked about to close the cycle on.
There were some revenue in the quarter, but by and large, we've seen a lot in the sales and marketing space.
Andre Benjamin - Goldman Sachs & Co.
Okay. Thank you.
Operator
Our next question comes from the line of Manav Patnaik from Barclays. Manav, your line is now open.
Manav Patnaik - Barclays Capital, Inc.
Thank you. Good morning, guys.
So...
Robert P. Carrigan - Chief Executive Officer & Director
Good morning.
Manav Patnaik - Barclays Capital, Inc.
...Rich maybe just a little bit more comment on the overall deferred revenue growth, if you could. I mean especially in the Americas, it sounds like that slowed down sequentially.
I don't know again if it's just comps or what's going on there.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Look, a couple things, Manav. As you know, in the first quarter, our business always tends to slow down in terms of growth rate.
It is the seasonal pattern that we see. So we saw it on both revenue, deferred revenue which was still up 1% for the company, 2% for the Americas -- was up less than last year.
But if you go back to last year, it was actually down a couple percent in the first quarter. So seasonal patterns still exist.
The line is shifting up which is good. But you'll see – as you always do, you'll see a very strong second half.
Manav Patnaik - Barclays Capital, Inc.
Got it. And then, on this compliance product you were talking about in Europe, maybe just a quick refresher what that is and what is the – I guess I'm just trying to understand your comment on -- you sold – or you signed the commercial agreement, but the customer can't implement it for regulatory reasons.
I'm just trying to understand what's really going on there.
Joshua L. Peirez - President and Chief Operating Officer
Hey, Manav. It's Josh.
So two different things. The first is the primary solution that we're referring to, but not the only one, is for the FATCA solution which helps banks outside of the United States to comply with the U.S.
tax law requirements on disclosing entities that might have a tax liability in the U.S. So that is the use case we're seeing, a lot of the traction from the latter part of last year into this year on the pipelines.
But we are also seeing traction with Know Your Customer onboarding products and the like. The FATCA products are also now expanding to cover similar regulations in various European markets where there are common reporting standards being required.
So those are giving us add-on opportunities into those tax compliance situations. The commentary that Rich had around the timelines for closing these -- we are not – it's not – we have not signed the agreements, but we do have agreement on business terms with business owners.
However, these are complicated deals for the financial services given the number of parties internally who are involved in making sure that they're in compliance with these various new regulations. So there's a long, internal approval processes at the banks that have to happen before we are able to actually sign those deals.
You could think about it as a kind of work that went into SOX (41:46) compliance when that was first launching. And so, until we get all those internal sign-offs, we can't actually sign the contracts and book the revenue.
The agreement is on business terms, but not in a signed contract yet.
Manav Patnaik - Barclays Capital, Inc.
And is there any way to size this I guess this backlog that you have that could be signed down the road?
Joshua L. Peirez - President and Chief Operating Officer
Yeah. We obviously don't give pipeline metrics, Manav.
It's baked into our guidance and our expectations for the year in terms of the sales, as well as the revenue.
Manav Patnaik - Barclays Capital, Inc.
Okay. And then last one, Bob, maybe for you is just you highlighted the Credit Cloud supplier risk and then the digital advertising sort of new opportunities or at least update on these opportunities.
Maybe the digital advertising is a little bit more on the new front. Maybe you could help us just understand how big of a business that could be for you guys.
Robert P. Carrigan - Chief Executive Officer & Director
Yeah. Hi, Manav.
So look, it's – the opportunity I think is pretty big. That's a growing market.
We're seeing marketers use data and technology in new ways. And in the area of advertising, they are looking to target the right customers, and a lot of the data that they've been relying on is largely behavioral data and inference data.
So we've taken our deterministic Dun & Bradstreet data, and we've onboarded it for the digital world. And we're able at scale, a scale that you typically don't see in the B2B world, to be able to serve the ad tech and marketing tech environment.
And so, look, as with a lot of things, it starts in B2C and it moves to B2B. That whole programmatic wave, it's all moving to B2B right now, and we're starting to see some really nice uptake, because we're available through all the major buying platforms as I said.
But we're also selling direct licenses to marketers as well. And obviously, we've got a portfolio already of sales and marketing solutions.
This is a really nice complement to that, and we're trying to catch this wave and really deliver scale in a market that's highly fragmented. So we're pretty excited about this.
It's a great example of leveraging our core data in a new use case, and it's a great place for us to be.
Manav Patnaik - Barclays Capital, Inc.
All right. Thanks a lot, guys.
Robert P. Carrigan - Chief Executive Officer & Director
Sure.
Operator
Your next question comes from the line of Bill Warmington from Wells Fargo. Bill, your line is now open.
William A. Warmington - Wells Fargo Securities LLC
Good morning, everyone.
Robert P. Carrigan - Chief Executive Officer & Director
Good morning, Bill.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Bill.
William A. Warmington - Wells Fargo Securities LLC
So I was going to start out by asking if you could review for us the value proposition from a client's standpoint from going from DNBi to the D&B Credit upgrade.
Joshua L. Peirez - President and Chief Operating Officer
Sure, Bill. It's Josh.
I'll take that one. So there are a number of different propositions that, to some extent, it will depend on which customers you're talking about.
But the first is that by moving the customers into this cloud offering, we're releasing new functionality and new features every three weeks in a rapid cycle. That's something they'll continue to see value from.
As we move forward, we're able to standardize their views across multiple geographies which we were not able to do and still not able to do on DNBi. That's one core value prop.
Another core value prop is that as we innovate on things like our new scores and new analytics or new data sources, we're able to rapidly deploy those into the product since it is a cloud-based product and we can just push that new information into the cloud data platform which will feed it right into the products. So that's a second major benefit.
The third major benefit for those customers who have departments that need to use this product in multiple geographies around the world is that they can be on a single product globally as we roll the product out across multiple markets, because, today, DNBi is geographically limited to each market in which it's launched. So the U.S.
has its own version. Canada has its own version.
And then, there's a version in the UK. Those products are not compatible today, so if you have a trade crediting department that is global or multi-national, you're not able to use the same product in DNBi.
We'll be able to move them into the same offering in D&B Credit. And then, the final benefit that we have articulated in the past is that we have many markets today where we actually don't really offer a subscription product for the trade credit space and customers must buy from us transactionally.
This allows us to offer the subscription service in all markets around the world including to our worldwide network partners. And from that, we do expect to see benefits for those customers in those markets who today can't get any subscription version of DNBi.
William A. Warmington - Wells Fargo Securities LLC
Okay. The second question for you on the – to revisit the deferred revenue question, I understand that the business is seasonal.
But we're looking at a year-over-year growth in the deferred revenue. So that ought to adjust for the seasonal aspect, meaning that Q1 is weak every year.
And so, if we look at the deferred revenue being up 4% in the December quarter, and it being up 1% in the first quarter, especially if it's up against a minus 2% comp in 1Q 2015, I just wanted to understand what's going on there because I think you're making the case that the business is getting stronger and the momentum is improving. And I'm just trying to tie that to that number which in the past has been a decent forward indicator.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. So look, good question.
And as we told you going into the year, we thought the first quarter would be weak in general, right?
William A. Warmington - Wells Fargo Securities LLC
Yeah.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
So obviously, from a – both from a sales standpoint, a little bit weaker than you'll see in the second half. Things pick up a heck of a lot in the second half of the year.
And we did have some contracts as we talked about that move. Some of those had revenue component.
Some of them actually had a deferred component as well. So all factored into our guidance, nothing that gives us any concern.
And we still feel really excited about where we are at this point in the year.
William A. Warmington - Wells Fargo Securities LLC
Okay. And then, on the cash, just a housekeeping question.
How much of the $366 million is offshore?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
The vast majority of it's offshore. Unfortunately, once you get the cash overseas, it's very difficult to bring back, and we don't – if you think about the fact that I have a short-term revolver, right, I really have debt in the U.S.
So it's really overseas cash.
William A. Warmington - Wells Fargo Securities LLC
Yeah. Okay.
No, no. It's...
Richard H. Veldran - Chief Financial Officer & Senior Vice President
(48:46).
William A. Warmington - Wells Fargo Securities LLC
We see that in a lot of our companies, this is the same situation.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
I'm looking for a way to bring it back.
William A. Warmington - Wells Fargo Securities LLC
And so, a final question for you. Just wanted to ask for an update on a couple of products that haven't talked about in the past, specifically D&B Compliance Check and D&B Custom Analytics just to see how those are doing in the quarter and how the pipeline looks for those two.
Joshua L. Peirez - President and Chief Operating Officer
Sure, Bill. It's Josh.
I can take that. So we're seeing actually very strong growth in our pipeline for Compliance Check, especially as we start to look at some mid-market opportunities as well.
So we are seeing those opportunities continue to benefit us over the course of the year. Again, these can be very lumpy in terms of where they would hit or show up in particular revenues.
So we don't really talk about individual performance for these in any given quarter, but we do continue to expect those products to be growth drivers for us.
William A. Warmington - Wells Fargo Securities LLC
Well, thank you for the insight.
Joshua L. Peirez - President and Chief Operating Officer
Sure. Thanks, Bill.
Operator
Our next question comes from the line of Judah Sokel from JPMorgan. Judah, your line is open.
Judah Sokel - JPMorgan Securities LLC
Hi. Thank you.
Good morning. Thanks for taking my questions.
First question is on DNBi. I was wondering you discussed that the decline minus 3% in the quarter which was a little bit worse than last quarter was due to some mix shift from other trade credit products.
I was wondering when we would – when should we expect DNBi to stop declining? When would we start seeing that product hit a vacuum contributing to growth?
Joshua L. Peirez - President and Chief Operating Officer
Hey, Judah, it's Josh. I think as we discussed earlier in the call, we actually do see DNBi moving to D&B Credit over time, and we haven't yet decided where we would actually be reporting all that.
So I think Rich gave a little bit of commentary that we may actually just be combining the various categories within trade credit, and you would see that trade credit category start to improve. It is a ratable product, and it's a product that we just launched in the end of January.
So it's something we really would expect later in this year into next year to see those trajectory shifts start to occur on the revenue line. You do see consistent performance in Q1 of this year to what we saw last year in the trade credit category overall.
So our commentary on the shifting was merely that you might see something in the DNBi line that could be misleading. If you really look at the trade credit line, that's a better indicator of the underlying health of our core trade credit business.
That's consistent year-over-year.
Judah Sokel - JPMorgan Securities LLC
Okay. Thanks for that clarification.
I appreciate it. Just another question about – so, the op income beat was a combination of about $5 million of pushed out cost and then some better than expected organic revenue growth which, just back of the envelope, seems like it's probably in the $3 million to $4 million range.
So first of all, could you just confirm maybe that number being around the right range to think about the better than expected revenues compared to what you're expecting? And also, maybe you could just give a little color on the type of revenues that those better than expected revenues were.
Should we expect them to see them recurring in future years, or were they maybe more one-off types of revenues or some sort of combination? Thank you.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. So your range is pretty close.
And I would call it $3 million to $4 million in that range on the revenue side. A big part of it was a little bit more usage than we expected because that can hop around.
The other piece, though, is the very strong alliances revenue in the quarter that did exceed our expectations and that all came in the quarter itself. So we feel good about where our alliances is heading.
The usage piece, that was just more timing.
Judah Sokel - JPMorgan Securities LLC
Got it. I appreciate it.
Operator
Your next question comes from the line of Shlomo Rosenbaum from Stifel. Shlomo, you may begin.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Hi. Thank you for squeezing me back in.
I just had a question on the alliances. You signed a lot of alliances last year, and I believe the strategy this year was to try to monetize them.
Which one of the alliances do you feel is really starting to pick up some of the newer ones that you could talk about that were signed last year? Maybe Bob, you can highlight a little bit about what's going on there.
Robert P. Carrigan - Chief Executive Officer & Director
Yeah. So look, we have a portfolio strategy with alliances.
And so, for sure, we'll have some winners and we'll have some that don't do as well. And look, we're seeing like in the area of Audience Solutions which we discussed, we have both the direct and an alliances approach and we're starting to see some traction with the alliances part of that.
We're available on a lot of the major data management platforms, Oracle, Adobe, Google, Xaxis, Nielsen, et cetera. So we're starting to see some nice uptake there.
And, look, we're putting a real focus on activating all the alliances that we announced last year, and we're really pleased with the portfolio. But we also have to put a focus on making sure that we drive those solutions.
And we've been talking a lot about Europe as well. Part of our compliance strategy in Europe is also involving an alliance partner, and that alliance is actually going quite well.
So we've got alliances across multiple use cases. And it's a great way to expand the opportunity for Dun & Bradstreet, and we're putting a real focus around making sure that we activate these and get them growing across the board.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
So should I think about this year, the focus is on getting the ones you signed last year going and maybe in future you're seeing another flurry like what we saw last year with announcements?
Robert P. Carrigan - Chief Executive Officer & Director
Well, look, we keep – we have a pretty healthy pipeline of potential alliance partners. So we're not going to give up on bringing on new alliances.
But you also have to put a focus around getting them growing and getting them going. And so, it's – we're leaning a little bit more in that direction this year, activating these things and getting them going.
But there's no dirt of potential partners out there. And this trend of data-as-a-service embedded in this increasingly as-a-service delivery of software, and that's a great trend for us and we want to continue to ride that trend.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay. Thanks.
And then, Rich, just I wanted to check my math here. Is the cost shift to 2Q provide $0.10 to the first quarter's EPS and then the better revenue like another $0.06 to $0.07?
Is that the way to think about it?
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Hang on. Let me do the math for it.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
It just seems like absent those items, you guys would have come in a little bit (56:21).
Richard H. Veldran - Chief Financial Officer & Senior Vice President
Yeah. That's about right.
Yeah. That's in the range.
That's in the range.
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay. Thank you.
Richard H. Veldran - Chief Financial Officer & Senior Vice President
And then the (56:28).
Operator
And our final question comes from the line of Jeff Meuler. Jeff's calling from RW Baird.
Jeff, your line is now open.
Robert P. Carrigan - Chief Executive Officer & Director
Hello again, Jeff.
Operator
Oh, I think Jeff may have disconnected. Now, I turn the call...
Robert P. Carrigan - Chief Executive Officer & Director
Okay, it's okay.
Operator
...there's no further questions, so I turn the call back over to the presenters.
Kathleen M. Guinnessey - Treasurer and Investor Relations Officer
Okay. Great.
Well, thank you, everyone, for your attention. Thank you for your questions.
And we look forward to talking to you next quarter.
Operator
That concludes today's conference call. You may now disconnect.