Nov 2, 2017
Executives
Kathleen M. Guinnessey - Dun & Bradstreet Corp.
Robert P. Carrigan - Dun & Bradstreet Corp.
Richard H. Veldran - Dun & Bradstreet Corp.
Joshua L. Peirez - Dun & Bradstreet Corp.
Analysts
Nick J. Nikitas - Robert W.
Baird & Co., Inc. William A.
Warmington - Wells Fargo Securities LLC Michael Y. Cho - JPMorgan Securities LLC Shlomo H.
Rosenbaum - Stifel, Nicolaus & Co., Inc. Manav Patnaik - Barclays Capital, Inc.
Stephen Hardy Sheldon - William Blair & Co. LLC
Operator
Good morning, and welcome to the Dun & Bradstreet 2017 Third 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 listen-only mode, until the question-and-answer session of the call.
I would now like to turn the call over to Ms. Kathy Guinnessey, Treasurer and Investor Relations Officer.
Ms. Guinnessey, you may begin.
Kathleen M. Guinnessey - Dun & Bradstreet Corp.
Thank you. Good morning, everyone, and thank you for joining us, today.
With me on the call this morning are Bob Carrigan, our Chairman and 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 this morning.
Following my brief remarks, Bob will provide a brief overview of our third quarter results, and an update on our strategy. Rich will then 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 undertake no obligation to update any forward-looking statements.
From time-to-time, we may refer to sales, which we define as the annual value of committed contracts. In addition, we speak from time-to-time about deferred revenue.
When we refer to the change in deferred revenue, we mean before foreign exchange, dispositions, acquisitions, and the impact of the write-down of deferred revenue, due to purchase accounting 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.
Unless otherwise noted, all metrics on the call will be presented on an as adjusted and non-GAAP basis as further described in our earnings release. You can find the reconciliation between 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. Where appropriate, we have reclassified certain prior year amounts to conform to the current year presentation.
Later today, you'll also find a transcript of our prepared remarks as well as a financial model with historic results on the Investor Relations site. So, with that, I'll now turn the call over to Bob Carrigan.
Robert P. Carrigan - Dun & Bradstreet Corp.
Well thank you, Kathy, and good morning, everyone. Last night, we reported our third quarter results, which came in a little ahead of our expectations.
Revenue for the quarter was up 4% with 2% organic revenue growth. Operating income was up 6% and EPS was flat.
About a point of top line growth was due to a timing shift from the fourth quarter and our earnings results benefited from both the higher-than-expected revenue in the quarter and ongoing expense efficiencies, which has been a focus for us this year. In fact, because of the progress we have made on expenses thus far, we are again revising our operating income and EPS guidance upward for 2017.
We now expect operating income growth between 1% and 3%, revised up from a range of 0% to 2%, and EPS between minus 1% and minus 4%, revised up from a range of minus 4% to minus 7%. While our reported third quarter results were good, we were disappointed in our underlying sales, and year-over-year organic deferred revenue for the quarter was flat.
The flat deferred revenue, combined with the timing shift that benefited third quarter revenue will result in fourth quarter revenue still growing, but at a slower rate than in the past few years. We now expect to end 2017 at the lower end of our revenue guidance range of 3% to 5% total revenue growth with 1% to 3% organic.
Now, staying on underlying sales, our performance in the non-Americas was about as planned, but our Americas business lagged due in part to slower than expected progress in the combined D&B Credit Suite that is the old the DNBi plus new D&B Credit. Revenue performance from the D&B Credit Suite in the Americas year-to-date is about two points better than last year, which is a significant improvement for a subscription product, but it is still running a little behind where we want to be at this point in the year.
The improvement in the overall D&B Credit Suite is due to our new D&B Credit Solution. Today, almost 35% of the customers in the combined D&B Credit Suite are on the new solution.
So, let me break that down for you by our three customer segments by size. We've made substantial progress in growing D&B Credit with our smaller customers, both through conversions from DNBi and through new customer acquisition.
As a reminder, our initial rollout plans were focused on the small business segment, and we're having success there. Customer feedback on the upgrade has been terrific.
However, underlying DNBi sales among our midsize customers have declined a little faster than we expected. So, we are taking steps to accelerate conversion of these customers from DNBi to D&B Credit.
Among our large customers, we have seen about a half a point of drag on growth in the D&B Credit Suite this year from a higher than normal number of corporate events, including M&A and regulatory changes that affected their contracts with us. So, while we're moving in the right direction, we are probably not going to get the D&B Credit Suite to flat this year as we had hoped.
However, given the improvement we have seen this year, the product suite should be at least flat next year. Turning to profitability, we have made good progress in improving the bottom line.
We are very pleased with our ability to deliver strong earnings relative to our original expectations year-to-date. In general, we have had very good cost discipline and have re-engineered processes to deliver savings.
This will remain a priority as we look ahead to next year. We are right in the middle of our 2018 planning process.
As always, we will issue guidance early next year after finalizing our plan. However, even if organic revenue growth were to be in the low single-digit again next year, we expect to start expanding margins in 2018, while still investing in the strategy to drive higher levels of growth.
Now, I'm confident in saying that we expect to begin expanding margin next year even before we finished our planning process, because improving profitability is not a new initiative for us, we've been doing this all this year. Based on our performance over the last three quarters, you can see that we have control over our cost base and can improve profit while still investing in our strategy.
As I mentioned, that has enabled us upward revisions of our operating income and EPS guidance for 2017. We have been purposeful in our approach to improving profitability.
We have let our investments run and the areas where we have invested are growing rapidly. So, we're sharpening our pencils to generate even more value for shareholders and we can do that as we continue to invest in the strategy and execute on our path to mid-single-digit growth.
Now, as we've said in the past, at its core, our strategy is about two things: having indispensable content, and delivering it in modern ways. We have indispensable content because we invest heavily in making sure we have the best commercial data and we are achieving modern delivery by delivering Data-as-a-Service.
We've chosen this strategy because the business world is rapidly moving to an as-a-service environment, be it infrastructure, platform or software. As-a-service is driving growth for some of the biggest companies in the world evidenced by strong earnings results in the technology sector announced over the past few weeks.
Now Data-as-a-Service is a logical extension of this shift in the marketplace. And in the last 12 months, Dun & Bradstreet generated more than 25% of our revenue in the Americas from products delivered as-a-service and that portion of the business is growing at a much faster rate than revenue from the rest of the business.
And there are three legs to the stool of our Data-as-a-Service strategy. We deliver our data through our own solutions like the D&B Credit and D&B Hoovers, through other company solutions like Salesforce and now Microsoft, and through APIs as with D&B Direct.
Providing our content through modern as-a-service delivery makes our data more useful and stickier, enhancing the value of the revenue we generate from newer delivery products. For our customers, it means more of our content is available in their workflows, across platforms and updated in real-time.
It means they have the most up-to-date and accurate data every time they access it. D&B Hoovers is a great example.
As you know, we launched D&B Hoovers in the first quarter and we got it to sales growth immediately. Organic sales of D&B Hoovers and our legacy Hoovers product combined are up low single-digits year-to-date and we only launched the new product in March.
This represents a significant turnaround from last year when we experienced a sharp downturn on legacy Hoovers. The product is really resonating with new customers.
In fact, almost half of the sales of D&B Hoovers this year were to new customers and the majority of those sales were of the more advanced products that can integrate into other applications like CRM. Now, given that it is a subscription product, our improvement in the category bodes well for next year's revenue.
D&B Hoovers is an important component of our overall sales acceleration strategy. It's also an important part of our go-to-market strategy with our alliance partners, including Salesforce and Microsoft.
So, let me take a moment to update you on both of those relationships starting with Salesforce. Earlier this year, we told you that our relationship with Salesforce is evolving and Salesforce is no longer selling new subscriptions of Data.com.
Today, Salesforce's first priority is to continue to renew existing customers on Data.com, but that revenue will fall off over time through natural attrition as they are no longer selling new Data.com subscriptions. I'm pleased to say, we've signed a new agreement with Salesforce on how to handle customers when they eventually migrate off Data.com.
We will work together to smoothly transition those customers onto our newer solutions, D&B Hoovers, and our brand new D&B Optimizer for Salesforce. Now, let me say more about this.
Today, Data.com has two offerings Prospector and Clean. Prospector makes Dun & Bradstreet company data and Salesforce's data on contacts available in the Salesforce CRM, so the customers can identify new prospects.
Clean uses Dun & Bradstreet's matching capabilities to keep customers' CRM records accurate and organized. D&B Hoovers replaces the Prospector component of Data.com giving customers the added benefit of having access to both Dun & Bradstreet's company data and Dun & Bradstreet's contact data, which customers of Data.com did not previously have integrated in the Salesforce CRM.
To replace the Clean component of Data.com, we are launching D&B Optimizer for Salesforce, which will bring our world-class Match & Cleanse capabilities to the platform. We will launch the product next week at Dreamforce, at Salesforce's annual event for its customers and partners.
We will have an even more significant presence at Dreamforce this year than in past years to showcase our offerings on the Salesforce platform. For our prospective new customers that don't already use Data.com, our sales team will continue to focus on getting them onto D&B Hoovers and now D&B Optimizer for Salesforce as well.
And since Salesforce is no longer selling to new customers, they will help funnel new prospects interested in Data.com over to us. Moreover, we will recognize 100% of this revenue and own the customer relationship going forward.
D&B Hoovers and a specialized version of the D&B Optimizer will also fuel our new Microsoft alliance. As we announced during the summer, we have partnered with Microsoft to provide companies with access to our data through Microsoft's Azure Cloud and its related services.
We are making our data available within Microsoft Dynamics 365, Microsoft's business application services such as ERP and CRM. The D-U-N-S Number and our core business data will be integrated into Microsoft's Common Data Service, through our D&B Optimizer for Microsoft Solution.
So with our data embedded in the Common Data Service, our joint customers will be able to clean and match data across the Microsoft Cloud application environment. We will reach Microsoft's commercial users and prospects through a joint co-sell arrangement focused on D&B Hoovers and our brand new D&B Optimizer for Microsoft.
Under this joint go-to-market arrangement, Microsoft will co-sell D&B Hoovers and D&B Optimizer for Microsoft with our sales teams and the value of Dun & Bradstreet data will become part of Azure customer conversations. I was very excited to participate at Microsoft's Annual Envision conference this September, where Dun & Bradstreet and Microsoft's senior leadership jointly discussed all elements of our partnership with potential customers and company employees.
Feedback from both groups was very positive, and I'm excited to work closely with the Microsoft team to build on this momentum. Now, let me turn to Audience Solutions, where our alliance strategy is also helping drive strong growth, specifically within our programmatic advertising offerings We are working with leading data management platforms and agency trading desks, as well as direct-to-customer to distribute our targeted customer segments.
Our unparalleled data on businesses and key decision makers enables us to provide advertisers a wide swath of potential buyers, based on curated, deterministic content. We're also seeing traction on our new Visitor Intelligence offering, which enables customers to identify visitors coming to their website and to customize content on their site for the specific user.
Audience Solutions was a key driver of the growth we saw in our Americas Advanced Marketing category in the third quarter. I'm excited about our progress in Audience Solutions as this is really all about making Dun & Bradstreet data available to marketers in the digital world.
This is a capability that our customers appreciate and expect as they increase their digital marketing efforts. And it is an integral component of our Sales & Marketing Solutions strategy.
Before I close, I'll just update you quickly on our suite of Supply and Compliance Solutions where we are also getting good traction. Customers are leveraging our crown jewel assets including our global business database and corporate linkage to comply with various regulatory requirements such as FCPA and Know Your Customer obligations, and manage their global customer supply chains.
These products are driving the strong growth we are seeing in other enterprise risk category, which is up high single-digits in the Americas year-to-date. So, we've got a lot of positive momentum in our newer use cases and our as-a-service offerings that will help drive future revenue growth.
At the same time, we're still dealing with some challenges in other parts of the business, among them we need to get midmarket customers in D&B Credit to the same level of success we've had with our small customers, and we need to manage the run off of revenue from Data.com, while we accelerate sales of D&B Hoovers. So, as we look to 2018, we're focused on positioning ourselves to deliver sustained revenue growth, while also being disciplined with respect to profitability.
We expect to grow operating income in 2017 and to drive margin expansion beginning in 2018. With that, I'll turn the call over to Rich.
Rich?
Richard H. Veldran - Dun & Bradstreet Corp.
Thanks, Bob. And good morning, everyone.
Today, I'll take you through the details of our third quarter results. And then I'll spend a few minutes on the new accounting rule ASC 606 that goes into effect next year, before we open up the call for your questions.
Now, as Bob said, third quarter results were a little bit ahead of expectations, as a large customer contract shifted from the fourth quarter last year to the third quarter this year. We've talked a lot about how products like Optimizer can be lumpy from quarter-to-quarter, and this is another example.
The shift was worth about a point to third quarter revenue. Total revenue for the company was $430 million and grew 4% for the quarter with organic growth of 2%.
As Bob mentioned, given the timing shift, as well as our deferred revenue balance at the end of the third quarter, we expect fourth quarter revenue to grow, but at a slower rate than it has in the past few years. Let me take you through the details of our performance by segment.
The Americas had third quarter revenue of $353.7 million, which represented 82% of our revenue in the quarter. Total revenue was up 4% and organic was up about 1.5%.
Within the Americas, Risk Management representing 57% of Americas revenue was down 1% in the quarter and organic revenue was about flat. As a reminder, we divested our Latin America business last year.
Within Risk Management, Other Enterprise Risk was 6% in the quarter, driven by strength in compliance and supply, as well as D&B Direct. Trade Credit was down 4% in the quarter, a D&B Credit Suite, which represented about three quarters of Trade Credit revenue was down 2%.
Bob already discussed D&B Credit, so I'll move on to Other Trade Credit, which was about a quarter of Trade Credit revenue and was down 10% in the quarter. Now, as we've mentioned on previous calls, the category has been impacted by shift out of Trade Credit products into other D&B solutions.
After adjusting for shifts within D&B, Other Trade Credit was down slightly. Now, let me shift over to Sales & Marketing, which represented 43% of total revenue in the Americas in the third quarter.
Total revenue was up 12% in the quarter, and organic grew in the mid-single-digits. Advanced Marketing, which was 53% of Sales & Marketing revenue was up 11% in the quarter, all of which was organic.
As I said earlier, Advanced Marketing benefited from the shift of a large contract in the fourth quarter – from the fourth quarter, and adjusting for that, Advanced Marketing was still up in the mid-single-digits due to strength in Master Data including Optimizer, as well as Audience Solutions. Sales Acceleration, which was 47% of Sales & Marketing revenue was up 12% due entirely to the acquisition of Avention.
Organic revenue was down in the mid-single-digits. As a reminder, Sales Acceleration includes the D&B Hoover Suite, which is made up of old Hoovers, the new D&B Hoovers, Avention and Data.com.
The category also includes our educational marketing business, and revenue from other analytics and sales prospecting solutions. Revenue in the Americas for Sales Acceleration was $210.8 million through the third quarter, and then D&B Hoovers Suite was $129.6 million of that total.
The decline in organic revenue was driven by weak sales of the old Hoovers product in 2016. While we need to get through the drag on revenue this year, we're very pleased with the early progress that we've had with D&B Hoovers.
We're seeing improvement across all metrics. Retention is up, we're getting a strong lift in average selling price on conversions, and we're generating strong new business growth as well.
We expect 2017 sales to help revenue in the D&B Hoovers Suite next year. However, as Bob mentioned, the D&B Hoovers Suite also includes revenue from Data.com, which will be stepping down over the next few years due to normal attrition.
Shifting to non-Americas, revenue was $76.3 million in the third quarter, which represented 18% of revenue for the company. Total revenue was up 1%, and organic revenue grew in the mid-single-digits.
Total revenue growth was behind organic revenue growth, primarily due to the divestiture of our Benelux business last year. The organic revenue growth was due to a strong performance in our Worldwide Network partnerships in Europe and continued strength in Asia.
Total company deferred revenue was flat before M&A activity and the impact of foreign exchange. Americas deferred revenue was down 1% and non-Americas was up 4%.
Now, let me turn to profitability. Operating income in the quarter was up 6%, which was much better than we expected due to the better performance on the top-line, given the contract shift that I just talked about and our focus on streamlining our expenses.
Early in the year, we started focusing on finding efficiencies in our cost base. We reduced discretionary spending, renegotiated outsourcing contracts, and pushed to get M&A synergies ahead of schedule.
As a result, our operating income growth will be better than originally planned for 2017. And we will continue to drive efficiencies to deliver higher margin next year.
One of the great things about a data company is the ability to expand margins with organic revenue growth. Over the past few years, while we have delivered organic revenue growth, we have not expanded margins, as we've invested in the strategy.
We've now gotten steady growth and are focused on driving it higher. And we are now on pace, where we can continue to invest to get that growth moving, and begin expanding margins at the same time.
EPS was flat in the third quarter at $1.79 per share and we now expect full year EPS to be between negative 1% and negative 4%. The decline in EPS despite growth in operating income is primarily due to higher interest expense and to a lesser extent a higher tax rate this year.
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 $431 million for a net debt of $1.3 billion.
Before I close, let me just touch on accounting changes that will affect our 2018 reported financials. In May of 2014, the FASB issued ASC 606, a new accounting standard, in that standardizing revenue recognition and related practices across businesses and conforming U.S.
GAAP with IFRS or the International Financial Reporting Standard. The standard covers various areas of financial accounting including revenue recognition principles, deferral and amortization of cost to acquire a contract, and the presentation of certain balance sheet line items.
ASC 606 goes into effect for most companies on January 1. So, beginning with the first quarter of 2018 results, companies will be reporting under the new standard.
Now, there's been a lot of press recently about companies not being ready to meet the deadline for the new reporting given how complicated this transition is. We've been working with our auditors and outside advisors for quite some time and we will be ready for the new standard.
We, like most companies will be transitioning to the new reporting on a go-forward basis called the modified retrospective method. As such, in 2018, our GAAP reporting will be under the new accounting standard, but we will also report results under the standard that is in effect today, ASC 605.
Under the new standard, certain of our revenues that are currently recognized at the time of sale will now be recognized on a more ratable basis. In addition, certain cost to acquire a contract may be deferred and amortized over time.
The new standard will also impact the presentation of deferred revenue and accounts receivable on our balance sheet. Converting to the new standard is literally a contract-by-contract analysis, so I cannot say what the impact would be on our reported results for next year at this time.
The important thing is that, nothing about the underlying business changes. Our free cash flow will be on the same basis as it's been historically, and as I said, we will report under both the old and the new standards next year, so you'll have a full transparent apples-to-apples comparison of 2018 results with our historic results.
I expect to be able to give you more insight on the potential impact on our 2018 reported results on our next call. With that, let me open up the call for your questions.
Operator?
Operator
Your first question comes from the line of Jeff Meuler of R.W. Baird.
Nick J. Nikitas - Robert W. Baird & Co., Inc.
Yeah, thanks. Good morning, guys.
You got Nick Nikitas on for Jeff. Just thanks for the additional detail on D&B Credit.
I guess relative though to the full year shifts in organic growth, were there any other areas where you're coming in slightly below trend or is that the main driver of the revision to the expectations?
Joshua L. Peirez - Dun & Bradstreet Corp.
Hey Nick, it's Josh. I think that – we definitely, the D&B Credit line as we said, see us falling a little bit short of our goal, but are pleased with the two point shift in trajectory.
And I think as we indicated, our Q3 sales were a little disappointing for us. And so, that affects us as you see in the deferred.
So, really it's the drivers that you see there that are the main factors.
Nick J. Nikitas - Robert W. Baird & Co., Inc.
Okay, thanks. And then just Bob, more high level.
Anything that you're saying or seeing that I guess would change your confidence in still achieving that mid-single-digit organic growth rate longer term?
Robert P. Carrigan - Dun & Bradstreet Corp.
Look, our strategy, I firmly believe will get us to the mid-single-digit growth. That is very much the focus everything we've been investing in and we're making a lot of progress against that.
And I think we've been pretty clear about the areas that we need to do better in. And so, absolutely, we are focused on that mid-single-digit.
When I was talking about – even if we're at low-single-digit next year, I was referring to that in the context of margin expansion, because previously we had talked about being able to expand margins when we get to that mid-single-digit point. So, based on some of the things that were – of the investments we've made, the efficiencies we've created, the fact that we're moving to as-a-service, which creates terrific improvements to our processes, and again, generates efficiencies, we're saying that, even if we – and we're not giving guidance now.
But even if we were to be at low-single-digit revenue growth next year organically, we see expanding margins in fiscal year 2018. So, lots to be excited about.
And it's hard for us to call exactly for instance how the Microsoft relationship will unfold. We're just launching.
We like the – we like what we've laid out with them, there's a lot of early momentum, and we're excited about being in market with these solutions as we speak, but we're – it's a little too early to call. So, those kind of things could swing things.
And they're exciting and they're all very much on strategy. This idea of liberating our data, making it available as-a-service, working with a fantastic partner like Microsoft and now with our new arrangement with Salesforce, we're really excited about where we're headed with those things.
So yes, absolutely, we got to get D&B Credit at least to, as we said, at least to flat and ideally a little better than that, that's a key part of it and we're very focused on that as we speak.
Nick J. Nikitas - Robert W. Baird & Co., Inc.
Okay. Great.
That's helpful. And then just last one for me, on the Salesforce relationship and the additional detail there, does that change the revenue contribution from your existing book of business or should we still think about that as about kind of $45 million to $50 million contribution this year?
And then looking into next year, just thinking about the potential headwind to growth or how that new agreement could change the revenue base?
Richard H. Veldran - Dun & Bradstreet Corp.
Yeah. This is Rich.
So look, this year Salesforce in the neighborhood of $50 million, because they're not selling new on their side. We expect, with natural attrition that to step down over time.
We'll assess what we think that rate of decline looks like, but I expect it to be gradual over-time, but a headwind for a period of time. As we ramp up and sell new product on – that will go into their platform, we'll obviously have 100% of the revenue of the sales that we sell.
So, we're excited about that, but you're starting from a zero point and you've got to move up and it's a ratable product, so the revenue contribution will take a little bit of while to become meaningful.
Nick J. Nikitas - Robert W. Baird & Co., Inc.
Yep. Makes sense.
Thanks, guys.
Robert P. Carrigan - Dun & Bradstreet Corp.
Sure.
Operator
Your next question comes from the line of Bill Warmington of Wells Fargo.
William A. Warmington - Wells Fargo Securities LLC
Good morning, everyone.
Robert P. Carrigan - Dun & Bradstreet Corp.
Hey, Bill.
Richard H. Veldran - Dun & Bradstreet Corp.
Morning, Bill.
William A. Warmington - Wells Fargo Securities LLC
So, first question for you is just to ask about what's happening with the midmarket customers on the credit risk side. What is it that's causing the challenge there?
Robert P. Carrigan - Dun & Bradstreet Corp.
Well, let me just say that, when we look at overall progress with the D&B Credit Suite this year versus last year, revenue was down about 1% overall versus 3% this time last year. And as I said, we're seeing very positive signs in the Emerging Businesses segment, where we're focused around SMB; that had been an initial focus for us.
And we're seeing great progress in key areas of new customer acquisition. That had been a challenge for us historically.
Customer account is up nicely through the end of the quarter. And we're getting pricing on upgrades and the overall feedback is great, and now we're definitely shifting our focus to doing a better job in this midmarket segment.
And Josh, you want to talk a little bit about some of what we're doing in the go-to-market area there?
Joshua L. Peirez - Dun & Bradstreet Corp.
Yeah. Thanks, Bob.
First, we should note that, our midmarket performance, while negative in the year, it has improved year-over-year this year. But there were a couple reasons why we haven't been more aggressive in going after the midmarket customers for upgrade credit.
First, we wanted to make sure that the customer feedback was positive, the robustness of the product was firmly validated with these larger customers before we would move them onto it, both of which, we've now certainly proven out to ourselves. And then secondly, there are a spectrum of features that customers utilize on the DNBi product and some of those features are not yet available on the D&B Credit platform.
So, we've been hesitant, probably too hesitant, to try to convert those customers who may not be able to get all of the exact features that are on DNBi, with the new D&B Credit, but we've been digging in much more from an account planning perspective to segment the midmarket customers and identify which are right for us to go after for conversion now, even before some of those features roll out. And we believe there's a significant universe to go after even before full feature parity is available in 2018.
So, we're aggressively going after these customers now, and that's why, as Bob said, we expect to improve our performance on the D&B Credit Suite next year, just like we have this year which would put us at least flat, if not better.
William A. Warmington - Wells Fargo Securities LLC
All right. One other question for you on the potential for margin expansion in 2018.
Robert P. Carrigan - Dun & Bradstreet Corp.
Yeah. Yeah.
William A. Warmington - Wells Fargo Securities LLC
So a general comment is, it seems to be difficult to get much in the way of margin expansion without mid-single-digit growth. Just seems like the – it's hard to offset inflation in the general cost base, if you're not doing at least mid-single-digit organic revenue growth.
And so, I wanted to see if you could give a little color on how you're getting the cost cuts currently, how you think you're going to be able to get the cost cuts going forward. And it seems that one of the challenges is, at some point, you run out of stuff to cut, and again, you have to go back to that mid-single-digit growth to be able to get the margin expansion, so.
Robert P. Carrigan - Dun & Bradstreet Corp.
Yeah. No, I get your point.
This is Bob. Look, what we've been doing over the last couple of years in the context of our strategy is making critical investments to position ourselves to capitalize on this big opportunity, and we're pretty excited about that.
We've made these investments, we've done some pretty key acquisitions that have improved our technology infrastructure, and they fueled our growing as-a-service delivery model. And one of the benefits of that model is, you do get – the ongoing cost of innovation goes down.
And so, we're going to continue to invest. I mean, we think that's critical and we've said that all along, but we think we can do that more efficiently, and we've got a good track record here of driving cost savings.
We've been doing that this year. We're already realizing acquisition synergies and being very disciplined on the cost side.
And so, I'm pretty confident that that will carry into next year, and I don't think it'll have any negative impact on our strategy, and that really is the headline, again, because of the – what we've set up in the new processes and the technology environment, the cloud environment, lot of the ways we're delivering our content. We're doing it in a much more modern way.
This maps very much to our strategy, and that also has the benefit, as we have said, of lowering our cost of going to market and delivery over time.
William A. Warmington - Wells Fargo Securities LLC
Got it. Well, thank you very much.
Operator
Next up, we have Andrew Steinerman of JPMorgan.
Michael Y. Cho - JPMorgan Securities LLC
Hi. This is Michael Cho for Andrew.
I just want to touch on the margin commentary in the investments. When you mentioned that you're now investing more efficiently, I mean, does that also mean some of the push out of investments scheduled for second half of this year not going to happen or does that push out into 2018 as well?
Richard H. Veldran - Dun & Bradstreet Corp.
Yeah. This is Rich, Michael.
Yeah. So, the current guidance that we shared this morning does include both reductions in cost throughout the year, but our overall level of investment this year that we talked about in the $40 million range is still the same.
We did push a little of it later in the year, but we haven't necessarily changed how much we're spending. We've got a little more done with that $40 million than we might have expected to, again, because of some of the efficiencies that Bob talked about.
And then, as we look forward, we'll continue to invest. We think we can do it even more efficiently than we've ever done before, simply because we've done so much terrific work on the technology infrastructure, and with as-a-service delivery.
So, you can expect us to continue to invest, but do it in a way that we can expand margins as we move forward.
Michael Y. Cho - JPMorgan Securities LLC
Understood. That's helpful.
And then, just one quick one on D&B Credit. You mentioned that some more pending module upgrades for mid and large size clients, so when do you think that D&B Credit will be fully ready for the midmarket and larger clients?
Joshua L. Peirez - Dun & Bradstreet Corp.
Hey, Michael, it's Josh. So we – as I said, we expect to start aggressively upgrading midmarket clients now, as many of them we think actually can use the current D&B credit product.
We'll be rolling out features throughout next year to get to full parity. It's important to note, there's a relatively small percentage of our large and strategic customers who are on DNBi, so that represents a smaller segment.
That will be the last part to go, but that's not an area right now that is requiring of as much upgrade in the midmarket where we think we can start moving aggressively on that today.
Michael Y. Cho - JPMorgan Securities LLC
Great. Thank you.
Operator
Your next question comes from Shlomo Rosenbaum of Stifel, Nicolaus.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
Hi. Thank you very much for taking my questions.
Robert P. Carrigan - Dun & Bradstreet Corp.
Hey, Shlomo.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
Hey, can you talk a little bit about the setting up the sales forces in D&B Hoovers just in general with the Avention merger or acquisition? And then the company was also going to stand up as sales force to sell into the existing Salesforce.com clients on the Data.com.
I understand that you have a new contract and everything like that, but can you talk about some of the efforts that you're putting in over there?
Joshua L. Peirez - Dun & Bradstreet Corp.
Hey, Shlomo, it's Josh. So I think, I understand the question.
If I get it wrong, I'm sure you'll let me know. But in the context of the Avention acquisition, we have a luxury of riches of really talented sales people, particularly in the Sales Acceleration space and a bit more broadly in the Sales & Marketing space from our own team that we've had for a while, as well as those folks who came over along with the acquisition from Avention, and also with sales folks that we got in the NetProspex acquisition a couple of years ago.
So, when you put all those pieces together, we actually have a very good bench of talent of people who really understand this space, know how to sell into it, have good client connections, and really understand the value proposition that we have here, and can sell both that great technology platform that we now have as a result of the acquisition, and the wonderful underlying data that we've had as part of Dun & Bradstreet along with the contact data that we got from NetProspex. So, we really have all those pieces.
In terms of how we're pushing that into market – this year, the effort has been along a hardcore press on the D&B Hoovers solution as we've launched it, and on moving customers both new and existing over, which we're now beyond full feature parity, and moving to migrate everybody as quickly as possible, so that's exciting for us. And then, as we look at the Salesforce and Microsoft ecosystems, we believe we have the firepower necessary to sell into those ecosystems.
What was important for us there is making sure that the lead gen is coming from those partners, so that we're working collaboratively with them and able to actually close those deals, and with the new arrangements that we just mentioned with Salesforce, as well as with what we have in place with the co-sell arrangement with Microsoft through that partnership, we feel very confident that we can cover that landscape with the resources we have today. And, of course, we can always add great sellers if we need to.
But structurally, we're organized around that market effectively in terms of outbound and inbound and going after enterprise customers with people who are true experts in this space, and the performance shows that.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
So, there isn't a focus on bringing in more sales people for either the D&B Hoovers or for the Salesforce.com, you feel like you have enough sales resources in the company right now to approach both of those areas?
Joshua L. Peirez - Dun & Bradstreet Corp.
Yeah. Actually, the one thing I will say is, we are always in the market for great sales talent.
So, we will continue to bring in great sales talent. If any of you are listening at all times and so, it's not to say we're not hiring, we're always hiring great sales talent, but we do believe that in this particular suite, we have the best talent that's available and we're very pleased with where we are.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay. And then, Bob, it just seems like from your comments that you're trying to set expectations for another repeat year of low-single-digit revenue growth, but are pointing to the fact that you believe that the cost cutting will enable expanded profitability.
Number one, make sure that I'm reading you correctly; and number two, this kind of seems like the story I used to hear from the prior management.
Robert P. Carrigan - Dun & Bradstreet Corp.
Well, look, we're in the middle of our planning right now, and I'm not going to give you guidance for next year, but at a high level, if I look at kind of the four product categories in which we report our business, the formula for mid-single-digit growth includes getting Trade Credit and Sales Acceleration to low-single-digit growth. But for Trade Credit, D&B Credit is making progress, but we're a little behind where we expect it to be.
Again we're – through Q3, we're down about 1%, where this year – where last year this time we're down 3%, but we're not where we wanted to be. We wanted to be at flat this year.
So, we're actively addressing that and we've been talking about that in some of the questions in the call today. For Sales Acceleration, we're making great progress in D&B Hoovers, but we will have some impact from the natural run off of the Data.com royalties next year, so I'm pretty bullish on the long-term prospects.
But again, I'm framing the mid-single-digit concept next year, again, in the context of margin expansion, saying that look, even if we're at low-single-digit, we feel that we're at a place now, due to the efficiencies and the investments we've made we can expand margins. I think there is a pretty big contrast with kind of the old D&B.
I mean we have been growing sustainably for the last couple of years in low single digits from relatively flat for five years before I got here. And importantly, we've been investing in the business and identifying new areas.
If you look at the newer areas that we've put a real focus on in Advanced Marketing and other areas of Enterprise Risk, we've addressed those issues, those areas and we're growing nicely in those areas. And when I came in here, I was dealing with a pretty significant downward trajectory in our subscription products, and we've kind of re-imagined D&B Credit and have got that now going in the right direction, and D&B Hoovers is also going in the right direction.
So I think that's a very different profile from the so-called old D&B. And just because we are being more efficient with cost takeout, you shouldn't confuse that with kind of just a kind of brute force blunt instrument.
We're able to do that because of the smart investments we've made, the talent we have here, and the focus on our strategy, particularly the as-a-service delivery, which creates, again, great efficiencies for our customers and also for us.
Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc.
Okay. Thank you very much.
Robert P. Carrigan - Dun & Bradstreet Corp.
Sure.
Operator
Your next question comes from the line of Manav Patnaik of Barclays.
Manav Patnaik - Barclays Capital, Inc.
Yeah. Good morning, gentlemen.
So my first question, somewhat as a follow-up to that is, I think the flat growth to the low single-digit growth you talked about, obviously, has come at the expense of a lot of margin, and one way to read what you're saying here is you were investing obviously a ton to get this business back to mid-single-digit growth, but it doesn't sound like you're going to get there anytime soon and so you're paring back on some of these investments that you made and therefore calling for this margin expansion. But my question is more, as you pare these back, like what's the risk that that 2%, or that low-single-digit growth starts getting worse as we track you guys?
Robert P. Carrigan - Dun & Bradstreet Corp.
Well, again I – respectfully I – I want to kind of reframe your assessment of this, because we've made investments to be able to enjoy some of the efficiencies and the more modern delivery that we're enjoying in our business right now and how we deliver our data. And so, this is perfectly consistent with our strategy and where we're headed.
And so, I don't view it as we're not getting in the single-digits, so we've got to cut costs and that could then become this self-fulfilling downward spiral. That's not how we talked about it today, although I appreciate the question.
And again, I do have our sight set on mid-single-digit growth. I've said in the past that we were dealing with a lot of legacy issues here historically, perhaps some more profound than I appreciated.
But I can tell you that we're addressing all of those issues and I like where we're headed. And we're just trying to give you some level of reassurance that, even if we are at low single-digit, a lot of the things that we've done will start to improve margins as we move forward.
So, we have great control of our model here. We've got control of our cost base.
We're targeting our investments in areas that we don't think will compromise our strategy. And so, we're moving full steam ahead in that direction.
Manav Patnaik - Barclays Capital, Inc.
So maybe then just on those legacy issues, if you can touch on that a bit. I mean, I'm just curious, towards the end of every year, I mean it sounds like you have to lower the expectations and push out the recovery further.
And so, when you're trying to address these legacy issues with the board, I mean, how does that discussion go? I mean, it sounds like you're saying your technology investments are up to par now and maybe that's where you're finding these efficiencies.
You've highlighted a few new products and stuff that are obviously doing well. So, is it just then the Salesforce or what are these legacy issues left that's holding you back four years into the process?
Robert P. Carrigan - Dun & Bradstreet Corp.
Look, the headline is we're doing what's required to be able to address all the areas of our business while we pursue new areas. Look we've had some – subscription products, first of all, they take a little while to turn and we're trying to turn them from – if you look at what a lot of companies are doing today as they move from either on-prem to the cloud or from shrink wrap software to subscription-based, cloud-based delivery.
What we're trying to do here is move some of these solutions into the most modern way that companies can receive us. So, we're not just kind of upgrading these solutions.
We're doing something more ambitious, which we feel is in the best interest of our customers, and will ultimately create a lot of value for our customers and for us. And so, it is ambitious and in the area of like Trade Credit, we're dealing with Risk Managers and Chief Risk Officers, and we're getting them – they appreciate us, they've been using us, and they value us and we're trying to get them into – and we're leading the market.
So, we're now pushing these folks into a new place and we feel that's what we should do as a leader in the market. That's not without its challenges, but we're trying to do something that again will position our customers for great success, give them a great workflow solution that's very modern and cloud-based.
And again, we've said that there are certain areas of that that are working faster than others, but it is not without its challenges, but I hope you can appreciate the ambition that underlies all of this.
Manav Patnaik - Barclays Capital, Inc.
Yeah, I mean. No doubt.
I mean, it's been a tough turnaround here. Just one last question for me.
So, I think in your first year when you had sort of talked about the investments being made, I think you had broken it up by category of sort of technology, you had the rebranding and so forth. Maybe just over the four years in terms of the investments you've made, like, is there a way to bucket, which – like, is it a third in technology or third in product or so forth, just looking for just some broad color there?
Richard H. Veldran - Dun & Bradstreet Corp.
Yeah, look, this is Rich. Generally speaking, it's been and I won't give you exact percentage, but a large portion has been on innovation and technology, product development.
You can see that all of the used cases that we've launched into, so that's been a big thrust of it. But there's been work throughout the system, right?
We had to upgrade our marketing. We brought in our first Chief Marketing Officer and equipped the company for a digital world, so work to do there.
Work to do on the culture and we've talked many times about that over the last several years, bringing in new, better talent, becoming much more outwardly focused, et cetera. And then, we've done work on the sales force, bringing in new talent, bringing in folks who are more equipped to deal with the C Suite, and folks that could – that can really tell the world the digital story.
And then, of course, as a data company, one of the most important things that we had to do is, foundationally, bringing in new sources of data and making sure that our data across the globe was – that no one can compete with. So, that's a pretty big task.
That's what a lot of the work has been focused on. In my view, it's been all the right work and all of those things will be leveraged as we think about the journey that we're on, which is getting this company to mid-single-digit growth over time.
We're still focused on it, everything we've done will lead us there.
Manav Patnaik - Barclays Capital, Inc.
All right. Thanks a lot, guys.
Robert P. Carrigan - Dun & Bradstreet Corp.
Sure.
Operator
And your final question comes from the line of Stephen Sheldon of William Blair.
Stephen Hardy Sheldon - William Blair & Co. LLC
Good morning. Appreciate you taking my questions.
I guess, first, you talked about slower migrations to D&B Credit and the impact it's having on the midmarket. I guess beyond that, has anything changed in the midmarket from either a demand perspective or a competitive perspective that may also be causing some of the weakness?
And then, also what's the rough percentage of Trade Credit revenue that comes from each of those three customer buckets by size that you talked about?
Joshua L. Peirez - Dun & Bradstreet Corp.
Sure, Stephen, it's Josh. Let me just start, a small percentage of our total revenue in the D&B Credit line comes from our large strategic customers who are on the DNBi, but the vast majority of the revenue comes from small and mid-sized customers, I'm not going to give you exact numbers, but you should think of those as roughly even in terms of split throughout the rest of it.
So, hopefully that gives you a sense of how it breaks down. I should emphasize in the midmarket, the performance we're seeing here is consistent on the D&B Credit line with previous years, and overall in the midmarket, we are seeing a slight improvement year-over-year just not as much as we would've expected and planned for.
And so, we haven't benefited as much from the potential D&B Credit offers through the higher capture rates, which is a combination of pricing and retention that we've seen down in the small part of the market because we have not moved as aggressively to go after migrations, which we refer to as upgrades in this segment. So we need to do a better job of going after that, that's our focus right now, but it's not that there was a deterioration.
It's that we didn't see the level of improvement that we planned for.
Stephen Hardy Sheldon - William Blair & Co. LLC
Okay. That's fair.
And then, I guess, just lastly, under the co-sell arrangement with Microsoft. What are the economics behind that?
And I know you're not giving guidance, but how should we think about the potential impact looking into 2018.
Robert P. Carrigan - Dun & Bradstreet Corp.
This is Bob, look we're – it's a co-sell and we each have incentive to promote these solutions. Microsoft is incenting its folks.
They're obviously putting a big focus around Azure, and we're kind of a premier kind of solution that is now on that platform. And so, they've got incentive to drive Azure consumption and see their customers be successful in that platform.
And then of course, we are focused on D&B Hoovers, and – on our side. And again, this is not something that's kind of like outside of our wheelhouse, we've been having real success with D&B Hoovers this year.
You could see like, it's something we can naturally sell. So, the good thing is, in that co-sell we ultimately paper that relationship and we own the customer relationship, and again, it's in an area that we're pretty comfortable in.
So look, we're in planning with Microsoft right now. Again, we just kicked this off, and there's a lot of momentum and excitement as usually happens when you launch these things.
Our focus has got to be on the execution and making sure that we're out driving this each and every day, and feel really good about that. I'm not going to put a number on it, but it's a substantial market opportunity and Microsoft is doing quite well these days.
They've got a lot of momentum themselves, so it's great to be partnered with them. And it's also great to be partnering with Salesforce.
If I can leave you with one thought, I think a lot of this speaks to the strategic nature of the data that we have, the fact that we are able to work with some of these best-in-class companies, leaders in the cloud space. And when they need a partner that has the breadth and depth of content to be able to fulfill their global customer needs, they are turning to us, and we are working with them.
So, I hope you can appreciate also the strategic nature. And when you think about the investments we've made and the things we're doing, to be able to deliver our data in a real-time fashion at that level to work with these kind of premiere technology companies, you have to have the chops to do that.
You also have to have the data quality, and again that breadth and depth. So that is our strategic positioning, and I think it speaks to the value of this company, and our ability to do business in very modern ways.
And that really is a key part of our strategy. So, as you could tell, we're pretty passionate about it, pretty excited about it and stay tuned.
Look forward to reporting results in subsequent quarters on that.
Stephen Hardy Sheldon - William Blair & Co. LLC
Great. Thanks.
Operator
There are no further questions at this time.
Kathleen M. Guinnessey - Dun & Bradstreet Corp.
Great. Okay.
Well, thank you, everyone. Thank you for your interest.
And we will talk to you next time.
Operator
This concludes today's conference call. You may now disconnect.