CFO Studio Magazine with Holly Hess

pro tability. “It’s not easy,” he adds, “because inherently, when you are reengineering at those levels, there’s uncertainty and change. It’s not the easiest thing to do, but it’s something that’s helped us grow over time.” Another key to D&B’s ability to maintain high pro tability is its inherently scalable model and commitment to being in lines of business that complement its core functions. “As a data and insights business, our core assets the world’s largest commercial database and state-of-the- art analytics capability can be monetized to serve multiple use cases,” says Veldran. “It is the ultimate, ‘build once, sell many times’ model.” Again, investment discipline comes into play here, as there are endless exciting business ideas out there. “ e key for us is to stay disciplined in our approach to selecting only opportunities that play to our strengths and that leverage our core assets and capabilities.” Mandate 3 Strong Capital Stewardship e third mandate of value creation is strong capital stewardship making optimal use of the cash that the company generates. According to Veldran, “At D&B, we place a high degree of import on capital deployment and hold ourselves accountable for making appropriate decisions regarding that capital.” e company has three key priorities for capital deployment. e rst is to invest back into the business for pro table organic growth: “the true virtuous circle,” as Veldran calls it, since “pro table revenue growth is the best way to drive future incremental free cash ow.” e second priority is for selective “tuck-in” acquisitions, although, according to Veldran, “in this regard, our bar is very high and we generally do few deals, mostly to acquire capabilities to further our strategy.” e third priority is to return all excess cash to shareholders in the form of both dividends and share repurchases. According to Veldran, “once you’ve looked at investing for organic growth, and you’ve considered making very select strategic acquisitions, all excess cash should be returned to shareholders. You’re not going to create value by having cash si ing on a balance sheet.” Since 2005, around the time Veldran took over as Treasurer before rising to the role of CFO, D&B has returned more than $2.6 billion in cash to shareholders through share repurchases and dividends. “Given our high, consistent free cash ow and our visibility to that free cash ow,” he says, “we decided to introduce our rst dividend in 2006 and began ramping up share repurchase over that time as well.” In the recent turbulent economic environment, when many companies have continued to stay on the sidelines, si ing on cash, D&B took a contrarian position. It temporarily increased its leverage to embark upon the largest share repurchase in the company’s history a $1 billion authorization, representing approximately a quarter of the company’s market cap at the time of the announcement. “We did this to take advantage of an unprecedented con uence of circumstances,” says Veldran. “First, interest rates were at historic lows, making borrowing costs a ractive. Second, the company’s valuation, measured by its price- earnings ratio, was at an historic low, coming o of a few years of stalled growth brought on by the nancial crisis and by a slowdown in innovation as we completed a major technology infrastructure rebuild. And third, and most important, with the technology rebuild complete, the company was gearing up the innovation engine and was poised for greater growth. I didn’t think our stock price adequately captured the growth potential that I see ahead,” he says, “and we would have been missing an opportunity to create signi cant shareholder value had we not increased our share repurchase program.” Summing It All Up Ultimately, according to Veldran, “the CFO’s mandate is to be the champion for total shareholder return for the company” from safeguarding the brand and assets through a strong control environment, to ensuring resources are used most e ectively to drive growth, to intelligently controlling costs, and to being a strong steward of capital. Each of these priorities is critical in its own right, but it is the integration of all four that ultimately creates the most value. “If you study the great companies, the ones with staying power, the common denominator is around driving the top line through innovation, keeping their edge on pro tability through discipline, using their cash wisely, and constantly adapting to a changing world, and in all ma ers, acting with the highest degree of integrity,” says Veldran. “It’s an age-old formula and it works.” C 20 WWW.CFOSTUDIO.COM Q4 2017 D&B: THE ART OF SELF-REINVENTION D un & Bradstreet’s main business is B2B risk management. D&B combines the world’s largest commercial database with patented algorithms that identify and show linkages between companies, offering firms in the global marketplace insights into the companies with which they do business. Historically, D&B’s data helped companies make decisions on extending credit to other businesses. As relationship selling and CRM have grown in importance, D&B has expanded into the Sales & Marketing space. According to Rich Veldran, CFO, “In a world of information overload, we help our customers to derive insight and informed perspective from data in order to manage risks and improve business performance on a global basis.” Back in the days when Abraham Lincoln worked at Dun & Bradstreet (he is one of four U.S. presidents to have worked there), the business model was guys on horseback who would go out and visit business owners in order to write up a credit report on them. “We’ve changed many times along the way — reinventing ourselves to stay in front of the curve is one of the things that gives the company staying power over the long term,” says Veldran.