Transcript of Richard Veldran’s speech at the CFO Studio Reception on September 25th at Mayfair Farms
Andrew Zezas: It’s time to introduce you to the man of the hour. Rich Veldran, who I had the pleasure of meeting through his sister-in-law, said to me, “Oh, by the way, I don’t know if you know, but my brother-in-law happens to be the CFO of Dun & Bradstreet.” Oh? Boy, I’d like to meet him. And, you know, you would think that someone who has attained the status of CFO of a company with a reputation as wonderful as Dun & Bradstreet, must be very accomplished, and he is. When people attain that kind of success or that kind of a status, you would also understand if they were arrogant jerks, because we all know people like that and say, “Well, I don’t like the guy, but I understand why he’s that way.” In my capacity as publisher of CFO Studio, I have the pleasure, and sometimes the displeasure of meeting some very successful people. So, when I met Rich Veldran and for the first time, I braced myself. We had lunch, and I thought, “what a nice guy!” Now, I’m sure he’s got his moments, but he struck me as a genuine nice guy who accomplished a lot, which says a lot about him, right? Yet, he came to our last reception and he said, “I do like this event. I can’t wait do the story, the cover. But when you do my cover photos, can you make me look like a badass?” He really did. I promise you, he really did say that. I don’t think he looks like a badass, but it doesn’t say, “Take me home to mom” either. What it shows is a very serious, very focused, very accomplished finance executive. And while Rich is a nice guy, he’s also all those things. Now, if I could just get back to my notes, I could tell you what else he is.
Rich Veldran took his first role at Dun & Bradstreet North America in 2003. Two years later, he was named corporate treasurer and investor relations officer. Two years after that, he became senior vice president of global reengineering. Two years after that, he became chief strategy officer, and the head of finance. In 2011, Rich became Dun & Bradstreet’s CFO. Interestingly enough, Rich credits his current CEO, Sarah Mathew, a former CFO it Dun & Bradstreet, with providing him with the opportunities to grow to where he is. There’s a lot of really cool stuff to say about Dun & Bradstreet, but I wouldn’t do it justice, and some of the things that Rich shared with me about the company I found to be – you know, my response was, “Really?” And I’m going to ask Rich to share some of those things with you tonight, but I will leave you with one thought that I had the pleasure of standing next to Rich Veldran, our current cover story CFO, and next to Rich, Harald Henn from Mercedes Benz USA. Harald, are you still here? Everybody say hello to Harald Henn back there.
Harald Henn, also a very humble, nice guy, incredibly accomplished, was gracious enough to appear in the cover story of last quarter’s CFO Studio, and a gentleman – and so Dun & Bradstreet is 170 years old. Mercedes-Benz is 130, 127? Yeah? 127, 130? What’s three years after it’s over 100, right? So these two companies – and then I was standing next to my friend and client Gunther Mertens from Agfa, and his company is over hundred years old. So I’m standing with three gentlemen, all of whom are incredibly accomplished, all of whom are very nice people working for the name-brand companies that we all know and love, and it was almost 400 years worth of history. My company’s 11 years old, guys. How many of us in the United States can say we work for a company that’s over hundred years old? When Rich tells you who worked for that company, it’s going to be amazing. Rich is going to share some interesting thoughts, his insights about finance and strategy, and some background on Dun & Bradstreet. I ask you all to join me tonight. And, by the way, when Rich is done, please stay, have some more drinks and some hors d’oeuvres, but rich is going to chat with you for a few minutes, and ask you all to join me tonight in congratulating Dun & Bradstreet and CFO Rich Veldran for appearing on the cover of CFO, for thanking Rich for taking the chance to appear in CFO, and welcoming Rich Veldran, ladies and gentlemen.
Richard Veldran: Thanks for having me out here tonight. Kathy Guinnessey, who is our head of IR as well as the treasurer, has really warned me not to say anything that can get us in trouble. But just couple of things. For those of you don’t know D & B, as Andy mentioned, we’re a 170-year-old company, we have the world’s longest commercial database, and what we do is we provide information for companies, globally, to help them make better business decisions. And that’s something that we’ve done, as you said, for well over hundred years. We operate in essentially every country around the globe. While, some of the things that we do, like credit reporting, aren’t the sexiest of topics, we have had four US presidents worked there over the time, so we have an interesting and storied history.
We had the Civil War covered because we had Lincoln and Grant at Dun & Bradstreet. We also had McKinley, as well as Grover Cleveland. And I believe at least one or possibly two of those guys were shot. But that is part of our history, and it’s interesting. If you come to our headquarters, you’ll see a lot of that history laid out. It’s fun. We feel a connection to be part of something that has been there so long, and something that you’re expecting to just be a little part of as it continues, hopefully for the next 170 years.
Andy asked me to talk a little bit about part of what’s in the articles. He said, “You know, this is a group of CFOs, it’s a group of finance professionals, it’s some folks who potentially are aspiring to be a CFO someday. Can you talk a little bit about what you think important in finance, what you think is important for the role of finance, and what is important as you think about becoming a CFO?” So, I decided that I would spend some time on what I consider to be the primary mandate for a CFO and for any finance organization. And my view is that finance is the best job in any company because our job is to be an unbiased, champion, and leader of creating value for shareholders. In any other function, you’ve got kind of your functional biases. If you’re in sales, your job is to get that sale. No one’s telling you, “Sell the most profitable product,” or, “Sell this over that.” Your job is make sure that you sell. If you’re a general manager of a division, your job is to grow your division. There may be a better formula that says, hey, we should be selling this stuff instead and we should be deemphasizing what you’re in charge of. But, again, that’s not your incentive structure. Your incentive structure is to grow your division.
The CFO’s job, is to take a look, holistically, at the entire company and find the best way to create value. There’s nothing more exciting than that, there’s nothing more interesting than that, and there’s not a role where you’re really more at the nexus of everything that’s going on in the company.
What I wanted to spend some time on today is how I view creating shareholder value, and what I believe are the primary tenets of that. I’ll talk a little bit about what we do at Dun & Bradstreet, and how my finance organization actually drives us to those things. And I promise to keep it relatively short because I haven’t had a drink yet because I had to speak, so I want to make sure the bar’s still open.
With that, let me talk about it just at a high-level, the three things that are really driving sustainable, long-term revenue growth through innovation, first piece of creating value. The second piece is around driving profitability, doing that through rigorous cost control, continuously looking at processes to make sure that you’re operating in the best way. And then the last one is, once you’re generating profit, taking that cash and making sure that you use it wisely because, at the end of the day, you bring cash in and then you don’t use it wisely, you haven’t actually created value. So, at a high level, those are really the three things that are on my radar screen at the end of the day, and they’re the lens through which I look at any decision.
So, the first one is around driving revenue growth. This is not an area you typically say, “Hey, that sounds like the domain of finance,” because, if you think about it, it’s generally your sales force or it’s your product development folks or innovation guys who are really charged with the top line. The important role that finance plays is around portfolio analysis, resource utilization. Funds are not unlimited in any company, so making the right choices, focusing on the right things, trying to identify the right meters for growth, that’s the domain of finance. That’s the role we need to play, and it’s critical. So if I look at D&B, the president of North America, the president of International, the head of innovation, the CIO, they’re all members of the team. And any major investment that the company is considering, we rate through the lens of value creation. We make sure that it ties to the strategy, we make sure that – it may be a great idea, but we make sure that we can actually execute it. So we have to look at things through that lens. I do see that as truly in the domain of finance, which is why I chair the committee.
For all of you folks who are CFOs, you probably have versions of that. For those of you who are coming up and thinking about, “Hey, if I want to run a finance program, how should I run it?” that’s one of the most important things you can do. To do that well, you actually really have to understand the business, the strategy. It’s not just a numbers game, it’s not just a math exercise. It’s really getting in and understanding where the company’s headed.
So that’s one side of that coin. The other side of that coin, equally important, is choosing what not to spend on. One of the things that we spend a lot of time on is portfolio review. We say, look, there’s a business, and that business is not delivering a return or it doesn’t have high growth potential or it’s not core to our strategy, we will consider divesting that business, shutting it down, partnering it. We’ve done all of those over the last few years. It’s really part of our growth strategy. So that’s something that I personally spend a lot of time on, and our organization spends a lot of time on. I think it’s critically important.
The second piece of value creation is around profitability. Revenue growth is great, but if it doesn’t help you to generate a strong bottom line, it’s not going to create value. So one of the things that we do is we take a look at the portfolio and make sure that we’re selling the optimum mix of product. But we also undertake a process called continuous reengineering of our company, and that’s a hard process. Every year, we take a look at all our processes across the company, we try to find more efficient ways to do things. If something is inefficient, we outsource it. In some cases, we may insource because the world changes and things that we outsourced 10 years ago, when the world was a different place, actually may be cheaper, more efficient to in-source now. We’ll actually make those tough decisions. It’s a hard because, typically, when you’re doing that, jobs change, jobs are eliminated. It’s a hard thing to do. In fact, as Andy mentioned, I actually ran that group for a period of time. It’s probably the hardest job I’ve had – and not the job that every night I went home feeling terrific, because a lot of times, you’re impacting people’s lives, but critically important to a company into creating shareholder value.
The third element of value creation is, once you bring the profit in and you’re generating cash, it’s making sure that you use that cash wisely. It’s really around capital stewardship because, at the end of the day, if you don’t use your cash wisely, it’s meaningless. You see a lot of that with companies that make very bad acquisitions that actually destroy shareholder value. For us, D & B, we have three primary uses of our cash. The first is always to invest back in the business for organic growth. Organic growth is always the key to generating sustainable value over time. The is the surest way to generate more cash, you invest it back in the business..
The second is, we look at acquisitions, but our bar is really high. So, if we’re going to do an acquisition, we need to make sure it has a very strong strategic fit. It’s got to have, projected financial performance well in excess of our cost of capital. It’s got to be something that we think we can execute. That’s the part where most companies’ acquisitions fail. I’ve seen a lot of acquisitions in the companies I’ve been in over the years fail, generally not because it was a bad idea, not because it didn’t have the potential to deliver the financials. It was because they didn’t integrate it, and didn’t execute on it well.
And then I’d say the last piece around uses of cash, and one that over the last several years has generated quite a lot of value is, if there’s excess cash that we haven’t used for organic growth, and haven’t used for an acquisition, we return it to shareholders. We do that through both share repurchase and dividend. And the reason for that is simple. Cash that’s sitting on the balance sheet doesn’t do anything for you. It is not going to create value, especially in this interest rate environment.
If I go back to 2005, which is around the time I was treasurer, to today, we’ve returned over $2.5 billion of cash to shareholders, again, through both dividends and repurchase. And we’ve taken a very careful approach to this, and we’ve considered every factor that you need to consider. When I think back to 2006, we did not have a dividend. I looked at my profile as a company. We’re a company that generates a lot of cash. It’s very consistent, it’s very predictable, it’s certainly the kind of company with a profile of having a dividend. There was a whole investor community that actually is really interested in dividend-paying stock. So for us, it made perfect sense to use some of that cash to bring in a whole new class of investors, and that worked for us and was successful. Along the way, though, we’ve always been very conservative with our balance sheet. We always have a target. We try to keep the debt balance of less than a billion dollars. But about a year ago, we took a look at the role. We said, you know what? There’s an interesting confluence of events going on here. First, interest rates are at historical lows, which they have been for a while. Second, for us, because we had just come through the financial crisis, because we were in the midst of a very significant investment in our infrastructure, our valuation was well below our historical norm. So, we looked at the ratio.
And the third one, probably the most important one, is looked at our technology and innovation. We had just invested a lot of money in innovation, and we see the results on the horizon. So with those factors in place, we said that absolutely, by far, the best value-creating thing that we could do was to buy back our shares. We announced a billion-dollar program, which is about a quarter of our market cap at the time, so it was a pretty significant program. We actually took up a level of debt. We knowingly went into it, taking a downgrade in our debt rating by about a notch. We knew that would occur. And that was, I believe, a terrific move for us. We bought most of the stock over the last year in the 70s. The stock is $105 today. You know, things change over time. But if I look back at it, it was a good use of cash, far better than sitting on the balance sheet.
If I step back, in my closing moments, and really look at everything, you’ve got to look at what your strategy says. You’ve got to look at what your operations look like and look at the balance sheet. You’ve got to look at the outside environment, what’s going on in interest rates, what’s going on with your valuation from an investor standpoint. All the constituents come into play So what I would say, again, to anybody who’s In the CFO role is to use the lens of value creation in anything you do. If you rely on that, you will never go wrong and you will be very successful. So that’s what I’ll close with, and say now it’s time to head back to the bar.