TransUnion Q3 FY2024 earnings call

Chris Cartwright began by highlighting that TransUnion exceeded guidance across all key financial metrics in the third quarter and raised the full-year 2024 guidance. He detailed progress against the transformation program, which includes optimizing the operating model by expanding the global capability center network and modernizing technology capabilities on the OneTru platform. Over the last 12 months, roughly 1,000 roles were relocated to Global Capability Centers (GCCs), and nearly all new GCC positions were filled. Todd Cello detailed third quarter results, with adjusted EBITDA increasing by 11% and adjusted diluted earnings per share at $1.04. He discussed segment financial performance in detail, including the U.S. markets adjusted EBITDA margin of 37.7% (down 120 basis points excluding certain items), financial services excluding mortgage up by 4%, mortgage revenue growing by 63% with volumes down by 8%, emerging verticals growing by 3% led by insurance, and Consumer interactive growing by 21% due to breach wins. The International segment was also detailed with regional growths in India, U.K., Canada, Latin America, Asia-Pacific, and Africa.

In the third quarter, TransUnion's U.S. markets segment revenue increased by 12%. Financial services within the U.S. markets grew by 17%, led by over 60% growth in mortgage and growth across all non-mortgage lines of business. Emerging verticals saw a 3% growth, driven by double-digit growth in insurance. Consumer interactive grew by 21% due to large breach remediation wins. The International segment grew by 12% on a constant currency basis, marking the 14th consecutive quarter of double-digit growth. India led with a 23% growth, while Latin America, Asia-Pacific, and Africa all experienced double-digit growth. Specifically, U.S. markets revenue including Consumer Interactive was up 12% compared to the year-ago quarter. Financial services revenue grew by 17%, with excluding mortgage up by 4%. Emerging verticals grew by 3%, and Consumer interactive grew by 21%. The International segment grew by 12% in constant currency, with India at 23% and other regions also seeing double-digit growth.

TransUnion raised its full-year 2024 guidance. For the fourth quarter, revenue is expected to be between $1.014 billion and $1.034 billion, up 6% to 8% on an organic constant currency basis. Adjusted EBITDA is expected to be between $360 million and $375 million, up 10% to 15%. For the full year, revenue is now expected to be between $4.161 billion and $4.181 billion, up roughly 9% on an as-reported and organic constant currency basis. Organic constant currency growth excluding mortgage is expected to be up about 5%. U.S. markets are expected to grow in the high-single-digit or low-single-digit range excluding mortgage. Financial services are expected to be up in the mid-teens or low-single-digits excluding mortgage. Mortgage revenue is expected to increase about 60%. Emerging verticals are expected to be up in the mid-single-digit range. Consumer interactive is expected to increase in the low-single-digit range, and International is expected to grow in the low-double-digit range. Adjusted EBITDA is expected to be between $1.488 billion and $1.503 billion, up 11% to 12%, and adjusted diluted earnings per share is expected to be $3.87 to $3.93, up 15% to 17%.

Actual results could differ materially from forward-looking statements due to factors discussed in the earnings release, conference call, and SEC filings. There are risks associated with the execution of the transformation program, including knowledge transfer risks and potential challenges in completing the program as planned.

Q: Faiza Alwy asked about OneTru pipeline and additional revenue benefit from transformation.

A: Chris Cartwright said OneTru is having a profound impact on the business, with ~$50 million of pipeline related to OneTru products, an elevated pace of innovation, and derisking the revenue growth outlook.

Q: Andrew Steinerman asked about consumer credit activity assumptions through the fourth quarter and guidance.

A: Todd Cello said financial services excluding mortgage is expected to have mid-single-digit growth in the fourth quarter, with a medium-term benefit from recent Federal Reserve interest rate cuts.

Q: Toni Kaplan asked about the delta between mortgage revenue growth and inquiries.

A: Todd Cello explained that mortgage volumes declined 8% in Q3, but revenue grew 63%, with the fourth quarter expecting a 10% volume increase and 80% revenue growth due to mix and price factors.

Q: Jeff Meuler asked about the impact of RBI actions on the India business.

A: Chris Cartwright said RBI actions are prudent, the India market is strong with diversification, and strong growth is expected in the fourth quarter.

Q: Ashish Sabadra asked about the improvement in emerging verticals.

A: Chris Cartwright said emerging verticals momentum is improving, with insurance seeing double-digit growth and prospects looking good.

Q: Kelsey Zhu asked about Canada market growth and medium-term outlook.

A: Chris Cartwright said the Canada team will continue to innovate, with the rate of growth expected to decelerate but the team well-positioned to grow.

Q: Jason Haas asked about Consumer Interactive segment trends.

A: Chris Cartwright said the focus is on broadening the value proposition and improving the go-to-market strategy, with progress in identity protection and offers capability.

Q: Manav Patnaik asked about the drop in CapEx from 8% to 6% in 2026.

A: Chris Cartwright said the technology transformation is being achieved with lower spend, leading to the CapEx reduction due to effectiveness.

Q: Simon Clinch asked about the long-term competitive environment in the core credit business.

A: Chris Cartwright said there is competitive intensity, an expanding market, and TransUnion is well-positioned to grow with the market.