TransUnion

Good day and welcome to the 2024 quarter earning conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Aaron Hoffman. Please go ahead.

Good morning, everyone, and thank you for joining us today. I hope that all of you remain safe and healthy. On the call today, we have Chris Cartwright, President and Chief Executive Officer, and Todd Cello, Executive Vice President and Chief Financial Officer. We posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website. Our earnings release and the accompanying slides include various schedules, which contain more detailed information about revenue, operating expenses, and other items, as well as certain non-GAAP disclosures and financial measures, along with the corresponding reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures. Today's call will be recorded and a replay will be available on our website. We will also be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements because of factors discussed in today's earnings release, in the comments made during this conference call, and in our most recent Form 10-K, Forms 10-Q, and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statements. With that, let me turn the time over to Chris.

Thanks, Erin, and let me add my welcome and my best wishes that you and your families are healthy. As we start a new year, I want to once again thank more than 8,000 TransUnion associates who continue to work diligently from their homes throughout this pandemic in order to support the needs of our customers and consumers in these uncertain times. Our client service hasn't missed a beat, and it's all due to their amazing efforts. I also appreciate how they've supported TransUnion's embrace of social justice causes during this time of turmoil and transition in the U.S. We continue to focus on diversity and inclusion among our associates and in the communities we serve. On our last call, I discussed our Total Impact Task Force. To more clearly convey the intention of the task force, we renamed it Racial Equity Task Force. While the names changed, the mission remains the same, to combine and connect TransUnion's efforts to support racial equity and social justice. The task force will amplify our advocacy and outreach through consumer tools and support designed to improve access to economic opportunity. For example, we partner with the Credit Builders Alliance, which helps underserved communities build credit. Additionally, we will double our corporate giving in 2021 in Chicago and Philadelphia, the locations of TransUnion's two largest offices. We also have reallocated funds from sports partnerships to charities in our communities that support racial equity. We see further opportunities to partner with local organizations that promote grassroots targeted support for underserved communities. such as My Block, My Hood, My City in Chicago and the Covenant House in Philadelphia. The task force will also reexamine the use of data in our analytics and solutions to ensure that all uses are consistent with our values and the goal of financial inclusion in the economies that we serve. To that end, we engaged a specialized consultancy in the fourth quarter of last year to objectively assess our data and model development to identify opportunities to improve our practices. And finally, the task force, working with TransUnion's Chief Talent and Diversity Officer, is formulating clear commitments for diversity in new hires and promotions. We've also expanded racial bias training throughout the organization and have provided managers with direction and tools to build a more inclusive workplace. These actions support our public commitments including the Chicago Network's Equity Principles Campaign, a pledge to work toward achieving gender equity in global leadership roles by 2030, and the CEO Action for Diversity and Inclusion Pledge to advance diversity and inclusion in our workplaces. In a short time, the task force has made encouraging progress, and I have no doubt that we will achieve our goal of making TransUnion a truly diverse and inclusive organization that plays a positive role in the communities that we serve. Now, I'd like to lay out the agenda for this morning's call. First, I will review the global organizational changes we've made and the considerable investments we are making in solutions, operations, and technologies. to ensure that we continue to deliver strong growth and margins in the years ahead. Over the past 18 months, we established global centers of excellence in solutions, operations, and technology. We also commenced Project RISE, a multi-year effort to streamline, standardize, and migrate our technology stack to a hybrid public and private cloud model. Less known are the considerable efforts and investments we've self-funded to improve our core solutions and to establish and effective and shared global operational spine. Together, these actions strengthen our foundation for future success. Next, I'll review the performance trends in the fourth quarter across the various geographies we serve. Throughout this presentation, you will hear a consistent story of TransUnion advancing our solutions, services and go-to-market approach to respond to current conditions while also re-architecting our business to free resources to invest in future growth. Finally, I'll pass the baton to Todd to discuss our fourth quarter results in detail along with first quarter and full year 21 guidance. Now, since taking over as CEO of TransUnion, my leadership and I have developed an ambitious set of initiatives to fundamentally strengthen TransUnion while navigating the challenges created by the global pandemic and the need to address social justice issues. Now clearly, we began with a strong business with a history of success. However, we recognize the opportunity to raise our performance and create an even better version of QU for our stakeholders. Over the past year, you've heard me discuss the areas for improvement on which we're focused. Technology via Project RISE, global operations and global solutions. Today I want to review the opportunities before us and our progress to date. These various initiatives together form a transformational program to strengthen TransUnion. Internally, we refer to this program as our path to possible, meaning our path to building the best version possible of TransUnion and to maintain high rates of revenue growth and increasing margins into the future. So let's start with Project RISE. are accelerated initiative to make TransUnion's technology more scalable, secure, efficient, and effective. I begin here as technology forms the bedrock of TransUnion, and in many ways, we are a technology company. RISE builds upon Project Spark, a systems migration from costly, complicated mainframe technology to a modern, flexible, distributed, and hybrid cloud architecture. And since Spark's completion, we've implemented new technologies and tools as they became available to improve systems reliability and security. Importantly, we also integrated acquisitions such as Call Credit, Iovation, and eBureau that utilize the public cloud, gaining important experience in hybrid public and private cloud architectures. This consistent investment in technology has laid the groundwork for Project RISE. So let me remind you of some of the expected benefits. First, like many technology-enabled companies, we have the opportunity to further streamline our application ecosystem. We've already worked through more than 1,000 applications and determined their path forward, whether we refactor, rehost, replatform, or retire them, allowing us to simplify the delivery of IP on a global basis, reduce cost, and increase our speed to market. Second, will implement a hybrid cloud infrastructure to create economies of scale around computing and intellectual property distribution. Our on-premise infrastructure currently operates at high levels of efficiency, and the additional use of public clouds helps us to optimize our computing capabilities. This approach has already allowed us to power key international opportunities in countries such as India and Chile, as well as to provide the spine for our media vertical, which I'll talk about in more detail shortly. Third, we will leverage the growing arsenal of innovative cloud-based tools to enable faster product development. Examples include new compliance tools, analytic stacks, model training, machine learning, and other cutting-edge technologies. We have delivered the first set of foundational cloud services to our development teams and expect the first deployments into production in the second half of this year. Given our focus on talent and building continuity for the long term, we continue to embrace upskilling our workforce. In this regard, we've made considerable progress in training our internal teams with 80% having completed or currently enrolled in cloud training, including hundreds receiving full AWS certification in addition to the new hires that we've brought on this past year. We believe developing our internal talent will make our company cloud native just like our technology. This will allow us to continuously evolve and stay nimble in the future. Beyond these very attractive marketplace benefits, we expect Project Rise to deliver between 20 and 30 million per year of operating expense reductions beginning in the year 23. Project RISE represents a critical evolution of our technology strategy and enables significant long-term opportunities and efficiencies for TransUnion. Global Operations provides another way to deliver efficiencies and facilitate commercial success through centralization, process optimization, and automation, leading to a better customer experience as well as cost savings that we will reinvest in growth projects. Our team has identified three areas of greatest potential impact and they've made significant progress thus far. First, we expanded our discipline procurement processes to all of our purchasing. We've renegotiated our largest contracts and recently began to focus on the remaining opportunities. We've reduced costs while adding features and functionality. We also have begun implementing a lifecycle procure to pay system from Coupa. enabling complete spend visibility globally. We've already deployed the tool in the US, Canada, and the UK, and we'll add more of our major markets in 21. Second, we continue to expand on the success of our Global Capability Center, or GCC, in Chennai, India, which now employs more than 900 associates. We added another center in Pune, India in the fourth quarter of last year, focused on providing analytic services across our organization. And this year, we opened a GCC in Johannesburg, South Africa to provide a range of business services in order to flex capacity and to create continuity safeguards. Each GCC meets the growing needs of our customers while refining our delivery and support capabilities and eliminating concentration risk. They also allow us to cost-effectively process more sophisticated and confidential work than we could using third parties. And finally, we're focused on business process refinement and automation to enhance customer experience. Most significantly, we are implementing a standardized global CRM system that when coupled with our GCCs forms an effective technology and operational fulfillment spine for transparent, High quality customer support. Said another way, we're creating a structure to efficiently process work so we can focus on delivering the best experience for our customers. Together, we are confident that global operations will deliver significant effectiveness and cost benefits, and we will reinvest these in growth and enhanced margins in order to drive shareholder value. Now moving to global solutions, In a short time, this team has delivered some exciting successes along with an array of important partnerships and acquisitions. We've organized around key horizontal solutions such as credit, fraud, analytics, decisioning, and others, and then staffed these teams with experienced leaders to develop and diffuse configurable platform solutions across our various geographies and vertical markets. First, let me talk about our internally generated opportunities. And then, I'll turn to how we've leveraged our core capabilities into new areas through partnerships and acquisitions. So let's start with our refocused strategy in fraud, the second largest solution offering at TransUnion behind credit. We have an outstanding starting point with our suite of fraud solutions. In fact, in November of last year, Javelin Strategy and Research ranked TransUnion Best in Class among 26 providers on its identity-proofing scorecard. After hiring security industry veteran Shai Cohen, we undertook an extensive review of our solutions and market position. The outcome of this work suggested an opportunity to rebrand, standardize, and integrate our various fraud mitigation products into a unified solution which utilizes our best capabilities. While this will require time and investment, we've already begun to rebrand all of our fraud solutions globally under the umbrella of True Validate. We will also refocus our sales efforts on the most appropriate market segments and user profiles. This strategic repositioning represents a starting point for creating a truly integrated and global fraud mitigation business within TransUnion. I also want to share another recent success in solutions from our international markets. As COVID led to an explosion of e-commerce, many customers in emerging markets lacked an integrated, data-enabled solution for activating new accounts. To meet this need, we created a digital onboarding solution that bundles our suite of data pre-fill, ID verification, credit scoring, and origination decisioning tools through a common orchestration layer. We deliver this tool in a single API that customers can deploy as a mobile application, as a mobile website, as a white label tool, and integrate it into their own platforms. The modular design allows them to buy a full solution or individual components based on their needs. The digital onboarding solution suite represents a great example of our global diffusion strategy at work. We rapidly launched in India, South Africa, Colombia, and the Philippines, creating a multi-million dollar business in under a year. We built a strong inventory of sales wins in these markets that will ramp this year, and we're also exploring applications in more developed markets. In addition to these two efforts, we brought to market several solutions to aid customers with the uncertainties created by the COVID pandemic, including our credit vision acute relief attributes, which were adopted rapidly to enhance portfolio risk assessment as well as new customer acquisition. Now turning to how we've leveraged partnerships to create new growth vectors, let's talk about employment and income verification. On our October earnings call, we announced a partnership with MX which aggregates financial information on more than 45 billion consumers through consumer permission connectivity with a myriad of banks, Credit Unions, and FinTech players. Through this partnership, which covers the US and Canada, TransUnion will enable consumers to enrich their credit profiles while helping lenders to make more informed decisions. I'll ask you to hold onto these thoughts about MX for a moment while I review another highly complimentary partnership with the largest payroll provider in the US. Just a few days after our last earnings call, We announced this partnership and immediately introduced a differentiated income and employment verification solution. We understood that our customers wanted these tools combined with their credit search in order to simplify their workflow. The solution we launched in late October did exactly that and customers have responded favorably. Since the announcement, we received numerous inbound inquiries from a variety of industries and lenders and closed multiple contracts with clients who have begun to transact. Now let's talk about how these two partnerships fit together. Fundamentally, they provide a more complete view of consumers to better inform decisions about customer acquisition and risk. More tangibly, we will create a solution that first pings our payroll processing partner. If we don't get a hit there, we can then query MX to determine if they have checking account data that indicates employment and income. By doing so, we expand the universe of consumers that we can reliably verify. We expect this tiered solution to launch in the second half of 21. Verification solutions complement our credit-based solutions, thus expanding our addressable market and providing another long-term growth factor. Before I move on, I want to note that the solutions team also played an instrumental role in a number of other recent investments. We completed a minority equity investment and formed a commercial partnership with Finlocker, a secure online data store that enables consumers to gather their financial information online and then grant permission to lenders initially in mortgage to access it for underwriting purposes. We also partnered with Socially Determined, the social health risk analytics company, to create tools to assess and mitigate health risk by using a combination of social risk and clinical data. This creates another growth path for our healthcare vertical. On the last earnings call, we highlighted our growth plans in media, which focused primarily on digital marketing solutions. We built the vertical through a series of acquisitions, TrueSignal, Signal, and TrueOptic, that complement the array of data and world-class linking and matching logic of TransUnion. Together, these acquisitions and our in-house capabilities allow us to compete for audience segmentation and identity resolution market share, two growing categories within the larger digital marketing ecosystem. As we scaled up this business, we've added new, high-caliber talent like Jessica Hinlian, who recently joined us from Nielsen, where she served as SVP of Product for Advanced Video Advertising and Identity. She will lead our vertical specific channel and our product partnerships. We've also quickly realized meaningful commercial success. We have completed partnerships with Comscore to enable precision targeting in a cookie-free environment and wide orbit to bring enhanced audience targeting to their streaming radio and podcast advertising solutions. And we have expanded an existing relationship and will now power connectivity for a leading retailer's ad marketplace. So this concludes my discussion of our significant investments. I'll reiterate that there are immense opportunities that we have created through Project RISE, global operations and global solutions. And we've accomplished a lot in a short time, giving us even greater confidence in the long-term impact from these initiatives. Now I'd like to pivot to our fourth quarter results and walk you through some of the business and market trends. I'll start with U.S. markets with a review of the online transaction volumes for financial services, our largest vertical market. Volumes remain strong in mortgage, improved in consumer lending, while auto and card held relatively stable quarter over quarter. I would note that in card, we continue to compare against strong volumes from the successful launch of a new card in the second half of 2019. Now, excluding that impact, our volumes and card would better reflect the underlying market. I also wanna let you know now that going forward, we do not intend to provide this level of volume detail. We introduce these slides in response to the severe impact of the pandemic on financial services. Given the relative stability in the market, and hopefully, We will return to our normal disclosure practices beginning with the first quarter of 2021. Now let's spend some time on the key lending markets that comprise the vertical. So beginning with consumer lending, it continued to recover during the quarter as larger fintech lenders slowly returned to customer acquisition fueled by solid levels of investor commitment to funding loans. Consumer demand remains tepid as low credit card balances, cash-out refinancings, and stimulus payments have reduced the demand for certain installment products like debt consolidation and short-term loans. On the other hand, we continue to see significant growth with point-of-sale lenders, both from their own success as well as share gains. Auto lending was relatively stable quarter-over-quarter. Thank you for joining us. from the sharp declines in the second quarter. We also continue to see a slow recovery in marketing and believe that there is considerable pent-up consumer demand that should fuel this category in the future. Now, I want to spend a minute taking a slightly deeper dive on our mortgage business, which delivered outstanding growth in 2020 on the strength of both refinancing and home purchase activities as interest rates remained historically low. On this chart, you can see the incredible growth in the market over these last two years, creating a very challenging stack of comparisons as we enter 2021. As always, we have spent considerable time with our customers and advisory boards while also incorporating an array of public data to develop our outlook for the market this year. Based on this rigorous work, We believe that the mortgage market will decline about 10% in 2021. More specifically, we anticipate continued strength in mortgage in the first half of the year, particularly the first quarter, and then weaker second half as volumes taper off and comparisons remain very challenging. Now, we will update you if our view changes as the year unfolds. I want to wrap up, though, with a quick view of our financial services sales pipeline. Despite the impact of the pandemic on our markets, our sales team delivered exceptionally strong results. Our healthy pipeline reflects our effective customer engagement and highly relevant product offerings, including a substantial number of credit vision wins that demonstrate the long runway to the solution. For the full year, we increased our new wins in dollars by almost 40%, behind a win rate that's just shy of 50%. We attribute the success to the nimble changes our sales teams made to conduct business virtually along with our thought leadership that provided tangible assistance to customers and of course the strength and breadth of our product portfolio. And now shifting to our U.S. emerging verticals, most of them saw trends generally improve or at least stabilize during the fourth quarter. Beginning with healthcare, Performance played out largely as we expected during the quarter. Front-end volumes continued to slowly recover as providers saw outpatient volumes return to pre-COVID levels. Inpatient visits remained depressed but stable as patients showed caution about returning to the healthcare venues. Emergency department visits continued to show weaker but stable trends. The impact of reduced front-end volumes negatively affects the back end of the business, resulting in a reduced number of potential coverage discovery opportunities. Despite the headwinds that we faced, the vertical only declined mid-single digits for the full year, reflecting the importance of our offerings. And even if the UL's healthcare system lost more than $320 billion in 2020, we saw solid levels of new business wins last year. As our business helps providers recover cash, we remain well positioned to help healthcare providers protect their revenue and balance sheets. And as we look forward, we see no structural change to this market such that we won't return to a more steady growth profile post-pandemic. Now, shifting to insurance, this vertical defined slightly in the fourth quarter as we had a modestly more challenging comparison than in the third quarter. However, the vertical delivered growth for the full year as a result of our successful diversification into areas such as commercial auto, life, group life, and other types of property and casualty insurance. Notably, we realized significant growth in our sales pipeline, with new business won in 20 exceeding our strong 2019 levels. Many of the deals involved multi-product wins, reflecting our attractive suite of products. and our partnership with NeuroID began to generate revenue. As a reminder, NeuroID helps customers understand biometric behavior during the online application, providing insight into potential fraud based on how consumers enter data. The solution uses the same data to explain why consumers abandon applications so processes can be refined. As online applications increase in insurance, this partnership positions us to capitalize on that trend. and public sector grew significantly as most government agencies operate as business as usual, providing meeting necessary support for their constituents. We posted strong new sales in the quarter at the state and federal levels and also increased our opportunity pipeline. Our media vertical grew both on a reported and organic basis as we continue to make meaningful progress against the strategy I highlighted earlier. We also delivered growth in our screening business, which includes both tenant and employment screening. We saw solid performance in tenant screening as leasing companies remained active and our SmartMove screening product made additional inroads in the marketplace. Employment screening remains depressed as it mirrors employment trends. And the telco market recovered largely as we expected, with consumers returning to more normal device purchasing levels. And finally, although collections is counter-cyclical over time, we don't expect any uptick in the near future as loan forbearance programs and collections moratoriums delay demand. Further, government payments during the pandemic have helped many consumers stay current on their loans or reduce their debt loads. Now moving to consumer interactive. We deliver double-digit revenue growth in our direct business due to increased advertising and higher conversion rates to our subscription products. Consumers continue to value our credit health and identity protection services. Our indirect channel remains soft as financial products lead aggregators have experienced diminished demand from the lenders they serve for new client acquisitions. Reduced acquisition levels has caused some of our clients to cut back on their own marketing, causing a decline in their subscribers and negatively impacting our revenues, a portion of which are based on subscriber levels. Although this dynamic has now stabilized and we are seeing some recovery, it created a growth headwind for our business in 2020. Wrapping up with our international segment, Let's look at revenue trends, which illustrate the ongoing recovery across our geographic footprint. Generally, successful reopenings have allowed economies to restart, leading to increased overall economic activity. However, as we've all seen, the duration and the durability of reopenings varies greatly market to market. At the same time, our team has done an outstanding job partnering with customers to assist them in managing through the impacts of the pandemic. You'll hear about new products, new business wins, and creative ways that we deliver thought leadership. Now let me turn to the specifics for each region. In the UK, we returned to growth, excluding the impact of a divestment earlier in the year. While lending markets remained depressed, they did improve in the fourth quarter, particularly for mortgage. As in previous quarters, the alternative lending market continues to see pressure. The burgeoning buy now, pay later space has provided a source of growth as we hold a strong leadership position. Our fraud and gaming and gambling positions also showed further improvement. In setting the stage for future growth, we have inked contracts with one of the UK's largest lenders to provide them the credit view platform and our open banking solutions. Now, our Canadian business grew again in the fourth quarter, despite generally weak lending markets and continually escalating COVID mitigation restrictions. Our good performance reflects the meaningful portfolio diversification that we've intentionally developed, including insurance and public sector expansion, direct-to-consumer offerings, and growth in the emerging fintech markets. and in India, the country has now fully reopened, resulting in slowly improving transaction volumes, including very strong volumes during Diwali, which typically drives the strongest business of the year. We continue to benefit from our diverse product portfolio as well as specific programs to address critical pandemic-driven issues. For instance, We extended our string of significant business wins supporting the Indian government as they work with lenders, small businesses, and consumers to provide incremental oversight and stimulus during the pandemic. We also engaged with our FinTech customers by setting up our innovation lab on the cloud and inviting them to compete with our developers to see who could deliver the best performing models. and through our TGIF or TransUnion Great Insights Fridays, we've had interactions with more than 300 discrete lenders, bringing them important insights about the market, consumers and their own businesses. As we look ahead, India remains a singularly vibrant and innovative market with significant growth potential for years to come. As the lending market transitions from traditional products, high velocity, short term, low dollar loans, We expect hundreds of millions of Indians to enter the credit economy. And in the case of small businesses, only about 10 million of the 60 million currently have loans. These changes have meaningful implications for TransUnion's addressable market and we remain extremely well positioned to benefit from them. In Latin America, we serve a variety of markets and most remain somewhat stable, albeit at depressed levels compared to last year. Notably, Columbia delivered a solid quarter of growth on the strength of our fintech, insurance, and telco businesses. As we've discussed previously, we expect a slow and long-linear recovery in many of these markets. In Asia Pacific, the market in Hong Kong has stabilized, though at generally depressed levels, as the fallout from the pandemic and political unrest continues. We returned to growth on the strength of our relaunched direct-to-consumer offerings. We expect it to provide a meaningful source of growth in 21, likely exceeding the previous revenue run rate over time. Now rounding out APAC, the Philippines continues to face significant headwinds as the country has struggled to reopen, impacting consumers and our customers. Our team held its first lending summit to bring more sophisticated thought leadership to the market, even as we roll out Credit Vision, which provides a superior tool for our customers to assess Lending Risk, particularly in this current environment. Longer term, we remain confident and optimistic that the Philippines will return to attractive growth. The South African economy remains challenged, particularly with the second wave of COVID spread causing further lockdowns recently. As in other markets, our team has responded by prioritizing our customers' needs like account management, collections and e-commerce. They have successfully expanded uptake of key solutions such as credit vision, TrueValidate, and digital onboarding to drive value for customers. Now, I've just taken you through how TransUnion is managed effectively through the global pandemic while also accelerating investments that set up our path to what is possible. So I'll now turn it over to Todd to walk you through our financial results in detail and our first quarter and full year 2021 guidance. So over to you, Todd.