TransUnion

Good day and welcome to the TransUnion 2023 First Quarter Earnings 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 touchtone 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, Senior Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for attending today. Joining me on the call are Chris Cartwright, President and Chief Executive Officer, and Todd Sello, Executive Vice President and Chief Financial Officer. We posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website this morning. 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 statement. With that, let me turn the time over to Chris.

Thanks, Aaron. And let me add my welcome and share our agenda for the call this morning. First, I'll discuss the macroeconomic conditions in TransUnion's markets around the world. Then I'll provide an overview of our strong first quarter financial performance. I'll also review the continued progress with NuSTAR to accelerate revenue growth, achieve target savings, and leverage its technologies across the enterprise. Finally, Todd will detail our first quarter results along with our second quarter and full year guidance. Inflation in our developed markets around the world remains elevated, although with signs of subsiding as central banks have raised interest rates to slow consumer demand and return to long-term inflation targets. Higher prices and higher rates have pressured consumer finances, and economic growth has slowed as a result. However, thus far, developing economies have been less impacted by these factors. Lending volumes in our emerging markets of India, Asia Pacific, South Africa, and LATAM have remained strong. In the U.S., consumers remain healthy relative to historical norms with modest spending growth, high employment levels, and some real wage increases. Credit performance metrics have continued to normalize and remain within the range of pre-pandemic and historical levels. Against this backdrop, we've seen increased caution from banks. While their financials are still strong and consumer demand for credit is healthy, banks are concerned that their markets might slow further and as a result have tightened lending standards, reduced marketing and originations, and increased loss reserves. Thus far, we've seen some limited impact on our business from these changing conditions. However, like our customers, we remain cautious about the rest of 2023. And I note that the recent failure of a few lenders should not cause the lending system to contract materially. We are confident that even if certain institutions slow their pace of origination, other lenders will take advantage of the situation to garner new business and satisfy strong consumer demand. And given this confluence of concerns, and despite our outperformance in the first quarter, we will maintain our full year guidance at this point to account for market uncertainties. Todd will walk you through the details later of our second quarter and full year guidance and expectations for each of our markets and verticals. Now turning to first quarter highlights, we beat our guidance on revenue, adjusted EBITDA, and adjusted diluted earnings per share. Our financial services vertical performed slightly ahead of our expectations, down 1% organically and flat, excluding the impact of mortgage. Auto lending increased due to the easing of supply chain constraints and strong new business winds. Card was flat, despite comparing to continued very strong originations for over a year. Although consumer lending declined, it also faced challenging comparisons over exceptional growth last year. And mortgage was down mid-single digits, but better than expected. U.S. emerging verticals delivered moderate growth, in line with our expectations, given the comparison to strong year-ago performance. Importantly, we've seen early signs that the temporary issues we faced in tenant and employment screening and insurance are abating, setting us up for a good full year. Our international segment again grew constant currency revenue by double digits for the eighth consecutive quarter, led by 32% growth in India and double-digit growth in Asia Pacific, Africa, and Latin America. We continue to outperform our underlying markets as a result of strong lending growth, market share gains, and our successful innovation. As I'll detail in a moment, we had another good quarter integrating NuStar and continue to see strong customer adoption of our platforms and solutions. Finally, we continue to point our free cash flow toward reducing our debt levels. And in the first quarter, we prepaid $75 million of debt with intent to make additional prepayments in the second quarter and the second half of the year. Now, Newstart delivered 3% revenue growth, largely in line with our expectations as we compared against last year's strongest growth quarter. For the full year, we continue to expect high single-digit revenue growth at a 32% margin fueled by the revenue growth and achieving our aggressive integration cost savings. We have line of sight to the revenue growth based on our strong bookings and the momentum achieved by joint sales teams aligned by our market verticals. We also enjoy a favorable portfolio effect from the broad range of NuSTAR solutions. Our customers are challenged by compliance with privacy and regulatory requirements and also increasing focus on cost management and vendor consolidation, all of which play to our strength as a scaled platform provider of identity-based solutions. Our solutions are highly relevant regardless of the macro backdrop as we help customers unlock value in their first-party data, reach consumers in a cost-effective manner, measure the return on their marketing investment, mitigate fraud, and improve communication effectiveness. We see this relevance playing out with meaningful new business wins across our verticals, including a top 10 traditional lender, a large fintech player, a major auto manufacturer, and a large used vehicle retailer. Now, this next slide illustrates the key NuSTAR integration and innovation initiatives. We've made significant progress on each with meaningful paths to deliver more value as we complete each initiative. As we execute our plan, we've identified substantial incremental opportunities for cost reduction and commercial success. On previous calls, we've shared important progress on many of these initiatives. Infrastructure savings have been driven by data consolidation, rather data center consolidation, and the migration of NuSTAR cloud computing to the Google Cloud, which supports improved performance at a lower cost. This enables a stronger cybersecurity stance, the opportunity to eliminate redundant tools, and cost savings. We've also made meaningful progress and are already seeing valuable lift and cost savings from combining TransUnion and NuSTAR data. Underlying the integration of NuSTAR is the combination of its data assets with TU's. Bringing our data together on a common tech platform has given us 15% greater coverage of all adults in the US, a 10% increase in email coverage, and a 15% improvement in telephone number coverage. At the same time, by bringing more data sets in-house, we're realizing cost reductions and superior performance. Work is underway to bring together additional data sets like offline household data, real-time digital interactions, and phone signals, which should yield incremental uplift in performance when we complete this year. Importantly, all of our U.S. verticals and all product types benefit from these improvements. Greater value in our data assets is achieved by connecting them into a more complete and powerful identity graph, where each company previously had its own identity graph per product We now have one that performs considerably better. With this work well underway, we're beginning to deploy this single identity graph across all products. I'll offer you some compelling examples in a minute. At the same time, bringing all of our data together is just the start. Underpinning all of this progress is a single enterprise data and analytics platform, OneID. We benefit from improved data ingestion speeds and the ability to quickly link and match the data. We can also deliver superior analytics rapidly to our customers. This is all done in a highly privacy compliant manner to support both regulatory and customer specific requirements. From there, we've made progress in expanding and improving our customer data analytics enablement. We're migrating the Proma platform onto OneID, where it will combine with NuSTAR's Cleanroom functionality to create the next generation of advanced analytic capabilities. All of this work has allowed us to consolidate products into integrated platforms, like the True Audience Marketplace, enhanced call center capabilities, and the combination of all of our best-in-class fraud solutions. So let me spend some time on the significant progress we've made in aligning relevant TU and NuSTAR platforms. In the first quarter, we announced a key milestone in the integration of NuSTAR with the launch of True Audience Marketplace. We married the expansive consumer data and identity resolution, audience building, and targeting capabilities of TU and NuSTAR into a comprehensive and interoperable site of privacy enhanced marketing solutions. Additionally, the product suite now offers closed loop marketing measurement and attribution and credit informed marketing solutions, which weren't previously available. True Audience enables clients to improve marketing effectiveness by increasing audience reach, improving the quality of consumer insights and leveraging more accurate and up-to-date identity data across all marketing and measurement activities. Clients have reported seeing a 40% reduction in duplicate CRM records and a 30% increase in conversions from higher performing audiences. True Audience now leverages the proprietary data ecosystems of TU and NuSTAR, spanning 200 authoritative data sources including data from over 16 billion monthly phone signals, offline consumer data covering over 125 billion U.S. households, and data spanning 10 billion real-time digital interactions daily. Additionally, True Audience combines TransUnion's direct media and technology partnerships across the television and streaming media world with NuSTAR's integrations across the walled garden and digital media ecosystem to ensure clients can reach and measure consumers across the channels that matter most. This includes partnerships with over 250 leading media owners and publisher networks and more than a hundred advertising data management and cloud providers, as well as social and retail media platforms, ad servers, demand side and sell side platforms, and customer data platforms. In communications, Our innovative family of trusted call solutions, which includes branded call display and caller name optimization, continues to provide differentiated growth. While landline caller ID continues to decline, we are more than offsetting that headwind with considerable growth in TCS, which delivered a very strong first quarter and is expected to grow almost 50% in 2023. In the first quarter, we onboarded one of the largest retailers in the US to our trusted call suite. A key part of the growth is the expansion of branded call display, which should triple in size this year and then represent about half of all TCS revenue. We're in the early days of penetrating the market with branded call, but we are scaling rapidly. We quadrupled the number of customers using this solution over the past year. In addition to the impressive TCS growth, we continue to realize considerable cross-sell revenue from call center solutions, most notably with financial services and insurance customers. Further, we are creating a blended phone append that will lead to best-in-class right-party contact solutions, leveraging our contact center and specialized risk data assets. And in fraud, We continue to push toward the completion of a single integrated platform that marries all of our best-in-class solutions, including those acquired from NuSTAR. Early testing has shown substantial lift in match rates, reduction in false positives, and an increase in identification of fraudulent activity driven through the combination of TU and NuSTAR data. We expect to have this fully formed offering in market by the end of this year. Just as we've integrated and redefined our solutions, we also announced an important rebranding of our global business solutions. We organized thousands of existing B2B products and dozens of brands into seven solution lines globally, defined by business need and unified by a promise to deliver a true picture of consumers. a robust, multi-layered, and actionable view of each person, stewarded with care. You'll find explanations of each of the new brands on this slide. DU's rebranding clarifies our product offerings and better demonstrates our expertise in our heritage and new markets, while also making it easier for customers to find what they need. After almost 20 acquisitions in the last decade, This rebranding is a logical step in the company's evolution. We can now offer more powerful consumer insights than ever before, allowing us to meet the needs of our customers in more ways and at a much deeper level. I want to conclude by noting that we recently published our annual sustainability and diversity reports, which can be found on our investor relations website. In both cases, You will find expanded disclosure and meaningful progress against important topics like diversity representation among our associates and more comprehensive ESG reporting. I encourage all of our investors to read these important documents. As a reflection of our progress, Newsweek recently named TransUnion one of the 500 most responsible companies. That wraps up my comments on our market conditions, first quarter performance, progress in integrating NewSTAR, our global rebanding, and our ongoing commitment to diversity in ESG. Now, Todd will provide you with further details on our first quarter financial results, second quarter outlook, and the full year 2023 outlook. Over to you, Todd.