TransUnion

Hello and welcome to the TransUnion first quarter 2024 earnings call. All participants will be in 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 your telephone keypad, and to withdraw from the question queue, please press star, then two. As a reminder, this conference is being recorded. I would now like to hand the call to Greg Barty, Vice President, Investor Relations. Please go ahead.

Good morning 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. and they can be found in the current report on Form 8K that we filed 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 reconciliation 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, 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 it over to Chris.

Thanks, Greg, and let me have my welcome and share our agenda for the call this morning. First, I'll provide the highlights of our first quarter 2024 results, including an update on our progress against our transformation initiatives. Second, I will discuss our India growth story, And finally, Todd will detail our first quarter results along with our second quarter and full year 2024 guidance. In the first quarter, TransUnion significantly exceeded guidance across revenue, adjusted EBITDA, and adjusted diluted earnings per share. Given the strength in the quarter, we are raising our full year 2024 guidance, which Todd will describe later, while still maintaining a conservative guidance posture given still tepid market conditions and macroeconomic and geopolitical uncertainties. Revenue in the quarter exceeded $1 billion for the first time in the company's history, growing 8% plus on an organic constant currency basis, well above our 3% to 4% guidance. Mortgage drove much of the outperformance due to better than expected third-party score and credit report price realizations, as well as slightly better prequalification volumes. We expect much of the pricing benefit to persist throughout the year, increasing our expectation for mortgage growth. However, our mortgage volume assumption remains conservative, as in February, and in fact, we have trimmed volume expectations for the second half of the year, despite the strong start, to provide further cushion against an uncertain mortgage market backdrop. Our organic constant currency growth excluding mortgage of 5% also exceeded our expectations led by international as well as key emerging verticals such as insurance, media, public sector, and collections. U.S. markets grew 7% with financial services up 13% and emerging verticals up 4%. Consumer Interactive declined 2% as expected. Consistent with the fourth quarter, Muted but stable economic conditions and lending volumes supported financial services growth. Consumer finances in the U.S. remain healthy due to low unemployment and real wage growth. Inflation is moderated but remains above target, and market expectations have reverted to higher for longer interest rate forecasts. Lending standards remain tight as lenders face potentially increasing capital requirements as well as rising delinquencies, albeit still within historical averages. The banks echoed these sentiments during recent earnings calls, reporting subdued loan and deposit growth as they balance consumer resiliency against continued market uncertainty. Within U.S. markets, New Star delivered another good quarter, and we remain on target to grow mid-single digits in 2024. Communications, Marketing and risk all contributed, led by robust growth in trusted call solutions. Our international segment grew by 15% on a constant currency basis, the 12th consecutive quarter of double-digit growth. India led with 31% growth, while Canada, Asia Pacific, and Africa again grew double digits. Finally, we achieved key milestones in our transformation programs. reinforcing our confidence in delivering against our financial commitments. Let me address this in more detail. As we discussed last quarter, our transformation efforts comprise two complementary programs, optimizing our operating model by further leveraging our Global Capability Centers, or GCCs, and modernizing our technology capabilities. We believe these initiatives will accelerate innovation, streamline workflows, reduce costs, and ultimately position us to deliver better experiences to meet the evolving needs of customers and consumers. In our operating model optimization program, we substantially completed our local market workforce reductions and migration notices in the first quarter. Concurrently, we're on track with our planned GCC hiring. We now have roughly 4,900 employees in our GCC network, and our talent acquisition in India South Africa and Costa Rica is stronger than ever. As more work shifts to the GCCs, we're taking a rigorous approach to change management, systematically tracking and documenting knowledge transfer, training our leaders to manage increasingly global teams, and developing a feedback loop to improve processes continuously. We're also deliberately balancing the need for customer-centric work in markets with the opportunity to centralize standardize, and automate key global functions. In our technology program, we're modernizing our capabilities by completing our cloud transformation and leveraging NuSTAR's technology to consolidate the assets we've built and acquired in recent years onto One True, a common, state-of-the-art solutions enablement platform. One True is becoming the platform for ingesting, managing, governing, analyzing, and delivering data and insights. The OneTrue platform integrates separate data and analytic assets in credit risk, marketing, and fraud prevention and concentrates them in a single, layered, and unified environment. We believe that OneTrue will enrich our data quality, speed time to market, and accelerate innovation, ultimately driving better growth across our credit fraud and marketing solutions. From a financial perspective, we expect One True will also save costs and enable us to rationalize applications and standardize global services. These efficiencies will allow our engineers to focus more time on innovation. Finally, the standardized operating model will enable us to adapt more quickly to rapidly changing regulations and ensure compliant data usage. Our focus in 2024 and 2025 is in consolidating our U.S. and India products, data, and analytics onto the platform in accordance with respective laws and regulations. We made meaningful progress in the first quarter. We launched advanced acquisition in the U.S., which combines data enrichment with our credit and marketing capabilities for an integrated credit-based consumer prospect marketing solution. We also moved key capabilities of our short-term lending credit bureau, Factor Trust, onto One True with full online solutions to follow, representing the first credit bureau applications on our new platform. Finally, we began the process to move our U.S. and global internal analytics environments, as well as our core U.S. credit, onto One True over the next several quarters. These actions reinforce our confidence in delivering an expected 65 million of operating expense savings in 2024. And we continue to target 200 million of free cashflow benefit by 2026. Now over the last two decades, TransUnion has built a leadership position in India, one of the most attractive global markets. We've grown our Indian business more than 30% every year since 2017. except for the pandemic year in 2020. And this market contributed roughly 1.5 points to total company growth in 2023. We have a tremendous long-term opportunity to enable growth in the Indian market. India is the fifth largest economy in the world and the fastest growing, with GDP expected to double by 2030. Two-thirds of India's population is under the age of 35. And this segment alone comprises 890 million people, more than three times the size of the U.S. adult population. These demographics drive economic growth and need a sophisticated consumer credit system to support an expanding aspirational middle class. The Indian government remains highly focused on modernizing its economy, promoting financial inclusion and digital transformation initiatives. India's evolving economy creates high demand for credit, marketing, and fraud solutions, and we have built a unique market-leading business. The credit bureau, TransUnion Civil, was founded in 2000 and has become a household brand that is synonymous with credit reports. We have 640 million consumer records in our bureau, growing roughly 15% each year. We serve more than 6,000 institutions, including the largest banks, non-banking financial institutions, fintechs, and insurance companies. We also reach 100 million consumers directly through our consumer solutions. As the leading credit bureau, we play an impactful role in the Indian credit economy. We closely engage with the regulatory and government institutions, such as the Reserve Bank of India and the Ministry of Finance, to support initiatives focused on managing financial stability and systemic risk as well as driving financial inclusion. We also improve financial literacy through our education and awareness programs and our direct connections with more than 100 million consumers. And as I will describe in more detail later, we enable credit penetration in critical underserved areas such as small and mid-sized businesses, agriculture, and microfinance. Our strategy in India exemplifies our enterprise vision to make trust possible between consumers and businesses in global commerce. India's market dynamics by themselves drive attractive growth, with GDP growing nearly 8% and credit growing roughly 16% in 2023. We expect strong volumes again in 2024, albeit with likely lower growth rates as the lending ecosystem takes a modestly more conservative stance. We have consistently outperformed the underlying market, however, driven by the same growth playbook that we use across our business. First is client engagement or deepening client relationships to drive wallet share and share shift. We empower our verticalized sales force to focus on thematic selling, emphasizing our role as a trusted advisor to our clients. This enables us to build upon our already strong share in core consumer credit by expanding our suite of solutions and penetrating new lenders. Second is product innovation. We continue to successfully bring innovation from other markets to India, such as trending credit data and consumer education tools. Increasingly, we're driving in-market innovation like our API marketplace and in areas such as financial inclusion, fraud, and identity in open banking. We're also exploring opportunities to bring new start capabilities such as trusted call solutions and marketing products to the Indian market. Third is market adjacencies or India's version of emerging markets. Key focus areas are commercial, fintech, and direct-to-consumer. Commercial credit is unique to India as we do not operate a commercial bureau in the U.S., We help Indian lenders assess the creditworthiness of businesses based on credit, as well as bank statement, tax, and trade data. From 2018 to 2023, we grew in India at a 27% compound annual growth rate. And the chart on slide 9 highlights how the growth playbook enabled this market-leading performance. Consumer credit grew at a 23% CAGR, Commercial, fintech, and direct-to-consumer grew to faster combined 36% CAGR and now represent roughly 40% of revenue. We believe over time our solutions outside of consumer credit can contribute 50% plus of our Indian revenue. We're only scratching the surface of the opportunities outside of consumer credit. With the right to ruin, given our scale and brand recognition, our breadth, and the quality relationships that we have in the market, as well as product innovation. Much of our next generation of innovation focuses on enabling credit penetration in underserved sectors, all of which the government of India has identified as key economic growth priorities. Our FIT rank assessment uses credit and alternative data for sharper risk differentiation of small and mid-sized businesses. The solution enables lenders to better serve India's 63 million small and medium businesses, which contribute to 30% of India's GDP. The Civil Credit and Farm Report consolidates credit, satellite, and other relevant agricultural data to begin to digitize the historically manual and cumbersome agricultural lending process. Farming is the livelihood of 55% of the Indian population. And agricultural loans account for at least 18% of the bank's lending portfolios. And the Civil Microfinance Report and Score provides comprehensive data and analytics to serve the 70 million microfinance borrowers in India. Microfinance refers to collateral-free loans for lower-income families. The loans average roughly $500 and typically focus on rural and remote areas. The Reserve Bank of India has specific mandates for lending to this segment of the population. To close out, India is a multi-decade growth story for TransUnion. At our investor day, we targeted $300 million of revenue from India by 2025, and we are well on our pace to exceed that target. We continue to believe this business can deliver conservatively 20% plus growth over the medium term, And our next goal is to build India into a half a billion dollar business over the next several years. Now, Todd will provide further details on the first quarter financial results in our second quarter in full year 2024 outlook. Todd.