TransUnion

Good day and welcome to the TransUnion 2024 Third Quarter Earnings Conference 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. 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 Craig Barty, Vice President of 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 also 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, 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 it over to Chris.

Thanks, Greg. And let me add my welcome and share our agenda for the call this morning. First, I will provide the financial highlights for our third quarter 2024 results. Second, I will detail progress against our transformation program and next milestones. Finally, Todd will detail our third quarter results along with our fourth quarter and full year 2024 guidance. In the third quarter, TransUnion again exceeded guidance across all key financial metrics. Given the strength in the quarter and ongoing business momentum, we are raising our full year 2024 guidance, which Todd will discuss later. Revenue grew 12% on an organic constant currency basis above our 8 to 10% guidance. Excluding mortgage, our growth of over 8% also exceeded expectations. In the U.S., we continue to experience stable economic and lending conditions. Household finances remain healthy due to low unemployment and some real wage growth, although lower income consumers face affordability pressures from higher shelter, transportation, and other expenses. Consumer delinquencies have improved for personal loans and appear to be stabilizing for credit cards and auto loans. In mortgages, delinquencies have risen but remain below historical averages. In September, the Fed announced a 50 basis point interest rate cut with market expectations for further gradual reductions over the next several quarters. We expect an interest rate easing cycle will benefit our volumes over the medium term. In mortgage, we expect there will be a notable refinancing opportunity for loans opened over the last three years, as well as potentially higher purchase activity resulting from improved affordability. Outside of mortgage, we expect lower rates to benefit consumers who will see lower borrowing costs and our customers who will benefit from lower funding costs and increased consumer demand. These dynamics are in the context of lending volumes that remain below historical trends. In our US market segment, revenue grew 12% in the third quarter. Financial services grew 17% led by over 60% growth in mortgage and growth across all our non-mortgage lines business. Emerging verticals grew 3%, driven by double-digit growth in insurance. Consumer inactive grew 21% due to our large breach remediation win. In our international segment, we grew by 12% on a constant currency basis, the 14th consecutive quarter of double-digit growth. India led with 23% growth, while Latin America, Asia Pacific and Africa all grew double digits. And finally, we prepaid $25 million in debt during the quarter for a total of $105 million year-to-date with the intent to make additional prepayment in the fourth quarter. Our leverage ratio is on track to be within our near-term target of three times or under by year-end. As we approach the one-year anniversary of announcing the next step in our transformation, I want to provide an update on the strong execution throughout the year. As a reminder, this phase of our transformation comprises two complementary programs aimed at reducing costs and accelerating innovation. First, we're optimizing our operating model by expanding our global capability center network. Second, we're modernizing our technology capabilities on the state-of-the-art data management and product platforms. Let me detail the progress made to date and the next steps to complete the programs in 2025 as intended. Our operating model optimization is the continuation of a multi-year journey to build scale across the organization, foster knowledge sharing, and standardized ways of operating. We leverage our global capability centers or GCCs driving workforce productivity and allowing us to provide more services from talent-rich geographies such as India, South Africa, and Costa Rica. Over the last 12 months, we substantially completed the relocation of roughly 1,000 roles from local markets to our GCCs. As of the end of the third quarter, nearly all new positions in the GCCs have been filled. We now have roughly 5,600 employees in our GCC network, largely in India, but with significant presence in Africa and Costa Rica to support 24 by 7 availability. We also strengthen our local GCC leadership by hiring senior management roles within the regions to support these deep talent pools. A majority of our GCC employees are software developers within our technology, data, and analytics organization, in addition to sizable teams supporting our corporate functions and business transformation efforts. As more work shifts to the GCCs, We're implementing a rigorous playbook to mitigate knowledge transfer risk. Our centralized transition team systematically tracks and documents work processes and develops a feedback loop for continuous process improvement. We also emphasize training, development, and assessment for recent hires to ensure success in their new roles. We're very pleased with the execution of our GCC strategy, which is driving material realized cost savings in 2024. Our focus now is further refining our processes to enhance and expand our best-in-class GCC network. Last quarter, we laid out how we're aligning TransUnion around global technology and product platforms powered by One True. Today, I'll focus on the innovative capabilities and product launches in recent months. Earlier this year, we tested and demonstrated that One True can materially improve the speed and efficacy of FactorTrust. our short-term credit lending bureau in the U.S. We recently went live with several enhanced capabilities, including triggers, innovation labs, new attributes, and customer prescreens. We plan to migrate Factor Trust customers over the remainder of this year. In 2025, we plan to migrate our primary U.S. credit system customers and decommission the legacy platforms. We also released the first capabilities of TrueValidate integrated fraud suite for general availability. The suite produces notable predictive uplift and allows us to deliver our fraud point solutions to customers via a common API. In the third quarter, we signed our first contract for the integrated suite in a competitive win against top fraud vendors. TrueIQ Data Enrichment provides instant access to TransUnion credit from within a customer's technology environment. This privacy-first approach enables our customers to develop highly targeted marketing campaigns while retaining control of their sensitive IP. In August, we launched Data Enrichment on the Snowflake platform to high customer interest with strong new sales and a growing pipeline. We see significant opportunity to embed identity-centric solutions like data enrichment directly within cloud data warehouses, such as Snowflake, enabling customers to access our data within the environments of their choice. In our true audience marketing solutions, we achieved another key milestone in integrating products and building capabilities. Earlier this year, we unified the underlying identity graphs of our solutions to deliver more accurate identity resolution. This quarter, we consolidated the products so that customers can experience our identity products on a common and modern user interface with improved features and functionality. Over the next few quarters, we expect to release further enhancement as well as roll out the capability internationally. Finally, We're in the process of migrating our internal big data and analytics environment, which we call Shape, onto One True. Shape is frequently the starting point for new product innovation and is also used for customer analytics work, including our innovation labs. We've onboarded and trained approximately 400 of our data scientists onto One True and delivered 10 innovation labs utilizing the platform. We plan to onboard and train all 1,000 plus of our data scientists by the end of this year, allowing us to decommission the legacy shape platform in early 2025. OneTrue is accelerating our innovation and enabling new products that resonate with our clients. We've already built a pipeline approaching 50 million and growing from recently introduced OneTrue powered products. Now, the early success of One True strengthens our conviction in our technology modernization strategy. In addition to delivering continued innovation, 2025 will focus on application development and customer migration. Let me discuss our key initiatives for the coming year. In core US credit, we aim to have end-to-end capabilities for both online and batch services on One True by early next year. We plan to start parallel runs and initial migrations of customers in the first quarter, with continued migrations throughout 2025. In India credit, we are similarly migrating all data and analytics work onto One True next year. This will enable us to launch our TrueIQ analytics suite and innovation labs into the region. We anticipate strong demand in India for our next generation analytics solutions. We're also well underway in modernizing our consumer solutions technology, which underpins our credit education and identity protection offerings for our indirect channel partners. We plan to consolidate our offerings, including those acquired through Sontic, onto a single global platform. We also plan to launch a comprehensive new interface for our direct-to-consumer product in early 2025. Finally, given the positive early indications of One True strengthening our core credit applications, we're evaluating opportunities for further International Bureau migrations. Remember that our announced program focused on the U.S. and India through 2025, but we view One True as our destination platform for all Bureau applications. Next year, we plan to lay the groundwork in four other key markets for their eventual migration to One True. We remain on track to complete our transformation program in 2025 with full savings benefits expected in 2026. We continue to expect to incur $355 to $375 million of one-time expenses to capture the benefits of our transformation programs, including $200 million in 2024. We now expect CapEx to be 8% of revenues in 2024 against a prior expectation of 9% driven by more efficient spend throughout this year in addition to higher revenues. We continue to expect CapEx to be approximately 8% of revenues in 2025. We continue to expect to deliver roughly $200 million of free cash flow benefit by 2026 driven by 100 to 140 million of operating expense savings, as well as 70 to 80 million of CapEx savings as we lower our CapEx requirements to a sustainable 6% of revenues. In 2024, we now expect to deliver 85 million of in-year operating expense savings ahead of our 65 million expectations at the start of the year and supporting almost 100 basis points of margin expansion in the year. The higher savings in 2024 have been largely driven by our people-related actions and expanded GCC network. The remaining $45 million of expected savings will be driven primarily by our technology modernization. We expect to complete the investment program in 2025, and most of the technology cost rationalization will be actioned late in 2025, near the completion of the program. That means that the remaining savings will not be realized until 2026. Taken together, our transformation programs are driving tangible benefits across the organization and will enable us to reach new levels of performance and scale. We look forward to updating you on our accelerating innovation as well as progress against our remaining cost savings targets. Now Todd will provide further details on our third quarter financial results and our updated full year 2024 outlook. Todd.