TransUnion

Good morning and welcome to the TransUnion 2026 Second 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 on your telephone keypad. 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 that this event is being recorded. I would now like to turn the conference over to Greg Bardi, Senior Vice President, Investor Relations. Please go ahead, sir.

Good morning and thank you for attending today. Joining me on the call are 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 this morning, and they can also be found in the current report on Form 8-K that we filed this morning. Our earnings released in 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 SEC. We do not undertake any duty to update any forward-looking statement. With that, let me turn it over to Chris.

Thank you Greg and good morning everyone and welcome to our Q2 earnings call. Let me outline the agenda for this morning. So first I'm going to review our second quarter results and the increased guidance for full year 2026. Then we'll get into an example of how we are driving innovation-led, diversified, and scalable growth across the business using U.S. financial services as an example of this strategy in action. Then I'll hand it over to Todd who will go into the details on Q2, provide the third quarter guide, and also the full year 26 guide. So turning into the second quarter, again we delivered strong results exceeding our guidance for revenue, adjusted EBITDA, and adjusted diluted earnings per share. Our organic constant currency revenue grew 10% above our 8% to 9% guidance, which marks our 10th straight quarter of at least high single-digit growth. And if you exclude FICO mortgage royalties, the organic revenue grew 7%, which is also above our expectations. Now, in U.S. markets, revenue increased 11%. Financial services, again, led the way, up 18%. or 10% excluding FICO mortgage royalties. We delivered broad-based growth across lending types, driven by sales momentum across credit and non-credit solutions, alongside some modest volume growth and pricing actions. Now, emerging verticals grew 9% in the quarter, led by double-digit growth in insurance, as well as high single-digit growth in technology, retail and e-commerce. International revenues accelerated to 6% organically, driven by our largest markets. Canada again posted strong results at 10%, and India and the UK also grew high single digits. In India, strong new business wins and a gradually improving credit volumes drove a return to growth. And additionally, our recently acquired bureau in Mexico continues to track well ahead of our acquisition case on both revenue and adjusted EBITDA. Revenue growth translated into 13% adjusted diluted earnings per share growth, and we increased our share repurchases in the second quarter and through July, bringing our year-to-date total to roughly $150 million. We retain ample capacity for additional repurchases in the second half of the year under our billion-dollar authorization, and we also reduced our leverage ratio to 2.6 times in the quarter due to strong adjusted EBITDA growth. Now our strong first half performance has allowed us to raise our full year guidance. We now expect 8 to 9% organic constant currency revenue growth, 10 to 11% adjusted EBITDA growth and 11 to 12% adjusted diluted earnings per share growth. are 11% to 12% adjusted diluted earnings per share growth. That guide represents an increase from our prior 9% to 11% assumption. So our guidance balances operating overperformance in the first half and constructive ongoing trends in the market with appropriate conservatism given it's still an uncertain macro environment. Across our markets, we continue to experience Consumer resilience and broadly stable market volumes. Specific to the U.S., lenders are cautiously optimistic and anticipate modest loan growth, which is supported by strong consumer credit performance. Now, we continue to monitor inflation levels and interest rates and their potential impacts on consumer behavior and loan demand. The 10-year Treasury yield is now approaching 4.7%. That's up roughly 50 basis points from the start of the year. And while this has modestly pressured mortgage activity, impacts across the remainder of our portfolio have been limited. If the current trends continue, we expect performance to be at or slightly above the high end of our guidance. At the same time, our range is designed to absorb a reasonable level of market softening. and Todd's going to provide more details on this in the guidance assumptions later. Our strong results in guidance reflect consistent execution against the growth strategy we outlined in February, unlocking the full potential of one true platform and accelerating innovation in AI-enabled solutions and translating these capabilities into commercial momentum across our portfolio. So let me highlight the milestones against each of these priorities. So first on the platform modernization, we continue to make really good progress. We have materially increased U.S. credit customer migrations to One True during the quarter. At this point, roughly 60% of our U.S. batch activity and 30% of online customers are now running on One True. That's over 4,000 U.S. credit customers now migrated. And we continue to convert the most complex activity first but maintain an emphasis on minimizing customer disruption. We expect to complete the US migrations by the end of this year. Additionally, we continue to extend the One True platform and solutions internationally. We have now deployed One True instances in Canada, the UK and India to support the launch of our True IQ analytics platform. We also launched True Validate, our fraud solution in the UK and Trusted Call Solutions in Canada and India, creating new local market opportunities for these global products. And One True is enabling us to increase our innovation velocity. Across the enterprise, we launched 40 new products and AI-powered enhancements in the first half alone, contributing significantly to our sales pipeline. And beyond this innovation, we're also deploying AI at scale internally to improve our productivity. We are already seeing gains by using these tools across key employee groups, including average gains over 25% for our software engineers and data scientists and an early experimentation more than 20% within our consumer support operations. These successes reinforce our confidence in the broader opportunity to drive AI efficiencies that can enhance our margins and fund future growth investments. Now, these platform and innovation investments are increasing commercial momentum across solutions and within verticals and geographies. In the first half of the year, core credit, excluding FICO mortgage royalties and fraud, each grew in the high single digits, driven by traction in TrueIQ alternative data and trusted call solutions. Marketing solutions also grew mid-single digits, supported by strong identity performance, with acceleration expected in the second half. So together, One True and our global solution strategy is increasing our innovation, expanding addressable opportunities, and supporting scalable revenue growth. So let's have a case study of this strategy in action, focusing on U.S. financial services where platform modernization, product innovation, and deeper customer engagement are translating into sustained outperformance. Within U.S. financial services, growth has consistently exceeded underlying market volumes. Excluding mortgage, financial services has grown at 9% compound annual growth rate, outpacing the roughly 2% average growth in U.S. consumer credit originations and real GDP growth over the same period. We've sustained this outperformance across multiple operating environments. U.S. financial services, excluding mortgage, has delivered high single-digit or greater growth, except for modest pullbacks during the pandemic and in the 23 and 2024 consumer lending slowdown. This track record reflects the strength of our U.S. credit data and expanded solution suite, which have enabled outperformance across market cycles. Growth is increasingly driven by share gains, pricing, and innovation, not simply underlying lending activity. Now one reason that we've been able to consistently outgrow the market is the increasing diversification of our financial services business. At almost two-thirds of financial services revenue, Core Credit remains the foundation of the franchise. We continue to grow our share on the strength of our leading trended data and attributes, as well as our differentiated and insight-led engagement model. Building from that foundation, More than one-third of revenue now comes from solutions outside traditional credit reports and scores. These newer revenue streams represent faster-growing opportunities that are often less directly tied to lending origination volumes. Roughly 12% of revenue comes from alternative data, like Factor Trust, as well as our True IQ Analytics enablement suite. These solutions serve lenders' increasing appetite for alternative data sets, and AI-enabled analytic tools to activate our data at scale. Another 24% of revenue comes from non-credit solutions, most notably trusted call solutions and our modernized marketing and fraud solutions. This intentional diversification has expanded our position beyond core credit to make us a broader partner for clients across the customer lifecycle. We help them reach the right consumers Improve engagement, mitigate fraud, manage portfolios, and make better decisions. This combination of core credit leadership and complementary adjacent growth opportunities is a real differentiator for TransUnion. The benefits of our diversified growth strategy are evident in our recent performance. Over the last two years, U.S. Financial Services, excluding mortgage, has grown at a roughly 10% compound annual growth rate. with contributions from across the product portfolio. CoreCredit is growing low double digits annually. This growth exceeds lending volume growth, reflecting customers' continued preference for our differentiated, trended data and analytics. Our alternative data and analytics are growing in the low teens annually, led by factor trust and new wins for our true IQ suite. The maturation of TrueIQ provides a new opportunity to further increase growth. Non-credit solutions is growing at a high single-digit annual rate with room for further acceleration. Trusted call solutions in particular has been a standout, growing over 50% annually within financial services. And we see increased revenue and bookings momentum within marketing and fraud. These solutions address a growing set of mission-critical use cases. Now, AI will increase demand for proprietary data, analytics, and decisioning capabilities, areas where we are well positioned. Over time, we expect increased AI sophistication to drive higher data consumption, stronger demand for true IQ analytics, and faster adoption of our marketing and fraud tools. Taken together, these trends position us to continue growing above underlying market volumes. Financial Services now benefits from multiple growth factors, a broader addressable market, and a more diversified revenue base than at any point in our history. So with that as context of how our strategy is driving commercial success, I'm going to pass it to Todd who will detail Q2 performance and our refreshed guidance. Todd?

Thanks, Chris. And let me add my welcome to everyone. Starting with the quarter, Revenue exceeded the high end of guidance by $27 million and adjusted EBITDA exceeded by $11 million, led by stronger than expected performance in U.S. non-mortgage financial services, emerging verticals, and international. U.S. mortgage was roughly in line with expectations despite rising interest rates throughout the quarter. Total revenue increased 15% on a reported and 10% on an organic constant currency basis. led by U.S. Financial Services and Emerging Verticals. Excluding FICO mortgage royalties, organic growth was 7%. Adjusted EBITDA increased 12%. Adjusted EBITDA margin was 34.8%, slightly better than guidance and down 90 basis points year-over-year. The impact of FICO mortgage royalties accounted for the entirety of the year-over-year decline with underlying margins up modestly. Acquisitions had an immaterial impact on consolidated margins as Mexico delivered better than anticipated adjusted EBITDA performance. Adjusted diluted earnings per share was $1.23, up 13% year-over-year, and 8 cents ahead of the high end of our guidance. In the second quarter, U.S. markets revenue grew 11% on an organic constant currency basis versus the prior year. growth was diversified across our verticals supported by strong first half bookings and retention as well as continued demand for both credit and non-credit solutions. Financial services revenue grew 18% or 10% excluding FICO mortgage royalties. In core non-mortgage financial services revenue grew 8% with healthy growth across lending types. As Chris discussed Growth reflects a mix of healthy lending activity, pricing, new wins, and increasing adoption of our broader solution set. Credit card and banking rose 6% on lending volume growth and new wins from trusted call solutions. Consumer lending grew 8% with strong fintech growth and sustained consumer demand. Auto was up 8% driven by pricing and new wins across our solutions. auto growth outpaced declining industry volumes, lapping last year's tariff-related pull-forward and purchase activity. In mortgage, revenue grew 37%. Excluding FICO royalties, mortgage growth was 15% versus inquiries down 7% without performance due to pricing actions and non-tribural revenues. Growth was in line with expectations, even as volumes came in modestly lower as rates increased during the quarter. Within mortgage, we recently added new alternative credit attributes from factor trust to our mortgage credit file at no additional cost to customers. This enhancement reflects our continued focus on helping mortgage lenders develop a more complete and actionable view of borrower behavior. Additionally, Vantage score usage in mortgage was a highlight in the quarter with a meaningful increase in adoption. At the start of the year, less than 5% of our mortgage credit inquiries included VantageScore. That figure is now closer to 30% across more than 900 lenders and increasing each month. Most activity remains dual pools with VantageScore and FICO, but we are beginning to see increased VantageScore only usage. including certain mortgages requiring mortgage insurance. Importantly, our 2026 guidance continues to assume no benefit from Vantage Score adoption. That said, the momentum we are seeing gives us greater confidence in the long-term opportunity as the market moves through testing, validation, and operational readiness. Starting to emerging verticals, growth accelerated to 9% led by our eighth straight quarter of double-digit growth in insurance as well as trusted call solution strength across our verticals. Within insurance, we experience robust demand across our solution suites. Credit-based marketing continues to strengthen, consumer shopping remains active, and we drove growth across core credit, driving history, and trusted call solutions. Tech, retail, and e-commerce, where a significant portion of our marketing and fraud revenue is reported, grew high single digit. With emerging verticals, insurance and tech, retail, and e-commerce account for over half of the revenue. Across our other emerging verticals, public sector and media grew mid-single digits. Tenant and employment returned the growth, and the telco vertical declined modestly. Consumer Interactive declined 3% in line with our expectations as growth in the indirect channel was offset by declines in the direct channel. In international, all revenue growth comparisons are on an organic constant currency basis. National revenue accelerated from flat growth in the first quarter to 6% in the second quarter. Overall results reflected strength in developed markets and improving trends across emerging markets including an inflection in India and moderating headwinds in Asia Pacific. Starting with India, revenue accelerated to 8% growth, slightly ahead of our expectations. We experienced gradually improving volumes over the course of the quarter, supported in part by the recent government-backed program to support commercial lending. We also delivered very strong new wins in the quarter. We continue to monitor the Indian market with cautious optimism about the trajectory. We expect similar growth in the third quarter with acceleration in the fourth quarter as comparisons ease. Canada grew 10% reflecting healthy activity across financial services as well as strong growth in fintechs and insurance. The UK grew 9% outpacing modest market growth driven by share gains and new business wins across banking and fintech. Latin America improved to 5% organic growth with double-digit growth in Brazil and modest and improving growth in Colombia and other markets. Africa also grew 5% with broad-based growth across verticals and regions. And Asia Pacific declined 7% with the rate of decline improving versus the first quarter as we finished lapping prior year one-time contracts. We expect Asia Pacific to return the growth and the second half of the year. Within our international business, TransUnion New Mexico continues to strongly outperform our acquisition case in the first few months of ownership. Over the last several years, TransUnion New Mexico has grown at a double-digit compound annual growth rate supported by a growing economy, favorable demographics and meaningful room for further formal credit penetration. Growth has been stronger than its Latin American peers over the last two years, reflecting not only these credit market fundamentals, but also Mexico's fiscal and monetary stability, as well as its accelerating nearshoring activity supported by its proximity to the United States. We are now applying TransUnion's global product, technology, and commercial playbooks to accelerate growth beyond market volumes. Let me detail our early priorities as we integrate Mexico into TransUnion. First, we are enhancing our data foundation. Our longstanding relationships with the largest Mexican banks and fintechs have created the market's leading data coverage, quality, and predictive depth. That foundation includes nearly 600 million trade lines with positive and unique data representing 90% of the total. Under Mexico's regulatory framework, those positive data trade lines are not shared with competitors, creating a structural advantage. We are building on this advantage by introducing new trended scores and attributes, expanding alternative data sets, and eventually migrating Mexico to one true, to unlock greater scalability. Second, we are accelerating innovation. We plan to bring our leading global capabilities to Mexico over the course of the next year, including TrueIQ Analytics, TrueValidate, and our credit education tools. Third, we are enhancing client engagement. In core financial services, we are strengthening relationships with leading lenders via deeper analytics consulting. At the same time, we plan to use our data advantages and faster innovation to win in our already fast-growing FinTech and Retail Verticals. In summary, Mexico is performing ahead of plan and we are building on that momentum with multiple opportunities to deploy our global capabilities. We believe this combination positions us on the path to drive sustained and scalable growth. Turning back to the enterprise, operating performance is translating into strong cash generation, improved balance sheet flexibility and greater capacity for capital return. We ended the second quarter with $5.6 billion of debt and $839 million of cash. And our leverage ratio decreased to 2.6 times. During the second quarter and through July, we accelerated our pace of repurchases. Year to date, we have repurchased 2.1 million shares at an average share price of roughly $71. a total of roughly $150 million. We continue to view share repurchases as a highly attractive use of capital at current valuation levels. For the remainder of 2026, we plan to continue executing on our disciplined capital allocation framework with a current bias toward capital return to shareholders. Based on current conditions, we expect the pace of second half repurchases to be at least comparable to the first half. We also remain committed to reducing our leverage ratio toward our long-term target of under 2.5 times. Before getting into guidance details, I want to reiterate our discipline guidance philosophy. Our increase in full year guidance reflects strong performance in the first half of the year. A continuation of those trends would position us to deliver at or slightly above the high end of our range. while the range preserves flexibility to manage ongoing market uncertainty. In the third quarter, we are guiding revenue to be between $1.292 and $1.310 billion, up 11% to 12%. Growth is comprised of 6% to 8% organic constant currency growth and a 4.5 percentage point contribution from acquisition. We expect 4 to 5.5% organic growth excluding FICO mortgage royalties. Importantly, the implied sequential deceleration from 7% excluding FICO in the second quarter is entirely related to our non-FICO mortgage revenue, reflecting greater year-over-year declines in inquiry volumes. We expect non-mortgage organic growth to be at or slightly above the 6% rate that we delivered in the second quarter. In other words, the deceleration does not reflect a change in core non-mortgage trends. We are guiding adjusted EBITDA to $455 to $463 million, up 7% to 9%, implying a margin of 35.2% to 35.4%. Underlying margins expand by 20 to 40 basis points, offset by an 80 basis point drag from FICO royalties and a 60 basis point impact from acquisitions. We expect adjusted diluted earnings per share to be between $1.18 and $1.21, up 7% to 10%. For full year guidance, we expect revenue to be between 5.127 and 5.162 billion dollars up 12 to 13 percent. A raised guidance reflects stronger growth from our Mexico acquisition as well as modestly higher non-mortgage organic growth due to strong first half performance. Acquisitions now add four percent and FX has an immaterial impact on our guidance. We expect organic constant currency revenue growth of eight to nine percent or 5% to 6% excluding FICO mortgage royalties. Our segment level assumptions are broadly unchanged. Mortgage revenue growth guidance of 28% for the full year or 6% excluding FICO is unchanged since February. Mortgage revenue exceeded our expectations in the first half, particularly in the first quarter when mortgage rates briefly dipped below 6%. As mortgage rates have moved back above 6.5%, we have de-risked our second half assumptions. Our conservative assumptions provide us flexibility to deliver these growth rates even if rates increase modestly from current levels. We now anticipate mid to high single digit inquiry declines for the full year, including low double digit declines in the second half of the year. We continue to expect pricing actions and revenue beyond traditional Triburo reports to drive out performance versus underlying volumes. At the same time, stronger momentum across the remainder of the portfolio helps offset our more conservative second half mortgage assumptions. We expect adjusted EBITDA to be between 1.807 to $1.827 billion in 2026, up 10 to 11%. that results in a margin of 35.2 to 35.4% down 60 to 80 basis points. Underlying margins are expected to expand by 50 to 70 basis points driven by revenue flow through and remaining transformation savings. This strong underlying expansion is offset by a 90 basis point drag from FICO royalties and a 40 basis point impact from our acquisitions. We anticipate adjusted diluted earnings per share to be $4.75 to $4.83, up 11% to 12%. This represents an increase from prior guidance of 9% to 11% growth. All other guidance items, including depreciation and amortization, net interest expense, adjusted tax rate, and capital expenditures as a present of revenue, are unchanged from April. With that context, I will now turn the call back to Chris for closing remarks.

Thank you, Todd. So recapping, in the second quarter, we beat guidance with double-digit revenue and earnings growth, reflecting the strength we're seeing in the U.S. markets and our improving trends in international. We raised the full year 26 guidance, but we maintain prudent assumptions around the macro environment. We now expect 8-9% organic constant currency revenue growth and 11-12% adjusted diluted EPS. This performance would reflect our third consecutive year of at least high single-digit organic constant currency revenue growth and double-digit adjusted diluted EPS growth. And we executed well against our 2026 strategic priorities. Most notably, with substantial migrations of our U.S. credit customers to OneTrue, as well as an accelerating pace of product launches, enhancements, and international rollout of the OneTrue platform. Our investments in platform modernization, innovation, and our unique data assets are translating into diversified and above market growth rates. As our business continues to become increasingly driven by scalable innovation, share gains and diversification, we are growing our free cash flow generation as well as our capacity to return capital to our shareholders. With that, it's back to you, Greg.

That concludes our prepared remarks. For the Q&A, we ask that each of you ask only one question so we can include more participants. Operator, we can begin the Q&A.

Thank you. And ladies and gentlemen, at this time we will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, you may press star then 2. Please limit yourself to one question. And at this time, we will pause momentarily for the first question. And that first question today will come from Jeff Mueller with Baird. Please go ahead. Mr. Mueller, your line is open.

Sorry about that. I guess I'm struggling to understand how the non-mortgage organic upside and momentum gets adjusted in the guidance and if that's just baked in as increased conservatism. I ask because the mortgage full year revenue guidance is unchanged and it looks like most of the The revenue guidance range is the outperformance in Mexico and increased M&A contribution. So if you could just help me with that. Thank you.

Hey, good morning, Jeff. And this is Todd. I'll take that question for you. So in essence, what we've done with guidance for mortgage is we've maintained our full year guide that we came into the year with where we were calling for 28% growth all in and 6% when we exclude the FICO mortgage royalty. And that contemplates a decline of volume from mid to high single digits. Now to go back a little bit, the first half of the year, in particular in the first quarter, we had outperformance in mortgage. Feels like a long time ago, but the 30-year mortgage rate was about 6% when you go back to January and February. And then with geopolitical tensions, we saw the 10-year Treasury yield rise, and as a result of that, the 30-year also went up, and that had an impact on our volumes. So as far as the way that we're looking at mortgage, we're being conservative with our assumptions. We are looking at where the 30-year and many more. Thank you very much. The other part that I think is important, and I think this is your question, is specific to the non-mortgage part of our business. In the second quarter, we delivered 6% growth, and what we're contemplating when you look at it on that basis is a similar trajectory for the third quarter. So you take a look at The performance that we're very pleased with within core financial services, a very strong quarter for us. Emerging verticals coming in at 9%, as well as then in our international portfolio when you look at the performance in India returning to growth at 8%, Canada at 10%, and the UK at 9%. There's some good tailwinds that we're looking at as we go into the second half of the year. but the market remains uncertain. So we are taking a prudently conservative approach towards our guidance. And as we've put on, as I said in my prepared remarks, as well as what we've put on the slide, we would orient you to the high end of that guidance and that more than likely if these conditions that we're currently living through right now persist, we'll be above the high end of that guidance.

Yeah, and so just to emphasize a couple of those points, again, we feel like we're well-positioned to deliver on this revised, raised, full-year guide, so high-end or above. And the conditions that we're experiencing right now across the business and in mortgage clearly support that. We have built in some margin for error, some margin for deceleration in mortgage. in the second half of the year because, as Todd pointed out, you know, rates are higher than they were by about 50 bps. But that said, we are positioned to absorb some deceleration in mortgage volumes that would come with higher rates and still deliver at the high end of the guidance. So this is prudently conservative. But when you are conservative, you got to park that conservatism somewhere, right? We park it disproportionately Thank you.

And our next question will come from Tony Kaplan with Morgan Stanley. Please go ahead.

Thanks so much. I was hoping you could expand on if you're seeing demand for your data sets given acceleration in AI agents and, you know, which particular areas customers are really ramping up demand in terms of data versus a few quarters ago. I expect that's a trend you're seeing, so I wanted to touch on which specific areas. Thanks.

Yeah, Toni, look, it is a trend that we're seeing. As we've been saying for some quarters now, and as we emphasized at our Investor Day in March and had some slides last quarter as well, the AI and Leighton customers tend to consume more data the models the predictiveness all you know improves with more curated and authoritative data that we provide so I think in the big in general generally we expect to see that accelerate as more lenders experiment and adopt AI modeling techniques across their kind of lending analytics life cycle you know I think we are well positioned with our product innovation in AI to support more of the work that those clients are doing with our analytics orchestrator agentic framework which again we presented we demoed at our investor day and you can see we're now using agentic AI on our foundation of data we're able to automate a lot of the model building and prediction that our lenders typically do on their own or many segments of the market simply don't do. So net-net, we still believe that AI is going to be a positive growth tailwind. One, it's stimulating greater data consumption as we've talked about. But two, the agentic layer that we're building on top of our true IQ analytics foundation is going to expand our TAM and let us take over some of the work that's either done by our lending clients, not done currently, or done by other players in this data and analytics ecosystem.

Thank you.

And our next question will come from Andrew Steinerman with JP Morgan. Please go ahead.

Hi, Chris. In your prepared remarks, you suggested that marketing solutions, as you know, true audience, revenue growth should accelerate in the second half of the year from the mid-single-digit revenue growth in the second quarter. What's driving that dynamic about the acceleration in the second half?

Yeah, well, there's some seasonality in the marketing business, Andrew, as you know. In the fourth quarter, a lot of the big players in the publishing universe turned to TransUnion. to do market share and marketing effectiveness studies that they then use in their own media sales cycles. We're making greater inroads across the publishing ecosystem and being that kind of neutral measurement provider that the industry needs. We're also getting increasingly good traction with with True Audience, which is the suite of marketing solutions that we've migrated onto One True. We are converting a lot of the legacy customer base from those solutions onto the True Audience solutions. It's a more powerful product. It's a streamlined interface. It's a broader series of services that have been integrated together, which allows cross-sell and up-sell. And so I think the general pipeline build The level of bookings, particularly in identity where we've got a tremendous data strength, but increasingly in audience and also in spend planning and measurement, as I mentioned at the outset, which are historic strengths in our marketing portfolio, we just see that momentum building and we expect a better second half of the year. Thanks. Sounds good.

Thanks.

In our next question, we'll come from Andrew Nicholas with William Blair. Please go ahead.

Hi, good morning. Appreciate you taking my question. I wanted to hone in on India a bit further, a nice sequential uptick there. Can you speak to what you're seeing on the ground from an economic perspective, from a commercial perspective, and kind of how you're thinking about rest of the year with a nice uptick in the second quarter now under your belt? Thank you.

Yeah, for sure. Excited to talk about India always. In terms of the volumes that we're seeing on the consumer and the commercial side, things are stabilizing, which is good. The macro continues to be attractive. There's GDP growth. There's reasonable levels of inflation. But as we all know, there's been any number of macro shocks that have hit India over recent quarters, which have interrupted our growth. That said, The volume of unsecured lending to the consumer space, which is a big driver of credit pulls, along with card originations, that seems to be a floor reached and we're now in a more stable environment. On the commercial lending side, particularly with smaller to medium-sized businesses, there have been some government support programs that's enabling better activity in the space. in that segment of the market. So what I would say from a market volume perspective is that we're now moving sideways to slightly upwards. We're seeing the stability that's going to allow our better products to gain traction and to grow. So that's kind of the market volume backdrop. From a competitive perspective, we're doing really well. I mean, the team has doubled down. We just posted our largest quarter of new sales ever in India, which is super exciting. First, the team is innovating on the data layer. We have redeveloped all of our principal consumer and commercial credit scores. They're performing better than ever, and that refresh is keeping our relevance in the marketplace. We're expanding the breadth of data contributions from lenders or furnishers, as we call them, around India. We're even starting to expand the type of data that we're getting from the furniture network, which just drives continued improvement in model predictiveness. And we can consistently show to our lenders that they need to use our data throughout the lending cycle, from the beginning where they're evaluating a prospect, kind of top of funnel, all the way through underwriting, using our data because it's broader and it's more predictive leads to better decisions and better capital allocations. And we've got a very tight pitch that we deliver along with our data science team that's helping us really sell and win more share in the market. On top of that, we have successfully implemented Our analytics solution in India, it's called TrueIQ. And there's a ton of interest. There's a ton of bookings and revenue momentum there, which we're super excited about. And we're expanding trusted call solutions there as well. We are securing all the relationships we need with all of the right carriers to expand that component of our fraud solution. And we're getting good traction there. So, you know, it's... New products driving some revenues in addition to really competing effectively in the core credit market.

And our next question will come from Faiza Alway with Deutsche Bank. Please go ahead.

Yes. Hi. Thanks. Good morning. I wanted to ask about consumer lending more specifically within financial services. Growth sort of slowed a little bit this quarter, and I'm wondering if that's just a function of, you know, just tougher comps as you've had a few quarters of, you know, double-digit growth there. And maybe if you could talk more specifically around the FinTech environment and maybe how sensitive that business is to, you know, rising interest rates and if that was a factor this quarter.

Yeah. Well, first, it's not particularly sensitive to interest rates. within a reasonable range of course. Mortgage origination and refinancing far and away is the most interest rate sensitive, but the spread on personal lending tends to be high enough that lenders can absorb increases in rates. So I just want to put that to rest at the outset. So yeah, growth in consumer lending and even Cardinato, they're a tick down from where they were a year ago. That's simply us lapping comps. You know, the absolute growth that we're getting each of those segments is very consistent and healthy. It's just the businesses are getting bigger. And if you look back for two years, you see that, particularly on the consumer side, there is just a resurgence in growth as consistent and durable funding has flowed back into the fintechs. and they really diversified their funding sources as well and they're meeting a robust market need. So, you know, I think, you know, pulling back the lens and thinking about the last few years, the outlier for fintechs and consumer lending was during the 22-23 time period where rates spiked after incredibly hot growth in that segment for a long time and there was simply a retrenchment, right? There wasn't enough funding and the rates were so high, it wasn't really an acquisition-oriented environment. So they pulled back and focused on portfolio management for a while. Now we've been out of that environment for a couple of years. And again, the fintech model based on borrowing from the capital markets or getting funding in other ways is a consistent and durable model that's been part of the American lending landscape for decades now. So we're confident that we can continue this run of good growth in consumer lending.

Great. Thank you.

And our next question will come from Ashish Sabhadra with RBC. Please go ahead.

Thanks for taking my question. I wanted to ask a question on the EBITDA front. The guidance implies a step up from 2Q to 3Q, but a much more serial step up from 3Q to 4Q. If you can talk about what's driving that improvement in margins going forward. Thanks.

Thanks, Ashish. I'll take that question. So if you look at our adjusted EBITDA margins, and we'll talk about this and break it out into all the different pieces, but if we start just with our reported margins in the second quarter, We finished with a margin of 34.8%, and that was down 90 basis points on a year-over-year basis. In essence, the FICO mortgage royalty was accountable for that entire decline. And if you look further into the details, our underlying margins that exclude that royalty and also exclude M&A expanded by about 10 basis points. but M&A, specifically that's Mexico, had a 10 point drag in the quarter. When we look at the guidance for the third quarter, as you already can see, the high end is 35.4% and that's a 100 basis point decline. FICO is about an 80 basis point drag, so kind of consistent with what we saw in the second quarter. But M&A becomes a little bit more of a drag on a margin perspective as we focus on integrating the Mexico acquisition, and it's a headwind of about 60 basis points. So when you do the net of that, in essence what you see in the third quarter is a 20 to 40 basis point increase in our underlying margins, excluding FICO mortgage royalty and M&A. So when you look at then the full year, We've been consistent in our guidance. We're calling for 35.4% for the full year, which is down 60 basis points. But that underlying, when you exclude FICO mortgage royalties and M&A, we're calling for 50 to 70 basis points of underlying margin expansion. So the net of that then is what's implied for the fourth quarter. and so forth. So, you know, in essence does have, you know, a step up in margin. And, you know, when we look at, you know, where is that coming from, the mix as we get into the fourth quarter, as we already talked about in the first question, mortgage, we have a very conservative posture. So, and as you know, mortgage is a lower margin, you know, product for us. So, when we have less of that, we end up having higher margins. We're also anticipating more growth Our financial services vertical excluding mortgage. What that means is a lot more credit sales with a higher margin flow through. And then also the international business. And Chris just went through the details on India. We're expecting that business to continue to accelerate. Also very good flow through as we get into the second half of the year. The last point I want to make here is when you look at our expenses in Q2, Q3, and Q4, and when we take out the FICO mortgage royalty, in essence, that expense base is roughly flat, quarter over quarter. So that's really the key point as to why we expect to see the margin improvement accelerate in Q3 and then even more so in Q4.

yeah and that last point just about the expense base is a good one as all of you know on the call we recently completed a multi-year tech modernization and cost restructuring we're very happy that we you know we got it done we got it done on time we got it done within our initial spending budget and the fact that we're holding expenses flat when of course there is underlying expense growth in a variety of of areas it shows that The program has worked, and it's allowed us to take out some material costs, and we're just now starting to see that benefit. Just switching gears quickly here, I realized that on the India question that was just asked, I forgot to mention one thing. You know, you're going to see a nice increase in the growth rate in India that we're expecting in Q3 and 4. The good news is, of course, the business is re-accelerating. and all the ways in which I described, but it's also re-accelerating to get some very soft comps. So the second half of the year, you're going to see nice percentage growth. I just wanted you guys to appreciate that dynamic.

And our next question will come from Raina Kumar with Oppenheimer. Please go ahead.

Good morning. Thanks for taking my question. Given that your competitor recently announced the acquisition of the second largest credit bureau in Mexico, Can you comment on your positioning in the region long term? Obviously, it was a strong spot for you in the quarter, but just curious on how it could impact your long-term strategy in Mexico. Thanks.

Yeah, thanks for the question. Well, look, Mexico is an exciting development within TransUnion. As you guys know from prior calls, we have been a minority investor and a tech provider to the Bureau de Mexico for over 25 years and we wanted to acquire controlling interest for 25 years. Fortunately, we were able to complete that transaction and we've got the leading bureau with the leading market position in the broader data archives in the Mexican market. Since acquisition and in recent years, the Bureau of Mexico has consistently outperformed growth and profit expectations. It is performing nicely above our deal book and compounding revenue on a much larger revenue base in the low double digits, which is exciting, even though we have guided to less going forward. So look, it's a great entry position. We have... Terrific market coverage, but there's just so much work for us to do in Mexico, and the same is true of our competitor. Mexico today operates with, I would say, a pretty basic level of credit data and analytics, and we're positioned to broadened contributions from a wider range of data furnishers to push deeper into you know the FinTech space to bring alternative credit data sets to market and to do it all on the one true platform which we will be rolling out into Mexico and to bring just a level of Thoughtfulness and forward engagement to the marketplace that has served us so well in the U.S. and across all of our market segments. Additionally, right away we're bringing in the true IQ analytics platform and layering it over the current tech stack in the Mexico Bureau. That's going to allow us to start to service our clients more deeply, as we do in most markets, and generate some incremental revenues. So look, it's a great market to be in. It's a terrific foundational entry point. There's a ton of innovation and value that we can bring. The market is large, inherently growthful, and underpenetrated from these solutions. So I'm confident that we can do well. And look, there's plenty of room and opportunity for multiple players to do well in the Mexico market.

And our next question will come from Manav Patnik with Barclays. Please go ahead.

Thank you. Good morning. Thank you for that breakout for the U.S. Financial Services and your prepared remarks. Just curious, you know, I guess the non-core credit pieces, like how do you think – you gave us some growth trades. I'm just curious on your strategy there in terms of trying to, you know, maybe get that to be a much bigger percentage of the business there.

All data and true IQ opportunity. Oh, I see. So you're talking about financial services and the diversification for the diversification?

Yeah, the 36% that you called out that was non-co-credit, I guess, just curious, longer term, if that's an area for the investment, M&A, those kinds of things.

Yes. Okay, good. I'm clear on your question, Manav, and thanks for it. Well, look, you know, the first point that we wanted to emphasize is that, you know, our growth, which has been above market levels in financial services, is diversified, right? Obviously, we've got leading credit data from a quality perspective in the U.S., our trended data. We were the first mover. It goes back the furthest. It has the most attributes for analytics in the marketplace. which is kind of foundational to our success. We've also extended down market to payday lending and other unsecured lending types. And as you well know, there's kind of an arms race amongst the bureaus to bring other relevant alternative to core credit data sets into the market. And we're gonna continue to expand organically and inorganically if we get the opportunity and it makes sense in that space. Additionally, you know, a lot of the solutions that we acquired, either from Nusadar, which increased our depth in marketing and fraud, were cross-selling into the financial services space. There's also further opportunity with our identity solutions to work with some of these lenders and become kind of the system of record, underpinning their corporate data hygiene and identity resolution within the banks. We see that. And I think it's very important to note that Look, if you went back a couple of years, you could criticize TransUnion for not having a top-of-the-market analytics suite, right? Other players traditionally led. We closed that gap a couple of years ago when we launched TrueIQ. We've continued to accelerate innovation and mature the TrueIQ product. It's now doing well in the U.S. market. We've expanded it into India, And our next question will come from Curtis Nagel with Bank of America. Please go ahead.

Great, thanks so much for taking the question. Maybe just pivoting to the advantage score adoption, right, so I think move from 5 to 30% or so, had been kind of dual use, sounds like it's moving more to single pool, just maybe if you could unpack what's driving that acceleration in terms of, you know, lending cohorts, lender types, stuff like that, just a little more detail would be helpful in what you're seeing.

Yeah, sure, Kurt. So, well, look, in terms of cohorts or more specifics around it, the data that we shared reflects the adoption of Vantage that we're seeing across 900 customers, right? So, it's a fairly broad-based observation of what's going on in the market. And what I would simply characterize it as, this is a period of experimentation and and Calibration by the market broadly, by lenders and resellers, even the GSEs, and on into the securitization space and mortgage insurers. At the outset of the year, we were clear that we weren't budgeting or including in our guidance any revenue from selling the Vantage score. That's still our posture in this current raised guidance. As a company, we are just laser focused on helping the market adopt the Vantage score. There's a tremendous opportunity for lenders to get a more predictive score at a substantially lower price and improve their economics and hopefully pass on some of that benefit to consumers, which was the intention behind this government policy change. And as we step back from all of the fray and the occasional drama about this, It's clear the market is highly interested in the Vantage score. Almost everybody is experimenting with it. The efforts are being led by the largest players in the market that have the most financial benefit. And all of the other players that need to calibrate are deeply engaged in doing so, whether that's updating their risk models for a new score or it's altering some fields in their software so that they can include multiple scores. This year of experimentation and preparation for faster and scaled adoption of a competing score is happening. Full stop.

And our last question today will come from Kelsey Zhu with Autonomous. Please go ahead.

Hi, good morning. Thanks for squeezing me in. And Chris, in the prepared remarks, you also mentioned that there are increases in lenders that adopt Vantage Score only usage. And I was wondering if you can talk a little bit more about that and what you're seeing in terms of score gaming activity for lenders are currently running both.

Thanks a lot. Yeah, sure. Yeah, and thanks for the question, Kelsey. Yeah, well, there are some players in the market that if they're not exclusively using Vantage today, and that would be in a minority category, In our dialogue with them, and believe me, our teams are actively engaged across the marketplace, they clearly have an intention to move to a single score, Vantage, once they're through this experimentation and calibration phase, right? As you know, because you report on this, the percentage of players that are using only Vantage is increasing. and some of these Vantage mortgages or the Vantage only scores in mortgage are showing up in securitization. Now, it's a relatively small percentage now, but it's growing rapidly. And just given the breadth of experimentation and activity that we see, it just speaks to, you know, real tailwinds. So I, again, am confident that in the coming quarters, we're going to continue to see Greater Share Adoption. That'll flow through all of the metrics around Vantage adoption and utilization in the mortgage origination through securitization process. And that Vantage is really well positioned for growth and share gain in subsequent years.

All right, Chris, any final remarks?

Yeah, well, look, we talked about the adoption of OneTrue. in the prepared remarks. That is progressing well. We are highly confident we'll have the entirety of the U.S. credit market converted by the end of the year, most of it sooner than that. We're also migrating our marketing and fraud clients from their current legacy applications onto OneTrue. And this is just an enormous proof of concept that we have built this platform and that we can roll it out globally. Next up are our principal markets in Canada, in India, in the UK, and, of course, Mexico, where we want to move quickly there because there's a great opportunity. And, again, once we complete that, which I would expect roughly to complete within the next two years, we'll have 95% of our business running on a common software platform. That's going to generate enormous revenue. economies of scale for us that are unique in the industry. And that further assures that we'll have ample capacity to continue to grow our margins while accelerating our investments in innovation. So this is a super exciting innovation inflection point that we've been working to for four years now. And look, the modernization and the transformation is working. diversifying the business to drive more sustainable growth. We're gaining share through innovation. Our cash flow metrics are greatly improved. We've got tremendous capacity to return capital to shareholders while continuing to invest and accelerate the top line. So a lot of good momentum here and we're just going to keep delivering quarter by quarter.

All right, Chris, I think that's a good place to end. Everyone, thanks for the time today and have a great rest of your day. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.