Q3 2019 Earnings Call
Good day and welcome to the Transunion.
That was done in 19 third quarter earnings conference call.
All.
Aaron Hoffman, Vice President of Investor Relations.
Please go ahead.
Good morning, everyone and thank you for joining us today on the call. We have credit card right, President and Chief Executive Officer, and Todd Cielo Executive Vice President and Chief Financial Officer, We posted earnings release inside the company. This call on the Trans Union Investor Relations website.
Our earnings release includes schedules, which contain more detailed information about revenue operating expenses and other items, including certain non-GAAP financial measures reconciliations of these non-GAAP financial measures. They're most directly comparable GAAP measures are also included in these schedule today.
This call will be recorded in a replay will be available on our website.
We will also be making statements. During this call that are forward looking.
Payments are based on current expectations and assumptions that are subject to risks and uncertainties.
Actual results could differ materially from those described in the forward looking statements because the factors discussed in todays earnings release in the comments made during this conference call at our most recent Form 10-K forms 10-Q, and other reports and filings with the FCC.
We do not undertake any duty to update any forward looking statement.
With that let me now starting to time over to Chris. Thank you Aaron as you saw the earnings release. This morning, ranging delivered another strong quarter in fact, it's worth noting that the third quarter saw record adjusted revenue and adjusted EBITDA in absolute dollars and the highest quarterly adjusted EBITDA margin in our history.
Sure.
The results reflect broad based innovation driven growth that attractive expanding margins and we're very proud of our track record.
Since our IPO.
Over the past seven years, we have expanded into attractive new verticals and geographies built or acquired innovative solutions and developed industry, leading technology at the same time. We've also created a culture that emphasizes customer focus individual accountability and performance our state.
All nurse.
It is trade Union, just as we expected from ourselves each day.
Sure.
The company the understands the needs of the customers served and can deliver best in class solutions to meet those needs, we're positioned to continue to deliver market, leading growth and shareholder value creation.
And we continue to evolve our organization and to develop new capabilities and or compete effectively.
Earlier this year, we trade to new global leadership positions in order to accelerate product development and operational effectiveness.
First we consolidated responsibility for our horizontal locations on her global leader.
Samples of be solutions include thought mitigation decisioning credit products and our goals, we have a analytic solutions.
Second we create a global operations role to support the department of customer focused operational platforms through improved process efficiency and greater automation.
We've also expanded our investment in our vertical markets, where our leaders. This brings significant industry experience and deep insights as the customer pain points by adding resources across telecommunications utilities E Commerce gaming and other verticals this investor.
But the market planning typically enables us to create more valuable solutions, leading to accelerated organic growth.
And we continually deep and differentiated data.
In addition to our traditional attractive physicians and consumer credit data. We've added an array of alternative data included including trended credit.
Payday and online short term loans retail loans certain demand deposit information.
Certainly and other data this extended David coverage enables us to provide credit behavior insights on billions of consumers that we could not previously.
We've also diversified our business portfolio overall with important extensions into insurance healthcare public sector consumer identity digital services and other verticals in categories.
And we recognize while having deep differentiated data is important clients also need effective and user friendly solutions to visualize analyze models and develop actionable insights from our data that enables better decisions across their enterprise.
While much of our data analytics capabilities have been internally developed overdues lot seven years. We've also executed 18 acquisitions and a host of strategic partnerships that have meaningfully augmented our capabilities and created value for shareholders.
Examples of key acquisitions and include Tilo drivers history, East and call credit and I would patient, which delivered new data and capabilities and expanded our geographic coverage and accelerated our organic growth.
I'll walk away Transunion has developed a flexible and effective technology platform through consistent focus and investment.
Efforts began with a project spark citizens migration from mainframe technology to a cloud compatible architecture based on high performance distributed Koesters Permian both proprietary open source software.
Deployed to solutions in containers running out of our World class technology stack and also the public cloud as appropriate.
At the same time, we proactively improve our information security along multiple dimensions, including.
Additional personnel procedures hardware software reporting and the use of independent security experts.
The combination of these efforts has produced a technology infrastructure that provides high availability and faster solution deployment at lower cost.
True security.
And we're improving our software development capabilities by continuing to use safe abstral across our products and technology organizations.
This scale to agile for enterprise. This approach has enabled improvements and software development consistency speed reliability and security, we're enjoying more predictable outcomes and faster throughput the previously.
And as technology inevitably progresses, we will continue to invest to improve our infrastructure and development capabilities to effectively meet market needs.
Our current efforts include material new functionality standardizing applications implementing a modern microservices architecture, developing a PR layer and leveraging the public cloud for solutions, such as promo, which require flexible competing capacity based on our customers and bearing.
And just.
In sum.
We believe that we understand how to oil.
Finance information technologies to high quality datasets to create differentiated solutions for customers and superior returns for shareholders.
With that let's talk about the strong performance we've enjoyed in each of our divisions.
Starting with us markets.
We saw good performance in both financial services in our emerging verticals, which include insurance healthcare collections rental screening public sector media and a long tail of fast growing diversified markets.
In financial services the momentum we saw in the second quarter continued as result of several factors in mortgage Lois and lower interest rates drove an increase in refinancing activity against more favorable year over year comparisons.
Our industry, leading trended and alternative data solutions credit vision and Creditvision link also continued to grow rapidly.
The third quarter was the largest revenue quarter for these products in our history.
Part of the strength was due.
To the increase in mortgage activity credit card issuers also have increased their usage of trended data in both marketing on Friday, we expect this trend to continue over the next several years.
Finally, fintech lenders have resumed their growth by meeting consumers' expectations for fast low friction lending experiences on loss.
The launch of the Apple carpet in the third quarter bar by our client Marcus.
A good example, more powerful mergers are responding to consumer demands for speed and ease of use.
Our working closely together markets and Transunion, we're able to provide real time credit decisions and enable usage of the Apple cart through consumers to digital wallets in a matter of seconds.
We were well positioned to support markets all of this launch based on our investments in our fast available and secure technology infrastructure.
To deliver the array of traditional and alternative data usage.
To render such rapid credit decisions.
Another critical element of our focus on our customers come through our consumer operations team, which works each day with consumers and furniture to increase understanding and resolved discrepancies.
In addition to our outstanding and knowledgeable call Center agent trends Union has developed easy to use applications to allow consumers to lock or freezes there Chris.
With a single screens white, when they're not seeking credit and again to quickly unlock the credit files when they become critical factors that again.
No the other half of us markets.
We experienced good performance in our emerging verticals highlighted by another very strong quarter for insurance and diversified markets along with a good quarter for our healthcare vertical.
As a reminder.
Diversified markets represents a collection of high quality verticals that level through the core data in capabilities of trade Jinyan.
Such as investigative services.
Background screening and telco multi without the invasive and expensive medical tests, otherwise we'll car.
More recently, we've expanded the solution to prove life underwriting providing get another avenue for growth, we both a multimillion dollar business in life and it continues to grow rapidly.
Similarly, we recently developed a commercial habitational risk score that leverages, our existing data assets. This solutions helps PNC insurers to more accurately underwrite policy.
These for apartment complexes and condo buildings.
The score is increasingly being used by our existing customers as well as new ones and has all revenue multimillion dollar business.
We've built in for diversify insurance protocol.
As a long significant growth runway ahead fueled by the solutions I've described as well as the opportunity to continue innovating in this attractive market.
The second area of growth I'd like to highlight is in our Colo business.
Fueled by Kilo XP.
Which is a powerful data aggregation and distribution tool that lngs vast array of services between individuals entities and locations.
We are in the unique position as the Bureau.
As we have both full credit files and extensive array of public records the data provide differentiated and value added solutions.
Along with investigators services third party collections and the public sector, where their applications at all levels of government.
Hello, FSP is well positioned for future growth as we increase and leverage our data assets and continue to address additional end user markets.
As I've discussed today, we're seeing very good performance across the us markets and are confident this is performance will continue as a result of arch.
Strong data assets, our innovation, our capability and a vertical expertise.
Now turning to our international segment, we had a tremendous quarter the growth was broad based and generally well above the underlying markets in which we participate as a result of internet of executing our international growth playbook, which focuses on innovation.
Spending into adjacent capabilities, improving go to market operations and leveraging our core horizontal solutions.
I'll highlight two markets, starting with the UK, which delivered very strong performance with 12% constant currency adjusted revenue growth at an attractive market.
We experienced growth broadly across our UK business.
First despite lingering questions and concerns about Brexit, we saw growth in our core lending business as the market grew slightly but we were able to capture share.
Second in more than a third of the business relates to five mitigation that market continues to see outsized growth and we're very well position to capitalize on it with differentiated solutions like I have Asia.
Sure.
We have an attractive position in the game markets and continue to see strong growth augmented by the effective application of our capabilities and five mitigation and I'd verification.
As we discussed last quarter, both true vision and credit view are now and market.
And we'll take some time.
To penetrate as customers test solutions and integrate them into their environments.
As these solutions build momentum in the marketplace, we have confidence they will be drivers to that incremental growth in 2020 and beyond.
I would also point out that open banking is likely to be important growth driver of the future. We've already built a very strong solution that has resulted in the winter tranche in June ranging from large banks to syntax.
Our UK businesses position first sustainable double digit growth behind and strong execution in our core lending business rapid expansion of adjacent cities like fraud mitigation in gaming and the launch of truth vision and credit view.
Given market I want to highlight as India, where we continue to benefit from attractive overall market conditions in a truly diversified suite of solutions. All the core of the business remains consumer credit, we've augmented that with trended credit data direct to consumer offerings.
Fraud mitigation and analytic and Decisioning solutions. We also have the industry, leading commercial credit score, which is seen rapid growth.
The strength of the market and our broad suite of solutions positions us well for long term growth in India.
Across our geographic footprint, we see significant opportunities for continued growth as we effectively execute our international playbook.
And now shifting the consumer interactive again, we saw strength in both our direct and indirect channels.
Growth in the indirect channel is primarily a result of continued strong performance by our broad portfolio partners as well as continue adding new partners.
For instance, during the quarter one of our largest fintech lenders lending club begin using our credit if you platform. This dovetails nicely with my earlier discussion about our leading position within tech lenders, we continue to expand our offerings to help them improve the consumer experience.
And our current channel consumer interest in credit management and identity protection remains strong and our analytics driven marketing strategy has addressed these favorable market trends, we continue to focus marketing efforts into areas that deliver efficient returns and these efforts have proven effective.
For growing revenues in the direct business.
We also continue to innovate in our correct channel.
In the first quarter of this year, we launched at Compass and effective tool for consumers to see how good financial behavior based on real data can lead to better credit health and an improved four.
It's important to note that these actions benefit the customer.
Virtually any listener and.
And regardless of whats or lender shoes and to make an underwriting decision.
That concludes my discussion of our business I'll now turn by turn over to Todd I'll walk you through our financial results and our outlook.
Todd.
Thanks, Chris as usual from the same can some sled city are the comparisons I discussed today will be against the third quarter of 2018 unless noted otherwise so let's start with the income statement.
Third quarter consolidated adjusted revenue increased 11% on a reported basis and 12% in constant currency.
Adjusted revenue from acquisitions contributed slightly less than one point of growth in the corner related to the 2018 acquisition of from Texas, and the 2019 acquisition of true signal.
And one other minor the lack of incremental credit monitoring from the breach in a competitor was again about a one point headwind in the corner.
As we've discussed previously we are receiving an immaterial amount of revenue this year compared to last year as the offering is now handled by another provider and serve significantly fewer subscribers.
Excluding the comparability impact from this revenue.
Adjusted organic revenue in constant currency would have grown 12%.
Adjusted EBITDA increased 15% on a reported basis and 16% in constant currency.
As Chris noted our adjusted EBITDA margin was the highest we've seen for a quarter at 40.7%.
While the third quarter is typically our strongest this high watermark reflects strong revenue flow through even as we continue to invest aggressively in all aspects of our business.
Third quarter, adjusted EPS grew 16% with a 26.2% adjusted effective tax rate.
The rate in the quarter was slightly lower than our full year expectation and 27% as the result of realizing the benefits of certain tax planning initiatives.
SGN, a increased 10% and constant services was up 6% as a result of higher operating and integration costs related to our recent acquisitions investments in strategic initiatives and higher data and costs associated with our revenue growth.
As we did all of last year, we want to show you the impact that recent acquisitions have had on our margin and to help you see the good performance of the underlying business.
We reported margin expanded by about 135 basis points.
Excluding the impact of the acquisitions the margin on our underlying business expanded by about 160 basis points in the third quarter, reflecting the typically strong incremental margin profile of our business.
As the difference between reported and underlying is negligible and long only getting smaller as were basis will fall out of the calculation in the fourth quarter.
We launched our this slide again until there are additional acquisitions and it makes sense to provide these details.
I'll wrap up my comments on our consolidated results with a couple important points about cash flow and our balance sheet.
During the third quarter, we voluntarily prepaid and another $165 million of debt after prepaying $100 million last quarter and $60 million in the fourth quarter of 2018.
This brings our rolling 12 month prepayment total to $325 million.
And for the remainder of the air and the absence of significant transactions.
I'd expect to voluntarily prepaid additional debt.
Now these actions clearly a very positive impact by reducing our interest expense and helping to de risk our debt profile, which is now approximately 77% fixed and 23% variable.
At the same time, our leverage ratio continues to decline and winds 3.4 times net debt to adjusted EBITDA at the end of the third quarter.
We had committed to be at 3.5 times are less by year end.
So I'm pleased to report that we got there early.
Key driver as you can see on this slide is our fast growing adjusted EBITDA and good cash conversion reinforcing our ability to rapidly de lever, even as we aggressively invest organically participate the strategic M&A paying our dividend and prepaid that.
Now looking at segment revenue and adjusted EBITDA US markets adjusted revenue grew 12%.
Excluding the impact of the acquisitions of remixes entry signal.
Organic adjusted revenue would have been up 10%.
Our financial services vertical grew 13% on a reported and organic basis.
The other verticals combined grew 11% and 8% on an organic basis.
Insurance diversified markets in public sector continued to deliver strong results.
I will care had another solid quarter as we continue to see earlier contract signings begin to monetize.
And the recent acquisitions have integrated in effectively we are starting to realize cross sell synergies between them and our core back end business.
As keeps us in position to achieve our guidance of mid single digit growth for the full year.
Adjusted EBITDA for Us markets increased 8%, 18% on multiple reported and organic basis.
Moving to international adjusted revenue grew 10% and 14% in constant currency.
All of our six regions delivered double digit constant currency revenue growth ranging from 34% in India to 13% in Latin America to 12% in UK and 12% in Canada.
Africa was solid with 7% growth in Asia Pacific grew slightly as we continued to face a headwind from having temporarily shut down our direct to consumer platform.
Without the impact of the direct to consumer platform revenue would have grown up low double digits, reflecting continued strength in the Philippines, and and ongoing strength in our business to business trends in Hong Kong.
Adjusted EBITDA for international grew 12%.
On a constant currency basis, it was up 16%.
Consumer interactive adjusted revenue increased 7% driven by balanced growth between the indirect and direct channels.
As I noted earlier. This result includes the headwind.
I was comparing against the lack of incremental credit monitoring from a breach and a competitor and the segment would have grown low double digits excluding that.
In addition to good performance across the business. We also benefited from several onetime opportunities related to breach remediation.
Adjusted EBITDA for consumer interactive grew 10%.
Turning now to our guidance for 2019, as we typically do who we're going to flow this quarter's outperformance through to the full year.
You'll note that greater FX headwinds are offsetting some of the ongoing trends in the fourth corner.
Now, let me start with an update to some base assumptions.
For the full year acquisitions, including call credit.
Imation.
S remixes entry signal should add approximately five points of adjusted revenue growth.
Perhaps facts, we expect to see about one point of headwind impacting bulk adjusted revenue and adjusted EBITDA Theres also a one point headwind from the absence of incremental monitoring revenue from a competitor's deferred reach.
We expect adjusted revenue to come in between $2.644 billion to $2.649 billion up 13%.
So on an organic constant currency basis, excluding the incremental monitoring adjusted revenue should be up 9.5% to 10%.
Adjusted EBITDA is expected to be between 1.0 for $8 billion and $1.052 billion up 14% to 15%.
At the high end of our guidance adjusted EBIDTA margin is expected to be up about 60 basis points from 39.1% in 2018.
Adjusted diluted earnings per share for the year are expected to be between $2 in 74 cents in $2.76 up 10%.
This improvement from previous guidance reflects our stronger operating results along with the benefits of prepaying debt and reducing our interest expense.
Update you on some of the modeling assumptions Theres no change to our tax rate expectation, which is approximately 27% in 2019.
Terminal DNA is still expected to be approximately $360 million.
Excluding the step up and subsequent M&A portion dnanet should be about $155 million.
Net interest expense should now be about $170 million as a result of prepaying debt in the corner.
We anticipate that capital expenditures will be.
7.5% of revenues this year as we aggressively invest a new products and integrate our recent acquisitions, though now slightly below previous expectations due to the timing of projects.
Turning to the fourth quarter 2019, let me provide our assumptions for the corner.
Our adjusted revenue, we expect about 50 basis points of contribution from M&A. There is approximately one point of impact on both adjusted revenue and adjusted EBITDA from FX and there is a one point headwind from the absence of incremental monitoring revenue.
On the competitors from reach.
Adjusted revenue should come in between $667 million and $672 million, an increase of 7% to 8%.
Excluding the impact of not having the incremental monitoring revenue organic constant currency adjusted revenue is expected to be up 8% to 9%.
Adjusted EBITDA is expected to be between $264 million and $268 million, an increase of 6% to 8%.
Adjusted diluted earnings per share are expected to be 69 cents to 71 cents, an increase of 5% to 7%.
You may recall that in the fourth quarter of 2018, we recognized a number of benefits from our tax planning initiatives to tough comparison negatively impacts our EPS growth.
And the corridor.
That concludes my review of our financial results I'll turn the call back to Chris for some final comments.
Thanks, Todd So let me end, where I started the business model and culture of Transunion are very strong in tune for long term growth and success.
Our people data technology capabilities culture.
And of course innovation.
Our synergistic blend that enables superior shareholder value creation.
As you've heard regularly from us including today there are many avenues for our long term growth and you can be confident that our management team is pursuing them aggressively.
With that I'll turn the time back to Aaron.
Thanks, Chris that concludes our prepared remarks today for the Q today as always we ask that you each at only one question. So that we can include more participants.
No.
Down but take those questions.
Thank you.
We will now begin the question answer session.
Ask a question.
Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the key.
Your question.
Please press Star and then too.
At this time, we will pause for a moment tomorrow roster.
First question today will come from Andrew Nicholas of William Blair. Please go ahead.
Hi, good morning.
Just wanted to ask a quick question might EBITDA guidance I think it implies that margins are down a bit in the fourth quarter relative to last year.
I'm just wondering if you talk about what's driving your outlook for margins is there anything in terms of investments or timing you would call out for the fourth quarter.
Or any reason you would expect margin expansion as flow.
Hey, Good morning, Andrew This is Todd ill take that question of I think the way.
To think about it as if you look at our adjusted EBITDA margin in the fourth quarter of 2018, and we were at 39.9% on so the guided that we've put out is an asset is.
To maintain that margin were just staying.
We'll act on the on to that and if you and if you think about that a little bit more.
At the 40% EBITDA margin a few around it.
Thats very strong.
And what do we think about how we're going to operate the business in the fourth quarter clearly there are some investments.
That we're going to make so we actually feel really good about this guy that we're able to make those investments and still deliver what's approximately 40% adjusted EBITDA margin.
Thank you.
Our next question will come from Jeff smaller of Baird. Please go ahead.
Thank you the Euro financial services performance, particularly good demand, especially considering how hard to accomplish one year ago I know mortgage market is a factor but just.
Other factors worth I guess discussing like CV in CV link I understand that they're strong but are they accelerating and then I think Chris how to call out about the financial Tech end market, maybe being more active printers.
Any additional color on Berman.
Yes can serve growth.
Good morning, Jeff This is Chris.
And performance overall digital services was strong and positive across the varying.
Market segments.
Certainly mortgage had a very strong quarter, given low prior year comps and.
The improvement in volume, we saw because low interest rates.
We've got some nice growth opportunity.
Consumer lending space as well cargo originations.
Continue to be moderate to strong even auto is showing some growth. So it was a.
It was a quarter of well balanced growth across all of financial services in terms of arc trended in our trended costs alternative data products.
We continue to make a very nice new sales.
Prior implementations are ramping contributing nicely to results.
Again, I think the call out was that it was our largest quarter in absolute sales dollars for both credit vision and then Creditvision link.
The two trended products. So we're excited.
Our next question will come from Manav Patnaik.
Please go ahead.
Thank you good morning.
I said a question on the emerging verticals.
Hoping you could elaborate a little bit loan to growth in the diversified on the non insurance related because then maybe just.
Update us on if healthcare is coming back to the high single digit to then anticipate.
Hey amount of good morning, Todd I'll take that question on emerging verticals. So as you as you already.
Spoke about the insurance vertical of was very strong and Chris obviously talked about that I'm in his opening remarks. This morning.
Well, we think about the we look at the rest of the emerging verticals.
Healthcare on had a nice quarter, but it also was rebounding again.
Would be considered to be a weaker comps in the in the prior year, but the business delivered on the expectations.
That.
We were anticipating in the quarter I would say that the only ami area that might be down a little bit is our collections on vertical which is down on a year over year basis.
I think thats really just more of a testament to the overall strength.
We're seeing just in the consumer space in the in the you asked the consumer a now.
It is healthy netting thats reflected in our financial services results. So its slip that over to the emerging verticals.
You know expedite the counterbalanced seven our business right by happened that collections vertical there is down in good times, but it'll probably be up is delinquencies on the consumer space up tick up and right now we're not seeing that in a meaningful way. So we look to growth on that slows pulling that back.
Our next question.
From Gary Bisbee of Bank of America Merrill Lynch. Please go ahead.
Hey, thanks.
Maybe I could take another kind of doubt last one that the comp.
In the emerging verticals God sticks on little more than six points easier and yet the growth rate year over year was.
Let's call it the same as last quarter. So.
I don't think collections is big enough that that unless that changed dramatically from last quarter that that would have that they can impact. So so something else functions have deteriorated or or health care just didn't get much better. Despite the comp is there anymore.
Color and whatever it is is the short term in nature or is there. Some reason the growth potential that businesses decelerating. So much. Thank you.
Yes, no Gary Great Great question good Carla.
On that I really when we look across the portfolio.
All the vertical markets.
That make up emerging.
A growing I would say the insurance.
Business is outside services I already mentioned, Chris talked about already this morning.
Healthcare did post a nice rebound in delivered everything that we said we saw good growth out of our diversified market. This business. So yeah. The rest of the verticals are while they grew they probably didn't they did not grow as fast as.
The 8% right. So then that becomes the drag them in the overall growth rate.
So by and large I'd say the the verticals that were most for focus in with the emerging space of healthcare.
The insurance.
We're very happy with the performance that they posted.
In the quarter.
Okay. Thank you.
Our next question will come from Toni Kaplan of Morgan Stanley . Please go ahead.
Thank you.
Consumer had a really strong quarter can you break.
How much of your mix is coming from direct versus indirect and trying to trend you're seeing any change signing new part you're seeing higher volumes and what are the main drivers there and the margins were really strong telephone consumer.
So is that helped by sorry, I'm on the direct or indirect as well. Thank you.
Hey, Hey, Tony and this has had some of those as it pertains to the consumer active business going you think about the direct to versus the indirect channel think about that is one thirds direct two thirds.
Indirect and then when you get into.
The overall margins of that business.
A lot of it has to do with the type of products that the consumer is purchasing frontline sites. So it's a single hero products, meaning that it's just the transient in credit report Thats being provided obviously, that's a higher margin product for us to deliver because it's hard.
Yeah that we're delivering.
The opposite of that would be where we're offering a threepl monitoring product, where we have to purchase.
Credit file from Equifax and from the experience.
To deliver that so theres costs associated with it so the margin profile.
It's hit so when you look at the overall.
Performance of the the margin this quarter, yes, we did definitely benefit.
From a mix shift and that's not always something thats deliberate.
Third I see it variances, depending on the buying patterns.
Of our customers.
Just going back to the topline, though I would I would say that doesn't have the business performed exceptionally well.
Mobile channels.
First the direct business has been an area that we've been investing incremental advertising dollars into.
Because we are able to attract high quality consumers.
That we're able to retain so there is another they're interested in monitoring or credits and they're staying with us.
Firstly on on the indirect side of our business.
We believe we benefited from a couple of annual breach services agreements, which we highlighted.
Our prepared remarks.
That also.
Providing meaningful growth, but then also all the rest of the indirect partners continued in general to grow overall very nicely for us.
Thank you.
Our next question will come from George Mihalos Cohen. Please go ahead.
Good morning, guys. Thanks, Thanks for taking my question.
Chris I wanted to ask a question on on PST to in in the UK and open banking, which is something that you highlighted in your remarks is that a.
Potentially meaningful driver of the UK business next year and can you maybe kind of scope for us how you're thinking about that opportunity between servicing fintechs and traditional banks in in the UK.
Okay.
Hey, good morning, Jordan.
We're really excited with two groups that we posted this quarter in the UK focused on organic as you saw.
It came from.
Abroad mix of areas.
We gained some market share and core credit origination services.
We're very robust fraud business, there and fraud mitigation is fast growing and now with the addition of our I ovation capabilities. It's made is even more competitive and open banking is really just in the early.
Phases of [noise].
The option in that market as we're looking next year, we do believe that open banking.
And kind of transaction categorization services.
We don't generate some.
Interesting revenues for us, but really thinking about the UK as an opportunity to apply.
The same approach the same playbook that we've applied internationally with success our growth play book, It's a combination of.
Just.
Good knowledge based marketing and blocking and tackling in the field, having strong product trended products and alternative data as well.
And bringing in some of our global horizontal solutions.
Like.
Credit view like our.
We're growing prama analytical suite.
Maybe get emphasizing io patient in the marketplace.
So really we're looking for broad based growth and hoping to acquire additional share of the process.
Obviously.
Our next question will come from David Togut Evercore ISI. Please go ahead.
Thank you. Good morning, you called out strengthen mortgage solid performance in credit card and auto is driving the underlying strength. The U.S. markets could you comment on the sustainability of these three big macro drivers of a U.S. credit reporting demand.
Thanks.
Happy to share some thoughts to then maybe talk and and I can tell chemo this question, but.
The growth or is that we experienced in the third quarter and mortgage as I look forward or I don't know 12, or 18 months I would be surprised we continue to grow better trajectory again, it's bit of a turnaround on top of a soft comp.
That said home prices are easing interest rates are low and there could arguably be further downward pressure is that it's always good for refinancing volume.
We didnt get an uptick in and new home purchases in the future all of that's been fairly slow.
So.
I would say ignite mid single digits volume growth, perhaps for the future.
Auto was flat as we've talked about before from a volume perspective.
However, there is starting to be a shift between new cars and used cars and.
Typically a bit more credit gives polled.
To finance.
We used car so there's a certain offset the volume slowdown.
You didn't mention consumer lending growth there was nice growth you alluded to consumer lending.
I think the marketing that we're seeing there the fin tech space is.
Is more restrained that it has been in prior years, but it is still active and.
Growth full category, probably expanding the limiting pie and also capturing some share from traditional lenders.
And then card continues to.
Each curve along nicely into the mid single digits volume growth.
Hi quality.
Account origination for Myrisk perspective, and then really across all of these segments.
Further just being world damage to the consumer the economy has strong overall certainly.
But if the delinquencies remain.
Well below pre recession levels.
And so all that is very good for our core financial services business. Although it is a drag on our collections businesses.
Explained before.
Thank you.
[laughter].
And my comment from Bill Warmington.
Please go ahead.
Good morning, everyone.
So you mentioned in your remarks that.
Scott about six months in.
Consumers and India benefiting from credit few dashboard day I, just wanted to ask how that compared to a more mature market like the U.S. and how long do you think it'll take India to reach similar penetration and if so what kind of revenue opportunity to does that present.
Do you mean credit view or credit position I.
Matt sorry credit view of dashboard.
Okay.
Okay.
Yes, so the credit yes, just for clarity on the call Unicredit vision is premium for the trend new product credit view.
Our white label packaging of our direct to consumer functionality that we license.
Two lenders in order.
So big.
Cultivated eventually monetize the audience.
Yeah.
Due to that end product has done extremely well given to US we had a nice.
Order in the year to date of selling efforts I can't tell you exactly the audience that we have I'm not sure that all of our lenders would report that information back to us. So I'm just a clear on that we have introduced that product into a variety of a third or.
National market, including India.
We're having sort of selling success there.
I very much expected that will be very complimentary product to our overall data offerings interest away for us to leverage the deeper relationships. So we've cultivated with.
Both the traditional bank lenders in the.
The nonbank financial companies.
It Bill in just one other thing to add to that is the overtime.
Credit view and everything Chris just explained and that's the relationship that we would have with financial institution, but I'm not for credit, but we also have a nice growing direct business on this well off in India. So you got to think about.
Both channels in that space on similar to how we operate on in the U.S.
Got it thank you.
Our next question will come from Andrew Jeffrey of Suntrust. Please go ahead.
Hi, Good morning appreciate you taking the question.
I wanted to ask about.
The the Fintech performance and specifically looking at slide five in your deck.
I Wonder you, Chris you call out mortgage and how that might get transitory tailwinds, but clearly been tech demand in the success you've had there is more structural.
How do you think about the potential zero sum game that arises as.
Legacy financial institutions.
There.
Is that a net benefit to to you over time simply because you have such a leadership position in that fires that is that something you think about and talk about and try to balance than your long term growth plans.
So first some commentary on market share I mean.
And again I'm.
This is more anecdotal unscientific, but I would.
My feeling is that the rise of the Fintechs the rise of.
Online consumer finance is growing the pie and stuff necessarily zero sum right no doubt there is some share gains try this fintech space collectively.
And I mean, you can see that.
Fair out.
That is borne out by.
Some of the numbers that we track internally.
I would expect.
That.
Consumer on lending book online lending will continue to outpace.
Traditional lending market growth and because we have first mover advantage and a nice concentration share there.
That means that we have.
A superior Oh, we've seen much more of the inquiries that take place with marketing and origination activities that gives us more robust data asset that reinforces the value and secures the share that we've got now that said, it's still highly can.
Additives space.
There is price compression as we've talked about before as these lenders.
Renegotiate based on.
Very substantial volumes that they have attained.
That's not necessarily a bad thing, it's just the natural development of market like this and we're super excited to serve all of these clients and the way that we do.
So advantaged position or not I wouldn't have stated so strongly we're trying to compete aggressively in every segment that we serve.
If you look at traditional odors their online capabilities are extremely impressive as well and I think as we try to convey in slide five it's really all for the net benefit of the consumer.
The rise of the Internet the rise of data infuse decision, making in near real time.
That demand is permeating away all lenders are competing.
Thank you.
Our next 10 will come from.
Okay.
Deutsche Bank. Please go ahead.
Yes.
Sure. So congrats so just wanted to Walker.
Question lets just wonderful Q revenue guidance implied Tonight.
Some of them onto more creation and organic growth I was just wondering can you help us understand what's causing that slowdown is that conservatism or I guess.
Assumptions around mortgage benefit so any color on that trend. Thanks.
Issues. This is Todd thanks for the question, yes, so typically what are our position going into any given quarter.
Is it provides the market with a forecast and also they hadn't says guidance that we feel comfortable that we can achieve.
In that and Thats really where we're at right now when we go into our business review meetings and do the deep dives with season had a sense of what the pipelines look like in the conversion of that.
We feel good about how the numbers that we put out on yield for the for the fourth quarter.
Albeit at each to your point, it's a little bit slower than what we saw in the third quarter, but nevertheless, b. If there is the if there is ultimate performance to be had meal that will materialize.
Throughout the quarter for us.
Expenses.
And our next question today will come from Kevin Mcveigh of Credit Suisse.
Please go ahead.
Great. Thank you Hey.
Congrats on the margins really really strong.
Hey, Todd any sense of E. In a way to think about how much email it to the extent.
You see incremental benefit on margins how much of that those two reinvestment to come to continued to spur the organic growth as opposed to.
Get shared with the market and does that kind of mix vary over time.
Yeah, Kevin that's a that's it's a great question and that's one that we debate.
You bet.
And his management team in when we are especially when and where our approach machine.
This year the high end of our guide for the full year meeting at 39.7%.
Approaching 40%.
For the for the full year.
Yes, that's a significant amount of margin that's there and I think the way. We we think about his first we believe there is a lot of runway.
Last with our organic offerings that we already have been market, but we're also excited about outages.
Products that are still gaining traction with so Chris in spoken about Prama as an example, so.
We're very well.
In investing back in those in those businesses and in those products on to ensure says sustainability of the the topline.
Performance as we go back to the Investor day in the long term guide on that we provided.
Said that we would grow revenues.
By 7% on average over over the next three years. So we've always got that number in our minds that thats something that we we've committed to due to the market needs something that we want that we strive to achieve the only way we're going to do that is by continuously in the.
Operating in differentiating ourselves.
In the marketplace.
Into the the margin itself.
Pushing 40% is significant and I think we somewhat tempered expectations back on the Investor Day, where we said we would grow the margin of 50 basis points on average over the next three years and really what that's getting too is the margin profile trends.
Union has changed so much out of the from our IPO.
In 2015, when we are around 30%.
We have sustain that getting almost up to 40%, but it's really more of a question how much margin.
Do we want to squeeze out of trends Union or do we believe that Theres long term revenue growth potential settled we believe that we believe that theres a lot more to go as eveready side.
So I expect on the margin side, that's to be very deliberate and focus on topline growth and making investments and maybe not having as much.
No flow through.
To the bottom line and adjusted EBITDA.
Sure. Thank you again congrats.
Thank you.
And ladies and gentlemen, this will conclude our question and answer Sachin.
I'd like to turn the conference back over.
Smith for any closing remarks.
Great. Thank you very much and we appreciate everyone's time today is at the top of the out going to wrap things up we hope you have a terrific. Okay. Thank you.
The conference has now concluded we thank you for attending todays presentation and you may now disconnect your lines.