Q2 2020 TransUnion Earnings Call
<unk> earnings Conference call.
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Please note. This event is being recorded I would now I'll turn the conference over to Aaron Hoffman. Please go ahead.
Good morning, everyone and thank you for joining us today I hope that all of you are safe and healthy on the call today, we have crushed car right, President and Chief Executive Officer, and Todd Fellow Executive Vice President and Chief Financial Officer.
We posted earnings release implied to accompany this call on the train to Union Investor Relations website.
Our earnings release from 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 their corresponding reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures.
Today's call will be recorded in a replay will be available on the web site.
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 todays earnings release in the comments made during the <unk>. This conference call and in 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 all that out of the way, let me turn the tying them over to Chris.
Thank you Aaron and I want to welcome all of you to our call and extend our most sincere hope that you and your loved ones are healthy and safe.
Our dreams Union, we continue to prioritize the health and safety of our associates, our customers and the wider communities in which we operate do that in globally. We have we continued to have almost every one of our 8000 employees working from home.
There's no need for us rush back into our offices as our associates have demonstrated the flexibility to work remotely and run our business with virtually no interruption.
We remain deeply appreciative of the selfless and tireless work of health care professionals first responders and other east central workers, we recognize them for how much they do to keep so many of us safe.
I also want to take a moment to talk about some other heroes during the quarter in the wake of the senseless and brutal death of George Floyd, we witnessed a remarkable and Swift movement to finally made good in the American promise of a quality and justice for all.
The millions of Americans, who peacefully and thoughtfully took a stand for racial justice our heroes too.
A trade Union, we have a culture that embraces diversity.
And fosters inclusion with more than a dozen affinity groups for employees ranging from African Dspro for our Black associates to a veterans Alliance group to group for our LG BT Q population and many more.
However.
We can and we will do more as a major employer. There are many ways that trains union and I connect for change my first priority will be to ensure our company is the place where all colleagues have equal access to professional growth in career opportunities and can come to work everyday as their authentic cells.
And listening to many of our colleagues I know, we have more work to do to make that happen.
To achieve this goal we must submit a culture of mutual support and open communication, which we started in earnest with many of our black associates.
Our focus on inclusion must exist on an ongoing basis I believe that the whole is strengthened when we understand and embrace diversity and I believe we can do more to make this happened.
We will not tolerate racism. It has no place a train junior we will have more diverse company through how we hire promote and retain our black colleagues and other underrepresented groups.
We will improve transparency around promotions and pay we will increase our training starting with our managers and each of us will undertake unconscious bias training this year.
We will listen and learn from each other and survey our associates regularly to measure our progress.
I'm grateful.
So many of our black associates for having the courage and candor have this difficult conversation with me and my executive team and to help shape. The next very important steps with trade Union. Thank you.
There is no easy transition from here. So I will just move on to the agenda for this morning's call.
First I will give you are short overview of how the second quarter unfolded.
Second I'll discuss the current volume trends across our primary verticals end markets and how we have supported our customers and consumers during this crisis.
You will hear consistent story of rapidly adapting our go to market approach, our product offerings and solutions to the current market conditions.
Then I will discuss our ongoing investments to position trade Union for a continuation of our best in class growth.
I'll walk you through the early progress, we've made with global solutions and global operations.
I will also provide you with an update on the status of our accelerated technology initiative project rise.
Finally, I'll then turn it over the time to Todd to discuss our detailed second quarter results balance sheet strength and several financial scenarios for the third quarter based on the trends I will describe.
Todd will reiterate this when he talks about the scenarios, but we continue to monitor the socio economic situation across the us and around the world we recognize the fragility of the Reopenings.
And the significant risk of returning to more stringent controls that could again have a meaningful negative impact on our business.
Now as you've seen in the earnings release this morning.
Trade Union delivered adjusted revenue adjusted EBITDA, and adjusted EPS solidly in our upside case scenario.
When we spoke to you in April we were in the early stages of the pandemic and we're dealing with high levels of uncertainty. It appears that April may have been the trough and we've seen generally positive trend since then.
Over the course of the second quarter, our business benefited as our associates, our customers and consumers transition into a work from home and physically distanced reality.
This call is clearly took some time and created considerable disruption.
As we were all settling in government stimulus began to reach consumers, who in turn reengaged in the economy, adding momentum to the recovery.
And finally during this time, our customers developed a response stabilize their businesses and mobilize to manage risk.
We participated in this range of actions supporting them with insights and thought leadership redesigned and new products as well as customize campaigns to strengthen our long term relationships.
We saw similar behavior across the majority of our markets and taken together led to very good results on a relative basis.
So let's take a look at the specifics behind the quarter, starting with US markets. As we did last quarter I want to review the overall online transaction volumes year to date for us financial services, our largest market vertical.
As you can see performance bottomed out in April and to shown a progressive recovery through May June and into July.
Notably the combination of our sales effectiveness programs specific market actions that I will discuss shortly and the efficiency created by traveling less led to an increased sales pipeline and improved win rate in financial services as well as in our other verticals.
Now, let's spend some time on the key lending markets that comprise the vertical.
Mortgage refinancing activity was very strong throughout the second quarter on the strength of historically low interest rates at the same time, we saw the home purchase market recover from a sharp decline in the first quarter to modest growth in the second quarter as pent up demand from March and April may have flowed into the market.
The strength in more than certainly helped our clients, but we remain cautious about how long the cycle and it is clearly cyclical growth will persist.
Pool of potential refinancing candidates will eventually run its course, though it may be extended as consumers come off forbearance and we are maintained a.
A conservative stance about the sustainability of the new home purchase market.
Similar to new mortgage activity auto financing suffered sharp declines in April due to consumer Lockdowns and dealer closures as we moved into May the market showed great resiliency and we saw the start of a rebound fueled by pent up demand from April stimulus checks enhance unemployment benefits.
And attractive incentives from auto manufacturers.
We also saw an elevated level of used car sales and financing financings, which tend to entailed more credit pulls them with the new car purchase.
As customers returned to the market new car inventory had shrunk with factory shutdowns and used car inventory was elevated by off lease vehicles and the liquidation of rental car fleets.
We continue to have success, providing relevant solutions, including enhanced prescreen account management and fraud mitigation solutions as more transactions have moved on line.
We are watching the Martin carefully as manufacturers resumed production and government stimulus potentially abate.
Credit card lending continues to be bifurcated between issuers, who are benefiting from the pronounced transition to online commerce offset by those in the travel and terrestrial spaces that have been severely impacted.
The latter group will likely experienced this sort of pressure Intel business and leisure travel resume.
At the same time marketing campaigns, particularly using traditional mail have slowed considerably we've seen some increase in activity around marketing recently, but it remains well below pre cobot 19 levels.
Finally, consumer lending has started to rebound during the quarter as some lenders have cautiously shifted to customer acquisition, while others remain on the sidelines working with new models and technology to prepare for a fuller consumer recovery.
In the Fintech space, we continue to extend our leadership position in the emerging point of sale Fintech market the Pos lenders.
Has seen a booming activity as online retail patterns continue to shift in their direction.
We also began to see additional funding in the Fintech space and believe there is considerable capital on the sidelines that will likely be deployed if the economy and consumer health continued to improve.
Across our lending businesses during the quarter, we provided existing thought leadership.
Of dozens of advisory board meetings.
We also created a crisis focused solutions bundle for account management and developed relevant data to measure the impact of the crisis on consumers credit files.
As online transactions have risen considerably so to have incidents of online fraud.
To address this we produced multiple solution bundles to address a range of fraud.
Risk ranging from online transactions to applications to fraudulent requests for government subsidies.
Finally, we developed the suite of cobot specific attributes called Creditvision acute relief that includes a non adverse actionable sat at 88 attributes that identified credit relationships for consumers currently in relieve status.
Attributes allow lenders and insurers to better understand how consumers and their accounts have been affected creating a more complete financial picture.
Lenders can utilize this information to better support impact to consumers, ensuring each person is reliably and safely represented in the marketplace.
Allowing businesses to transact with confidence and helps support their customers.
Our ability to leverage Creditvision with this expanded set of attributes has helped lenders to better tailor their risk management efforts and improve their direct relationships with struggling consumers.
A number of customers.
Including some very large lenders this exposure to credit vision has led to a significant increase in their interest in using the product more broadly in the future.
As I said in my opening comments, while we have seen the early signs of recovery in the lending markets. We remain responsibly cautious about the potential for a regression if reopening stall or reverse themselves.
Rating the sorts of headwinds we experienced in March and April.
However, regardless of the situation, we have positioned ourselves to partner with and support our customers through the crisis.
We've taken a similar tact and or healthcare vertical which helps healthcare providers navigate the revenue cycle and help improve the patient financial experience and maximize reimbursements for uncompensated care.
The front end of the cycle represents about one third of the revenue of the vertical and includes insurance eligibility checks.
Identity verification and charity determination and patient payment estimation as expected the friends of the business experienced sharp volume declines in the second quarter as patients and providers delayed or canceled elective and preventative care over the course of the quarter, we saw volume softness slow.
Lee abate as patients gain comfort with returning to medical facilities.
Our business also whether bet, whether the situation better than the significant volume declines would suggest.
As our payment estimation solution is priced.
On a SaaS model and we have volume floors and pricing minimums and our other solution lines.
The other two thirds of the vertical is the backend of the revenue cycle, where we help providers identify opportunities to recover lost reimbursement through various revenue recovery products and services.
The financial situation for health care providers, frankly has been quite dire as highly profitable year visits and preventative and elective care have diminished significantly.
We've seen furloughs lay offs and even some hospital closures in fact.
The American Hospital Association currently projects 320 billion in losses for hospitals in 2020.
As our back end products help providers increased their revenue reduce uncompensated care and avoid bad debt write offs, we provide a critical source of cash flow and in some cases provide essential products and services to assist providers in maintaining financial solvency.
As we signaled last quarter, we face at potential risk as the reduced front end volumes may translate to fewer recovery opportunities to work on the back end.
If the current situation holds or worsens, we may see some sort of impact in the back half of the year.
In any scenario over the long term our solutions continue to represent a valuable an essential part of the revenue cycle, helping providers reduce risk and increase or cash flow.
Our insurance vertical serves property and casualty life and commercial insurers with marketing underwriting solutions and policy management as well as analytic can investigative tools for claims.
As we discussed as we had expected.
Insurance has been a less severe impact than many other parts of our business.
After an initial slowdown ensures focused on an improved digital experience for consumers recognizing an increased need for fraud mitigation tools and began to explore solutions to continue to realize efficiencies in the business.
Retrans Union those three initiatives contribute to our insurance vertical declining only a few percentage points in the quarter.
Clearly a better shopping and application experience helps to drive our volumes as ensures pull our data in the underwriting process.
At the same time to come to that fraud.
We had success selling our risk verification product, which helps to ensure confirm important information like garage being addressed household drivers and other critical underwriting questions.
Customers also recognize the potential cost benefits of implementing our driver risk solution to prescreening, whether the carrier should pull an often extensive motor vehicle report.
Only about one third of applicants have ratable violations on their record, meaning the insurer can significantly improve efficiency through the utilization of our driver risk solution.
We stimulated engagement through our advisory boards, where we shared a valuable insight about the insurance industry, while uniquely marrying them with lending trends that provide another window into consumer behavior.
Our customers remain engaged.
On new initiatives and we saw strong contract signings during the quarter across a spectrum of insurers and ensure tech players.
As we continue to see consumers reengaging in our customers evolving their approach to the market. We expect our insurance vertical to continue to post solid results relative to many other verticals.
Now to round out my discussion of the US market segment I want to touch on a few other verticals starting with public sector, which provides a variety of data driven solutions for federal state and local governments.
At this point government agencies, largely continued to operate unabated in support of their constituents.
In the quarter public sector delivered very strong double digit growth actually running ahead of our original plan for 2020.
Our team has proactively address potential opportunities with both federal and state agencies, primarily around fraud mitigation insider threat monitoring and contact Tracy.
While many of our solution set our customers' needs. We have also rapidly innovated to tune our products for instance, working with our solutions team, we rapidly build a new report within our T., a low product to support contact tracing.
The report provides invalidates contact information so that call centers charged with reaching at risk individuals can act as efficiently and effectively as possible.
We've built a fast growing diversified public sector vertical and expect continued strong performance through the cobot 19 crisis and thereafter.
While we certainly see collections as counter cyclical over time, we don't expect to see any significant uptick until early 2021 as forbearance programs and state imposed moratoriums on collections have delayed activity.
Government subsidies.
I have helped consumer pay off debt or stay current leading to lower delinquencies and defaults that we would likely see otherwise.
To address the pressure many of our customers face in the near term we want.
We went to the market with the campaign that offered short term relief in exchange for extending our contracts.
We also executed a successful campaign for customers to add new products with a free introductory period period to help them. During this challenging time and to enhance our status as a long term partner.
The company campaigns have been well receive resulting in incremental revenue over time.
Within our tenant and employment vertical tenant screening took a sharp hit initially but as recovered relatively quickly as the rental market has shown some resilience during the crisis.
During the quarter, we offered a resident I'd our fraud mitigation tool.
For free to customers and many of now converted the paid version.
And in May we launched credit property review, which leverages the coded acute relief attributes I discussed earlier to provide insights into the credit health of residence and future bad debt risk. We've seen strong initial results from this new offering.
Now we trends in employment screening persisted through the quarter as unemployment skyrocketed and hiring slowed to near hall as economy slowly reopened we expect some modest recovery in this part of the business.
Small businesses and those previously employed by them are among the group's facing the greatest financial hardship as result of the pandemic.
During the quarter, we offered shareable for hires for free to small businesses. So that they can get back up and running quickly and help people get back to work faster.
Implementing trades unions web based shareable for hires small businesses can safely and securely conduct background checks on prospective employees within minutes instead of days.
As a result of this offer shareable for hires new account acquisition has nearly tripled since the launch.
Resulting in a 13% increase in our total customer base.
And finally in telco, we experienced a significant decline early in the quarter that has shifted to a faster than expected recovery due to the pace of Reopenings combined with our customers quick transition to digital channels.
Turning to consumer interactive, we delivered top and bottom line growth in this segment as consumers and customers continue to recognize the value of credit and identity protection.
Credit monitoring and related financial education tools like those that we offer both directly and indirectly through partners, we clearly benefit from having a diverse range of customers, including individual consumers that subscribe to our direct products financial institutions and lead Aggregators.
In the quarter, we saw good performance in our direct channel behind continued successful marketing to consumers focused on their credit health.
The other hand, some of our indirect partners have curtailed their marketing programs, resulting in a decline in subscribers, which is the basis of our revenue model.
If these trends persist we would expect a larger headwind in the back half of this year.
At the same time, though we continue to have meaningful conversations about long term opportunities with a number of potential indirect partners that have expressed interest in building more robust consumer facing offerings like financial education and modeling tools for their customers, who may be facing difficult personal financial situations.
And now wrapping up with our international market.
This slide illustrates the sharp decline in revenue that occurred in March and the subsequent recovery we've seen across our regions.
The point of this chart is less about the exact numbers and more so about the shape of the curve to help you appreciate the trends that we're seeing at this time.
Let's now spend a few minutes on each region, where you're seeing the impact of our focus on highly relevant solutions to help Arkansas, our customers manage through the current situation.
These solutions include Creditvision credit view.
Market, leading portfolio management insights and fraud solutions.
In the UK much like the US the government is provided significant stimulus to help consumers managed the crisis.
We're almost one third of the workforce to has been furloughed and is receiving government subsidies.
Lending markets were weak, particularly as Reopenings only recently begun.
We've also seen a more significant downturn in subprime and payday lending markets, where we have a particularly strong position.
During the quarter, we launch true vision transitional risk index to help lenders flag consumers currently receiving government subsidies. So they can proactively address those consumers whenever government relief ends.
We've seen strong interest from many of our top 30 customers.
Weakness in lending markets was partially offset by continued strength in fraud mitigation solutions as well as some recently won hosted relief.
And mitigation business.
With the UK government.
Not much like the UK Canadian lending markets have generally been weak the significant government stimulus of about 14%.
Of the country's GDP.
And coordination among the major banks for consumer deferral programs has moderated some of the impact for the time being.
Our business held up well falling less than 2% in the quarter and improving each month throughout the quarter.
That relatively good performance reflects two of our strength strength.
First our team reacted quickly by providing valuable thought leadership as well as new offerings like risk vulnerability score cobot of benchmarking for competitive analysis, and an acute relief package, which will launch in August.
The second it is the successful adjacent see strategy that Weve executed in recent years key adjacent season, Canada include insurance public sector, Fintech direct to consumer, including the credit view platform and breach mitigation services.
During the quarter these areas outperformed our core financial services business.
In India, we experienced dramatically different trends over the course of the quarter.
In April the government implemented an extremely severe lockdown, which depressed volumes considerably.
They saw hints of improvement with the Reopenings in some areas outside of the major financial centres and increased government stimulus.
In June the country, largely reopen and consumers began to reengage in the economy.
During the quarter and regardless of the changing circumstances, we remain highly focused on serving our customers engaging with many for as long as two hours each day for month, helping them understand the evolving situation and how they can best navigated.
At the same time.
We tune some of our solutions to better serve these customers for instance, we launched an improved small business score and improved our coverage of the space from 60% to 100%. We also supported the Indian government effort to provide stimulus small businesses by sizing the market and helping them identify who should be risk.
Leaving the support.
And we successfully launched a simplified version of our scores and algorithms using creditvision for Fintech lenders, who in India tend to provide small ticket very short duration loans.
Unlike many of our businesses portfolio reviews provided significant value to our customers.
In Latam, we serve a variety of markets and in general has seen very limited recovery as most governments have provided little stimulus and there has been a lack of coordination between lenders and governments.
The exception at the moment is in Colombia, where the recovery appears to be accelerating ahead of most other countries fueled by higher level of stimulus.
We also continued to see fits and starts of recovery in South Africa, where we have a diverse portfolio.
We have actively work for our customers to accelerate their transition to more digital channels package with valuable fraud mitigation solutions.
And in Hong Kong, where we saw the impact of Coven 19. The earliest the country is largely returned to fairly normal activity with schools and businesses almost uniformly open.
However, the continuing protests against Chinese imposed restrictions on certain civil liberties has disrupted.
A normal reset of the economy.
Of note during the quarter, we relaunched our direct to consumer offering and expect that to contribute to our financial growth.
Going forward once again.
Rounding out a APAC the Philippines continues to face significant headwinds with an initial very aggressive lockdown that was partially lifted and then restored when cobot 19 cases search we continue to expect a very long and slow recovery in the Philippines.
Despite some of the idiosyncratic challenges in our various international markets trade Union has enviable long term geographic positions.
We remain confident in the long term growth prospects and all of our markets.
I've just described power businesses have adapted to the radical changes.
Changes our customers and our consumers have faced in the world I'm pleased with the creativity urgency in termination that our team has demonstrated to ensure the best possible performance for our business, while also strengthening customer relationships.
And I'm also pleased that the organization has maintained its commitment to our long term growth rate at the same time.
I want to highlight the direction in early successes of our newly formed solutions and operations organizations as well as project rise our next major technology investment.
Let's start with solutions, our newly formed global solutions organization will improve our ability to aggressively in strategically develop in diffuse innovation across the more than 30 geographies in which we compete.
We realized consistent success with our vertical in regional strategies with somewhat inconsistent global application of our product suite.
Creditvision and credit view have both been globalized inefficient and highly successful manner. However, we have an opportunity to expand our approach more fully.
Our vertical strategy.
Hinges.
On a highly focused team of associates with deep experience in a given area like insurance or media or the public sector.
And our regional strategy benefits from leaders with deep end market knowledge and expertise.
Weve extrapolated that approach to build a series of solution focused teams populated with talented associates with deep product and market knowledge.
In the short time since we put this organization in place we've seen a number of successes in fraud, we had for high quality offerings that overlap in some ways and could complement each other and others.
The standardized and globalize our position we brought in shy Cohen, a seasoned veteran from the fraud and cyber security industry, having worked at our Assai MC Intel.
We've already pulled together three of the solutions and are actively developing our go forward strategy with a unified global vision and approach.
In other cases this team has accelerated the launch of existing products, including the cobot acute relief attributes that I discussed earlier.
I believe that we have just scratched the surface at a morphed into more fully leveraging our solutions and capabilities on a global scale, which will help sustain our best in class topline growth over the long term.
Another Avenue to help ensure our long term growth trajectory is our investment in global operations, which allows us to expand our core capabilities through centralization process optimization and modernization, leading to a better customer experience as well as cost savings that can be reinvested the fund.
Growth projects.
Our team has identified three focus areas, where they can have the greatest impact.
The first is global procurement historically most of our centralized procurement has resided within our global technology organization.
We intend to leverage and build on that disciplined against all spend while creating consistent global standards.
We started by renegotiating, our 20 largest contracts and are implementing a full lifecycle procure to pay system from Cooper, allowing complete spend visibility globally.
We will roll this tool out in August in the us in Canada and follow with our remaining regions over time.
Second we also have an opportunity to replicate the success of our global capability Center interest to India.
We opened it two years ago with about 600 associates focused on global technology and will likely have more than a thousand there in the near future.
Establishing the center has helped reduce our technology costs and improved our technology capabilities. In fact, the great place to work organization in India recently named the tree Ingenium capability Center in Chennai.
As the number 40 best company to work for out of the field of more than 1000 other companies.
We intend to replicate our success in Tonight, and other strategic locations around the world to meet the growing needs of our customers, while refining our delivery and support capabilities and eliminating concentration risk.
Finally, we have brought our focus to business process optimization, where we have significant opportunities to further enhance the customer experience.
Recently, we implemented a contract lifecycle management system.
To convert a very manual process to automated and vastly improve that critical interaction with customers and suppliers, we sped up the contract signing time by over 60% with about one third of all contracts being executed in a single day.
We also are actively transitioning to an upgraded CRM to provide more sophisticated and effective work flow management, consistent and transparent customer information and standardized processes.
We will utilize and upgraded version of Salesforce that will form the backbone of these efforts.
In the future. We will also address other areas like the time for data loading smart, scoring for batch delivery and dispute acceleration in consumer operations.
Overtime. We are confident that are focused on operations will yield significant efficiency and cost benefits that can either be reinvested or return to shareholders. While also furthering our market leadership through improved customer engagement.
The final investment focus I wanted to discuss is project rise our accelerated technology initiative to ensure that across trends transunions and by design or even more effective efficient secure reliable and performance and we will do this through streamline processes.
Automation and more rapid adoption of a hybrid public private cloud.
Architecture globally.
We spoke extensively about these plans on our February earnings call and I will refer you back to that commentary for additional details.
Project rise began in earnest early this year with a clear plan in an experienced leadership team in place in early March like so much else in the world. We experienced some delays as we transition our organization to a work from home model and faced a more challenging environment for hiring, particularly if there were immigration requirements for Canada.
However, just as our business and customers quickly found their footing during the Lockdowns. So did the project rise team.
Already this year. The team has identified a series of critical global applications that will be redeployed into cloud in early 2021, and others will quickly follow behind them.
At the same time, we continue to progress toward our goal of making our entire organization cloud ready not just our technology team.
To that end, we have embarked on a companywide education initiative to ensure that we maximize the power of these investments.
There is also allows us to build our workforce of the future and avoid being reliant on outside firms over the long term.
Just as we did with project spark, we will retain a strong internal talent base, which enables consistent and easily managed evolution of our tech stack in the future.
At this time, we remain confident in both our timeline and the benefits of these investments.
And as I wrap up my review of the business I want to leave you with a clear message Transunion has demonstrated creativity and resilience during the crisis.
And we will continue to do so.
We also remain deeply committed to delivering outstanding long term revenue growth and an attractive growing margin.
And we have a broad range of opportunities that give us conviction in that outcome.
So with that I'm going to turn it over to our CFO Todd.
Thanks, Chris as Chris highlighted we achieved our upside case scenario for the second quarter as we benefited from Reopenings in the us and many of our international markets and the efficacy of our proactive response to support customers and consumers.
I'll start with our consolidated results and for the sake of simplicity all of the comparison I discussed today will be against the second quarter of 2019, unless noted otherwise and all revenue discussions relate to adjusted revenue.
Starting with the income statement second quarter consolidated revenue decreased 4% on a reported basis and 3% in constant currency revenue related to the May 2019 acquisition of true signal was immaterial in the quarter.
Adjusted EBITDA decreased 8% on a reported basis and 7% in constant currency.
Our adjusted EBITDA margin was 38.2% down 150 basis points compared with a year ago corridor.
We realized a much higher margin than anticipated as revenue and margin flow through were relatively good and we maintain a conservative posture on expense management, though we continue to invest as Chris outlined and we did not reduce headcount.
Second quarter adjusted diluted EPS fell 4%.
Our adjusted tax rate was 23.7%.
Now looking at segment financial performance US markets revenue was flat compared to the year ago corridor the to signal acquisition had virtually no impact.
Our financial services vertical revenue grew 4% on a reported and organic basis.
Chris discussed we saw improvement in all our lending end markets with considerable strength in mortgage and solid recovery in auto card and consumer lending.
Including the cyclical growth in mortgage the vertical would have declined mid single digits.
Probably not too soon to offer a word of caution about the comparisons were going to face in mortgage next year as they're likely to be a challenge.
Emerging verticals declined 5%.
And 6% on an organic basis, both in public sector and media helped moderate declines in the other verticals.
Though the two largest insurance and healthcare both held up relatively well in the face of such a challenging backdrop.
Adjusted EBITDA for us markets decreased 2% on both the reported and organic basis.
From my comments about international all comparisons will be in constant currency.
For the total segment revenue fell 16%.
As we mentioned on our February call, we divested a small business in the UK reciprocal excluding that divestiture international revenue would have been about one point better.
We saw revenue we saw revenue decline across all of our regions, Canada performed quite well on the strength of their diversified portfolio, While India Latin America Asia Pacific and Africa were severely impacted early in the quarter and generally realize varying levels of.
Covering.
UK experience, a sharp impact and financial services, partially offset by strength in fraud and government solutions.
Adjusted EBITDA for international declined 32%.
Consumer interactive revenue increased 4% driven by growth in the direct channel.
Adjusted EBITDA for consumer interactive was up 4%, even as we increased marketing behind the direct channel during the quarter and continue to see good returns on that investment.
As I stressed last quarter, when a strong balance sheet and the ability to rapidly build cash.
And the results of our attractive cash conversion and prudent steps to appropriately retain cash we finished the quarter with $432 million of cash on the balance sheet.
This is the highest level of cash on hand, since we went public five years ago.
In addition, we clearly benefited from outstanding margin flow through even on a slightly depressed revenue base.
Also experienced little fall off in our cash collections, which were essentially in line with trends prior to cope with 19.
The net of all of this was that our leverage actually fell slightly from 3.1 times at the end of the first quarter. The 3.0 times at the end of June.
In addition to the significant cash build and reduce leverage we continue to have access to a $300 million revolver and believe we could enter the debt markets had reasonably attractive rates at this time should the need arise.
Notably our loans have retraced much of their price declines in the leverage loan market since the tough start coven 19.
And currently trade a little below par and much better than the double b and thats, indicating continued demand for our paper.
A couple reminders about our portfolios that first we have hedged about 70% of our debt and are benefiting from extremely low LIBOR rates on the unhedged portion helping to reduce our expectations for net interest expense.
Also we have no debt maturities until the end of 2024.
Turning to our priorities for cash fundamentally we will continue to take a conservative posture as we face an uncertain back half of the year and want to ensure the health of the company regardless of the macro situation.
We continue to prioritize fully funding our business servicing our debt paying our dividend and investing in the long term growth opportunities that Chris described.
That said, we are in a position to contemplate additional M&A activity.
That could be funded from cash the revolver and or the debt markets.
I will also consider debt prepayment if we do any more clarity and confidence about business conditions in the second half of the year.
I believe that we're proactively position transunion to whether these challenging times and we will continue to demonstrate our commitment to an appropriate and attractive capital structure for our shareholders.
Given the ongoing considerable uncertainty about the impact to call that 19 across all our geographic and vertical markets.
We continue to believe that is prudent to spend to suspend full year 2020 guidance related to adjusted revenue.
Adjusted EBITDA and adjusted diluted EPS.
Overtime, we will revisit this decision and at the appropriate time with sufficient visibility reinstate full year guidance.
I do want to comment on the three year outlets that we provided in March of 2019.
As I discussed last quarter, given a truly unique circumstances, we are facing the guidance that we provided at that time of 7% per year average revenue growth along with 50 basis points per year on average of margin improvement in double digit EPS growth no longer makes sense at the current time.
However, when we return to a more normal postcode 19 state.
Our confidence that our business will deliver against those previous commitments as a result of our persistent strong market positions and the consistent investments, we're making even during the pandemic of course, we like everyone else don't know when that return to normalcy will occur but.
I do want to be clear with you about our confidence in our long term growth.
Turning to our outlook for the third quarter of 2020.
We will again provide you with a range of potential outcomes, along with the scenarios around each which is far more instructive and valuable at this time.
And as we said last quarter scenarios like these are not predictions of Valeant is likely to happen rather they are intended to help frame possible outcomes.
On our call today, we provided additional detailed trying to information to illustrate how come in 19 has impacted transunion.
We expect to continue to offer these details during the pandemic to help investors.
We believe this scenarios represent our best possible view on the information trend analysis and marketplace intelligence that we have available right now.
The base case is a continuation of the trends, Chris previously outlined which would result in revenue down 5% to flat and that includes about one point of FX headwind.
At the segment level, we would expect us markets to be flat to up low single digits.
International to be download scenes in consumer interactive to be down low single digits.
In this scenario adjusted EBITDA would fall, 6% to 12% and that also includes about one point of negative FX impact.
Adjusted diluted EPS would follow less than adjusted EBITDA as a result of lower interest expense and adjusted tax rate.
On the framework in this scenario you can extrapolate that adjusted EBIDTA margin when decay when declined slightly on a quarter over quarter basis.
This would likely be the case as we continue to invest significantly any initiatives that Chris described related to solutions operations and global technology.
We would expect cash on hand to build again and that assumes we don't prepaid that or make acquisitions.
And our net leverage ratio would remain fairly stable.
Let me quickly highlight both an upside and downside scenario.
In the upside scenario revenue would grow adjusted EBITDA was declined less than 6% and could grow and adjusted diluted EPS would be better than adjusted EBITDA.
In this case cash would build fairly significantly and leverage would fall below three times again, unless they made an acquisition.
In the downside case.
Revenue will decline more than 5%.
Adjusted EBITDA would decline more than 12% and adjusted diluted EPS was declined in line with adjusted EBITDA.
And this situation cash would not build as it does and the other two scenarios.
And leverage would move up slightly but should remain below 3.5 times.
I want to wrap up with some updated thoughts about some of our annual guidance items.
First.
Yes rates to be between 23, and 25% depending largely on our international earnings.
Total depreciation and amortization is expected to be about $360 million.
Excluding the step up in subsequent M&A portion depreciation and amortization should be approximately $170 million.
Third net interest expense should be about $125 million as a result of a reduction of the forward LIBOR curve.
And finally.
Capital expenditures will be around 8% of our revenue in 2020.
It will be lower in absolute dollars than we had originally plan of course.
To conclude despite the challenges from Kobin 19, we delivered results that reflect the strength of our business model and the diversification of our company. We remain focused on manage managing through the unprecedented times and believe the strength of our business and our balance sheet will allow us to continue.
To weather the situation.
Ill now turn the call back to Chris for some final comments.
Thanks Todd.
So to conclude this morning.
You've heard about how we have whether the current crisis environment created by Cobot 19, as well as our substantial investments in global solutions Global operations and project rise.
We remain deeply committed to delivering strong above market growth over the long term and we have a clear plan to do that.
In the near term, we will continue to prioritize the wellbeing of our associates.
Customers and consumers and communities.
I'll end by reiterating my hope that all of you and your families remained safe and healthy and with that I'll turn the time back to Aaron.
Thanks, Chris that concludes our prepared remarks for the Q1 day, we ask that you each ask only one question that we can include more participants.
And now we'll be glad to take those question.
We will now begin the question and answer session.
To ask a question you My press Star then one on your Touchtone phone, if you're using speakerphone. Please pick up your handset.
Keith.
Draw. Your question. Please press Star then too.
Our first question is from May math pad NAC from Barclays go ahead.
Hi, This is actually I beg, calling on for amount of nice to hear about the improving sales pipeline and win rates I just was hoping for a little bit color of color on whether you're seeing.
Changes in that type of.
Exit offerings that are driving that pipeline and also maybe a little bit of color on.
Converting that pipeline and actual new sales, if you're seeing any slowing sales cycle. Thanks.
Okay, Yes, good question and good morning.
Yes in fact it.
And would you spoke about this at the end of our.
First quarter call.
We we.
The kind of re position our consumer engagement.
Approach.
Rather our customer engagement approach.
At the beginning of the pandemic to focus more on risk management.
And less on acquiring new customers.
As our as our customers became concerned about.
Increasing delinquency risk.
Which you saw was.
Conversion, a diminishment of demand for.
Pre screened and marketing effort general in a pivot toward.
Account management.
In general risk assessment.
In support of that pivot.
We developed through our analytics group.
A a suite of.
Creditvision, our trended credit data.
Attribute we call it our acute release suite.
That helps.
Lenders identify those consumers.
That may be suffering financial distress as a result of the pandemic.
Who may have entered into.
Forbearance relationships with their lenders and so they can determine the appropriate credit management practices, but also anticipate which lenders or other consumers are going to need some lending relief after government support.
Side.
That has been very helpful to the marketplace, we've seen strong demand.
What I would emphasize also is that with the migration to.
Online selling which has really accelerated during the pandemic there has been a concurrent increasing fraud activities.
And that's driven a lot of demand in new sales for our.
Fraud mitigation solutions.
Which weve heavily invested in recent years.
And I think the combination of that plus and just effective.
Go to market tactics.
And a lot of thought leadership and in client engagement has allowed us to.
Drilling maintain a very strong pipeline and I think more importantly, a high win win win rate in a high absolute level of new sales volume.
And that in comparison to the sales volume that we had achieved and we're trending.
In the quarters prior to the pandemic.
So I feel really good about.
The way we.
Adjusted our offerings in our go to market.
In the early phases, the pandemic and we did it on a global basis.
And we've had really strong results.
As a consequence so thanks.
Our next question is from Jeff Mueller from Baird go ahead.
Yes. Thank you for all the details and good morning, I guess just.
Maybe to boil it down a little bit third quarter revenue base case implies a similar trend to Q2 July obviously trending better than.
April was I know mortgage comps tough and then I'll, let others ask about kind of the macro and reopening process a restriction factors I just wanted to make sure I'm picking up on.
All of the business specific headwinds that you're calling out that we should think to incorporate so I'm hearing three but I'd love to know if theres anything else that we should be contemplating or including so the three I'm hearing the backend health care business.
From the flow through of the weaker kind of.
Procedures are front end volumes recently.
Second factor would be the indirect consumer solutions on that end market.
Marketing and and subscriber churn and then the third is the collections pricing concessions.
Do I have all three of those correct and many others business specific kind of headwinds that you know about that you call out. Thanks.
Hey, Jeff Good morning.
I'll take a stab at that one and Chris jump in afterwards, so yes. When you when we think about the third quarter I think the first thing thats important to call out.
Is that the third quarter of 2019 was a record quarter for trends in our than that revenue and adjusted EBITDA. We're at all time highs.
For us.
The fact that where we've got a scenario that contemplating flat.
To down five really just Steve.
Yes.
Currency and the diversification of Transunions business.
As far as the specific drivers obviously, what we provided and what we what I just stated.
Just a little while ago is that the base case that we put together the continuation of the trends that we are seeing right now so that obviously had some hitting.
Financial services in particular in mortgage as well as auto.
Remains strong.
To your point.
The areas that we want to keep our cautious I on.
Is exactly that on health care in the back end.
The impact.
Health care providers.
Slowing down.
I should take focusing on cobot, 19 cases and care and slowing down the.
Other types of preventative and elected Karen has an impact on the has a tail because it theres less.
On the tail end of that there'll be less on insurance or to recover later, so thats something were cautiously watching.
And then consumer interactive.
We're keeping an eye on in particular on the our indirect channel and specifically just the Aggregators and what we saw early in the second quarter was pulled back on marketing spend we've seen some of those aggregators cautiously.
Sure back.
Into the market.
I'm not.
Collections I don't think is as much of the drivers.
Particularly focused.
On that.
Okay. Thank you.
Our next question is from Andrew Steinerman from JP. Morgan go ahead, Hi, I was hoping at this time it could just give us a little more color on health care revenue declines in the second quarter, obviously had listened carefully as you describe slide eight are we talking about high single digits.
Clients, how did they do in the second quarter and when you say that backend could have some drag it to the second half.
Could you give us any sense of what you thought on that potential is.
Hey, Todd why don't you start with that one and then I've got some commentary for the end, yes, Sir and I'll be happy Hey, Good morning, Andrew. Thanks for the question on that so yes in the in the second quarter on as I was just answering jeffs question healthcare business.
Impacted on the front end of the revenue cycle management product offerings, So thats, where.
Dominantly, what we're selling as insurance eligibility type of products that we also have patient destination services and charity care and other identity products.
That we sell the.
The insurance eligibility was lower for the reasons that I just provided to Jeff just simply because the number of cases.
Patients to come in.
Was significantly lower at the beginning of the beginning of the second quarter.
As I said it was off it was just the focus on cobot 19 for many providers, but we also.
We're we're dealing with patients for you to go into the hospitals for care as well too.
For the quarter progress, we Didnt know that there was somewhat of a recovery.
On those preventative and elective procedures and we've actually put out a couple of press releases.
Kind of make that point throughout the quarter. So take a look at that that's the good data that we put out in the market.
Well, we saw in the back end of health care in the quarter is that the backend solution on were not down as much simply because of the reasons I just talked about on the front end hospital.
The care providers and the majority of the revenues.
Doing those preventative and elected tears and when they when they shut down on those procedures. It had a very significant impact.
On their operations so at that put them in a position. Unfortunately was to focus on their liquidity, which is where our backend revenue cycle management products came in to help them and that part of our business. As you know is focused on what we call ensure.
Turns a coverage discovery right, which is where we are looking for.
Care, that's been provided but the provider has not been paid by commercial ensure.
Or the government so those those products on service.
Actually slightly grew for us.
In the quarter, so that the net of it.
In Q2.
As I said in my remarks on the held up relatively.
Well, we're not going I'm not going to provide you the exact number but it wasn't a significant decline I think we we were very pleased with with the results.
As we think about the back half of the year.
We are seeing as I said, a little bit of an uptick in the preventative and elective care, which is going to help the front end.
A little just cautious about the backend I'm right now just simply because the volume that weren't there.
In April may timeframe could potentially translate into lower revenues in the second half of the year.
Okay.
Yes, no one point I would just add to that is regarding the overall health of the healthcare business.
We feel pretty good about it.
You will remember a couple of years.
We slipped off of a.
A trend of.
Double digit organic growth.
At that point, we did a major restructuring of our Salesforce.
We restructured we also expanded and they began selling the entire suite of solutions. Both what we traditionally provided draw also.
Hps and Rubik's us to recovery solutions.
We added through acquisition and really.
Within one quarter of doing that reorganization, we doubled the level of new sales in new implementations and we have continued on that pace.
So even though.
The overall demand for the services have been disrupted because of the unique circumstances around the pipe the pandemic, which targeting just really nailed in detail.
The underlying health of the business is strong and.
Had not been for.
Hi, Good 19, I'm very comfortable that we would have returned to the high single digit organic growth that we've talked about previously.
Thank you very much.
Our next question is from Gary Bisbee from Bank of America Securities Go ahead.
Hey, guys. Good morning, I guess a question on a cost.
And.
Think about all the investments you're making in.
Algae in some of the process improvement stuff, but also obviously.
Focused on costs at this point any is there any color you can given how we might think of the cadence of costs and it's part of the question is also.
The incremental or decremental margin whatever you call it on the revenue.
Performance this quarter was quite a bit better than I think.
How we're thinking about it following your commentary quarter.
So just any color to help us think through the moving parts in costs.
Hey, Gary Good morning, Todd Let me, let me take a stab at that one for you I'm and thanks, Thanks for asking it to that.
It's important one so as we entered into the second quarter.
Chris and I focus quite intensely on.
Managing managing costs and just overall liquidity of Transunions is due to the high level of uncertainty that we were operating in.
If you go back to.
On April, which we hope is a trough for us.
So things that we did.
During that time, we put a freeze that headcount.
With the exception of select areas that we felt less important to invest back into.
Hello project.
Right.
We also manage.
Our CE expense and other other controllable expenses that we have I think you can see that when you look at the relative performance of our operating expense in the quarter on I think you know total operating.
Were only up about $8 million in the quarter and last year, we had a very significant benefit on stock based compensation, so for all intents and purposes.
We manage on the cost base pretty very strong.
And but lot while also making those those certain investments.
We also dealt with.
In the second quarter was you can see its and then the trends that we provided in the presentation materials you can see.
The recovery in volumes in particular in the U.S. on and then in their international business might have been a little bit lab.
The recovery.
There. So it was a there was definitely a very high flow through.
To margin, which resulted obviously in a very nice adjusted EBITDA.
Performance for the second quarter as we go forward, though on cost.
We said at the onset of the call we're being very deliberate.
About taking the opportunity to invest back.
Into the business and Chris went into significant detail.
Great programs that we have going on in our operations group as well as in our solutions Group. In addition to project rise.
So there there are just we highlighted.
Some of those with procurement than our global capability Center.
CRM.
Okay.
So, saying on the ops and solution side, what we're doing with with fraud.
So we're going to continue to be aggressive investing in those areas because those are important.
Parts of our organization that we believe are going to drive.
Future future growth and when we get October 19.
Source.
The topline from solutions group has been the apps through.
Source of efficiency and lower operating expenses.
Yes, and just I think from a philosophical perspective to answer your question.
Gary I mean, we're still very much focused on strengthening the business during this period.
The management team when I became CEO, obviously, we'd had a nice.
Run of result.
But we all believed that there was an opportunity to further strengthen the business and that was in terms of accelerating topline growth.
Certainly.
Ensuring that we could consistently compound at the levels that we had previously.
And even freeing up cost for further growth investments were for margin improvements.
And in the prepared them Mcworld, we were confident as a team that we could make investments in solutions operations and in project rise and still deliver.
[noise] against the.
The margin trends that we've established.
In the prior quarters.
Obviously, the macro environment is to materially disrupted.
I think all things equal we're weathering the storm pretty well and I think it's just really important that we not take our eye off the ball because theres a great opportunity to strengthen the business while still.
You know delivering very satisfactory results to the market.
And we're going to we're going to focus on that because.
Confident we're going to emerge from this.
And I'm confident that we're going to be able to resume and a solid growth trajectory and it's just going to be better enhanced as a result of the work we're doing in these three areas.
Great approach thanks.
Our next question is some Toni Kaplan from Morgan Stanley go ahead.
Thank you I'm just wanted to ask about the consumer interactive segment and it sounds like on that direct side, you're making some investments and and just wanted to understand.
What kind of benefit you're targeting from those and then on the indirect side you talked about some of the headwinds and just wondering if theres any steps that you can take 10 mitigate some of those I'm just trying to understand there could be upside to your outlook there. Thanks.
Okay, well, let me talk about the dynamics there and then you can defined.
Upside against outlook, but.
The two parts of our business again direct is 40% of.
Of our.
Tumor interactive business in the indirect is roughly 60%.
The customers that we serve on the indirect side.
Their business models rely heavily on.
Monetizing leads that they generate by offering.
Our credit report services and other services and obviously in an environment, where customer acquisition is diminished their models are going to suffer and their ability to advertise and acquire.
Is going to get restricted.
We're working with a variety of the partners that we support.
To be helpful. During this period, we have numerous ideas to continue to innovate and provide them with support and solutions.
Beyond just reselling our credit data in our trended credit data.
Thats a way for us to get growth in that segment wall.
Macro landscape is challenged.
The benefit in the real balance in our portfolio is.
This is a.
Still a very fertile market to establish subscription relationship with consumers directly.
And we've taken advantage of that by accelerating our investment.
Our yield is really strong or conversion there and it's pushing.
During nice organic growth on the direct side, which is helping to balance.
Headwinds that we've got on the indirect side.
Thank you.
Our next question is from Andrew Jeffrey from Suntrust Go ahead.
Hello Mr. Jeffrey.
Hi, sorry about that got no I appreciate you taking the question.
Chris.
I'm wondering if you can talk about plans to.
To potentially build out.
Competitor to Equifax is work number database Vws business generally is that initiative that you think is important is that an area, where you think trend union has the ability to to be more competitive and perhaps change some of the growth profile through the cycle for you.
I asked business.
Well, let me share a few thoughts I mean first obviously.
The work number the talks business generally is a tremendous franchise.
And with the current very favorable market circumstances, it's performing.
Amazingly well.
As you can see through our efforts.
Also experience efforts and others.
There is a.
It's a next generation of income solutions.
Coming to market.
Beyond income verification, it's really.
Directly tapping into consumers checking account their demand deposit accounts.
With consumer permission of course through partnerships with financial Aggregators.
And they're also other vehicles for gathering.
Both income current account and other alternative.
Data sources that can be.
Predictive of financial management behavior, and I think you'll see all three bureaus developing these solutions what that landscape ends up looking like is.
It's still open for debate, but it is clear that this is a critical new frontier for developing.
Income solutions, rather alternative data solution.
Everybody's going after.
Our next question is from Bill Warmington.
From Wells Fargo go ahead.
Good morning, everyone.
So you you had some cautious comments about the 2021 mortgage comps and I thought it might make sense to ask about how what mortgages as a percentage of revenue these days.
And then also to ask about some of that drivers that you mentioned in how they would play out in terms of the refi backlog the purchase market and then the impact of forebear, intending how that all comes into the mix.
Okay Bill.
Yes, let us get let me get started on that I mean in.
More normal circumstances lets say pre pandemic.
I've told you mortgages between seven and 8%.
Of our revenues right now because of the surgeon volume due to the low interest rates, it's getting closer to 10% revenues.
Which is.
Certainly a helpful counter cyclical component at this point in time.
When you look at the current mortgage rate and we think about.
Total universe of mortgages in the U.S. that could be refinanced.
With.
Oh, I don't know, maybe 18 million 20 million something like that.
Some depend somewhat on.
The degree to which the banks.
Lower.
Mortgage pricing to increase the addressable market.
And then I think if you just look at the the volume of daily Refinancings.
There is enough backlog, where we're comfortable that through the end of of 20, we're going to continue to see strong mortgage performance I.
I think it's hard to see how it really extends beyond the middle of 21. So if I were to take a guess sometime second quarter of next year, we start to see some immaterial diminishment in the refinance bubble that we're all enjoying currently.
I would you.
We could add anything to that.
I think you covered it well Chris.
Okay.
Thank you very much.
Our next question is some SAS LIBOR from RBC capital markets go ahead.
Hey, guys good morning.
Doing well.
Chris You mentioned, a few times kind of investing in the fraud business I'm wondering can you just give us some more details on really.
You know what do you feel like you still need to do to build out.
Build out that platform to get to where you wanted to be thanks.
Yes sure.
Well I would just say Roger in recent years, we made a couple of material acquisitions that brought great fraught assets into the portfolio and that complements.
An already strong business.
Providing what we call knowledge based off indicators.
To mitigate online fraud basically challenging.
Individuals to demonstrate that they know things that only that individual of wouldn't know about their credit about information that resides in their public records.
In order to confirm identity.
That's effective but it adds a lot of transactional friction and breakage as those the result, we acquired one of the leading providers of device base.
Identification in fraud detection and that is I ovation based in Portland.
In a complemented another device based acquisition that we had done previously.
The solution out of Ireland called Trust that.
And then when we acquired the call credit business, the called credit business roughly a third of those revenues come from.
Broaden litigation solutions the product there is called call validate and it it overlaps materially with the product that we have in the U.S.
So we're currently focused on.
As one.
Understanding from a global perspective, how we need to evolve these capabilities.
In order to meet both current market demand, but also where we see the market going because that's one thing about fraud is challenging in persistent.
So difficult to mitigate because of the fraudsters or super creative So we're getting a very clear sense on where the market's going.
And then integrating all of these applications on a single next generation platform.
Supported by.
Global Salesforce and a consistent value proposition that we push out into all the markets that we serve and again, we're in 30 regions globally and they all have varying degrees of E. Commerce fraud. Currently I mean, if you look at fraud activity.
It's highly concentrated in the U.S. markets Western Europe, as well, but as.
As banks and other lenders just raise their barriers of defense in those markets. It will push out into other markets globally. So theres, great tailwinds in fraud, because it's difficult and there's a lot of.
Financial opportunity and.
We want to have a best in class solution that is.
Configurable and leverageable into all the different markets that we compete.
And do you feel like you have the adequate the assets in house already and it's just a question of kind of configuring them or do you feel like Thats, an area, where you might do more M&A.
Look I think we've got a great complement of assets currently.
And if we integrate the mall, we're going to achieve some efficiency that we can apply toward ongoing.
Ongoing organic product development internally that said.
Theres any number of complimentary fraud mitigation solutions that we.
Could acquire or continue to invest in I mean, I think we.
We've got a nice physician in one of the leading providers of cellular phone data, which is a great persisting consumer identifier.
And it's also a dataset on which our analysts can configure fraud mitigation algorithms.
And so we have tended to make those type of early strategic investments.
Any emerging datasets that are helpful.
To mitigate fraud overall.
But also kind of lays a path toward acquisitions.
Got it is very helpful. Thank very much guys.
Our next question is some door smell this shows.
Some college go ahead.
Hey, guys good morning.
Just a quick question as it relates to equity emerging markets vertical.
And on on page and can you sort of rank order for us.
What those sub segments contribute to.
The emerging verticals sort of after healthcare insurance and then Chris just.
The political climate that's out there a lot of rhetoric. That's out there just curious if we didn't make any sort of high level comments as to how you think maybe some of these.
Comments, I am not things I call them initiatives up sort of sort of play out and and the potential impact on of Europe's. Thank you.
Okay. So.
Going to ask Todd to handle the first.
I'm not sure we give rank ordering but I'm sure you can provide some color and then I'll handle the question about the political landscape.
Todd.
Hey, George Thanks for the question on that yet so as far as emerging verticals are concerned.
Obviously.
By insurance and healthcare those are clearly that the two biggest.
In there.
I think about it.
No other other significant contributors I mean, there I'd say, our diversified markets, which Chris spoke to earlier, so think of what we do with.
Utilities and telecommunications on you know just two examples, but it's a broad basket of retailers E commerce.
Businesses like that fall into it I wouldn't say no tenant.
And employment collections.
And then from there.
Verticals that we also highlighted in media as well as in the public sector.
Yeah and in terms of the political landscape.
No.
There.
If you look at the various proposals that are being discussed.
By consumer advocates or conservative politicians.
Like there's really nothing that we haven't seen previously.
I'd also point out that often there's a gap between.
The rhetoric of the campaign versus the reality of legislating.
You know post election.
From our perspective, the most important thing that we can do is seeing engaged in the process.
We have a very.
Evolved understanding of the role that the data that we provide plays in fueling.
The U.S. economy, and also economies around the world.
We believe that accurate comprehensive.
Unbiased and transparent data.
He is critical to enabling maximum consumer lending.
In fueling economic growth and we're committed to demonstrating that in explaining that with with legislators and regulators alike. I think overall, we've got a pretty deep and balanced understanding of that perspective now.
From time to time, there criticisms that.
The body of of information that's used to originate loans.
Has certain biases in it.
We really haven't seen it we have looked hard at this issue over time.
We have several smart and aggressive regulators, who also look hard at this issue.
And it really hasn't been demonstrated and I think you just have to get back to the fundamental economic motivations in the situation.
It's our desire to provide all the information that we can to promote financial inclusion.
And really expanded the Lin double universe, that's good business for trends Union.
It's good for American consumers and it's good for lenders alike. So we want to provide comprehensive and unbiased inaccurate information and I feel as a whole that our industry does.
Great. Thanks, Chris and thanks, everybody for joining us on the call we hit the by the hour here.
So we're going to wrap up the call everybody in a lot of calls going on today get onto those thanks, everybody for your time and we hope you continue to be safe.
Healthy all the best.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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