Q1 2021 TransUnion Earnings Call
We're looking these statements are based on current expectations and assumptions and are subject to risks and uncertainties and.
Actual results could differ materially from those described and the forward looking statements because of factors discussed in today's earnings release and the comments made during the conference call and and our most recent form 10-K and forms 10-Q, and other reports and filings with the SEC, we do not undertake any duty to update any forward looking statement.
With that said, let me turn the time over to Chris.
Thanks Darren.
And my welcome and my Best wishes that you and your families are healthy and.
The Transunion and our associates continue to largely work from home and continue to demonstrate their ability to support the needs of our customers and consumers I remain grateful for their efforts and commitment.
Now I'd like to lay out the agenda for this morning's call first I will discuss some of the broad macro infringing and specific trends that we experienced in the first quarter and how they set the stage for a much stronger year than we previously anticipated.
Next I will discuss our portfolio and strategies, which position us for high single digit revenue growth at an attractive growing margin over the long term.
Finally, I'll pass the baton to Todd to discuss our first quarter results in detail along with second quarter and full year 2021 guidance.
Let me start with our strong performance in the quarter, we significantly outperformed our guidance as we experienced a rapid recovery and many markets throughout February and March Todd will discuss some of the specific revenue trends later as part of his remarks, but the takeaway is that we broadly soft trends improved across our.
<unk> consistent with the many improving macro indicators, notably according to of J P. Morgan report.
U S consumer spending accelerated during the first quarter outpacing 2019 levels and according to the Labor Department unemployment fell to 6% a pandemic low and.
And March small business owners felt the most optimistic since the onset of the coronavirus pandemic. According to the National Federation of independent business.
And together these and many other salient points from the first quarter indicate the start of what we hope will be a long sustained economic recovery in the U S. As Americans returned to more normal work and social behavior.
We've seen similar trends and our key international markets and the U K consumer confidence reached its highest level and a year. While income is expected to grow along with consumer spending in the coming quarters.
And Canada unemployment reached its lowest levels since March 2020, and consumer confidence hit pandemic era of highs.
And in India reported unemployment dropped below pre pandemic levels, while consumer confidence and spending continued to recover.
These metrics are business improved as uncertainties resolve themselves positively business prospects improved and health concerns moderated and sure the consumer has strengthened and businesses of regained confidence.
For our business that led to a resurgence in demand for lending and new customer acquisition.
<unk> and improved non mortgage performance and our financial services vertical.
Even as the rate of mortgage growth slowed.
Similarly results accelerated as demand strengthened across our emerging verticals highlighted by double digit growth and public sector tenant and employment screening.
And media.
And our consumer interactive segment, we saw better than expected performance as our direct business remains strong and declines and indirect channels moderated.
We saw similar results and our international markets with trends improving quarter over quarter, and all of our regions, except the U K.
I would note that we continue to see the fragility of reopening around the world as evidenced by recent targeted Lockdowns and Canada.
Lockdowns and almost all major cities in India.
<unk> Mumbai.
And in parts of Colombia and elsewhere.
Illustrates that recovery from the pandemic will be volatile and non linear, which we've attempted to accommodate and our financial outlook.
Nonetheless.
Given our strong first quarter and the more positive macro environment, we have substantially raised our full year 2021 guidance Todd will provide you with the details later importantly, we remain confident and our long term growth algorithm of high single digit revenue growth and expanding attractive margins and with.
Double digit EPS growth.
Yeah.
Now I want to spend a few minutes on transunion differentiated market position and approach, which fuels. This long term growth algorithm <unk>.
Ill discuss these points on past earnings calls, but what to review them again as we continue to progress in each area.
First we have a track record of delivering outsized growth across the markets, we serve through innovation and disruption leading the share gains.
For example, and the U S. We.
And we've grown rapidly and financial services due to our first mover advantage and trended and alternative data, which provides better credit insights for lenders and our deep understanding of their needs. This innovation and customer into the sea has helped us to grow much faster than the market as a whole.
We also have developed deep partnerships with leading fintech lenders and positioning ourselves uniquely to grow.
And as E Commerce continues to disrupt traditional delivery of financial services.
We are attacking the insurance market by expanding from a credit and scores only position and personal auto underwriting and to a broader set of solutions, serving multiple insurance sub verticals and use cases and.
And we've applied this approach of increasing breadth and depth of solutions and the healthcare and public sector verticals and across the spectrum of diversified markets such as telecommunications.
e-commerce and tenant and employment screening.
Most recently, we established a media vertical and of won meaningful new relationships with partners, such as Comscore media math and block graft, which is owned by Comcast charter and Viacom CBS.
And earlier this month, we signed an agreement with open AP, a consortium of Fox NBC, Universal and Viacom CBS.
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We also announced earlier this month that we will extend our presence and the fast growing online gaming and gambling markets and the U S.
Building on our success in the U K and.
And both cases, we provide valuable digital identity and fraud solutions to site operators to ensure they comply with local regulation and fourth the efforts of Fraudsters Importantly, we will not offer solutions designed to extend credit to gamblers.
And and our consumer interactive segment, we engage consumers directly and indirectly through channel partnerships across industries with solutions for personal financial management identity protection and targeted credit offers.
Established this attractive combined approach more of than a decade ago by partnering with market leaders and benefiting from their growth.
Recently, we've moved our direct to consumer business under our U S market leader, Steve Chalky.
These two businesses can now combine the best of their offerings and pursue opportunities primarily in the indirect channel, where we help our customers serve consumers with engagement solutions such as the credit the dashboard.
By closely aligning U S markets and consumer interactive, we can better leverage our combined capabilities.
I will continue to share our progress.
As we develop this new strategy and our new organization.
In addition to our attractive market positions, we have of proven and scalable enterprise playbook based on the foundation of customer and consumer insights. We've developed a repeatable approach to client engagement product innovation and adjacency expansion.
This approach fuels, our ability to grow in excess often by multiples of of given underlying vertical or geographic market.
And our recently established global solutions and global operations organizations will enhance and accelerate the use of our playbook Cross train junior.
As an example of how this approach has produced meaningful results I'll highlight the development of our insurance vertical and the U S, which has substantially outgrown its underlying market.
Historically, we focused on providing credit solutions, the personal auto underwriters overtime, we expanded systematically across the insurance value chain.
Today, our offerings include fraud mitigation Custer.
Customer acquisition data Prefill underwriting assessment policy renewal analytics collections and claims investigation.
We've built a broad and differentiated position that has fueled many years of strong organic growth in the vertical.
At the same time.
We've entered the adjacent insurance verticals using the solutions from personal auto we expanded into commercial auto bringing powerful driver of insights. We also launched a data driven life insurance underwriting score, which we later extended to group life's customers and we also provide impactful solutions.
And to assess the risk of apartment and condo buildings for commercial habitation of insurers.
Altogether. These innovations have enabled us to generate superior growth and our insurance vertical.
And international we've consistently utilized our growth playbook to outperform underlying markets, regardless of their inherent growth rate.
I want to use two examples of dramatically different markets, India, and Canada to illustrate the point.
And India, we delivered a 32% revenue CAGR from 2016 to 2019.
Now clearly the underlying market grew rapidly during that time, perhaps low double digits, suggesting that we outperformed by a factor of two to three times, we did that through thought leadership and by becoming a valued partner to the commercial banks Fintech and government agencies that support lenders and consumers alike.
We delivered a steady stream of innovation, including credit vision credit view, a powerful commercial credit score true validate and many other solutions and.
And we moved into adjacent markets, including commercial credit direct to consumer and insurance.
And Canada, where we grew at 12% CAGR from 16 through 19, our approach was much the same but and a much more mature market the underlying market likely grew and the low single digits and we outperformed by multiples. We did this again through thought leadership and close partnership with our.
Customers are growth benefited from numerous centrally developed solutions that we leveraged and Canada, including credit vision credit view fraud mitigation and trauma, we also extended into adjacent markets, including insurance public sector and direct to consumer.
The story repeats itself across verticals and geographic markets around the world the.
This approach allowed us to successfully enter new markets like the U K Colombia.
And the Philippines, where our growth playbook enabled us to quickly deliver above market growth.
We complement the growth playbook with powerful proprietary and third party data assets and.
In addition to our traditional attractive positions and consumer credit data.
We've developed and array of alternative data assets to serve core and high growth of use cases, I'll provide you with some significant examples but not a comprehensive list.
For lenders, we have trended credit pay day and online short term loans data.
Consumer contributed data through our Amex partnership and income and employment verification from the largest U S payroll processor from <unk>.
Rod mitigation, we have a massive repository of device based fraudulent behavior that spans more than 15 years and 8 billion devices from virtually every country and the world.
We have access to public records from thousands of sources delivered through TLO XP debt.
Powers investigative solutions used in virtually every one of our verticals.
From our recent acquisition of dropped and we have data on streaming devices and activity for more than 80 million U S households, and our insurance vertical we offer comprehensive driving the violation data and state issued motor vehicle reports.
And in other international markets, we have a.
Similarly broad array.
Of information, including commercial credit data public record data and other alternative data as well as differentiated data used by insurers and a number of countries.
While we internally developed much of our data and analytics capabilities over these last eight years. We've also executed 20 acquisitions and a host of strategic partnerships that have meaningfully augmented our data assets and created value for our shareholders and we continue to aggressively pursue new differentiated data assets.
We also differentiate ourselves, but how we manage the data entrusted to us.
To that in last week, we announced the preferred equity investment and and strategic cooperation with spring labs, and leading financial technology firm transforming the exchange of sensitive data.
The advanced cryptography allows strict control of information and visibility.
And the permission blockchain provides the timestamp immutable record and audit trail together, we can increase access to spring labs data exchange network and products, while enabling us to expand protection of sensitive consumer data initially for fraud and identity verification.
Our industry, leading technology remains a competitive advantage I have regularly discussed our track record of delivering on large scale complex technology initiatives as well as project rise our current program to make the June technology, more scalable and secure efficient and effective.
So I wont recount them here.
The project rise keeps us from the cutting edge of cloud computing and information security and remains on plan to deliver considerable operational and financial benefits as we achieved key milestones and the program will continue to provide you with updates.
The underpinning these market positions, our culture is rooted and customer focus and partnership.
We've built the company that understands the needs of the customers and serves and can deliver best in class solutions to meet those needs.
We also balance of since of humility with a deep and our drive to be successful and accountable.
While also taking the collaborative approach both internally and externally.
As a result, we have built a track record of winning and the marketplace and delivering superior results.
And our success and growth has allowed us to hire extremely high caliber talent across the organization.
At the same time.
Our culture has always embraced diversity equity and the inclusion.
Over the past year that has taken increased importance and we witnessed an unprecedented wave of social activism.
Aimed at Remediated, the historical and Justice has inflicted on minority populations.
Spoken before about our task force for racial equity which continues to make progress. Most recently, we hired an experienced executive to lead our supplier diversity efforts and joined three nonprofit organizations, which serve as chambers of commerce for diverse businesses.
I'll highlight a few other items relative to this work first.
Can read and our most recent proxy and about our board's decision to link of component of our executive team's compensation to diversity hirings and promotions.
Second I'd encourage you to read our recently published diversity of report.
Which highlights of the good work that we're doing to create a more inclusive and diverse employee base.
Was pleased to see debt over the past year, we increased our percentage of global female leaders from 27% to 30% of solid improvement, although we still of a lot of work to do to achieve our goal of gender parity at all levels.
Third.
And our sustainability report Youll see that we have embraced the SaaS b and <unk> reporting frameworks, along with making significant progress on all three dimensions of ESG.
And finally, I would like to state unequivocally that transunion stands and opposition to the surge and hate crimes against Asian Americans. These actions are deplorable and and an acceptable.
And any form.
Now this morning, I've laid out tree and juniors differentiated market and portfolio positioning that has enabled industry leading growth since our IPO.
I fully expect and expect the same differentiators and which we continue to invest aggressively to fuel strong performance over the years to come.
And with that let me turn over the time Todd the walk you through our financial results and our second quarter and full year 2021 guidance Todd.
Thanks, Chris.
Want to start by building and Christmas commentary about the accelerated recovery, we experienced in the middle of the quarter.
This slide shows monthly year over year revenue growth for all of our reported segments verticals and geographies with only a few minor exceptions, you can see of clear inflection over the course of the quarter, reflecting the positive macro dynamics that Chris highlighted.
I will note that while total financial services shows relatively consistent monthly growth rates. If you look at the non mortgage business. It progressed from down mid single digits in January to up strong double digits and March.
This timing had a significant impact and how we guided the quarter.
And the full year on February 16, compared to the actual results we delivered in the quarter and the revised guidance that I'll share with you shortly when.
When we built our forecast for the 2020 year and earnings call. We had seen actuals for January and heard limited incrementally positive comments from our customers.
Crow indicators still hadn't definitively flipped the more positive trajectories.
And all changed and the middle of the quarter.
More specifically with February's results, we gained additional conviction and the outlook and March came in substantially better than we would've expected based on all of the information we had in early February.
And we've always stressed we.
We want to provide guidance that is based on the best available data and what we have line of sight too which is exactly what we did in February and that's what we're going to do again this quarter by raising full year guidance based on a more constructive view of our markets.
Courted by concrete macro indicators and clear signals from our customers.
With that context and place I'll start my review with our consolidated results and for the sake of simplicity.
All of the comparisons I discuss today will be against the first quarter of 2020 unless noted otherwise.
Starting with the income statement first.
First quarter consolidated revenue increased 8% on a reported and constant currency basis.
The signal and true optic acquisition had just under one point of impact so organic constant currency growth.
7%.
Excluding mortgage from both the first quarter of 2020, and 2021 of our business grew 4% and on organic constant currency basis.
Adjusted EBITDA increased 14% on a reported and 13% on a constant currency basis.
Our adjusted EBIT margin was 43% up 200 basis points compared with the year ago quarter, driven primarily by the significant revenue outperformance.
First quarter adjusted diluted EPS increased 25%.
It's largely driven by strong adjusted EBITDA growth.
And a fit from reduced interest expense related to our debt refinancings, prepayments and lower LIBOR rates as well as the slightly lower adjusted tax rate of 22, 8%.
Now looking at segment financial performance.
U S markets revenue was up 11% compared to the year of the quarter.
The two media acquisition had about one point of impact on revenue.
Excluding mortgage organic revenue would have grown 4%.
Adjusted EBITDA per U S markets increased 16% as reported and 17% and on an organic basis adjust.
Adjusted EBIT margin improved by 180 basis points, largely as a result of the strong revenue growth and.
And the offset partially by our continued strategic and operational investments and the cost to integrate and scale. Our recent media acquisition.
Diving into the results by vertical financial services revenue grew 14% and was up 5% excluding mortgage.
Notably consumer lending auto and credit card each improved over the course of the quarter, while the growth rate and mortgage as expected began the slow.
And Chris and Scott, we have seen improvement and most of our end markets and we are well positioned to see an outsized benefit from this recovery.
That view comes from a number of factors, including our strong position with Fintech players and their expansion into new lending markets like credit card and buy now pay later.
As well as accelerated customer adoption and usage of credit vision as it provides unique insight into consumers and a post pandemic lending market.
And our continued success and winning business.
Looking at the individual end markets in consumer lending lenders and their investors are primed to resume more aggressive customer acquisition.
The other plans were somewhat delayed as the quarter began and ended with the stimulus checks from our consumers.
And auto markets surged in March and the strength of another round of stimulus that further strengthen consumers' personal balance sheets and while there is some disruption to the OEM production from the well publicized chip shortage, we have seen a shift to used car purchase which is an area of strength for our business.
And.
And and card, we've seen an increase and marketing activity and expect that to continue as we progress through the year.
And for mortgage we now expect the market to be roughly flat instead of down 10% in 2021 as we previously shared.
Let me now turn to our emerging verticals, which grew 7% on a reported basis and 4% excluding the revenue associated with the two media vertical acquisition.
As Chris discussed we experienced generally improved trends from.
Across almost all of these verticals led by double digit organic growth and public sector tenant and employment screening and media.
Public sector remains a very strong growth vector for transunion as we benefit from work from home trends and certain new programs being advanced by the bite and administration.
And both the federal and state level, we continue to see significant growth in the fraud and identity space and agency administer additional programs to provide support to their constituents during the pandemic.
And tenant and employment screening, we saw and modest improvement and employment screening.
The tenant screening solutions continued to deliver strong revenue growth behind key partnerships and accelerated usage of our smart move solution.
And our media vertical continues to deliver attractive growth, while also inking new customers as Chris highlighted we.
We're pleased and momentum and scale, we've developed and this vertical and our recent acquisitions are tracking to our expectations.
We also saw and insurance continued to deliver growth driven in part by improving market trends and even more so by the strength of our sales efforts and customer adoption of our innovative solutions like drivers risk national driving record solution.
<unk> vision, Prefill and true validate.
Finally, our health care vertical revenue was down slightly but showed improvement compared to recent pandemic impacted quarters.
In particular, we are seeing continued growth and front and patient visit volumes, suggesting people are gaining comfort with returning to health care venues.
As vaccines that are administered more broadly we believe this trend will continue to improve.
Consumer interactive revenue increased 3%.
Driven by growth and the direct channel and.
Adjusted EBITDA was up 2% as we continued to increase marketing and the direct channel during the quarter.
Marketing helped drive double digit revenue growth in our direct business and a solid increase and our subscriber base and.
<unk> value of our credit health and identity protection services.
Our team is also beginning to engage the sophisticated people based marketing solutions, we've developed through our recent acquisition.
Given the efficacy we believe they will help our direct business deliver solid growth and the years to come.
Our indirect channel remained soft and financial product lead Aggregators and some modest improvement over the course of the quarter.
We've seen lenders increased marketing and.
Intensity.
We would expect that to provide some incremental benefit to our business as the year progresses.
And subscriber bases are rebuilt.
From my comments about international all comparisons will be and constant currency.
For the total segment revenue grew 3% as we saw trends improved and most of our regions adjusted.
Adjusted EBITDA per international increased 16%.
Let me dig into the specifics of certain region.
And the U K revenue declined 5%.
The trends improved considerably over the course of the quarter as the country has moved closer to being fully reopened we.
We continue to see strength, and our fraud and online gaming businesses and.
While the lending market remains depressed relative to pre COVID-19 levels, we are seeing encouraging signs from lenders. While we also benefit from a strong position with the fast growing buy now pay later players.
Our Canadian business grew 9% and the first quarter, while key end markets like lending neared pre pandemic activity levels, we generated growth from the portfolio diversification that we've intentionally developed including insurance direct to consumer offerings and the emerging fintech.
Thanks.
And India, and we grew 11% of the country is largely reopened though of the caveat that the situation there and is worse and significantly in recent weeks.
Highlighting just how fragile some markets remain.
We continue to benefit from our diverse product portfolio, including commercial credit, scoring fraud mitigation solutions direct to consumer and the government sponsored programs to assist lenders through the pandemic.
And Latin America revenue was up 5% and the strength of double digit growth and our two largest markets, Colombia and Brazil.
Many of the smaller countries in Central America continue to see sharp declines as customers consumers and governments and navigate the challenges of the pandemic.
And Asia Pacific, We grew 5% and continued recovery and our largest market Hong Kong.
There we are seeing very positive momentum with our relaunch direct to consumer offering and are beginning to pursue more indirect partnerships.
The Philippines remains very challenging and our current expectation is for a highly delayed recovery.
And finally Africa declined 5%.
And our largest market South Africa, the economy remains challenged and vaccination rollout has been slow.
Based on recent market wins, though we do expect continue improvement and revenue as the year progresses.
One of the many strength of Transunion is our balance sheet and our ability to rapidly generate cash and this provides us with consistent optionality to make the best decisions for the company and our shareholders.
We finished the quarter with $433 million of cash on the balance sheet after voluntarily prepaying $85 million of our term loans.
At the same time, our net leverage ratio continued to decline from two eight times at the end of the fourth quarter to two seven times at the end of March.
With our strong balance sheet, we remain and a good position to continue to proactively pursue additional attractive investments, which remain an important part of our long term growth strategy.
That brings us to our outlook for the second quarter and the full year.
Starting with second quarter revenue, we expect slightly less than one point of M&A contribution from signal and true optics as well as a two point tailwind to revenue from FX.
And we expect two points of benefit to adjusted EBITDA from FX.
Revenue is expected to come in between $744 million and $754 million or of 17% to 19% increase reflecting the improved macro environment and very easy second quarter 2020 comparable.
This result, and organic constant currency revenue growth being up 15% to 16%.
Embedded in our revenue guidance is an approximate two point headwind from mortgage.
Adjusted EBITDA is expected to be between $296 million and $303 million.
And increase of 22% to 25%.
Adjusted diluted earnings per share are expected to be between 89.
And 92.
And increase of 35% to 39%.
And for the full year, we expect 50 basis points of benefit from M&A and one point of tailwind to revenue from FX.
Revenue is expected to be between $2 949, Q2 point $9 $92 billion up 9% of 10%.
Our guidance includes one to one five points of headwind from mortgage reflecting the fact that we only expect mortgage to be a tailwind and the first quarter and that will be progressively more challenging and the remaining three quarters.
For our business segments, we expect U S markets to grow revenue high single digits financial services to be up high single digits and emerging verticals to be up low double digits.
Excluding the impact of mortgage.
S markets would be up low double digits and financial services would be up low double double digits as well.
We anticipate that international will grow mid teens.
On an as reported basis as we continue to see a varied pace of recovery across our market.
And we expect the consumer interacted and.
Interactive to be up low single digits.
Adjusted EBITDA is expected to be between 1157, and $1 $189 billion up 11% and 14%.
We expect one point of benefit from FX.
We expect our adjusted EBIT margin to expand 80 to 130 basis points. This year.
Even as we continue to aggressively invest in the business.
The diluted earnings per share per the are expected to be between $3 45.
And $3 58.
Up 15% to 19%.
At this time, we have no material updates to our other guidance items like tax rate DNA interest expense and capital expenditures.
I'll now turn the call back to Chris.
And for some final comments.
Thanks, Todd and to conclude this morning, we took you through the.
The strong first quarter and a much more bullish outlook for the full year based on significantly stronger macro trends across most of our markets and we've discussed the differentiated portfolio and market positions that of propel transunion to best in class growth since our IPO and debt. We believe will allow us to remain on this path and the future.
I'll end by reiterating my hope that all of you and your families remain safe and healthy and with that I'll turn the time back to Aaron.
Thanks, Chris that concludes our prepared remarks as always for the Q&A. We ask that you. Each ask only one question. So that we can include more participants and now we'll be glad to take your questions.
We will now begin the question and answer session.
Ask a question you May press Star then one on a touchtone phone.
If you were using a speakerphone please pick up your handset before pressing the keys and if at any time of your question has been addressed and you would like to withdraw your question Press Star then two.
As was said before please limit yourself to just one question. So we can get to as many people as possible, we will pause momentarily to assemble our roster.
And the first question comes from Manav Patnaik with Barclays. Please go ahead.
Good morning, gentlemen, and thank you for all of that color I was just hoping you guys could give us some more.
The color on your Fintech vertical.
And it was obviously of a fast growing area of before.
And I did get hit during the pandemic I was just wondering if could give us some anecdotal color on what that pace of the causeway and outlook looks like today.
Yes sure Manav.
Todd and I will tag team on this one but.
First I would say that the consumer lending sub vertical within financial services was one of the components of our business that strengthen the month over month during the quarter.
And that we expect will continue to benefit from the recovery and of course, the fintech players are material component of.
The consumer lending and generally we see strengthening there and we see and increased interest in new customer acquisition, which is terrific.
And again longer term, we feel like.
E Commerce is going to become increasingly important to the delivery of financial services and we're very grateful for the partnership we have with so many of the players.
In that space, but generally speaking I would say, it's the strengthening component of the portfolio of that should.
Benefit us in the quarters ahead.
And so Todd anything you want to add to that yes.
Yeah for sure and Chris had definitely would add to that.
We are.
Being the Fintech players expand into new lending markets like credit card and especially.
The buy now pay later segment, which we've got a meaningful position and as well too.
In addition, the story of that we've told about how we won share with Fintech.
With the accelerated adoption and usage of our credit vision suite of products.
<unk> continues to hold true as well with this customer group as they enter into.
And new markets. So we're very encouraged and excited about.
<unk> with.
With the <unk> extra and the remainder of the year.
Yeah, and then I would just add the note as we've talked about another calls the fee.
Fintech space has.
Has been more stable during the.
This downturn.
Any expected.
And you've seen and funding begin to flow back and the <unk>.
Substantial way to the space so.
It's all very encouraging.
The next question so net.
Next question comes from Andrew Steinman with J P. Morgan. Please go ahead, hi, I'm, sorry, I'm going to ask two questions. When looking at slide 11, and I just wanted to make sure for the U K line that you felt the revenue declines and the quota was just related to the Lockdowns, obviously I show of the plus seven.
And in the months of March and wanted to share how cross selling of true vision and credit view of.
Our going in the UK.
Secondly, I also wanted to know if you want to give us kind of the percentage of revenue per U S financial services revenues card and mortgage.
Pilon, etc.
Yeah I'll leave that.
I'll leave the second question, Andrew to Todd, but I will say you know obviously the of the.
And the U K has been very hard hit by COVID-19 and the Lockdowns had a negative impact on our business.
Also just have some revenue lumpiness in the quarter, because we had a very large piece.
Piece of business of nonrecurring business locked last January.
And so that exacerbated the decline.
And what I'll say about true vision is that theres been a lot of interest and the products since we.
Introduced it.
We generated some revenue last year on the whole variety of customer pilots.
We've built a very nice pipeline and we are beginning to convert into recurring revenue.
Some of the banks that are part of that pipeline. So I would say true vision.
And our penetration and the U K is encouraging and it is very much following the path.
That we experienced.
In the U S.
Todd.
Thanks, Chris.
Andrew just to finish off the question.
And the UK IV and that first of all kind of open up the quarter, a little bit right and show you what the the trends look like by month. So a couple of things that are important.
In January.
We had a comparison to the prior year when we had a large one time prior year deal.
And there and and also you may recall that in January of 2020.
That was the last month that we recorded revenue for the business, we divested by the name of about <unk>.
So if you exclude those two items the UK actually would've been down mid single digits in January but typically these are things we would never talk about because we don't show the monthly trend and.
You're really just seeing the quarterly number but hopefully that provides the context that you need as it pertains to your your second question about <unk>.
Percentage breakouts of the and lending markets and financial services, what I can tell you.
And the mortgage and in particular.
On a trailing 12 month basis.
Revenues were about 13% of total transunion and mortgage.
At this time, the Andrew we were not providing the details on auto.
Card.
And consumer lending.
So hopefully that gives you enough zone with mortgage cash thank you.
David.
The next question comes from Jeff Mueller with Baird. Please go ahead.
Yeah. Thanks, Good morning, just Chris since you refresh us I guess on the growth playbook, just wanted to revisit promo.
Which was I guess and area of that investors were optimistic about a few years ago, it seemed to fade a bit to the background.
Interested when it got of recent call out at an Investor Conference and then again this morning as it relates to Canada.
The question is is it as promised starting to gain more traction as.
As part of the the broader.
Ongoing business wins that Youre talking about thanks.
Yeah. Good question I mean look from a remains a vital part of our new product offerings and our.
I would say technology integration with our clients if you will.
And we continue to invest materially and the product not only because it represents.
And the new revenue stream for us as we mature of the future functionality.
And we increasingly license it across the markets that we serve.
But I think promo and tools such as promo are going to become more.
And a supporting way of engaging with the marketplace.
They provide.
Direct access to the.
And the range of information that Transunion and other bureaus provide.
A lot of analytic and modeling technology, the ability to upload and append other types of information or unique financial institution and information.
With the other data of the Transunion provides the ability to place orders and monitor the status of the orders and so you know.
It's a new interface layer to the range of services that the industry provides and that will be building out over time and.
And we think it's going to provide uplift on revenues one through direct licensing, but also really through improved utilization and.
And increased stickiness with our customers.
Thanks.
The next question comes from Gary Bisbee with Bank of America Securities. Please go ahead.
Hey, guys. Good morning, Todd I think I heard you say your your guidance now implies from mortgage flat for the year versus the prior downturn.
Since you last reported the industry trends of clearly deteriorated and so can you help us understand.
And like what you mean or why why you now see it that way and and then part two of.
The question I guess that would be a portion of that if I heard that right of of the improvement and the guidance, but it seems like smaller portion can you just sort of give us a sense of what are two or three of the key areas that of improved most since since you last provided the initial outlook for the year. Thank you.
Hey, Gary Thanks for the question and obviously an important one for us to go through this morning, so starting with our assumption around mortgage.
<unk> and <unk>.
The February earnings call, we did call for a <unk>.
10% and year over year decline and I think what we saw.
Happen in the first quarter as mortgage actually continued to perform relatively well, albeit though.
We did start to see the year over year growth rates start to taper off throughout the throughout the quarter.
And the comparison, obviously gets significantly more difficult because if you think back to.
March of 2020, and Thats really when mortgage took off significantly and when interest rates.
Plummeted.
So that's definitely a.
Part of it is that the Q1 performance.
And definitely stronger and Jan in my opening remarks, and hopefully I provided the necessary and context on what our business would have grown with and without the mortgage contribution.
So as we extrapolate mortgage out for the remainder of the year.
I think we had a little bit more of the pessimistic.
Thought about what was what was going to happen and I think what we're seeing is the market is relatively holding.
And in particular.
<unk> refinance but also we continue the team of bid activity.
The and the purchase.
And the purchase side of things.
So with that being said, if you dive a little bit more into mortgage.
What we talked about for Q1, as we said that we had a 3% benefit.
In the quarter from mortgage and the guide that we're providing for the second quarter calls for a 2% headwind. So now we're starting to run into the comparable and.
For the full year, we're calling for 1% to of one 5%.
Headwind. So if you just do the math and kind of come up with okay, well, what's going to happen in the and the second half of the year.
And we're anticipating.
The down about 3% in mortgage.
And so there is definitely.
A tapering.
Forthcoming I think what's more instructive, though about our outlook and the portfolio.
The business is that transit enhances and.
Everything else that we're anticipating too.
Recover.
The second quarter and into the second half and.
Particular financial services, if you exclude mortgage completely we're talking about expectations of low double digit growth. So that comes across all the other <unk>.
Articles.
And lending markets like auto consumer and consumer lending and bank and card. So obviously strong recovery there.
Our emerging verticals similar story, we're expecting low double digit growth.
Throughout the us and I highlighted them and my prepared remarks, and think about and I talked about with a.
Public sector and insurance and media.
And all performing very well.
And our health care vertical a little bit slower to recover.
But nevertheless, they are and.
So we're expecting that and the second half of the year, but if you looked at the emerging verticals and the excluded health care at low double digits would be up mid double digits.
So a lot of strength.
We're anticipating and the emerging verticals.
Our international business.
The mid teens growth on a reported basis and others.
Again, and my prepared remarks and laid out the caveat there is clearly some unfortunate.
News coming out of India.
And these cases surge as well as other geographies the Transunion operates and like Brazil, and even Canada. For example, so the recovery there won't necessarily be linear and then finally, I'd say that the consumer interactive business.
We're expecting low single digit growth.
From that business as well so all.
And all across the portfolio.
Bill.
And I think Chris and I, both feel very confident about what's taking hold.
Yes, it's hard to look that's great color and I appreciate the breakdown.
The one small thing no by the add on mortgages that we're heavily focused on this as well forecast.
And we will no doubt very great, but as the rates of increased and that has impacted the.
The business.
Mortgage lenders are still very busy there's a tremendous amount of work and process and Theres also they've been operating on the generous spread and as we talked about in prior calls there's the opportunity to cut into that spread and in order to stimulate further demand.
Okay. Thank you.
The next question comes from Hamzah <unk> with Jefferies. Please go ahead.
Good morning, Thank you.
My question is just around a little more around the the.
The playbook that you guys articulated which had great color specifically.
On the media and digital art offering could you maybe talk about how differentiated that offering is what the competitive share. It looks like there and then and then you know do you continue to expect the scale of this up through M&A and just given the the leverage today.
Is that the all time low for you.
Sure.
Yes. Thank you for the thank you for the question.
Yes, we've talked about for quite some time now we think that the.
Media and digital marketplaces will benefit from the per.
Precise matching logic and the high data quality of that Transunion and can bring.
We have behind the scenes from many years now of.
Fueled.
And the match and append operations of.
Of different players in this ecosystem of it.
It's a slightly different set of players.
And so we decided to formalize it and enter initially.
And we'll obviously youre doing a lot of quality datasets and as I mentioned, our match logic is very powerful given.
The core credit markets that we serve and the more recently, we did acquisitions too.
Acquire underlying data management technologies that allow us to bring together the range of data that we have and our match logic and the very user friendly way, where digital marketers can generate audiences on the fly.
And also recent acquisitions of brought us data and insights.
As to which households are subscribing to various streaming services growth.
Audio and video streaming services.
Which is leading which will allow advertisers to cap.
A really rapidly growing marketplace debt does not have the same level of.
Insights or add precision that the rest of the marketplace has so we've just bought a couple of businesses.
And true optic and signal and we're merging them into our existing operations. Yeah, we're feeling of the management team.
We're doing product integration integration of a variety of the level of we're building out of our selling.
Our product support of <unk>.
The profit ratios.
And our platform integration and activities quite materially thats going to continue to be of focus its an area, where we expect to have.
Higher than average earnings for the foreseeable future and we think it's a large debt market that it can mature into one of our larger emerging verticals over time and certainly we are open to M&A to add additional capabilities as we seek.
Thank you.
The next question is from Toni Kaplan with Morgan Stanley. Please go ahead.
Yeah.
I wanted to start by saying I appreciate the strength and acceleration from January to March.
But you mentioned the non mortgage financial services growth of 5% the change below what your closest competitor reported in the quarter of 11% organically and I'm sure you have some ideas on what you think is driving the Delta just wanted to know if you think it's tough for you at a tougher comp.
Or is there a mix component here or is it a sign that the environment, just getting all of that mark competitive frame.
Or anything else. So I just wanted to give me a chance to explain here from your thoughts on that thank you.
Hey, Tony.
Okay.
Hey, Tony This is Todd sorry about the.
Background noise there.
As it pertains to.
The comparison to the prior year for our non mortgage financial services business.
And I think what a couple of things first the and financial services the mortgage piece.
Did the growth did decelerate as I've already as I've already said.
We have seen.
Good.
The recovery.
And many of our end markets.
<unk> auto, which I talked about and my my prepared remarks.
That was an area of particular strength for us.
The card and banking and consumer lending I would say.
It was really the areas, where when you look at it on a year over year basis, perhaps the growth rate isn't as strong.
And a significant part of that is.
You can't forget that Q1 of 2020 was the relatively strong quarter for us and we were not.
Italy impacted by the pandemic and there's only about two weeks on in particular.
In the U S. So if you think back to that period of time.
The.
Performance that we were seeing from our Fintech customers was exceptional and strong last year. So we're comping against that.
And as I already said our position with the syntax.
And as an area that we're incredibly proud of.
And we've got deep relationships with these customers.
And so again as I answered the previous question and these guys are branch and into new businesses and we're right there partnering with them. So they were a little bit slower.
And to recover.
And the in the first quarter because of that comparison, but I think what's more instructive is what's ahead and.
And that's really where we get into.
The.
And the opportunity.
Low double digit growth and financial services ex mortgage debt.
Spaces.
A big part of that the other thing too that I'd throw out there and the fintech side and.
And as you know, there's a lot of consumer lending and that goes down and that space.
Don't forget about two stimulus checks arrive.
Many consumers in the quarter.
The one early January and another one in the quarter ended so demand might not necessarily have been strong.
And as it has and the past.
The other part and then two I spent a lot of time talking about fintech. The other part, though is our bank and credit card business.
And we were comparing against some really good growth in the prior year on the.
The strength of our credit card marketing activity that was pretty good and Q1 of 2020 and that business is now starting.
And to recover and our customers are going to start fighting for wallet share.
With the potential travel and.
The dining out.
Picking up so we started to see that as well. So that's all of it. So just another another part about the future debt I think is important.
Yes, good color Todd and you know look I would just boil it down to this Tony Fringe and new is firing on all cylinders and Q1 of 'twenty with the exception of the last two months of March when the Lockdowns occurred and.
Let me look.
The non mortgage portion of financial services grew 14% and the first quarter of 'twenty. The fact that we're now posting growth over that high level of growth and I would guess.
That was probably a high watermark for our business.
And is just really encouraging going forward and I think youre going to see that growth rate and net spread accelerate against the easier comps that we face and certainly Q2, but also Q3 and Q4.
Thank you.
The next question comes from Andrew Jeffrey with Truest. Please go ahead.
Hey, good morning, and I appreciate you taking the question guys.
I think transunion has a particularly enviable position and fraud.
And I'd, which you highlighted Chris can you talk about.
Whether you think there is any sort of pandemic affected demand.
And in those horizontal offerings work.
No.
Is that also sort of sort of more digitally structural I guess driven by panned out and I'm, just trying to get a sense of where.
And where the puts and takes our abilene the opening of it.
Yes, I'm not sure about the dynamic specifically related to reopening but look as we all know.
The pandemic, resulting and the Lockdowns loosen and enormous e-commerce, forcing mechanism and e-commerce penetration of worldwide grew by multiples right.
And that has caused and I think of structural change and consumer behavior and and all of that's just an increase and anonymous digital transactions, which require increasingly sophisticated and.
Of the entity and of the authentication.
And that's where I think our portfolio is well positioned because of.
The historic strength that we've got because we know a lot about individual consumers inquiry them and we have sophisticated fraud propensity models, but we've also infused this with.
Just gobs of digital and information from <unk>.
Novation.
And that's collected from almost every country.
Every country and the world.
Okay.
The next question comes from Kevin Mcveigh with Credit Suisse. Please go ahead.
Great. Thank you and congratulations.
Hey, Chris its Todd.
Just the longer term question around framing the recovery relative to prior cycles and just it feels like youre better positioned given the pace of disruption.
And as we're coming out of this ginger and the way to think about how that can impact the revenue growth longer term, particularly the positioning and taxes and becomes more pervasive across the enterprise and.
And it didn't meet and framed and it seems.
And the incremental growth and margin profile of the business as your channel and the Fintech opportunity given the pace of disruption.
Yes, good question and I agree that we are well positioned.
Coming out of this pandemic recovery and I mean, it feels a bit premature to say that given what's going on and some of our international markets and particular, India, and Brazil, but things are substantially better and the U S.
The the vaccinate.
So vaccines are highly available the vaccination rates are substantially improving and to eight.
Pagers.
And of turned back toward the normal and consumption and that's really hitting and our business and as Todd mentioned the benefits are and almost every vertical.
Across our portfolio in the U S with the exceptions of mortgage which is going to face headwinds for a couple of years because.
And the air is going to get let out of the debt balloon. If you will and that was caused by the low interest rates and also it's going to take some more orders for our healthcare business to return.
Great.
And everybody that and in the first quarter of 'twenty to health care business grew organically, 9% and we'd really kind of return to the targets that we expected and it.
Okay.
During this pandemic.
Look the portfolio.
It's still not firing on all cylinders, but I do think it's positioned for meaningful recovery quarter by quarter.
We've re emerge from this I think youre going to see you know and <unk>.
Celebration and financial services from.
From the non mortgage verticals I think the emerging markets are and the U S of particularly the emerging vertical that is are particularly going to accelerate.
And the direct to consumer business.
As of.
And as lenders become more focused on new customer acquisition, our indirect channel, we will again become the strength of differentiator, that's going to propel further growth and.
And again I'll remind everyone debt.
And a couple of in the two years prior to this pandemic our international portfolio was growing at 12% to 15% organically right and it was a real strength within our enterprise.
We grew 3% and the first quarter and while that is a substantial improvement.
Look there's a lot of just inherent organic growth across that portfolio.
Given that we serve emerging markets growing middle classes and increasing financial penetration. It's just those markets are grappling with COVID-19 right now, but again.
As vaccines rollout and as we approach herd immunity and different markets, it's going to have the.
The significantly beneficial impact on our results.
Thank you.
The next question comes from Shlomo Rosenbaum with Stifel. Please go ahead.
Hi, Thank you very much for squeezing me in Hey, Todd I thought I'd, just kind of ask you about a little bit of the organic.
Growth expectation for the year is there some way you can parse it.
If not quantitatively maybe qualitatively in terms of.
The economic recovery boost versus kind of the company getting back to you know aggressively being able to drive the sales from internal initiatives.
Just trying to figure out how you guys are looking at debt internally, how much is going to just be the boost from the economic recovery and how much is hey, we're getting back on our front foot again.
Hey, Shlomo Thanks for the question and yes, it's obviously a good one to ask because so much of the focus.
Is an economic recovery, which undoubtedly.
Does benefit Transunion, but I would say that.
If you were to look back.
Over the last year.
And where the where to look at our portfolio and our pipeline of sales deals and the March timeframe.
It was for deals to help our customers continue to grow their business because that was the mode and they went in at.
Debt at that period of time.
And it was remarkable how quickly our sales force pivoted.
Two what was the new expectation from our customers to help them manage their existing portfolio.
So if you were to look at our pipeline and May of last year.
And drastically changed and the reason I tell you that as it's just the.
Expertise that we have and our sales force and understanding the customers needs, but more importantly, how we are able to pivot and not just sales, but the teams quoting and sales all of our all of the.
And our performance team.
And to deliver products.
Is that a relevant quarter customer at that time.
And we did that last share.
And we reacted and we continued.
To win a significant amount of business.
Throughout the remainder of 2020.
As you move into.
The first quarter of this year.
And it's again kind of remarkable how that pipeline turns over again and you've heard us and our.
The commentary.
Talk about our customer and is looking to acquire again and start the market.
So that pipeline has again.
The changed and and.
It's changing for a different market that we've been we've adapted to.
So when we look and we provide guidance.
Guidance for the full year.
We're not only just take into consideration of the macro factors, but we're also taking a look at.
The deals that the team is one of them and edit and and that's that's factored in here. So Shlomo I can't give you the precise.
Breakdowns, but I think what's important is.
Pipeline is robust our.
And our sales force is executing and we're winning.
And it's really again driven by the superior.
Innovation and Transunion has debt.
Arguably makes our sales teams.
Very effective and the marketplace.
Thank you.
This concludes our question and answer session I would now like to turn the conference back over to Aaron Hoffman for any closing remarks.
Great I'll just thank everyone for joining us today and hope that you have a wonderful wonderful rest of the day, we look forward to speaking with many of the over the course of the quarter of a good day bye bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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