Q4 2022 TransUnion Earnings Call

Speaker 1: So.

Speaker 2: Good morning and welcome to the TransUnion fourth quarter 2022 earnings conference call.

Speaker 2: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded.

Speaker 2: I would now like to turn the conference over to Aaron Hoffman, Senior Vice President and Vector Relations. Please go ahead.

Speaker 3: Good morning everyone and thank you for attending today. Joining me on the call are Chris Cartwright, President and Chief Executive Officer and Todd Sello, Executive Vice President and Chief Financial Officer. We posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website this morning.

Speaker 3: Our earnings release and the accompanying slides include various schedules which contain more detailed information about revenue, operating expenses, and other items, as well as certain non-GAAP disclosures and financial measures along with the corresponding reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures.

Speaker 3: Today's call will be recorded and a replay will be available on our website.

Speaker 3: 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.

Speaker 3: Actual results could differ materially from those described in the forward-looking statements because of factors discussed in today's earnings release. In the comments made during this conference call, and in our most recent form 10K, forms 10Q, and other reports and filings with the SEC.

Speaker 3: We do not undertake any duty to update any forward-looking statement. So with that, let me turn the time over to Chris.

Speaker 4: Thank you, Aaron, and let me add my welcome and share our agenda for the call this morning. First, I'll discuss the macroeconomic conditions in trans-Unions market throughout the world. Then, I'll provide an overview of our solid, in range, fourth quarter revenue, and adjusted EBITDA. I'll also review the promising progress with our recent acquisitions.

Speaker 4: to accelerate revenue growth, achieve targeted savings, and leverage their technologies across the enterprise.

Speaker 4: Finally, Todd will detail our fourth quarter results along with our first quarter and full year guidance.

Speaker 4: Beginning with slide 4, inflation in our developed markets.

Speaker 4: around the world remained elevated throughout the year and central banks raised interest rates to slow consumer demand and return to long-term inflation targets.

Speaker 4: Economic growth flowed as a result. However, thus far, developing economies have been less impacted by these factors.

Speaker 4: Activity in our international emerging markets of India, Asia Pacific, South Africa, and Latham have remained strong.

Speaker 4: Over the course of 2022, in the US, the UK, and Canada, higher inflation and interest rates have pressured consumers in SAP Economic Grove.

Speaker 4: In each succeeding quarter in these markets, growth slowed and consumers became more cautious given the impact of inflation on their spending power.

Speaker 4: In the US, consumers are still healthy overall due to high employment and low debt to income levels compared to before the pandemic.

Speaker 4: However, consumer savings have declined, delinquencies have risen, and spending has fallen, especially for lower income and subprime consumers.

Speaker 4: Many of our large lending customers have confirmed this perspective.

Speaker 4: And while their financials are still strong and consumer demand for credit is healthy, they too are cautious that their markets might slow further and as a result have tightened lending standards, reduced originations and increased loss reserves.

Speaker 4: Despite these headwinds,

Speaker 4: Franger Newger Revenue at high single digits organically in 22.

Speaker 4: excluding the impact of mortgaging the US.

Speaker 4: and improved its margins because of revenue fall through improved cost management, while also maintaining our transformational investments.

Speaker 4: Our forecast for 23 assumes a continuation of the challenging market conditions from the second half of 2022 in little recovery over the year, although our growth rates will improve in the latter half due to easier comparisons.

Speaker 4: Despite these more difficult conditions, we expect to grow revenue in the low to mid single digits in organic constant currency terms and expand adjusted EBITDA margins.

Speaker 4: Our investments in recent years have diversified our business along geographic, vertical, and product dimensions.

Speaker 4: In this expansion is enabling our ongoing growth even as US lending markets slow.

Speaker 4: Attractive growth continues across our international markets.

Speaker 4: US emerging verticals, and our three recent acquisitions, New Star Sontic and Argus.

Speaker 4: Our solutions enable growth and effectiveness in all market conditions, and we believe we'll be able to grow organically in 23, even should the U.S. economy dip into recession.

Speaker 4: Todd will walk you through the details later of our full year guidance and expectations for each of our markets and verticals.

Speaker 4: Now in the fourth quarter.

Speaker 4: Our business delivered good results despite challenging macro conditions and softening lending volumes in some markets.

Speaker 4: Our financial services vertical grew in the U.S., excluding the impact of mortgage.

Speaker 4: Auto lending increased due to using of supply chain constraints and credit cards continued the strong originations seen for over a year.

Speaker 4: And although consumer lending did decline slightly, it faced very challenging comparisons over breakout growth from a year ago.

Speaker 4: US emerging verticals resumed attractive growth after an unusually slow third quarter due to anomalous and non-recurring factors.

Speaker 4: Tenant employment screening volumes improved after stalling last quarter, and media revenues resumed growth after implementing systems improvements. Also, insurance carriers increased marketing as they began to receive rate increase approvals from state commissioners.

Speaker 4: Our international division again grew revenue by double digits organically in constant currency, led by 33% revenue growth in India, 26% growth in Asia Pacific,

Speaker 4: 16 percent growth in Africa and 12 percent growth in Latin America.

Speaker 4: Canada grew 8% and the UK was up 3% excluding one-time business from the year ago quarter.

Speaker 4: And our international sales teams continue to attain record bookings through thematic selling, leveraging innovation and expanding into attractive adjacencies.

Speaker 4: Importantly, we expanded our adjusted EBITDA margin by about 110 basis points organically while maintaining our heightened investment levels in transformational programs.

Speaker 4: And the growth in momentum from our acquisitions also increased in the fourth quarter, especially at New Star, where we made meaningful progress integrating our acquisitions and further developing our global enablement platforms.

Speaker 4: I'll provide further details on this in a moment.

Speaker 4: And finally, we successfully completed the divestment of several non-core assets acquired as part of the Argus transaction.

Speaker 4: further lowering the purchase multiple and enabling strong returns.

Speaker 4: Our progress in the fourth quarter across these many areas illustrates the overall strength of our execution last year. We delivered organic constant currency revenue growth of 7% excluding mortgage highlighted by the strength of our international emerging markets and strong growth in financial services and key emerging verticals.

Speaker 4: We also delivered attractive adjusted EBITDA margins due to revenue flow through effective cost management, which we began late in the second quarter when we recognized slowing conditions, and acquisition profitability improvements from growth and cost synergies.

Speaker 4: As a result, our cash flow remains strong and we prepaid roughly 600 million in debt throughout the year.

Speaker 4: Now on to slide 7. 2022 was a strong year for the growth and integration of our recent acquisition. These businesses are delivering financially and strategically, and their strong results, along with positive customer feedback, confirm the rationale for each deal and the benefits of combining them with RNG.

Speaker 4: your revised guide.

Speaker 4: Adjusted EBITDA margin was 28% in the quarter and 26.5% for the full year. 150 basis points ahead of our guidance at the beginning of 2022.

Speaker 4: The strong fourth quarter for Newstar sets the stage for another significant step-up in performance in 2023, which I'll discuss in a moment.

Speaker 4: Crangerian and Newstar marketing solutions together produce roughly 300 million in revenue last year, growing double digits, organically, despite softer advertising market conditions, and a step back in the commerce activity.

Speaker 4: Marketing interest remains strong in these targeting or for these targeting ineffective resolutions as shown by our strong bookings last year and the growing pipeline of opportunities.

Speaker 4: Significant wins in 2022 include

Speaker 4: an 8-figure multi-year agreement with a performance-based marketing firm to become the primary provider of credit-informed marketing.

Speaker 4: A deal with the car division of a large consumer bank for multi-touch attribution to help them optimize their spend across all addressable channels.

Speaker 4: and a partnership with a major online streaming platform to optimize the monetization of their inventory using Newstar and Trans Union solutions.

Speaker 4: We also completed the onboarding of the Fortune 10 company we announced last year and are benefiting from the ramp in its revenues.

Speaker 4: The fourth quarter also concluded a strong year of product integration as we continue to combine our data, products, and infrastructure to create market-leading capabilities.

Speaker 4: The accomplishments include integrating TrinGenones relevant data into NewStars 1ID platform to enhance identity resolution, including our header file, phone and email addresses, device IDs, and auditing its targeting data among others.

Speaker 4: commencing the replacement of all identity graphs across our non-FCRA products with our new Enterprise Graphs on 1ID.

Speaker 4: In beginning the consolidation of multiple audience targeting products on our true audience platform.

Speaker 4: We also closed eight data centers and completed the migration of 1ID to the Google Cloud.

Speaker 4: saving almost 20 million a year in recurring costs.

Speaker 4: And finally, we've integrated our identity resolution services into Snowflake's Media Data Cloud to enable their customers to enrich their information using our services.

Speaker 4: which utilize privacy protected resolution capabilities fueled by offline and online identity intelligence.

Speaker 4: from within Snowflake's environment.

Speaker 4: This partnership continues our success in penetrating cloud-based data management environments using our identity services through partnerships including Amazon, Google, and many other clean room and customer data platform providers.

Speaker 4: No under communications.

Speaker 4: Our innovative family of trusted call solutions, which includes brandy call display and Colour Name Optimization continues to provide differentiated growth.

Speaker 4: During 2022, we strengthen our position through several new partnerships that now provide TransUnion with the largest footprint of wireless and wireline devices in the US.

Speaker 4: Since the inception four years ago.

Speaker 4: Krustik Hall solutions has grown to more than 50 million of revenue, and we estimate that we've tapped less than 5% of the U.S. market.

Speaker 4: This enormous potential combined with our sales reach in the large enterprises and our international footprint positions us for significant growth.

Speaker 4: Our sales forces are now fully integrated and are able to paint across cell trusted call solutions across our many verticals.

Speaker 4: which has led to wins in insurance, collections, and financial services and a strong pipeline entering the year.

Speaker 4: Now, given NewStars Revenue Momentum, we have confidence in a high single digit organic revenue side for 2023 based on strong prior year sales and the 80% plus recurring nature of NewStars Revenue.

Speaker 4: We also expect adjusted EBITDA margin to expand from 26.5% to 32% in year. Positioning us to reach roughly 40% margins by 2025 as we fully realize cost synergies of at least $80 million now.

Speaker 4: increased from our prior guidance of $70 million. El Santec Revenue again grew in high single digits in the fourth quarter and for the full year on the strength of new subscription sales of targeted offerings with TU's Consumer Direct Business.

Speaker 4: Now this combination led to an 8-figure competitive win that should fully monetize in 2023.

Speaker 4: Also adjusted EBITDA margins in 22

Speaker 4: We're 32% or 38% excluding integration costs.

Speaker 4: We also have a growing pipeline of opportunities for identity protection services across our financial verticals, which should ensure that we reach our targets for Sontag.

Speaker 4: And in the quarter, Argus's revenues declined 3% as we lapped. Strong comparisons for spin-informed analytics and portfolio management services, resulting from a surge in credit card marketing beginning in late 2021.

Speaker 4: Now for the full year of 2022, ARG or screw revenues in the low single digits and adjusted EBITDA margin was 21% or 29% excluding integration costs.

Speaker 4: We also divested G2, LCI, and Phintelix, non-core businesses, bought last year as part of the Varisk Financial Services acquisition for 176 million in consideration.

Speaker 4: Devestitures of the non-core assets from this transaction, along with expected cost and revenue synergies, should comfortably lower the EBITDA multiple of the steel to high single digits.

Speaker 4: And we continue to see renewed interest in the market for innovations using Argus data in insights.

Speaker 4: Revitalizing the delivery of August data on TU's analytic platforms and infusing our market insights will be the key to increasing revenue growth in the future.

Speaker 4: On our March 2022 investor day, we introduced our global operating model and our four enable platforms, technology, data analytics, solutions, and operations.

Speaker 4: and during the year we made considerable progress developing each.

Speaker 4: Our technology evolution will increase our development capacity and our innovation speed.

Speaker 4: With project rise, we're migrating to a hybrid multi-cloud environment on a common set of enterprise software services and eliminating redundant applications.

Speaker 4: In 2022 we moved 30 applications to our secure cloud environment in eliminated 8 Davis centers.

Speaker 4: This year, we will scale our migrations and move over 100 applications to our two clouds and shutter portions of our legacy infrastructure.

Speaker 4: By the project end, two-thirds of our applications will run in the public cloud.

Speaker 4: With the acquisition of NewStar and a 2NID platform, we formed a data in analytics function to create a common foundation for our data management, governance, decisioning, and analytics tools globally.

Speaker 4: This team set up a security, privacy, and compliance guard rails around the world for all data assets and has developed a central identity resolution capability.

Speaker 4: The DNA team is also enhanced our innovation lab model development capability using the 1ID platform and extended the service from the US into the UK to help lenders of all types enhance underwriting and compliance.

Speaker 4: We held a record number of innovation labs in 22 and we expected increase this number in 23 as we roll this capacity out globally.

Speaker 4: and in solutions.

Speaker 4: We're integrating new stars fraud capabilities into our next generation modular and flexible platform.

Speaker 4: We also rolled out US products like Sherable into international markets.

Speaker 4: In India, we've launched a new solution to support agricultural lending.

Speaker 4: which accounts for roughly 18% of lending in that market.

Speaker 4: The U.C. Bill released a credit and farm report in October , which digitizes a traditional lending process by combining credit data with satellite imagery, land records, and crop intelligence.

Speaker 4: This powerful tool enables better decisions on agricultural loans and faster disbursements of funds to farmers, supporting our goal of using information for good, and also promoting financial inclusion.

Speaker 4: And finally, our operations team implemented a common sales, service, and order management system globally based on standardized and automated processes.

Speaker 4: In 2023, we'll continue to refine the user experience, workflow automation, and analytics and reporting in the system to drive efficiency.

Speaker 4: We also more than double the employees in our global capability centers from about 1800 to roughly 4000 through acquisitions and also internal hiring, including opening a new center in Costa Rica.

Speaker 4: We've set up our GCCs in multiple locations around the globe to prevent a single point of failure, to minimize country risk, and to provide services around the clock.

Speaker 4: These centers offer broad capabilities.

Speaker 4: and access to immense pools of talent, along with proximity to markets with rapid growth potential.

Speaker 4: That wraps up my comments on our market conditions, fourth quarter performance, and the meaningful accomplishments in 2022.

Speaker 4: Todd will provide you with further details on our fourth quarter financial results, our first quarter in full year 23 outlook over to Todd. Thanks Chris and let me add my welcome to everyone. I'll start off with our consolidated financial results. Fourth quarter consolidated revenue increased 14% on a reported...

Speaker 4: and 17% on a constant currency basis.

Speaker 4: Newstar, Santic and Argus added about 19 points to inorganic revenue, and I'll remind you that both Newstar and Santic contributed to organic growth beginning in the month of December .

Speaker 4: Organic Constant Currency revenue declined 2%.

Speaker 4: Our business grew 2% on an organic constant currency basis.

Speaker 4: excluding mortgage from both the fourth quarter of 2021 and 2022.

Speaker 4: For full year 2022, mortgage represented about 6.5% or

Speaker 4: about $240 million of our total revenue.

Speaker 4: Adjusted EBITDA increased 14% on a reported and 17% on a constant currency basis.

Speaker 4: Our adjusted EBITDA margin was 35.6%, down 10 basis points compared to the year ago quarter.

Speaker 4: excluding Newstoyer and Santic in October and November in August from the full quarter the organic constant currency margin would have been 36.8% up about 110 basis points compared to the year ago of fourth quarter.

Speaker 4: Fourth quarter adjusted deluded EPS declined 4%.

Speaker 4: With adjusted EBITDA growth offset by higher interest expense.

Speaker 4: and a higher than expected.

Speaker 4: full year adjusted tax rate of 22.4%

Speaker 4: compared to our 22% guide.

Speaker 4: Our full year adjusted tax rate came in almost a half a point higher than we anticipated, primarily due to the completion of our analysis of certain tax implications of our recent acquisitions.

Speaker 4: and the final determination of the impact of a change in U.S. tax law regarding the requirements to capitalize and amortize R&D expenses.

Speaker 4: The result was a slightly higher full year adjust to tax rate with a cumulative catch-up recorded in the fourth quarter.

Speaker 4: I point out that our multi-year proactive tax strategy has resulted in an attractive adjusted tax rate and we continue to look at future opportunities to further ensure our tax structure is operating efficiently.

Speaker 4: Now looking at our segment financial performance for the fourth quarter.

Speaker 4: US markets revenue was up 23% compared to the year ago quarter.

Speaker 4: Organic revenue declined 4%.

Speaker 4: but was up 3% excluding mortgage.

Speaker 4: Adjusted EBITDA for US markets.

Speaker 4: increased 21% on an as-reported basis, and declined 3% on an organic basis.

Speaker 4: The adjusted EBITDA margin increased by 50 basis points on an organic basis.

Speaker 4: Diving into the results by Vertical, please note that we are now reporting new stars financial results to the appropriate verticals.

Speaker 4: To help you with your modeling, we provided a recast of our 2022 results yesterday in an 8K filing.

Speaker 4: The majority of the revenue remained within emerging verticals.

Speaker 4: For the full year 2022, Newstyer contributed $120 million of revenue that is now part of financial services.

Speaker 4: All the results we provide today will be on the recast basis.

Speaker 4: Financial Services revenue grew 6% as reported and was down 10% organically excluding Argus for the full quarter and new star from October and November .

Speaker 4: excluding mortgage, organic const and currency revenue growth was 2%, despite comparing to a 27% growth rate in the fourth quarter of 2021, implying a 15% two-year growth cager.

Speaker 4: Looking at the individual end markets, consumer lending remained in relatively good shape.

Speaker 4: Lenders continued to market and originate, even as we saw some modest, targeted pullback.

Speaker 4: In the quarter, revenue declined 4% against 40% growth in the year ago quarter.

Speaker 4: Our customers continue to confirm that investors are in market but focused increasingly on lower risk consumers and the lenders with the best recent track records.

Speaker 4: We've also seen balance sheet lenders using this as an opportunity to gain share.

Speaker 4: As we've done in pass-soft markets,

Speaker 4: We will use this as an opportunity to enhance our already strong position with Fintech Lenders, leveraging our expanded, impactful set of solutions to help them understand their customers and make effective decisions through the cycle. Understanding that Fintech is of particular interest to investors.

Speaker 4: Let me put our current strong position in historical context.

Speaker 4: In 2022, total FinTech revenue was about $175 million.

Speaker 4: up 15% over 2021, which had been the largest year ever.

Speaker 4: The prior largest year was just over $100 million a revenue in 2019.

Speaker 4: That means today we have a business that is almost 75% larger than just three years ago.

Speaker 4: Driven not just by growing volumes, but also by share gains.

Speaker 4: and innovation led growth.

Speaker 4: We continue to believe that over the long term we can continue this very strong growth trajectory as we win new business and expand our share of wallet with existing accounts on the strength of our innovation and the capabilities acquired with Newstar and Argus.

Speaker 4: Our credit card business had another solid quarter, growing 5% after nearly 30% growth in the year ago quarter.

Speaker 4: We have seen consistently strong origination activity for more than a year.

Speaker 4: To date, we've observed very limited pullback in customer marketing activity as most lenders are still in strong positions to find opportunities across the spectrum.

Speaker 4: and gain top of wallet position with the generally healthy consumer Chris described.

Speaker 4: Our auto business delivered 14% growth in the quarter.

Speaker 4: We saw new vehicle sales take up for the first time this year.

Speaker 4: Days inventory on the dealer lot building and used vehicle prices coming down.

Speaker 4: These factors set the stage for an industry expectation of a 7% increase in new car production in 2023.

Speaker 4: We're already experiencing solid market trends in the early weeks of the first quarter.

Speaker 4: Used car sales remain somewhat sluggish as higher interest rates tend to have a more pronounced impact in this part of the market.

Speaker 4: We continue to outperform the underlying market based on wins from the strength of CreditVision Link, which lenders are using to better assess risk in the current environment.

Speaker 4: ongoing success with our digital pre-qualification solutions and renewals with key new-star auto customers.

Speaker 4: For mortgage, revenue is down 44% in the quarter, in down more than 30% for the full year.

Speaker 4: At this point, refinancing activity is almost nonexistent, while the purchase market has maintained modest origination levels.

Speaker 4: And as we've expected, HELOC activity has picked up as consumers use this as an efficient way to realize short-term liquidity.

Speaker 4: For 2023, we expect the inquiry market to be down mid-20s and our revenue to increase mid-single digits.

Speaker 4: We expect to outperform the market on the strength of HELOC activity, increase demand from the targeted marketing solutions lenders are turning to in a very tight market, and price increases.

Speaker 4: Let me now turn to our emerging verticals, which grew 47% on a reported basis, and 4% organically excluding the revenue associated with Newstire in October and November .

Speaker 4: Insurance delivered another good quarter. Growing despite the slowdown in marketing activity driven by higher repair and replacement costs and the extended time required for carriers to affect rate increases at the state level.

Speaker 4: Our attractive portfolio of innovative solutions in commercial and life applications, as well as driver risk in our traditional private auto market, have helped offset some of the macro issues in the market.

Speaker 4: Importantly, we've seen a steady stream of rate approvals on a state-by-state basis that should result in increased marketing activity and consumer shopping.

Speaker 4: Both of which lead to revenue opportunities for TransUnion.

Speaker 4: Tenant and employment screening growth improved sequentially as a result of early signs of recovery in the tenant market with month-over-month declines in rental rates and increases in move rates.

Speaker 4: This growth was somewhat offset by a softer employment screening market as employers take a more cautious approach to hiring.

Speaker 4: Our media vertical grew again in the quarter, despite some modest market softness.

Speaker 4: driven by multiple years of new business wins and accelerating usage levels with existing accounts.

Speaker 4: We continue to sign new deals and expect further growth in this area from the integrated go-to-market and solution offerings Christ's Gust.

Speaker 4: Consumer interactive revenue, which includes SANTIC, declined 2% on a reported basis and declined 13% organically.

Speaker 4: As we discussed in the fourth quarter of 2021, our business benefited from significant breach remediation work last year.

Speaker 4: excluding that large one-time business.

Speaker 4: or organic revenue would have declined 5%.

Speaker 4: Adjusted EBITDA was up 3% and down 5% organically. Similar to the previous two quarters, several factors adversely impacted revenue, moderating consumer demand for paid credit-related solutions across both the indirect and direct channels.

Speaker 4: Challenging multi-year comparisons to exceptionally strong performances in the direct channel in both 2020 and 2021.

Speaker 4: and the comparison to one time breach related business.

Speaker 4: Our continued strength and identity protection in area where our sonic acquisition enhances our capabilities partially offsets these factors.

Speaker 4: Stop date you on the direct, indirect revenue split with the inclusion of SANTIC.

Speaker 4: about two-thirds of revenue is indirect and one-third is direct.

Speaker 4: For my comments, national all comparisons will be in constant currency.

Speaker 4: For the total segment, revenue grew 12 percent, with four of our six reported markets growing by double digits.

Speaker 4: Just at EBITDA for International increased 15% as a result of our strong revenue growth.

Speaker 4: Now let's dig into the specifics for each region.

Speaker 4: In the UK, revenue declined 5%.

Speaker 4: excluding the revenue related to one time contracts and including with the UK government, we would have grown about 3% in the quarter.

Speaker 4: despite a challenging macro environment.

Speaker 4: We saw softness with many lenders in the fourth quarter, but have experienced improved trends in January .

Speaker 4: At the same time, we had a strong quarter in our gaming vertical driven by heightened activity levels around the World Cup.

Speaker 4: Our insurance vertical also delivered good growth as more customers are using true vision and trended credit data for pricing.

Speaker 4: and our consumer business has gained share due to the credit view platform strength and we want a large breach contract in large part because of SANTIC and its unique remediation capabilities.

Speaker 4: Finally, a few weeks ago we announced an investment in BUD Financial.

Speaker 4: one of the leading open banking providers in the UK to help drive innovation and growth in the market and support financial inclusion.

Speaker 4: Our Canadian business grew 8% in the fourth quarter reflecting growth across the portfolio.

Speaker 4: Similar to last quarter, the macroeconomic indicators remain soft. Yet our business continued to grow as we won material new business, ranging from large banks to Fintech entrance.

Speaker 4: These new wins are still ramping up and we expect to realize the full financial benefit in late 2023.

Speaker 4: In India, we grew 33% reflecting strong market trends and generally healthy consumers.

Speaker 4: The diversity of our portfolio remains a real strength in India. We saw meaningful growth in both consumer and commercial credit markets as well as from fraud, employment screening, and direct consumer offerings.

Speaker 4: In Latin America, revenue is up 12% with broad-based growth across our markets, including another quarter of growth over 20% for our largest market, Colombia.

Speaker 4: While macro conditions have generally softened in the region, our teams continue to win new business and financial services.

Speaker 4: particularly with Fintechs and Neobanks.

Speaker 4: insurance, government, and telcos.

Speaker 4: We also continued to see strong adoption of Credit Vision and our fraud solutions.

Speaker 4: In Asia Pacific, we grew 26% from continued good performance in Hong Kong, driven by new business with FinTech players, and exceptional growth in the Philippines, which is now running well ahead of pre-COVID levels as the economy is now fully re-emerged from COVID.

Speaker 4: and resumed its strong growth trajectory. Finally, Africa increased 16% based on broadly strong performance across the portfolio and the region.

Speaker 4: despite a challenging environment that includes rolling electrical blackouts and other persistent challenges.

Speaker 4: In South Africa, our core business continues to grow on the strength of new business wins and meaningful contract renewals. We also benefited from growth in fast growing verticals like telco and gaming.

Speaker 4: Outside of South Africa, we continue to see very strong growth in markets like Kenya and Zambia, particularly with micro and fintech lenders.

Speaker 4: We ended the quarter with roughly $5.7 billion of debt after pre-paying $200 million in the fourth quarter and another $400 million earlier in 2022.

Speaker 4: That left us with $585 million of cash on the balance sheet, including the receipt of approximately $104 million of the proceeds from the non-core asset divestiture that Chris already covered. We finished the year with a leverage ratio of 3.8 times.

Speaker 4: Since our IPO in the summer of 2015, we have targeted a leverage ratio of less than 3.5 times.

Speaker 4: Going forward, we intend to work toward a leverage ratio of less than three times.

Speaker 4: Though as in the past, from time to time our leverage ratio may be higher than our target.

Speaker 4: With that said, from this chart you can see that we have to rapidly reduce leverage as a result of our strong adjusted EBITDA growth.

Speaker 4: What's more, we intend to further prepaid debt in 2023 with our excess cash flow.

Speaker 4: And at this time, we have no intention to pursue any large-scale acquisitions, and even smaller bolt-on acquisitions are not currently in our plans.

Speaker 4: We are focused on absorbing, integrating, and maximizing the growth potential of NuSTAR, Sontic, and Argus.

Speaker 4: We have multiple pieces related to our debt as we enter 2023 that impact our net interest expense.

Speaker 4: We have multiple pieces related to our debt as we enter 2023 that impact our net interest expense. I want to spend a minute on these items.

Speaker 4: First, our debt stack is unchanged entering 2023, but I wanted to lay out the three tranches with their associated rates on this slide.

Speaker 4: Second, we use a layering of swap instruments to hedge about 70% of our debt, which allows us the flexibility to execute meaningful prepayments.

Speaker 4: At the end of 2022, a swap with $1.4 billion

Speaker 4: We replace that with another with 1.3 billion notional value, but at a higher rate of 4.4%.

Speaker 4: You'll note this swap is a relatively short duration.

Speaker 4: expiring in just two years when we can optimistically contemplate a lower interest rate environment.

Speaker 4: Third, you can see the impact of higher libor on our un-hege debt and the new higher rate swap on the right hand side of the slide.

Speaker 4: The forecast uses the current forward curve.

Speaker 4: Net interest expense is expected to increase by $55 million.

Speaker 4: However, and this is a critical point, this does not include any additional prepayment.

Speaker 4: This is in line with our long-standing practice of not providing speculative guidance about capital allocation.

Speaker 4: whether related to acquisitions, prepayments, or any other activity.

Speaker 4: However, for your consideration, as a rule of thumb, based on the current forward curve and on an annualized basis.

Speaker 4: every $100 million of debt prepayment would add about $0.3 per share to adjusted deluded EPS.

Speaker 4: That brings us to our outlook for the first quarter.

Speaker 4: where we have the most challenging comparisons of the Earth.

Speaker 4: For that reason, we expect our growth rates to improve as the year progresses.

Speaker 4: In the first quarter, we expect about one point of headwind from FX on revenue and two points of headwind from FX on adjusted EBITDA.

Speaker 4: For revenue, we anticipate about a two-point benefit from the acquisition of our gifts.

Speaker 4: We expect revenue to come in between 908 and 917 million dollars or down 1% to flat.

Speaker 4: in between $908 and $917 million or down 1% to flat on an as reported basis.

Speaker 4: in down 1 to 2% on an organic constant currency basis. Our revenue guidance includes an approximately 2 point headwind from mortgage.

Speaker 4: Meaning that we expect the remainder of our business will be flat to up 1% on an organic constant currency basis.

Speaker 4: We expect adjusted EBITDA to be between $310 and $316 million.

Speaker 4: a decrease of 6 to 7%.

Speaker 4: We expect adjusted EBITDA margin to be down 190 to 210 basis points as a result of incorporating Argus's relatively lower margins and the impact of revenue mix.

Speaker 4: We also expect our adjusted deluded earnings per share to be between 73 cents and 75 cents.

Speaker 4: a range of down 19 to 21 percent, a result of lower adjusted EBITDA and higher interest expense.

Speaker 4: Starting to the full year, we expect about one point of headwind from FX on revenue and one point of headwind from FX on adjusted EBITDA.

Speaker 4: For revenue, we anticipate approximately one point of benefit from the acquisition of Argus.

Speaker 4: We expect a revenue to come in between 3.825 and 3.885 billion dollars or up 3 to 5 percent on an as reported basis and an organic constant currency basis and is the same excluding mortgage as we expect a minimal, full year impact.

Speaker 4: For our business segments, on an organic basis, we have U.S. markets to grow mid-single digits, and without the impact of mortgage.

Speaker 4: We anticipate financial services with and without mortgage to be up low single digits.

Speaker 4: We expect emerging verticals to be up mid-single digits. We anticipate that international will grow high single digits in constant currency terms, and we expect consumer interactive to decline low single digits on an organic basis. Turning back to the total company outlook, we expect adjusted EBITDA...

Speaker 4: to be between 1.388 and 1.4 to 1 billion dollars. Up, 3 to 6 percent.

Speaker 4: That would result in a justity of it the margin, a margin being flat to up 30 basis points.

Speaker 4: With the significant benefits of the new star cost savings partially offset by the inclusion of Argus's relatively lower margins earlier in the year, and some revenue mix considerations.

Speaker 4: The anticipate adjusted, deluded EPS declining 1 to 5 percent with higher interest expense offsetting adjusted EBITDA growth.

Speaker 4: And to help you complete your modeling of 2023, at this time, we expect our adjusted tax rate to be approximately 23%.

Speaker 4: Depreciation and amortization is expected to be approximately $525 million.

Speaker 4: and we expect the portion excluding step-up amortization from our 2012 change in control and subsequent acquisitions to be about $225 million.

Speaker 4: We anticipate net interest expense will be about $280 million for the full year, up significantly as I showed you earlier due to rising rates.

Speaker 4: And we expect capital expenditures to come in.

Speaker 4: And we expect capital expenditures to come in at about 8% of revenue.

Speaker 4: Our guidance assumes that current market conditions persist and does not incorporate a US recession. Nonetheless, in the event that does happen, as we discussed in detail on our second quarter earnings call, we would still expect organic, constant currency revenue growth. I'll be at last.

Speaker 4: than the mid-single-digit guide I just provided. This growth is possible because of our expansive, diversified portfolio of relevant solutions, and our deep partnerships built on thought leadership and innovation. And in this situation, I would expect incremental pressure on adjusted EBITDA and adjusted diluted EPS. UM8 JavaScript ? deposited clearly the cherry ???.

Speaker 4: In the downturn, we would keep our focus on integrating our recent strategic acquisitions to ensure they deliver against our long-term expectations. And we would manage our cost structure to ensure it aligns to the trajectory of revenue growth in order to support our attractive margin structure. In the downturn, we would manage our future.

Speaker 4: I want to wrap up with some extra detail about our expectations from Margin Expansion in 2023.

Speaker 4: The bridge on this slide shows the significant benefit we expect to derive from the NewsDAR cost-saving program.

Speaker 4: We also have good margin flow through from our revenue growth.

Speaker 4: partially offsetting these positives are three factors. First, we have the impact of Argus's lower margin for the first three months of the year as the acquisition closed in April of 2022.

Speaker 4: Second, we have the year-over-year impact of resetting variable compensation costs to target while also allowing for appropriate increases in employee compensation. And finally, we will have higher royalty costs in US markets.

Speaker 4: At the same time, we continue to prioritize long-term growth-focused investments in all the areas that Chris discussed this morning. I'm pleased to say that we expect to be able to expand the 2023 margin without taking any significant cost actions largely because we have a long history of prudent, consistent cost management.

Speaker 4: For example, in recent years, we've closed dozens of owned or acquired data centers.

Speaker 4: We've slowed hiring at times to calibrate to our growth and we have excellent expense management processes.

Speaker 4: Beyond that, we continue to reduce our cost structure and derive savings from the good work of our global operations organization, particularly through our global capability centers that Chris highlighted earlier, and there are significant future costs benefits from these initiatives. With that said,

Speaker 4: If the situation deteriorates, we have additional actions like reprioritizing certain investments, managing T-E or other one-time costs.

Speaker 4: that we can execute. We remain focused on maintaining our high quality workforce in order to fully execute all of the exciting projects that we've described in today's call. I'll now turn the call back to Chris for some final comments.

Speaker 4: We remain focused on maintaining our high quality workforce in order to fully execute all of the exciting projects that we've described in today's call. I'll now turn the call back to Chris for some final comments. Thanks Todd.

Speaker 5: I want to wrap up today's call by reiterating our commitment to our 2025 targets. Despite the market challenges we're experiencing, we expect to deliver against these targets, although we don't expect that the growth will be linear. Our combination of attractive and markets and geographic footprint

Speaker 5: Along with differentiated and complementary solutions and a robust innovation pipeline gives us a line of sight to reaching these goals. Now let me turn it back to Aaron.

Speaker 3: Thanks, Chris. That concludes our prepared remarks today. For the Q&A, as always, we ask that you each have one question. Here we go. We can include more participants.

Speaker 3: That concludes our prepared remarks today. For the Q&A, as always, we ask that you each are going to win one question. Here we go. We can include more participants. Operator, we can begin the Q&A now.

Speaker 2: We will now begin the question and answer session. To ask a question you may pass bar then one on your touch tone phone. If you are using a speaker phone, please pick up your hands up before pressing the keys. To withdraw from the question, please pass bar then two. The first question is from Jeff Muller of Baird. Please go ahead.

Speaker 6: Yeah, thank you. So the overall revenue guidance looks quite good to me. You gave us a lot of detail on international bookings and emerging markets, conditions, trends in US emerging verticals, New Start, etc. It looks, I guess the area that I'm struggling a bit with is it looks like it implies quite an excel-

Speaker 6: I think further you can say to give investors confidence in the implied better trends in US financial markets later in the year.

Speaker 4: Hey, Jeff, good morning. It's Todd. Thanks for the question. I think it's a very appropriate place to start this morning. So clearly, when you look at our guide, compared to the high end that we provided about about 3.885 billion.

Speaker 4: And you see where Q1, where we're guiding 917 million at the high end, we definitely see a little bit of an uptake in the revenues from the Q1 levels. And largely, what we're seeing is we feel that we have felt the impact of businesses.

Speaker 4: that are impacted by cyclicality. So for example, the mortgage business, we definitely expect Q1 of 23 to be a further headwind. But as the year progresses, that those headwinds will start to find an equilibrium point.

Speaker 4: factors in the second half of 2022 with the high repair and replacement costs that our customers were seeing due to supply chain issues and their individuals.

Speaker 4: to increase their premiums. As you heard in my remarks already this morning, we started to see that subside. So we're expecting the insurance business to benefit from insurers being back in marketing as well as consumers shopping.

Speaker 4: you know, foreign insurance. And just as a reminder in our insurance vertical, it's not necessarily linked to car sales. It's more about, you know, the premiums and the impact, you know, to the consumer. So that shopping activity we anticipate to be a driver as consumers are focused on managing their finances in this high inflationary environment.

Speaker 4: There's a couple of other areas to highlight. Our tenant screening business was another one that we saw some impact in the second half of 2022 as well that we're starting to see those trends side as consumers are moving, more apartments are coming online, creating more capacity, and as a result of that, runs are coming down. And then finally, I think the last one I'd highlight for you, Jeff.

Speaker 4: business will also benefit as well from that shopping activity as consumers are looking at. The last point I would make on this is that the guidance that we are assuming does have a sense of returning back to what I would consider to be normal seasonality for our business. So where Q1

Speaker 4: It looks a little bit white. Normally you'd see Q2 and Q3 step up, Q4 maybe be a little bit less, so that's also open-factor in to our guidance as well.

Speaker 5: Yeah, and look, let me just – this is Chris, and –

Speaker 5: The first question, let me just set levels that here.

Speaker 5: The basis of our forecast in 23 is heavily influenced by the challenging market conditions we saw in the fourth quarter. And so while we're not assuming a recession, we're also not assuming any particular recovery.

Speaker 5: Now of course the growth rates are going to increase in the back half of the year because the comparisons are going to ease substantially.

Speaker 5: And then as Todd said, the first quarter of the year, because of seasonality, is typically our softest from a revenue standpoint. And it just so happens that this year, we're comparing against a very strong first quarter in 2022, where the enterprise grew 8%, financial services, US grew.

Speaker 5: I don't know, I think it was in the mid teens, right? So things were quite robust then. But over the course of 22 with each passing quarter, we saw softening in our US financial services business and also in the FS businesses and other developed markets. So we took that endpoint.

Speaker 5: which we think is near a bottom and we extrapolated from that. Now we've also got some counter-sicklicle benefits as you saw our acquisitions are delivering good growth. In New Star, which is a very material chunk of the revenue, we're guiding it to 8%, we exceeded the year at 8%. We've got a strong line of sight to that revenue in particular because...

Speaker 5: As we've said before, it's about 80% recurring. And we had one of our best selling years ever last year, with sales volumes and momentum increasing with each passing quarter. Right? We feel like we've got Knights Momentum and Newstar, which is a big kind of diversifying and counter-sick little force at this point.

Speaker 4: The next question is from Andrew's Dynamon of J.P. Morgan. Please go ahead. Hi, Todd. I wanted to look at slide 19. Slide 19, this is the margin slide. And particularly focus on the second red bar, the 45 basis point drag.

Speaker 7: to formulate the 23 margin. I was hoping you could break down and maybe explain a little bit more of the three items that are highlighted there, incentive comp, royalties, and continued investments, you know, recognizing that these three items are offsetting the revenue flow through.

Speaker 4: Yep, good morning, Andrew. Yeah, thanks for the question. So, you know, specifically, you know, to the margin, as you see almost a 50-point, you know, decline there, you know, a couple of factors, you know, go into that. You know, first of all, from a compensation perspective, since the second half of last year,

Speaker 4: of TransUnion has been very focused on ensuring that we are making our hiring decisions on important strategic priorities for us.

Speaker 4: So, you know, we continue to fill roles that have that importance for us.

Speaker 4: But when you and when we look forward, we're very proud of the talented team that we have and you know all the work that they accomplished in 2022 with acquisitions and organic initiatives. We felt that it was important to make certain that we're fully recognizing the extraordinary world.

Speaker 4: when you compare to what the payouts were in 2022. A second thing to cover here would just be, you know, when you think about our volumes, in areas where we are experiencing year over year declines in volumes.

Speaker 4: It's important to note that those declining volumes have a higher margin impact than any type of pass-through pricing markup that we would have on a higher royalty expense.

Speaker 4: You know, as an example. So that's the second important factor to go into there. And I think third, you know, in really getting back to the point to spend on our people, we are continuing to invest in several organic initiatives. We're not sacrificing the long-term growth potential of trans-Union, so we continue to continue to invest in the long-term growth potential of trans-Union.

Speaker 2: The next question is from Pfizer, Awe of Deutsche Bank. Please go ahead. Yes, probably good morning. Thank you. I wanted to pick up on the new star commentary. Chris, I think I heard you say that you're a new star around the new VD-Rest because we think about 2023.

Speaker 2: Maybe give us a little bit more perspective around that. And, you know, how do you need additional sort of big wins as we look at 2023? And perhaps you can give us some commentary around, you know, your perspective on market sharing that business, or some of these new wins related to...

Speaker 2: You know, market share is a more, this more demand for some of the analytic seduary was now provide.

Speaker 2: You know, market share or is it more this more demand for some of the analytic security personnel provide? Thanks.

Speaker 5: We'll just quick comment on market share. I think it's difficult for us to comment on our relative market share with regard to new start marketing services at this point. Generally, there are more competitors. It's more fragmented. However,

Speaker 5: In my comments, I did highlight a series of very attractive wins that we scored in this past year, as well as pointing out that that Fortune top 10 customer has been onboarding.

Speaker 5: or did and the revenues are ramping. And so look, I think those are good examples of competitive success in the market, and I would expect those to keep coming. But thinking about a new start in a bit more detail, 21 was a very growthful year for a new start. They did 8% organic and change.

Speaker 5: We expected that level of growth going into 22. What we were surprised by is that the foundation of growth in 21 was on an elevated level of e-commerce activity during the pandemic. That dip, in as a result, made year we lowered our guide. We also had some of the normal, I'd say, integration growing pains in the early part.

Speaker 5: year. But pretty quickly all of that started to gel together and we began executing well on the sales side. And in each passing quarter over the course of 22 we sold more, we sold more broadly and we built really nice momentum going into 23.

Speaker 5: And at the 8% organic growth in the fourth quarter of last year, four news star, it's important because that comes on top of 9% organic growth roughly the prior year, right? So it's growth over...

a meaningful comparison. And then you get to 23. Now look, you know, de-risk in such a risky environment is always a difficult term to address. And I'm only half kidding here. The fact is we got great momentum. We had a big year of sales. We've got probably higher line of sight to the 8% growth than we typically would coming into the new year.

And I feel like we're just getting our rhythm, our mojo, if you will, in terms of cross-selling new star products across all of our verticals. So that's my two cents about the sales and revenue momentum at NewStar. I'd also point out that the product integration.

has gone really well. It's going very well in terms of getting training and data into the one ID database that underpins all of NewStar's identity resolution for marketing and fraud. I think we got further faster than we expected. And now we're taking that really best in class identity.

and we're integrating it into all of our products across Transgene and the US on the non-FCRA side. Right? Additionally now, we've combined all of our audience capabilities, our data and our platforms, that's coming together, and we achieve a huge step in our integration.

We closed eight new start data centers and we migrated new stress core technology to a new cloud provider and we've saved or added 20 million in recurring EBITDA as a result. So I feel like we're getting nice traction but our plan is to continue our head sound execution on this deal and to build further momentum.

So I'm just wondering, should we expect this going forward in Q23? And that's the key. How do you think about the shifts in competitive lens in that market? That's one of your competitors. We still continue to invest.

in these products. Yeah, absolutely. We'll look.

Our consumer direct businesses have faced a series of challenges in the near term. On the indirect side, we needed to lap some contract restructuring, and that's the single largest piece. And on the direct to consumer side also, we realized that.

Some of our marketing wasn't yielding fully profitable new customers. And also we wanted to adjust our acquisition workflows to ensure that they were as consumer-friendly as they could possibly be. As a result, we curtailed some of our direct advertising.

And as a consequence of that, we're winning new, smaller, new classes of customers if you will to replace those that are tread over the course of the year. As we look to 23 though, the foundation is farming considerably and the rate of decline is moderating, in particular moderates.

quarter by quarter over the course of the year. So first, there's Sontic. Sontic, we believe, is a long-term mid-teens grower. Now last year we didn't have the benefit of a particularly large breach, but we did accelerate our subscription sales with Sontic, which is...

especially valuable because of the higher recurring nature. In 23, Sonic grows in the mid teens. On the indirect side, in 23, we expect a return to mid-single digits growth. And then in the direct subscriptions to consumers, you know, the first half of the year, we're still declining because of the change.

profile go forward? Yeah, so the first thing I would add on the margin is the consumer interactive business always has had an attractive margin profile within a justative margin, you know, in the upper 40% range sometimes to 50%. And clearly that's what we just saw, you know, in the fourth quarter.

job with that. So as a result, we would expect that the margin for this business would be in the same range that we've had historically. So in that high 40s to around 50% adjusted even to margin.

The next question is from Tony Kaplan of Morgan Stanley . Please go ahead. Thanks very much. I noticed that you reiterated the 2025 targets, and for adjusted EPS at $6 versus the midpoint of the 23 guidance.

I would imply like a 30% CAGR from 23 to 25. So maybe just talk about your confidence in achieving it. I guess clearly you do believe it because you wouldn't have reiterated it. But I just think it sounds sort of high. But I know you clearly...

have reasons as to why you think you can achieve it. Thanks. Thanks for the question, Tony. Right now we're facing some challenging market conditions.

In lending articles and in development markets, and I think it's easy, you know, perhaps to get a bit more pessimistic about those things. But we're talking about, we've got three full years to get there. We have a variety of paths to get there.

We expect that over this period that market conditions generally are going to improve materially. And what we've seen is that our business has the potential to grow very rapidly coming out of downturns. We did so in the 2010 timeframe. We did so again coming out of the pandemic where we posted 13% enterprise growth.

And again, there are a whole variety of different ways to get there. I would point out that our results in this particular reporter generally are tempered a bit by volumes and fentech. That said, the reason we went into the detail on that space in our commentary is we wanted to understand just how growth full that business is.

has been. It's been a nice cherry on top of our overall lending portfolio. And we think that the growth coming from disruption in that space is going to continue. There's just been a bit of a pause, some caution as players try to understand market conditions.

and funding sources in the like. So I think we're gonna get disproportionate growth out of Fentech, out of Newstar, out of the resurgence in emerging verticals. And then India is becoming really material for us. It grew by a third last year. And while we don't have that rate of growth,

In our plan, we've got a heck of a lot of upside and we've got a lot of ambitions to expand the number of markets that we plan in India. So I mean, look, perhaps we revisit this at the end of the year, but at this point, I think again, we can get there. There are multitudes of different paths.

And then I think you were more focused on EPS and I'm going to let Todd take that one. So from an EPS point of view, I mean one of the significant drags that we've had is the rise in the in-liver which our debt is still tied to.

for the time being. So that has a rather significant impact on the EPS. In 2023, we had an impact of about 22 cents. So think of it as another way. Our guide on EPS would be up another 22% if interest rates were like roughly.

flat, 22 cents. So if you now think about that over the next three years, if you believe that interest rates decline, transunion and arresting market will get a natural benefit there. So not an operating factor.

But it wasn't an operating factor that provided this headwind. So this is all. And again, just to reiterate, we're very focused on driving as much process as we can out of the new acquisitions and taking call style. We were happy to be able to raise the guide to 80 million and synergies from New Star. And look, I hope a year from now I can come back and share even better news on that front.

But we're also focused on paying down our debt. We're hoping to get to three and a half times this year, and to take it as low as three or below by the end of the fall and year. That's a lot of interest savings that will benefit some RTS. Yeah, and just to underscore that point.

we always do with our guidance we do not make assumptions on capital allocation decisions with cash that builds

So to that point, if you look at our guide for 23 and then even out into the future.

Those paydowns are not supported into the overall just the diluted EPS as well.

The next question is from Manaus, Pat Next of Farquhalle. Please go ahead.

Thank you. Good morning. You had a lot of helpful commentary on how you would perform if there was a recession. And I was just wondering, do you guys have any internal macro calls and probably the probability of that given all the data that you see? And just type to that, the guidance overall, is this?

Would you characterize this as conservative as, you know, true as being historically or is it more, you know I think last year when we came out with guidance she talked about it being, you know less conservative more realistic She's trying to get a sense of, you know, what this year it's set up to be Yeah, I'm on off

You know, good question on guidance philosophy, but also just kind of some macro insights. And what I'll say is, look, I think you should take us at our word on the guidance for 23, right? We crafted a range after a significant amount of deliberation and thought that we think

is reflective of what we can do. Now, if economic conditions were to deviate materially in one direction or another, that's a different factor, right? But I mean, we're guiding three to five. I think you should consider three to five. And again, if you look at our fourth quarter.

you know, we outlined a guidance range and we delivered within that guidance range for revenue, for EBITDA, and on an operating basis from EPS, you know, the smallness on the EPS was due to a tax item, a below the line item, right? So I think we would just ask investors to take us at our word on the guide. That's where we're targeting.

And in terms of the macro stuff, look, I can arm your quarterback with you, but the reality is all of you guys have much smarter and more qualified economists on your staff. So I'm going to pass on that question. The last question is from Heather Balsky of Bank of America.

into that and how you're thinking about that range. And then later on there, you express confidence in your ability to grow in a recession. So how to think of the low end of the range and maybe how that compares to a potential recession scenario.

how you're thinking about that range. And then later on there, you stress confidence and you're ability to grow in a recession. So how to think at the low end of the range and maybe how that compares to a potential recession scenario. Yeah, probably the first.

Common to make on this question is about diversification across the portfolio and how that dynamic is playing out. Without a doubt, our lending lines of business has slowed materially in-developed markets because of the effect of inflation first and then rising rates.

And, um, and potentially, you know, may have slowed, um, you know, a little extra because it's just uncertainty, right? When there's uncertainty in the market, transaction volumes fall, right?

And as certainty gets restored around direction of inflation, around the direction of rates, we could see some improvement. But the negative is around the lending bias, the positive. And again, in the US, I'll remind you that the emerging verticals are equal in size to the lending verticals, right? And their growth is increasing, it increased from.

1% in the third quarter, which we said was based on anomalous and non-recurring factors, to 4% and we expected to improve again over the course of 23. The international businesses, you know, there was less fiscal stimulus, so they're not dealing with the same degree of elevated inflation. They continue to roll.

that businesses 800 million, you know, gets growing. We've targeted to grow in the low double digits. There's a lot of momentum there, right? And it's broad-based momentum because our footprint is more skewed. So that's going to be growth-full.

And then direct the consumer because we've had a reset in process over the past 12 months, has been a material drag on our results. And we see that improving substantially over the fourth quarter. Now again, I just want to reiterate in terms of the guidance.

You know, we didn't model in a recession and we didn't model in economic improvement. We took a very challenging macro environment in our fourth quarter and we largely model off of that. Now again, there's any number of puts and takes given the multistudioverticals and subverticals

But we think it's a prudent guide. It's not overly negative, but it's also not found it on some back end optimists.

And again, the reason organic growth rates increase in a latter half of the years because our cons are much much easier, particularly in the fourth quarter.

Excellent. Chris, thank you and thanks everyone for joining us this morning. There's a lot to digest. I think in our call we'll be sick to time to do that and let us know if we can be of assistance as you contemplate the print today. We hope you have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.