Q2 2023 TransUnion Earnings Call

Hello and welcome to the TransUnion 2023 2nd Quarter Earnings Conference Call. 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 touch tone phone. Please note this event is being recorded. I would like now to turn the conference over to Aaron Hoffman, Senior Vice President of Investor Relations.

you may press star then one on your touch tone phone. Please note this event is being recorded. I would like now to turn the conference over to Aaron Hoffman, Senior Vice President of Investor Relations. Please go ahead.

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. Our earnings release and the accompanying slides include various schedules which contain...

and a replay will be available on our website. We will also be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements because of factors discussed in today's earnings release.

in the comments made during this conference call and in our most recent Form 10-K , Forms 10-Q, and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statement. With that, let me turn the time over to Chris.

Thanks, Aaron, and let me have my welcome and share our agenda for the call this morning. First, I'll discuss the macroeconomic conditions in transgendered markets around the world. Then I'll provide an overview of our strong second quarter financial performance.

I'll also review the continued progress with New Start to accelerate revenue growth and achieve savings targets.

And I'll wrap up with a short discussion of our Global Capability Center strategy, which enables us to scale our global business efficiently and tap into diverse talent pools. And finally, Todd will detail our second quarter results along with our third quarter and full year guidance.

Through the second quarter, macroeconomic conditions are unchanged to slightly improved, with reduced expectations for recession in the U.S. In most of our markets globally, consumers continue to face higher interest rates and elevated, although moderating, inflation levels.

This combination will continue to strain household finances, although high employment levels and modest real wage gains have mitigated the impact of these pressures to date in most of our markets.

Consumers remain resilient and we see positive continued demand for borrowing.

In the U.S., we've seen increased caution and tighter lending standards from banks. However, the strong demand for credit continues to be met by a broad range of lenders.

U.S. consumers remain healthy and optimistic relative to historical norms, with modest spending growth based on strong employment and real wage increases.

Credit performance metrics have continued to normalize and remain within range of pre-pandemic and historical levels.

Although delinquencies have increased, they're still very comfortable by historic standards across mortgage, card, auto, and unsecured personal loans.

Across our international portfolio, conditions also remain largely unchanged.

In Canada and the UK, consumer health and credit demand continue to be similar to the U.S.

with persistently high inflation and rising rates burdening consumers and slowing lending markets.

However, lending volumes in our emerging markets of India, Asia Pacific, South Africa, and LATAM remain strong.

in our emerging markets of India, Asia-Pacific, South Africa, and LATAM remain strong.

Like many of our customers, we remain cautious about the rest of 2023. Therefore, we will again maintain our full year guidance at this point to account for market uncertainties despite overachieving in the second quarter.

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

Now turning to second quarter highlights.

We again beat our guidance for revenue adjusted EBITDA and adjusted diluted earnings per share.

US markets grew 1% with financial services flat and emerging verticals up 3%.

Our financial services vertical performed in line with our expectations, though mortgage was slightly below expectations, but offset by modestly better performance in consumer lending.

US emerging verticals was also in line with our expectations and improved sequentially from the first quarter. Importantly, we have seen signs that the short-term headwinds we've faced in tenant and employment screening and insurance are moderating, which should position us for faster growth in the second half of the year in those verticals.

Our international segment grew constant currency revenue by double digits for the ninth consecutive quarter, led by 35% revenue growth in India and double digit growth in Asia Pacific, Africa, and Canada. We continue to outperform our underlying markets because...

we continue to make progress integrating New Star and see strong customer adoption of our platforms and solutions. Also in the quarter, we announced a commercial partnership and a minority investment in TruWork, a rapidly emerging player in the income and employment verification market. TruWork uses sophisticated orchestration software and is a

to support a multi-pronged strategy to provide coverage of 90% of U.S. employees.

We see an attractive opportunity to help bring TruWorks unique solutions to our broad customer base in markets like financial services and rental screening among others.

And finally, we continue to direct our free cash flow toward reducing our debt levels, and in the second quarter, we prepaid another $75 million in debt and intend to make additional prepayments in the second half of the year. We have now prepaid $150 million of debt this year.

Moving to New Star, New Star delivered 6% organic growth as a result of solid performance across marketing, fraud and communications.

For the full year, we continue to expect high single-digit revenue growth in a 32% margin, fueled by profit flow-through on accelerating revenues and attainment of our integration cost savings.

We have line of sight to the revenue growth based on our strong bookings and the momentum achieved by joint sales teams aligned by vertical markets.

In the first half of the year, we signed meaningful renewals with dozens of customers, including some of the largest companies in the world.

We've also begun recognizing revenue on a number of new multi-million dollar contracts that we believe will accelerate growth in the second half. At the same time, we have numerous late stage large contracts that should further enhance growth over the remainder of the year.

Taken together, these winds give us confidence in delivering high single digit growth for New Star this year.

During the quarter, we also announced a number of partnerships that further underpin our confidence in the short and long term prospects for New Star.

At Snowflake's annual user conference, we announced the launch of TrueAudience Marketing Solutions Transferless Identity Resolution App.

It's now in the Snowflake Marketplace. This partnership brings our advanced identity resolution capabilities to shared customers wherever their data and marketing technology lives.

Together, we're helping our customers improve their consumer data quality and collaborate with partners without sharing sensitive customer information.

Marketers and publishers want to connect disparate offline and online data and enrich consumer profiles with demographics data from true audience identity solutions.

Using this app, they can do that without transferring data outside the snowflake environment.

The transferless quality of the native app helps to support security, privacy, and data governance.

We also partnered with Video Amp to release a comprehensive analytics solution for cross-platform media measurement and optimization.

Marketers will now have more accurate visibility into the effectiveness of their linear television advertising by integrating VideoAmp's TV viewership dataset into the TrueAudience marketing analytics and attribution solution. This integration enables marketers to better measure the holistic impact of their campaigns.

Connected TV.

Magnight can now help agencies, brand, and publishers reach audiences across digital media channels, including streaming video, audio gaming, and digital out of home.

TransUnion's TrueAudience Data Marketplace offers advertisers and brands audience solutions that cover over 80 million US connected homes. And our communication solutions continue to grow on the strength of our suite of true contact trusted call solutions or TCS.

which grew about 75% in the second quarter. Our teams continue to identify new applications that have resulted in rapid customer adoption across a host of verticals.

Let me detail some of the recent progress in two end markets.

First, we've made inroads into the healthcare sector where TCS can enhance the effectiveness of necessary phone calls at many steps of care, including booking appointments, pre-appointment insurance authorizations, appointment reminders, telehealth phone calls, test results, prescription pickups, and other health care providers.

and payment notices or reminders. Second, we see opportunities in the public sector. A few weeks ago, we launched True Lookup Veteran Connect to help state departments of Veterans Affairs improve outreach and effectively deliver housing, health care, job training.

and other essential support to their members.

essential support to their members. In this case,

TrueContact branded call display verifies that the inbound call is coming from the Department of Veterans Affairs and adds context to the mobile call display including brand name, location, logo, and reason for the call. Last quarter, I discussed our ongoing..

data and technology transformation which has been supercharged by the NuSTAR acquisition.

This quarter, I want to highlight our Global Capability Centers, or GCCs, and how they're enabling our transformation into a truly global organization.

Investment in our GCCs in recent years has allowed us to centralize and standardize a variety of important work in high talent and lower cost locations.

Today our GCCs are delivering high quality solutions and services to customers using a follow the sun coverage approach across time zones.

We launched our first GCC in 2018 and over the last five years we've grown to more than 4,000 employees across India, South Africa and our newest location, Costa Rica. All GCC associates inject new ideas and energies into our solutions and our processes.

Concentrating functions in software development, data science and analytics, operations, and business support functions creates scale efficiencies and consolidates knowledge and best practices.

And as we grow our market share in the region surrounding the GCCs, we believe their real-time support, regional expertise, and strong local language skills will be critical to supporting our customers.

We've received numerous rewards reflecting the outstanding work of our GCCs. These include certification as Great Places to Work in India and a Top Employer in South Africa. And in the last two months, our India GCC was recognized by NASSCOM.

the Indian IT Business Process Management Association for its stellar distributed work model for the future and also named by Everest Group as a top global business services employer in India.

This recognition reflects the strong leadership we've put in place and the high caliber diverse talent they've assembled. We see the growth of our GCC network as another attractive path to margin expansion and improved operational performance in the year to come.

Now that wraps up my comments on our market conditions, second quarter performance, progress, integrating New Star, and our successful GCC strategy. Now Todd will provide you with further details on our second quarter financial results and our third quarter and full year 2023 outlook. Over to you Todd.

Thanks Chris, and let me add my welcome to everyone. I'll start off with our consolidated financial results. Second quarter consolidated revenue increased 2% on a reported and 3% on an organic constant currency basis.

There was no impact from acquisitions as we lapped the purchase of Argus last quarter.

Adjusted EBITDA declined 3% on a reported basis. Our adjusted EBITDA margins sequentially improved to 35.0% down almost 200 basis points compared to the year ago second quarter which had the most challenging comparison for 2023. Second quarter adjusted diluted earnings per share declined 13% as a result of lower adjusted EBITDA and higher interest expense.

Before I get into U.S. markets results, a reminder that we are reporting New Star revenue within our vertical market structure and we will discontinue providing standalone New Star reporting at the end of 2023.

Now looking at segment financial performance for the second quarter, US markets revenue was up 1% compared to the year ago quarter.

Adjusted EBITDA for US markets declined 5% and adjusted EBITDA margin was 34.6%. Financial services revenue was flat. Turning to the individual end markets, consumer lending revenue declined low double digits against a high 20% growth rate in the year ago quarter.

after pulling back late last year in response to a potentially weakening consumer.

fintechs have stabilized and remain active market participants with reasonable access to funding.

We also continue to see strength in the buy now, pay later market.

Our credit card business was down mid single digits against a high teens growth rate in the prior year quarter.

Issuers remain selective on marketing outreach, but continue to originate at a healthy level.

We expect emerging verticals to be up mid single digits.

You can see the benefits of our diversified portfolio playing out.

Allowing us to maintain our full year revenue guidance.

We anticipate that international will grow low double digits in constant currency terms driven by ongoing strength in emerging markets.

And we continue to expect consumer interactive to decline low single digits.

Turning back to total company outlook, we expect adjusted EBITDA to be between 1388, and one $4 billion to $1 billion up 3% to 5% also unchanged.

That would result in adjusted EBITDA margin being flat to up 30 basis points with the significant benefits of the new star cost savings, partially offset by the inclusion of Argus is relatively lower margins in the first quarter and some revenue mix considerations.

We anticipate <unk>.

Adjusted diluted earnings per share being flat to declining 4% with higher interest expense offsetting adjusted EBIT growth.

And we continue to expect our adjusted tax rate to be approximately 23%.

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

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

We anticipate net interest expense will be about $275 million for the full year as the benefits of debt prepayment.

Offset by an increase in the sofa forward curve.

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

I'll now turn the call back to Chris for some final comments.

Thank you Todd to wrap up we had another good quarter, beating our guidance for revenue adjusted EBITDA and adjusted EPS were.

We're prudently holding our full year guidance given the level of uncertainty in the market at the same time, we continue to make meaningful progress integrating new star and.

And delivering business wins from the combination.

And with that I'll turn it back to Aaron.

Thanks, Chris that concludes our prepared remarks for the Q&A as always we ask that you. Each ask only one question. So that we can include more participants and so now operator, we can begin the Q&A.

We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Our first question comes from Jeff Mueller with Baird.

Go ahead, yes. Thank you. Thank you so totally.

Respect the prudence and maintaining the guidance.

I guess just in terms of not flowing through the better Q2, and I know you said, it's still uncertain in tough macro but.

That's unchanged to slightly improved.

I see the offset in the lower U S mortgage revenue and inquiries guidance.

Is there anything else that youre seeing in your business kind of later in the quarter early in Q3 or any signals you're getting from your customers that is showing a pullback in activity or is it just maybe extra conservatism or prudence. Thank you.

Good morning, Jeff This is Todd I'll take that question.

Very appropriate place to start.

This morning.

In Q1, and Q2, we did beat XP.

Expectations across revenue adjusted EBITDA and adjusted diluted EPS.

Did not.

The guide and the reason for that is we feel that E S.

Economic conditions, particularly in the U S and then some of the.

Developed markets that we operate in continue to remain uncertain.

And a point.

To that and how we think about as you.

If you go back to our April call.

When we gave our Q1 results and the updated guide at that time.

Significantly increased our mortgage assumption for the year, because we saw a mix shift.

And more.

More towards smaller players in the space.

We reduced our consumer lending.

Cash or.

For the year close to similar amounts brawl intents and purposes and.

And in the consumer lending space, what we were seeing at that time.

Was it wasn't slowed down and it was primarily in response.

So the aftermath of the Silicon Valley Bank and signature failures.

Our cautiousness.

In the late March early April period.

So what happened is in the second quarter.

Dynamics that I, just articulated that we forecasted.

In essence, we saw.

Almost reverse.

Interest rates tick up in particular on the on the 10 year yield which had a direct impact on <unk>.

Mortgage rates, where we saw mortgage rates close to 7% long ago still.

Still in the upper sixes, so as a result of that in this guide what we've done is we've taken out.

Our mortgage assumption.

Conversely.

<unk> lending.

The second quarter, and our customers got more and more comfortable with the type of environment that we're operating in we started to see a consumer lending volumes.

Pick up.

So again kind of similar.

Offsetting case there. So I think that's just important is when you look at the full year guide you can see that we maintained our puts and takes that we're seeing in the business and that's probably the.

The example, I can give you I would say, though is needless to say is we're really pleased to have been able to outperform in the first half of the year and really what we're focused on is.

Derisking.

Derisking in the second half of the year.

That being said when you look at the growth rates and the expectations for the second half of the year, we feel that the guide is strong.

Feel like we're going to deliver.

A good second half.

So your point of your question is our customers we are seeing a stability.

Right now.

And more of our developed markets and think of U S financial services.

As well as I'm in markets like Canada, and even a little bit in the U K, maybe that's a little bit more pressured in the international business continues to grow strongly.

In the double digits. So that's what gives us.

The conviction in the second half.

Got it thank you.

Yeah.

Our next question comes from <unk> <unk> of autonomous.

Go ahead.

Good morning, Thanks for taking my question I'm very excited about your partnership with sure just trying to understand a little bit better about the size of <unk> database and revenue that's why I asked your strategy.

And there I was also wondering if you can share with us a little bit more about what the downstream customer breakdown looks like between kind of mortgage background screening companies mature and whether youre, usually competing with equifax and experian.

In this space or are you more competing with some of the in house manual verification processes at these mortgage lenders.

Okay.

Okay, Kelsey and thank you for the question and again we are.

We're excited about our <unk>.

Our partnership with true works.

I think any any discussion of verified employment and income space starts with the context of that.

The work number is setting the standard.

For product in this marketplace, but it is a big and attractive adjacent market for us and I think the investment ensure work just reflects our.

Our continued efforts to find our way into this market.

And.

And scale our revenues, we think the market is.

Hungry for competitive alternatives.

We're one of them.

A number of players that seize the opportunity and we're going to continue.

To work.

So far in the rate.

The right solutions that can satisfy client needs and scale revenues.

What we like about <unk> work as you know there are rapidly.

Emerging player in this space in.

And they are very kind of foot forward technologically.

Have sophisticated.

Workflow and orchestration software, that's very easy to access and has a very streamlined user interface.

It allows customers to.

Fulfill the need through a variety of.

Approaches or mechanisms that could be tapping into.

Their database.

Employment and income wages.

Which is well beyond critical mass and growing.

From relationships with payroll processors, but also with major corporations.

But they can also support a consumer permission to account access workflow the traditional telephonic workflow.

Document upload embedded within the loan origination lifecycle, so be kind of umbrella functionality that they provide across a range of fulfillment methods is particularly attractive.

We think we have certainly attracted data assets and very broad distribution msas relationships with the demand side that can help them.

Scale of this investment.

And then to some of your more detailed questions.

Probably better for the true works CEO , but I think this just reinforces.

Our strategic intent to compete in this space and our ongoing efforts to find.

The right solution to help us penetrate and scale.

Okay.

Thanks for that.

Okay.

Okay.

Yes.

Our next question comes from Faiza <unk> of Deutsche Bank go ahead, yes.

Yes, hi, good morning.

I wanted to just go back to the credit market again.

And wanted to get your perspective on what Youre seeing from Fintech customers.

And it seems just from your commentary that maybe marketing revenue seemed to have accelerated.

The credit side of the equation.

So.

I'd love to get some perspective on that sort of the puts and takes around marketing versus portfolio monitoring and sort of what youre seeing from your customized curriculum fintech in particular.

Okay, Yeah happy to.

<unk> on that.

I would say trading conditions for the fin techs are largely unchanged between the quarters.

We see certainly reduced activity from prior years, where the.

Their growth has really accelerated.

But a lot of stability.

And resilience in this sector.

They are still originating loans, albeit at a lower level and they are more selective than they were previously.

I don't think we've seen a distinct shift.

Toward marketing and customer acquisition in either the centex or frankly consumer lending in the broad right.

There is more caution.

And there is more sensitivity to risk which has.

Induced overall marketing and acquisition activity that said.

There is still a good level of blending activity. There is certainly ample consumer appetite for loans.

Because of the consumer remains pretty healthy and as long as that's the case the market is going to find a way.

To fulfill.

That demand and.

And I think it's important.

Again to provide some context wall.

And 22 in the first half of the year, the Fintech and consumer lending in general was booming we saw that diminish in the second half of the year and we still have kind of <unk>.

Steady as she goes outlook for Fintech for the remainder of this year, but with that said the business is still up 75% over the last three years and we view that as something to be excited about not concerned about.

Thank you.

Our next question comes from Andrew Steinman with J P. Morgan.

Go ahead.

Hi, I'm coming back to slide six you Scott could you just be a little more specific and tell us what's driving the strong bookings renewals and you said Jan is there a joint product road map, yet between new Star and Transunion.

Yes.

Happy to elaborate on that.

First of all I would say across the three.

Product areas of marketing risk and communications, we've had strong growth.

In each of those areas.

And we are looking to accelerated growth in the third and the fourth quarter to reach.

The full year high single digits guide.

As I said in my commentary, we had strong renewals with big customers.

We are ramping the revenues from big customer wins last year, we continue to sell well.

And so theres a lot of positive indicators that give us confidence in that new star high single digit guide.

Yes, we absolutely are executing on our cross sell.

And on our integrated product development in very meaningful ways.

In prior calls I have talked.

I think extensively about the benefits of new stores technology.

I'd platform that they developed.

We have adopted and rebranded as one true and is becoming the integrated data acquisition management and analytics platform for transunion across multiple geographies multiple markets will continue to roll that out.

<unk> proven the concept that we can do it.

So yes, the integration is going well on multiple levels I think on the selling side.

We integrated the sales forces in the first year and they are very comfortable and their knowledge of the broader product line is increasing and their comfort cross selling is increasing and we are seeing improvement.

Now clearly Andrew more work to do and a lot of upside there. So we're going to continue to push hard.

But we do have integrated <unk>.

Product development, our multi generational product plans in each of their product lines between.

The two companies thank.

Thank you Chris.

Yes.

Yes.

Yes.

Our next question comes from Toni Kaplan with Morgan Stanley .

Go ahead.

Thanks, so much.

Wanted to ask maybe one more question on the sort of.

True work and and verification.

No.

Ultimately.

Where do you see this going for you.

Our strategy really to try to compete head to head with Equifax now I know historically.

Loss of being sort of newer and smaller than that.

Part of the business like you had sort of had this niche strategy. So I guess what is the new strategy, there and where are the real differentiators that use case.

For sure and your combination.

Yeah sure again look I have to acknowledge that.

Equifax has a very strong business in the space, we all understand that.

However, I think there are I think the market will support.

Multiple competitors in this space.

At <unk> and.

Different niches and so when you take all of them are strong an entrenched competitor like this youre looking for an opportunity to penetrate the market the.

The market I think is hungry for alternatives.

For a variety of competitive factors I think it is healthy.

For the market I think it's good for consumers.

And I think true work has demonstrated that.

They have a value proposition that can sell that they are scaling the business and the distribution partnership with us is going to be significantly additive to that.

No.

We're working.

On growing this beachhead that they've established and we can grow it in a variety of ways from adding records.

Two.

Increasing the distribution to deeper and more meaningful penetration into transunion products. So they can ride our rails and to our clients et cetera.

And we're just going to continue to fight the fight and.

And Theres really not a strategic change.

Yeah.

Thank you.

Our next question comes from Andrew Nicholas with William Blair.

Please go ahead.

Hi, Good morning. Thank you for taking my question I wanted to circle back to New Star maybe a multipart question here. If you will the first is the 6% growth essentially what you were expecting for the second quarter and then the second part is just on kind of medium term growth outlook, there I know.

The target when you announced the deal was to eventually get to double digit growth I'm just wondering if that's still.

The target and to what extent do you need a supportive macro to get there. Thank you.

Yes.

6% growth in new store in the second quarter is right on plan.

The plans for new store over the course of 'twenty three was accelerating revenues.

Just on the strength of the bookings and the implementations the bookings from 'twenty, two and the implementations ramping over the course of 'twenty three.

And that is playing out as planned.

We still.

We still expect to get the high single digits for new store in total by the end of the year.

Now back to the guidance the initial guide.

Yes, Indeed, we didn't expect for the business to be executing.

In the low double digit organic revenue range.

A couple of years after acquisition that is still our expectation for the potential of this business over the longer term.

But again, we are facing more challenging conditions overall economically, but certainly in terms of marketing and advertising spend.

Then when we first.

When we first provided that guidance.

So right now, we're really focused on achieving high single digit and sustaining that in the foreseeable future.

And Chris I would just add on to that that just underscore the point that Neustar has performed to our expectations through the first half.

And the second point that I think is important to understand that.

This business is expected to be the fastest grower in our U S markets business in 2023, so it gets to the question on the on the growth rate as Kristian said.

We fully expect to deliver on the high single digit.

We put 3% growth in Q1, 6% up in Q2, you can do the math as far as how high single digits against there.

We have good visibility into Q3, Q4, and it should be at a higher rate.

Yes, those are good at two.

Too early to guide for 'twenty, four we're still focused on hitting 23.

The other out I guess is that the integration savings program continues right on target and as we grow revenue when we take cost out of the business.

We're going to progress toward those long term margin objectives for new start as well.

Great. Thank you both.

Our next question comes from Ashish <unk> of RBC capital markets go ahead.

Thanks for taking my question I wanted to focus on the EBITDA margin. The PQ guidance implies a significant improvement both sequentially and year over year EBITDA margin expansion, but the implied fourth quarter margin.

If my math is right around 39% implies another sequential improvement and I was wondering if you could talk about the drivers for that improvement that one time thing or is that how we should think about the jump off point as we get into 2024.

Ashish Thanks for the question, so as far as our outlook or adjusted Ebitdas concern analysts to say I think the appropriate place to start is with our with our revenue guide.

Guidance right and so if you look at.

The guide.

But also obviously maintaining if.

If you look at that.

From the high end of our guidance range, we are expecting incrementally more dollars to arrive.

From a revenue perspective.

In the second half seasonality is a big factor.

So Q3 is typically what a trans union's highest revenue quarters.

On a historical normal.

That make times.

And you can see that in the guide that Theres incremental dollars that are assumed from a revenue perspective.

And that's going to drive.

A nice amount of flows through.

Into our adjusted EBITDA margin.

The second thing that I would say is that the.

<unk> cost synergies that Chris just alluded to in the previous question.

Question, they continue to build for us and provide a very meaningful benefit so that'll definitely be a driver for us as well.

And no comment back to the first question that we got.

Talking about the uncertainty that we face.

And the business in response to that the organization over the last year plus has prudently managed expenses and we've been focused only on the most critical hires we pulled back on our travel and entertainment and look for other one time spend to be able to pull out of.

Out of our operating expense run rate. So all of those forces are also an effect as well.

And then the final point I would make is if you think about Chris his opening remarks.

And when we cover the global capabilities centers.

<unk> provides a very meaningful benefit.

Two trans Union and that's why we felt it was appropriate to.

Provide that update in a little bit more detail this quarter. So that's definitely another another driver.

For us as well too.

Yes, I think thats all spot on and I think just to amplify that last point.

Centralizing operations and building out our.

Our global capabilities centers has been a big part of Globalizing. This company, but also making it structurally more profitable and that's why we put a spotlight on the March that we've been on for the past five years now.

And.

We think there's more opportunity.

We're going to stay the course, there and take full advantage of it.

We also think there is opportunity and time to become.

Structurally more efficient on the technology side.

And as we continue our migration through project rise.

To the cloud with considerable standardization along the way that will then create an opportunity for us to consolidate the tech stack further.

And produce some some further efficiencies there as well.

So we were on a multi year path here to get our margins back to where they were before the acquisitions thats our commitment to investors.

And it's a combination of the near term things that Todd talked about but also the strategic backdrop.

We've been investing in for many years.

That's great. Thanks, Thanks, Thank you.

Our next question comes from Andrew Jeffrey of Truest Securities Go ahead.

Hi, Thanks for taking the question.

I'm wondering specifically Christian in the trusted call solutions as part of your business can you talk about sort of where those wins are coming from are they coming from internal solutions.

So from whom you're taking share and what are the pricing characteristics of those contracts.

Yes.

Okay well.

Well, let me, let me shed some more light on that what I would say is that.

Trusted call solutions is a relatively new solution to the market.

And.

I mean, new star over the past four or five years has taken it from from zero to where it is today I think we've guided on the specific dollars, but it's already been a considerable success. So don't think of this as US taking share from established players. This is an innovation that they brought to market that we're scaling.

We're having success selling it.

Across.

All of our vertical markets frankly.

<unk>.

Knock on wood here, thus far it's been easiest cross sell.

That's come out of this trade Union and new Star combination.

We view trusted call solutions as you know.

It's a product that straddles both marketing effectiveness, which is a major strategic push for us, but also risk mitigation.

And again, it's based on the broad and unique phone intelligence that new Star has always had at its core that goes all the way back to targets info.

And.

And we think Theres a lot of growth upside. So it has been from a revenue perspective.

A nice positive to our M&A case since we bought the business and we are focused on investing and accelerating and further scaling it.

I appreciate that thank you.

Our next question comes from Heather Belsky of Bank of America. Please go ahead.

Hi, Thank you for taking my question I was curious about the insurance business and the trends you saw in the quarter and how to think about the improvement for the rest of the year.

Shopping is improving marketing hasn't started to ramp just yet and kind of what are you hearing what do you think happens with marketing as the year progresses.

Yes, I think those are some fair insights Heather and what ill say about insurance that we expect the growth rate in insurance to accelerate in the second half we're happy that we've already seen some improvement in the second quarter.

I'll remind you that the third quarter of last year, and even the fourth quarter to a lesser extent for insurance were.

Quite muted because our marketing activity client acquisition activity.

Just came to a grinding halt because of the mismatch between the pricing and repair and replacement costs.

P&C carriers as we updated you last call.

The carriers are making good progress in getting price increases from the various states.

I think and they say that there is still a bit more work to do but we're approaching a point, where they can initiate new business again with more confidence and so with that I would expect.

Some improving trends on the marketing activities.

It goes back to the same level of frothiness or how long it takes to get to that point.

It remains to be seen but given the material price increases that they've had to put through on their customers.

There is an acceleration in shopping behavior.

<unk> has helped our numbers as well so we've got some pretty reasonable confidence that we're going to accelerate in insurance over the second half of the year and hopefully that'll set us up for a nice guide in 2014.

Great. Thanks, Chris and given that we're now at the bottom of the hour and we want to be respectful of everyone's time on what we know is a busy day of earnings in this space.

On the call, but thank you everyone very much for joining us today speaking with you over the course of the quarter all of that.

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