Q1 2025 TransUnion Earnings Call
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Speaker Change: Good morning, and thank you for attending today joining me on the call are Chris Cartwright, President and Chief Executive Officer, and Todd Cello Executive Vice President and Chief Financial Officer, We've posted our earnings release and slides to accompany this call on the Transunion Investor Relations website. This morning. They can also be found in the current report on form 8-K that we filed this morning.
Speaker Change: Our earnings release and the accompanying slides includes various schedules, which contain more detailed information about revenue operating expenses and other items as well as certain non-GAAP disclosures and financial measures along with their corresponding reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures.
Speaker Change: Today's call will be recorded and a replay will be available on our website we.
Speaker Change: 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 and in <unk>.
Speaker Change: 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.
Speaker Change: Any duty to update any forward looking statement with that let me turn it over to Chris.
Chris Cartwright: Thanks, Greg Let me add my welcome and share our agenda for the call. This morning.
Chris Cartwright: First I'll provide the highlights of our first quarter of 2025 results and a brief overview of what we are experiencing across our markets.
Chris Cartwright: Second I'll discuss progress toward our 2025 strategic priorities finally, Todd will detail, our first quarter results and 2025 guidance.
Chris Cartwright: But we also offer a perspective on how our diversified portfolio positions us to navigate current market uncertainty.
Chris Cartwright: In the first quarter Transunion exceeded financial results on all key metrics for a fifth straight quarter, we delivered high single digit organic revenue growth and double digit adjusted diluted EPS growth once again, highlighting our ability to drive strong results in a subdued macro environment.
Chris Cartwright: Revenue grew 8% on an organic constant currency basis above our 5% to 6% guidance, excluding mortgage our growth of 6% also exceeded expectations.
Chris Cartwright: Our U S market segment delivered 9% growth in the quarter.
Chris Cartwright: Within that financial services grew 15% in total and growth excluding mortgage accelerated to 9%.
Chris Cartwright: Across all lending types, we continued to outperform overall volume growth by driving new business wins across our solution suite.
Chris Cartwright: Consumer lending and auto both grew double digits and card and banking grew mid single digits activity from Fintech lenders picked up supported by improved funding and heightened consumer demand for debt consolidation products.
Mortgage was up 27% modestly above expectations due to favorable pricing and additional non Tri Bureau mortgage revenue mortgage inquiries were down roughly 10%.
Chris Cartwright: Emerging verticals grew 6% led by double digit growth in insurance as well as improved growth across our diversified verticals.
Chris Cartwright: Tech retail and e-commerce, and telecommunications verticals accelerated to mid single digits growth benefiting from improved bookings and revenue performance and our marketing and communication solutions.
Chris Cartwright: And then in employment screening grew high single digits against healthy industry volumes as we lap the impact of our product recalibration due to revised regulations and increased new business wins.
Chris Cartwright: Consumer interactive declined 1% as anticipated as we continue to turnaround the segment, we expect to complete the launch of our new freemium solution later this quarter.
Chris Cartwright: And international grew 6% on a constant currency basis as expected India grew 1% as we lap robust activity in the prior year.
Chris Cartwright: We remain confident in re accelerating our growth rate in India throughout 2025 supported by growth.
Chris Cartwright: In our non consumer business, new business wins and increases in consumer lending activity.
Chris Cartwright: The reserve Bank of India has continued its pro growth actions recently with another interest rate cut in April and the reauthorization of lending by several important non bank finance companies that were restricted in 2024.
Chris Cartwright: We expect that lending conditions will further strengthen as the year progresses. The rest of our international markets grew high single digits, including the U K, which delivered very strong 9% plus growth.
Chris Cartwright: Our strong financial results supported progress against our refreshed capital allocation strategy, our leverage ratio declined to two nine times down from 3.5 times, a year ago, we repurchased $10 million of shares in March and April our first share repurchase since 2017.
Chris Cartwright: We anticipate greater flexibility for capital deployment, including share repurchases as the year unfolds, we will balance capital deployment.
Chris Cartwright: Our goal to Delever below 2.5 times before funding the Mexico acquisition later this year.
Chris Cartwright: We achieved strong results despite subdued market conditions in the first quarter, overcoming elevated interest rates and softening business and consumer sentiment.
Chris Cartwright: Looking ahead, we are maintaining our organic growth guidance for the full year balancing our strong start and conservative volume assumptions against the ongoing market uncertainty.
Chris Cartwright: As a reminder, the high end of our guidance in February assumed subdued yet stable lending volumes over the course of 2025.
Chris Cartwright: Your pin by healthy conditions for.
Chris Cartwright: For both consumers and our customers.
Chris Cartwright: The U S economy entered 2025 with low unemployment modest real wage growth and manageable inflation our.
Chris Cartwright: Our customers were cautiously optimistic supported by stable consumer finances, low delinquencies replenish deposits and improved access to the capital markets.
Chris Cartwright: In the first quarter.
Chris Cartwright: Revenue and loan volumes tracked ahead of our expectations for U S financial services.
Chris Cartwright: Volume trends remained consistent through the middle of April.
Chris Cartwright: Our international portfolio, including India continues to perform well as anticipated it.
Chris Cartwright: A continuation of these trends would support results at or above the high end of our guidance.
Chris Cartwright: That said.
Chris Cartwright: Recent proposals in the U S around tariffs trade and physical policy have added risk around the trajectory of employment inflation interest rates and global economic growth.
Chris Cartwright: The 10 year U S. Treasury rate has fluctuated over the last two months and remains elevated although below its mid January peak.
Chris Cartwright: The fed is maintaining a cautious approach of monetary policy opting to wait for more clarity on potential impacts of policy.
Chris Cartwright: We are actively monitoring market dynamics and the impact of policy changes on consumers and our customers.
Chris Cartwright: Well Todd will provide additional details on our guidance assumptions, our portfolio dynamics and how we plan to manage the business if conditions softened.
Chris Cartwright: I'll spend the rest of my time. This morning detailing our recent progress on the three pillars of our transformation enhancing our global operating model, completing our technology modernization and accelerating innovation across our solutions portfolio.
Chris Cartwright: We continue to refine and enhance our global operating model to standardize how we operate and build scale across the organization.
Chris Cartwright: In 2025, we plan to further develop our best in class global capability centers and improve collaboration across our functional matrix to accelerate solutions innovation.
Chris Cartwright: A world class Global operating model requires strong leaders and we made.
Chris Cartwright: Key additions in the quarter.
Tiffany Chambers as our new Chief operations Officer, She joins US from Bank of America, where she most recently served as Chief operating officer of its retail banking division prior to that she served as chief operating officer for the bank's global banking and markets risk finance and infrastructure technology team.
Chris Cartwright: At Transunion, Tiffany will focus on delivering premium experiences for consumers and customers overseeing activities, including consumer relations.
Chris Cartwright: Customer delivery and relationship management team.
Chris Cartwright: He used global capability centers, and our procurement and real estate.
Chris Cartwright: Well I'm a little Tzaddik has also assumed the role of Chief Global Solutions Officer. He joins us from Mastercard, where he held several executive roles and serve on the company's management Committee.
Chris Cartwright: And his last position Mohamad was responsible for the business the market's insight group, where he developed and commercialized products that grew into a multibillion dollar operation.
Chris Cartwright: The group delivered data insights and analytics solutions across over 100 countries, using mastercard and customer data.
Chris Cartwright: He was also responsible for the global consulting business that provided advisory services to financial institutions, and retail and Commerce organization.
Chris Cartwright: Mohamad its focus will be to advance innovation across trade unions global product portfolio.
Chris Cartwright: Yeah.
Chris Cartwright: So Tiffany mohamad represent the high quality of talent that we're attracting as we scale our business to drive greater innovation and service to our customers and consumers.
Chris Cartwright: Our operating model optimization complements the next pillar of our transformation, which is modernizing our technology into a global Configurable cloud based platform.
Chris Cartwright: We delivered on key milestones in the first quarter to migrate U S credit customers to one true.
Chris Cartwright: We are initially focused on dual running over 90 U S credit customers on one true and our legacy platforms simultaneously. The one true platform is managing well the scale and complexity of these many challenging workloads and we've planned additional rollouts in the coming months, we are achieving notable performance in <unk>.
Chris Cartwright: Aviation improvements on the new platform, including over 50% faster processing speeds enhanced cyber security and compliance.
Chris Cartwright: And rapid development and deployment of new scores and attributes.
Chris Cartwright: This quarter, we launched our proprietary AI powered tool for our developers called one true assist wonder.
Chris Cartwright: I want her assist Leverages advanced language models to help our developers auto generate repetitive code convert code between languages and identify and remediate security vulnerabilities.
Chris Cartwright: I wonder if this can be used across the one true software development lifecycle, and we're already seeing a 20% to 50% lift in our developers productivity from leveraging the tool.
Chris Cartwright: We expect to expand our our adoption and use cases of this tool throughout the year.
Chris Cartwright: And finally, we began mobilizing our teams internationally for the migration of Canada U K and the Philippines. Two one true in 2026, we will begin key capability development over the course of this year.
Chris Cartwright: And our final transformation pillar is accelerating innovation and growth across our solutions, we continue to make strong progress across our product suites.
Chris Cartwright: In February we discussed the reinvigoration of our consumer interactive business throughout the quarter, we performed initial testing and consumer migrations to our new freemium offering in the U S.
Chris Cartwright: Positioning us for a full rollout by the end of the second quarter.
Chris Cartwright: We also completed the acquisition of <unk> on April one.
Chris Cartwright: When he both centralized decisioning infrastructure enables lenders and banks to deliver highly personalized credit offers to consumers through freemium websites and other online publishers, we're already adding new publishers and top tier lenders to the platform to complete a robust marketplace.
Chris Cartwright: And we experienced strong demand for our true IQ analytics suite, including a sizable pipeline and increasing revenue realization for data enrichment.
We also continued to build out functionality for our end to end credit marketing suite that we call advanced acquisition, we launched credit strategy Studios beta program with multiple customers and with many more in the pipeline.
Chris Cartwright: And fraud, we on boarded new customers on a true validate integrated solutions with increasing customer interest. We also launched our new global device risk machine learning model, which delivers a material lift in predictive newness for account origination in some account management and logging use case.
Chris Cartwright: Marketing also delivered a solid first quarter with strong bookings as well as strong retention rates during a key renewal season for many of our true audience customers.
Chris Cartwright: And trusted call solutions had another strong quarter of broad based growth across the verticals. We remain on track to deliver 150 million of Tcs revenue in 2025.
Chris Cartwright: Up from $115 million in 'twenty four.
Chris Cartwright: Now Todd will provide further details on our first quarter financial results and our full year twenty-five outlook Todd Thanks, Chris and let me add my welcome to everyone as Chris mentioned in the first quarter, we exceeded our guidance across all key financial metrics driven by outperformance, particularly in U S financial services.
Chris Cartwright: <unk> and emerging verticals first quarter consolidated revenue increased 7% on a reported and 8% on an organic constant currency basis, there was no impact from acquisitions, and a 1% headwind from foreign currency.
Chris Cartwright: Our business grew 6% on an organic constant currency basis, excluding mortgage from both the first quarter of 2024 and 2025.
Chris Cartwright: Adjusted EBITDA increased 11% on a reported and 12% on a constant currency basis our.
Chris Cartwright: Our adjusted EBITDA margin was 36, 2% up 115 basis points and above the high end of our expectations due primarily to revenue flow through annualized.
Chris Cartwright: Annualized <unk> of transformation savings and timing of certain investments.
Chris Cartwright: Adjusted diluted earnings per share was $1.05 an increase of 15%.
Chris Cartwright: Finally in the first quarter, we took $30 million of one time charges related to our transformation program.
Chris Cartwright: 10 million for operating model optimization, and 20 million for technology transformation to date, we have incurred $287 million of one time transformation expenses over the course of the program.
Chris Cartwright: Looking at segment financial performance for the first quarter U S markets revenue was up 9% compared to the year ago quarter.
Chris Cartwright: Adjusted EBITDA margin was 37, 4% or up 120 basis points, driven by revenue growth and transformation savings.
Chris Cartwright: Financial services revenue grew 15% or 9% excluding mortgage.
Chris Cartwright: Credit card and banking business was up 5% against tempered online and batch volumes we.
Chris Cartwright: We saw healthy new business wins for trusted call solutions, and the broader true IQ analytics suite.
Chris Cartwright: Consumer lending revenue grew 11%.
Chris Cartwright: We experienced strong marketing and online volumes is fintech lenders continued to reenter the market.
Chris Cartwright: We also delivered new fraud wins as we expand our solution suite to this customer set.
Chris Cartwright: Our auto business grew 14%.
Chris Cartwright: Volumes were flattish year over year in January and February but picked up in March.
Chris Cartwright: <unk> due to a pull forward of demand ahead of tariffs.
Chris Cartwright: In total auto volumes in the first quarter were up modestly with growth driven by price realization as well as new wins in credit and communication solutions.
Chris Cartwright: For mortgage revenue grew 27% compared to inquiry volumes down roughly 10%.
Chris Cartwright: Mortgage accounts for about 11% of trains unions trailing 12 month revenue.
Chris Cartwright: Emerging verticals growth accelerated to 6% in the quarter led again by double digit growth in insurance.
Chris Cartwright: <unk> retail and ecommerce telco tenant and employment, all improved and delivered mid single digit or higher growth.
Chris Cartwright: And media grew low single digit.
Chris Cartwright: Public sector declined modestly as the business lapped strong double digit growth in the first half of last year.
Chris Cartwright: And insurance strong growth was supported by stable market conditions.
Chris Cartwright: He segments of the insurance market are expanding new business activity and posting solid results with marketing activity continuing to recover as rate adequacy improves, especially in personal lines auto.
Chris Cartwright: Insurance shopping remains active we continued to deliver broad based new business wins, including in core credit and driving history as well as trusted called solutions in our modern marketing products.
Chris Cartwright: Turning to consumer interactive revenue decreased 1%.
Chris Cartwright: Chris noted, we made substantial progress towards launching our freemium offering later this quarter.
Chris Cartwright: We believe a key step in returning consumer interactive to sustainable growth over the long term.
Chris Cartwright: For my comments about international all revenue growth comparisons will be in constant currency for.
Chris Cartwright: For the total segment revenue grew 6%.
Chris Cartwright: Adjusted EBITDA margin was 45, 3% up 10 basis points.
Chris Cartwright: Now, let's dig into the specifics for each region.
Chris Cartwright: India grew 1% as anticipated as we lapped last year's robust activity.
Chris Cartwright: Commercial credit and new products like our API marketplace drove growth offsetting declines in consumer credit volumes.
Chris Cartwright: We expect India growth to improve in the second quarter with further acceleration in the second half of the year supporting our guidance for 10% growth for the full year.
Chris Cartwright: Our U K business performed better than expected growing 9%.
Chris Cartwright: We benefited from strong batch and online activity from our largest banking customers continued improvement from Fintech and new business wins across our diversified markets.
Chris Cartwright: In Canada, we grew 7% and a muted market driven.
Chris Cartwright: Driven by wins in financial services, and consumer indirect as well as healthy insurance activity.
Chris Cartwright: In Latin America revenue also grew 7% with modest growth in Colombia, and Brazil, and double digit growth in our other Latin American countries.
Chris Cartwright: In Asia Pacific, We grew 8% led by strength in the Philippines.
Chris Cartwright: In the second quarter, we expect modestly negative growth in Asia Pacific as we lap onetime consulting revenue in the prior year.
Chris Cartwright: Finally Africa increased 10% with broad based growth led by our retail and insurance verticals.
Chris Cartwright: Turning to the balance sheet, we ended the quarter with $5 $1 billion of debt and $610 million of cash.
Chris Cartwright: Our leverage ratio at quarter end was two nine times.
Chris Cartwright: Through mid April we repurchased $10 million of shares our first share repurchases since 2017.
Chris Cartwright: System with our refreshed capital allocation approach, we will take a balanced approach to deploying capital over the remainder of the year. We remain focused on delevering to under two and a half times, we plan to balance debt prepayment and share repurchases throughout the year based on market conditions.
Chris Cartwright: We also plan to preserve capital ahead of our Trans Union de Mexico acquisition.
Chris Cartwright: Which we expect will close later this year.
Chris Cartwright: Turning to guidance as Chris mentioned, we are maintaining our organic growth assumptions for the year.
Chris Cartwright: The only change the guidance from February is the incorporation of the acquisition of Monique Vo.
Chris Cartwright: Based on the trajectory in the first quarter and early April our financial performance is tracking at or above the high end of our full year guidance.
Chris Cartwright: In that regard we believe we can manage some level of U S lending activity softening within our guidance range conditions.
Chris Cartwright: Conditions, clearly remain fluid and we will monitor and update as appropriate.
Chris Cartwright: That brings us to our outlook for the second quarter.
Chris Cartwright: We expect FX to be a 1% headwind to revenue and adjusted EBITDA.
Chris Cartwright: We expect our Moon Evo acquisition to add a percent to revenue.
Chris Cartwright: Based on Munoz geographic mix, it's revenue will be reported mostly in our U K business.
Chris Cartwright: With a portion also in consumer interactive.
Chris Cartwright: We expect revenue to be between 1.076 in $1.095 billion were up 325% on an organic constant currency basis.
Chris Cartwright: Our revenue guidance includes approximately two points of tailwind from mortgage.
Chris Cartwright: In the second quarter, we expect mortgage inquiries to decline mid single digits.
Chris Cartwright: Excluding mortgage we expect the business to grow 1% to 3% on an organic constant currency basis.
Chris Cartwright: We expect adjusted EBITDA to be between 375 and $386 million flat to up 3%.
Chris Cartwright: We expect adjusted EBITDA margin of 34, 8% to 35, 3% down 90 to 130 basis points as certain expenses shifted from the first to the second quarter.
Chris Cartwright: Our margin for the first half of the year is expected to be approaching 36% similar to our expectation for the full year.
Chris Cartwright: We also expect our adjusted diluted earnings per share to be between 95, and 99 cents down 4% to flat.
Chris Cartwright: Yeah.
Chris Cartwright: Turning to the full year, we anticipate FX to be a 1% headwind to revenue and adjusted EBITDA and the Moon Evo acquisition to contribute half a percent to revenue.
Chris Cartwright: We expect revenue to come in between 4358, and four point for $1 $7 billion. We continue to expect organic constant currency revenue growth of four 5% to 6% or 2.5% to 4% excluding mortgage.
Chris Cartwright: These growth rates include 1% headwind from lapping against last year's large breach win which occurred in last year's third quarter.
Chris Cartwright: Our business segment organic constant currency growth guidance is also unchanged, we expect U S markets to grow mid single digit or up low single digit excluding mortgage we.
Chris Cartwright: We anticipate financial services to be uploaded low double digit or mid single digit excluding mortgage.
Chris Cartwright: We expect mortgage revenues to increase about 20%.
Chris Cartwright: <unk> modest declines in mortgage inquiries.
Chris Cartwright: We expect emerging verticals to be up mid single digits, we anticipate consumer interactive decreasing low single digit.
Chris Cartwright: But increasing low single digits when excluding the impact of last year's large breach when we.
Chris Cartwright: We anticipate international growing high single digits.
Chris Cartwright: Turning back to total company outlook, we expect adjusted EBITDA to be between 1.549 and $1 five 9 billion.
Chris Cartwright: Up 3% to 6% unchanged from February that.
Chris Cartwright: That would result in adjusted EBITDA margin of $35 six to 36, 8% down 40 basis points to flat.
Chris Cartwright: We expect limited adjusted EBITDA from <unk> in 2025, due to onetime integration investment in the business, resulting in a 20 basis point drag to full year margins.
Chris Cartwright: We expect <unk> to scale to company level margins overtime.
Chris Cartwright: We anticipate adjusted diluted earnings per share to be $3.93 to $4 eight flat to up 4%.
Chris Cartwright: Depreciation and amortization is expected to be approximately $570 million.
Chris Cartwright: We expect the portion excluding step up amortization from our 2012 change in control and subsequent acquisitions to be about $285 million as technology modernization initiatives go into production and start to depreciate.
Chris Cartwright: We anticipate net interest expense will be about $195 million for the full year and we expect our adjusted tax rate.
Chris Cartwright: To be approximately 26, 5%.
Chris Cartwright: Capital expenditures are expected to be about 8% of revenue.
Chris Cartwright: We expect to incur $100 million to $120 million in one time charges in 2025 related to the last year of our transformation program.
Chris Cartwright: Given those investments we continue to expect our free cash flow conversion as a percentage of adjusted net income to be roughly 70% in 2025.
Chris Cartwright: Before turning it back to Chris I want to provide perspective on our portfolio resiliency and our ability to navigate a changing economic environment.
Chris Cartwright: Over the last decade, Transunion has grown revenue organically at high single digit compounded growth annual growth rate and adjusted diluted earnings per share at a double digit CAGR.
Chris Cartwright: We delivered growth in each of the last five years, despite periods of significant headwinds in key end markets.
Chris Cartwright: We grew 3% during COVID-19 impacted 2020, and 3% in 2022 and 2023, despite sharp increases in interest rates and broad based slowdown in U S lending volumes.
Chris Cartwright: This track record of growth is underpinned by our diversified and growth full portfolios across solutions verticals and geographies for.
Chris Cartwright: For example, U S financial services now accounts for one third of total revenue compared to 16% in 2007.
Chris Cartwright: We believe our business is stronger than ever in terms of the breadth of solutions and expertise that we can deliver to help customers navigate a dynamic market environment.
Chris Cartwright: Our ongoing transformation Fortifies these strengths enhancing our innovation and quality of service, while delivering efficiencies across our business.
Chris Cartwright: Slide 15 provides a breakdown of our U S financial services revenue by lending category. We believe our portfolio is broadly representative of the overall consumer lending ecosystem.
Chris Cartwright: Through mid April trends remained consistent with prior year and our guidance.
Chris Cartwright: That said, we are keenly aware of broader business and consumer uncertainty in the current environment.
Chris Cartwright: We plan to actively monitor risks and market dynamics.
Chris Cartwright: Taking a step back I want to provide a couple of considerations for our U S financial services business.
Chris Cartwright: As we discussed in February current volumes are already at subdued below trend levels.
Chris Cartwright: Mortgage volumes are historically low at 50% below 2022 levels. While other lending types are also below robust 2022 levels.
Chris Cartwright: Additionally, consumer consumption is not the only driver of credit activity is slowing economic growth leads to lower interest rates refinancing opportunities would increase.
Chris Cartwright: <unk> and mortgage.
Chris Cartwright: Higher refinancing activity drove U S financial services growth in 2020 for context there.
Chris Cartwright: There are 7 million mortgages in the U S with interest rates above 6%.
Chris Cartwright: Which compares to $5 million total mortgage originations in 2024 that said the current refinancing opportunity is limited with mortgage refi mortgage rates still in the high 6% range.
Chris Cartwright: Another lending type that we would expect to see good demand in a slowing economy is our consumer lending and fintech business, whether for loans to consolidate higher cost debt or for loans to manage near term financing needs.
Chris Cartwright: Finally, we have significantly broadened our solutions suite to U S financial services in recent years and not all of our revenue is generated from online or batch marketing credit volumes portfolio review, an analytics enablement solutions account for a little under 10% of financial services revenue and demand is.
Chris Cartwright: Likely to be more resilient during peaks of market stress.
Chris Cartwright: Non credit solutions, including fraud, and communications account for an additional 20%.
Chris Cartwright: Most of this revenue is within our non mortgage lines of the business.
Chris Cartwright: The remaining two thirds of our portfolio is diversified across solutions verticals and geographies.
Chris Cartwright: Emerging verticals, our largest vertical insurance is highly relevant in all economic scenarios and remains on a strong trajectory.
Chris Cartwright: The rest of emerging verticals consists of a broad range of solutions, serving a diversified set of customers.
Chris Cartwright: Friday and communication solutions are largely a cyclical marketing solutions performed well even in 2020 due to its strong relationships with customers and 70% subscription revenue base.
Chris Cartwright: In consumer interactive our offering is highly relevant in periods of economic stress and we will we will be well positioned going forward with our freemium offering.
Chris Cartwright: Additionally, I D protection is by nature, a long term engagement and our breach solutions are episodic, but a cyclical.
Chris Cartwright: Our international business tilts credit oriented, but it is also diversified and index to faster growing economies, we have a track record of outperforming our underlying markets growing double digits every year over the last decade, except for 2020.
Chris Cartwright: Transunion has a seasoned management team with experience operating through economic cycles, we plan to prudently manage costs based on market conditions.
Chris Cartwright: We remain committed to completing the final phase of our business transformation, which will continue to generate value through structural cost savings and accelerated innovation.
Chris Cartwright: The last several years of investment and started to bear fruit and our 2025 investments ensure that we harvest the benefit of that hard work.
Chris Cartwright: These benefits include the continuing scaling and enhancement of our global capability Center network.
Chris Cartwright: Which currently has over 5000 employees.
Chris Cartwright: Our global operating model with increased centralization standardization of work enables us to manage cost more dynamically as conditions evolve should.
Chris Cartwright: Should we see signs of deteriorating lending volumes or pressures on business and consumer activity.
Chris Cartwright: We have a plan ready to offset some of the potential near term earnings pressure with cost mitigation actions.
Chris Cartwright: The initial scope for potential reductions would be managing hiring levels third party spend in travel and entertainment.
Chris Cartwright: In addition, we will analyze the prioritization and timing of growth investments based on environmental condition.
Chris Cartwright: We're not yet actioning these initiatives given still healthy activity.
Chris Cartwright: With that I will now turn the call back to Chris for final comments.
Chris Cartwright: Thanks, Todd as we laid out.
Speaker Change: We're well positioned and prepared to navigate this period of economic uncertainty.
Speaker Change: At the same time I remain highly confident in the long term growth opportunity in front of us and our ability to execute against it.
Speaker Change: We're competing in attractive markets and our transformation positions us for a new generation of growth.
Speaker Change: From a market perspective, the secular trends that have underpinned the last decade of growth remain intact.
Speaker Change: Our core U S credit market is mature and growth full we continued to experience increasing customer demand for alternative data and advanced analytics to strengthen credit assessment and engage with consumers while credit volumes can be cyclical we expect volumes to grow over the long term, particularly in areas like mortgage.
Speaker Change: That are well below historical trends.
Speaker Change: From our core <unk> credit, we have thoughtfully expanded into attractive solutions areas and verticals, we see momentum in our right to win in the multibillion dollar and highly complementary fraud marketing and communications markets.
Speaker Change: We plan to deepen our customer relationships across our verticals with these highly relevant solutions.
Speaker Change: And we also have a best in class International business index to geographies with large populations and emerging credit penetration, we will continue to diffuse our innovation across these geographies.
Speaker Change: Over the past several years.
Speaker Change: We embarked on a significant business transformation to support this next generation of growth and we're now transitioning from a period of rapid investment and change to a period of execution and value creation in the last few years, we integrated three sizable acquisitions, we modernized our technology.
Speaker Change: And we optimized our global operating model and bolstered our product function and capabilities. Additionally, this year, we made key steps to reinvigorate our consumer interactive business and announced the acquisition of the largest consumer credit Bureau in Mexico.
Speaker Change: This hard work is already driving stronger financial performance and we believe it positions us to accelerate organic revenue and earnings growth independent of the credit cycle.
Greg: With that let me turn it back to Greg.
Speaker Change: That concludes our prepared remarks for the Q&A, we ask that you each ask only one question. So that we can include more participants operator, we can begin the Q&A.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: If you're using a speaker phone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two again please limit yourself to one question at this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Jeff Mueller with Baird. Please go ahead.
Jeff Mueller: Yeah. Thank you good morning nice quarter.
Jeff Mueller: Wanted to ask on the confidence on the Reacceleration in India.
Speaker Change: Based on the expected benefits from the RPI tenet and the easing comps or are you starting to see a pickup in your business like bookings growth or you're seeing a pickup in consumer lending activity or if you could size up kind of like the non bank financial lending and just.
Jeff Mueller: How impactful that wasn't 24 thanks.
Jeff Mueller: Yeah.
Jeff Mueller: Yeah. Thanks for the question Jeff.
Jeff Mueller: You know you cited two reasons, where we might be optimistic for the reacceleration in I would say.
Jeff Mueller: Both are true.
Jeff Mueller: We are selling particularly well in India, we have a new suite of analytics solutions based on the <unk> platform and the data conversion that we've done that we're taking to market in India.
Jeff Mueller: But we also think that the rbi's posture, which is growth oriented now.
Jeff Mueller: Supports increased consumer lending activity quick recap in late 2023, the RBI under previous leadership got concerned about the level of growth in personal lending in India.
Jeff Mueller: They thought there was a bit too much leverage in the system.
Jeff Mueller: They prefer a loan to deposit ratio of about 70% at its stretch to 78%. The area. We are also concerned that certain lenders, we're not doing appropriate affordability analysis. So they sidelined some fintech lenders.
Jeff Mueller: They kept rates higher for longer.
Jeff Mueller: They curtailed lending across the space in order to get that deposit or at the loan to deposit ratio back to a level. They are comfortable with with a change in administration and also a year of reduced GDP growth the.
Jeff Mueller: <unk>, clearly said that theyre balancing growth.
Jeff Mueller: Along with safety and soundness equally they've put through two rate cuts they've communicated that they don't feel there is too much leverage in the market currently.
Jeff Mueller: They've allowed the certain lenders that were restricted in 2024 to get back into the game and yes, we are seeing.
Jeff Mueller: Improvements in activity in India now of course as you mentioned.
Jeff Mueller: We got a big comp this quarter against prior year. It was probably another 30% quarter previously got a big comp in Q2, but we do expect reacceleration quarter by quarter over the year.
Jeff Mueller: We're guiding to 10% growth in India.
Jeff Mueller: We would exit the fourth quarter at high teens growth at least.
Jeff Mueller: And we're feeling pretty good about how the Indian market is developing against that remember it took about four quarters for the deceleration full impact to.
Jeff Mueller: To show up in our numbers and so it's going to take some number of quarters for the reacceleration to take full grip.
Jeff Mueller: Thank you.
Speaker Change: The next question comes from Andrew Steinman with J P. Morgan. Please go ahead.
Speaker Change: Hey, Todd two quick questions why are you still expecting free cash flow conversion to be about 90% next year and that was on a slide a quarter ago and also if you could tell us how you think U S markets financial services will trend in the current quarter the.
Speaker Change: Quarter I definitely.
Speaker Change: You are talking about low double digit for the year.
Speaker Change: Good morning, Andrew Thanks for the both questions. Let me take the free cash flow question first as you are aware over the last several years, we've made significant investments to support our transformation program, which we talked about in our prepared.
Speaker Change: Remarks that needless to say has been a significant use of cash.
Speaker Change: For for our business.
Speaker Change: This year, we still have a good line of sight to being able to achieve about 70% free cash flow conversion as we had.
Speaker Change: Guided in February.
Speaker Change: And when we think about 'twenty 'twenty, six and beyond with the transformation program, ending and the onetime spend related to that.
Speaker Change: As a reminder, this year, we have between 101 hundred $20 million to spend there on the second piece is we also expect.
Speaker Change: To bring our capital expenditures as a percentage of revenue down from 8% to 6%. So the combination of those two factors plus anticipated.
Speaker Change: Operating performance showing itself through adjusted EBITA will get us to a point, where we're at a 90% plus free cash flow conversion in 2026.
Speaker Change: Yeah, and Andrew look I would remind you and everybody on the call that we won't have an add back next year.
Speaker Change: Our tech modernization will be.
Speaker Change: It's the phase that we outlined will be behind us and I'm reiterating our confidence in achieving the level of savings we previously conveyed.
Speaker Change: And the timing of those savings.
Speaker Change: Okay. So Andrew your second question pertained to.
Speaker Change: Financial services and the growth that we're expecting for the remainder of the year right. So.
Speaker Change: Oh for the second quarter is what you what you're looking for okay. Great. So as you can see.
Speaker Change: You look at our results for the first quarter were needless to say pleased overall with the performance that we had with <unk>.
Speaker Change: Services up 15% nine excluding mortgage I think what's important there is some strong reacceleration that we've seen in consumer lending, particularly with the syntax. We also saw some good strength.
Speaker Change: In auto and card and banking is held on a relatively good with mortgage.
Speaker Change: All up but really price driven inquiries were down so that is the foundation moving into the second the second quarter as again, we said in our prepared remarks, we haven't seen any impact at this point, we're obsessed with looking at the.
Speaker Change: The data on a day to day basis, and what our customers activity in up to walking into this call. This morning really haven't seen any impact at this point, but that doesn't mean that we're not looking at it and monitoring it we're not complacent.
Speaker Change: But if that if the trends persist, we would expect consumer lending to.
Speaker Change: To continue to be.
Speaker Change: Strong as we go forward.
Speaker Change: Again card and banking and you know this because youre at J P. Morgan.
Speaker Change: The commentary that came from the banks was you know relatively optimistic but with the appropriate caution based on the unknowns. So that's what we're seeing from our card and banking customers in auto.
Speaker Change: Again, we talked about this in our prepared remarks.
Speaker Change: January and February were a little bit softer we saw a stronger March and we felt that that might have been in anticipation of a pull forward of demand because of the anticipation of tariffs. So that's an area that we're going to continue to watch closely but again trends have been relatively okay in that space.
Speaker Change: And mortgage with as you know probably the most cyclical part of our business you can all see what's happened with the 30 year.
Speaker Change: Mortgage rate and it's ticked up to the high sixes, so with that we've seen.
Speaker Change: Corresponding.
Speaker Change: The decline in volumes early on in the quarter, but the net net on all of this things when you look at across all four lines that we continue to trend favorably.
Speaker Change: Sounds good thank you.
Speaker Change: The next question comes from Toni Kaplan with Morgan Stanley. Please go ahead.
Toni Kaplan: Thanks, so much.
Speaker Change: Maybe just following on that.
Speaker Change: Question. Its thought process you know if you look at the organic branch from you grew 8% organically Q1overall.
Speaker Change: For QQ.
Speaker Change: Basically at the midpoint, it's about 4%, but so far no change to.
Speaker Change: Demand or anything that you're seeing.
Speaker Change: You know, India, you're expecting to get better sequentially as you go through the year I'm just like.
Speaker Change: Help us out.
Speaker Change: In addition to just conservatism.
Speaker Change: What sort of is that change or what could impact to Q, that's worse than <unk>.
Speaker Change: What you are in the guide and what you saw in one queue. Thanks.
Speaker Change: Okay. Thanks, Tony I'll take that question from you and I think maybe let's let's take a look at this more from a overall view looking at our guidance clearly you've seen our Q1 results you have our Q2 guide and you see the full year and we didn't change the full year guidance so with <unk>.
Speaker Change: 7% growth or 8% on a constant currency basis, and we compare that to four 5% to 6% organic constant currency growth needless to say that that implies that there's a stepped down from from Q1 and as we said in.
Speaker Change: My prepared remarks.
Speaker Change: If trends continue from what we saw in Q1 and what we've seen thus far we have good visibility to exceeding the high end of the full year guidance that we provided but right now there's just a significant amount of uncertainty that we're navigating so we felt that the pre.
Speaker Change: <unk> thing for us to do.
Speaker Change: It was to maintain.
Speaker Change: At the full year guide that we provided in February so that does provide us some room in the event that we do see any type of deterioration with the consumer and in general we see a consumer that's still broadly healthy with real wage growth and high employment and there.
Speaker Change: Reasonably using credit.
Speaker Change: In delinquencies at this point across the four lines of business that I just went through on Andrew's question in financial services. The delinquencies are good they are back at a level.
Speaker Change: Pre pandemic, but historically, they're still they're still in a good spot. So in general we're still dealing with a very healthy consumer.
Speaker Change: If you look at the guide then and you can look at the first half versus the second half with the pieces that we've provided and in essence, what it's calling for is as significant as it is about the same amount of growth.
Speaker Change: In Q2 and also in the second half of the year from an earnings perspective, you see the same thing with adjusted diluted EPS.
Speaker Change: Our guide of $4.08 is roughly split half and half.
Speaker Change: Throw out throughout the year.
Speaker Change: The things that we talked about with financial services or could be continued if that continues that will be a positive Christian gave a response on India. That's clearly it could be a positive our emerging verticals had a very strong quarter at 6%. We went through the details there those trends.
Speaker Change: And if those continue.
Speaker Change: All in all the net net of this is the trajectory of the business is pretty solid, but we're being watchful of events in a macro perspective.
Speaker Change: And just going back to the beginning of the year. When we first communicated the guide for 2025, we were clear that we intended to be prudently conservative in an environment with a lot of uncertainties. So we did not assume.
Speaker Change: A reduction in interest rates over the course of the year, we did not assume an improvement in volumes in any category in the second half and as Todd pointed out.
Speaker Change: Volumes in financial services in the U S are at historically low levels right.
Speaker Change: So this just feels like a beat and hold environment, not a beat and raise environment.
Speaker Change: Our guidance for Q2 and the year reflects that.
Speaker Change: Thank you.
Speaker Change: The next question comes from Faiza <unk> with Deutsche Bank. Please go ahead.
Faiza: Yes, hi, thank you.
Speaker Change: I wanted to ask about emerging vertical and you know when you were talking about the resiliency in the business I think you mentioned that 70% of the business is subscription based so maybe give us a bit more color on the various pieces, but then emerging vertical then and the resiliency that you would expect in a slowing environment.
Faiza: Yeah.
Faiza: Okay. Good good morning, Faiza I will take that question and the emerging verticals and just great start as far as the subscription number that you're referencing that's our marketing business only where we have about 70% of the revenues.
Faiza: Our subscription based so it's not across the entire <unk>.
Faiza: Urging verticals.
Faiza: So when you do look at the emerging verticals we have abroad.
Faiza: Of customers, let me walk you through each one each one of them and I can give you some color on what we saw in the quarter, but I think more importantly, the resiliency of each one of these businesses as we go forward and an uncertain type of market. So starting with insurance we were pleased low double.
Faiza: Digit growth, we saw good marketing and shopping activity trends in general.
Faiza: You.
Faiza: To be positive if you think about that in a slow slower growth type of environment.
Faiza: The insurance business typically outperforms in that market.
As consumers shop for lower insurance rates and that shopping activity as a benefit.
Faiza: For our business.
Faiza: Moving along in the emerging verticals tenant unemployment.
Faiza: Returned to a good high single digit growth you may recall that we did some recalibration of our products a couple of years ago.
Faiza: So that's been a positive and as a result of that we've seen some new business ramping up and we've also seen an increase in consumer move rates as well.
Faiza: Tenant unemployment in a downturn typically is also a positive if consumers arent taking out a mortgage they are more prone to rent and that rent that rental activity is a positive for that business.
Faiza: Our telecommunications vertical.
Faiza: Our technology retail and E Commerce and media.
Faiza: A lot of those three verticals within the emerging verticals are primarily.
Faiza: Led by products and services that we acquired through the New Star acquisition and what we've seen there is growth improving.
Faiza: We've seen strong performance.
Faiza: In particular in communications.
Faiza: As everyone knows trusted trusted call solutions has been a significant positive for us we still expect that business to grow.
Faiza: From $115 million to $150 million this year, so substantial growth there.
Faiza: Communications.
Faiza: Also has a lot of the legacy.
Faiza: Telecommunication capabilities that we acquired from new Star and those businesses.
Faiza: Performed actually pretty well.
Faiza: In the quarter so.
Faiza: We saw mid single digit growth across telco tech retail and E Commerce and in media, we saw low single digit growth what's important there in media is the point you started your question with 70%.
Faiza: That business is subscription based so there is some installation telecommunications and tech retail and E. Commerce will probably be more of a neutral in a in a downturn type of scenario media, we'd say it would be probably more of a.
Faiza: More of a negative and just simply from the perspective of our customers may build lest audiences, but our products in marketing a highly relevant as it pertains to identity as well as the analytic capabilities of doing campaign management, and then finally to kind of.
Faiza: A rounded out our public sector business, we talked about in our prepared remarks that declined who's really year over year comps.
Faiza: As we think about where the where the government is headed in and not just the federal government, but we support the state government as well to our products and services are really get into fraud insider threat mitigation.
Faiza: A mitigation in it so think about like welfare payments and making certain that they go to the right.
Faiza: Consumer our products and services will serve that well.
Faiza: So we look at that as probably a neutral to maybe positive.
Faiza: In a downturn and then finally last one is collections.
Faiza: Collections is typically a countercyclical play.
Faiza: Delinquencies do tick up. Unfortunately, this is a business that does increase so it just shows the resiliency of our portfolio so in a downturn.
Faiza: See a positive there.
Faiza: Great. Thank you for all the detail.
Jason Haas: The next question comes from Jason Haas with Wells Fargo. Please go ahead.
Jason Haas: Hey, good morning, and thanks for taking my question.
Jason Haas: I was curious it looks like your guidance implies that the outperformance of mortgage revenue versus increase will moderate in the remainder of the year. So can you just talk about that dynamic and why youre expecting that thanks.
Chris Cartwright: Okay. Good morning, Jason So yeah as far as the <unk>.
Chris Cartwright: Quarters concerned on mortgage as you saw.
Chris Cartwright: We grew 27% with volumes down 10, so that gap if you do the math, it's about 37%, primarily where that's coming from for US is pricing realization was a little bit better but also as a reminder, the way that we report out our mortgage business as we include.
Chris Cartwright: Everything that we do with with mortgage in that number and so what I mean by that is we are including pre qualification as well as home equity.
Chris Cartwright: And where we're a little bit different than other players in the market is with our batch marketing, where we're helping our mortgage lenders identify potential consumers may be in the market.
For a mortgage.
Chris Cartwright: As the remainder of the year goes on and we're expecting revenue to grow 20%. Then we're saying volumes are going to be down modestly. So the gap that I just talked about shrinks.
Chris Cartwright: A little bit.
Chris Cartwright: So yes.
Chris Cartwright: If we look at.
Chris Cartwright: The volumes themselves and as I said, we include everything that we have in our mortgage number.
Chris Cartwright: But we know you're looking for the pieces here. So if we were to exclude Prequalification and just included the Tri Bureau inquiries on mortgage.
Chris Cartwright: Origination we would be in a similar spot than other numbers that you've seen.
Chris Cartwright: In the market. So we're seeing in essence, the same thing and as far as what we're what we're assuming for the rest of the year as I've said in the previous responses simply a continuation of the trends that we've seen thus far into the point, Chris just made we came into the year with that assumption, we did not assume.
Chris Cartwright: Any interest rate.
Chris Cartwright: Cut benefit and we're going to continue.
Chris Cartwright: It's a whole debt that posture.
Chris Cartwright: That's helpful. Thank you.
Speaker Change: The next question comes from Ashish.
Speaker Change: So both drop with RBC capital markets. Please go ahead.
ashish: Thanks for taking my question I just wanted to clarify one quick thing on <unk> that was a comment on some pull forward in March I was just curious if you saw any pull forward in any of the other segments within financial services.
Speaker Change: Consumer lending.
Speaker Change: Yes, the short answer to that is no.
Speaker Change: What I would point out about.
Speaker Change: The performance of some of the loan categories.
Speaker Change: We've been saying for some time that we felt consumer consumer lending in the Fintech in particular, we're positioned to rebound at the end of last year you saw a good number of the largest and best known of the Fintech skip material.
Speaker Change: Funding that position them to compete in the loan consolidation market. We think that's a real good opportunity. We think it's counter cyclical as you know coming out of the pandemic.
Speaker Change: Card issuance was quite high as credit scores had drifted up due to forbearance.
Speaker Change: A lot of those consumers, particularly the ones further down the risk spectrum.
Speaker Change: They use it to their cards vigorously and they've developed material loan balances. So the revolving a good deal of debt at a fairly high interest rate.
Speaker Change: It's a situation that's ripe for debt consolidation and I think that our fintech and consumer lending in general is positioned to take advantage of that.
Speaker Change: Okay.
Speaker Change: That's great color and congrats on funding.
Speaker Change: Thank you.
Speaker Change: The next question.
Speaker Change: Is there time for another question.
Speaker Change: Sure Yes, Okay that question comes from Andrew Nicholas with William Blair. Please go ahead.
Speaker Change: Hi, Good morning. This is Tom <unk> on for Andrew Nicholas Thanks for taking my question.
Speaker Change: Last quarter, you mentioned you guys planned on migrating 50 of your largest U S.
Speaker Change: Customers a lot of <unk> I was just wondering if you provide color on how that transition why and if youre seeing any really material benefits and then relatedly.
Speaker Change: I know you said, you're confident that $35 million of expense savings in 2026, I was wondering I'm halfway.
Speaker Change: Capex for the year. If you think there is any upside to that number. Thank you.
Speaker Change: Yeah. Thanks for the question, Russia, Yes, we had communicated 50 and it was 50 of the largest and most complicated customers.
Speaker Change: We were running 50 in parallel on one through we actually increased the total number to 90.
Speaker Change: And we're seeing it's going pretty well and we're seeing some raw material performance benefits.
Speaker Change: Generally speaking response times are about.
Speaker Change: Half.
Speaker Change: On one true relative to <unk>.
Speaker Change: Our heritage or legacy platforms, So, we're seeing materially faster processing of online and batch transactions.
Speaker Change: We.
Speaker Change: As part of this migration.
Speaker Change: We migrated.
Speaker Change: The customer that has the largest batch job with trans Union the largest standing batch job. It takes about 18 hours 19 hours to run.
Speaker Change: It's now down to 10 hours and with some further engineering refinement it'll be down to six hours. So you're seeing kind of the order of magnitude of improvement that we're talking about on the processing.
Speaker Change: Speed side. Additionally, we're able to develop.
Speaker Change: New data sets, new data attributes and analytics far faster on one fruit right. It is a standardized consolidated cloud native platform from the data layer all the way up to the business logic and the deployment of all of that in our seven different product solutions and look the data governance and cyber security.
Speaker Change: <unk>.
Speaker Change: Is just far more rigorous not that it was ever a concern, but you just can never be secure enough and we have a lot of contractual and geographic regulatory issues that we have to make sure that we comply with and we've got much better functionality. So so far.
Speaker Change: Very pleased with the migration to one true and we're going to continue to migrate.
Speaker Change: Migrate customers and workloads over in.
Speaker Change: In the second quarter.
Speaker Change: And look in terms of additional savings you know as I mentioned, we are already planning the migration of some of our other geographies the U K, Canada, the Philippines to one true in 2026, so that planning work is taking place currently and yes, we expect strong efficiencies.
Speaker Change: We have migrated those geographies over the one true we never really tried to model that but the hope is that we will have a dynamic where we're saving a good deal and we can redeploy that for growth and also to support.
Speaker Change: Expanding margins over time.
Speaker Change: The last question today will come from Manav Patnaik with Barclays. Please go ahead.
Manav Patnaik: Thank you I appreciate it I guess I'd, just like to squeezing Chris maybe some of your thoughts on that.
Speaker Change: <unk> one is the capital on discover and just.
Speaker Change: Exposure to those banks and then it sounds like to work that acquired by checklist. So just curious what are you.
Speaker Change: How you guys are.
Speaker Change: <unk> equity stake in that.
Manav Patnaik: Yes, thanks for the questions Manav, while in terms of the big card issuer mergers both of them are significant clients and we have good relationships with both.
Manav Patnaik: We understand the kind of the industrial logic of the acquisition.
We're gonna be highly <unk>.
Manav Patnaik: Engaged in helping them manage their changes.
Manav Patnaik: And just look forward to ongoing collaboration with regard to you know true work, where we had a minority investment and a distribution partnership.
Manav Patnaik: And their acquisition by.
Manav Patnaik: Checker Who's also a client we do a lot of data collaboration with checker.
Manav Patnaik: We've got good relationships there we have rolled our minority stake into the combined transaction and we look forward to continuing to work with them on the distribution partnership.
Manav Patnaik: Perfect. Thanks for all the questions and I think that's a good place to end, thanks and have a great rest of the day.
Manav Patnaik: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Manav Patnaik: Good.
Manav Patnaik: Okay.
Manav Patnaik: [music].