TransUnion (TRU) Q3 2015 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen my name is Susan and I will be your host operator on this call. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time. [Operator Instructions]. I would now like to turn the meeting over to your host for today's call, Colleen Healy Vice President of Investor Relations for TransUnion. Please go ahead.

Good afternoon, everyone and thank you for joining us today. This afternoon I am joined by Jim Peck; President and Chief Executive Officer and Al Hamood; Executive Vice President and Chief Financial Officer. Today's call will start with Jim providing some key takeaway's from our third quarter results he'll then turn it over to Al for a more detailed review. And then Jim will conclude today's prepared remarks by providing guidance for Q4. After that we'll take your questions. Our earnings release includes an addendum of financial highlights which contains more detailed information about revenue, operating expenses and other items including certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measure are included in our earnings release. These materials can be found on our investor relations website at www.transunion.com/tru. The earnings release is also available as an exhibit to our current report, on form 8K furnished today with the Securities and Exchange Commission. We plan to file and make available our form 10 Q for the quarter ended September 30, 2015 on October 29th and it will also be found on these same resources. Today's call will be recorded, please be aware that if you decide to ask a question, it will be included in both our live transmission, as well as any future use of this recording. Shareholders and analysts can listen to a live webcast of today's call at the TransUnion website. A replay of the call will be available at the same site following the conclusion of the call. As we discuss results today all growth comparisons relate to our comparable quarter of last year, unless otherwise specified. 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 risk 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 10K, forms 10Q and other forms and filings with the Securities and Exchange Commission. We do not undertake any duties to update any forward-looking statements. With that, let me now turn it over to Jim.

Thanks Colleen and good afternoon, everyone. I'll start today's call with a few key points from our third quarter's performance followed by the primary drivers of that performance in each of our business segments and then after Al provides more details on Q3, I'll share our outlook for the rest of the year. We're very pleased with the excellent Q3 performance, we experienced robust demand from business customers and consumers for core and new products across our markets. Our investments are driving attractive growth, across an increasingly diversified business. Strengths of our third quarter performance as a result of continuing to execute on our strategy of developing, growing and maintaining attractive verticals and geographies and developing solutions that scale across these. We posted record company revenues and adjusted EBITDA and each enjoyed double digit growth rates. We saw strength across all three of our business segments and within those segment, all the platforms in the U.S., both developed and emerging markets and international and both direct and indirect channels in consumer interactive contributed significantly to growth. Q3 revenue grew 15% and adjusted EBITDA grew 11% year on year resulting in adjusting margins of approximately 36% while they continue to invest strategic growth and productivity initiatives in our business. On a local currency basis, revenue growth was 18% and adjusted EBITDA growth was 14%. All 3 business segments also grew revenue on a double digit clip on a local currency basis, with USIS turning a 14% growth, international at 17%, consumer interactive at 37%. As I mentioned, this growth was also broad-based with any business segment, some notable highlights as follows USIS growth was attributable to a healthy consumer lending activity, as well as to the adoption of new solutions and the expansion into emerging verticals. Our growth in USIS continues to be driven by new growth initiatives and emerging verticals. Let's look at just a few of these new growth initiatives that spanned a number of our verticals starting with an update on CreditVision. We have had the opportunity to discuss CreditVision with many of you over the summer on our road show and also on our last earnings call. We shared with you the difference this solution is making for our customers by providing substantial performance lift in their underwriting, acquisition and account management strategies. Traditionally, credit scores have incorporated a snapshot in time of a consumer's credit history. Trended data like that incorporated in our CreditVision offering incorporates a history of data points connected over time to indicate risk level based on the trajectory of a consumer's debt balances, spending and actual payment amounts. This trended consumer credit behavior data is powerful information that can give a more predictive view of a consumer's risk and his ability to manage financial commitments. Additional data points also have the benefits of allowing underwriters to a assess and approve more consumers while offering terms based on the improved insights. The great examples of unlocking the power and value of our data through next generation analytics. During the quarter, CreditVision's revenues more than doubled in size. Their USIS business added on average over one new CreditVision customer every business day. TransUnion pioneered bringing trended credit data to market more than five years ago and launched CreditVision first ever suite of solutions in U.S. history to utilize such data, January of 2013 and we haven't stood still. We leveraged the jump start we had on the innovation cycle. In fact this month TransUnion released CreditVision Link, the first and only credit store in market to combine both trended credit bureau data and alternative data sources. CreditVision Link allows lenders to score up to 95% of the U.S. adult population, including tens of millions of consumers who cannot be scored by traditional means. Our customers and consumers benefit while we generate increased value from our solutions. Even though CreditVision Link has just been launched, we already have 40 lenders that have assessed or are currently assessing this score. TransUnion is dedicated to staying ahead of evolving risk scoring strategies and in fact is leading the way in the industry. Last week's announcement that Fannie Mae will integrate trended views and our CreditVision offering assessments of mortgage applications beginning mid-next year is an exciting one for us and for our industry. We believe that Fannie Mae's announcement to use trending consumer credit data is a major shift for the industry. We're honored to have been a pioneer in trending consumer credit data to be a leader in moving our industry forward with innovative approaches. Moving onto TLOXP, I've always been struck by the power of data and analyzing data, sometimes seemingly unrelated data, that powerful insights are revealed. We feel we have some of the most predictive data sets and analytics capabilities out there. And one of the many reasons behind that is due to the investments we've made, acquiring and building diverse public records data, data fusion capabilities, in addition to the credit bureau data that we have. TLOXP is a great example of bringing disparate data subs together by leveraging our fusion capabilities create innovative solutions for our customers. This past quester TLOXP's growth was once again outstanding and in the double digits. That's exciting to me for a number of reasons including that a material element of TLOXP's growth, especially within traditional financial services was made possible because of the deep customer relationships we brought that TLO previously had not had before we acquired them in 2013. But besides providing a point of confirmation on our strategy, these results indicate that our integration engine is working well and our horizontal capabilities of data analytics and technology provide a platform to scale. Fraud solutions is another great example of an innovation that leverages our core capabilities to serve both businesses and consumer customers across a number of vertical channels and geographies. The increase in security compromises and data breaches around the world along with the more sophisticated fraud schemes increase demand for better analytics and monitoring, tech fraud and protect consumer identities, without placing an undo on the consumer experience. With our fraud and identity solutions we help our customers acquire and grow trusted relationships. Our flagship solution for real-time identity decision called ID Manager solves this need by combining personal identity verification, robust device analysis and multiple authentication modes to quickly approve good actors while identifying fraudulent ones. All while providing a smooth experience for the consumer. ID manager is comprised of layers of interconnected data and fraud detection tools delivered through a single flexible decisioning platform. This common platform is available in the U.S. and other geographies and can package with other TransUnion decisioning services enabling more debt and dynamic and customized offerings that can span across the customer life cycle. Customers are responding favorably to our fraud and ID solutions. They are in use by leading financial service companies in the U.S., Canada, Hong Kong, South Africa, India and certain countries in Latin America. Our fraud and identity solutions business has been performing very well and are helping to solidify TransUnion as a go to partner in this market. Another great example of how we scale by building once and using many times. These new initiatives contribute to growth not only in some of our emerging verticals such as you'd expect, they also contribute to verticals often considered more traditional. Our financial services vertical for example generated another quarter of double digit growth. And the emerging vertical and healthcare insurance and rental screenings verticals also posted double digit growth rates. With healthcare enjoying another quarter over 20% revenue growth. Our healthcare business is being driven by unique offerings like Clear IQ and E-scan. Addressing the underlying need that healthcare institutions like hospitals and payers have in managing payments and cash flows in order to lower their uncompensating cost that can make a critical difference to their organization's ability to achieve profitability. In an era of increasing healthcare costs, as consumers assume more of the burden providers face significant uncompensated care costs to the tune of about $27 billion. This exposure coupled with the rapidly changing healthcare industry results in the demand by our customers to help them navigate healthcare coverage. The drivers behind these changes in the industry include the introduction of new insurance options and reimbursement bottles, the expansion of insurance coverage to include 20 million more Americans covered under the Affordable Care Act, consolidation activity within the healthcare space. Pricing estimation, eligibility, ID, propensity and insurance coverage solutions have never been more important. Our solutions drive both top line revenue for our customers as they are reimbursed for what would otherwise be uncompensated care fees. Both bottom line efficiency gains, as our solutions help them to consolidate the number of vendors and platforms for revenue life cycle management. Overall our solutions are delivering value to health providers and payers as they manage their payments and the industry seeks to empower consumers to take greater control and responsibility of their healthcare service choices. During the quarter, we continued to drive adoption of our solutions with seven new prominent health systems signing on as clients and we're seeing their solutions drive even more incremental yield for our client and for our business through additional data sets and analytics processes. We were happy to announce last week, TransUnion's E-scan solution was rated the highest performing in collections outsourcing and accounts receivables debt by Black book. This is an especially meaningful recognition these are the results compiled by a survey of the industry of over 1000 healthcare CFO's and finance executives polled. Overall we continue to invest in emerging verticals like healthcare and others as well as in growth initiatives across USIS. Moving on to our international business, international revenue increased 17% on a local currency basis. Each of developed markets and emerging markets enjoyed mid- teen local currency growth, with developed markets at 15% and emerging markets at 18% growth. Developed markets were fueled by double digit growth rates performance on a local currency basis in each of Canada and Hong Kong where we're seeing robust demand for newly increased products like CreditVision which has the momentum to be a truly global solution. Emerging markets also experienced strong growth and they generally benefit from both increased usage and adoption, credit bureau solutions, credit penetration in those markets increase, as well as new risk and information solution opportunities in analytics and decisioning. India propelled Asia Pac to be our fastest grower across all of our regions during the quarter. This performance from India was notable since the growth is all organic now, in light of the anniversary in May of taking our ownership position in CIBIL to a majority stake. Also during the quarter in September, we further increased that ownership stake from 55% to 60% in CIBIL which was the first ever bureau in India and one that we co-founded about a dozen years ago. We like the Indian market, the markets possessing characteristics similar to it. India is one of the fastest growing major economies with an emerging middle class in the early stages of becoming credit active. Both our core credit, as well as our suite of risk information solutions provide value to our customers, also supporting the government's goal of fuller financial inclusion for it's citizens. We have never been more aligned with CIBIL and our increased stakes supports our growth agenda and strengthens our leadership position on the subcontinent. In our international business, we invested in growth initiatives across various regions as well as in programs to drive productivity improvements associated with our global technology platform rationalizing common functions in offices around the world. These programs are well into the execution phase here in the fourth quarter. Turning to our consumer interactive business. Generated revenue growth of 37% with double digit growth across both direct and indirect channels, the model that we helped pioneer recognizes that consumers seek a variety of choices in how they obtain and consume services, including through paid and premium offerings. This has resulted in a healthy ecosystem that reaches a larger set of consumers in the industry. A nice position to have in a space that continues to grow as more and more people become aware of the impact of their financial decisions and the information about them can have in their ability to access goods and services. As a recognized leader in the thriving consumer space we continue to attract as partners the most exciting players and to do interesting, innovative things together for our consumers, including enhanced alerts, credit score simulation and financial product recommendations. We continue to grow through key partnerships with financial institutions, personal financial management company. During the quarter, we experienced year over year growth in our subscriber base and we drove higher retention rates over this time last year which are beneficial not only for higher incurring revenue from subscribers, but also for reaping the value for our advertising cost to acquire subscribers. We've become more savvy with recent customer vintages, better targeting and prospecting, as well as enhancing the offering of self, deliver an even more compelling consumer experience and to increase engagement. Taking those two aspects in turn, starting with targeting and prospecting; we're better able to identify consumers who will most benefit from our product and have a genuine intent in subscribing and remaining on an offering like ours in order to monitor and manage their credit and financial decisions. And we're more sophisticated in our relevancy by meeting these more qualified potential subscribers and members at their point of need or decision in a channel where they most receptive, whether in their mobile devices, on their PC's, streaming media in their cars while watching TV or through other marketing methods and we made advertising investments in the quarter to execute upon these. Moving to the second half, engagement, on the engagement front we continue to raise the bar on the consumer experience for our members, product and feature enhancements, like better user interfaces, easier navigation and mobile features. We empower our members to interact with our service on their devices of choice for example our members can instantly freeze and unfreeze their credit reports from a mobile application. This allows them to lock and protect their credit on the go which enhances a monitoring and alerting capabilities very nicely. While we're discussing the consumer we will also note that security breaches have driven demand by consumers for our services that address fraud prevention, detection and ID restoration that I mentioned previously. There have been several large breaches in 2015 and we're often part of the solution to help consumers manage and if needed, restore their identities. We look forward to the continued strength in this business, spanning the market, engaging new consumers and empowering our members and partners. Turning back now to company-wide results. Adjusted EBITDA grew 11%, outpacing our expectation, while are also allowing for investment back in the business, primarily in the areas of strategic growth initiatives and identifying productivity drivers in our USIS and our international businesses, as I discussed. Taken together the company generated double digit revenue and adjusted EBITDA growth rates on top of what was already a double digit quarter this time last year which speaks to the increasing depth and breadth of the demand of our solutions by business customers of all sizes across a variety of verticals and by the consumer. Continue to execute well in our growth play book. Trucked by the product innovation pipeline being churned out by our USI-team and their leadership with standards and pushing innovation for our industry and our customers. We're making nice strides in taking our core companies and products around the globe, not only with more traditional products but also with newer offer like CreditVision and our consumer business is a leading innovator in it's space pushing itself to further empower consumers. With those takeaway's from the quarter, I'm going to turn the call over to Al for more details before we go to guidance, Al.

Thank you Jim and good afternoon. Today I'm going to walk through our consolidated results and then I will move through the GAAP penile to operating income along with the adjustments to drive adjusted operating income. Then I will move to the segment results and I will finish up with a review of the balance sheet and cash flow statement. Third quarter consolidated revenue was $389 million, an increase of 15%, on as reported basis and 18% on a local currency basis compared with the third quarter, 2014. Revenue from acquisitions contributed 1.4% to the growth. Adjusted EBITDA was $140 million, an increase of 11% on a as reported basis and 14% on a local currency basis compared with the third quarter, 2014. These strong results were driven by a broad based organic growth in all three segments on a local currency basis, offset by investments in growth initiatives and productivity initiatives to drive diversified top line growth and long-term operating leverage. Adjusted net income was $56 million, an increase of 41% compared with the third quarter, 2014. Adjusted diluted EPS was $0.30, up from $0.27 in the third quarter 2014. The adjusted effective tax rate was approximately 35% which benefited from a change in assumption on repatriation of certain foreign dividends. For the full year we expect an adjusted effective tax rate of approximately 38%. Now let me walk you through the details of our P&L, as I just mentioned, consolidated revenue increased 15% on as reported basis, 18% at local currency. This again was driven by strong broad based growth across all segments. This again was driven by strong broad based growth across all segments. Operating income was $60 million, an increase of 48% compared with the third quarter 2014, driven by the increase in revenue and lower operating expenses as a percent of revenue. Cost of services was $135 million, an increase of 8% compared with the third quarter 2014. Due to increased variable compensation related to current year financial performance. Increased variable and non-variable product costs related to revenue growth and inorganic increases in operating expense from recent acquisitions that have not fully lapsed and investments. This increase was partially offset by savings enabled by our technology transformation and other productivity related initiatives along with the impact of weakening foreign currency. SG&A was $122 million, an increase of 16%, driven by increased variable compensation related to current year financial performance, increased head count to support our growth investments and E-growth initiatives, inorganic increases in operating expenses from recent acquisitions that have not fully lapsed and increased advertising expense in our consumer interactive segment. This increase was offset partially by savings nailed by productivity related initiatives, the reduction of one-time expenses in 2014, related to M&A integration, executive severance and consulting fees, along with the impact of weakening foreign currencies. And depreciation amortization was $72 million, an increase of 6% due primarily to the overall increase in capital expenditures in early 2014 and early 2015 related to the initiative to transform our technology platform and improvements to our corporate headquarters. Depreciation amortization not related to 2012 change of control transaction and subsequent acquisitions, was approximately $28 million for the quarter, a level that is consistent with what we expect to see in the fourth quarter. Adjusted operating income increased 9% compared with the third quarter of 2014 after adjusting for the following as noted in schedule 5 of the earnings release. Stock-based comp, M&A divestitures and business optimization, cost associated with the project to transform our technology platform and amortization of intangibles related to 2012 changing control transaction and subsequent acquisitions. Now looking at segment revenue and adjusted operating income. USIS revenue was $244 million, up 14% compared with the third quarter 2014 driven by robust revenue across all platforms and verticals, looking at the platforms, all three platforms grew double digits, online data services revenue was $159 million, an increase of 11%. Marketing serves revenue was $40 million, an increase of 12% due primarily to increased batch activity derived from demand for our newer solutions such as CreditVision and revenue from our recent acquisitions. Decision services revenue was $45 million, an increase of 27% due primarily to revenue growth in the healthcare and insurance markets and revenue from our recent acquisitions. Adjusted operating income for USIS was $87 million, an increase of 9% compared with the third quarter 2014 due primarily to the increase in revenue along with savings enabled by our technology transformation and other productivity initiatives partially offset by investments in key strategic growth initiatives and additional depreciation amortization. International revenue was $69 million, this was flat compared with the third quarter 2014 on a as reported basis and an increase of 17% on a local currency basis. We saw double digit local currency revenue growth in both developed and emerging markets that was offset by 17% decrease in revenue from the impact of foreign exchange rates, namely the south African rand, Brazilian real and the Canadian dollar. Developed market revenue was $25 million, an increase of 2% on an as reported basis and an increase of 15%. The increase in revenue was driven by double digit growth in both regions Canada and Hong Kong on a local currency basis. Emerging markets revenue was $44 million, a decrease of 1% on an as reported basis and an increase of 18% on a local currency basis. Adjusted operating income for international was $19 million, a decrease of 10% compared with the third quarter 2014, however on a local currency basis adjusted operating income increased 5%. The increase in local currency revenue was offset by investments in cost management initiatives to drive operational efficiencies in long-term margin expansion along with additional depreciation and amortization. Consumer interactive revenue was $80 an increase of 37% compared with the third quarter 2014. Driven by double digit growth from both direct and indirect consumer channels. As we mentioned last quarter our consumer business has enjoyed four years of consecutive double digit annual growth. And we look forward to seeing this business continue in strong execution. Adjusted operating income for consumer interactive was $34 million, an increase of 51% compared to the third quarter 2014, due primarily to the increase in revenue partially offset by an increase in variable product costs, associated with increase in revenue and investments in advertising. In the corporate segment, adjusted operating expenses were $26 million, an increase of $7 million compared with the third quarter 2014, due primarily to increased compensation expense, variable compensation expense resulting from our strong operating performances, increased head count to support our investments and growth initiatives and severance in a few select areas as we refine our business unit support cost structure. Now moving onto the balance sheet, cash and cash equivalents were $129 million at September 30, 2015, compared with $78 million at December 31, 2014. Total debt including the current portion of long-term debt decreased to $2.2 billion as of September 30 2014, compared with $2.9 billion at December 31, 2014. On July 15, 2015 we used the proceeds from the senior secured term loan A together with the net IPO proceeds to redeem all of the outstanding 9.625% and 8.125% senior notes including unpaid accrued interest and an early redemption premium. As of September 30, 2015 the full $210 million revolving credit facility was also available for use. As of September 30, 2015, total net leverage, measured as total debt less cash and cash equivalents divided by adjusted EBITDA for the previous 12 months, was approximately 4.1 times down from 4.4 times at June 30, 2015 and adjusted for the July term loan A borrowing in senior pick title notes redemption and 6.1 times at March 31, 2015 prior to our IPO and related balance sheet recapitalization. Moving onto the statement of cash flows, for the 9 months ended September 30, 2015, cash provided by operating activities of $206 million, compared with $110 million for the same period ended 2014. This increase was due primarily to the increase in revenue along with the decrease in cash paid for interest. Cash used in investing activities was $118 compared with $165 million for the time period ending 2014, due to lower acquisition activity and lower capital expenditures. Capital expenditures were $96 million compared with $118 million for the same period ended 2014. Total capital expenditures are expected to be lower in 2015 than 2014 as the improvements to our corporate headquarters are complete and investments in this initiative to transform our technology platform have been increased. Cash used in financing activities was $33 million compared with the source for $49 million for the same period ended 2014 due primarily to the net pay down of debt partially offset by the net proceeds from the IPO. That concludes our prepared remarks on the third quarter financial results I will now turn the call back over to Jim.

Thank you Al, now turning to our forecast, we're raising guidance for 2015 revenue and adjusted EBITDA, due to strong results through September and a solid fundamentals for our business. For revenue we now expect approximately $1.49 billion representing growth of approximately 14% year on year or 17% on a local currency basis. There are larger foreign exchange headwinds since our last earnings call, making the increase in guidance note able. For full year 2015 adjusted EBITDA, we now expect approximately $516 million representing growth of about 14% or 16% on a local currency basis. Growth in revenue might outpace adjusted EBITDA just a bit with our transformational and growth investments in 2015 fueling revenue growth and margin expansion in 2016. So as you can see in the fourth quarter, we expect a strong finish to cap off what has been a very good year. We expect Q4 revenue of $367 million to $369 million, representing on the top end of the range, about 10% growth or about 13% on a local currency basis. Adjusted EBITDA, we expect $125 million to $127 million resulting in approximately 8% to 9% growth or 11% to 12% on a local currency basis. We'll continue to focus on strategic growth opportunities and productivity opportunity initiatives where we can differentiate ourselves while leveraging our horizontal capabilities we'll invest in these in Q4 as we're seeing excellent growth coming from them. We'll provide full-year and Q1 guidance for 2016 on our next earnings call. Project Spark which refers to our investments in next generation analytics and technologies remains on track for completion by mid-2016. And we continue to feel good about our long-term strategic operational and financial objectives that we've set out to achieve. I'll hand the call back now to Colleen so we can get started on taking your questions.

Great thanks Jim, let's now proceed to questions, operator will you please provide instructions?

[Operator Instructions]. Your first question comes from the line of Andrew Steinerman of JPMorgan. Your line is open.

My question is about margins. It seems to me with the stronger than expected revenue growth, that the company is also increased its investments in these growth initiatives, even compared to a quarter ago. Is that a fair characterization and could you be specific where the additional investment is going?

Yes, Andrew. You're pointing out exactly what's happening. If you look back at our overall strategy, as you know it's been to invest in growth initiatives and we started that in about 2013 and you saw them really starting to hit our results in the third quarter of 2014 and fourth quarter of 2014. As we have had strong over performance relative to the top and bottom line, we decided to continue to investment in these things, specifically in the area that we talked about. So kind of our emerging and high growth verticals like healthcare, insurance, rental screening and government and then we’ve also invested in our initiatives like CreditVision, broad and alternative data. So very consistent with the areas where we have told you we're going to invest in the past.

Okay. And are those variable cost or fixed cost?

I would call them they're development costs, so they're one-time costs that allow us to develop the base functionality in a lot of the growth initiatives and the infrastructure in the verticals where we're looking to growth. I think you're asking me -- can we count on those to consistently grow going forward and I'd say we'd got back to more normalized investment will be reflected in our guidance as we move forward.

Your next question comes from the line of Gary Bisbee of RBC Capital Markets. Your line is open.

One other thing that was mentioned several times specific to international was investments to drive future productivity or efficiency. Can you just expand upon that? What's the timing of achieving that?

Sure, Gary. So our plan with international has always been to get them back on what I would say a diversified growth plan kind of going forward and you again have seen that in the result. It's always been in our plans and as the infrastructure for technology begins to harden up and as they become more used to being in the growth mode and continuing to execute on those, that we would start -- actually it started in the second quarter of this year, the planning and we're executing now on various initiatives to reduce costs and these would be in areas that you'd expect us to look at, consolidating operations into I would say centers of excellence, consolidating operations generally and consolidating certain functions within each country. These are happening as we speak and will continue into next year and you should begin to see margins expanding because of the growth and because of these actions that we're taking.

And then a quick follow-up on the consumer interactive business which continues to be exceptionally strong. I know you talked about both growth in the base business, number of users, but also it sounds like a lot of new relationships, several of which we've heard about or seen press reports. Can you just give us a sense, I know the comp is getting increasingly difficult, but what's been the trajectory of new business signing there throughout the year? In other words is there a lot that started to drive revenue in the last quarter or two, such that even though comps get tougher you would expect to continue to have these strong double digit revenue growth rates in that business in the next few quarters? Thank you.

Yes, so if you look at business, it breaks down into basically two main lines of revenue or two lines of revenue. One is the direct business, and we feel good about the demand that exists in that market and our approach to that market, we're attracting all kinds of consumers, those who are going to retain with us, and so we see strong or good double digit growth there. In our indirect business, obviously we have had very strong growth associated with the partnerships that we've developed and continue to develop with new clients over the last several years and including this year. And the pace of closes, I think this is what you're asking me, the pace of closes continues and it gives us a high degree of confidence that we'll continue to have double digit growth in that part of our business going forward.

Your next question comes from the line of David Togut of Evercore. Your line is open.

This is [indiscernible] on for David Togut. Just a follow up on the last question, could you talk about what the year-over-year unit growth rate was and kind of change in unit price in consumer interactive in the third quarter?

Yes, on pricing of that level of specifics, that's not something that we've gotten into historically for competitive reasons.

Maybe just talk about the sustainability of the growth in consumer interactive?

Yes, so I'll kind of repeat myself here, but I think it's important. There are two facets that are very fundamental to driving our growth. It's our indirect and direct business. In the indirect channel, we have very early on embraced the idea of premium which you hear talked about and we reach more consumers through that channel than anyone else because we have been a partner for the leading industry players and the emerging players in that space from day one. It's made us learn and grow and our technology is very easy to work with. Our business model is very easy to work with and so we find ourselves in a very good position with a strong closed pipeline and a strong pipeline for future growth. So that gives us confidence there. In our direct business, even as recently as the last six to nine months, we've taken a more focused approach to identifying the kind of clients that we want to serve and more precisely advertising through them for both in all kinds of media and including television and that has increased -- the most important thing is it's increased the retention on the kind of plans we have which is making those vintages which once you establish a vintage, it's pretty straightforward how they're going to work, to making those vintages give us very good confidence that we'll be able to maintain double digit growth going forward.

Just one final question, do you have any details on revenue growth from mortgage in the third quarter and could you provide your outlook for mortgage in the fourth quarter in 2016?

Yes, so it's hard for us, obviously, to predict what's going to happen in the mortgage market with the tail-ends that we’re receiving. I put it this way, we get about 1 to 2 points of growth in this business, specifically in this quarter it's 1 to 2 points so it's not overall significantly driver of our top line growth at any point in time. So you can -- depending on a head or tail-wind you can tell it's going to affect 1 to 2 points of our growth in any quarter.

Your next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is open.

Jim, how much runway do you think you have for CreditVision in terms of being first to market? I mean you’ve definitely gotten some notice from some of your competitors out there and are you seeing anybody else trying to come into the market with similar trended data that your customers are coming back to you with a me too product that they're showing you?

We talked quite a bit about this on our road show. We've been in the market with CreditVision for over three years now and if you recall, I’ve made the statement that we think it should be the industry standard. It helps both businesses and consumers so much that we felt like it should be something that is used extensively. I won't really comment on what others are doing, but I can tell you we’re in market with both a badge and an online product which is critical. We have the systems to be able to test all your different programs across all the different areas that we're able to play with CreditVision. We've been able to extend CreditVision already into Hong Kong, Canada and then very soon into India and other countries which kind of show you how well our infrastructure is built to be able to take this on. We have already implemented a next generation of CreditVision like products called CreditVision Link that has trended alternative data which let us score an even bigger part of the population. We've talked about the uptake there, Credit Vision itself, I said one close per day, you can imagine that's in the 70-range of new customers. And in CreditVision link, we already have 40 new customers, either testing it or using it. And that leaves us to Fannie Mae. Obviously that was a big decision for them. I think it's part of making this kind of solution industry standard. We've been with them from the beginning on this and we're happy that they've done this. And we're happy that the industry is now able to participate more. But I can tell you we're very much on our front foot with this kind of trended data specific to a consumer. And I think we're going to continue to outpace and differentiate ourselves relative to the competition because we're that much further ahead.

And then was there any other acquisitions in the quarter besides the buy-up in India?

No. There were no other acquisitions.

Okay. And then just lastly, you look like the business is firing on all cylinders, are you hearing anything from your clients about -- any concern about turn in the economy, [indiscernible] any of the end markets that you’re highly focused on?

We're not hearing any of that. Consumer credit is healthy and functioning well over the past few quarters as you know people are more likely to be employed now, they are carrying less debt and overall just have better access to credit. But we see a good strong environment in virtually all our geographies going forward and of course our portfolio extends beyond credit in areas like public records which hits areas like fraud and identity management. We see good strong growth there as well and of course also in the insurance sector. So I didn't talk about healthcare, but I can assure you that the issues facing the healthcare industry remain the same as far as being able to identify payment information. So that business, we're very bullish on going forward.

Your next question comes from the line of Paul Ginocchio of Deutsche Bank. Your line is open.

Just wanted to follow-up on the Fannie Mae question, I calculated you roughly have about 8% revenue exposure and total to mortgages, is that within a point or two of your exposure, does the Fannie Mae relationship impact the entire mortgage exposure? And then finally, as you look into mid-16, can you just talk about sizing that increased price that most people are going to pay for the CreditVision versus just a normal credit report? Is it low single digits? Is it double-digit? Is it high single digit? Any rough way to help us understand that one year bump you’re going to get from the move to CreditVision from Fannie Mae? Thanks.

Paul, first of all, the first question, yes, the total exposure is definitely less than 10%. I think that's a good way to look at it. As far as the bump we might get relative to CreditVision and Fannie, that starts somewhere at the end of the second quarter, third quarter. We can't predict exactly what it will be. It will be meaningful to that particular business unit. Overall the way I look at CreditVision, we're definitely able to differentiate it and get premium pricing. But I also look at it as a way to establish a larger footprint in the customers that we serve. And this is the biggest customers and also the midsized customers and even the emerging customers that’s allowing us to differentiate ourselves, therefore getting into bigger part of their workflow and getting more transactions. So it's not just about price but also getting more transactions. So it's a meaningful part of our growth story going forward.

And Jim just, will it impact all your mortgage revenue or most of it?

We're not giving guidance on that. It's going to impact the mortgage associated principally with Fannie, but no, not the whole amount.

Your next question comes from the line of Sara Gubins of Bank of America Merrill Lynch. Your line is open.

This is David [indiscernible] for Sara Gubins. Al, I think you mentioned that acquisitions aided growth by about 1.7% for the quarter; is that right?

That's correct.

Can you give us organic constant currency revenue growth for USIS and international?

Yes, I can. For USIS organic constant currency growth for the quarter was 12%. And for international organic constant currency growth was 17%.

And then just a broader question on margins. So based on the numerous investments if you can give us any high-level color on how to think about margins for 2016?

So for 2016, we will come out and give guidance during our fourth quarter call which will help you very quickly quantify that. As Jim said, we're making investments. We've been making them during the year. We expect to see a return on those investments which will drive margin expansion in 2016. But to get into the details of those, probably not right now, but we will do it and needless to say, you will see margin expansion next year as those turn from a cost to a return.

Your next question comes from the line of Bill Warmington of Wells Fargo Securities. Your line is open.

So a question for you on our consumer interactive business, there is been a fair amount of talk in the industry about affinity programs where you have banks and other large membership organizations looking for companies to do those for them and I was curious what your involvement in that has been, and what you think the pipeline looks like in potential opportunity for you guys?

We're a strong participant in that area. We have a specific suite of products, we label credit view. We were able to talk last time about U.S. bank leveraging that and basically buying a testimonial about how valuable it is to their customer engagement. Now we don't talk about all the other providers because they generally don't want us to. But needless to say, we're in some of the very largest banks and other institutions providing a credit view like product and what credit view does is allow a consumer to stay engaged with the bank by understanding their financial profile and how a change in their behavior can affect their ability to get different kinds of services from the bank and it is a very good driver and generator for those banks. So we’re going to continue to invest in that product and continue to differentiate it. I would say that, guess about the pipeline, the pipeline is also very strong, not only in banks but in other companies like insurance companies that might use these services to stay engaged with their consumers.

And then a question for you also on the claims side of the business, with TLOxp, whether you're seeing any increased interest in that product.

Yes, on TLOxp, I think we told you last time we had very, very strong growth. In the second quarter that growth has continued into the third quarter. As we continue to penetrate the various markets that use these kinds of services. So we do not see any slowdown in that business and are very confident in our prospects for double digit growth with TLP.

And then on the core credit reporting business, have you seen some lift on a revenue per report basis, some getting a higher mix of volume from some of the smaller banks? Are you seeing a pickup in business there?

Yes, the smaller bank and let's say the emerging banks or the nontraditional lenders, we're seeing a very nice pickup there. In many ways, it's much easier for them to take on these new services that we provide like CreditVision because they don't have to retest their policy engines as deeply and so they're able to take advantage of these services much, much more quickly.

Your next question comes from the line of Andre Benjamin of Goldman Sachs. Your line is open.

My first question was about the decision services, I was hoping you could maybe give a little bit of color on exactly how much of the growth was from insurance and healthcare which I don't think you talked as much about versus the core credit decision of the business and how you think about growth in that for fourth quarter?

I would say for Q3 organic decision services growth is 17%. With the other part of it coming obviously from some of the acquisitions that we've done from previous year which has been in the insurance space. So you are getting a little bit of a bump from that on an inorganic basis.

Yes, Andre, that's also in decision services where you see our healthcare vertical show up quite a bit as well as a driver.

And as Jim talked about, that's growing on a quarter over quarter basis over 20%.

And then in terms of how you're thinking about the fourth quarter, to get to the range, any -- you talk a lot about consumer, is there any insight that you can provide on how you're specifically thinking about the decision services and international organic growth in the fourth quarter versus the third?

Yes, I would state our views on the fourth quarter this way, we see good growth across our whole broad base of our business and it's largely in line with previous quarters.

I think exactly, broad based growth across all of our businesses.

Thank you. Our last call for today will come from the line of Manav Patnaik, Barclays. Your line is open.

It sounds like you said a lot of broad based growth and it seems like the consumer interactive will continue its strong pace as well. So I think it would be surprising I guess if in '16 you guys didn't do it at the high end or above your medium term range, but without giving [indiscernible] was to understand was is there anything one=time-ish that’s the comp or just a lumpy contract or so, in '15 that we should be aware of in terms of when we are trying to model out '16?

No, we really have had good growth across -- we keep saying broad based growth and what that means is that we have had good growth across our base business. We have had good growth across all our growth initiatives and our emerging verticals and we can't point to any one particular contract that's had a big pop in it that might be driving growth above what is normal.

And then I guess the last one is, just in the context of could you remind us your leverage targets and just in that context, what your sort of M&A opportunities whether that's geographic or product specific that you guys are looking at?

I'll start with the second half of the question and let Al take the first. Just to remind you our M&A strategy is really focusing on acquisitions that are either going to help us take our current capabilities and expand into new verticals and you've seen that play out in healthcare as an example and even to some extent in insurance. And then another example is the DHI acquisition, in which we've taken the ability to understand the kind of accident history that a consumer has and then apply that with the rest of our business in the insurance space and in other markets. So it's either new capabilities or something that will get us into new markets. We continue to have a good pipeline of those things that we're looking at. And when we see the opportunity, we'll jump and I think we've done five acquisitions since I've come on board. They're all fully integrated, they're all hitting the mark. I mean that's because that we really look at these kinds of criteria to make sure that we can absorb them and that they'll be accretive for us.

And just as a quick reminder, our target leverage ratio if you remember, in Q1 pre-IPO, we were at 6.1 in. Q2, post IPO in balance sheet, recapitalization we got down to 4.4 this quarter, we ended at 4.1 and what we're focused on in terms of a leverage target is somewhere around 3.5 times net leverage.

Thank you, everyone, for your participation in today's call. If you’ve further questions, please feel free to reach out to me or Lindsey Whitehead and my team directly. As mentioned previously we will post the audio replay of this call on our website at www.transunion.com/tru later day. I will now turn it back to the operator to conclude the call, please.

Thank you. And this does conclude today's conference call. You may now disconnect.