TransUnion (TRU) Q1 2016 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. My name is John 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] Please note that this call is being recorded as of today Tuesday, April 26, at 4:00 PM Central Time. I would now like to turn the meeting over to your host for today's call, Colleen Healy, Vice President of Investor Relations at TransUnion. Please go ahead.

Good afternoon, everyone and thank you for joining us. 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 we'll start with Jim providing some key takeaways from our first quarter results, he'll turn it over to Al for a more detailed Q1view and then Jim will conclude today's prepared remarks by providing guidance for Q2 and for the rest of the year. After that we'll take your questions. Our earnings release includes schedules, 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 the schedules. We have posted the earnings release, as well as en excel file which provides a historical view of our new reporting structure recast to reflect the movement of our direct to consumer reseller business and allocated certain other costs related to our consumer facing business in the US from our USIS segment to our Consumer Interactive segment. These 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. Our Form 10-K for the quarter ended March 31, 2016 will be available on April 27 and available through the 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 recap, as well as any future use of the 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 the 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 press release in the comments made during this conference call and in our most recent form 10-K, forms 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty 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 first quarter's performance, followed by the primary drivers of their performance in each of our business segments. And then, after Al provides the details on Q1, I'll share how we see the rest of year and Q2 are shaping up. With the performance in Q1, we're off to outstanding start to the year on a few key dimensions. First, customer demand for our offerings across our business is very robust, whether you look at across core offerings and new solutions, across our various geographies and verticals, or across our business and consumer customers. Second, our business model is scaling nicely. We have built a differentiated core set of capabilities, starting with data, technology and analytics, often interfacing with customers' systems directly, seamless and hard to replicate pipes into our customers, the global sales force and a brand that is recognized around the world. We apply these capabilities at scale, across the workflows of many established verticals, seeking to further penetrate our existing verticals such as financial services with new solutions, and expanding into emerging and under penetrated verticals such as healthcare, insurance, and rental screening. We've built domain expertise in each of the verticals we serve, and are poised to go after new verticals more profitably, because our underlying platforms and capabilities are designed to scale across them. Additionally, our platforms and solutions scale across geographies to quickly generate profitable revenues on new solutions, that are powerful economic and market trends enabling growth in many of the regions where we have chosen to operate. The market trends include a growing middle class, expansion of credit to the underserved, and together these support growth for consumer credit, and therefore demand for our solutions. We have a presence in over 30 countries, with number one or number two positions in several regions, including some key emerging markets. Third, our investments continue to yield attractive returns by contributing to revenue growth and significant adjusted EBITDA margin expansion. For example, we're pleased with the top and bottom line impacts from our investments in next generation analytics and technology, providing us with a cost innovation and time-to-market benefit. We refer to the set of investments as Project Spark, and this project remains on track for completion at the end of the second quarter. The new growth initiative investments, and productivity investments at Spark are together helping to fuel not only impressive top line growth, but also notable margin expansion. Lastly, we continue be focused on growing the business and bringing innovations to market. On the past calls, we discussed new growth product initiatives that are already having meaningful impact to our growth, and contributing to this quarter's 40/60 split of growth coming from the new product growth initiatives, entire growth verticals, and emerging markets versus the core. These include CreditVision, fraud, and TLOXP just to name a few examples among many. And as Fannie Mae appears to continue to target mid year for go live on Trended Credit, and our CreditVision product serves to remind and motivate us that big ideas, combined with focused execution and persistence can move an industry forward in the uses and benefits of data analytics for both business customers and consumers. And it's in the execution of ideas and innovation where success is ultimately determined. Since launching CreditVision, we have migrated thousands of mortgage resellers to prepare for the adoption of Trended Credit and CreditVision by Fannie Mae. Just as important to me, however, to these more immediate innovations that we're driving, is ensuring we have also positioned ourselves for successful innovation over the long-term, and our ability continue to enhance our strategic growth playbook, our replenishing and expanding on an already robust new product growth initiative pipeline of innovations is key to that. Gains in product momentum and continuing to fill that innovation pipeline are our life blood, and I'm confident we are doing just that. Ultra strategic acquisitions like our majority ownership stake in the Colombia credit bureau CIFIN that closed during the quarter, that we previewed for you on our last earnings call, as well as organically to position us for the long-term. For example, during the quarter we launched our Prama solution suite, which leverages our expanding data sets and analytics capability. We believe Prama will revolutionize the accessibility of building the analytical enterprise, by putting the power in the hands of our customers to access and harness massive underlying data assets, and to apply advanced analytics in a dynamic graphical user interface, in order to make and operationalize better decisions, to quickly see for themselves how their decisions compare to the market, how change to strategy might ultimately the impact their revenue and profitability. Prama is the first of its kind of offering that links analytics, to insights, to action, all on a single platform. It also provides access to a massive data set of anonymized consumer credit information, on virtually every credit active consumer in the US. Leveraging the power of CreditVision and a seven-year historical view of data will also feature alternative data assets. Several financial customers are already testing and beginning to implement the first flagship solution of the Prama portfolio called Prama Insights. We will continue to roll out additional solutions under the Prama portfolio throughout the year, and into next year. The product road map is robust, with applications across several verticals including healthcare, insurance, and government. This is just the beginning for Prama, and we are very excited about this unique and innovative analytics environment, where our customers can explore, share and act on powerful data and insights. Prama is in good company with other new-to-market solutions that we believe will serve our customers well for years to come, like CreditVision Link. We continue to onboard new customers and validations for CreditVision Link, and we believe we are the pioneer in the market to have combined the predictive power of trended credit and alternative data for better decision-making around risk. So with these points, on strategically important progress and momentum made during the quarter, let's turn to the strong financial performance. During the quarter, the Company grew revenue at 15% or 18% on a constant currency basis, and posted record quarterly revenue. As I mentioned, the high growth initiatives are paying off, and contributing to the overall growth rate. On a constant currency basis, all three business segments, USIS, international, and consumer interactive grew at a double-digit clip, the latter two segments growing over 20%. Turning to each of the business segments. USIS saw strength with financial services, rental screening, insurance and healthcare being among the verticals contributing to segment's growth rate of 13%. Similar to the overall Company, new product growth initiatives fueled over 40% of the growth in financial services vertical alone. Which is to say, that in the business considered by many to be our most traditional one, the mindset is to find new sources of growth through innovative approaches, and providing new and existing customers with deeply valuable solutions. In international, the segment grew 22% on a constant currency basis. Developed markets delivered 19% constant currency growth, with Canada and Hong Kong both delivering solid growth through share gains from offerings like CreditVision. Emerging markets posted 23% constant currency growth, with all regions contributing to the increase. India and Asia-Pac, as well as Latin America now with CIFIN, contributed to the robust growth rate. And more of this revenue growth is falling to the bottom line, in light of the investment we've made -- investments we've made and discussed with you, to drive productivity improvements associated with our global technology platform, and rationalizing common functions in offices around the world. Together, revenue growth and productivity improvements helped to contribute to this segment's 240 basis points of adjusted operating income margin expansion in the quarter, and sets us up well for the rest of the year. Our consumer interactive business enjoyed 25% growth, as increased retention rates, subscribers and partners contributed to our growth, and we think to the growth of the space more generally. Turning back to company-wide results. During the quarter, that robust revenue growth, combined with the benefits from investments in productivity initiatives that we've discussed with you on prior calls, paved the way for our fastest-ever adjusted EBITDA growth rate in our recent history at 23%, or 26% on a constant currency basis. So the business did nice job of converting revenue growth into adjusted EBITDA growth. In fact, the adjusted EBITDA grew 8 points faster than revenue, yielding 230 basis points of margin expansion, and achieving [34.8]% adjusted EBITDA margin, in what is historically our seasonally lowest quarter of the year. So in total, the Company had robust mid-teen growth, adjusted EBITDA growing even faster than revenue, on top of a tough comparable in Q1 of 2015, which delivered similar growth dynamics. The business is off to a strong start again, here in 2016. Before I turn to guidance, I'll now turn the call over to Al for more details on our first quarter performance. Al?

Thank you, Jim, and good afternoon. Today I'm going to walk through our consolidated results, and segment results through adjusted operating income. Then I will finish up with a review of the balance sheet and cash flow statement. First-quarter consolidated revenue was $406 million, an increase of 15% or 18% on a constant currency basis, compared with the first quarter of 2015. Revenue from acquisitions contributed about 1 point of growth in the quarter. Adjusted EBITDA was $141 million, an increase of 23%, or 26% on a constant currency basis, compared with the first quarter of 2015. Adjusted EBITDA margin was 34.8%, an increase of 230 basis points, compared with first-quarter of 2015. Adjusted net income was $58 million, an increase of 96% compared with the first-quarter of 2015. Adjusted diluted EPS was $0.32, compared with $0.20 in the first quarter of 2015. The adjusted effective tax rate for the first quarter was approximately 37%. Now let me walk you through the details of our P&L. As I just mentioned, consolidated revenues increased 15%, or 18% on a constant currency basis. This again, was driven by strong broad-based growth across each segment on a constant currency basis. Operating income was $52 million, an increase of 42% compared with the first quarter of 2015, driven by an increase in revenue, and lower operating expenses as a percent of revenue. Cost of services was $149 million, an increase of 19% compared with the first-quarter of 2015, due to increased product costs associated with our revenue growth, investments in key strategic growth initiatives, the acceleration of maintenance contract costs related to Project Spark, and inorganic increases in operating expense from recent acquisitions. SG&A was $132 million, an increase of 8%, driven primarily by increased variable compensation related to the financial performance of the business investments in key strategic growth initiatives, including headcount to support these initiatives, inorganic increases in operating expense from recent acquisitions and advertising. And depreciation and amortization was $72 million, an increase of 5%, due primarily due to the overall increase in capital expenditures in 2014 and 2015 related to Project Spark, improvements to our corporate headquarters, and from our recent acquisitions. D&A not related to the 2012 change of control transaction and subsequent acquisitions was approximately $28 million for the quarter. Adjusted operating income was $113 million, an increase of 24% compared with the first quarter of 2015, driven primarily by the increase in revenue. Before we turn to the segment results, let me first discuss the change we made to our segment reporting structure. In the first quarter of 2016, we moved our direct-to-consumer reseller business in the US, from our USI segment to our consumer interactive segment. This change better reflects the evolution of our consumer-facing business in the US, and how we manage that business. As a result, we modified our segment reporting effective the first quarter of 2016. The segment results I am about to discuss have been recast to reflect this change for all periods presented. This change does not impact our consolidated results. However, with this change, the medium- to long-term growth outlook for consumer interactive moves from high single, low double-digits, to mid to high single-digits as the growth of the direct-to-consumer reseller business is traditionally lower than that of the rest of our consumer interactive business. This move will have minimal impact on our medium- and long-term growth outlook for USIS, given the size and scale of that particular business. For further information, please see the supplemental schedule posted on our Investor Relations website in the quarterly results section, that provides a full recast by quarter, back to the first quarter of 2014. Now looking at segment revenue and adjusted operating income, USIS revenue was $247 million, up 13% compared with the first quarter of 2015 driven by strong growth across all platforms. Starting with online data services revenue was $161 million, an increase of 10% driven primarily by an increasing credit report volume. Marketing services revenue was $37 million, an increase of 12% due primarily to increased batch activity derived from demand for our newest solution such as CreditVision. Decision services revenue was $49 million, an increase of 25% due primarily due to revenue growth in the healthcare and insurance markets. Adjusted operating income for USIS was $77 million, an increase of 13% compared with the first quarter of 2015, due primarily to the increase in revenue, partially offset by increased product costs, investments in strategic growth initiatives, additional depreciation and amortization, inorganic increases in operating expense from recent acquisitions, acceleration of maintenance contracts related to Spark, and increased variable compensation related to the financial performance of the business. International revenue was $68 million, an increase of 7% or 22% on a constant currency basis, compared with the first quarter of 2015. Revenue from recent acquisitions contributed approximately 5 points of growth in the quarter for international. We saw strong double-digit constant currency revenue growth in both developed and emerging markets, that was offset by a 15% decrease in revenue from the impact of foreign exchange rates, primarily the South African rand Brazilian real, and the Canadian dollar. Developed markets revenue was $23 million, an increase of 11%, or 19% on a constant currency basis. Emerging markets revenue was $45 million, an increase of 5% or 23% on a constant currency basis. Revenue from recent acquisitions contributed approximately 8 points of growth. Adjusted operating income for international was $17 million, an increase of 18% compared with the first-quarter of 2015. On a constant currency basis, adjusted operating income increased 37%, driven by the increase in revenue, along with the savings enabled by key productivity initiatives, partially offset by inorganic increases in operating expense from recent acquisitions, and increased product costs associated with revenue growth. Furthermore, and as previewed on our last call, we saw over 200 basis points of adjusted operating margin expansion in international in the quarter. Consumer interactive revenue was $106 million, an increase of 25% compared with the first quarter of 2015, driven by strong growth in both the direct and indirect channels. Adjusted operating income for consumer interactive was $42 million, an increase of 46% compared with the first-quarter of 2015, due primarily to the increase in revenue. Please note, the guidance we provided in our press release fully reflects the anticipated impact of the recently announced potential acquisition of one of our indirect channel partners by one of our competitors. While the timing of acquisition is unknown, the updated guidance range Jim will provide fully takes this into account. Lastly, in the corporate segment, adjusted operating expenses were $23 million, an increase of 14% compared with the first quarter 2015, due primarily to increased variable compensation expense related to the performance of the business. Now moving to the balance sheet. Cash and cash equivalents were $150 million at March 31, 2016, compared with $133 million at December 31, 2015. Total debt including the current portion of long-term debt increased to $2.4 billion at March 31, 2016, compared with $2.2 billion at December 31, 2015, primarily due to funding the acquisition of CIFIN. As of March 31, 2016, we had the full $210 million revolving credit facility available for use. Our net leverage ratio as of March 31, 2016, was approximately 4.0 times. Moving on to the statement of cash flows, for the three months ended March 31, 2016, cash provided by operating activities was $42 million, compared with $17 million for the same period in 2015, due primarily to the increase in revenue, along with a decrease in cash paid for interest. Cash used in investing activities was $161 million, compared with $35 million for the same period in 2015, due primarily to the acquisition of CIFIN. Capital expenditures were $31 million, compared with $30 million for the same period in 2015. We expect total capital expenditures to be lower in 2016 than in 2015 as a percent of revenue, as we completed the improvements to our corporate headquarters facility in the first half of 2015, and expect to complete Project Spark in the first half of 2016. Cash provided by financing activities was $136 million, compared with $29 million for the same period in 2015, due primarily to the incremental borrowing on term loan B under our existing credit facility to fund the acquisition of CIFIN. Lastly, prior to the end of the quarter, we successfully closed our secondary offering. This transaction had no material impact on our financial statements, as all stock sold under the registration statement was sold by our controlling shareholders. That does conclude our prepared remarks on the first quarter financial results. I will now turn the call back over to Jim.

Thanks, Al. Now turning to our forecast. Let me first outline some of our key assumptions and inputs. As always, the growth outlook and guidance that I'm providing today, includes organic growth, and the impact from acquisitions already closed. We expect about 2 points of inorganic growth for the year, as well as for Q2. Also, we expect FX will continue to provide headwinds. At today's rates, our guidance reflects about 2 points of drag on the year, and roughly 3 points for Q2 due to foreign currency rates. Starting with guidance for the full year 2016, given the higher than expected Q1 performance, and the strength of the business we see going forward, we are increasing our projected growth rates for 2016 revenue, adjusted EBITDA, and adjusted EPS guidance by 2, 4, and by 5 to 6 points, respectively. And we now also expect 2016 adjusted EBITDA margin to show additional expansion versus the guidance provided in our prior call. We expect our revenue to come in between $1.63 billion and $1.65 billion, an increase over last year of approximately 10% to 12% on a constant currency basis, or 8% to 10% on a reported basis. Adjusted EBITDA for the year is expected to be between $600 million and $610 million, an increase over last year of about 16% to 18% on a constant currency basis, or 14% to 16% on a reported basis. This results in expected adjusted EBITDA margin close to 37% now, versus our prior guidance of about 36%. This equates to about 200 basis point increase over 2015. Our investments in key strategic and productivity initiatives are clearly paying off. This revenue and adjusted EBITDA guidance is especially notable on top of two prior consecutive years of robust revenue and adjusted EBITDA growth. Adjusted diluted earnings per share for the year are expected to be between $1.30 and $1.34 or 19% to 23% growth. For the second quarter of 2016, we expect the following. Revenue should come in between $405 million and $410 million, an increase of approximately 10% to 11% on a constant currency basis, or 7% to 8% on a reported basis, compared to the second quarter of 2015. Adjusted EBITDA is expected to be between $145 million and $150 million, an increase of approximately 11% to 15% on a constant currency basis, or 8% to 11% on a reported basis, compared with the second quarter of 2015. Adjusted diluted earnings per share are expected to be between $0.31 and $0.33, an increase of 15% to 22% compared with the second quarter of 2015. So in closing, the year is off to a great start, with accelerating growth as you move down the P&L, seeing the performance in the quarter, as well as the strength we expect in the business over the rest of the year provides feedback that we are on the right path, and delivering value for our customers. We continue to innovate to drive near- and long-term growth, to provide differentiated value to our customers, both through current offerings and growth initiatives like CreditVision and digital marketing, as well as initiatives still to come and impacting our results, like Prama. We'll continue to drive innovative business model and channel delivery, as well as to take advantage of advances in technology and analytics to drive top and bottom line growth. We continue to execute on our strategic operating and financial plan. We're also taking steps to optimize the balance sheet as Al discussed, as well as providing our sponsors with liquidity, while increasing the public market float of our stock, offering new investors an opportunity to create a base in our stock, and for existing investors to increase their positions as we did last month, with the successful close on March 14 of our secondary offering of 17.9 million shares of common stock, including the exercise portion of the green shoe. 2016 is shaping up to be a great year of top and bottom line growth, one with opportunities to increase our product, customer, and geographical footprints, while expanding our margins. With that, I'll hand the call back now Colleen, so we can take your questions.

Great. Thank you. We look forward to taking your questions. And operator, could you please repeat your instructions?

Thank you. [Operator Instructions] Your first question comes from the line of Gary Bisbee from RBC Capital Markets.

Good afternoon, and congratulations on the strong results.

Thank you, Gary.

I guess, I'd like to start there. You reported and gave guidance for the quarter, one day after halfway through the quarter if I recall, and obviously you've delivered significant outside. I realize there's a desire to be conservative, but what changed during the quarter if anything, to allow you to deliver such revenue across-the-board, and such strong margin relative to the prior guidance? And as part two of the question, how should we think about answers is putting context around the guidance for Q2? What out there really could lead to such deceleration? I realize the comp is tougher by the quarter. But it feels like there's got to be some conservatism too, given how strong this report was. Thank you.

That's a good question. I'm sure everyone might have that. Nothing really changed in the quarter. I think if we go back to how we have been performing, over the last six or eight quarters really, we been able to turn in extraordinary growth. This is driven by broad-based performance across of virtually all aspects of our business. So demand has been good in virtually all of our markets. Our growth initiatives, as we describe them, continue to ramp, maybe some singles now turning to doubles. And the new verticals that we are in like healthcare, rental screening, and others, continue to perform very well. So all these growth drivers are laying on and they're kind of hitting on all cylinders. The way I look at it is we look forward, we increased our revenue guidance by up to 10% to 12% for the year. And or EBIDTA guidance up to 16% to 18% for the year, which is, I think, ambitious by any account. And we really feel good about that. Going forward.

Okay. Thanks. If I could ask one quick follow-up. Any incremental color you could give on the decision services business which you continue to put up terrific growth. How much of that is the healthcare and insurance? What's driving that? How do you feel about that going forward? Thank you very much.

Yes. Hey, Gary. It is Al. Just to put numbers around your point, decision services for the quarter was up 25%. If you look at the last four quarter's of 2015, it has been consistently growing in the mid-20s, and Q1 was no different. The biggest drivers behind that which are important to note continue to be as Jim talked about, strong performance in our healthcare business, strong performance in both rental and insurance, but also in our core business, financial services, we see decisioning [ph] revenues continuing to trend up and a lot of that is driven by the innovation that we're putting into our core business.

Thank you.

Thanks, Gary.

Our next question comes from the line of Shlomo Rosenbaum from Stifel.

Hi. Good afternoon. Thank you for taking my questions. Hey, Jim can you talk a little bit more about the international growth, you discussed - you mentioned CreditVision is clearly very healthy. Is there something else going on over there? Is there just a taking of US products over to international locations at a faster pace or could you give us a little more color on what's driving that? And it's also unusual, which was mentioned last quarter, was questions as well as the develop market seems to be growing faster than the emerging markets on an organic basis which is generally a little bit unusual?

Yes, so let's kind of take it, break it down a little bit Shlomo. We have seen I think extraordinary growth in some of our developed markets, let say talk about Canada, particularly you think, they are in a recession, their developed market, however are getting the growth, while we are getting to a specifically through things like CreditVision and some other solutions that we brought the US there. No one else is able doing that. So that is allowing us to shift share not only of use of CreditVision, but also kind of the overall credit business and some of the biggest clients they are. And so we're experiencing double-digit growth rates in an economy or a country that you wouldn't necessarily expect to get that, same in Hong Kong, which we've talked about in the past as well, where they are taking CreditVision and more or less mandated it. It's used across the board because it is so powerful. So that is what you are seeing some great growth there. Now in emerging markets, I think 23% growth on a constant currency basis. We're seeing a lot of growth really across-the-board, some better than others. India continues to be a very, very strong performer for us as you would expect. And with the addition of CIFIN you are seeing the same kind of growth characteristics, where even if there might be things going a little sideways in the economy, the banks as well as the consumers, as well as the government are interested in getting credit to their on bank starting to build the middle class. So that's creating lots of tailwinds. On more traditional credit products, but also they are seeing the value of bringing things like CreditVision and seems to be things like digital marketing. So we are establishing a bigger footprint in our customers workflow. And in some cases we're also getting the tail end associated with not only a good economy but also good dynamics we want to see over many, many years as a good-sized population with the desire it gets more credit to these folks so that they can buy goods and services. So that’s kind of – kind of everything is kind of moving in the right direction for is there.

If I could just sneak in one more on the interactive. Can you just talk a little bit about the growth in direct versus reseller, and what's - how should we think of that over the near-term, where there a bunch of resellers that were brought online recently that should cure you through the year? Can you just talk about that and I'll pass it on?

Sure. So both -- let say if we're looking at that business in two components, both of those businesses grew very, very well and are projected to continue to grow very, very well. Given the size of our direct business and the kind of clients we're going after, we continue to see good uptake and to see good retention, which drives good vintages going forward. And we're getting the benefits of last year's vintages essentially that are staying – still retaining with us. And then that strong demand as you know also plays into other business models which we don't necessarily think are right for TransUnion, but we enable, let's say the industry. And so we continue to grow with our partners and we continue to provide them with different kinds of solutions that give them differentiation. And as far as the portfolio, we do continue to add partners, so that’s kind of a combination of both all driven by increasing or the - I guess the continuing interest by consumers into the things that affect their ability to get goods and services. So it's kind of across-the-board that we're seeing good growth and we're projecting growth in '16.

Okay. Great. Thank you.

Great. Thanks, Shlomo.

Our next question comes from the line of Ato Garrett from Deutsche Bank.

Just a couple questions about your guidance. I wanted to see what your thoughts were, your expectations from mortgages in your revise guidance, one. And two if you could provide any details on just your expectations by segment. And finally, if you can update us on your expectations for your tax rate for the year? Thanks.

Sure. Let me take the first one expectation for tax rate its going to be on adjusted tax rate of approximately 37%, pretty much where we came in for this year. As it relates to segment growth, we don't give guidance per se per segment. But I'll give you like mid-longer term. As we look at this, it hasn't deviated from the last time we talked about on the call, a little bit of a tweak, USIS growth we still expect to be high single digits, medium to longer term and what you have is continued outsize growth in healthcare, insurance, and government, growing at lower double-digits and the core vertical is growing at mid-single digits driven by new growth and a stable market. As it relates to mortgager, specifically, and we talked about this, the mortgage on a percent of revenue basis has not been a big driver of our growth over the last several quarters. No more than say 1%, even though rates are low. And that really hasn't changed this quarter. As we assume, and the way we look forward on that, is we assume that mortgage volumes are going to be deep stable. We're not hoping or banking on a big year-over-year increase. Also remember second half of 2015 mortgage volumes were stronger relatively speaking, so as you moved into the second half of '16, we're not banking on any big increases from account standpoint.

So that’s USIS. Within international, we talked about strong growth we saw this quarter close to 20% on a constant currency basis, which was a great mix of both emerging and developed. We expect internationals to continue to grow in the doubled-digit range and we expected to be a good mix to of developed in emerging. Developed is the biggest driver's Jim talked about, new product growth and taking share, and then emerging just the macro environment within those markets with continued credit penetration, driving a lot of that growth, coupled with new products or products we have in US manifesting away to the P&Ls in the international markets. That all complement it with some of the key acquisitions we made over the last couple years with India and CIFIN, we expect that growth to remain sustainable and healthy. Finally, interactive, we expect interactive to be mid-to high single digits. And with the movement of our direct consumer revenues into interactive, that's traditionally and historically been a lower grower business relative to the consumer interactive. So we think that’s again mid-to high sickle digits as we move forward.

Great. Thank you.

Our next question comes from the line of Bill Warmington from Wells Fargo.

Good afternoon, everyone. And congratulations on very strong quarter.

Great. Thank you.

So a question for you on trended data. I was hoping you could talk a little bit about what kind of lift, clients are seeing from the use of trended data versus traditional credit data? And then also if you could talk about what kind of assumptions you have built-in from trended data into guidance and how big you think that opportunity could potentially be?

Yes. So - the lift I get varies, hope for me to try and give you an exact number, I don't think that would be factual. But I will tell you it’s meaningful. And the kinds of things it does is it helps them - someone for example is in the prime area, they are likely to get put in the super prime area based on trended data. If some been in sub prime they're likely to get put into prime because of the ability to go back in time and see how they've been performing overtime. So that is extremely valuable not only to our B2B customers, but also to the consumers. So the lift is meaningful. Part of the reason its hasn’t been integrate into our customers so quickly as we might want to think and we might've even thought is because its profoundly changed the way that their kind of policies were being enacted upon. So they had to absorb it and test it to make sure it was really working the way that it seemed to be testing. So we're still in the middle of a lot of testing, even though we had another quarter of triple digit growth. In CreditVision as you know, Fannie Mae has mandated, hopefully starting midyear, the use of trended data for all mortgage pulls. And you know, so that was an important, a nice big deal for us, as far as the size of it. What was more important is its setting trended data as a standard for the industry. And we've been the first in. So we're already getting a lot of penetration. We've already worked with literally thousands of customers and getting them onboard, so all different sizes of customers are using it. And as explained before were using in Canada, in Hong Kong and our other countries. As they get used to the idea of using trended data. As far as our guidance, I would say we haven't over light in any way on the Fannie deal. So if things were to happen there, some delays or whatever because others could not be ready in time or whatever, I wouldn't worry about that. But we are counting on continued triple digit growth in that. And that will obviously pay dividends of going forward.

Okay. You referenced obliquely the Experian buying CSI identity and potential implications for LifeLock. Would you quantify that for us some, you mentioned that was formally incorporated in your guidance. I just wanted understand how better model that?

Yes. So we don't normally like to talk about different things that we don't know when they're going to close, and if there going to close, what they're going to do. But we can say that we have a portfolio of partners in this space that give us a lot of diversity. And so this particular, I guess thing that you're talking about would have about a 1% revenue per quarter on our business. And it's frankly very low margin for us. So we don't know when it's going to close. We wanted to make sure we understand the guidance we've given fully reflect any anticipated impact on us and frankly we're not worried about it.

Okay. One then last question on this. The technical investments on the – sorry, technology investments, the increase from $8.4 million up to $12 million, how should we think about modeling that going forward? Is $12 million the way to do it quarter, or is that early front-end loaded and we should be doing something lower?

Yes. The way we're delayed, it's under technology transformation. We treated as an adjustment today. The reason why we treated it as an adjustment today is we expect to be complete with our project by June 30, 2016, and we are tracking to that. What we would say is assume after June 30 assume after June 30, 2016, there's no longer an adjustment and it's going to make its way into our normal results. The benefits of that, you're seeing coming through in margins, EBITDA margins, so we feel good about that completion of that is adjustment of always subsequent to Q2, and three we're getting the EBIDTA lift that we got and Jim talked about many generating revenue generating ideas because we're much more faster in our general markets as it relates to that.

Got it. Thank you very much for the insight.

Great. Thank you.

Our next question comes from the line of George Mihalos from Cowen.

Hi. This is Alex calling in for George Mihalos. Congratulations on the quarter. Just one follow-up question on that trended data with Fannie Mae. Did you have any updates on how you're going to be pricing that solution? And do think that the rest of the mortgage market might follow in order with that in terms of adopting trended data?

Well, because it is required every time you pull mortgage, they are going to have to. So the question regarding pricing is a little more complicated than saying what is your pricing. CreditVision, in many cases, I think the gain here is to include increased volume. Okay. And so we're using it in a way that to increase share to expand the market, we need to do more transactions. And certainly in some cases, we use it in leveraging the price premium. And so there is definitely upside that will come from the Fannie Mae requirement for using trended data.

Great. Thanks.

Okay. Thank you.

Your next question comes from the line of Manav Patnaik from Barclays.

Hi. Good evening, gentlemen. So the first question I just wanted to ask, I guess little differently from Gary's question up ahead, which is I guess the nature of the beat this quarter, like what other - the contracts are more one time in nature? Or do they have long-lasting revenue streams for the rest of the quarter and maybe even years? Just trying to understand again to this point that you guys beat pretty nicely and I think the guidance is raised roughly around the lines of this beat, it sounds like the rest of it could have similar beat that these contracts aren’t just one time in nature?

Yes. So there is not a bunch of one time in nature contracts that drove this. It is not one big batch contract or one-time sale of anything. So these are typically long-term contracts as we've always have them. And there's nothing you'll see blip there. And just if you know, if you look at the segment revenue growth, USIS of 13% and international close to 20% and interactive 20 plus, its also portfolio growth.

Okay. But I guess the point is, like I mean, the momentum that you have this quarter, I mean, is there a reason to think its going to continue into the next two?

Yes, I would say that we're are seeing in the business is, I'm just repeating myself, but it's driven by good demand, good uptake in our drivers and innovation and our growth drivers in vertical that maybe we typically haven't gone again like healthcare, insurance, rental, and that geography. Now we are lapping the three significant comparables going back a quarters now. So we have to add into account as well…

Okay…

But I guess I'll repeat myself. There's no - I know you are talking about, there is not like some one-time profits in the year that you can anticipate going away.

Okay. Fair enough. And then just to follow-up on this into the trended data contract as well. I mean, is it a right to think of the opportunity as, whatever your more garage revenue is today, like I guess the majority of that revenue gets a price uplift and then down the road as trended data [indiscernible] is that the right formula without giving us any numbers?

Yes. I think, there's a little background noise, so I didn't quite catch the middle of your question. I think I'll try and answer it. I think there's just going to be a slow and steady increase with the use of this data. It is not replacing the use of other data pulls. Okay. So it is not like one thing is replacing another. It's in addition to what's already being done. So we shouldn't view it as, at least at this point, it's cannibalization, something changes. So I think it's just going to be a steady increase in use in mortgage and capital more quickly and that's going to continue to spread like its already doing through auto and other forms of credit.

Okay. All right. Fair enough. Thanks a lot of guys. Congrats on the quarter again.

Thank you. Thank you, Manav.

Our next question comes from the line of David Togut from Evercore ISI.

Hi. This is Anthony Cyganovich for David. I was hoping you can comment on the overall health of consume credit in the US and you're thoughts specifically on credit cards and auto?

Yes. So as far as the kind of overall on US, we continue to see like we did last quarter, some strong engagement from consumer and strong interaction between consumers and our business customers. So we are really not seeing any slowdown. And we're really not anticipating that. And with regards to auto, specifically, again, I'm telling, we can't predict everything. We can't predict the future. But nothing that we're seeing right now tells us that that is imminent, that there is a slowdown that is imminent.

Great. Thanks. And just a follow-up. Al could you call out what the organic constant currency revenue growth rates were for each segments sorry, if I missed that?

Yes. And first of all, at the top line organic growth was 17%. So just on a consolidated, we only got one point or one percentage of growth in the quarter related to M&A, but very briefly, USIS organic growth was the same as UST. We had to M&A activity. 13, and 13 international, international organic growth was 17%. You've got 5 basis points attributable to M&A principally to be sustained or acquisition in Colombia. And then obviously consumer interactive, no impact from acquisitions, organic growth was 25 % a total growth was 25%.

Great. Thank you.

Your next question comes from the line of Tim McHugh from William Blair & Company.

Yes. Thanks. Most of my questions have been asked. But a few quick ones maybe, on the Fannie Mae contract, you kind of alluded to it sounded like some risk that it may not necessarily happen in mid June. Is that’s just you trying to be careful? Or is there something you picking up in terms of?

No. I would say it’s the former. You never know, right, dealing with complex and many big organization and many businesses that have to react to this. We are fully prepared. The are ready to go, we've been ready to go. We are already converting customers now we're using it anyway. Though there is no signal I am trying to send other than if anything were to happen, the impact to us is - it won't be profound or anything. And the real point is that they have sent a very strong message by saying this is required because of the positive impact it will have on consumers. And that's of course what we want, and that's what our business customers want. They want to do the right thing and they want to do the best we can to help consumers get the credit they deserve.

Can you quantify at all or I guess I give even qualitative give us a sense how much has adoption happen, you mentioned some are moving ahead with it, some clients aren’t there yet. How much of the benefit have you seen from people already moving forward versus how many people are waiting until right around the June period?

That’s a good question. I can't say compared to June what that is. I'll repeat that we have grown that business triple digits again, but I would state that we're still in the early innings of adoption. Because its kind of a massive, massive shift in a massive undertaking not only in mortgage, but it also plays an auto and the other areas, HELOC, et cetera, where credit is used in a big way. So Fannie is helping I think lead the way in mortgage with us, frankly. But it's also being implemented in card everywhere else. But I like it because we are still in the early innings, so it’s going to be strong growth story for some time. On top of that, we're adding CreditVision Link which is an alternative data. So we're already at the next thing right behind it for the early adopters. On top of that, we - this Prama thing which no one has asked about, it is really a meaningful new platform that gives our customers, our business customers the ability to basically access all data on an anonymized basis. So we provide the horsepower through our new spark platform, we call it, and our new shape platform, we call it. And then it allows them to actually visualize and evaluate their own portfolio against the world or the US. And then they can pick attributes out of that and say what if I change them, they can test them, they can actually build their models if they choose to in this environment. And they can go ahead and put them right into play in their decisioning. So we've integrated this across-the-board. And in the future it's going to contain fraud. Our digital marketing products. So it's really a big deal. I can tell you that for a fairly large players are already testing that. So they are testing it in their world, not somehow are using it and building reports for them. They are actually testing it. And we have a significant number of smaller players that are also testing it. So I think anywhere we walk into with this platform, there's no one thing we're not interested. And so I think it's a very long-winded answer to your question. But I think CreditVision some ways is the tip of the spear on a lot of the new things that we are putting into place.

That's helpful. Thanks.

Thank you.

Our next question comes from the line of [indiscernible] from JPMorgan.

Hi. Good evening. Thank you for taking my questions. I just wanted ask a question about Project Spark since we are coming to a close in the middle of the year. I recall at the time of the IPO, the company spoke about uncovering close to $50 million of annual outback savings from the transformation. So I just wanted to get a sense of where we stand in that $50 million has it ended up being more or less than that? And what percentage of the $50 million as already been uncovered versus what we'll see perhaps in the next quarter or so? Thank you.

Good question. Thank you. So I don't think we ever set us particular number. I think we said tens and tens of tens of millions. So your interpretation might be merely correct. And we have already received the benefit of most of those dollars. As we implemented, as you can imagine, we are into most intimate, so we only have a couple months of real work to do to complete this. So we've already seen most of the benefit. What's happening now is the savings is kind of into our performance. And we are shifting a lot of the resources. The magic year was that we would reduce costs within the money we're spending both in terms of capital and outback's is shifting from what it used to be maintenance, and now with building Spark, now we have even more resources to put on building new sets of innovative solutions. And they are building it on top of the platform that you can innovate and build very quickly, so graphical programming and things like that. And so they financial benefit itself for cost I think it’s mostly been realized, I would say. Is that right Al?

Yes. I think that's what's driving - a big chunk of that is what's driving the 37% EBIDTA margin that we provided.

Exactly. But the real benefit is going to be in this kind of innovative company we become that will continue to pursue organic growth initiatives and get these things into market I think quicker than most can.

Got it. maybe just one other very fast question. Was there any M&A contribution from Trustev [ph] in the quarter?

That would be small to minimus.

Got it. Okay. Well, thank you guys.

Thank you.

Thank you. And we have time for one last question, please.

Our last question comes from the line of Andre Benjamin from Goldman Sachs.

Thank you for taking my question and squeezing me in here. I guess on the consumer channel, the businesses continue to grow faster than long-term growth rate than most people expected as we been talking about for most of the call. Could you may be help frame for us how to think about the long-term opportunity both for you and your competitors can't say, over five years to 10 years revenue wise what we should be thinking about here?

Yes. So maybe Al and I'll both take a swing at this. My view is that at least I don't know if I can predict anything five years to 10 years out, but I will say that from what we see in the business today, that we will continue to see good growth from both the direct channel and the indirect channel. And that comes because consumers are interested in continue to be interested in all the kinds of information that affect abilities to get goods and services. There also interested protecting themselves from fraud, which is the space we plan to. In which we have an opportunity to grow. And so to our partners, were trying to tap in to the folks here in the US. I presume you're talking about the US market primarily. Now we are lapping some pretty significant comparables. So you can imagine maintaining this pace of growth will get more and more challenging.

Yes. I think that's right.

By the way they look more challenging.

Yes, I think that’s right.

By the way to look at it.

And as we look out and as we said look at the medium to long-term outlook of it, we do think it's mid-to high single digit grower on a more steady-state basis. I think also moving direct-to-consumer in that business, which has traditionally been a lower growth business, we'll further keep us at those types of growth rates.

Great. And thank you, Andre. Thanks to everyone for your participation in today's call. If you have any further questions, please feel free to call 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 later today. I will now turn it back to the operator to conclude the call please.

This concludes today's conference call. You may now disconnect.+