Good day and welcome to the TransUnion Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note today’s event is being recorded. I would now like to turn the conference over to Aaron Hoffman. Please go ahead, sir.

Good morning everyone and thank you for joining us today. I’m joined by Jim Peck, President and Chief Executive Officer; and Todd Cello, Executive Vice President and Chief Financial Officer. We've posted our earnings release and slides to accompany this call on the TransUnion Investor Relations Web site. Our earnings release includes schedules which contain more detailed information about revenue, operating expenses and other items, including certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are also included in these schedules. As a reminder, today's call will be recorded and a replay will be available on the TransUnion Web site. We will also be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements because of factors discussed in today's earnings release, in the comments made during this conference call and in our most recent Form 10-K, Form 10-Q and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statements. With that out of the way, I’m happy to turn the time over to Jim.

Thanks, Aaron. Continuing the trends we saw in the first quarter and over the past several years, TransUnion delivered another strong quarter. Our teams continue to execute against our strategies and deliver growth well above the underlying markets in which we operate. Once again, revenue, adjusted EBITDA and adjusted EPS grew double digits for the total company. We also had a strong performance across our segments with double-digit revenue and adjusted operating income growth in all three. We continue to see a majority of our growth coming from innovation across all markets, our new vertical markets like healthcare and insurance and fast growing emerging markets like India and Colombia. Our second quarter performance reflects our strong business model that broadly leverages data assets and capabilities across our organization to help us realize this industry-leading revenue growth with good incremental margins. While this approach certainly contributes to our financial performance, it has also created a more sustainable diversified growth profile that we believe can deliver relative outperformance through cycles. Our formula of selecting attractive verticals and geographical markets and layering world-class innovation and capabilities on top of them continues to drive our performance. We have been very deliberate in the construction of our portfolio. In my comments today, I will talk to you about how these decisions have formed the backbone of our growth engine. During the quarter, we closed on the acquisitions of Callcredit, iovation and Healthcare Payment Specialists. Each of these helps to further diversify our portfolio while entering very attractive new markets. I’ll spend a few minutes discussing how to add fuel for our continued long-term growth. Let me start with a short review of the four key strategies that we are executing against and provide you with some examples around each. The first strategy is driving growth…

Thanks, Jim. As Jim mentioned, we had a strong second quarter. For the sake of simplicity, all of the comparisons I discuss today will be against the second quarter of 2017 unless noted otherwise. Second quarter consolidated revenue increased 19% on an as reported and constant currency basis with strong performance across all three segments that I’ll detail in a moment. Revenue from acquisitions contributed approximately 5 points of growth in the quarter. This was related to Datalink Services, eBureau and FactorTrust which closed in 2017. It also includes HPS and Callcredit which closed in June, so we recognize the revenue associated with those businesses from the close date. iovation closed on the last day of the quarter and thus had no financial impact. We also realized about 1 point of growth, roughly $5 million from incremental credit monitoring business from a competitor. So our underlying business grew 12% in the quarter. Adjusted EBITDA increased 19% on an as reported and constant currency basis. Adjusted diluted EPS increased 34%.The adjusted effective tax rate for the second quarter was 28.1% in line with our expectation for the full year. The lower tax rate accounted for 16 points of our EPS growth in the quarter, meaning that adjusted EPS without the benefits of the lower rate would have still been up 18%. Let’s spend a minute discussing some of the key income statement items. Cost to services increased 25% as a result of higher data costs associated with our revenue growth, investments in strategic initiatives and the operating costs related to the acquisitions I mentioned. SG&A increased 15% for many of the same reasons I mentioned in cost to services and also including incremental marketing in Consumer Interactive. Over the past few quarters, we’ve talked to you about the short-term impact of…

Thanks, Todd. Built on a very strong first half, I think we’ve laid out a compelling case not only for further industry leading performance for the remainder of the year but also for the long term. We’ve built a truly powerful growth engine on the back of cutting-edge technology, unique data assets and excellent capital allocation decisions. The six acquisitions we’ve closed over the past year, including the two largest in our history, provide yet another infusion of fuel for our growth and at the same time they create further portfolio diversification which gives us increased confidence in our ability to deliver relative outperformance through cycles. As I look at the near-term and long-term prospects for TransUnion, I’ve never been more enthusiastic or confident. As much as we’ve had a very good first three years as a public company, I firmly believe that the best is yet to come. With that, I’ll turn the time back to Aaron.

Thanks, Jim. That concludes our prepared remarks. For the Q&A, we ask that you each ask only one question so that we can include more participants. Now we’ll be glad to take those questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Today’s first question comes from Manav Patnaik of Barclays. Please go ahead.

Thank you. Good morning, gentlemen. My question is maybe just taking a step back in terms of the pace of acquisitions you’ve done this year and as you mentioned the two biggest ones, can you talk about whether the cutting-edge technology, the tech replatforming that you mentioned, does that give – like what in that has helped you get comfortable integrating so many deals at once, the big ones? And maybe also as a side note just talk about management capacity to handle all this together?

Sure. So as we ended last year with FactorTrust and eBureau, the three acquisitions we made this year were clearly on our radar. And the big questions we had to ask ourselves was, did we have the management capacity to do them? Did they fit our strategy? And did we have the financial capacity? I don’t think we felt they were all going to happen as quickly as they did, but they did and we feel very comfortable with our management capacity. They’re all kind of in different areas. And FactorTrust and eBureau we kind of have under our belt. There’s more integration going on but we knew those companies very well. So we’re unequally good on that front. From a technology standpoint, these all just kind of fit in, Manav. It’s not rocket science, so it’s pretty straightforward. And going forward I think we’re going to obviously get these – the buffet table’s kind of full and we’re going to kind of get these integrated but they’re all right in our wheelhouse. We’re not trying to figure them out. We know exactly what to do and it just gives us great confidence. They’re in great markets. They’re already performing. We’re going to just make them stronger, take out costs and do our thing.

Today’s next question comes from Andrew Steinerman of JPMorgan. Please go ahead.

Hi, it’s Andrew. Jim, you were good enough to mention the growth rate of CreditVision and CreditVision Link on Slide 4. Thanks for sharing those growth rates. Could you give us a sense of size for those products? And in particular I’m interested in understanding the penetration on the trended credit side. How much of that has penetrated outside of mortgage and is this a marketplace that is rapidly adopting trended credit data outside of mortgage?

Andrew, we don’t really give and have not given you the size of these things, but we – obviously they are big. And we told you before we’re getting substantial growth outside of mortgage which is reflected in kind of the outsized growth we continue to have. And we’ve lapped mortgage now by – somebody remind me?

August of 2017 was when that lapped.

Right. So we’re about to see that – we’ve already lapped it almost two years now, so we’re obviously getting growth well outside of mortgage. This use of trended data remains – we’ve penetrated I would say certain, like the FinTech space obviously mortgage. We’ve gone into other areas outside of the mortgage itself. But with our biggest clients which can take a longer time to absorb these kinds of meaningful data changes, we have all that in front of us with this product. And we’ve also seen a meaningful pickup in the insurance space which we really hadn’t quite seen before and that’s CreditVision and CreditVision Link. So I would say there’s a lot of runway ahead. And then internationally kind of the same story, maybe just a year behind in a way because other than Canada because it takes time to digest these things. And I’ll mention from a Callcredit standpoint, we keep emphasizing this, we’re excited about it. We believe the UK market is kind of aching for this kind of solution. We’re already in the midst of implementing it. We’re laying the groundwork to implement it with Callcredit so it’s in market next year. So we still see a lot of runway not only in the U.S., not only in financial services but outside of financial services and then internationally.

Jim, thank you.

Thank you.

Our next question today comes from Tim McHugh of William Blair. Please go ahead.

Thanks. Just following up on some of your last comments there, can you talk about the pace of growth in Callcredit as you folded on the hood as well as what businesses did you decide weren’t a good fit I guess both initially and then the business you recently changed and added to that group?

Yes, so what we’ve stated is that the market in this area is growing around 11% and we believe Callcredit is going to outgrow that. I don’t think we’ve given specific guidance quite yet other than double-digit growth and we feel pretty good about that. And obviously we’ll layer on our or the TransUnion kind of core stuff around CreditVision, CreditView, et cetera. Regarding the companies that will be divested, look, they’re all good companies. We just think they’re going to be better in the hands of some companies that’s more core to their strategies. And obviously we think our business will perform better both strategically and financially growth without these businesses. We’re not right now able to tell you which ones they exactly are but that will be coming. This was all well thought out before we did the transaction. I do want to point out. So this is kind of just following our playbook now. And I think the people who work in those companies are also going to be happier because they’re going to be owned by or working with people who – that’s what they do. It’s core to their business.

Our next question today comes from Jeff Meuler of Baird. Please go ahead.

Thanks. I guess first, can you just verify what exactly the adjusted EPS methodology is? And I guess I’m specifically wondering are you continuing to include acquisition integration expense for the acquisitions other than Callcredit, including like iovation in the numbers? And if so, is the 2018 guidance impact from the acquisitions accretive, neutral or dilutive once you factor in acquisition integration expense that’s not adjusted out and increased interest expense? And if you’ll allow me a second since that one was kind of dry, Jim, could you just hit on the fraud suite go to market. I’m just kind of wondering how the different products and capabilities are incorporated, like how many different products are you selling as part of the suite? Thank you.

Where do you want to start? Let’s start I guess with the dry one --

We’ll start with the dry one, Jeff. This is Todd. So great question and I think it’s important to clarify what we are doing with M&A integration expense. As you will recall going back to our IPO, we stopped adding back M&A integration expense as a one time. So that’s why we’ve prepared the slide that we did today to show the impact that the recent M&A has had on our adjusted EBITDA margins. That being said, because of the size of the Callcredit acquisition we just think it’s the right thing to do to add it back because the integration expense is going to be significant and meaningful. So I think just from a sake of being transparent with our investors and shareholders, we think it’s the right thing to do to give everyone that visibility as to what we will be spending on integration. So Callcredit is the only one that will be added back for integration purposes. The other acquisitions that we made of HPS and iovation will not be added back. As it pertains to the accretion of the acquisitions, our updated guidance does assume that all three of these acquisitions are accretive on an adjusted diluted EPS basis.

So our fraud products include – we’ve bundled them under something called IDVision and I think it starts with what would be traditional identify verification, kind of doing out-of-wallet solutions. We’re able to bundle in digital verification. Especially with iovation now we’re able to look at devices which I think is the trend in where people or companies are moving. Further doing ID document identification and some with selfie or face recognition and authentication. Something very cool we have called the fraud prevention exchange. We’ve created a network of transaction histories and it kind of allows if a fraudster is trying to open multiple accounts all at once and doing loan stacking and things like that, we’re able to help our customers. First it was in FinTech and now it’s actually spreading out into all the banks to detect this kind of behavior. And so we’ve kind of bundle them all under one solution and we can sell them separately as well. I think if you got into it, you’d see that some of the bigger banks kind of do their own thing and they want point solution, some don’t. Some want the full solution. And then as you go down to midmarket and smaller, they want a turnkey solution. And so we’ve got all those things. And iovation is one of the few device ID companies that are out there that have any kind of bulk. And with that – I think it’s something like 500 billion devices and the data associated with them, it really fit into that kind of hole in our offering very, very nicely, growing very, very nicely on its own. And now we’re going to be able to sell that important part of identity verification into our customer base.

Thank you.

Today’s next question comes from David Ridley Lane of Bank of America Merrill Lynch. Please go ahead.

Good morning. I appreciate the details on the trends that you’re seeing in healthcare and insurance. Could you provide some additional commentary on revenue trends and some of your other end markets like mortgage, auto lending and credit cards? Thanks.

Yes, so for 2018 – I think you’re asking me what we’re seeing in the market let’s say for the rest of this year. Personal finance and FinTech are going to remain strong. Auto lending is strong mostly by positive trends in used cars. We continue to expect mortgage to be flat to down. The kind of dynamic that’s happening there, the refis are obviously declining but there is some new growth in new home sales. The credit card market is probably going to remain a little soft going forward. Internationally, good trends in India and Colombia. We’ve already talked about the UK. These are bigger markets growing double digits. So we pretty much see strong growth all the way around there.

Thank you very much.

Our next question today comes from Toni Kaplan of Morgan Stanley. Please go ahead.

Hi. Good morning. I was hoping you could give us just an update on the competitive environment specifically in USIS? So online data was very strong this quarter again organically but a slight deceleration from last year and so just want to know if you’re seeing any tougher competition from your largest competitors as time goes by since the breach? Thanks.

So I’ll maybe let Todd comment on any specific thing, but generally speaking if anything what I’ve seen change is that some of the commentary or the questions I get are, are competitors positioning relative to TransUnion so they’re almost telling the story relative to the TransUnion story, whether it’s we’re going to replatform now or we’re going to have something like Prama in the market. And so there’s definitely kind of an acknowledgement of what we’ve become, what TransUnion has become as a leader in innovation, leader in growth all while kind of maintaining or growing our margins. That’s probably the biggest thing that we’ve seen. As far as any specific negative relative to our ability to grow the business, no. We’ve always competed in a very – I guess I’d back up and say there are only three players if we’re talking about U.S. that have the kind of data we have in this market. And we’ve all gone in different directions while we’re strong. I think we all have the same kind of core mostly. So it’s not a zero-sum game in my view. However, we’ve through innovation been able to really take some significant positions in the FinTech space. We’ve been able to hold our own and grow in the largest customer base. CreditView has been an extremely strong grower and we think we have great competitive positioning there. Our fraud products continue to grow. We think we have great competitive positioning there. The acquisition of TLO gave us a nice footprint in kind of third and first party collections and we continue to grow in our other investigative tools. I do think that the fact that we have our technology replatforming behind us largely is something you’re always doing because you have to kind of…

Thank you.

Our next question today comes from George Mihalos of Cowen. Please go ahead.

Good morning, guys. Congrats on the strength again this quarter. Jim, you’ve highlighted strength in FinTech and it’s been a very consistent theme for TransUnion. Just wondering if at a high level if maybe you can sort of ballpark growth rates or revenue contribution coming from that segment? And then where sort of the big geographic opportunities outside the U.S. are in servicing FinTech?

Yes, I don’t think we want to get into how big it is in the growth rate. Obviously then it’s meaningful and it’s double digit. So that said, we are seeing like in many of our markets we’re seeing other markets starting to embrace this FinTech model; Canada, the UK, India, virtually all the markets but I would say those are the three most prominent. And just like in our other businesses we’re taking CreditVision into those markets. Obviously we’re also taking CreditView into those markets which is another way – especially FinTech but now even the banks want to engage with their clients. So we’re well positioned we feel. Plus something we don’t I guess talk all that much about just the ability to support the FinTech in a way they need to be supported is something we embrace early. So helping them more or less set up what they need and to underwrite their customers in their way with their secret sauce is something that we’ve learned to do. And so we’re just applying that in these other markets. And we continue to build capabilities to allow our current clients in these markets to perform much better, whether it’s the fraud exchange or CreditVision Link or integrating FactorTrust data or the iovation data into our suite of products.

Thank you.

Today’s next question comes from Andrew Jeffrey of SunTrust. Please go ahead.

Hi. Good morning. I appreciate you taking the question. The performance in insurance was particularly impressive this quarter and I think you touched on some of the drivers, Jim. But I’m wondering if you could elaborate a little bit on whether you think – and I’m thinking about auto in particular, whether much of your growth in coming from greenfield around trended data solutions of if there’s some share shift that’s taking place broadly in insurance and maybe in auto in particular?

Yes, so our growth has definitely come from auto underwriting and we think the underlying trends are just more transactions happening there. I don’t think it’s fair to say that there’s been significant share shift. I think if you look at our new solutions, they’ve now been in the market for a while but DHI or drivers history combined with the new capability we have around MVRs that’s actually driving a good amount of our growth as well. So I think we’re holding our own with all our major clients and growing within them. We have gotten some new business for sure. But I wouldn’t associate it with any kind of major share shift. And I would say that the trended data portion of this is just beginning, so we have that to look forward to. We don’t think it was interesting. The models really weren’t proving big lift a few years ago, but as we’ve matured we’re starting to show more lift which is getting the attention of our clients in the insurance space.

Thank you.

Due to time constraints the final question comes from Bill Warmington of Wells Fargo. Please go ahead.

Under the wire. Thank you very much. So a couple quick ones then. I wanted to ask for some more color around the two healthcare customers that Todd mentioned that created that temporary revenue slowdown and your confidence on reaccelerating in 2019? And then if I can slip it in as a housekeeping one, just the mix of the fix versus floating on the new capital structure as it is going forward.

Sure. We obviously can’t comment on exact customers but these were customers in the frontend of our business that they had some issues with their own business which affected us in the short run. We chose our words carefully when talking about the business getting back to high-single, low-double digits because I think our guidance reflects high single digits but depending on the timing of some newer business, we could be right back at double digits in the third or fourth quarter. Either way we feel really good about the business heading into 2019 with the new deals we’ve closed and not to mention the acquisition itself. But the backend of the business is especially strong, so we feel good about double-digit growth going forward.

Hi, Bill. As it pertains to the debt, your second question, all of our debt is floating rate both on the Term Loan A and the Term Loan B. We do have a hedge in place that will get us to about 35% of the total amount that we can then consider to be fixed. And as you can imagine with the increase in the debt, working on a hedge program going forward is something that we’re focused on.

Thank you very much for the insight.

All right. Thank you very everyone for your time today. We appreciate that very much. And we’ll look forward to speaking with you next quarter and certainly over the course of this quarter. Have a great day.

Thank you, sir. Today’s conference has now concluded. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.