Good morning, and welcome to the TransUnion Third 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 Mr. Aaron Hoffman. Please go ahead.

Good morning, everyone and thank you for joining us today. On the call today we have Jim Peck, President and Chief Executive Officer; and Todd Cello, Executive Vice President and Chief Financial Officer, as well as Chris Cartwright, the President of our U.S. IS Segment. Chris is joining us to provide some additional color on the acquisition of iovation. We've posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website. 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 their most directly comparable GAAP measures are also included in these schedules. Today's call will be recorded, and a replay will be available on our website. We will also be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements because of factors discussed in today's earnings release, in the comments made during this conference call and in our most recent Form 10-K, Form 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 out of the way, let me now turn the time over to Jim.

Thanks, Aaron. We're pleased to report another strong quarter, continuing the trends we've seen since our IPO of more than three years ago. Driven by strong execution, leading innovation, growing vertical markets and an attractive global footprint, we again delivered growth well above our underlying markets. Adjusted revenue, adjusted EBITDA and adjusted EPS grew double-digits for the total company. We also had strong performance across our segments with double-digit constant currency organic adjusted revenue and adjusted operating income growth in all three. Even as we delivered this broad-based growth, one of the questions we feel regularly about our growth is how much is coming for market share gain. Over the past four or five years, we've gained share across our global footprint through industry leading innovation and capabilities built on a modern differentiated technology platform. That trend continues as we recently launched significant business from one of our competitors in a number of verticals including financial services and government. We expect these new contracts and the associated incremental share to contribute among other things to another strong year in 2019. Switching gears, a bit, I want to make an important point about our strategic business model. We continue to uniquely benefit from the diversification of our portfolio and I stress the word portfolio here. My model is predicated on a wide array of growth opportunities. This means we don't have an over alliance on any single product, market vertical. For example, if you think back to 2015 and early 2016 when our consumer interactive segment is growing revenue in the mid-teens to mid-20s. Our consumer direct business slowed and we saw a more fully scaled key indirect partner decelerate. But our TransUnion's growth rate has remained strong in spite of this. Similarly, we told you last year that our business…

Thanks, Jim. It’s a pleasure to be on the call this morning and share more details about this great acquisition for TransUnion. Before I jump into the iovation story, it's important to set the market context of why this acquisition is so valuable to our customers. With the enormous growth in online channels in recent years, fraudsters have become more sophisticated and aggressive and our customers are facing a new set of challenges. First, we've reached the point where the vast majority of transactions are now digital, with mobile device transactions in the majority. This digital migration has supplanted in-person transactions which were much easier to authenticate and much harder for fraudsters to perpetrate that scale. Second, with more than 1500 reported data breaches in the U.S. alone there is a considerable amount of personal information available to fraudsters, making it easier for them to answer challenged questions about identity or even to build synthetic identity. And third, as the need for more sophisticated intelligent fraud protection has increased so to have consumer expectations for fast frictionless online experiences. So, this is clearly a challenging landscape for our clients and they need additional tools to protect themselves and their customers and that’s what’s driving significant growth for products that reduce fraud risk and friction. As a result, the global fraud month and occasion [ph] market is growing double-digits in a row and by more than 20% per year in the U.S., the UK and many other large markets. So, it’s with this market context, slide six provides an overview of the fraud prevention assets that TU has assembled with the acquisition of iovation. So, next slide shows the personal identity and reputational information that TransUnion utilizes within its IDVision suite of products. In simple terms, you can think of IDVision…

Thanks, Chris. That's outstanding. I think iovation on our expanded fraud and ID capabilities represent a new growth avenue in a very fast-growing market. I'll turn now to our second strategy expanding an attractive vertical and geographic markets. I want to spend a few more minutes on our healthcare vertical. A detail of the basics of the business on our call last quarter, so I want to do that again here. Rather like I did with CreditVision, I want to argue my perspective on where we see the vertical going. As I mentioned earlier, we have seen the slowdown largely as a result of some customer issues on the front end of the business. I'll stress again that these are not related to our service product quality or value in the marketplace. In the second quarter, we saw partial impact on these issues as they cropped up. In the third quarter, the impact [indiscernible] leading to flat organic revenue performance for the vertical. Frankly, that was a little worse than we had expected. As such, we now expect to return to growth in the fourth quarter and mid-single digit organic growth for the full year. In no way this does change our view of the industry for our business. We continue to have high levels of conviction and a long-term strength of the revenue cycle management market. Fundamentally, we are helping our customers to better manage increased margin pressures in rising and compensated care costs. We are confident that we have the right suite of products will drive increase revenue plus recovery and to win more business overtime particularly on the back end of the revenue cycle management going forward. Our optimism is based on the attractiveness of the underlying market and our already best-in-class capabilities combined with the recent…

Thanks, Jim. As Jim mentioned, we had a strong third quarter. For the sake of simplicity, all of the comparisons I discussed today will be against the third quarter of 2017 unless noted otherwise. I will also point out that the share size of our recent acquisitions creates some unusual comparisons on an as reported basis. In our press release today and in slide deck, as well as my commentary, we’ll bridge through the impact and help you fully understand the underlying business trends. Let’s start. Third quarter consolidated adjusted revenue increased 25% on as reported basis and 26% in constant currency with strong performance across all three segments that I’ll detail in a moment. Adjusted revenue from acquisitions contributed approximately 15 points of growth in the quarter. This was related to Datalink services, eBureau and FactorTrust, which all closed in 2017. It also includes iovation, HPS and Callcredit. Organic constant currency adjusted revenue growth was 11% in the quarter, we also realized about one point of growth roughly $5 million from incremental credit monitoring business from a competitor. Adjusted EBITDA increased 26% on a as reported basis and 28% in constant currency. Adjusted diluted EPS increased 33%, the adjusted effective tax rate for the third quarter was 26% which brings our year-to-date adjusted rate to 27.4%. We now expect to deliver a full year 2018 rate of about 27.5%. We’re benefiting from some successful tax planning that is being partially offset by our strong growth in high tax international jurisdictions like India. Let’s spend a minute discussing some of the key income statement items. Cost to services increased 23% as a result of higher operating and integration costs related to our recent acquisitions. Investments and strategic initiatives and higher data cost associated with our revenue growth. SG&A increased 34%…

Thanks, Todd. Let me end where I began on the strength of our diversified portfolio, very attractive businesses and assets we continue to deliver outstanding above market performance. We have the ability to whether isolated slowdowns in the portfolio and keep up our growth trajectory. At the same time, we continue to make moves, whether organic or through M&A to further enhance our portfolio and position TransUnion even better for long-term growth. We talk about that this morning with CreditVision, iovation, Callcredit, International CreditView opportunities and our ongoing technology leadership. Every confidence that we set ourselves up for a strong conclusion 2018 and we are in great shape heading into 2019. With that, I'll turn the time back to Aaron.

Great. 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.

We will now begin the question-and-answer session. [Operator Instructions] First question comes from Timothy McHugh with William Blair. Please go ahead.

Thank you. First, just wanted to ask about healthcare business, I guess can you elaborate on I guess what the issues are in the confidence and that they aren't permanent? I guess particular on that front end of the business?

Sure Tim, this is Jim. So, I guess first off, we remain very confident in the -- on our spot in the healthcare market, there's still billions of dollars of uncompensated care. And the issues are primarily in that front end that we talked about with consolidation happening with some of our customers. In the back end, we have a well-rounded set of solutions. We just bought Rubixis, which gets into the under payments and denials. And we've closed some deals recently that give us a lot of confidence heading into 2019. So, we're very bullish on that business. And I guess, we're trying to make a point is that our overall portfolio is very, very strong. We are able to absorb things when we may have a quarter that doesn't go the way we wanted for a particular business. And so, we're able to overcome that. On the other hand, the silver lining is the comps on this business we'll get easier next year and the business itself fundamentally very, very strong. So, we're very bullish on it.

And just to clarify, I guess this is an issue where client mergers or I guess negatively impacting it, and you just say comps get easier. This three more quarters or 2.5 more quarters before those comps get easier though that we should expect the growth to stay…

So, I was actually thinking about a full year Tim, not trying to go quarter-to-quarter here. And my statement of bullishness is primarily based on the back end and the amount of business that we're closing there.

Okay. Thank you.

The next question comes from Andrew Steinerman with JPMorgan. Please go ahead.

Sorry. So, hi, it's Andrew, I wanted to dive in more on online data services. Todd mentioned that's benefiting from a favorable backdrop and selling new products. Specifically, I wanted to know in the third quarter how credit activity by asset class helped or hindered TransUnion and how ODS organic revenue growth is positioned for the fourth quarter. I didn't quite get if you said, you're not assuming any revenues from the trusted ID product from the other bureau.

Okay. So, Andrew thanks for the question and good morning. This is Todd. So, let me just kind of dive into the trends that we're seeing in the online data services. So, I think your question really is just coming into the organic growth rate that we're seeing came in about 11% in the previous two quarters, the revenue growth rate was a little bit higher. I would say kind of overall, the trends that we're seeing are still continuing to be positive, but I would say the minor kind of blemish that we would see I mean the economy would be with mortgage where we did see a little bit of a downtick in our volumes there. But otherwise, as far as our other end markets are concerned, we kind of look across the portfolio, when we look at credit card, card looks pretty good for us sometimes kind of the uptick. We're looking at home equity lines of credit with the rising home values. There is a lot of consumer interest in those products. So, and then auto continues to be about neutral for us. So, overall kind of and in the Fintech, space continues to be very strong for us as we kind of leverage the first mover advantage that we've had in that space. So, the markets all in all kind of feel good. We're actually pretty proud of the 11% growth that we put out when we expect just to continue on as we're able to whether kind of the slowdown that we're seeing in mortgage in particular. As I think the second part of your question pertains more to the credit monitoring revenues that we're getting from Equifax. And in essence what we've done is, we've just assumed nothing in our guidance just simply because what they committed to with consumers a year ago is one year of monitoring. And it appears that there is kind of indefinite amount of time that they're continuing off of these services, we don't know what the terms are on that. So, we’re just being very conservative in our guidance and not assuming that that revenue is included. And if it does continue on in the quarter like we have done every other quarter, we will be fully transparent and then tell you what's in there.

Thanks, Todd. That's perfect.

Okay. The next question comes from Manav Patnaik with Barclays. Please go ahead.

Thank you. Good morning, guys. Again, I think in your opening comments, you talked about winning significant business from competitors setting up well into 2019. I was hoping you just elaborate on that. Was there any new sort of big wins that you had in the last quarter, and how you think about what the opportunities are there into 2019?

Sure. We can't get specific with names, but I think certainly we're acknowledging, let me step back though. We've been taking share for while than I have been kind of consistent with that message based on innovation, based on new capabilities, even based on drive revenue some things like Prama and our other CreditVision, CreditVision Link. I will say a recent, more recent occurrence which we alluded to is that there were some RFPs being led out and they take a while to work through where we've actually taken share that maybe we otherwise might not have. And so that as you stated bode well for 2019 and it now takes a little while to get these things up and running. But they're meaning to us. And it should help us have good set of quarters relative to U.S. IS revenue.

And just to clarify, sorry. Was that a U.S. comment or is this a global?

Yes, it's mostly the U.S. comment, but I don't want to indicate that we're not taking share and winning business internationally. We're also doing very well across the portfolio there as well.

All right. Thank you.

Okay. The next question comes from Gary Bisbee with Bank of America Merrill Lynch. Please go ahead.

Hey guy, good morning. I guess I wanted to ask a bit about the fraud iovation and the fraud comments that you went through. How big an opportunity there to really put iovation together with your fraud business and sort to sale it together. Or is it or should we think of this more as this is an ancillary potentially bigger opportunity that rounds out the suite of products there. And as part of that, can you give us any sense just directionally how big fraud is or how fast that’s growing for the business overall? Thank you.

Yes, good morning. This is Chris Cartwright. And I am going to take the question on fraud in Iovation. I mean obviously it’s a really exciting opportunity for us. The product Iovation is highly complementary with what we have traditionally done here at TransUnion, which is two years the knowledge that we have about consumers both from our credit archives but also our public data repositories and you that to confirm our identity. We have also developed various analytical models to determine that’s synthetic IDs being used, we have one-time passcode authentication and things like that. And there’s actually quite a bit more. We stitched all of that together in an integrated product suite, which we call IDVision and now at the core of IDVision is this market leading digital device authentication and verification service, which we acquired with Iovation. So, it’s already been integrated into the TransUnion ID Vision suite, we’re already getting sales from countries in the portfolio around the world, which is really exciting, we have built a really robust pipeline, both in the U.S. and in our international markets and there is just a lot of cross-selling capabilities across the suite. So, we think this cements our market position as a clear leader in this state globally and I think it’s going to and I know will further accelerate DRA attractive growth we've been getting from our various fraud solutions.

And any senses to the scale of it within TransUnion?

We haven’t given yet, Gary, we haven’t disclosed that the size of it, but our fraud products are relatively significant in our U.S. IS business. So, think about this just on a go forward basis, by putting the assets together now that the growth that it’s going to be able to drive for our TransUnion.

Great, thanks guys.

The next question comes from Jeff Meuler with Baird. Please go ahead.

Yes, thank you. Maybe just a little different take on some of the earlier questions. I get that your kind of talking about, you have a good portfolio and that’s helping power through up a bit of softness in the healthcare vertical, but the market seems to be concerned about the housing market, the auto market and think stocks have generally been weak lately. So, I guess just as you look at like the September and into October data and some of your leading indicators. Are you seeing sign to that within your customer base, in a way that would negatively impact to you and maybe if you can just give us a little refresher on when you see market inflections in the past just roughly how long as your visibility into to seeing the change? Thank you.

So, its Jim. I am just going to restate what we have already stated. We have seen mortgage softness and we have planned for that relative to refi and if you kind of look at some of our recent publications, we know Hillock [ph] is poised to grow and that was offset that somewhat. Card remains positive, consumer lending remains positive, auto new sales and lead sales and things like that are continue to drive that, so we don’t think that’s going to grow from here, but we don’t necessarily and are seeing a slowdown and then the Fintech space remains really strong, so we’re not really seeing an inflect point, but I think you’re trying to anticipate. I don’t know how to answer your other question, because all of that depends when we go all the way back to a rate, when things really got bad, we had obviously a slowdown in growth, but we quickly transitioned out of that, I mean grow before the rest of the market recovered. And we can get into more detail and if you would like to have enough time. So, we find that we generally recover much more quickly than the rest of the market, but that’s a big question around, it depends on which parts of the market working, but we simply aren't seeing that. And so, I would not factor that into your thinking.

Okay, thank you.

The next question comes from George Mihalos with Cowen. Please go ahead.

Great, thanks. Good morning, guys. Just wanted to go back to the point Jim on healthcare in terms of maybe the trajectory of how that revenues starts to come back. Does that start to tick up in the fourth quarter and then accelerate more sorts we get to the back half of 2019? And just thinking about the U.S. IS business broadly, some of the changes that are going on in scoring with FICO in the like, can that be a meaningful -- can the bureaus be meaningful beneficiaries from widening the credit box?

Yes, sure. So, regarding healthcare, the way I would view it is that we feel very -- I mean I do view, we feel very good about 2019 and we know we’ve closed the deals that will pay benefits in 2019. The way that business works though, it does take some work by our customers to prepare to use the service. So, I would rather not try and say, it’s going to start at this point in this quarter, but I can say, and I feel very good about the overall business into 2019. I feel very good about our fourth quarter that we’ve talked to you guys about. Regarding FICO, I'm going to let Chris answer that since we have him on the phone. I will generally say that the world seems to be migrating, it is using more and more different kind of scores, and those are based on our data in some cases or in a lot of cases. We create our own scores. So, generally that’s a good thing, the kind of the diversification of our customers use different kinds of scores whether it’s in mortgage or other lending vehicles.

Yes and just to amplify Jim’s comments a bit, I think if you pull back the lend of the positive of TransUnion in the broad and the industry is that there is a real appetite for developing scores based on an expanded set of information whether you call it alternative or whatever term you choose, it’s beyond the historic credit trade lines that were used to complete scores. That innovation really started quite a few years ago with the introduction thing to data which is now becoming a standard in this provided great growth. But for quite a few years now TransUnion, we’ve had alternative scores that were a combination of both our traditional credit data, but also alternative data sources such as demand deposit information, clubbing continuity programs, rental payments, and a variety of other information. Some of the acquisitions we’ve made through the years to cement our position in this space firstly acquired LTC which was a market leader and a long-time partner for us in the alternative credit score space. And then last year we acquired FactorTrust, because we wanted to have direct access to credit trade lines that were captured from heavy lending and various online small dollar short term unsecured types of loans. So, I think with recent announcements in the market, which really is just seeing a continuation of a trend of using a broader set of data that calculate consumer credit worthiness and to help our customers more precisely segment the market and define them price risk. I agree with Jim that I think it’s a real positive for the industry and TransUnion is well positioned to benefit from these trends.

Thanks for the color.

The next question comes from David Toga with Evercore ISI. Please go ahead.

Thank you. Good morning. Could you comment on what percentage of Callcredit’s revenue comes from domestic UK demand versus International and what impact if any do you expect from Brexit in March of next year?

Yes, so the first part of your question is there is some revenue that comes Internationally, it’s based on the fraud products, but it’s primarily and I would think of it, primarily like almost all in the United Kingdom itself. And then you talked - I think you asked the second half is about Brexit, look, we’ve analyzed this to depth, we just don’t see that we’ll have any impact on the Callcredit business at all.

Thank you very much.

The next question comes from Andrew Jeffrey with SunTrust. Please go ahead.

Hi. Good morning. Thank you for taking the question. Jim very much appreciate the color on the long-term opportunity in CreditVision and Link and particularly the integration with FactorTrust. Can you talk a little bit about IEC sales cycle as you go to market with this newer solution? Should it do you think you'll see sales of the integrated factor trust offering ramp the same way that CreditVision and Link in other words perhaps a reacceleration of growth in those products as we get into '19.

Sure, so we have Chris here. And he lives and breathe that every day. So, why don't we have him answer that?

Yes, good question. Look, we're really excited about both products and like Jim said, there is a lot of runway left for CreditVision, which is really calculated on what we called thick file consumers for trade lines and more. And in CreditVision Link is more for evaluating center file or no file consumers that have less than four or even no trade lines. And we again, leverage our access to alternative sources of data to do that. If you look at our results for the past couple of years, we had robust sales of both solutions. So that's already incorporated in our recognized revenues in our run-rates go forward. We continue to innovate, particularly with CreditVision Link where we're going to continue to release improvements to that score as we incorporate more data elements and refine our analytic techniques. And I think that's going to help us continue to lead the space. But I do want to be clear that we're selling a lot of this stuff already, a lot of CreditVision Link already and for both Link and up market CreditVision, the pipeline materially good for the future.

Okay. The next question comes from Bill Warmington with Wells Fargo. Please go ahead.

Good morning, everyone. So, a question for you on the FICO ultra-score that was announced yesterday. And I wanted to ask whether you guys are going to be a part of that. And then also just a clarification in terms of the use of the alternative scores. Are you finding - there is increased use of alternative scores that you're finding that in addition to FICO score or in place of the FICO score?

Okay, this is Chris again, I'll answer this one first and then had we answered lot of comments around the table. But to the point I was making earlier, there has been a continuing with innovation within the industry where score providers are continuing to bring new refined scores to market based on a range of data beyond the core of traditional credit. And it's improving precision in credit estimation. We are not directly part of the Experian and FICO announcement of the ultra-score. But what are you point out is that, if you look competitively across the industry, there have been similar competitor alliances and for announcement in recent years as competitors partner up to try to pull together the data that they need to create a more refined score. Because of the breadth of the data that we have and that we own, and our focus is really a focus that we had for over 5 years now. We haven't needed to do such partnerships in order to pull together the necessary data. And I'll point you to probably several years ago where another competitor partnered with Lexus, Nexus and FICO to create an alternative risk score. I don't believe it has material traction in the market. But it just an example of the competitive dynamics that we see in the industry today. I also want to be clear that we work very hard in our data sourcing and analytics group to evaluate the potential lift at a whole variety of data sources have on our current best products. That's just part of our ongoing innovation. So, which you should expect is that innovation is going to continue and it's going to leave the better and better products for our customers and ultimately for consumers.

I'll just add, we're very comfortable with our position as a market leader and alternative data in simple [ph] scores. And reiterate Chris's point, we've been focusing on this for some time and we feel like this is maybe a competitive response to us. But we're also very confident in our pipeline and our closes and this gives us a lot of confidence heading into 2019.

Thank you very much

Okay. The next question comes from Shlomo Rosenbaum with Stifel. Please go ahead.

Hi. Thank you very much of squeezing me in the end. Actually, want to just ask a question that is, not at all directly on your business operations. But just given the season that we're in, and the potential that the Democrats could take the house they're going to be looking for a quick legislative win, credit reporting legislation is a potential for them, they clearly have the recognized champion some stuff like that. Have you guys kind of thought about that in the potential of things or has anything been floated that you can share with us? And I just how do you look at that in terms of just a legislative risk?

So, our -- I guess view or our position as we work well with, I guess both sides of the house and we try and stay connected to the legislation that they're thinking about. We don't want to have any conjecture on what might happen there other than as we obviously stay close to it. I mean work them to provide to help build the best legislation possible for the consumer.

So, this is not a keep you up at night type of thing.

No.

Thank you very much.

That brings us to the top of the hour to the end of the call. Thank you everyone for your time this morning. Have a wonderful day.

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