Good morning and welcome to the TransUnion 2019 Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Aaron Hoffman, Vice President of Investor Relations, please go ahead.

Good morning, everyone and thank you for joining us today. On the call, we have Chris Cartwright, President and Chief Executive Officer and Todd Cello, Executive Vice President and Chief Financial Officer. We posted our earnings release and slides accompanying 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 the factors discussed in today's earnings release and the comments made during the 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 statement. So with that, let me turn the time over to Chris.

Thank you, Aaron and good morning, everyone. I'm pleased to report that TransUnion delivered another strong quarter. As we take you through the results, you'll see consistently good performance across segments, most verticals in geographic markets on both the top and bottom lines. As we typically do, we're letting our quarterly outperformance flow through into our full-year outlook and are further raising both revenue and adjusted EBITDA expectations slightly beyond that, reflecting a more bullish view of the second half. I will walk you through all of these points in detail a bit later. We will also talk to you about the strength of our cash flow and how we use that to fund attractive internal projects, make strategic external investments and an acquisition, while also prepaying a $100 million of debt. Our results this quarter, again, highlight the power of the TransUnion portfolio, a theme that we've discussed many times, and it continues to be one of the defining characteristics of our Company. Our growth remains balanced and diversified, driven by industry-leading innovation and decisioning capabilities. This combination enables us to deliver relative outperformance, above our underlying markets for the long term and through business cycles. As the new CEO for over two months now, I want to spend some time talking about how we will continue to deliver this outperformance in the next phase of TransUnion's evolution. First though, I think it's important to emphasize all that's not going to change TransUnion. We've got a very solid strategy for innovation and creating value in the marketplace. And we've demonstrated that over a significant period of time, our strategies and approach will not change. The financial commitments that we had laid out at our Investor Day in March, are also not changing. However, some things will necessarily evolve as…

Thanks, Chris. As usual, for the sake of simplicity, all the comparisons I discuss today, will be against the second quarter of 2018 unless noted otherwise. So let's start with the income statement. Second quarter consolidated adjusted revenue increased 18% on a reported basis and 19% in constant currency. Adjusted revenue from acquisitions contributed approximately 9 points of growth in the quarter. This was related to the 2018 acquisitions of CallCredit, iovation, HPS and Rubixis, as well as the 2019 acquisition of TruSignal. As we noted in our release this morning, there was a notable impact from the timing of when we closed the CallCredit acquisition last year and the timing of when that revenue became organic in 2019. As we discussed on our first quarter earnings call, our policy is that in the month when a transaction reaches its one-year anniversary of booking any revenue, it becomes organic, and we count all of the revenue for the business for that month as organic. Most of the time, transactions closed on the first or last day of the month or are small enough that there is no material impact. As you recall, CallCredit closed on June 19th of last year. Based on our internal accounting policy, that means we booked all UK revenue in June of 2019 as organic. So we are comparing to only 11 days of revenue in 2018. This creates the appearance of outsized growth in the UK, our International segment and about a 150 basis points of benefit to the total Company. For the sake of transparency, we've provided results for the UK, the International segment and Company, excluding this revenue, so you can properly understand the underlying performance of each. And one other reminder, the lack of incremental credit monitoring from a breach at a…

Thanks, Todd. Well, I'll wrap up, I'll punctuate some of the points that I made at the beginning of our call. TransUnion remains extremely well positioned to deliver top-tier revenue growth at an attractive and expanding margin. [Technical Difficulty] innovation of vast differentiated technology infrastructure, diverse vertical and geographic markets and a unique set of core capabilities, there is no reason that we can't and won't maintain our industry leadership for many years to come. But we don't take that as a given, and we are anything but complacent. This is a company and a culture that prizes performance and demands excellence. We are relentlessly seeking the best opportunities to drive the best possible results. As shareholders, I want to clearly convey to you that we have and always strive to meet our commitments to you and all of our constituents. And I think we are better positioned for success, than we ever have been, as you've seen in the first half of 2019 and as I expect you'll see for the remainder of the year and well beyond. So with that, I'll turn the time back to Aaron.

So that concludes our prepared remarks for today. For the Q&A, we ask that you each ask one question, so that we can include more participants. And now I'd be glad to take those questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Manav Patnaik of Barclays. Please go ahead.

Thank you. Good morning, gentlemen. I just wanted to follow up on your comments around the greater second half visibility. Is that driven by kind of new product pipeline? How much of that was maybe a bit kind of mortgage benefit everyone is talking about? I was just hoping you could elaborate on that.

Hey, Manav. This is Todd. I'll take that question. So yes, as we look out toward the second half of 2019, I think the way we are thinking about it right now, first of all is, we're assuming stable economic conditions in the US. So we are clearly dealing with the consumer right now that is empowered, right. Unemployment is low, wages are high, and they're receptive to credit. I think you just saw that come out in the recent bank earnings, in that the consumer side of their business was strong, right. So, we feel good about that. I would say second, it's all -- it's really just kind of about our product innovation and it's the ramp that's there. We continue to be very excited about the opportunities with CreditVision, as well as with CreditVision Link. And in addition to that, on our IDVision suite of products as well. So that looks good. When we think about just kind of the sales pipeline in general across all of our verticals, the bookings have been ramping up nicely. So that gives us a lot of encouragement. And then I would say, finally, as we look internationally, we feel really good about what we see across all the different geographies that we operate in that we think [Technical Difficulty] can continue to perform well, Latin America and Canada. And as you probably saw, the UK business is pretty much right where we expected that to come in at. So, we are expecting that -- the UK start to ramp now. The team there has done an excellent job, getting things stabilized and our new product innovation has been launched in market. But the great thing about what we got going in the UK is we're not necessarily betting on that stuff. It's a lot of what they already have in -- that they had already in place that they're going to deliver on. So hopefully, I answered your question, but we're feeling pretty good about the second half.

Our next question comes from Gary Bisbee of Bank of America Merrill Lynch. Please go ahead.

Hey, guys. Good morning. I guess I'd just follow up on that by saying, you know, given the strong second quarter results on the top line and the strong snap back, the Q3 guide really doesn't call for much incremental acceleration. And that's a bit different than how you were telling the story a quarter ago, which was the comp sees a lot, the faster growing M&A lapse, and so calling for real acceleration in the back half. I realize maybe the big issue is just Q2 accelerated a lot, but has anything changed that's worth noting as it relates to the cadence of growth? It sounds like maybe you're calling for a little slower ramp in the UK, but anything worth calling out? Thank you.

Hey, Gary. I'll take that one too. So, no, as far as we think about the third quarter guide, I mean, I think it's relatively consistent with what we talked about on the last call, right. And we did expect that we would see a ramp in the second quarter, which did happen. And then in order to get to that full year number of that we guided, there was implied that we would have to perform the way that we're putting the guidance out, right. So I think, what you're seeing from us is that, as we always do, the guide that we put out there is what we have a high degree of conviction that we're going to hit, right. I mean, we're only a couple of weeks into the new quarter here and we haven't really had a lot of data points. But what we can see through our forecasting process and what the team's coming back with as well is just bookings in general. The numbers we put in for Q3, we feel pretty good about. The UK, as I already said, I mean, this is a business that we highly anticipate will be in a double-digit growth trajectory by the end of the quarter. So I think it's more of -- more kind of the same from us and that we're giving you numbers that we have a very high conviction, that we'll be able to achieve. And if we outperform those numbers, just like in the second quarter, expect us to bank that over-performance and let it stick for the full-year guide.

Our next question comes from Andrew Steinerman of JPMorgan. Please go ahead.

Hi, team. I think you might have addressed this somewhat, but my question is about how do you feel about the various asset classes of consumer credit applications in the second quarter? And specifically, do you feel like that might be a catch up from the first quarter being bank were slower to marking the first quarter, strong to marking the second quarter? Or do you feel like the success that banks and lenders saw in the second quarter continues in the second half of the year, which will drive more business to TransUnion?

Good morning, Andrew. It's Chris. I'll take this one. I'll focus my comments on the U.S. market merely because rest of the world has been very strong, year-to-date Financial Services. But we did see the reacceleration of our financial business in the second quarter. As you can see, a lot of it has to do with just the markets stabilizing after the sharp stock market correction of the fourth quarter based on a variety of economic uncertainties that we've talked about extensively. With a change in the outlook and their return of confidence, marketing activity picked back up and our numbers benefited from that and we expect that to persist over the remainder of the year. Also as interest rates abated, we saw mortgage volumes improve. Mortgage had been a negative in the first quarter, it's now positive. And so that's helped our numbers. Card continues to methodically plug along in the mid-single digits where card -- the number of cards issued in the U.S. is over 181 million now. We're seeing the strongest originations in the prime and above categories, although there is an increase in activities in the subprime as some new players enter the space. And consumer credit in general remains robust. If you recall, our big challenge in the first quarter and the second quarter as well, was lapping some really aggressive comps from the prior year. But we managed to do that. And I think conditions in Financial Services remain favorable for the remainder of the year with easing -- with easing comps because of the reasons that I described extensively in the first quarter.

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

Yes, thank you. Nice quarter. Chris, maybe could you give us kind of your current views on penetration for the trend of data solutions across the business? So where there's still a lot of room and USFS for U.S. emerging verticals, were you kind of seeing success with the product? I think you called out insurance underwriting, not sure if that's what's driving the share gains in telco. And then international markets obviously just rolling out to the UK, but just the other markets that you call out that are of size for you where your early days opportunity entered? Thanks.

Okay. Well, penetration there is based on the geographic market and the time of introduction, as well as different lending sub-vertical for the -- your mortgage or card, etc. We're furthest along in terms of market penetration in the U.S. obviously. However, we have introduced trended data in a host of markets around the world and the bottom line is trended data outperforms and it is a next generation product for the credit industry. I think we have got quite a bit of runway ahead of us, as well as combining trended data with various alternative data sources to score more of the population, and the population more accurately in general. So, I do think we have ample intermediate term runway to continue to post strong relative and absolute dollar gains. We just launched in the UK. We're excited to have a prototype out there that clients can test for meeting with clients and we're demonstrating a material list that they can expect if they move to trended data. And we expect that market to adopt it in much the manner that it was adopted in the U.S., and it's a large robust market. So that really bodes well for us. India, Colombia, South Africa are still in the early days of adoption. So I've used the baseball analogy before. We're not middle innings yet on a worldwide basis, and it will be a strong driver of growth in the foreseeable future.

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

Yes, hi. Thanks. Just wanted to ask a little bit about the growth outlook maybe in Asia. I know you can't talk about the investigation maybe, but when do we lap the drag from the consumer business? And I guess, in the context of the recent events, how do you think about growth over the next year or two in that market? Thanks.

Hey Tim. Thanks for that -- thanks for the question there. As far as our Asia-Pacific region is concerned, I think we had a really good quarter. The headline number shows that it was down slightly, but as you already alluded to, that primarily relates to us shutting down our direct-to-consumer product offering to work in conjunction with the regulators in Hong Kong to tighten up the access and the security of the system. Absent that though, that business grew in a high-single digit range. So the business continues to perform exceptionally well. The other part of our Asia-Pacific region is our Philippines business, and this is a business that we started probably eight years or nine years ago in conjunction with all the large banks in the Philippines. That business continued to perform very well in the second quarter as well. So, there's obviously some headlines in the news with the political kind of situation there. We're keeping a close eye on that, but the second quarter also had that type of unrest. I mean, we did deliver some good results. So we'll keep an eye on it as we go forward. But the product itself on the direct-to-consumer side is still something we're working on with the regulator. It's still not ready yet for production to go back line. But all-in-all, we feel pretty good.

Yes. And this is Chris. If I could just add a couple of points. I've recently spent some time focused on the region, and obviously, we have a nice business today in Hong Kong and in the Philippines. But we definitely view this as an intermediate-to-longer term growth priority. We participate in different ways, in different markets throughout Southeast Asia. And first, we're always vigilant to opportunities to extend our franchise into the Chinese mainland. I think, I really like the bets that we're seeding throughout the region. And I think it can become an increasingly important part of our portfolio over the intermediate-to-longer term.

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

Hey, good morning, guys. Thanks for taking my question. Wanted to ask on the margins a little bit, it looks like over the first half of the year EBITDA margins are up around about 60 basis points. You're targeting 50 basis points for the full year. And then when we think of the back half, you have accelerating growth relative to the first half, then you're anniversarying some acquisitions. Is there something that would weigh the margins down a little bit relative to the first half reinvestment mix, something we should be thinking about?

Hey George. This is Todd. Thanks for the question. As far as, yes, our margins are concerned, you're very accurate in what you're seeing in the performance of being relatively strong with us, being up through the first six months of the year meaningfully, but then still targeting the 50 basis points of growth for the full year. Yes, I think the way we look at it, it's more about the belief that we have in the sustainability and the momentum in our organic products. And so, we're very aggressive in making investments back into the business in order to continue to deliver the attractive top line growth that we have been posting for a period of time. So I would expect us to be opportunistic in where we would spend, and that's really what it is. It's just more that conviction that we see good top-line growth and we'll spend the operating expense to ensure that we get it.

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

Hi, thank you. Given the details yesterday about the Equifax settlement, I guess, providing the free credit monitoring for four years, how should we think about the impact of that on the consumer business, if at all? I just wanted to get sort of a -- whether that is impactful or not. Thank you.

Hey, Toni. As far as the impact is concerned, last year there was a material impact for us, right throughout all of 2018. And that was why we provided the transparency that we did as to what that number was. As we moved into 2019, Equifax decided to use Experian as their provider for that service. And when that happened from what we can see, there were a significant number of subscribers that dropped off in there. So the materiality of that as it pertains to TransUnion this year, is not very significant. So when we look at the details that came out on the settlement that Equifax reached yesterday and we think about the impact, it's kind of more of the same. And it's really dependent upon how many consumers sign up for the service. But being that it's already come down from a level, I think we're anticipating that it will come down even further and this is really not a material piece of business for us as we go forward.

Our next question comes from Bill Warmington of Wells Fargo. Please go ahead.

Good morning, everyone. So a mortgage -- sorry, a question on mortgage and what that's running as a percentage of revenue and what kind of assumptions you're making in the guidance for the second half in terms of volumes?

Hey, Bill. This is Chris. As we've said before, mortgage is about 7% of total Company revenues. And we don't expect that to dramatically change in the second half of the year as a result of the improved mortgage environment.

Your next question comes from Andrew Jeffrey of SunTrust. Please go ahead.

Hi. Good morning. Appreciate you taking the question. I wanted to focus a little bit, Chris if I might, on healthcare, which is I think an important business in your emerging newest verticals as far as a potential reacceleration broadly. Could you elaborate a little bit on the type of business you're signing out of the pipeline? Is it mostly RCM, what are the nature of the customers? Just trying to get a sense of what the driver is and how much visibility you feel like you have in that business?

Okay, fair enough. And it was a good quarter for healthcare and we're continuing to progress in that business, as we lap the difficult consolidation of some major customers. Our business is more focused on the back-end revenue recovery. And while we are achieving improved sales across the spectrum of our solutions, they are naturally weighted toward the back-end where our portfolio is the strongest. I believe in the fourth quarter of last year, we began to communicate that we were experiencing higher bookings than previously, because of a lot of work we've done to improve our sales force, and because of sales force education of getting the field folks comfortable with the broader value proposition that we now bring in and the improved performance of our solutions as we acquired more revenue recovery, if you will. That's all tracking. And we continue to be optimistic that we're trending toward a high-single digits organic growth business. Although we're not changing our guidance at 2019, this transitional year is going to be more mid-single digits. But we're feeling good about the progress the healthcare team is making and we're committed to the market. It's a terrific market and we're adding a lot of value in it.

Our next question comes from David Togut of Evercore ISI. Please go ahead.

Thank you. Good morning. India continues to be the highest growth geography you have, up 37% at constant currency. I'm curious what do you see as being unique to India as a market for you versus what might be more broadly extensible to your other international geographies?

Hi, David. This is Chris. Well, in terms of extensible to other geographies, what I would emphasize that we have an explicit strategy for exporting IP and product development across various marketplaces and there is a high degree of similarity and client need for industry vertical. So banks have common problems across different geographies and we're sharing know-how product. So it's no different in India. India is just a super high-growth dynamic and optimistic market currently, as they have developed economically. They have now almost 180 million consumers participating in mainstream credit. And when you travel the region, the positive energy is amazing and infectious. And they're focused on the next 300 million consumers that will be new to credit in the coming years. And so I think there's just a groundswell of demand at a time where TransUnion continues to execute its playbook for bringing trending creative data and we're expanding our direct-to-consumer offerings. We launched a commercial data business, we're investing and expanding our decisioning products, etc., etc. So, it's just a really great market, and we're very excited about the number of information businesses that we can build there in addition to bringing the full suite of what we have currently.

Our next question comes from Ashish Sabadra of Deutsche Bank. Please go ahead.

Hi. Thanks for taking my question. Chris, I believe you highlighted new business opportunities in the pipeline. I was just wondering if you could give some more color around these online data services or batch processing opportunities on the FI site? And what's really driving those business opportunities on each share gains? Thanks.

Okay, Ashish. Well, I would say -- well, first of all, it's a good time in the markets, right. The U.S. markets and markets internationally remain relatively strong. Todd rattled off a lot of the positive statistics earlier. We've got reasonable GDP growth, really low unemployment, and we've got the beginnings of wage inflation in a low inflationary environment overall. While we are later cycle in some consumer-lending categories, the consumer still has an appetite for borrowing and there's runway there. And you can see that delinquencies are very low. So the consumer is strong and lending practices have remained prudent. As a result of this, and the fact that they're -- collectively the industry is bringing better data and decisioning to the market than we ever have, trended data, plus trended and alternative data, plus advanced analytic platforms, plus improvements in decisioning, and all that's resulting in higher sales. And those sales are ramping over time as clients integrate and volume ramps. And so I think for the foreseeable future, we've got solid demand and solid new sales. So a solid wind in our sales, if you will.

Our next question comes from Shlomo Rosenbaum of Stifel. Please go ahead.

Hi, thank you for taking my question. Hey, Chris, I just want to probe a little bit more on the TruSignal acquisition, the Payfone investment. Just -- I know you're looking to open an aperture in terms of, you know, expanding the market opportunities. Can you talk a little bit about TruSignal, what you can do together TruSignal that TruSignal couldn't do on its own? How you can kind of accelerate its growth? Is it -- what are the end markets over there? The end market's primarily Financial Services or are there other markets that it serves as well? If you can just kind of expand on what you see the combination of those two doing like -- over the next couple of years?

Yes. Fair enough, Shlomo. So as we have described before, we think that the media vertical and targeted digital advertising offer some opportunities for TransUnion, because of our data and our linking capabilities and just ID resolutions in general. The point of resolving ID is to be able to then append relevant consumer information and slice and dice the audiences so marketers get exactly what they're looking for. TruSignal was a business focused on this and they had a very good underlying technology platform that was tailored to the needs of digital marketers. And with that, we've added this tech platform combined with our data and our matching capabilities, and it's just a more powerful combination. It also helps us scale our efforts. We got a nice complement of talented and digital market -- digital industry focused talent in the acquisition. We are also tapping in a number of key brands and our broader sales and marketing efforts, I think, can bring attention and mind share of the marketplace and help accelerate the revenues. So with this and other targeted shipments we're making in the digital advertising market, the media vertical in general, we're kind of rounding out our capabilities in terms of the fundamental to the foundation that we need in place to grow this new vertical.

This concludes our question-and-answer session. I would like to turn the conference back over to Aaron Hoffman for any closing remarks.

Great. Thank you very much, and thanks everyone for joining us on the call today. We appreciate you taking the time to do that. We hope you have a great day. Thank you very much.

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