TransUnion (TRU) Q2 2019 Earnings Report, Transcript and Summary

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 we stay keenly focused on maintaining our industry leadership. We've already made some important evolutionary changes, that frankly, probably would have happened with or without a change at the very top of the organization and that are just natural response to market dynamics and competitive pressures, as well as where we see opportunities to serve our clients better. To that end, we've made some adjustments to the executive team of TransUnion. Now having won a majority of the USIS segment and global product development, for much of my tenure here, I had a good perspective on how we can sharpen our focus in several critical areas going forward. Increasingly, some of the functions within the U.S. business were becoming global in nature. For instance, we were sharing IP capabilities and product functionality across our geographies, wherever it made sense. To address these opportunities, we've divided the product development and operations roles in the U.S. into two distinct global responsibilities. TransUnion now has a Head of Solutions globally, Tim Martin. He is a talented operator that came out of our U.S. business. We should think about his role as similar to say, category of management at a consumer packaged goods firm or a leadership over the various software applications within an integrated software business. There are certain solutions within our portfolio that have value to customers across most of the markets that we serve. We've already demonstrated best-in-class diffusion of innovation and IP. Tim's mission, is to even more aggressively and strategically, develop our solutions for the common needs of those markets and then push the solutions out across the 30 plus geographies in which TransUnion competes. The other change relates to creating a Global Operations role, which we filled with a member of our outstanding leaders, Dane Mauldin. This is really a next-step evolution for us to build from our leadership and innovation, technology and sales force effectiveness. We have almost doubled in size from just 2014 through 2019. We have to ensure that our operational practices and our platforms evolve appropriately to properly serve our customers over the life of their relationship with the Company. Now there are many ways to get better at doing this. We can continue to improve the efficiency of the organization, we can automate and reengineer the internal workforce that aren't as crisp as we would like. We can think about the work that we do and where it can best be executed across the various geographies in which we have a presence. All of that is just scratching the surface. There are a myriad number of opportunities to continue to improve our operational excellence. Now these changes don't represent a dramatic point of departure, but rather a fine-tuning with an eye to consistent organizational innovation to pair with our highly successful solutions in order to maintain our industry leadership position. The clear conclusion is that we don't stand still. We are not complacent with the excess that we've had. We will always press forward and aggressively pursue the best possible actions to drive long-term success and performance at TransUnion. Now on to our U.S. Markets. One of the change that we've made as we backfilled my role with Steve Chaouki, who has very successfully managed our Financial Services vertical, was to change the segment name from USIS to U.S. Markets. While this sounds like semantics, it's actually an important reflection of the broad array of attractive markets that we serve in the US. This includes the three largest vertical markets that we have spoken about frequently, financial services, insurance and healthcare. It also includes some smaller markets like collections, rental screening, and the public sector, that we've occasionally discussed. And it includes a broad array of smaller high potential markets in various stages of development. Collectively, we refer to those as our diversified markets business. Our diversified markets represents a collection of high-quality businesses that effectively leverage the core data and capabilities of TransUnion. For instance, we have a strong investigative services business that leverages the TLO asset and other TransUnion data. We also built outstanding telecom position and have recently taken leadership in this market through some significant customer wins. In a similar vein, we've had a small, but relatively fast-growing digital marketing business for several years now. We're placing a greater focus on this area and carving out an appropriate, attractive niche in the vast landscape of digital market. We refer to it as our media vertical and we have a top-notch, highly seasoned leader with decades of industry experience spearheading our efforts. We recently bolstered our position in this market with the acquisition of TruSignal, which provides both valuable [Technical Difficulty] technology, as well as an influx of quality industry talent. TruSignal as a platform that can rapidly generate custom audiences or pre-screened groups of consumers for our customers to enable their online marketing efforts, so when a client has a target audience that they would like to reach online, we can help make that match and then append other valuable data to round out the segmentation and make their targeting more effective. This is a foundational platform on which we can build additional solutions, that leverage our technology, matching and linking logic along with our data. So what can this look like for TransUnion? Well, as you know, we've had a tremendous amount of information about individuals and we are very good at matching and linking that data accurately to them, even in the online environment. That will allow us to help market -- marketers target consumers with specific ads. We can also help e-commerce players customize their service [Technical Difficulty] that they apply to a client, because they will know exactly who that individual is. The more salient takeaway about U.S. Markets in the broad is that we have a long-term, well-conceived game plan for delivering sustained, diversified and attractive growth. So that provides a good segue to discussing the second quarter performance of the U.S. Markets. Overall, it was a very good quarter, highlighted by a significant reacceleration at our Financial Services vertical, behind better market conditions; innovation growth and the gradual benefits of some share shift. We continue to expect the vertical to deliver high-single digit organic growth for full year and we're well-positioned to deliver that as all these factors should persist over the next six months, along with an easing of our year-over-year comparisons. Of note, we continue to see a long runway of growth with our industry-leading trended data products, CreditVision and CreditVision Link. CreditVision Link in particular is delivering very strong growth. More, more vendors are coming to appreciate the value of incorporating alternative data for making better and smarter decisions, while expanding their universe of potential borrowers. The pipeline for both of these products is strong as it's ever been, especially with large credit card issuers showing increased interest. I'd also point out that the composition of the pipeline is telling. It's fairly split between renewals, which reflect strong customer satisfaction or solutions and new business opportunities. Another area where we continue to see real success is around client engagement, leveraging our world-class analytic capabilities. Now, we've spoken to you in the past about our Innovation Lab, which provides customers with an onsite, highly focused venue for immersive customer analytics ranging from credit risk management to fraud mitigation to prospect marketing. In each case, we were able to reduce cycle time from months to literally hours by utilizing our analytic capabilities and a vast array of traditional and alternative TransUnion data assets, as well as appended third-party data in some cases. Clients have included everyone from start-up Fintechs to top-tier card issuers to large banks with a number returning for multiple engagements. Innovation Lab has been used to build complex strategies in auto finance, personal lending, home improvement and credit cards. This is the sort of capability that helps TransUnion distinguish itself in the marketplace, strengthens our relationships and brings valuable near real-time solutions to our customers. Now, with [Technical Difficulty] verticals, we saw another very strong quarter in insurance driven by solid underlying market conditions and the continued penetration of our innovative products. These include DriverRisk, the National Driving Record Solution; trend and scores for underwriting; a fast growing position in life insurance underwriting; and industry-leading investigative solutions. An another important factor in our performance is that our renewals remain very strong, reflecting the differentiated customer benefits of our solutions. We also saw healthcare growth accelerate as we lapped a customer consolidation from last year and are benefiting from a renewed focus on sales execution and go-to-market effectiveness, as well as the benefits from our recent acquisitions of HPS and Rubixis. Importantly, our sales pipeline continues to grow nicely, setting us up for a solid finish to the year and a good 2020. Once again, for 2019, we expect organic revenue for this vertical to grow mid-single digits. Now, shifting gears to our International business, we had again, another very strong quarter. As usual, the growth was broad based and generally well above the underlying markets in which we participate. India remains a highlight with the very strong market growth, coupled with our broad range of solutions and fast-growing adjacencies. We, again, delivered double-digit constant currency revenue growth in Latin America with our two largest markets, Colombia and Brazil, leading the way. Canada continued its strong multi-year growth trajectory, leading the market with innovation, while also building attractive adjacencies in insurance, public sector and direct-to-consumer markets. We were very pleased with [Technical Difficulty] growth in our UK business, despite tougher comparisons driven by some one-time business in the year-ago quarter. This is a testament to the reconstituted leadership team that's come together very quickly to execute our go-to-market playbook and leverage the strong assets that we acquired with Callcredit. Now during the second quarter, we launched CreditView Dashboard, our leading consumer platform and also TrueVision, the UK name of our trended credit product. It's now in the market for client testing and with a full product launch planned for the fourth quarter. Both of these solutions should have a positive impact on the growth in 2020 and beyond. At the same time, we'll continue to shift other innovative products to the UK to help drive strong above-market growth over the longer term. Given the momentum we've generated in the UK, we expect constant currency revenue in the third quarter to increase to high-single digits and double digits in the fourth quarter. Shifting to Consumer Interactive. This past quarter saw strength in both our direct and indirect businesses. Growth in indirect was driven by increased enrollments from many of our partners, which is translated to revenue growth for us. As we support our partners' growth, we empower more consumers with tools and solutions to better understand and manage their credit. In addition, we deliver new products to several partners during the quarter, providing incremental value to them and further contributing to the growth we saw. In our direct channel, consumer interest in credit management and identity protection remained strong and our analytics-driven marketing strategy has been able to take advantage of these favorable market trends. We continue to focus marketing efforts in areas that deliver efficient returns, and these efforts have proven effective for growing revenue within the direct business. While this wraps up my discussion of our businesses, I'll now turn the time over to Todd, who'll walk you through our financial results and outlook. Todd?

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 competitor was, again, about a 1 point headwind in the quarter. As we've discussed previously, we are receiving an immaterial amount of revenue this year compared to last year, as the offering is now handled by another provider and served significantly fewer subscribers. Excluding the impact of the monitoring last year from a competitor's breach and normalizing for organic growth in the UK, organic constant currency adjusted revenue growth was approximately 9.5% in the quarter. Adjusted EBITDA increased 20% on a reported basis and 21% in constant currency. Second quarter adjusted EPS grew 11% with a 27.6% adjusted effective tax rate. The tax rate is slightly higher than our expectation of 27% for the full year. This is simply the normal non-linear nature of quarter-to-quarter tax rates related to planning items, as well as our mix of international income. SG&A increased 15% and cost of services was up 14% as a result of higher operating and integration costs related to our recent acquisitions, investments in strategic initiatives and higher data costs, associated with our revenue growth. As we did all of last year, we want to show you the impact that recent acquisitions have had on our margins and to help you see the good performance of the underlying business. The reported margin expanded by 60 basis points. Excluding the impact of the acquisition, the margin on our underlying business expanded by about 115 basis points in the second quarter, reflecting the typically strong incremental margins in [Technical Difficulty] of our business. Acquisitions become more fully integrated, you can expect that impact to the margin will continue to decline. I will wrap up my comments on our consolidated results with a couple of important points about cash flow and our balance sheet. During the second quarter, we voluntarily prepaid another $100 million of debt after prepaying $60 million in the fourth quarter of 2018. Given our strong cash generation, we were able to do this, while also funding the acquisition of TruSignal, and our investment in Payfone. And for the remainder of the year, in the absence of significant transactions, I'd expect to voluntarily prepay additional debt. These actions clearly have a very positive impact by reducing our interest expense and helping to derisk our debt profile, which remains approximately 73% fixed and 27% variable. What it doesn't do is it impacts our net leverage ratio, which is calculated by netting cash from debt. Nonetheless, we do continue to see our net leverage decline, as a result of our strong adjusted EBITDA growth. Net leverage fell to about 3.75 times at the end of the second quarter from 4 times at the end of the first quarter. We remain confident that we will end 2019 at or below 3.5 times net leverage. In just 18 months, we will have reduced our leverage by more than a full turn, while also funding several smaller strategic acquisitions and equity investments, fairly funding a strong slate of internal opportunities, paying our dividend and prepaying $160 million of debt. Now, looking at segment revenue and adjusted EBITDA, U.S. Markets [Technical Difficulty] revenue grew 13%. Excluding the impact of the acquisitions of iovation, HPS, Rubixis and TruSignal, organic adjusted revenue would have been up a 8%. Our Financial Services vertical grew 11% on a reported basis, and 8% organically. The other verticals combined grew 17% and 8% on an organic basis. Insurance, diversified markets and public sector continue to deliver strong results. As expected, we saw quarter-over-quarter acceleration in healthcare, as we lapped the impact of the consolidation of two significant customers in the second quarter of last year, and are beginning to see the new wins in our pipeline monetize. Adjusted EBITDA for U.S. Markets increased 19% and was up 17% at an organic basis. Moving to International, adjusted revenue grew 44% and 50% in constant currency. At an organic constant currency basis, the segment was up 20%. About 8 points of that growth came from the timing of the CallCredit acquisition becoming organic. So excluding that, adjusted organic constant currency revenue grew 12%. Once again, we saw very strong performance in India with 37% constant currency growth coming from a combination of strength in the underlying market, combined with our infusion of innovation like CreditVision and adjacencies like commercial lending scores and fraud mitigation solutions. Organic constant currency revenue was up 9% as we see real durable strength from innovation, leadership, go-to-market execution and fast-growing verticals and adjacencies like insurance. As Chris mentioned, the UK had a solid quarter with 6% pro forma growth in constant currency. This was in line with expectations entering the quarter and as a reflection of good execution of our go-to-market strategy, leveraging the attractive assets we acquired. Early as the team has more time to implement our strategies, products and capabilities, we expect to see high-single digit constant currency revenue growth in the third quarter and double-digit growth in the fourth quarter. I want to spend a minute on our Asia-Pacific region, which declined slightly in the quarter. Let me start with what continues to perform very well. Our business-to-business offerings in Hong Kong and our Philippines bureau. The drag is entirely the result of having to shut down our direct-to-consumer platform in Hong Kong to work in conjunction with local regulators to enhance the security protocols for consumers logging on to the system. This is a short-lived situation that should be remedied later this year. In the meantime, the rest of the business is operating as normal and doing well. Adjusted EBITDA for International grew 45%. On an organic constant currency basis, it was up 18%. Consumer Interactive adjusted revenue increased 5%, driven by balanced growth between the indirect and direct channels in line with our mid-single digit revenue growth expectations. However, excluding the impact of comparing to the revenue derived from our competitors data breach, adjusted revenue would have been up high-single digits. Adjusted EBITDA for Consumer Interactive grew 2%, as we continue to invest behind the marketplace momentum in the direct channel. Turning now to our guidance for 2019. Let me start with an update to some base assumptions. For the full-year acquisitions including CallCredit, iovation, HPS, Rubixis and TruSignal, should add approximately 5 points of adjusted revenue growth. For FX, we expect to see about 1 point of headwind impacting both adjusted revenue and adjusted EBITDA. There is also a 1 point headwind from the absence of incremental monitoring revenue from the competitors breach. The timing of when the UK revenue was treated as organic, has an immaterial impact on the full year. We expect adjusted revenue to come in between $2.628 billion to $2.638 billion, up 12%. So on an organic constant currency basis, excluding the incremental monitoring, adjusted revenue should be up 8.5% to 9%. Adjusted EBITDA is expected to be between $1.036 billion and $1.044 billion, up 13% to 14%. At the high end of our guidance, adjusted EBITDA margin is expected to be up about 50 basis points, from 39.1% in 2018. Adjusted diluted earnings per share for the year is expected to be between $2.66 and $2.69, up 6% to 8%. This improvement from previous guidance reflects our stronger operating results along with the benefits of prepaying debt and reducing our interest expense. So I'll take you on some modeling assumptions. There is no change to our tax rate expectation, which is approximately 27% in 2019. Total D&A is expected to be approximately $360 million, up just slightly. Excluding the step-up and subsequent M&A portion, D&A should be about $155 million, which is down slightly and net interest expense should now be about $175 million as a result of prepaying some debt. We anticipate that capital expenditures will be about 8% of revenue this year, as we aggressively invest in new products and integrate our recent acquisitions. Going to the third quarter of 2019, let me provide our assumptions for the quarter. For adjusted revenue, we expect about 1 point of contribution from M&A. There is negligible impact on revenue and adjusted EBITDA from FX. There is 1 point headwind from the absence of incremental monitoring revenue from a competitor's breach. Adjusted revenue should come in between $672 million and $677 million, an increase of 8% to 9%. Excluding the impact of not having the incremental monitoring revenue, adjusted revenue is expected to be up 8.5% to 9.5%. Adjusted EBITDA is expected to be between $269 million and $273 million, an increase of 10% to 11%. Adjusted diluted earnings per share are expected to be $0.69 to $0.71, an increase of 6% to 8%. One final item that is germane to third quarter guidance, relates to the 8-K that we filed last week. As you likely read, TransUnion Limited, which is a Hong Kong entity in which the Company holds minority interest was the victim of criminal fraud. The incident involved employee impersonation and fraudulent requests targeting TransUnion Limited, which resulted in a series of fraudulently induced wire transfers in early July 2019, totaling $17.8 million. We have launched an internal investigation to determine the full extent of the fraud scheme and the related potential exposure. We self-discovered this fraudulent activity and promptly initiated contact with our bank, as well as appropriate law enforcement authorities. To date, we have not found any evidence of additional fraudulent activity. And very importantly, this incident did not result in any unauthorized access to any of the confidential consumer information or other data that we maintain. So in the third quarter of 2019, we expect to record a one-time pre-tax charge of up to $17.8 million in the third quarter of 2019 as a result of this event. This matter will also result in some additional near-term legal and investigative expenses that we do not believe will be material. All of these items will be backed out of our reported results as a part of our adjusted EBITDA and adjusted EPS calculations. Finally, we are working with law enforcement, and therefore, will not be commenting any further on the event until the investigation is concluded. So that concludes my review of our financial results. I'll turn the call back to Chris for some final comments.

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.