Good morning and welcome to TransUnion 2020 Third Quarter Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Aaron Hoffman, Vice President, Investor Relations. Please go, ahead.

Good morning, everyone and thank you for joining us today. I hope that all of you are safe and healthy. On the call today, we have Chris Cartwright, President and Chief Executive Officer and Todd Cello, Executive Vice President and Chief Financial Officer. We’ve posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website. Our earnings release and the accompanying slides include various schedules, which contain more detailed information about revenue, operating expenses and other items as well as certain non-GAAP disclosures and financial measures, along with their corresponding reconciliations with these non-GAAP financial measures to their most directly comparable GAAP measures. 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 and the comments made during this conference call and in our most recent Form 10-K, Forms 10-Q and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statement. Now with that, let me turn the time over to Chris.

Thanks, Aaron. I want to welcome all of you to our call and extend our most sincere hope that you and your loved ones are healthy and safe. At TransUnion, we continue to prioritize the health and safety of our associates, our customers, and the wider communities in which we operate. Globally, almost every one of our 8,000 employees continued to work from home. A select number of associates have continued to work on-site to ensure our technology infrastructure operates uninterrupted. I want to thank all of them for their dedication and commitment. Other than these critical employees, we see no need to rush back into our offices, as our associates have demonstrated the flexibility to work remotely and run our business with virtually no interruption. In fact, during the third quarter, we conducted a companywide survey of our associates and confirmed that they largely prefer to remain remote at this time and can work at very high levels, while doing so. Now on our last call, I talked about my personal commitment to making TransUnion a more diverse and inclusive company. I want to give you an update on our progress. First, we’ve appointed Teedra Bernard as our first ever Head of Talent and Diversity. In this role, Teedra’s responsibilities include talent acquisition, employment branding, on-boarding associate and manager training, leadership development, career development, employee engagement and employee relations. By lining all of these functions under Teedra’s leadership will ensure a diversity and inclusion lens is brought to all of our human capital management decisions. Secondly, we launched a taskforce, which we call Total Impact, which combines all our efforts to support racial equity and social justice and to connect these efforts through and for our associates, our culture and our operating model. This task force will amplify our…

Thanks, Chris. As Chris highlighted, we achieved our upside case scenario for the third quarter, as we benefited from gradual improvement across almost all of our markets as well as the strength and diversity of our portfolio. I will start with our consolidated results and for the sake of simplicity all of the comparisons I discuss today will be against the third quarter of 2019, unless noted otherwise. Starting with the income statement, third quarter consolidated revenue increased 1% on a reported basis and 2% in constant currency, the Signal acquisition, which we completed during the quarter, had an immaterial impact on the growth rate. Adjusted EBITDA decreased 4% on a reported basis and 3% in constant currency. Our adjusted EBITDA margin was 38.8%, down about 190 basis points compared with the year-ago quarter. Despite the decline, we still see this as a very good result given the significant challenges in the market. Third quarter adjusted diluted EPS increased 7%. We benefited from reduced interest expense related to our debt refinancings and lower LIBOR rates as well as a lower adjusted tax rate of 21.3%, which reflects our tax planning initiatives and a reduction in the Indian statutory rate. Now looking at the segment financial performance U.S. Markets revenue was up 4% compared to the year-ago quarter. Signal had an immaterial impact on the results. Our Financial Services vertical revenue grew 11%. As Chris discussed we saw improvement in all our lending end markets with considerable strength in mortgage and solid recovery in auto and consumer lending. Our card business faced challenging comps from our participation and a significant credit card launch in the year ago quarter. And to address the significant impact of mortgage in the quarter, excluding this cyclical growth, the vertical would have declined low-single digits, an…

Thanks, Todd. And now to conclude, this morning you have heard how we continue to effectively manage the global stresses created by the COVID pandemic. At the same time, we continue to invest for the long-term strength of our business with meaningful progress in global operations and Project Rise. A very exciting set of strategic partnerships to enhance our data and capabilities around consumers crafted by our global solutions team and the well planned out build of our media vertical. While we maintain a clear plan for long-term growth, in the near-term, we will continue to prioritize the well-being of our associates, customers, consumers and our communities. And I will end by reiterating my hope that all of you and your families remain safe and healthy. And with that, I will turn the time back to Aaron.

That concludes our prepared remarks today. For the Q&A, we ask that you each ask only one question so that we can include more participants. And now let’s go to those questions.

[Operator Instructions] First question comes from Andrew Steinerman of JPMorgan. Please go ahead.

Revenue guide up or down 1% to up 2% year-over-year, obviously that’s very similar to the plus 1% organic performance that we just had in the third quarter and so my question is, how does that frame with the comments that we are seeing consumer credit recovering. When you look at your October trends, are you extrapolating conservatism from there? What frames that fourth quarter organic revenue guide range?

Hey, Andrew. Well, good morning. This is Chris. And the first part of your question got cut off. So can I ask you to repeat it, and then I think Todd will best answer that one.

Okay, thanks. No problem. So I am thinking about the fourth quarter organic revenue guide to down 1% to up 2%, and that sounds very similar to me to the third quarter performance that you just guided, plus 1% organic revenue growth. And so my question is what’s being assumed in the fourth quarter guide in terms of the consumer credit activity, of course you highlighted that consumer credit activity on your slide is recovering. So why isn’t organic revenue growth, let’s say, better in the guide than it is in the third quarter performance.

Okay. Good morning, Andrew, and thank you for the question. As Chris indicated, I will take that one. So why don’t I walk you through some details as to how we are looking at the anticipated performance of our three segments in the fourth quarter. So first starting with the U.S. markets, we are anticipating that U.S. markets will grow in a mid-single digit range. Mortgage will continue to be strong for us and as you alluded to recovery will continue in our other annual lending markets that we went through detail on of auto and consumer lending and card and banking. However, the one area to call out is within the emerging verticals. We do expect that our Healthcare business will be down as we have signaled throughout our earnings calls in Q2 and Q3, because of the impact of the – the front-end has on the back-end. And then just to elaborate on that for a minute, the front-end is where we are doing insurance eligibility checks and patient estimation at the onset of the pandemic, we saw significant declines in those volumes as either hospitals cut back and elective procedures or patients just didn’t simply want to be in the facility. So that has had – that has an impact on the insurance coverage discovery part of our business in the back-end. So everything that we have laid out before about the impacts is playing out pretty much as we have been talking about over the last several – over the last couple of quarters. If I move over to International, we are expecting International business to be down mid-single digits on a constant currency basis in the fourth quarter. We are anticipating that the recoveries will continue. But, as Chris said in his remarks, the recovery has been uneven across all of our geographies that we operate in. So that just continues to be an area of focus for us. And then finally our Consumer Interactive business, we are expecting it to grow low-single digits and we – on the direct channel side of that business, we continue to see strong interest in our credit products, pre-bureau monitoring. However as again we have talked about over the last couple of quarters, we do see on the impact of our indirect channel partners curtailing their marketing programs still having an impact in the fourth quarter. So if you take all that together, Andrew, I mean, that’s how we are getting to the guide that we put out for the fourth quarter.

Right. And can I just get a clarification, are you assuming in U.S. markets additional recovery from October or just kind of consistent with October levels?

I think you are seeing – it depends on the market again though, Andrew, right, and that’s the context that we provided on the volume charts in the presentation. So I would say we continue to expect mortgage to be particularly strong into the fourth quarter. We expect to see a continued recovery in consumer lending. The one word of caution that I would give you in consumer lending and when you look at those charts and just those charts in general, you are just looking at our online transactions, you are not looking at the full picture of our revenue. So I think that’s just – probably looking on the call, context that, so there is a meaningful part of our business with this batch and that’s a good indicator of our consumers, our customers’ willingness to be more aggressive with marketing. So that we are starting to see our customers come back and be more aggressive, but not necessarily at the same level that we are seeing on the online volumes. So, and then kind of round that out, auto, we continue, we expect to kind of continue on the trend that it’s on as well as banking and credit card.

Perfect, thank you.

Thank you. Next question is from Manav Patnaik of Barclays. Please go ahead.

Just to follow-up on your comments on the media additions there. Can you give us like an example, maybe real example of how your datasets combined with these acquisitions and the value there? I guess so I am trying to understand what the niche, is it more about just the ID side to say, business measurement or maybe it’s more, I was just hoping you could have clear data?

So, hey, Manav. Thanks for the question. You kind of broke up at the beginning, as well. I just want to make certain we got this right, your question about our media vertical and the acquisitions that we made.

Yes, correct. I just wanted to get some kind of a real world example of how your capabilities in these acquisitions actually work. And what’s the real niche that you are going after?

Yes, Chris will take that one.

Yes, great Manav. And operator, I am not sure if this is a technical issue, but the first two questioners, we missed the beginning of their questions. So we are going to struggle unless we can correct that. Okay. Yes, Manav, so we believe for some time that there is an opportunity for us to expand into data and consumer matching in activation services, and in the digital marketing market and we had obviously some intrinsic capabilities as a sophisticated data management company that also possesses a lot of valuable data for marketing enhancement and segmentation, and we have also got very rigorous matching logic as you would expect as a leading bureau. What we did not have necessarily were some of the complementary capabilities needed to commercialize that. So one of those capabilities came in the form of the acquisition of TruSignal where we gained an online platform and a direct to the end user interface that allows marketers to come in and use a user-friendly UI to explore all of our data and the incremental data that TruSignal possess and slice and dice and create very custom and precise audiences. That is a big part of what marketers do as they pursue ever more specific segmentation and individually pursue this segment of one approach. Then when we next acquired Signal, we got there was begin the beginnings of an identity graph, which is really a vehicle for organizing all of the various data elements including digital identifiers around our traditional consumer records, which are comprehensive and accurate. In addition, we gained connections to a variety of publishers in the digital marketing ecosystem where our clients on the marketing side after they created an audience in the appended digital identifiers to those audience to then connect to publishers in…

Yes. Thank you.

Next question is Jeff Meuler of Baird. Please go ahead.

Yes. Thank you and good morning. Want to ask about the new sales metric that you gave us both given that it’s a new external metric and that 43% growth is a lot higher than I would have ever expected in this environment. So I guess two questions, first, can you just be more specific of what the metric is especially given that many of your revenue streams are transactional, so are they just an estimate or is this based on minimums? And then second, is there any rule of thumb or way that you can help us translate that into revenue. So picking something like if you would normally get, I am making up a number about 4 points of growth from new sales. If you have 40% plus growth that’s 5.6 or so points of revenue contribution, just anyway you can help us with what it is and how that translate us through to revenue? Thank you.

Yes, so let me handle the first part of the question, but just as to the second part, Jeff, you sound like me as a business review looking for that rule of thumb translation. I think the first thing –

I mean, I mean your company.

Yes, exactly. The first thing I want to emphasize is that these are not GAAP accounting numbers. These are numbers based on our internal sales pipelines, which we manage with some rigor but they obviously don’t meet the standard direct revenue reporting in the financial results. But they are indicative of the success we are having in the marketplace both because we have adapted to what we are selling and the services that we are providing to consumers rather to our customers during the pandemic with improved sales practices that which come from a variety of effectiveness measures. And so as you can see in 2020, the year of the pandemic, our overall sales pipeline, as we measure it is up 8% and then our rate of bookings or sales closes has improved by 5%. However, the dollar value of all those bookings year-to-date has improved 43% and the way you bridge that math is simply our – the average deal size has increased by about a third, roughly. Right and again, I just think it speaks and the regional shared is it speaks to both the ongoing good health of the financial institutions that we serve and the broader market places that we serve and also that what we are offering is attractive and that we are delivering it successfully to the market. So that is what we will answer the first part of the question. As to the second one, frankly, I just don’t have a good rule of thumb, we are relying on the sales executives estimates of the deal size. Sometimes, that’s right. Sometimes, it’s not. There is also uncertainties around how long it can take to integrate your particular client for a variety of reasons, client motivation, IT backlogs, etcetera, etcetera. So take it as a number, a directional number of kind of the health of the business.

Got it. Thank you Chris.

Thank you. The next question is Toni Kaplan, Morgan Stanley. Please go ahead.

Thanks very much. Chris, you mentioned in your initial comments that you are working with regulators to try to help promote greater financial inclusion. And from my reading of guidance proposal to create a new government sponsored bureau, I guess the objective seems to be just that. And so, would you expect that if you and other bureaus are able to show progress on this front that perhaps maybe there wouldn’t be a need for the government to set up a new bureau, maybe you could just address that and any thoughts on the topic in general, just given the election coming up next week. Thanks.

Yes, absolutely. Happy to discuss, and obviously this is a very important industry or other issue, not only for our industry, but for the American economy and consumers. And look, I think the bureaus collectively do a very good job of providing comprehensive and accurate and objective information to serve as a basis for extending credit. Now we are not the only information that is used and as you guys know, through recent years each of the bureaus has been extending the range of data available to identify consumers and evaluate their eligibility for loans. I think one thing that everybody can agree on is that increasing the visibility of all consumers so that they can participate in the lending market is a good day. That’s financial inclusion and I think both sides of the aisle are aligned around that. Often the debate comes down to a question of how do you achieve that end. Do you achieve it by the government providing the information and likely restricting certain negative aspects, like how long a delinquent credit remains on a credit report or do you provide even more information on the consumer, so that the consumer gets full credit for other financial behaviors that demonstrate the wherewithal to manage credit. We believe in the latter. I mean, we think that, and we know that when we move to trended data we were certainly able to score a tens of millions more consumers when we began adding alternative data like utility payments and negative activity on checking account and a whole variety of things that we have discussed previously. Again we could score millions of more Americans and score them accurately. What we would advocate for is that, the government assist in broadening our access to data types like telecommunications payments, utilities, consistent rent payments, etcetera, etcetera and then we round out individual consumers financial profiles and help lenders evaluate them and extend credit and price credit accurately for a much larger swap of the population. So if the Democratic candidate, Biden does win the presidency and there is I imagine what we find is a period of intensive dialogue where we are really trying to identify, what is the problem we’re trying to solve. What’s the best way to solve it and I think the bureaus have an important role in whatever solutions are proposed.

Thank you.

Thank you. The next question, Gary Bisbee of Bank of America. Please go ahead.

Hi guys, good morning. Just one quick follow-up on another one. And then a question on, just on, Manav, can you say who the customers are, who is buying this [indiscernible] marketing agencies – they are doing the marketing. And then the question I would like to ask is really on the cost front in the margin, wondered if you could just say is it right to think that the majority of the Project Rise and the other investments you are , whether that’s product development and others are falling within U.S. markets because it’s interesting to see costs there in dollar terms reaccelerate the pace of growth, reaccelerate quite a bit this quarter or significantly margin down more than International where you are still seeing cost decline point of it. Just any color on how we should think about levels of investment within this segment? Thank you.

Okay. I will handle the first question and I will pass it to Todd for the second question. But in terms of the digital marketing services that we are providing, it could either be a marketing agency or marketing advisor or an intermediary that was assisting a Corporation in client acquisition through advertising efforts or it could be the corporation directly. We have that, right. But what we are able to do now is help marketers broadly understand who they are targeting and ensure that that is indeed the audience they want to target and then we are able to array digital identifiers around those individuals and then help publishers and help activate those marketing campaigns through publishers.

Okay. Thanks, Chris, and good morning, Gary. Thanks for the question. So specifically on the margin, just kind of starting high level margin came in at 38.8% as I said the onset of the call, close to 39% what we would consider to be a very strong quarter, especially when we were tromping against what was probably the highest adjusted EBITDA margin, in the company’s – in the company’s history. When you drill down into the margins that we are seeing at the segment level, in particular in the U.S. markets, we still came in with what we would consider to be a very strong 40.4% adjusted EBITDA margin and to your point, we have continued to invest in particularly in areas such as solutions operations as we, as Chris highlighted earlier in the call, but also in technology with Project Rise. The only caveat with that is with Project Rise do handle that as an add-back for our non-GAAP metrics, so you are really not seeing that impact when we look at the margins this way. The other thing I would highlight, I mean I mentioned this in my remarks. Within the U.S. – within the U.S. markets, we accrued for some legal and regulatory matters for losses that we considered were probable and our best estimate for obvious reasons I can’t get into much detail – more detail on that, but consider that to be a kind of a one timer within the U.S. markets number on this [indiscernible] I mean I think what you see, if you kind of look at the other segments, you will see International’s margins coming in at 39.2%, which was down by 80 basis points. I think you are seeing as the business comes back on kind of two things, the resiliency of the business itself and the flow through of the profit. If you are also seeing those investments, I mean solutions and operations in that business as well too.

Thank you. The next question is from Andrew Jeffrey with Truist Securities. Please go ahead.

Thank you. Good morning, appreciate you taking the question. I guess just a couple of questions around the U.S. business, particularly the FI business. Chris, you called out strength in consumer, which is largely FinTech. I wonder if you could drill down a little bit into your point of sale lending commentary and whether that includes buy now pay later if that’s a driver and just juxtapose that with some of the weakness in the indirect consumer segment, which I assume is in some cases similar customers. So if you could just kind of parse out that relationship a little bit too will be helpful?

Okay. Look, I think you have identified an interesting mix issue that you see in the consumer sub-segment of our financial results. I mean, first thing I would say about the FinTech and in the consumer – online consumer lenders in general is that stability has returned to that space and we are seeing improved dollar volume as well as – a strong return in online volume, although the mix is really different. And I know you follow this, Andrew, that there’s consistent funding flowing into the FinTech lenders and they are beginning to deploy it through more aggressive, albeit still depressed levels of direct marketing relative to pre-COVID, right. But we have got a large swath of this market, as you know and we have particularly large chunk of the point of sale lenders, right. And those lenders are doing exceptionally well in this environment because e-commerce purchases have increased a lot. And that’s why you see from the charts that are online transaction volume in the consumer segment has increased pretty much back to pre COVID. Now, as Todd pointed out earlier, online transactions are a good portion of our revenues in this space, but they don’t account for all of them right, there is still a batch analytics, portfolio management, marketing pre-screen etcetera. But the point-of-sale lenders don’t rely on us to pre-screen and acquire customers and they write on the marketing of their channel partners, right. And so while that segment is booming and thus driving the high origination volumes, you see it’s not leading to the batch marketing work that we were enjoying before COVID when the mix was different. In the next year comment a sub-segment within a point of sale lenders, I really I just don’t have visibility at that level. So I will leave it to Aaron and perhaps you guys can follow-up after the call.

Alright. Thank you.

Thank you. The next question George Mihalos with Cowen. Please go ahead.

Hey, good morning, guys, and thanks for taking my question. I guess I just wanted to follow up on the question Andrew asked and maybe ask it a little bit differently. You’re talking in the U.S. about momentum on the online side with consumer lending and FinTechs and again you particularly called out the point of sale finance guys, I think you also made a point Chris though, when you were talking about the UK, which is a big, a big FinTech market, a big neo bank market, and so that in that area alternative lending is under some pressure. I was hoping maybe you can kind of juxtapose the two kind of why you think you are seeing sort of strength in the U.S. versus UK, is it more nascency of the U.S. more mix of the U.S. Just any sort of color you might be able to provide there?

Yes, I think what’s happening in the UK is that their regulators have been examining lending practices across the space and in particular the online lending segment where the players in question, it’s a combination of both online lenders, but also we call alternative lenders that are originating unsecured in very short-term loans and the regulators have concluded that some of these players, their practices, be it interest rates or a variety of practices, they actually don’t like right. And so they put pressure on those lenders. That pressure has led to a flood of complaints and recovery efforts by consumer advocacy firms in the UK that has pressured a variety of these players to lead the market and that’s really because of the cost of managing the complaints that they are receiving or the recovery request. You are not seeing that in the U.S. and I think it’s a function of different lending practices and perhaps just a function of the stages of evolution of the two different marketplaces. But I think that’s why we are seeing a net decrease in the lenders in the UK – in the UK markets or there is not that dynamic going on in the U.S. markets.

Great, thank you. Very helpful.

Thank you. Next question Shlomo Rosenbaum of Stifel. Please go ahead.

Hi, thank you. Hey, Chris, just a quick question on the commentary that the deals in the deal pipeline go up a lot, which area is driving them up so much, why are they going up so much, what’s going on? Is there some kind of mixing going on right now or what do you attribute that to?

Okay. Yes, you’re talking about our sales pipeline, right.

Yes.

I talked about earlier in the metrics and why the sales did larger. Well, look, I would like to think it’s because but I can’t exactly speak for what’s happening in the market across our customer base. I do know that clients are upgrading their credit origination and their portfolio management, data models and practices to use the latest and greatest data and attributes that are available from TransUnion and those tend to be fairly chunky sales. So we are seeing CreditVision, CreditVision Link and of course the COVID-19 attributes driving a lot of that sales success. And then as we have spoken in previous quarters, with the surge of activity online, fraud mitigation, leveraging services like iovation in our overall fraud suite, which we call IDVision, that’s been an attractive area for customers as well. So I think those are the two principle components that are driving the surge in sales in bookings revenue, and the increase in average deal size.

Okay. Do you think that that’s unique for where we are right now like within the cycle in the downturn, or is that just something that you think is like the trend that you envision going forward?

Yes, I don’t by any stretch believe that the demand for the two sets of products, credit and fraud mitigation is played out by any way. I think it’s probably accelerating on the credit side and really just begin to, well, I can’t say beginning but it’s accelerating on the fraud side too. Whenever the bureaus materially innovate on the data analytics side in a way that can really help lenders better understand their risk around origination and portfolio management, it’s going to lead to increased sales and an upgrade cycle, if you will. And I think that material segments of the marketplace, as consumers have lost employment or entering into forbearance relationships are experiencing distress and lenders need to understand that and in order to understand it, they need to subscribe to our more advanced datasets and I think that’s what’s happening and I think you will see that upgrades continuing in the intermediate term.

Okay, thank you so much.

Great. And that brings us to the end of the call. I know it’s an extremely busy day with a spate of earnings throughout the space. So we want to be respectful of your time and I give you guys the opportunity to deal with all of those. So thank you everyone for joining us on the call today and we look forward to talking to you down the road, and we hope you are all safe and well. Have a great day.

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