Good morning, and welcome to the TransUnion Fourth Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Aaron Hoffman, Senior Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today. I hope that all of you remain 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 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 the corresponding reconciliations of 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, Form 10-Q, and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statements. With that out of the way, let me now turn the time over to Chris.

Thank you, Aaron. And let me add my welcome and best wishes that you and your families are healthy and doing well in the year. To start, I'd like to lay out the agenda for this morning's call. First, I'll highlight our ongoing commitment to critical sustainability issues. And then, I will review our strong fourth quarter performance, and the underlying market trends that position us for continued attractive growth in 2022. I'll also provide an update on the very positive performance of our Sontiq and Neustar acquisitions of late last year, as well as details on the exciting deal for Verisk Financial Services division, which we announced this morning. And then, I'll cover our progress in executing on our global technology platform initiative. Finally, I'll pass the baton to Todd to discuss our first -- our fourth quarter results in detail, along with the first quarter and full-year guidance for 2022. So across TransUnion in 2021, it was a productive year as we focused on delivering to our customers while also making bold and impactful strategic moves. Across the Company, we adjusted to a new normal as the pandemic persisted and we felt the effects of the Omicron surge. Despite this challenge, TU associates have remained completely engaged and connected across the enterprise. I want to thank them for their perseverance and commitment. Now during the year, we also continued to make important progress around diversity, equity, and inclusion, as well as on our environmental impact. Our DE&I journey. We continued to strengthen our company culture, evolving intentionally so all our associates feel informed and empowered to succeed. Our Racial Equity Task Force and CEO Action for Ratio Equity Fellow advanced equity interest in Company policies and our recruiting, hiring, and development protocols. Our associates engaged in learning and…

Thanks, Chris. And let me add my welcome to everyone as well. As Chris pointed out, a lot happened in the fourth quarter, most notably completing the acquisitions of Neustar and Sontiq while divesting our Healthcare business. In order to make clear the impact of the sale of Healthcare, we have recast results for TransUnion U.S. markets as well as emerging verticals for the past three years along with quarterly recasting for 2021. They are available as exhibits to the 8-K we filed this morning and can be downloaded as an Excel file from the investor relations section of our website. We believe this will allow you to properly assess our ongoing business. In that vein, I want to start by bridging our fourth quarter 2021 results off the rebased fourth quarter 2020, which is laid out in detail on this slide. For the sake of simplicity, from this point on, all of the comparisons I discuss today will be against the fourth quarter or full year of 2020, unless noted otherwise. Fourth quarter consolidated revenue increased 21% on a reported and constant currency basis. Neustar and Sontiq added about nine points to revenue, which means that organic constant currency growth was 12% and above our rebased guidance range. Excluding mortgage from both the fourth quarter of 2020 and 2021, our business grew 16% on an organic constant currency basis. Adjusted EBITDA increased 14% on a reported and constant currency basis, and within our rebased guidance. Our adjusted EBITDA margin was 35.8%, down 210 basis points compared with the year-ago quarter, driven primarily by the lower margins of Neustar. Excluding both the Neustar and Sontiq acquisitions, the margin would have been 37.5%. Fourth quarter adjusted diluted earnings per share increased 13%, driven by adjusted EBITDA growth, offset by higher interest…

Thank you, Todd. And to conclude, TU delivered another strong quarter and full year while also making strategic acquisitions and investments that will better position us for long-term differentiated growth. We expect to have another very good year in 2022, driven by continuation of strong market conditions and executing our growth playbook. And looking ahead, we will hold our first Investor Day in three years on March 15th. At the event, we'll introduce our next-generation strategic framework and provide an updated multi-year financial outlook. I'll be joined by a dozen TransUnion leaders who'll cover a broad range of important topics including our vertical and geographic markets, global solutions, operations, technology and talent and diversity and inclusion strategies. We're excited to share the next chapter in our story, particularly on the heels of our recent transformative M&A. And with that, let me turn it back to Aaron.

Great. Thanks, Chris. And that concludes our prepared remarks today. For the Q&A, as always, we ask that you each ask only one question so that we can include more participants and now we'll be glad to take those questions.

We will now begin the question-and-answer session. [Operator Instructions]. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jeff Meuler with Baird. You may now go ahead.

Yes. Thank you. Want to ask about marketing. If I heard you correctly, I think you said marketing revenue at TransUnion organically was up like 40%. Can you just break it down for us if that was the case and just how much is this in financial services, to what extent is the entrant into media really adding? I think there was a call-out on insurance, digital marketing, and then would just love any update on current thinking on Neustar revenue synergy potential to stick with that strong growth that you're seeing at TU.

Okay. Good morning, Jeff. This is Chris, and thanks for the question. We talked about marketing revenues in the marketing business. First, these are revenues that are derived outside credit business. These are [Indiscernible] diversification, investments, and acquisitions that we've made both at TU but also that we anchored with the large Neustar acquisition last year. So the assets independent of Neustar at TU grew about roughly 40% and we have expectations for continued strong growth going into FY ‘22. Now, as Todd mentioned, the Neustar business in total, through 9%, 8% of that was organic, but the marketing component within Neustar was low double-digits. So as you think about 2022, as we have combined organizationally, our marketing, vertical leadership, and product development and our sellers and we start to combine our datasets and capabilities, you're talking about a marketing business that is positioned to grow low double-digits at least. So we're really excited about what we're seeing. And frankly, we feel with Neustar and with our marketing business, we're running well ahead of schedule. I think the other thing that I would point out is that, the profitability of the business is scaling rapidly as we expected when we made the acquisition and we conveyed to the market. Our profitability from Neustar for this year, the expectation is about $160 million, which was above our initial expectations of roughly $145, $150 - ish. I'll pause there and see if Todd wants to add anything.

The only thing I would add is to remind everyone that the Neustar acquisition on [Indiscernible] solidly accretive to TransUnion's EPS in 2022. And I think that's just important to remind everybody because, initially, when we announced [Indiscernible] in September of last year, we talked about the transactions being slightly dilutive potentially. So the significant performance that the business had through the end of FY '21 carried into FY '22, gave us the confidence to raise the revenue number meaningfully without very high flow-through to adjusted EBITDA as well as to adjusted diluted EPS. So we are expecting a very strong year from Neustar in 2022.

Thank you.

Our next question comes from Andrew Steinerman with JP Morgan. You may now go ahead.

Hi there. A lot is going on with this year. So adding Argus, the TransUnion will have really two major transformations going on in FY '22, both Neustar and Argus. How are you going to stay focused on both and do you have to meaningfully change the Argus product road map to achieve the growth targets that you're looking for Argus in FY '23 and FY '24? And could we also get mortgage revenue as a percentage of total for FY '21?

Sure, Andrew, we can do all of that. And obviously, there's a lot going on within TransUnion as we execute on transformative strategy and really expand our product capabilities in terms of whether we can handle it? I would ask you to look at our results from the core business for both the third quarter and this fourth quarter, where on a comparable basis, we continue to perform at the high-end of the market. The core is very strong. I'd also ask for you to look at the performance of the Neustar acquisition and the Sontiq acquisition in the early days. These are; the growth full assets, the growth rates accelerating, and the profitability of scaling. We feel like we are ahead of all of our expectations and we're really comfortable with the way things are going. Now, when you get to the Argus portfolio, I think it's important to remember that 65% of the a $143 million comes from the Argus asset itself. And that asset is entirely complementary with TransUnion's focus on financial services, which remains a high proportion of our revenues globally. And in fact, in our specialized market approach, we have a dedicated credit card marketing vertical. It's one of the largest single verticals within TransUnion. And this gives us a very special asset and analytic capability that is unique amongst the bureaus. As the market is long noted, the Argus data asset is highly differentiated and many in sell-side have speculated that it was an asset better owned by one of the bureaus. We believe that's the case that we bring the appropriate market focus, not only in the U.S. but across all the geographies that we operate in. Additionally, you have to remember that one of our largest product investments in recent years has…

Well said, and mortgage?

Yeah, mortgage is 11.5% of 2021 revenues.

Thank you very much.

Our next question comes from Manav Patnaik with Barclays. You may now go ahead.

Thank you. Good morning. I just wanted to follow up on Argus as well, and maybe just a broader question [Indiscernible]. So first thing I -- again, there's a lot of acquisitions in there to be integrated; two of them seem like to me to almost turn them around. Just talk to us a little bit about the bandwidth that you guys have to manage this all at once. And just -- just a quick follow-up on Argus. You've obviously under-performed for like 5 + years now. So just wondering if [Indiscernible] gave you comfort that you guys can fix it.

Yes. Manav, I think we got the majority of your question. Your voice is a little faint there. But let me start with the acquisition of workloads. I mean, obviously that was a very important consideration before we went forward. And we thought about it and came to the conclusion that we're well-positioned to take on this incremental work in part because different parts of the organization are engaged in different aspects of integrating our various acquisitions. So Sontiq, it's primarily a direct-to-consumer play and Neustar is the integration and the growth is being led by the combination of our marketing product folks and our fraud folks, and then we're adding this complementary communications protocol. And then on top of that, Neustar and Sontiq have very capable technology organizations. And in the case of Neustar, it's an upscale, mature business that functions well, that had just reached a growth and an efficiently inflection point. And I think you can see that in that -- our profits are scaling from roughly $115 million in FY '21 to an expected $160 million in FY '22. Now, Argus will be driven primarily by the hard sub-vertical within financial services overall. Argus operated largely separate from Verisk, and has an independent technology organization that's really going to benefit from an influx of financial services, data and analytics know-how. I just spoke extensively to Andrew 's question about the capabilities that Prama brings a modernize the delivery of that technology. Now, Argus, as you said, has been lower growth in recent years and there's been a combination of factors. I mean, one, I think we bring the focus as I've said. Two, the delivery of the service has needed to be digitized for some time. And again, I'll point you to Prama. We've spent a…

Thank you.

Our next question comes from Hamzah Mazari. You may now go ahead.

Good morning. Thank you. You've touched on a lot of detail around the top line as it relates to these acquisitions but you also mentioned increased tech spend through 2024. Maybe if you could touch on what your free cash flow conversion looks like post-integrating all of these deals. Does that look a lot better than what you had pre -business transformation, if you will? Thank you.

Hey, Hamzah, this is Todd. Let me take that question. From a free cash flow perspective, historically TransUnion has run in the high teens, and I would describe that, but so we're aligned on the definition as adjusted EBITDA less capex. We've been in that range. I think the expectation for us on in the longer term is to be solidly in the same spot. The tech transformation is going to -- it's going to provide significant benefits for us. When we talked -- when we initially launched Project Rise back in February of 2020 and we told the market about it, we talked about the savings that Rise would generate. And the savings actually came quicker. And we were able to start to redeploy some of those dollars last year into valuable investments to support our products, as well as our security infrastructure. That's how I would think about the tax part of this. The other part of it is the M&A itself. And if you think about Neustar, Sontiq, and now Verisk Financial Services, Neustar and Verisk Financial Services are coming into TransUnion with a lower adjusted EBITDA margin than what TransUnion has. But you've heard that our plans are to significantly scale those businesses to bring the margin more in line to the margin that you appreciate as a holder of TransUnion's shares, so meaning in that 40% range. That's our objective, is to scale Neustar and Verisk Financial Services to those levels and we've been consistent in that messaging. So taking the combination of the investments that we're making in TransUnion along with the acquisitions we've made in our intentions to fully integrate and then also scale on the businesses, The net result is an attractive, free cash flow margin. Now is that going to happen this year? Probably not, because there's going to be investments in this year, probably next. But longer-term, you'll be back to levels that you've come to appreciate from TransUnion.

And if I can weigh in just a little bit here, I just want to point out that we at the initial guide, if you will, for the profitability of these acquisitions. And so our confidence is higher and the execution is going well. And as for the increase in the overall cost to complete the development of our global engineering platform in the Cloud, it's really proportional to the increased size of our business. The M&A has given us considerably more revenues. We're on pace to be a little bit under $4 billion this year. But again, round numbers not guide, don't get excited. but we're substantially larger organization. But there's also more technology that we want to harmonize, that we want to share a common foundation and a common set of engineering services and security approaches, if you will, and so we increased the budget to achieve that. You have to point out that Neustar is a very strong technology organization, that they've been operating in the Cloud for over six years now, and that in fact, their experience in Cloud operations and the foundation that they have built is really informing and accelerating some of the work that we're doing around here. And in the end, I think the combination of, or rather having a mature tech foundation in both the Amazon Cloud and the Google Cloud is a good kind of competitive position with these key vendors. And so we like this multi-cloud approach that we're able to evolve to given Neustar's capabilities.

Thank you.

Our next question comes from Toni Kaplan with Morgan Stanley. You may now go ahead?

Thank you. You reported another strong quarter of non-mortgage financial services growth at 27%. Just hoping if you could talk about what you're seeing in terms of competitive landscape because it seems like you're taking share, so I just want to understand where you think your best position now relative to competition. Thanks.

Yeah, it's a good question, Toni, and I appreciate it. And again, the core business is performing extremely well. And the growth rates are top of market. And I think it's really, look, we're leveraging the momentum that we've built since the LBO forward. And our growth is based on really deep understanding and insights of customer needs. It's why we invest so much in our vertical market capabilities. For example, we don't just have a financial services vertical. We have a mortgage vertical, and we have a card vertical, on auto lending vertical, a consumer vertical, etc., because these are all different flavors of lending that have meaningfully different needs, and we've got people who come from those industries who connect well at the sea level there, that market through thought leadership. And then we backed it up with innovative and increasingly broad suite of interrelated products. And if you think of that strategy, you can see how the Argus data asset fits nicely into that because an important part of our value add is managing the data and creating the tools in the platform to yield important analyses that help our clients make better decisions and take more effective actions. What we're seeing is a robust market. We think things are looking good in terms of an expansion of lending volume in FY '22. Now, of course, the mortgage bubble is unwinding. We saw a deceleration in the fourth quarter, and we're forecasting further contraction. But despite that, we're able to post some pretty attractive organic growth. And again, when you think about the FY '22 guide and you pull out mortgage, the remainder of the business is we're guiding at 9% to 11% organic, which is pretty tremendous on top of comps that we've posted in the third and fourth quarter of FY '21, which again are at the top of market. So my overall messaging is, look, the core is proving as strong and performant as it ever has. And the acquisitions that we made, albeit there were some initial concerns, they're performing well in excess of the expectations we set on multiple financial metrics. We think we're successfully broadening the number of things we can do for our clients and we're executing quite well in the early days.

Thank you.

Our next question comes from Andrew Nicholas with William Blair. You may now go ahead.

Hi. Good morning. Thanks for taking my question. I just wanted to ask maybe another follow-up on the Verisk Financial Services deal. I think you mentioned an opportunity to increase penetration with demand deposit accounts. I was just hoping you could expand on that a little bit. Help us understand why there is such a large penetration opportunity there, going from 45% to potentially higher and maybe what the implications might be to getting more DDA data, whether it be increased financial inclusion, whether it's helpful for employment or income verification opportunities, any additional color there would be great. Thanks.

Andrew. Thanks for the question. Yes. So the consortium of lenders that contribute the card transaction in information on a depersonalized basis. The 18 member strong consortium gives us over 90% coverage of card transactions in the U.S. And then we've got majority market coverage in Canada, the U.K., and Australia. And of course with TransUnion, we feel we've got the ability to take this model to other countries where it doesn't exist because we are focused on the financial services sector in all the countries in which we operate. Now in the U.S., the Consortium also decided to contribute demand deposits information. Demand deposit accounts are less concentrated than credit cards accounts, so the current coverage is about 45%. And that data is used to do a variety of performance benchmarking between the Consortium members that inform their management practices. Well, TransUnion covers the entirety of the financial services market in the U.S. And we think that there is appetite for that type of benchmarking and other analytics that we can provide some that data as you go down market, and that having broader coverage would enrich the value of the assets overall. So we believe that we can leverage our selling and our business relationships generally to increase their contributions of demand deposit activity. Now, as to your question about verified income or other insights, I want to be clear that this asset is not used for those purposes currently, it is an analytic tool and it's a benchmarking tool. That said, it is -- both the card data and the DDA data are extremely unique in valuable data assets that can fuel, I think, a generation of innovation at TransU, right? But that's where our focus is today. And again, look, I understand that there's a lot going on here. That's by design. This is a period where we can really increase our product coverage and lay a foundation of data and capabilities for another generation of growth. But we feel like this is a great asset for us, for all the reasons we've mentioned. We feel like the acquisition price is fair and attractive in that -- it's 12.5 times EBITDA for a differentiated data asset, and that include -- and that's exclusive of the revenue in the cost synergies that we have -- we believe that we have because of our intense focus on financial services.

Great. Thank you.

Our next question is coming from George Tong with Goldman Sachs. You may now go ahead.

Hi, thanks. Good morning. You expect revenue growth from Verisk Financial Services business to accelerate from low-single-digits in 2022 to high-single-digits in 2023, and low double-digits by 2024? As you know, this business has declined in recent years. You talked about modernizing data visualization in the product that go to market. Can you elaborate a bit on how much of the growth improvement you're expecting from price realization, from new logo growth, and from cross-sell and up-sell into existing customers as you implement these various initiatives?

Yeah, I can in general terms, George, so what I'll say is look, we -- we've been part -- we know this asset very well because we've been partnered with them for over a decade. And we watched performance of the asset, and we understand why its performance has been distressed in recent years, particularly in this past year where it was in the full grips of the pandemic. Now, this was a focal point for us in our due diligence. So as we completed our commercial due diligence, we talked to a wide range of customers and they all said that the Argus data asset is extremely valuable. That they fully intended to continue to utilize it, go forward. And that they even expected to increase the discretionary analytics they'd previously asked for now that they've entered into a more customer-acquisition oriented period, one of robust growth. Part of this acquisition is a bet that we are acquiring the asset at the end of a market bottom, if you will. Now, the other feedback we received from clients was that they really wanted to improve the technology delivery capabilities. And again, Argus recently released an early version of a new and improved platform that provides some of the functionalities declines that we envision providing. But of course, we have Prama. And again, Prama has been -- we've been investing in it for four or five years now, tens of millions dollars and it is a state-of-the-art cloud-based data visualization, data analysis and delivery platform that is ideally suited for the type of data and studies that markets have. So this is another reason why we are good owner. And we're also bringing a large, dedicated sales force to this product. Verisk, did not have such a sales force. We do in our sale people, buttressed by the thought leadership our verticals provide, are really good at helping clients get additional value from these type of analytics. So it's another reason why we think we can grow the assets. And again, we can expand the data coverage, particularly in demand deposits, we can expand geographically, and we can innovate and develop new use cases for our clients that we can monetize. Maybe it will be some price there as we prove ourselves as the worthy owner, delivering some increased value-add to the Consortium. But again, I think if you look at the entry multiple and also the fact that we've got considerable revenue -- considerable synergies, both revenue and expense, this is a good opportunity for us and it will be immediately accretive and we think will create a lot of shareholder value from this deal. And listen, we came away after the commercial diligence even more positive about the assets than we were previously, and in the early hours here, post announcement, we're getting great feedback from a multitude of Consortium members to really get the industrial logic of this asset in the hands of a bureau like TransUnion.

Very helpful. Thank you.

Our next question comes from George Mihalos with Cowen. You may now go ahead.

Thanks for taking my questions, guys. I wanted to circle back a little bit to the increased tech spend, the $65 million or so increase from the original numbers for Project Rise. And first question, just a point of clarification, I want to make sure those will be excluded from the adjusted EBITDA calculation, going forward? And then secondly, I think you had said by 2023 you were targeting $20 million to $30 million of cost benefit; are you able to sort of update those number for what they'll look like, I guess, kind of closer to 2025 when you're fully up and running from the tech transformation? Thank you.

Hi George, this is Todd. Thanks a lot for the question. So yeah, let me hit off the first one as far as the Project Rise costs are concerned. Yes, we will continue to exclude our tech transformation from adjusted EBITDA. So that's been our practice since 2020. So we'll continue to do that. As it pertains to the commitment that we made a couple of years ago on cost saves of $20 million to $30 million for Project Rise, as I said earlier on one of the responses, we actually did start to secure savings a lot earlier than we had anticipated in particular, in 2021. And as consistent with what we said back in February 2020 when we launched Project Rise, we said we would take the opportunity to either let that flow back down to the bottom line or should we invest back into the business. So the meaningful savings that we had in 2021, we redeployed back into the business to support our organic product initiatives, as well as our information, security posture. And so that's where the priority has been.

Great. And that, that brings us to the end of our time as we're coming up to the top of the hour, give everybody a little bit of time. We need some transition to some other calls. Thank you, everyone for joining us on the call today and we look forward to speaking with people soon. Thank you.

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