TransUnion Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Second quarter exceeded key financial guidance metrics, with 9% organic constant currency revenue growth. Adjusted EBITDA increased 8%, and adjusted diluted earnings per share was $1.08, $0.09 above guidance.
• Strategic Priorities: Progress on technology modernization with the OneTru platform, enhancing identity graph and integrating public records. AI tools like OneTru Assist and OneTru AI Studio drive productivity. Marketing Solutions and Communications Solutions (including Trusted Call Solutions) show strong growth.
• India Update: Celebrated CIBIL's 25th anniversary, with India representing a long-term growth opportunity. Consumer lending in India expected to recover, with 10% full-year organic constant currency growth targeted, including high teens in Q4.
• Innovation: Launched new fraud models, freemium offerings in U.S. Consumer Solutions, and expanded OneTru capabilities for better identity resolution and analytics.

Segment Performance

• U.S. Markets: Revenue increased 10% in the quarter. Financial Services grew 17% (11% excluding mortgage). Mortgage revenue grew 29% despite flat inquiry volumes, accounting for about 12% of trailing 12-month revenue. Emerging Verticals grew 5%, led by double-digit insurance growth. Consumer Interactive grew 2% organically.
• International: Grew 6% on an organic constant currency basis. India’s growth accelerated to 8%, with commercial credit, direct-to-consumer, and API marketplace driving growth. Canada and Africa grew double digits, while Asia Pacific expected to return to growth in the second half. Latin America saw 4% growth.

Guidance

• Third Quarter: Expected revenue $1.115B-$1.135B (up 2%-4% organic constant currency, excluding breach headwind 6%-8%). Adjusted EBITDA $397M-$411M, up 1%-4%. Adjusted diluted EPS $0.99-$1.04.
• Full-Year 2025: Anticipates revenue $4.432B-$4.472B, organic constant currency growth 6%-7% (excluding mortgage 4%-5%). Adjusted EBITDA $1.58B-$1.61B, up 5%-7%. Adjusted diluted EPS $4.03-$4.14.

Risks

• Macro Uncertainties: U.S. fiscal policy impacts on inflation, interest rates, and economic growth pose risks to lending conditions. Elevated 10-year U.S. treasury rates could negatively affect the economy.
• Acquisition Risks: Closing the Mexico acquisition involves regulatory hurdles and may take time.

Question and Answer

• Q: About outperforming market driven by new business wins, what's the driver?

A: Combination of customer mix (fintech lenders recovering), new technology (OneTru platform, alternative data), and product innovation across financial services segments (mortgage, consumer lending, etc.).

• Q: FactorTrust momentum and Mexico acquisition status?

A: FactorTrust re-platformed on OneTru, achieving double-digit growth. Mexico acquisition on plan but faces regulatory review, targeting year-end close.

• Q: CI freemium rollout and intermediate growth?

A: Freemium launched, exiting beta, converting customers. Intermediate term expects mid-single-digit growth, with potential to exceed.

• Q: Consumer lending environment outlook?

A: Stable but muted, with fintech lenders recovering, and product breadth (Trusted Call Solutions, Marketing Solutions) contributing to growth.

• Q: India growth update and future outlook?

A: India grew 8% in Q2, expected 10% full-year growth with Q4 high teens. Long-term potential for 20%+ annual growth due to financial inclusion and regulatory support.

• Q: VantageScore strategy post FHFA announcement?

A: Support FHFA policy, expect score competition and innovation to benefit mortgage and non-mortgage verticals.

• Q: Transformation investment and savings?

A: $100M-$120M investments in 2025 for transformation, with benefits in 2026 including free cash flow improvement to 90%+ conversion.