TransUnion Q3 FY2026 earnings call

• Strategic Execution & Innovation: TransUnion exceeded guidance across revenue, adjusted EBITDA, and EPS. The company launched over 40 new products and AI-powered enhancements year-to-date, representing approximately $350 million in projected revenue potential over three years.
• OneTrue Platform Migration: The migration of U.S. credit online and batch activities to the OneTrue platform is substantially complete, with legacy system capacity reduced and cost savings met. Plans are underway to expand OneTrue to Canada, India, the UK, and the Philippines by 2027, which would cover ~94% of global revenue.
• Insurance Business Growth: Insurance remains a key growth engine, generating over $430 million in revenue and serving >80% of insurance carriers. Growth is driven by recurring policy renewals, wallet share gains, and new solutions like Driver History and Trusted Call Solutions. Over half of insurance revenue now comes from outside Core Credit.
• Capital Allocation & Balance Sheet: The leverage ratio decreased to 2.5x, within the long-term target. Share repurchases accelerated, with $243 million bought YTD and a plan to reach ~500 million shares for the full year. The board increased the repurchase authorization by $1 billion to a total of $2 billion. A dividend increase to 13.5 cents per share was announced.
• Market Context: U.S. consumer credit conditions remain stable despite rising interest rates (10-year Treasury ~5%). Mortgage volumes have slowed due to higher rates, but the company believes downside is limited given multi-decade low industry volumes.

Total revenue increased 12% as reported and 8% on an organic constant currency basis (5.5% excluding FICO mortgage royalties). Adjusted EBITDA grew 9% with a margin of 35.4%.

• U.S. Financial Services: Revenue grew 11% organically (5% excluding mortgages). Auto lending was the strongest driver, growing 13%, while credit card and banking grew 3% and consumer lending grew 5%.
• Emerging Verticals: Revenue grew 6%. Insurance led with double-digit growth for nine consecutive quarters, contributing significantly to the segment. Public sector returned to strong growth, while tenant employment and media volumes were softer.
• International: Revenue grew 10% organically. India accelerated to 18% growth, and Latin America grew 18% (led by Brazil and Colombia). Canada and the UK grew 7% and 5% respectively.

• Full-Year 2026 Revenue: Raised low end; expected to be $5.131–$5.162 billion, up 12–13% (8–9% organic constant currency).
• Full-Year 2026 Adjusted EBITDA: Expected to be $1.808–$1.827 billion, up 10–11%, with margins of 35.2–35.4%.
• Full-Year 2026 Adjusted Diluted EPS: Raised by one percentage point; expected to be $4.81–$4.88, up 12–13%.
• Q4 2026 Revenue: Guided at $1.264–$1.294 billion, up 8–10% (3–6% organic constant currency).
• Q4 2026 Adjusted EBITDA: Guided at $450–$468 million, up 8–12%, implying margins of 35.6–36.2%.
• Q4 2026 Adjusted Diluted EPS: Guided at $1.15–$1.22, up 7–14%.
• Mortgage Outlook: Excluding FICO royalties, mortgage revenue growth is expected to slow sequentially due to declining inquiry volumes (-20%+ in Q4), though pricing actions continue to support performance.

• Interest Rates and Housing Market: Rising interest rates (10-year Treasury ~5%, 30-year mortgage >7%) are weighing on borrowing costs, home affordability, and auto affordability, leading to slower mortgage and auto volumes.
• Regulatory Changes (Tri-Merge Standard): Potential FHFA shift to a 'buy-merge' standard for GSE-conforming mortgages could impact revenue. Management estimates a limited financial exposure (~$33 million annual revenue impact, or ~$0.15 EPS) if all regulated loans switch, noting that lender incentives and data completeness benefits may sustain tri-merge usage.
• Litigation Costs: Higher legal and regulatory expenses related to individual consumer cases (FCRA litigation) are pressuring underlying margins, alongside technology investments.
• Economic Uncertainty: Persistent pressures in lower-income and subprime credit segments, along with moderating real wage growth, pose risks to consumer resilience and credit demand.

Q: Morgan Stanley asked how TransUnion differentiates its credit report in a potential 'buy-merge' environment and requested updates on pre-qualification market share. / A: Chris Cartwright stated that TransUnion has held or increased market share despite market digestion of early assessment programs. He highlighted TransUnion's leadership in trended credit data (2.5 years), FinTech coverage, and alternative data as key differentiators. He emphasized TransUnion's neutrality as a bureau allows resellers to choose it alongside another bureau, positioning the company well even in a buy-merge scenario.

Q: JPMorgan asked why Card/Banking and Consumer Lending decelerated in Q3 while Auto accelerated, and sought context on rate sensitivity. / A: CFO Todd Cello explained that while QoQ growth decelerated from Q1/Q2, the two-year trajectory remains healthy (~10% TAGR). He noted that mortgage is most rate-sensitive, followed by auto, while consumer lending and cards are less sensitive due to shorter durations and higher APRs. CEO Chris Cartwright added that quarterly deviations are normal and not indicative of a fundamental shift in rate sensitivity dynamics.

Q: Baird asked about the drivers behind India’s faster-than-expected acceleration (18% growth) and the outlook for the next 12 months. / A: Chris Cartwright attributed the growth to improving market volumes, RBI comfort with unsecured lending practices, and strong GDP growth. He highlighted foundational improvements: expanded bank data furnishing, redeveloped scores, and momentum in the TrueIQ analytics platform. He expects mid-teens organic growth over the next three years, supported by new product launches like fraud and marketing solutions.

Q: William Blair asked for clarification on reinvestment in technology vs. legal costs in Q4 and whether this impacts future guidance. / A: Todd Cello clarified that Q3 saw opportunistic tech spending to accelerate the OneTrue global rollout, aiming for step-function benefits in efficiency and innovation. Legal costs are higher due to industry-wide FCRA litigation but are managed via process enhancements. He emphasized that Q4 revenue and expense bases are largely flat QoQ, suggesting a repeat performance of Q3 results is achievable, with the range providing flexibility for mortgage volatility.

Q: Autonomous Research asked about the adoption rate of FICO Preferred, VantageScore, and the availability of the 'First Look' program through resellers. / A: Chris Cartwright noted that FICO Preferred is only part of their monetization strategy and that contractual details are still being finalized. However, he asserted that VantageScore’s superior performance and 90% lower cost will drive adoption regardless of monetization changes. He confirmed 'First Look' allows lenders to review insights before purchasing additional scores, available through resellers, helping mitigate evaluation costs in a challenging mortgage market.