Good morning and welcome to the TransUnion Third Quarter 2021 Earnings Conference Call. [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. 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 their 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, in 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 statement. With that out of the way, my pleasure to turn things over to Chris Cartwright.

Let me add my welcome and my best wishes that you and your families are healthy. Now I'd like to lay out the agenda for this morning's call. First, I'll discuss the resilience of our markets along with some of the broad macro trends that we experienced in the third quarter. I'll also update you on our strong underlying business performance that reflects our ability to execute the growth playbook that I've outlined on previous calls. Next, I will discuss our strategic ambitions, and how our recently announced acquisitions and divestitures support them. We continue to build off a strong foundation in identity resolution that's applied broadly across our various solutions and all of our end market. This capitalizes on our strengths as a credit bureau as we extend and scale our marketing risk authentication and fraud solutions to enable better consumer experiences in a digital environment. As part of this discussion, I'll offer some additional comments about our recently announced acquisition of Neustar. I'll also provide color on today's announced acquisition of Sontiq, a highly complementary business that empowers consumers with identity protection solutions. I'll also touch on two attractive equity investments we made in financial technology firms in the UK and India. Each furthers our consumer identity focus strategy. And at the same time, our decision to divest TransUnion Healthcare both helps to fund these attractive acquisitions, and to sharpen our focus on our core markets and capabilities. Finally, I'll pass the baton to Todd to discuss our third quarter results in detail, along with fourth quarter and full year 2021 guidance. Let me start with the third quarter. We posted very strong results as most of our markets continued to rebound and our growth outpaced underlying market recovery on the strength of our growth playbook, namely, new…

Thanks Chris. Let me take you through our performance starting with our consolidated results. And for the sake of simplicity, all of the comparisons I discussed today will be against the third quarter of 2020 unless noted otherwise. Third quarter consolidated revenue increased 14% on a reported basis and 13% in constant currency. The Signal and Tru Optik acquisitions had just under one point of impact, resulting in organic constant currency growth of 12%. Excluding mortgage which represented about 12% of total revenue over the past 12 months from both the third quarter of 2020 and 2021, our business grew 17% on an organic constant currency basis. Adjusted EBITDA increased to 21% on a reported and 20% on a constant currency basis. Our adjusted EBITDA margin was 41.3%, up 250 basis points, compared with the year ago quarter, driven primarily by the strong revenue performance. Third quarter adjusted diluted EPS increased 24%. This was largely driven by strong adjusted EBITDA growth and the benefit from reduced interest expense related to our debt refinancing, prepayments and lower LIBOR. Now looking at segment financial performance, US markets revenue was up 14% compared to the year ago quarter, the two media acquisitions had about one point of impact on revenue, excluding mortgage, organic revenue grew 21%. Adjusted EBITDA for US markets increased 19% on an as reported and on an organic basis, adjusted EBITDA margin improved by 175 basis points, largely as a result of the strong revenue growth, partially offset by our continued strategic and operational investments and the cost to integrate and scale our recent media acquisitions. Diving into the results by vertical; financial services revenue grew 11% and was up 31%, excluding mortgage. Looking at the individual end markets, consumer lending continued its strong rebound throughout the third quarter, as…

Thanks Todd. To conclude this morning, we took you through a strong third quarter that highlights the resilience of our markets and our ability to effectively execute our growth playbook. And as our outlook for the year has further improved, we raised our outlook for the full year for the third consecutive quarter. We also highlighted our ongoing strategic pivot to deliver solutions for consumers and our customers in a rapidly evolving online environment. The Neustar and Sontiq acquisitions will play a critical role in advancing the strategy and will deliver compelling financial performance. I'll 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.

Right. Thanks Chris. That concludes our prepared remarks. 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.

[Operator Instructions] And the first question comes from Andrew Steinerman of JPMorgan.

Hi, everybody, I'd like to know on Sontiq what's the mix of revenues between corporate or institutional revenues versus direct competitors, direct-to-consumer? And I'd also want to know who the competitors of Sontiq are? And if it's okay, I know if it's bad. I'm going to ask a second question. What were mortgages as a percentage of revenues as of the third quarter?

Yes, so good morning, Andrew. This is Chris. And the audio faded a little bit, but I believe you asked two questions. The first is kind of the revenue mix across Sontiq which we discuss, and then also the performance of mortgage and the total of mortgage in the third quarter, right?

Yes.

Yes, let me jump into Sontiq. So the mix of revenues roughly about 25% of their revenues, are direct-to-consumer little bit more than that. Close to 20% is a direct sale to the insurance industry, where their solutions are bundled with personal and commercial policies. Direct sale into employee benefits, both to corporations directly and through brokers is another 20%. And then about 34%, 35% is into financial services, right. So it's a fairly broad mix. We like it because it gives us some additional channels for the combined suite of solutions with TU bringing credit and credit monitoring and education and like and some focused on the protection. And then Todd, why don't you handle the mortgage question?

Yes, sure, Chris. Thanks. And good morning, Andrew, as far as mortgage is concerned on a trailing 12 month basis, about 12% of our revenue is coming from mortgage and it's down a little bit from where we were at the end of the second quarter when we said it was about 13%.

The next question comes from Jeff Meuler of Baird.

Yes, thank you. On Sontiq, I recognize that the CI business and the immediate opportunities kind of cross-selling, I guess, both ways between Sontiq and our CI capabilities and partners and direct-to-consumer under your brand. Can you help us with the long term vision? I don't know if this is a coincidence in terms of the buzzword of identity. But as you think about bringing together Neustar capabilities, TransUnion capabilities, potentially into Sontiq, can you build some sort of super app or something that's really differentiated relative to what else is out there in the market? Thank you.

Yes, thanks for the question, Jeff. So I mean, I think you've touched on a couple of important points. At the core, we're extending the value proposition of what we can do for consumers, whether we reach them directly through our own marketing efforts and our own website, or through indirectly through different platform providers. And, look, we've had a relationship with other players where we could provide this on a partnership basis. We felt like we were missing an opportunity to develop this broader integrated suite in our arsenal and that's really Sontiq comes in. Also Sontiq has multiple channels as I just answered, but also direct-to-consumer presence and we can augment that with the full complement of our credit information. And yes, look, it's not a complete coincidence that we've acquired Neustar which is a leading provider of identity information and resolution capabilities, to help businesses target their consumers and also to protect transactions. And then now we've got this fraud and identity plays with Sontiq. I think there is some opportunity for innovation between those two positions. We also are the only bureau that owns a complete Public Records Archive and investigative solutions in the US. And again, that also gives us compelling content to engage consumers, and help them understand other dimensions of their data identity if you will and the ability to review and to correct an action. So I feel like, look, this just adds not only audience but a lot of capabilities for us to be creative with.

The next question comes from Gary Bisbee of Bank of America Securities.

Hey, guys, good morning. I guess you talked about each of the transactions and the financial impact that they would have on '22 and the two acquisitions each thing to be about neutral. I think that's obviously not assuming benefits from the proceeds of sale. And yet, there's also dilution from the sale. So I guess can you just give us at a high level how are you thinking about the impact of the three portfolio moves on 2022 in total?

Yes, sure. Hey, Gary, this is Todd. Good morning. Thanks for the question. Here's how we're thinking about implications of Neustar and Sontiq as well as Healthcare in 2022. Let me, first let me remind you of what we spoke about with Neustar back in the middle of September. So first, with Neustar, margin - from a margin perspective clearly a lower margin than TransUnion today, but we spoke about the expense energies that are they're clearly not buying the business for expense synergies, we're really excited about the top line growth. So if you take those two things kind of hand-in-hand, the business that today has got a 20% EBITDA margin, we have aspirations that over the next four to five years, it's going to scale to be something like TransUnion's margin today. However, in '22, it's a year of heavy lifting for us. So - act on our margin, from an earnings per share perspective, we did say that it would be slightly dilutive in 2022, but then accretive as we go forward, beyond, if you then turned to Sontiq, Sontiq as we covered this morning, we're expecting, if you look at the margin that's kind of implied in the numbers that we've put out there. It's already carrying margins similar to TransUnion's margins. So that will not be dilutive to the overall margin profile. From an EPS perspective, we're expecting it to be roughly about neutral in 2022. And then with growth thereafter. And then finally, Healthcare. As you can see, the numbers that we put out this morning for the size of the business, revenues about $190 million, and then mid 40% adjusted EBITDA margins, clearly that margin is higher than TransUnion's overall margin. So if you think about '22, it definitely will have a dilutive impact on the margin, as well as on earnings per share. So I would characterize '22, as a year, where we're going to integrate these acquisitions. And I think the most important thing is these are investments for the future of TransUnion to sustain the top line growth that we've enjoyed since our IPO, and that's the spirit behind everything, that we're doing here to reposition the portfolio towards attractive traders for growth. And when we'll have an Investor Day more than likely in first quarter of '22. So we'll get into all the details at that event.

The next question comes from Andrew Nicholas of William Blair.

Hi, good morning. Thanks for taking the question. I just wanted to ask about capital allocation from here. Obviously, it's been a pretty active last couple of months. So I'm just wondering if there any other portfolio moves to make or if you're open to M&A for the right opportunity right now? Or are you planning on kind of taking a step back in the near term to, obviously handle what is a few different balls that you're juggling right now? Thank you.

Yes, thanks for the question, Andrew, what a difference a quarter makes right. Second quarter, we got a lot of questions about the degree to which we deleveraged and toward debt ratio of 2x EBITDA by the end of year, and even some questions about whether we were going to increase the dividend, all a great thing to do. But as we said then, we were active in M&A discussions that advanced our strategy, and broaden our value proposition to the markets that we serve. We've now executed on a few of these, including the divestiture of our Healthcare business, which was designed in part to free capital to pay for these portfolio management moves that we've been making, but also to liberate the business and combine it with an asset that can help accelerate its growth, right. So I think it's exciting on a couple of levels. There's a lot going on in the M&A market, obviously, we've made some big moves here. And these are moves designed to drive nation, ultimately growth. And so we've got to digest them, and apply our talent and our innovation capacity to getting the most out of these acquisitions, because each one is very synergistic with a core position we have, and it's really a bet that these moves, one plus one can be more than two, right. And we believe that is the case. That said, we don't like never say never, and we're open to other moves that would advance the strategy. But we have to be mindful, of course of our balance sheet and not taking on too much debt. And also our ability to digest all of this. So we execute effectively. And then I think I'll pass it over to Todd, to talk a bit more about our thinking on debt.

Yes, thanks, Chris. So as I showed in the slides, you can see the leverage ratio that we're anticipating, so just to kind of go back and reiterate on that, if you looked at all of 2021. And on a pro forma basis, you layer in Neustar, Sontiq and subtract out the Healthcare business leverage ratio would be at 3.8x, and we've publicly said for a number of years, that our target leverage ratio is about 3.5x. So we're just slightly ahead of that. But as we also shown in our prepared materials, we're expecting that for full year 2022 that the leverage ratio will tick down to 3.3x. So the characteristics of TransUnion business model are full on display, with these acquisitions, as well because of the margins, free cash flows that businesses generate, ultimately, increased capacity that as well to gives us the confidence that we'll be able to delever. So with that being said, the ability to delever does create capacity for us on an M&A perspective. So, as Chris said, no, we're going to continue to look, the market is attractive right now, and but there's clearly a lot ahead of us from an integration perspective that we want to make certain that we execute flawlessly.

The next question comes from Manav Patnaik of Barclays.

Thank you, just two quick ones, and that is what is the, I guess the current normalized healthcare growth rate just try to understand the impact to '22 numbers and I apologize if I mistake for Sontiq like who is the competition there on the consumer side or just however you look at it.

Yes, well, let me start with the competitive landscape for Sontiq. And then I'll hand it over to Todd, for the financial question on healthcare. Look, it's many of the players that you know already, I mean, we consider certainly Experian and Equifax have offerings in this marketplace, and bring broad suite of solutions. One of the large insurers all state has InfoArmor; there's also Identity Guard, NortonLifeLock which is a direct-to-consumer play, that certainly has a comparable suite of functionality. But with amalgam we're going to bring, I think we meet the mark of the market terms, the breadth and dimension and the offering. And then we also have some kind of some unique benefits. So obviously, credit scores and reports and a simulator. And then one and multi bureau monitoring as part of the core package, as well as monitoring the dark web, looking at transaction monitoring through bank relationships, reputation and social monitoring. And in the event of a negative occurrence, we can restore the consumers' identity, as well as pursues reimbursement of stolen funds. So we really deepened our product offering here in the direct-to-consumer business, and that's going to benefit us both in the direct market and in the indirect space. Todd on Healthcare?

Yes. As far as Healthcare's growth rate, I think what's important to point out here is that vertical turn to growth in the third quarter, obviously impacted by the pandemic over the last several quarters. And that's the growth rate that we experienced in certain quarters mid-single digits.

The next question comes from Hamzah Mazari of Jeffries.

Hi, this is Mario Cortellacci filling in for Hamzah. Just wondering if you could just touch on the rationale for selling Healthcare. Obviously, you guys have made the point that it's much better off with a healthcare focused business and can benefit from that. But were there no synergies within TransUnion? Or are there any dis-synergies from divesting? And then I know you just touched on growth with Manav. But just around the timing, and you said that volumes are approaching pre COVID levels, you've returned to growth. But could you just update us on where is the revenue and the margins are today versus pre COVID levels?

Sure, well, we'll unpack the question, starting first with the strategic rationale for divesting Healthcare. And look, our position has been for a long time that Healthcare, both accelerated our growth, but also provided some portfolio diversification. And so we like the business and we invested in internal innovation and acquisition to grow it. However, as we've looked at the overall macro dynamics in the healthcare market over these past several years, there's a real push toward consolidation and building scale, both on the provider side, and actual healthcare providers themselves, the hospital systems, medical systems and the like. And also on the healthcare provider space, right. And so we felt like, we needed to gain scale and breadth in our offering to the marketplace in order to fully compete. But then we had a whole variety of other growth and innovation ideas. And frankly, not the balance sheet to fund it, all right, nor the pure focus on the healthcare space, that a dedicated player like nThrive backed by Clearlake can provide when the nThrive business was marketed a couple of years ago, we looked at it hard. And ultimately, we decided that given other growth ideas that we had, we needed to pass on it. But at that point, we realized that it was time to liberate this Healthcare asset that we bought, and find a really good strategic partner to combine it with. We think that the fit between nThrive and TransUnion Healthcare business is extremely complimentary. It gives us very nice and complete but not overlapping positions in the front and middle and back end of revenue cycle management. We're also excited that we're going to have a continuing business relationship with this new combined healthcare entity where we can provide them with data and analytic services to help them completely serve that are their healthcare customers. So that was, look, that was the rationale. It's bittersweet, because Healthcare has been a terrific diversification investment for TransUnion. But, we wanted to build scale, and really focus our portfolio on a collection of assets that made a lot of sense together, and were very synergistic, but could also be taken across all of the markets in which we compete around the world. Now, as synergies, yes, absolutely. There are some synergies; we're going to have an ample transition services agreement, as the new acquirer integrates our Healthcare business onto their platform. And look, over time, we'll unwind any dis-synergies, which we think are fairly minor.

And I'll just add on to that, from a financial point of view, obviously, we put the numbers out, you see the revenue, we said, 190, approximately, in 2021 with a mid 40% adjusted EBITDA margin, I would say, I would characterize the business as one that persevered throughout the pandemic, and it was more of an issue of an impact on patient volumes during that time, and what we found is that there was absolutely nothing structural that changed. And so now what we're experiencing is volumes now returning back to more normal levels, the business is now getting back to that mid single digit growth that we were expecting, and the case in point is the performance that we just saw in the third quarter, so and Chris articulated the strategic rationale for it. So - got it.

The next question comes from Andrew Jeffrey of Truist Securities.

Hi, good morning, guys. Appreciate taking the question. I, sometimes I feel like I've been doing this too long. But I go back and I think about the Alliance Data Conversion acquisition in 2014. And some of the rationale they talked about seven years ago, it sounds like some of the rationale behind the Neustar deal. I understand there's more fraud ID resolution. And you have proprietary data that didn't exist in that deal. But can you just talk a little bit about why, from a media effectiveness standpoint, this is a different transaction, a better transaction? And maybe how the market has changed to accommodate that?

Yes, sure. So listen, focused on what we're doing with Neustar today, and the combination of our assets. I guess at the most basic and strategic level to deal with Neustar helps us fully translate our traditional business model into the digital world. And I mean if you look back to the time, even before the internet, the CRAs have always operated at the intersection of credit risk analysis, target marketing, and product creation. So we worked with Chief Risk officers in the lending division, to understand the marketplace. And then to figure out whom they wanted to make offers to and the nature of those offers, we would then help them market the offers based on our authoritative terrestrial data. And those offers would show up, I think in pre internet, they show up in the consumers mailbox, the consumer, then, if they want to accept the offer, they initiate with a call to a call center, and an authentication experience, if you will, that back then was based on answering questions that came from knowledge of the consumers wallet, based on our credit information, and then with the acquisition of TLOxp we are adding public record information. So we've been at this intersection of these three domains for most of our existence. Now with the advent of the Internet, and the light in - to start reaching consumers on the web. We recognize there was a problem where outside of the walled gardens, a lot of transactions were anonymous. So we begin aggregating digital identifiers. And Neustar was one of the leading players in both aggregating that data, but also developing a technology platform, and a series of algorithms that help resolve identity on the fly, that could enable really accurate targeting, and fraud mitigation on the web,…

The next question comes from Toni Kaplan of Morgan Stanley.

Thank you. I wanted to ask about India, the growth there seems to be strong and recovering from some of the lockdowns that we've seen there. Can you just talk about the current state of India? And if you think the growth trajectory is fully back on track for that business?

Yes, well, I'll start off and then, Todd, as the former international CFO has got some boots on the ground experience. But look, I think the India business is proving its resilience. I mean, we've seen, obviously, lending volumes and business robustness in general has been directly influenced by the intensity of the pandemic. And India has gone through and is recovering from a really intensive period, infection rate. And we all know that. And I think what you're seeing in this recovery in a prior recovery is just how growth full and resilient that market is. And that we've got a great and broad position there. We're not only the leading provider of consumer credit information, but we're also one of the leading providers of commercial credit information, and fraud mitigation in a whole range of services. So, India is exciting. I don't think India or any market within our portfolio is yet firing on all cylinders, right? We're still recovering, there are still headwinds. But look, I think our positions overall, in the 30 markets we serve are heavily weighted toward emerging and growth full, verticals end markets so.

And I just, Chris, I just add on to that, to just follow me back to the minority investment that we made in IDfy. So, for years TransUnion has built out our business in India, by exporting IP from other geographies that TransUnion operates in. And we've benefited from such capabilities as CreditVision, fraud, decisioning, and analytics. But now, we're starting to see the opportunity to make investments in strategic partnerships in this space. So we're excited about what you announced with IDfy which is a provider of video ID verification and authentication for onboarding. And this is the type of capability that has the potential to have the IP go back the other way, which is something that maybe it's in India today, but it's something that we could use in our other geographies. So we're really excited about the opportunity just to continue to bolster the capable of the assets that we have in India.

The next question comes from Ashish Sabadra of RBC Capital Markets.

Thanks for taking my question. My question was just the changes in Apple' IDFA, and how that's affecting all the social media companies. I was just wondering if you can talk about how the Neustar acquisition, as well as the iovation and other strong identity products that you have, how does that position TransUnion for this changing environment? Thanks.

Hey, Ashish, can you repeat that? We had a little bit of a tech thing, or we didn't hear you well, we were scrambling to try to figure out what the exact question was. Could you ask it again, we want to make sure we get your question answered properly?

Sure. Sorry about that. Yes, my question was the Apple IDFA changes that seem to be impacting the social media companies, because of how the identity gets resolved. And my question was with the acquisition of Neustar as well as the iovation and other identity solutions that you have; can you help advertisers address those issues? Or how is TransUnion positioned in this changing environment? Thank you.

Yes, no, that - it is a great question. And it's one of the highest order questions of this industry. And look, this issue of identifying consumers on the web initially, it was solved by companies that focus their identity graphs around cookies. And as you have pointed out, whether it's Apple or Google or other players, with a push toward consumer privacy, the use of cookies by third parties on websites is diminishing, right? Making which is deteriorating performance of identity graphs that are anchored around the cookie. Now companies like Neustar and TransUnion design their solutions from the beginning to operate in the post cookie world, the way we resolve identity is based on multiple factors. Certainly, we have a large data set of cookies that is part of the solution. But we also have terrestrial information, cell phone information, URLs, device IDs, mobile Ad IDs, behavioral, a whole panoply of information, and a lot of real deep and thoughtful intelligence around the algorithms that resolve that information, frankly, in milliseconds, right to support personalized transactions in real time. So one of the reasons that we've doubled down in this space as we felt like the market was moving towards our broader identity resolution capabilities in that could be advantage

The next question comes from George Tong of Goldman Sachs.

Hi, thanks. Good morning. Turning to the base business, you touched on relatively healthy consumer credit trends. Can you elaborate on bank card, auto and mortgage volume trends that you're currently seeing in factoring into your outlook?

Well, let's say year-to-date and in third quarter, the performance of our financial services unit in the US is really strong. And it's substantially stronger if you control for the decline in mortgage, right. We've seen a surge in consumer lending activity and card activity as well. And even the auto business even though there are some constraints on supply is growth full and performing well. Now, in terms of a look forward, we've given you our guidance for the fourth quarter. And as you can see, it's not simply an improvement based on the overall performance in the third quarter, we're also assuming more robust environment. At this point, I don't think we're going - we're guiding for '22. I think that'll come in the early part of next year.

Great. That brings us to the conclusion of the call today. I know it's a very busy earnings day. We had a lot of news today. So we appreciate everybody's patience and perseverance working through all the news. It's an exciting day. So we know that you'll take the time to do that. And we thank you for spending the time with us this morning. Wish you all a great day today. Bye-bye.

The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.