TransUnion (TRU) Q2 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the TransUnion 2026 Second Quarter Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Greg Bardi, Senior Vice President, Investor Relations. Please go ahead, sir.

Good morning, and thank you for attending today. Joining me on the call are 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 this morning, and they can also be found in the current report on Form 8-K that we filed this morning. . 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 reconciliation 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, Forms 10-Q and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statement. With that, let me turn it over to Chris.

Thank you, Greg, and good morning, everyone, and welcome to our Q2 earnings call. Let me outline the agenda for this morning. So first, I'm going to review our second quarter results and the increased guidance for full year 2026. Then we'll get into an example of how we are driving innovation-led diversified and scalable growth across the business using U.S. financial services as an example of this strategy in action. Then I'll hand it over to Todd, who will go into the details on Q2 and provide the third quarter guide and also the full year '26 guide. So turning to the second quarter. Again, we delivered strong results exceeding our guidance for revenue, adjusted EBITDA and adjusted diluted earnings per share. Our organic constant currency revenue grew 10% and above our 8% to 9% guidance, which marks our tenth third quarter of at least high single-digit growth. And if you exclude FICO mortgage royalties, the organic revenue grew 7% and which is also above our expectations. Now in U.S. markets, revenue increased 11%. Financial Services, again led the way, up 18% or 10% excluding FICO mortgage royalties. We delivered broad-based growth across lending types driven by sales momentum across credit and noncredit solutions alongside some modest volume growth and pricing actions. Now emerging verticals grew 9% in the quarter, led by double-digit growth in insurance as well as high single-digit growth in technology, retail and e-commerce. International revenues accelerated to 6% organically, driven by our largest markets. Canada again posted strong results at 10%, and India and the U.K. also grew high single digits. In India, strong new business wins and a gradually improving credit volumes drove a return to growth. And additionally, our recently acquired Bureau in Mexico continues to track well ahead of our acquisition case on both revenue and adjusted EBITDA. Revenue growth translated into 13% adjusted diluted earnings per share growth, and we increased our share repurchases in the second quarter and through July, bringing our year-to-date total to roughly $150 million. We retain ample capacity for additional repurchases in the second half of the year under our $1 billion authorization and we also reduced our leverage ratio to 2.6x in the quarter due to strong adjusted EBITDA growth. Now our strong first half performance has allowed us to raise our full year guidance. We now expect 8% to 9% organic constant currency revenue growth, 10% to 11% adjusted EBITDA growth and 11% to 12% adjusted diluted earnings per share growth. Our 11% to 12% adjusted diluted earnings per share growth, that guide represents an increase from our prior 9% to 11% assumption. So our guidance balances operating overperformance in the first half and constructive ongoing trends in the market with appropriate conservatism given it's still an uncertain macro environment. Across our markets, we continue to experience consumer resilience and broadly stable market volumes. Specific to the U.S., lenders are cautiously optimistic and anticipate modest loan growth, which is supported by strong consumer credit performance. Now we continue to monitor inflation levels and interest rates and their potential impacts on consumer behavior and loan demand. The 10-year treasury yield is now approaching 4.7%, that's up roughly 50 basis points from the start of the year. And while this has modestly pressured mortgage activity, impacts across the remainder of our portfolio have been limited. If the current trends continue, we expect performance to be at or slightly above the high end of our guidance. At the same time, our range is designed to absorb a reasonable level of market softening. And Todd is going to provide more details on this in the guidance assumptions later. Our strong results and guidance reflect consistent execution against the growth strategy we outlined in February, unlocking the full potential of one true platform and accelerating innovation in AI-enabled solutions and translating these capabilities into commercial momentum across our portfolio. So let me highlight the milestones against each of these priorities. So first, on the platform modernization, we continue to make really good progress. We have materially increased U.S. credit customer migrations to OneTru during the quarter. At this point, roughly 60% of our U.S. match activity and 30% of online customers are now running on OneTru. That's over 4,000 U.S. credit customers now migrated. And we continue to convert the most complex activity first but maintain an emphasis on minimizing customer disruption. We expect to complete the U.S. migrations by the end of this year. Additionally, we continue to extend the OneTru platform and solutions internationally. We have now deployed OneTru instances in Canada, the U.K. and India to support the launch of our TruIQ analytics platform. We also launched TruValidate our fraud solution in the U.K. and trusted call solutions in Canada and India, creating new local market opportunities for these global products. And 1 true is enabling us to increase our innovation velocity. Across the enterprise, we launched 40 new products and AI-powered enhancements in the first half alone, contributing significantly to our sales pipeline. And beyond this innovation, we're also deploying at scale internally to improve our productivity. We are already seeing gains by using these tools across key employee groups, including average gains of over 25% for our software engineers and data scientists and early experimentation, more than 20% within our consumer support operations. These successes reinforce our confidence in the broader opportunity to drive AI efficiencies that can enhance our margins and fund future growth investments. Now these platform and innovation investments are increasing commercial momentum across solutions and within verticals and geographies. In the first half of the year, core credit, excluding FICO mortgage royalties and fraud each grew in the high single digits, driven by traction in TruIQ, alternative data and trusted call solutions. Marketing Solutions also grew mid-single digits, supported by strong identity performance with acceleration expected in the second half. So together, OneTru in our global solutions strategy is increasing our innovation, expanding addressable opportunities and supporting scalable revenue growth. So let's have a case study of this strategy in action, focusing on U.S. financial services where platform modernization, product innovation and deeper customer engagement are translating into sustained outperformance. Within U.S. Financial Services, growth has consistently exceeded underlying market volumes. Excluding mortgage, Financial Services has grown at 9% compound annual growth rate outpacing the roughly 2% average growth in U.S. consumer credit originations and real GDP growth over the same period. We have sustained this outperformance across multiple operating environments. U.S. financial services, excluding mortgage, has delivered high single digit or greater growth, except for modest pullbacks during the pandemic and in the '23 and 2024 consumer lending slowdown. This track record reflects the strength of our U.S. credit data and expanded solution suite, which have enabled outperformance across market cycles. Growth is increasingly driven by share gains, pricing and innovation, not simply underlying lending activity. Now one reason that we've been able to consistently outgrow the market is the increasing diversification of our financial services business. At almost 2/3 of financial services revenue, CoreCredit remains the foundation of the franchise. We continue to grow our share on the strength of our leading trended data and attributes as well as our differentiated and insight-led engagement model. Building from that foundation, more than 1/3 of revenue now comes from solutions outside traditional credit reports and scores. These newer revenue streams represent faster-growing opportunities that are often less directly tied to lending origination volumes. Roughly 12% of revenue comes from alternative data like FactorTrust, as well as our TrueIQ analytics enablement suite. These solutions serve lenders increasing appetite for alternative data sets and AI-enabled analytic tools to activate our data at scale. Another 24% of revenue comes from noncredit solutions, most notably trusted call solutions and our modernized marketing and fraud solutions. This intentional diversification has expanded our position beyond CoreCredit to make us a broader partner for clients across the customer life cycle. We help them reach the right consumers improve engagement, mitigate fraud, manage portfolios and make better decisions. This combination of CoreCredit leadership and complementary adjacent growth opportunities is a real differentiator for TransUnion. So the benefits of our diversified growth strategy are evident in our recent performance. Over the last 2 years, U.S. Financial Services, excluding mortgage, has grown at a roughly 10% compound annual growth rate with contributions from across the product portfolio. CoreCredit is growing low double digits annually. This growth exceeds lending volume growth, reflecting customers' continued preference for our differentiated trended data and analytics. Our alternative data and analytics are growing in the low teens annually, led by FactorTrust and new wins for our TrueIQ suite. The maturation of TrueIQ provides a new opportunity to further increase growth. Noncredit solutions is growing at a high single-digit annual rate with room for further acceleration. Trusted call solutions, in particular, has been the standout, growing over 50% annually within financial services. And we see increased revenue and bookings momentum within marketing and fraud. These solutions address a growing set of mission-critical use cases. Now AI will increase demand for proprietary data analytics and decisioning capabilities, areas where we are well positioned. Over time, we expect increased AI sophistication to drive higher data consumption, stronger demand for TrueIQ analytics and faster adoption of our marketing in fraud tools. Taken together, these trends position us to continue growing above underlying market volumes. Financial Services now benefits from multiple growth vectors, a broader addressable market in a more diversified revenue base than at any point in our history. So with that as context of how our strategy is driving commercial success, I'm going to pass it to Todd, who will detail Q2 performance and our refresh guidance. Todd?

Thanks, Chris, and let me add my welcome to everyone. Starting with the quarter, revenue exceeded the high end of guidance by $27 million and adjusted EBITDA exceeded by $11 million led by stronger-than-expected performance in U.S. nonmortgage financial services, emerging verticals and international. U.S. mortgage was roughly in line with expectations despite rising interest rates throughout the quarter. Total revenue increased 15% on a reported and 10% on an organic constant currency basis led by U.S. financial services and emerging verticals. Excluding FICO mortgage royalties, organic growth was 7%. Adjusted EBITDA increased 12%. Adjusted EBITDA margin was 34.8%, slightly better than guidance and down 90 basis points year-over-year. The impact of FICO mortgage royalties accounted for the entirety of the year-over-year decline, with underlying margins up modestly. Acquisitions had an immaterial impact on consolidated margins as Mexico delivered better-than-anticipated adjusted EBITDA performance. Adjusted diluted earnings per share was $1.23, up 13% year-over-year and $0.08 ahead of the high end of our guidance. In the second quarter, U.S. markets revenue grew 11% on an organic constant currency basis versus the prior year. Growth was diversified across our verticals, supported by strong first half bookings and retention as well as continued demand for both credit and noncredit solutions. Financial Services revenue grew 18% or 10% excluding FICO mortgage royalties. In core nonmortgage financial services, revenue grew 8% and with healthy growth across lending types. As Chris discussed, growth reflects a mix of healthy lending activity, pricing, new wins and increasing adoption of our broader solution set. Credit card and banking rose 6% on lending volume growth and new wins from trusted call solutions. Consumer lending grew 8% with strong fintech and sustained consumer demand. Auto was up 8%, driven by pricing and new wins across our solutions. Auto growth outpaced declining industry volumes lapping last year's tariff-related pull forward in purchase activity. In mortgage, revenue grew 37%. Excluding FICO royalties, mortgage growth was 15% versus inquiries down 7%. And with outperformance due to pricing actions and non tri-bureau revenues. Growth was in line with expectations even as volumes came in modestly lower as rates increased during the quarter. Within mortgage, we recently added new alternative credit attributes from FactorTrust to our mortgage credit file at no additional cost to customers. This enhancement reflects our continued focus on helping mortgage lenders develop a more complete and actionable view of borrower behavior. Additionally, VantageScore usage in mortgage was a highlight in the quarter with a meaningful increase in adoption. At the start of the year, less than 5% of our mortgage credit inquiries included VantageScore. That figure is now closer to 30% on across more than 900 lenders and increasing each month. Most activity remains dual poles with VantageScore and FICO, but we are beginning to see increased VantageScore only usage including certain mortgages requiring mortgage insurance. Importantly, our 2026 guidance continues to assume no benefit from VantageScore adoption. That said, the momentum we are seeing gives us greater confidence in the long-term opportunity as the market moves through testing, validation and operational readiness. Turning to emerging verticals. Growth accelerated to 9% and led by our eighth straight quarter of double-digit growth in insurance as well as trusted call solution strength across our verticals. Within insurance, we experienced robust demand across our solution suite. Credit-based marketing continues to strengthen. Consumer shopping remains active and we drove growth across CoreCredit, driving history and trusted call solutions. Tech retail and e-commerce, where a significant portion of our marketing and fraud revenue as reported grew high single digit with emerging verticals, insurance and tech, retail and e-commerce account for over half of the revenue. Across our other emerging verticals, public sector in media grew mid-single digits tenant and employment returned the growth and the Telco vertical declined modestly. Consumer Interactive declined 3%, in line with our expectations as growth in the indirect channel was offset by declines in the direct channel. In international, all revenue growth comparisons are on an organic constant currency basis. National revenue accelerated from flat growth in the first quarter to 6% in the second quarter. Overall results reflected strength in developed markets and improving trends across emerging markets, including an inflection in India and moderating headwinds in Asia Pacific. Starting with India. Revenue accelerated to 8% growth, slightly ahead of our expectations. We experienced gradually improving volumes over the course of the quarter supported in part by the recent government-backed program to support commercial lending. We also delivered very strong new wins in the quarter. We continue to monitor the Indian market with cautious optimism about the trajectory. We expect similar growth in the third quarter with acceleration in the fourth quarter as comparisons ease. Canada grew 10%, reflecting healthy activity across financial services as well as strong growth in fintechs and insurance. Pay grew 9%, outpacing modest market growth driven by share gains and new business wins across banking and fintech. Latin America improved a 5% organic growth with double-digit growth in Brazil and modest and improving growth in Colombia and other markets. Africa also grew 5%, with broad-based growth across verticals and regions. And Asia Pacific declined 7% with the rate of decline improving versus the first quarter as we finished lapping prior year onetime contracts expect Asia Pacific to return the growth in the second half of the year. Within our international business, transition to Mexico continues to strongly outperform our acquisition case in the first few months of ownership. Over the last several years, TransUnion de Mexico has grown at a double-digit compound annual growth rate, supported by a growing economy, favorable demographics and meaningful room for further formal credit penetration. Growth has been stronger than its Latin American peers over the last 2 years, reflecting not only these credit market fundamentals, but also Mexico's fiscal and monetary stability as well as its accelerating near-shoring activity supported by its proximity to the United States. We are now applying TransUnion's global product, technology and commercial playbooks to accelerate growth beyond market volumes. Let me detail our early priorities as we integrate Mexico into TransUnion. First, we are enhancing our data foundation. Our long-standing relationships with the largest Mexican banks and fintechs have created the market's leading data coverage, quality, and predictive depth. That foundation includes nearly 600 million trade lines with positive and unique data representing 90% of the total. Under Mexico's regulatory framework, those positive data trade lines are not shared with competitors, creating a structural advantage. We are building on this advantage by introducing new trended scores and attributes, expanding alternative data sets and eventually migrating Mexico to OneTru to unlock greater scalability. Second, we are accelerating innovation. We plan to bring our leading global capabilities to Mexico over the course of the next year, including TruIQ Analytics, TruValidate and our credit education tools. Third, we are enhancing client engagement. In core financial services, we are strengthening relationships with leading lenders via deeper analytics consulting. At the same time, we plan to use our data advantages and faster innovation to win in our already fast-growing fintech and retail verticals. In summary, Mexico is performing ahead of plan, and we are building on that momentum with multiple opportunities to deploy our global capabilities. We believe this combination positions us on the path to drive sustained and scalable growth. Turning back to the enterprise. Operating performance is translating into strong cash generation improved balance sheet flexibility and greater capacity for capital return. We ended the second quarter with $5.6 billion of debt and $839 million of cash. Our leverage ratio decreased to 2.6x. During the second quarter and through July, we accelerated our pace of repurchases. Year-to-date, we have repurchased 2.1 million shares at an average share price of roughly $71 for a total of roughly $150 million. We continue to view share repurchases as a highly attractive use of capital at current valuation levels. For the remainder of 2026, we plan to continue executing on our disciplined capital allocation framework with a current bias toward capital return to shareholders. Based on current conditions, we expect the pace of second half repurchases to be at least comparable to the first half. We also remain committed to reducing our leverage ratio toward our long-term target of under 2.5x. Before getting into guidance details, I want to reiterate our disciplined guidance philosophy. Our increase in full year guidance reflects strong performance in the first half of the year. A continuation of those trends would position us to deliver at or slightly above the high end of our range while the range preserves flexibility to manage ongoing market uncertainty. In the third quarter, we are guiding revenue to be between $1.292 billion and $1.310 billion, up 11% to 12%. Growth is comprised of 6% to 8% organic constant currency growth and a 4.5 percentage point contribution from acquisitions. We expect 4% to 5.5% organic growth, excluding FICO mortgage royalties. Importantly, the implied sequential deceleration from 7%, excluding FICO in the second quarter is entirely related to our non-FICO mortgage revenue reflecting greater year-over-year declines in inquiry volumes. We expect non-mortgage organic growth to be at or slightly above the 6% rate that we delivered in the second quarter. In other words, the deceleration does not reflect the change in core non-mortgage trends. We are guiding adjusted EBITDA to $455 million to $463 million, up 7% to 9% and implying a margin of 35.2% to 35.4%. Underlying margins expand by 20 to 40 basis points, offset by an 80 basis point drag from FICO royalties and a 60 basis point impact from acquisitions. We expect adjusted diluted earnings per share to be between $1.18 and $1.21, up 7% to 10%. For full year guidance, we expect revenue to be between $5.127 billion and $5.162 billion, up 12% to 13%. Our raised guidance reflects strong growth from our Mexico acquisition as well as modestly higher non-mortgage organic growth due to strong first half performance. Acquisitions now at 4% and FX has an immaterial impact on our guidance. We expect organic constant currency revenue growth of 8% to 9% or 5% to 6% excluding FICO mortgage royalties. Our segment level assumptions are broadly unchanged. Mortgage revenue growth guidance of 28% for the full year or 6% excluding FICO, is unchanged since February. Mortgage revenue exceeded our expectations in the first half, particularly in the first quarter when mortgage rates briefly dipped below 6%. As mortgage rates have moved back above 6.5%, we have derisked our second half assumptions. Our conservative assumptions provide us flexibility to deliver these growth rates even if rates increase modestly from current levels. We now anticipate mid- to high single-digit inquiry declines for the full year, including low double-digit declines in the second half of the year. We continue to expect pricing actions and revenue beyond traditional tri-bureau reports to drive outperformance versus underlying volumes. At the same time, stronger momentum across the remainder of the portfolio helps offset our more conservative second half mortgage assumptions. We expect adjusted EBITDA to be between $1.807 billion to $1.827 billion in 2026, up 10% to 11%, that results in a margin of 35.2% to 35.4%, down 60 to 80 basis points. Underlying margins are expected to expand by 50 to 70 basis points driven by revenue flow-through and remaining transformation savings. This strong underlying expansion is offset by a 90 basis point drag from FICO royalties and a 40 basis point impact from our acquisitions. We anticipate adjusted diluted earnings per share to be $4.75 to $4.83, up 11% to 12%. This represents an increase from prior guidance of 9% to 11% growth. All other guidance items, including depreciation and amortization, net interest expense, adjusted tax rate and capital expenditures as a percent of revenue are unchanged from April. With that context, I will now turn the call back to Chris for closing remarks.

Thank you, Todd. So recapping in the second quarter, we beat guidance with double-digit revenue and earnings growth, reflecting the strength we're seeing in the U.S. market and our improving trends in international. We raised the full year '26 guidance but we maintain prudent assumptions around the macro environment. We now expect 8% to 9% organic constant currency revenue growth and 11% to 12% adjusted diluted EPS. This performance would reflect our third consecutive year of at least high single-digit organic constant currency revenue growth and double-digit adjusted diluted EPS growth. . And we executed well against our 2026 strategic priorities, most notably with substantial migrations of our U.S. credit customers to OneTru as well as an accelerating pace of product launches enhancements and international rollout of the OneTru platform. Our investments in platform modernization, innovation and our unique data assets are translating into diversified and above-market growth rates. As our business continues to become increasingly driven by scalable innovation, share gains and diversification. We are growing our free cash flow generation as well as our capacity to return capital to our shareholders. With that, it's back to you, Greg.

That concludes our prepared remarks. [Operator Instructions] Operator, we can begin the Q&A.

I guess I'm struggling to understand how the non-mortgage organic upside and momentum gets adjusted in the guidance. And if that's just baked in as increased conservatism. I ask because the mortgage full year revenue guidance is unchanged, and it looks like most of the revenue guidance range is the outperformance in Mexico and increased M&A contribution. So if you could just help me with that.

This is Todd. I'll take that question for you. So in essence, what we've done with guidance for mortgage is we've maintained our full year guide that we came into the year with where we were calling for 28% growth all in, and 6% when you exclude the FICO mortgage royalty and that contemplates a decline of volume from mid- to high single digits. Now to go back a little bit, the first half of the year, in particular, in the first quarter, we had outperformance in mortgage. It feels like a long time ago, but mortgage -- the 30-year mortgage rate was about 6% when you go back to January and February. And then with geopolitical tensions, we saw the 10-year treasury yield rise. And as a result of that, the 30 year also went up, and that had an impact on our volumes. So as far as the way that we're looking at mortgage, we're being conservative with our assumptions. We are looking at where the 30-year is at today, and it is at the highest that it's been all year. And our guidance for mortgage would contemplate being at that level and perhaps even maybe being a little bit worse, so meaning that rates might be higher than they were in the first half. So in essence, what that's doing is it's providing us with flexibility to deliver these results even if the rates do increase slightly. Now the other part that I think is important and I think this is your question specific to the non-mortgage part of our business. In the second quarter, we delivered 6% growth and what we're contemplating when you look at it on that basis is a similar trajectory for the third quarter. So that you take a look at the performance that we're very pleased with within core financial services, a very strong quarter for us, emerging verticals coming in at 9% as well as then in our international portfolio, when you look at the performance in India returning to growth at 8%, Canada at 10% and the U.K. at 9, there's some good tailwinds that we're looking at as we go into the into the second half of the year. But the market remains uncertain. So we are taking a prudently conservative approach towards our guidance. And as we've put on, as I said in my prepared remarks as well as what we've put on the slide, we would orient you to the high end of that guidance and that more than likely if these conditions that were currently living through right now persist, we'll be above the high end of that guidance.

Yes. And so just to emphasize a couple of those points, again, we feel like we're well positioned to deliver on this revised raised full year guide, so high end or above. And the conditions that we're experiencing right now across the business and in mortgage, clearly support that. We have built in some margin for error, some margin for deceleration in mortgage in the second half of the year because, as Todd pointed out, rates are higher than they were by about 50 bps. But that said, we are positioned to absorb some deceleration in mortgage volumes that would come with higher rates and still deliver at the high end of the guidance. So this is prudently conservative, but when you are conservative, you got to park that conservatism somewhere, right? We park it disproportionately in our mortgage because mortgage is the most rate sensitive. But to be clear on everybody in the call, we are experiencing consistent trends in July with what we experienced in the second quarter. Those trends persist, we will overperform and we'll be back here in the third quarter making further guidance adjustments upward.

I was hoping you could expand on if you're seeing demand for your data sets given acceleration in AI agents? And which particular areas customers are really ramping up demand in terms of data versus a few quarters ago? I expect that's a trend you're seeing. So I wanted to touch on which specific areas? .

Yes, Toni. Look, it is a trend that we're seeing as we've been saying for some quarters now, and as we emphasized at our Investor Day in March and had some slides last quarter as well, the AI and Legend customers tend to consume more data, the models, the predictiveness all improves with more curated and authoritative data that we provide. So I think in the big and generally, we expect to see that accelerate as more lenders experiment and adopt AI modeling techniques across their kind of lending analytics life cycle. . I think we are well positioned with our product innovation in AI to support more of the work that those clients are doing with our analytics orchestrator, a genic framework, which, again, we presented -- we demoed at our Investor Day. And you can see we're now using agentic AI on our foundation of data we're able to automate a lot of the model building and prediction that our lenders typically do on their own or many segments of the market simply don't do. So net-net, we still believe that AI is going to be a positive growth tailwind. One, it's stimulating greater data consumption as we've talked about. But two, the agentic layer that we're building on top of our TruIQ analytics foundation is going to expand our TAM and let us take over some of the work that's either done by our lending clients, not done currently or done by other players in this data and analytics ecosystem.

Chris, in your prepared remarks, you suggested that marketing solutions, that's a true audience revenue growth should accelerate in the second half of the year from the mid-single-digit revenue growth in the second quarter. What's driving that dynamic about the acceleration in the second half?

Yes. Well, there's some seasonality in the marketing business, Andrew, as you know, in the fourth quarter, a lot of the big players in the publishing universe turned to TransUnion to do market share and marketing effectiveness studies that they then use in their own media sales cycles. And we're making greater inroads across the publishing ecosystem and being that kind of neutral measurement provider that the industry needs. We're also getting increasingly good traction with true audience, which is the suite of marketing solutions that we've migrated on to OneTru. We are converting a lot of the legacy customer base from those solutions on to the TruAudience Solutions, it's a more powerful product. It's a streamlined interface. It's a broader series of services that have been integrated together, which allows cross-sell and upsell. And so I think the general pipeline build the level of bookings, particularly in identity where we've got a tremendous data strength, but increasingly in audience and also in spend planning and measurement, as I mentioned at the outset, which are historic strengths in our marketing portfolio. We just see that momentum building, and we expect a better second half of the year.

I wanted to hone in on India a bit further, a nice sequential uptick there. Can you speak to what you're seeing on the ground from an economic perspective from commercial perspective and kind of how you're thinking about rest of the year with a nice uptick in the second quarter now under your belt.

Yes, for sure. Excited to talk about India always. In terms of the volumes that we're seeing on the consumer and the commercial side, things are stabilizing, which is good. The macro continues to be attractive. There's GDP growth. There's reasonable levels of inflation. But as we all know, there's been any number of macro shocks that have hit India over recent quarters, which have interrupted our growth. That said, the volume of unsecured lending to the consumer space, which is a big driver of credit pulls along with card originations, that seems to be a floor reached in we're now in a more stable environment. On the commercial lending side, particularly with smaller to medium-sized businesses, there have been some government support programs that's enabling better activity in the space in that segment of the market. So what I would say from a market volume perspective is that we're now moving sideways to slightly upwards. We're seeing the stability that's going to allow our better products to gain traction and grow. So that's the kind of the market volume backdrop. From a competitive perspective, we're doing really well. I mean the team has doubled down, we just posted our largest quarter of new sales ever in India, which is super exciting. First, the team is innovating on the data layer. We have redeveloped all of our principal consumer and commercial credit scores. They're performing better than ever, and that refresh is keeping our relevance in the marketplace. We're expanding the breadth of data contributions from lenders or furnishers as we call them, around India. We're even starting to expand the type of data that we're getting from the furniture network which just drives continued improvement in model predictiveness. And we could consistently show to our lenders that they need to use our data throughout the lending cycle from the beginning where they're evaluating a prospect kind of top of funnel all the way through underwriting, using our data because it's broader and it's more predictive leads to better decisions and better capital allocation. And we've got a very tight pitch that we deliver along with our data science team that's helping us really sell and win more share in the market. On top of that, we have successfully implemented our analytics solution in India. It's called TruIQ and there's a ton of interest. There's a ton of bookings and revenue momentum there, which we're super excited about. And we're expanding trusted call solutions there as well securing all the relationships we need with all of the right carriers to expand that component of our fraud solution, and we're getting good traction there. So it's new products driving some revenues in addition to really competing effectively in the CoreCredit market.

I wanted to ask about consumer lending more specifically within Financial Services. Growth sort of slowed a little bit this quarter, and I'm wondering if that's just a function of just tougher comps as you've had a few quarters of double-digit growth there. And maybe if you could talk more specifically around the fintech environment, maybe how sensitive that business is to rising interest rates and if that was a factor this quarter?

Yes. Well, first, it's not particularly sensitive to interest rates within a reasonable range of course. Mortgage origination and refinancing far and away is the most interest rate sensitive. But the spread on personal lending, tends to be high enough that lenders can absorb increases in rates. So I just want to put that to rest at the outset. So yes, growth in consumer lending and even Cardone auto, they are a tick down from where they were a year ago. That's simply us lapping comps. The absolute growth that we're getting in each of those segments is very consistent and healthy, it's just the businesses are getting bigger. And if you look back for 2 years, you see that particularly on the consumer side, there's just a resurgence in growth as consistent and durable funding has flowed back into the fintechs, and they really diversified their funding sources as well, and they're meeting a robust market need. So I think pulling back the lens and thinking about the last few years, the outlier for fintechs in consumer lending was during the '22, '23 time period where rates spiked after incredibly hot growth in that segment for a long time, and there was simply a retrenchment, right? There wasn't enough funding and the rates were so high. It wasn't really an acquisition-oriented environment. So they pulled back and focused on portfolio management for a while. Now we've been out of that environment for a couple of years. And again, the fintech model based on borrowing from the capital markets or getting funding in other ways is a consistent and durable model that's been part of the American lending landscape for decades now. So we're confident that we can continue this of good growth in consumer lending.

I wanted to ask a question on the EBITDA front. The guidance implies a step-up from 2Q to 3Q, but a much more material step-up from 3Q to 4Q. If you can talk about what's driving that improvement in margins going forward?

Thanks, Ashish. I'll take that question. So if you look at our adjusted EBITDA margins and we'll talk about this and break it out into all the different pieces. But if we start just with our reported margins in the second quarter, we finished with a margin of 34.8%. And and that was down 90 basis points on a year-over-year basis. In essence, the FICO mortgage royalty was accountable for that entire decline. And if you look further into the details, our underlying margins that exclude that royalty and also exclude M&A, expanded by about 10 basis points. But M&A, specifically, that's Mexico had a 10-point drag in the quarter. When we look at the guidance for the third quarter, as you already can see the high end is 35.4% and that's a 100 basis point decline. FICO is about an 80 basis point drag. So kind of consistent with what we saw in the second quarter. But M&A becomes a little bit more of a drag on a margin perspective as we focus on integrating the Mexico acquisition, and it's a headwind of about 60 basis points. So when you do the net of that, in essence, what you see in the third quarter, is a 20 to 40 basis point increase in our underlying margins, excluding FICO mortgage royalty and M&A. So when you look at the full year, we've been consistent in our guidance. We're calling for 35.4% for the full year, which is down 60 basis points. But that underlying when you exclude FICO mortgage royalties and M&A, we're calling for 50 to 70 basis points of underlying margin expansion. So the net of that then is what's implied for the fourth quarter in essence, does have a step up in margin. And when we look at where is that coming from? The mix as we get into the fourth quarter, as we already talked about in the first question, mortgage, we have a very conservative posture. So -- and as you know, mortgage is a lower margin product for us. So when we have less of that, we end up having higher margins. We're also anticipating more growth from our financial services vertical, excluding mortgage. What that means, it is a lot more credit sales with a higher margin flow through. And then also the international business. And Chris just went through the details on India. We're expecting that business to continue to accelerate. Also very good flow through as we get into the second half of the year. And the last point I want to make here is when you look at our expenses in Q2, Q3 and Q4 and when we take out the FICO mortgage royalty. In essence, that expense base is roughly flat quarter-over-quarter. So that's really the key point as to why we expect to see the margin improvement accelerate in Q3 and then even more so in Q4.

Yes. And that last point just about the expense base is a good one. As all of you know on the call, we recently a multiyear tech modernization and cost restructuring. We are very happy that we got it done. We got it done on time. We got it done within our initial spending budget. And the fact that we're holding expenses flat when, of course, there is underlying expense growth in a variety of areas, it shows that the program has worked, and it's allowed us to take out some material costs, and we're just now starting to see that benefit. . Just switching gears quickly here. I realize that on the India question that was just asked, I forgot to mention one thing. You're going to see a nice increase in the growth rate in India that we're expecting in Q3 and Q4, the good news is, of course, the business is reaccelerating in all the ways in which I described, but it's also reaccelerating getting some very soft comps. So in the second half of the year, you're going to see nice percentage growth I just wanted you guys to appreciate that dynamic.

Just given that your competitor recently announced the acquisition of the second largest credit bureau in Mexico. Can you comment on your positioning in the region long term? Obviously, it was a strong thought for you in the quarter, but just curious on how it could impact your long-term strategy in Mexico.

Yes. Thanks for the question. Well, look, Mexico is an exciting development within TransUnion. As you guys know from prior calls, we have been a minority investor and a tech provider to the bureau to Mexico for over 25 years, and we wanted to acquire or controlling interest for 25 years. Unfortunately, we were able to complete that transaction, and we've got the leading bureau with the leading market position in the broader data archives in the Mexican market. Since acquisition and in recent years, the Bureau of Mexico has consistently outperformed growth and profit expectations. It is performing nicely above our deal book and compounding revenue on a much larger revenue base in the low double digits, which is exciting, even though we have guided to less going forward. So look, it's a great entry position. We have terrific market coverage, but there's just so much work for us to do in Mexico and the same is true of our competitor. Mexico today operates with, I would say, a pretty basic level of credit data and analytics, and we're positioned to broaden contributions from a wider range of data furnitures to push deeper into the fintech space to bring alternative credit data sets to market and to do it all on the OneTru platform, which we will be rolling out into Mexico and to bring just a level of thoughtfulness and forward engagement to the marketplace that has served us so well in the U.S. and across all of our market segments. Additionally, right away, we're bringing in the TruIQ analytics platform and layering it over the current tech stack in the Mexico Bureau, that's going to allow us to start to service our clients more deeply as we do in most markets and generate some incremental revenues. So look, it's a great market to be in. It's a terrific foundational entry point. There's a ton of innovation and value that we can bring. The market is large, inherently growthful and underpenetrated from these solutions. So I'm confident that we can do well. And look, there's plenty of room and opportunity for multiple players to do well in the Mexico market.

Thank you for the breakout for the U.S. financial services in your prepared remarks. Just curious, the -- I guess, the non-CoreCredit pieces? Like how do you think -- you gave us some growth rates. I was just curious on your strategy there in terms of trying to maybe get that to be a much bigger percentage of the business there? .

Oh, I see. So you're talking about financial services and the diversification for the diversification...

Yes, the 36% that you called out, that was not non-CoreCredit, I guess just curious, longer term, if that's an area for the investment, M&A, those kinds of things.

Yes. Okay. Good. I'm clear on your question, Manav, and thanks for it. Well, look, the first point that we wanted to emphasize is that our growth, which has been above market levels, in financial services is diversified, right? Obviously, we've got leading credit data from a quality perspective in the U.S., our trended data. We were the first mover it goes back the furthest. It has the most attributes for analytics in the marketplace, which is kind of foundational to our success. We've also extended downmarket to payday lending and other unsecured lending types. . And as you well know, there's kind of an arms race amongst the bureaus to bring other relevant alternative to CoreCredit data sets into the market. And we're going to continue to expand organically and inorganically, if we get the opportunity and it makes sense in that space. Additionally, a lot of the solutions that we acquired either from Neustar, which increased our depth in marketing and fraud, we're cross-selling into the financial services space. There's also further opportunity with our identity solutions to work with some of these lenders and become kind of the system of record underpinning their corporate data hygiene and identity resolution within the banks, we see that. And I think it's very important to note that, look, if you went back a couple of years, you could criticize TransUnion for not having a top-of-the-market analytics suite, right? Other players traditionally led. We closed that gap a couple of years ago when we launched TruIQ, we've continued to accelerate innovation and mature the TruIQ product. It's now doing well in the U.S. market. We've expanded it into India, in Canada and the U.K. and we're fast following into Mexico. And if you think of those core countries, that's like 95% of the revenue of TransUnion globally. So in short, yes, there's a lot of further growth opportunity in diversifying in and around this CoreCredit position.

Maybe just pivoting to the VantageScore adoption, right? So I think move from 5% to 30% or so, had been kind of dual use, sounds like it's proving more single pool. Just maybe if you can unpack what's driving that acceleration in terms of end cohorts, lender type stuff like that? Just a little more detail would be helpful on what you're seeing.

So well, look, in terms of cohorts or more specifics around it, the data that we shared reflects the adoption of Vantage that we're seeing across 900 customers, right? So it's a fairly broad-based observation of what's going on in the market. And what I would simply characterize it as this is a period of experimentation and calibration by the market broadly by lenders and resellers, even the GSEs and on into the securitization space and mortgage insurers. . At the outset of the year, we were clear that we weren't budgeting or including in our guidance any revenue from selling the VantageScore. That's still our posture in this current raised guidance. And as a company, we are just laser-focused on helping the market adopt the VantageScore. There's a tremendous opportunity for lenders to get a more predictive score at a substantially lower price and improve their economics and hopefully pass on some of that benefit to consumers, which was the intention behind this government policy change. And as we step back from all of the fray and the occasional drama about this, it's clear the market is highly interested in the VantageScore almost everybody is experimenting with it. The efforts are being led by the largest players in the market that have the most financial benefit and all of the other players that need to calibrate are deeply engaged in doing so, whether that's updating their risk models for a new score or it's altering some fields in their software so that they include multiple scores. But this year of experimentation and preparation for faster and scaled adoption of a competing store is happening, full stop.

And Chris, in the prepared remarks, you also mentioned that there are increases in lenders that adopt vantage score only usage. And I was wondering if you can talk a little bit more about that and what you're seeing in terms of core gaming activity for lenders are currently running both.

Yes. And thanks for the question, Kelsey. Well, there are some players in the market that if they're not exclusively using Vantage today, and that would be in a minority in our dialogue with them. And believe me, our teams are actively engaged across the marketplace. They clearly have an intention to move to a single score Vantage once they're through this experimentation in calibration phase, right? As you know, because you report on this, the percentage of players that are using only Vantage is increasing. And some of the Vantage mortgages or the advantage only scores in mortgage are showing up in securitization. Now that's a relatively small percentage now, but it's growing rapidly. And just given the breadth of experimentation and activity that we see, it just speaks to real tailwinds. So I, again, am confident that in the coming quarters, we're going to continue to see greater share adoption that will flow through all of the metrics around Vantage adoption and utilization in the mortgage origination through securitization process and that Vantage is really well positioned for growth and share gain in subsequent years.

All right. Chris, any final remarks? .

Yes. Well, look, we talked about the adoption of OneTru in the prepared remarks. That is progressing well. We are highly confident we'll have the entirety of the U.S. credit market converted by the end of the year, most of it sooner than that. We're also migrating our marketing and fraud clients from their current legacy applications onto OneTru and this is just an enormous proof of concept that we have built this platform and that we can roll it out globally. Next up are our principal markets in Canada, in India, in the U.K. and of course, Mexico, where we want to move quickly there because there's a great opportunity. And again, once we complete that, which I would expect roughly to complete within the next 2 years, we'll have 95% of our business running on a common software platform that's going to generate enormous economies of scale for us that are unique in the industry and that further assures that we'll have ample capacity to continue to grow our margins while accelerating our investments in innovation. So this is a super exciting innovation inflection point that we've been working to for 4 years now. And net-net, look, the modernization and the transformation is working. We're diversifying the business to drive more sustainable growth, we're gaining share through innovation. Our cash flow metrics are greatly improved. We've got tremendous capacity to return capital to shareholders while continuing to invest and accelerate the top line. So a lot of good momentum here, and we're just going to keep delivering quarter-by-quarter.

All right, Chris. I think that's a good place to end. Everyone, thanks for the time today, and have a great rest of your day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.