TransUnion (TRU) 2018 Q1 法說會逐字稿

Good day, everyone, and welcome to the TransUnion First Quarter 2018 Earnings Conference Call. (Operator Instructions) And please note that today's event is being recorded. And I would now like to turn the conference over to Aaron Hoffman, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us today. I'm joined by Jim Peck, President and Chief Executive Officer; and Todd Cello, Executive Vice President and Chief Financial Officer. We've posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website this morning.

Our earnings release includes schedules which contain more detailed information about revenue, operating expenses and other items, including certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures are also included in these schedules. And as a reminder, today's call will be recorded and a replay will be available on the TransUnion website.

We also will 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, 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 Jim.

Thanks, Aaron. As I'm sure everyone has already seen this morning, we have some additional exciting positive news on top of our strong first quarter financial performance. I'll spend most of my time talking about our acquisition of Callcredit in just a moment.

First, let me quickly highlight our strong start to the year, extending the momentum we've had over the past 3 years. Our teams continue to execute against our strategies and deliver growth well above the underlying markets in which we operate. Once again, revenue grew double digits for the total company as well as for each of our segments. Similarly, adjusted EBITDA and adjusted EPS both increased significantly.

In the segments, USIS performance was outstanding, driven by ongoing strength in financial services and health care. In particular, we continue to see exceptional results for CreditVision and CreditVision Link. We believe that our suite of ever-evolving trended products has many years of substantial growth still to come in the U.S. alone.

In International, we continue to see very strong growth in India and generally across our global footprint. Notably, we saw modest revenue growth in the quarter in South Africa. Last year, we invested in our technology infrastructure there. This allows us to reduce costs by fully moving off our final legacy mainframe. At the same time, the technology platform will facilitate the efficient lift and shift of the innovation and capabilities that should stimulate our long-term growth there. Seeing South Africa return to growth this quarter is a good sign that the business is starting to stabilize and is heading in the right direction.

And finally, in Consumer Interactive, I'm pleased to announce that we recently signed another strategic partnership agreement, this time with American Express. American Express will leverage our CreditView dashboard branded as American Express My Credit Guide to provide all consumers free access to their credit information. This includes their credit report, credit score, factors impacting their score, credit alerts to help identify identity theft as well as educational tools such as our Credit Score Simulator to improve their financial health. American Express will benefit from a new channel for effectively engaging with existing customers and acquiring new ones. We are very excited about this new strategic relationship in our core financial services market.

Taken together, our first quarter performance reflects our strong business model that broadly leverages data assets and capabilities across our organization to help us realize strong revenue growth with good incremental margins. While this approach certainly contributes to our strong financial performance, it has also created a more sustainable diversified growth profile that we believe can deliver relative outperformance through cycles.

We are off to a solid start in 2018 and expect to have another very good year. There's no doubt that TransUnion has never been stronger. That puts us in an ideal position to make acquisitions that help make a great business even better and position us for outstanding long-term growth.

Before I delve into the details of the acquisition, I think it makes sense to spend a minute on our successful acquisition strategy and how it has played a key role in our growth over the past 5 or 6 years. We have focused on 3 key strategies with our acquisitions, and have often found transactions across 2 or even all 3 of them.

First, we invest in unique and differentiated data assets that can augment the core contributory credit data we receive in virtually all of our markets. This allows us to create new valuable offerings for our customers while leveraging existing data assets. We've made a series of very successful acquisitions around data. Going back to late 2013, we bought TLO, which utilizes public records data for identity authentication, fraud prevention and debt recovery. We've seen tremendous growth and margin expansion over the past 4 years and expect additional growth in the future.

About a year later, we bought L2C. This asset delivers predictive analytics using alternative data and has been instrumental in the development of CreditVision Link and other alternative data offerings.

And late last year, we made another alternative data-related acquisition with FactorTrust, one of the largest players in the short-term lending market. They're essentially a credit bureau for this market and have data on more than 20 million consumers who don't typically show up in the data we receive from traditional lenders. This more robust view of thin-file borrowers, as they're called, will help us develop the next version of CreditVision Link and enable many other products for our customers. FactorTrust also expands TransUnion's reach into the short-term lending, opening a new fast-growing market to the breadth of TransUnion's credit and noncredit risk information solutions.

Our second strategy focuses on acquiring new capabilities to expand in our vertical markets. In the health care vertical, we bought eScan in late 2013, and that asset is the foundation of our highly successful fast-growing coverage discovery business. In 2016, we augmented this business with Auditz and Rtech. Each of these bolt-ons has provided valuable data that improved our matching algorithms and thus, improved our yield.

And in the insurance vertical, we completed the acquisition of Drivers History in April of 2016 and DataLink Services in August of last year. Together, these businesses will allow us to offer a product that prescreens auto insurance applicants and then seamlessly purchases and incorporates costly motor vehicle reports only when appropriate. We see opportunities to utilize this data in employment screening, rental screening, collections, government and other parts of TransUnion to provide valuable insights about consumers.

Most recently, we acquired eBureau, which provides rapid development and deployment of custom models in financial services, collections and fraud. eBureau has a very broad applicability across virtually every part of TransUnion, both domestically and internationally. It is a type of core capability that can drive significant cutting-edge innovation.

Finally, we want to continue to expand our international positions. And obviously, Callcredit fits squarely into this strategy.

Before I come to that, let me remind you about 2 other international investments that have worked well and give us increased conviction in our ability to successfully add another bureau asset to our portfolio and to run the TransUnion strategic playbook.

Going back to 2001, we partnered with a number of large Indian banks to form CIBIL, the first and largest credit bureau in India. We owned 27.5% of CIBIL until 2014 and began to aggressively buy the equity, leading to our current stakes of 92%. The investment continues to pay off handsomely. India is now our second-largest international market, and it grew constant-currency revenue 24% in 2016 and another 32% in 2017. And we see a long growth path in front of us as the macroeconomic situation is excellent. On top of that, we continue to bring innovation into the market with products like CreditVision, CreditView, decisioning and more.

In February 2016, we acquired 1 of the 2 bureaus in Colombia. We have improved their technology platform, introduced pricing analytics and new products like CreditVision, while also bringing new talent to the organization to support our growth plans. After just 2 years, we're tracking well to our plans and seeing value creation from the acquisition.

And that brings us to Callcredit, which is 1 of the 3 bureaus in the attractive U.K. market. I will walk you through the market and the business in just a moment, but I want to start with a conclusion.

Callcredit is a truly outstanding acquisition for TransUnion. High-quality credit bureau assets like Callcredit are scarce, so the opportunity to acquire a strong growing foothold in the second-largest credit market in the world is a tremendous win for TransUnion. Callcredit is the second-largest and fastest-growing bureau in the U.K., with differentiated assets and technology. And candidly, there are many parallels to the TransUnion story from 5 or 6 years ago when we considered where the industry is, how the company has evolved and the potential to more fully leverage the core assets of the business through innovation. Similar to TransUnion, Callcredit has leveraged data and technology to deliver unique solutions to its customers, leading to outsized growth.

There is a view that in an efficient market, assets ultimately find their way to the right owner. I'm absolutely convinced that TransUnion is the best owner for Callcredit. The marriage of our global capabilities and proven track record of driving growth in international markets, with the differentiated position Callcredit and their team have built in a large growing market, will contribute to our long-term growth equation. We spent considerable time with the Callcredit team and found a strong cultural fit. The team has done an outstanding job in building Callcredit into the second-largest and fastest-growing bureau in the U.K. We have great confidence in TransUnion's ability to add value to an already attractive asset.

Let me highlight 3 key dimensions of the acquisition that give us great conviction that Callcredit will contribute to TransUnion's long-term top and bottom line growth. First, the core market has experienced underlying growth of about 11% per year driven by increased loan volumes, and that is expected to continue. A key component of this expectation is the growth or introduction of some of the important trends we benefited from in the U.S. Driven by the rapidly expanding digital economy, we are seeing the emergence of FinTech lending, Fraud Solutions and trended data. TransUnion knows how to win in these areas, and we have demonstrated the ability to lift and shift products and capabilities to capitalize upon or drive these trends in markets around the world.

An example, the Canadian market is at a similar level of maturity as the U.K., and we've been able to deliver strong above-market growth there. In fact, we grew constant currency revenue 14% in 2017 and 20% in 2016. This was accomplished in large part by gaining share or expanding the market with innovations like CreditVision and CreditView and extending into new verticals like insurance, all products that have applicability in the U.K.

Second, Callcredit has already been outperforming the underlying market and taking share through superior data and technology. This is a high-quality asset that should only get better as we leverage our global enterprise model and capabilities.

Third, we believe there is a meaningful opportunity to optimize the organization and the cost structure of the business, just as we did in our own International segment in 2016. We can unlock value by leveraging our global scale and enterprise capabilities.

While fundamentally this acquisition is about driving long-term growth and leveraging an incredible set of assets and people, there is no doubt that we can improve the margin structure over time. In fact, by leveraging our global scale and IP, we expect to realize at least $15 million of cost synergies by the end of 2019 and another $15 million after that. This meaningfully changes the margin structure and the implied valuation of the transaction before contemplating the substantial benefits we'll see from revenue growth.

Now let's walk through some of the details behind the transaction, starting with the market. By way of background, the U.K. is the second-largest credit bureau market in the world. However, Callcredit also plays in adjacent spaces outside of the traditional bureau market. Taken together, all Callcredit's markets have an addressable market of about $2.4 billion. That market grew at an 11% CAGR from 2014 through 2017. Going forward, we expect that total market growth to accelerate slightly, driven in large part by strong double-digit growth in fraud and decisioning and analytics.

And the regulatory environment is changing with open banking and General Data Protection Regulations, or GDPR. These will be implemented in 2018 and are focused on increasing competition among banks and enhancing consumer privacy rights. They will likely have a neutral to positive impact on our industry as the regulations will drive higher compliance standards and the need for new products among lending institutions.

Based in Leeds, Callcredit is the fastest-growing credit bureau in the U.K. We estimate that 2017 revenue was approximately $190 million with EBITDA of $63 million. In recent years, Callcredit's EBITDA margin has remained relatively stable at about 30% as the company made significant investments to drive future growth and margin expansion, which I will touch on in a moment.

While the top of the market is consolidated, Callcredit shows a broad base of more than 3,000 customers, including the largest financial institutions as well as attractive high-growth segments such as alternative finance, digital commerce and the public sector.

Over the past several years, Callcredit has made some important improvements to their business. First, they invested heavily in technology to move to a cloud-based platform. This has contributed to their market share gains and will enable margin expansion as the company now has industry-leading data quality and reliability.

Callcredit also brought in new management, including many industry experts like their CEO, Mike Gordon. This team has done an outstanding job of improving Callcredit's market position and product pipeline to deliver strong growth.

Callcredit is organized around 5 units: credit services, fraud, decisioning and analytics, marketing services, and consumer. Let me walk you through each of them.

Callcredit's core credit services business represents about half of the company's revenue, and they have roughly 32% share of this market. Credit services leverages Callcredit's data assets, which cover 99% of the U.K. population, to provide traditional credit reporting solutions, portfolio review and monitoring and collection services.

While the 3 credit bureaus within the U.K. operate with data parity, Callcredit has taken a leadership role in the market based on advantages in income data, technology and security, service and a leading position in FinTech lending among the bureaus. The unit also has a market-leading affordability assessment tool that analyzes historical consumer behavior and indebtedness to help customers make better lending decisions and comply with regulations.

Credit services grew about 7% per year from 2014 to 2017, driven by share shift in banking, both with new customer wins and incremental business with existing customers. At the same time, like TransUnion, they've seen substantial growth in alternative lending, where Callcredit also has a market-leading position. Callcredit has routinely won head-to-head comparison and thus, new business on the strength of unique data gain from alternative lenders and their superior matching capabilities. Along with cutting-edge technology, these are true differentiators in the marketplace. In fact, Callcredit recently gained the primary position at 3 of the 8 major banks and has additional large opportunities in the pipeline.

Based on customer feedback, we believe that the market is ready for new products like CreditVision, which has the potential to considerably accelerate growth on the top of the strong underlying market trends. There's also a sustained trend toward multi-bureau usage, which is still nascent in the U.K., that should continue to open the door to increased volumes. And nonbank customers like utilities and telcos are using more credit information to manage customer and channel risk. Finally, there's a growing demand for new products like affordability and ID checks.

Moving to the second-largest business unit. About 1/3 of Callcredit's revenue comes from its fraud business, which has grown strong double digits from 2014 to 2017. Callcredit is a market leader in fraud and identity solutions as a result of an array of quality point solutions. We see a real opportunity to strategically bundle these point solutions into a comprehensive suite of products as we've done at TransUnion when we created IDVision.

On top of these product-related opportunities, the market has grown rapidly and is expected to grow even faster at about 20% per year for at least the next 3 years as the mobile digital economy continues to grow. With rapid growth in the number of online transactions, fraud is becoming more prevalent even as consumers expect more frictionless interactions and are more concerned about fraud. At the same time, regulators are requiring greater levels of oversight to combat this problem. Callcredit and TransUnion can capitalize on this trend by leveraging valuable data assets, sophisticated analytics and superior technology. We believe we are extremely well positioned to benefit from the underlying growth in the U.K., the same way we are currently benefiting in our other markets. And just like credit services, we should be able to outgrow the market given Callcredit and TransUnion's leading capabilities.

Rounding out Callcredit's portfolio are relatively small decisioning analytics, marketing and consumer business units. The decisioning and analytics business unit includes decision engines, a suite of proprietary scores and workflow tools, among other products. The marketing business is focused on database management and enhancement. And the consumer business has direct-to-consumer brand called Noddle and white-label products used by a number of banks and lead aggregators. As I referenced earlier, we have been rolling out our direct-to-consumer solution, CreditView, internationally in recent years, and we will do the same in the U.K.

With that overview done, I'm going to end where I started, with this high-level view of why this is such an exciting acquisition for TransUnion. So to recap, Callcredit sits in an attractive growing market, where the long-term trends are pointed in a positive direction. We have the opportunity to bring meaningful innovation and capability to the market, just as we've done in Canada, Hong Kong, India, Colombia and other international markets. And finally, we can optimize the cost structure of the business to expand margins over time.

Clearly, we are very excited about Callcredit, and I believe it will create significant shareholder value. At the same time, we continue to pursue other smaller acquisitions that can also have a real impact on our business. I'm confident that our systems and employees are more than capable of integrating additional transactions as they come and that these will fit just as nicely with our clearly defined acquisition strategy as Callcredit and all the deals that have preceded it.

Now I'll turn the time over to Todd to first provide a few more details on the Callcredit acquisition. He'll then walk you through the financials and provide you with updated guidance. Todd?

Thanks, Jim. I'd like to spend a minute talking about our plans to finance Callcredit, the impact on our leverage and the path to unwind the leverage. The purchase price is about GBP 1 billion, which is approximately $1.4 billion at today's exchange rate. Since we will be raising U.S. dollar funds to pay for the acquisition, we are considering options to hedge the foreign currency exposure to avoid a negative impact on the amount of U.S. dollars needed at closing.

We expect the transaction to close either late in the second quarter or early in the third quarter pending regulatory approval. During that time, we'll be working on the financing arrangements with a focus on delivering the most efficient and cost-effective capital structure for TransUnion. We've already secured firm financing from several banks to allow us to sign and complete the transaction. And just to make one point clear, we will not issue stock to fund this transaction. Debt markets remain solid generally, and TransUnion has a strong balance sheet and cash flows to support the incremental leverage. We believe we can finance this transaction attractively based on current market conditions and outlook.

With the addition of Callcredit's adjusted EBITDA and the incremental debt, we estimate that our leverage should be about 4.2x when we close the transactions. We expect that metric to return to our target of 3.5x or less by the end of 2019. This should happen largely as a result of the strong expected increase in Callcredit's adjusted EBITDA that Jim discussed.

And finally, based on our current assumptions about the business and the financing, we expect Callcredit to be roughly EPS neutral in 2018 and accretive in 2019 and beyond.

As Jim mentioned, we had a strong first quarter. Let me spend the rest of my time on the call walking you through our consolidated and segment results. For the sake of simplicity, all of the comparisons I discuss today will be against the first quarter of 2017, unless noted otherwise.

First quarter consolidated revenue increased 18% on a reported basis and 17% on a constant-currency basis with strong performance across all 3 segments. Revenue from acquisitions contributed approximately 3 points of growth in the quarter. This was related to DataLink Services, eBureau and FactorTrust. We also realized about 1 point of growth, roughly $5 million, from incremental credit monitoring business from a competitor. So our underlying business grew 14% in the quarter.

Adjusted EBITDA increased 18% on a reported basis and 17% on a constant-currency basis. However, adjusted EBITDA margin was flat, largely as a result of 2 factors: First, as expected, we used about 2/3 of the incremental monitoring revenue from a competitor to invest in advertising and marketing and to reserve for some pending litigation in our International segment. The remainder flowed to the bottom line, meaning that this incremental revenue had a similar margin to our total business. And second, we experienced the normal cost to integrate the 3 acquisitions we made late in the year: DataLink Services, eBureau and FactorTrust. The margin impact of the acquisition integration and lower margin profile of the acquired businesses was about 80 basis points which suggests that the underlying business delivered solid margin expansion.

Adjusted diluted EPS increased 34%. The adjusted effective tax rate for the first quarter was 28.1%, slightly below our expectations of 29%. The lower tax rate accounted for 15 points of our EPS growth in the quarter, meaning that adjusted EPS, without the benefits of the lower rate, would have still been up 19%. We now expect the rate to be approximately 28% for the full year as we continue to refine the rate to reflect the impact of tax reform.

I want to point out that while we're glad to see this year's rate likely drop by about 8 points compared to 2017, there is more work that we can do to deliver a lower rate over time. It's too soon to give you an explicit view of where the rate can go, but we will continue to prioritize tax planning and to optimize our rate.

Let's spend a minute discussing some of the key income statement items. Cost of services rose 21% as a result of higher data costs associated with our revenue growth, investments in strategic initiatives and the operating costs related to the acquisitions I mentioned. SG&A increased 13% for many of the same reasons I mentioned in cost of services and also include incremental marketing in Consumer Interactive and some higher litigation costs. Adjusted operating income was up 17%, driven primarily by the increase in revenue.

Now looking at segment revenue and adjusted operating income. USIS revenue grew 21%, driven by strong performance across all 3 platforms. Excluding the impact of the acquisitions of DataLink, eBureau and FactorTrust, revenue would have been up 16%.

Online Data Services increased 25%, driven by the favorable macroeconomic environment and strength from innovative products like CreditVision, CreditVision Link and TLOxp. The 3 acquisitions I just mentioned are reported in this platform. Excluding them, Online Data Services would have grown 17%.

Marketing Services was up 23%, due primarily to demand for our new solutions, including CreditVision, CreditVision Link and digital marketing as well as ongoing strength with FinTech customers.

And Decision Services revenue grew 8% due to strength in our health care vertical. Adjusted operating income for USIS increased 15%.

Moving to International. Revenue grew 15% or 11% on a constant-currency basis. Developed markets revenue increased 12% or 8% on a constant-currency basis. Both Canada and Hong Kong continued to deliver solid growth. Emerging markets revenue increased 17% or 13% on a constant-currency basis. We saw strong growth in India and other key markets. Adjusted operating income for international grew 8% on a reported basis and 4% on a constant-currency basis.

During the quarter, we took a reserve for certain disputed claims that are the subject of litigation. Excluding that reserve, adjusted operating income would have been up about 9% in constant currency, which is more in line with what we would expect given the solid revenue growth.

Consumer Interactive revenue increased 12%, driven by growth in both the indirect and direct channels. Within indirect, we continue to benefit from recent new wins, such as Chase and Intuit. Our indirect channel also realized about $5 million of revenue from the onetime incremental credit monitoring business from a competitor. Excluding this incremental revenue, Consumer Interactive would have grown more than 7%.

In the direct channel, we benefited from a greater number of subscribers for the TransUnion Credit Monitoring due to increased activity starting in September, with stronger retention over that time. Adjusted operating income for Consumer Interactive grew 11%, driven by the increase in revenue.

Now moving to the balance sheet. Cash and cash equivalents were $154 million at March 31, 2018, and $116 million at December 31, 2017. Total debt, including the current portion of long-term debt, remained relatively flat even after funding acquisitions. Cash from operations rose by almost $36 million in the quarter, reflecting the strong cash generation capabilities of our business. Capital expenditures came in at $27 million, and free cash flow also increased significantly to about $74 million.

Turning now to our guidance for 2018. A couple of quick points about our assumptions for acquisition and FX impact. For the full year, acquisitions closed in 2017 should add approximately 2 points of revenue growth and about 3 points of impact in the second quarter. The impact of Callcredit is not included in our current guidance. We will update you after we close. For FX, we expect to have no significant impact in either period.

In the spirit of transparency, I also want to point out that the expectation in our guidance is for approximately $15 million of revenue for the full year from the onetime incremental credit monitoring from a competitor. This represents about 50 basis points of growth year-over-year. And we expect the revenue to be about $5 million per quarter for the first 3 quarters of 2018. We expect to invest at least 2/3 of this revenue in growth-oriented initiatives. Therefore, you can assume that there is limited flow-through impact on adjusted EBITDA.

For full year 2018, we expect revenue to come in between $2.17 billion to $2.185 billion, up 12% to 13% on a constant-currency basis. Adjusted EBITDA is expected to be between $845 million and $855 million, up 13% to 14%. At the high end of our guidance, adjusted EBITDA margin is expected to be slightly over 39%, up about 40 basis points from 38.7% in 2017. As I mentioned earlier, acquisition integration costs and the initial lower margin structure of the acquisitions is negatively impacting margin. Excluding this impact, our adjusted EBITDA margin would clearly be more in line with the historical flow-through from our revenue growth.

Adjusted diluted earnings per share for the year are expected to be between $2.37 and $2.41, up 26% to 28%. Of that increase, we estimate our reduced adjusted tax rate of 28% to account for $0.28 per share. Excluding this impact, adjusted EPS would be up 12% to 13%.

Turning to the second quarter of 2018, we expect the following: Revenue should come in between $534 million and $539 million, an increase of approximately 12% to 13% on a constant-currency basis; adjusted EBITDA is expected to be between $208 million and $211 million, an increase of approximately 12% to 14%; adjusted diluted earnings per share are expected to be $0.59 or $0.60, an increase of 26% to 29%. $0.07 per share of the increase relates to the positive impact of U.S. tax reform.

That concludes my review of our financial results. I'll turn the call back to Jim for some final comments.

Thanks, Todd. In our enthusiasm about the acquisition of Callcredit, I don't want to lose sight of the exceptional performance we delivered in the first quarter, which led to our ability to raise guidance for the full year. We are well positioned to have another very strong year in 2018, and that allows us to continue to stay aggressive and truly leverage the very unique assets of TransUnion. We've become industry leaders in technology and innovation. We've built and grown a diverse set of vertical markets. We've consistently expanded and refined our global operations. By leveraging all of these capabilities across our enterprise, we cannot only win in the marketplace today, but we can even better position ourselves for continued great success over the long term.

With the acquisition of Callcredit, we have real conviction that we are adding another foundational piece to our long-term growth algorithm that strengthens our ability to consistently deliver top-tier revenue growth in an attractive expanding margin.

With that, I'll turn the time back to Aaron.

Thanks, Jim. That concludes our prepared remarks. (Operator Instructions) And now we'll be glad to take those questions.

(Operator Instructions) And our first questioner today will be Tim McHugh with William Blair.

First, I guess, I want to focus on, I guess, Callcredit. Just 2 aspects to the question. One is, press releases even from the company and some other sources I've seen suggested I think they had been quoting GBP 201 million of revenue in 2016. So I think it's not an apples-to-apples comparison, but can you reconcile that for people who might see those headlines? I guess are you not buying part of what Callcredit historically reported as their revenue? And then secondly, I think along those lines, people are trying to do the math on what implied about growth rates, at least in the most recent year in 2017. So I don't think you gave that. But if you did, I apologize for missing it.

Okay. Tim, this is Todd. I'll take that question for you. So yes, the number that you see that Callcredit has pertaining to the GBP 201 million of revenue is prior to any accounting changes and is predominantly IFRS. They were not -- they weren't preparing their books on that manner in 2017. In 2018, they did move to that, to the new guidance that's there. So that's predominantly what the biggest change is. It's just simply the accounting side of it. As far as the growth rate, at this time, it's just not something that we're prepared to provide.

And the next questioner today will be Manav Patnaik with Barclays.

I just wanted to see if you could flesh out a little bit more in terms of how we should think about quantifying the synergies. It sounds like you're talking about both revenue and cost. Maybe on the cost side, just your comments on the meaningful opportunities to optimize and so forth. Should we think about that margin heading towards the true margin?

Manav, this is Jim. So yes. So as far as the, I guess, cost synergies go, these are fairly straightforward things that you'd expect given our ability to spread our global operating model. And I think we've proven that to you all over the last several years. So we feel very good about it and it's not a stretch. As far as margins goes, we're always seeking to get all our portfolio companies kind of to the same spot because that, I think, is consistent with the idea of having a global operating model outside of any aberrations that comes from having a business that has different cost characteristics. So I think you could expect over time that we get to the same kind of margins as the rest of TransUnion. And that will come through both improvements in operations that are going to happen fairly quickly as well as integrating things like CreditVision, CreditVision Link, which we believe the U.K. market is very ripe for. These are good high margin kind of capabilities. And so that all kind of factors right in on really good top line growth, along with continually expanding margins.

And our next questioner today will be Andrew Steinerman with JPMorgan.

I was intrigued that Callcredit had 1/3 of its revenues in Fraud Solutions. I wanted to make sure that was all B2B revenues in terms of Fraud Solutions. And then when you turn and look at your own USIS, what percentage of revenues are in Fraud Solutions? And does Callcredit really kind of maybe give ideas to USIS of -- that there's a bigger opportunity in Fraud Solutions for B2B?

Yes, good question. This -- there -- to answer the first part of your question, the product solutions are all B2B, okay? They do have some very interesting tools that we believe we can use not only in the U.S., but across all of our portfolio kind of geographies. And we also believe there are things we're doing in the U.S. that they're going to be able to use, so we're going to build a best-of-breed there. I don't believe we've pointed out what the fraud revenue is other than that it's growing double digits in the U.S. and we have our whole suite of products is something we're very bullish on. And we're also, by the way, bullish on Callcredit's stand-alone position in this space. So I think it's only going to get better with some of the things that we can add. And I'm just repeating myself now. Like you said, we're going to be able to use some of what they do across our portfolio. These are things we've already talked about, and they're really not that hard to do. When I say that, I mean, they're not hard to leverage in different spaces. So we're quite excited about that. Fraud, as you know, isn't going anywhere, and that market is going to continue to grow double digits for as long as I think we can project out.

And our next questioner today will be David Ridley-Lane with Bank of America Merrill Lynch.

I know that you've cited new products as the reason for acceleration in UIS -- USIS. Have your win rates on new opportunities meaningfully increased over the past 6 months?

I don't think so. We've been winning, I guess, for 3, 4 years now with these solutions. And we -- what we really have, if you kind of think of the whole story, we've not only put new solutions in place, but we've also kind of retooled our sales force and brought them into much more into a kind of solution selling mode. And we've also, I think, gotten better and better at perfecting, which we're not there yet, we'll never be there, the ability to manage the pipeline. And so I think I've mentioned in previous calls that our pipelines are strong across all businesses and even across all types of customers, from big customers down to smaller ones. So I would say, our close rates just continue to be strong and the pipeline continues to be strong. And the bigger customers take longer because they have a lot of other priorities and they have a different risk profile. And I'd say, the smaller customers, we've done a really -- mid to small, we've done a really nice job. So I feel good about the strength of what we're closing, but also the strength of the future based on the pipelines we built. And these are very straightforward things that we have in-market like CreditVision, CreditVision Link, Fraud, CreditView, which we just closed AmEx, as we talked about. So there's no horses that we're riding here that are on the come kind of. These are things that are in-market and doing very well.

Given the outperformance in the first quarter, do you still expect high single-digit revenue growth for USIS? Or has that expectation moved up a bit?

Yes. So we are expecting similar to the guidance that we provided earlier in the year for USIS in total to grow in low double digits for the remainder of 2018.

And our next questioner today will be Jeff Meuler with Baird.

When you called out there's superior data, you talked, I think, about income data. Could you just give us a sense of how broadly they have it on U.K. consumers, what the source of the data is? And then, I guess, maybe similar to Andrew's question on fraud, the potential to port those capabilities and a reminder of where else you have income data. I think maybe South Africa?

Yes. So they have data on, I think, 99%, virtually all the U.K. citizens. They get it from traditional sources, just like anywhere else, banks, et cetera. But they also have built up over time nontraditional sources of data. And that's given them the kind of the first-mover advantage in that space. Now that doesn't mean others can't go there, right? This is no different than any business that we're in and -- or any country that we're in, where we constantly have to keep innovating in order to stay ahead of the game. So I wouldn't -- I don't think anybody would tell you that there's some advantage here that's permanent. I think we've always been consistent with that. Kind of the permanent advantage is the capability to keep innovating, and that's what we're going to keep doing. That said, they do have a very nice head start now that's allowing them to take share. And you can see that they built themselves into the second-largest bureau in the second-largest market, which is growing very, very well. So there -- they have a lot of momentum, a great running start, and we're going to continue to augment that with things that we bring to the table like CreditVision Link combined with things like their affordability tool, which I think gets at the income data you're talking about. But it's -- that's still more extrapolated from checking, saving account information that's given to the CRA. And again, they have a head start on that, that's allowed their matching to be much better than the competition, which, again, is allowing them to take share. TransUnion, you asked about income data. There are markets where we have income data. But for the most part, we don't. There are other ways to get at it, but that's not the secret to our success. Our success is largely driven by our technology, our ability to innovate, certainly, access to data that most other companies in the world simply don't have access to, which makes us successful. So I hope I'm getting at your question. Regarding fraud, I'll just repeat myself that they have a good set of tools that gets at everything from real-time identity management to e-mail and mobile ID checks to monitoring devices to even some AML and KYC that is very effective in the market. They'll be able to use some of our technologies like Trustev and others once we close the deal. And we'll be able to use some of their IP in our businesses, not only in the U.S. but around the world.

And our next questioner today will be Toni Kaplan of Morgan Stanley.

In the past, you've focused more on growing in emerging markets. Has this acquisition changed your international strategy to focus more on developed markets as well going forward? And just aside from the U.K. and Lithuania, are there other geographies where Callcredit is concentrated?

Yes. So just a reminder that Lithuania is only the -- we don't have a business there. That's just where we -- or Callcredit does some of its development out of. And our strategy with regards to international has always to be in good geographies. And we've definitely emphasized, particularly with India and Colombia, liking emerging markets where the markets are growing at double digits. The U.K., as we talked about, just so happens, in their credit and in related markets -- that's the $2.4 billion, is growing double digits. And we're projecting that to continue and to maybe even accelerate a bit. So we view that as a very, very attractive market. So we will go to any geography that is, let's say, big enough and then has the growth characteristics, where we think that we can apply TransUnion's global operating model and have it make a difference. I think this is right in our sweet spot, and we're very excited about just the growth in the market. We're very excited about the business that's been built there with Callcredit. We've been following them for a very long time, so this isn't something we're just kind of getting used to understanding. And we're excited about that market's -- the ripeness of it to take in things like CreditVision, CreditVision Link. They simply don't exist there. And Callcredit has all the tools it needs to be able to do that in combination with our IP. So these are things we're going to be, I think, able to immediately put in there and help them to continue to take share and continue to grow at double digits. And then like we've talked about, there's also fraud, there's also digital marketing and other areas that are going to be nice growers as well. So the bottom line, it's just a very attractive market. And as far as some people are asking me, is this a pathway to the rest of Europe? I don't think so. If you're a company like ours, we know how to be a risk information solutions provider because we're that in the U.S. and we're that in many other countries. Being in the U.K. doesn't give you some kind of special intellectual capacity or otherwise to be in other parts of Europe. We already have that. So this is just a great investment because we're in the second-largest credit market with the fastest-growing bureau combined with all the capability we bring to the table. This is right in our wheelhouse. And we're super excited, kind of chomping at the bit, to get through this regulatory period and to work with that team there to continue their march and our march to continue to being the fastest-growing player in the space.

And our next questioner today will be Andrew Jeffrey with SunTrust.

Nice momentum in indirect and certainly an impressive win with AmEx, a marquee customer. Can you frame up what you think the TAM is in that market or at least where your share might be and what you think it could be? Just trying to frame up what you think the long-term growth potential is in that business.

You're talking about the indirect market?

Indirect consumer, yes.

Yes. We -- I don't think we [sit and] throw out numbers around our total addressable market. It's actually evolving quite quickly as we go. And just to give a little history there, we partnered with Credit Karma years ago, and we've learned a ton with them. And they still remain a very tight strategic partner. But as I think credit awareness has become more and more ubiquitous not only in the U.S. but around the world, other kinds of institutions are getting engaged. So the Intuits, Chase, AmEx, Capital One, et cetera, and many others. And so I don't think even a couple years -- 4 years ago we would have thought that this would be the case. So I -- so with regards to runway, there are FinTechs out there. There are other companies like Intuit that I think see value in engaging their consumer with a very important part of their lives, which is how their behavior is impacting their ability to get not only good terms on loans, et cetera, but insurance and other things, so goods and services. So we believe there's a lot of runway. Heading forward, we have strong pipelines there. I think we have a unique capability to quickly allow our customers to implement in a very seamless way that doesn't cause a lot of kind of stress in their environment. And the different capabilities we have, I think, are quite unique, and that's why we're getting this business.

And the next questioner today will be Georgios Mihalos with Cowen.

Todd, I wanted to ask a question specific to the Marketing Services line. Typically, 4Q going to 1Q on an absolute revenue basis, that revenue seems to step down 4Q to 1Q. That didn't happen this time around. I'm just curious if you could provide some color on that. And then I think on the last call, the one area I think you guys talked about a little bit of softness for '18 was credit card. Just wondering if you had an update there and if you feel any differently about it.

Okay. Thanks for the question. So Marketing Services, as you noted, we had a very strong Q1. And I would characterize it as continued growth that we're seeing first and foremost out of the consumer lending space. And when you think about that, think about the FinTech players are the big drivers there. Also, CreditVision and CreditVision Link and the capabilities there are driving that nice growth rate that we're seeing in Marketing Services. And I would say that just kind of the traditional marketing and portfolio review business that we do for financial services customers also just continue to be strong. So I think the net takeaway is think that consumer lending and CreditVision continue to be strong, and that would be the way to kind of think about that. Credit card, it's a little soft right now from our point of view. But it's kind of as expected and that's what we talked about during the last call.

And our next questioner today will be Bill Warmington with Wells Fargo.

So I wanted to ask, it looks like Callcredit had made some acquisitions as part of its growth back in 2016, Recipero and Numero being a couple. So I wanted to ask whether Callcredit was growing organically above, below, in line with the 11% market CAGR that you cited for the market.

Yes. So I guess the best way to answer organically, they well outperformed the market. I think that's the best way to answer that question.

And the next questioner today will be Shlomo Rosenbaum with Stifel.

The growth was pretty strong throughout the company. One area where it was -- just broke trend a little on the downside was just in the Decision Services. It was first time we've seen below double-digit growth in like 5 years. Could you talk about some of the items that impacted that? Maybe there's some timing over there, if there's any changes in the markets that you're addressing.

Shlomo, this is Todd. I'll take that one. So yes, you're right. Decision Services grew 8% in the quarter. And as you know, that is where we have our health care businesses predominantly reported. First, the health care business continued to grow at a nice double-digit pace. We continue to see great momentum in the back end of the revenue cycle management, in particular with our insurance coverage discovery product. So those -- that trend continues on, and we feel that there's quite a bit of runway left with the health care business. So what's dragging the number down a little bit is just some underperformance that we've seen predominantly in collections and maybe in some of our other -- remember, some of our [point of] service decisioning applications are the more legacy type of business. They're kind of flattish right now. But when we look forward, we fully expect this category to be back at a double-digit clip. So when we talk to you next time, that's what we fully expect it to be.

And this concludes our question-and-answer session. I would like to turn the conference back over to the management team for any closing remarks.

That ends the call today. Thank you all very much for joining us, taking the time this morning. Have a wonderful day and a wonderful weekend.

And the conference has now concluded. Thank you all for attending today's presentation, and you may now disconnect your lines.