TransUnion (TRU) 2025 Q3 法說會逐字稿

Good day, and welcome to the TransUnion's third-quarter 2025 earnings conference call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Greg Bardi, Vice President of Investor Relations. Please go ahead.

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 this 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 the 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 Chris.

Thanks, Greg. During the third quarter, TransUnion again exceeded all key guidance metrics and achieved its seventh consecutive quarter of high single-digit organic revenue growth. These results demonstrate the growing momentum of our innovation-led strategy. I want to outline four key highlights from the quarter.

First, we delivered market-leading and diversified growth with revenue increasing by 11% on an organic constant currency basis, excluding the significant breach remediation win from last year, which represents our strongest underlying performance since 2021.

Second, we are raising our 2025 guidance across all metrics, reflecting our strong third quarter performance stable lending trends in the US and new business wins. US lending conditions continue to be solid, characterized by modest GDP growth, still strong employment, stable delinquencies, lower interest rates and manageable inflation, and this is despite emerging concerns regarding a slowing labor market and stress first for lower-income consumers.

Third, we advanced our technology modernization with successful migration of our first US credit customers. OneTru is accelerating our pace of innovation in credit and noncredit products. We remain on track to achieve our remaining structural cost savings in 2026 as anticipated.

And fourth, we accelerated our share repurchases to take advantage of highly attractive valuation levels. During the third quarter, in October, we repurchased $160 million in shares, bringing the year-to-date total to $200 million.

Additionally, we increased our share repurchase authorization to $1 billion underscoring our commitment to delivering value to shareholders. Further details on each of these highlights are discussed below. Now our third quarter results demonstrate effective execution against our growth playbook, with strength evident across our solutions, our verticals and our geographies. US markets delivered 13% organic constant currency revenue growth when excluding last year's breach win.

Financial Services grew 19% or 12% excluding mortgage, reflecting continued broad-based outperformance in a stable and modestly growing market. Emerging Verticals accelerated to 7.5%, their strongest growth since 2022. Our noncredit solutions, which account for over half of US markets revenue grew 8%. These results reflect the emerging commercial benefits across our vertical markets from our accelerating innovation in credit marketing, fraud and communications.

Now international revenue grew by 6% on an organic constant currency basis. Canada, the UK and Africa all exceeded expectations and achieved double-digit growth despite muted economic conditions in each market. India grew 5%, slightly below our outlook as new tariffs impacted US export-dependent small- and medium-sized businesses, which tempered the pace of lending recovery.

We now expect high single-digit revenue growth in India in the fourth quarter. On a positive note, we experienced some volume improvement in the first days of the festival season in late September and early October. This is supported by further pro growth actions from the RBI and the Indian government. Todd will provide a comprehensive review of our results in just a minute.

Now looking ahead, we're raising our 2025 outlook based on our strong third quarter results, stable US lending trends and our continued commercial momentum. Our guidance raise maintains a prudently conservative approach, which offers likely upside if current lending conditions continue. Now at the high end of guidance, we now expect 8% organic constant currency revenue growth or 9% excluding last year's large breach win.

9% adjusted EBITDA growth and 9% adjusted diluted earnings per share growth. Excluding the 400 basis point impact of a higher tax rate in 2025, our results show another year of double-digit EPS growth, supported by our consistent execution and the strength of our diversified and resilient portfolio.

Now we continue to advance our technology modernization to drive cost savings, accelerate innovation and enable sustainable growth. In the third quarter, we completed the migration of our first US credit customers key milestone. We're enabling these clients with faster processing speeds and seamless access to our newest innovations, including TruIQ analytics. Additionally, we expanded our dual run program for key customers.

We're partnering closely with our customers to ensure smooth transitions ahead of a full migration. And by year-end, we expect OneTru to power a critical mass of our run rate US Credit volume and revenue, and we plan to complete all US migrations by mid-2026.

Over the year, we identified incremental third-party spend and other internal savings to deliver our targeted savings for 2026 and allow additional time to complete US credit migrations. In '26, we expect to deliver $35 million of operating expense savings and reduced capital expenditures to 6% of revenue. We will leverage these savings to drive margin expansion in '26 and fund growth investments. We anticipate no technology-related onetime expense add-backs in 2026.

Next year, our technology modernization will shift to our international markets. We've launched TrueIQ analytic platform in Canada, the UK and India in 2025. Next year, we plan to export other OneTru enabled solutions to these markets and start modernizing the core credit capabilities across Canada, the UK and the Philippines.

OneTru is our definition platform and we expect to fund these migrations through normal operations, driving additional savings in 2027 and beyond while diffusing our innovative solutions globally. Now our technology modernization is enabling commercial success across our solutions. We see new products rapidly gaining market traction, and we've built a robust innovation pipeline to fuel our next phase of growth. FactorTrust has delivered exceptional results. We secured multiple new wins in the quarter and continue to expand the pipeline.

FactorTrust has been a key driver of outperformance in our consumer lending business throughout the year. and we anticipate roughly 20% growth from FactorTrust in 2025. TruIQ data enrichment launched on Snowflake with the first few live customers. The Snowflake partnership expands the market opportunity for data enrichment and underscores our commitment to meet customers wherever their data lives. Data enrichment has quickly become one of our most successful recent product launches.

In fraud, we experienced strong demand for our newest synthetic fraud models and credit washing solutions. These new tools are built on OneTru and leverage our augmented identity graph which now includes integrated public records and delivers better fraud signals. With OneTru, we're beginning to penetrate the large and fast-growing global market for advanced fraud analytics.

We're accelerating growth in our marketing suite as well, driven by strong demand for our enhanced cloud-based identity resolution and audience activation capabilities. Over the last few years, we streamlined our marketing suite down from 87 products to across 6 separate platforms into a single integrated marketing platform on OneTru.

This integrated solution improves performance and simplifies our product portfolio for sellers and customers. Trusted call solutions continues to scale with new customer wins and ongoing capability enhancements. We expect to deliver over $150 million in revenue in 2025, a 30%-plus increase year-over-year, and we also continue to pursue global expansion opportunities for TCS.

And in Consumer Solutions, our freemium model is increasing in users and offers available. We're also migrating our indirect customers globally onto a new platform that combines our credit education, identity protection and financial offers behind a single set of APIs.

OneTru brings together our unique data within a single workflow platform. making it easier to deploy AI solutions across use cases and at scale. [NTU] is well positioned for AI-led growth. Our credit solutions are based on proprietary data contributed by thousands of individual furnitures. This data is not publicly available and can only be gathered and utilized within demanding regulatory frameworks.

Our noncredit solutions also are developed from data gathered from tens of thousands of sources, many unique to TransUnion and then combined with proprietary data exhaust from our fraud and marketing solutions. This vast ray of data fuels our credit, fraud and marketing predictive models, which already use advanced machine learning and AI to boost accuracy and to facilitate actions based on their better predictions.

And increasingly, TransUnion will capture value with AI agents by performing work currently done by internal client teams or automation upstream from our data and analytics. And our most AI-enabled customers already consume more of our data than our traditional customers, and they adopt our newer solutions more rapidly. So we are actively leveraging AI across the enterprise to drive faster product development, to enhance customer experience and improve ops efficiency.

Internally, OneTru Assist and OneTru AI studio are driving productivity gains for our software developers and data scientists, but also for nontechnical teams. Within the OneTru tech platform, Agentic AI is enhancing core processes such as data onboarding, ID resolution, analytics and delivery.

And at the product level, we're embedding AI into our solutions, including role-based agents for TruIQ analytics, our next-generation fraud detection model and advanced consumer behavioral analytics in our marketing suite.

So in summary, the tech modernization is driving rapid innovation and ops efficiency, but it's also positioning us to lead in the next phase of AI-driven growth. Our strong earnings and solid balance sheet have enabled us to boost capital returns for our shareholders.

In the third quarter and October, we ramped up share repurchases to $160 million, increasing our total for the year to $200 million, and this reflects our ongoing commitment to shareholder value. The board recently raised our share repurchase authorization to $1 billion and we believe buying back shares is especially attractive given our current market valuation.

Now with that, I'll hand it over to Todd.

Thanks, Chris, and let me add my welcome to everyone. As Chris mentioned, we exceeded guidance across all key financial metrics in the third quarter, driven by US Financial Services and Emerging Verticals. Consolidated revenue increased 8% on a reported and 7% on an organic constant currency basis. The Monevo acquisition added 0.5% to growth.

The foreign currency impact was immaterial. Excluding the comparison to last year's large breach remediation win, organic constant currency growth was 11%. Mortgage contributed 3 points to growth. Adjusted EBITDA increased 8% with margin at 36.3%, above our 35.6% to 36.2% guidance due to revenue flow-through.

Adjusted diluted earnings per share was $1.10, $0.06 ahead of the high end of our guidance and an increase of 6%. In the third quarter, we incurred $34 million of onetime charges related to our transformation program, $12 million for operating model optimization and $22 million for technology transformation. Cumulative onetime transformation expenses totaled $49 million, and we remain on track and within budget for our $355 million to $375 million in onetime expenses by the end of 2025.

Looking at segment financial performance for the third quarter. US markets revenue was up 7% on an organic constant currency basis versus the prior year or 13% excluding the impact of last year's large breach win. Adjusted EBITDA margin was 38.4%, up 70 basis points due to revenue flow-through and lower product costs compared to the prior year. Financial Services revenue grew 19% or 12% excluding mortgage. In the US, consumers remain resilient with still low unemployment and positive wage growth and lenders well positioned with adequate capital and healthy credit performance.

Our growth reflects strong performance against the favorable and stable market backdrop. We continue to outperform the market by driving new business wins across our solution suites. Credit card and banking rose 5% against modestly improving online volumes. We continue to see good sales momentum with trusted call solutions and alternative data. Consumer lending grew 17%, driven by healthy marketing and origination activity from fintech and point-of-sale lenders.

FactorTrust also delivered another strong quarter. Auto grew 16%, driven by pricing as well as growth in communications and marketing solutions. We saw an uptick in activity in the quarter, including increased electric vehicle sales in September ahead of the expiration of the federal EV tax credit. We anticipate volumes to normalize in the fourth quarter. Mortgage revenue grew 35% on flat inquiry volumes, benefiting from third-party scores pricing and non tri-bureau revenue.

Mortgage now represents 12% of trailing 12-month revenue. Emerging Verticals grew 7.5%, led by double-digit growth in insurance. Other Verticals accelerated as well, driven by strength in trusted call solutions, marketing and specialized risk, tax retail and e-commerce and collections posted double-digit growth. Media & Communications grew mid-single digits and tenant and employment grew low single digits. Public sector declined due to revenue timing.

In Insurance, we delivered another strong quarter. Consumer shopping remains elevated credit-based marketing activity continues to normalize as insurers benefit from improved rate adequacy complemented by new wins in our modern marketing solutions. Commercial momentum continued in core credit and driving history products as well as trusted call solutions.

Turning to Consumer Interactive. Revenue declined 18% on an organic constant currency basis due to last year's breach remediation win. Excluding this impact, Consumer Interactive grew mid-single digits with growth in both the direct and indirect channels. For my comments about International, all revenue growth comparisons will be in organic constant currency terms. For the total segment, revenue grew 6%. Canada and the UK delivered double-digit growth, demonstrating our ability to outgrow market volumes in our most mature markets.

Africa and the Philippines also grew double digits. Other markets, including India, Latin America and Hong Kong experienced below-trend market volumes and growth rates. Adjusted EBITDA margin for our International segment was 43.2%.

Looking at the specifics for each region. India grew 5%, slightly below our expectations as recent trade actions tempered the pace of volume recovery. We now anticipate the high single-digit revenue growth in India in the fourth quarter.

In late 2023 and throughout 2024, the Reserve Bank of India took actions to slow lending by tightening regulations and targeting lower loan-to-deposit ratios industry-wide. That actions included temporary bands of several nonbanking finance companies. Volumes troughed in the fourth quarter of 2024 with gradual improvement throughout 2025. Conditions overall are favorable with manageable delinquencies and modest inflation.

The RBI lowered rates by 100 basis points throughout 2025, and lifted lending bands on the impacted nonbanking finance company. The recovery has been measured. Loan-to-deposit ratios are still modestly elevated and non-bank finance companies have conservatively returned to the market. Lenders are prioritizing existing customers and lower volume, higher notional loans over new-to-credit opportunities. These dynamics have underpinned our guidance throughout the year.

Recent US tariffs of 50% on Indian imports, however, introduced uncertainty and has dampened commercial lending particularly to small and medium-sized businesses in export-oriented sectors. This has resulted in new pressures on CapEx, employment and credit demand. On a positive note, the Indian government recently enacted tax reforms and the RBI proposed further regulatory easing to support lenders and stimulate growth. Volumes in the early festive season in late September and early October, while still dampened from tariff effects showed some improvement.

We will monitor ongoing trends. From a TransUnion perspective, we continue to deliver double-digit growth in business wins and new product introductions, outperforming the broader market and our competitors. We remain highly confident in India's robust long-term growth potential. Our UK business grew 11%.

Our strongest performance since 2022 driven by healthy volumes from our largest banking customers and new business wins across verticals. We also continue to expand our consumer indirect offering to new partners, now serving over 27 million UK consumers. Canada also grew 11%. We drove innovation-led share gains across financial services, telco, insurance and auto as well as new and expanded wins in fintech and Consumer Indirect.

Latin America revenue was flat amid softer economic and lending conditions. Colombia delivered modest growth despite political uncertainty that weighed on government revenues and lending activity. Brazil declined as we lapped one-time project revenue. Our other Latin America countries grew modestly, impacted by consumer uncertainty linked to recent trade and immigration policies. Strategic campaigns and innovation-led wins offset some of the near-term volume pressures in the region.

Asia Pacific declined 8%. The Philippines remain strong, but Hong Kong faced a soft economic backdrop. We also lapped onetime consulting revenue from the prior year. Finally, Africa increased 12% with broad-based growth across financial services, retail and insurance.

Turning to the balance sheet. We ended the quarter with $5.1 billion of debt and $750 million of cash on the balance sheet. Our leverage ratio at quarter end declined to 2.7 times as we continue to push toward our long-term target of under 2.5 times. Our strengthening free cash flow and ongoing natural delevering positions us to accelerate capital returns to shareholders. We repurchased $160 million in shares in the third quarter and October, bringing the year-to-date total to $200 million. We remain on track to complete the Mexico acquisition in late 2025 or early 2026, which will be funded with cash on hand and debt. We look forward to adding Mexico to our leading global portfolio and bringing our state-of-the-art technology, innovative solutions and industry expertise to Mexican consumers and businesses.

Turning to guidance. As Chris mentioned, we are raising our full year outlook, reflecting strong third quarter results, stable US lending conditions and new business wins. Our guidance remains prudently conservative. If current conditions continue, we expect to deliver results at or above the high end of our guidance range.

That brings us to our outlook for the fourth quarter. FX impact is expected to be minimal to both revenue and adjusted EBITDA. We expect our Monevo acquisition to contribute roughly 1% to revenue. We expect revenue to be between $1.119 and $1.139 billion, up 7% to 9% on an organic constant currency basis.

Our revenue guidance includes 2 points of tailwind from mortgage. In the fourth quarter, mortgage inquiries are expected to increase modestly. We expect adjusted EBITDA to be between $393 million and $407 million, up 4% to 8%. We expect an adjusted EBITDA margin of 35.1% to 35.8%, down 70 to 130 basis points.

We expect our adjusted EBITDA margin in the second half of the year to be roughly 36%, consistent with the first half of the year and full year expectations. We expect our adjusted diluted earnings per share to be between $0.97 and $1.02, down 1% to up 5%.

Turning to the full year. We anticipate FX to be immaterial to revenue and adjusted EBITDA and the Monevo acquisition to contribute 0.5% to revenue. We expect revenue of between $4.524 billion and $4.544 billion. We expect organic constant currency revenue growth of 8% and an increase from our prior guidance of 6% to 7%.

Excluding mortgage, we expect organic constant currency growth of 5% to 6%. These growth rates include a 1% headwind from last year's breach win comparison. Specific to our segment organic constant currency assumptions, we expect US markets to be up high single digits or mid-single digits, excluding mortgage. We now anticipate financial services to be up mid-teens or roughly 10%, excluding mortgage.

We expect mortgage revenue to increase by nearly 30% against modest declines in mortgage inquiries. We expect emerging verticals to be up mid-single digit. We anticipate Consumer Interactive decreasing low single digit, but increasing low single digit when excluding the impact of last year's large breach win. We now anticipate international growing mid-single digits.

Turning back to the total company outlook. We expect adjusted EBITDA to be between $1.622billion and $1.637 billion, up 8% to 9%, an increase from our prior guidance of 5% to 7% that would result in an adjusted EBITDA margin of 35.9% to 36.0%, down 10 basis points to flat. The anticipated adjusted diluted earnings per share to be $4.19 to $4.25, up 7% to 9%, also an increase from prior guidance of 3% to 6% growth.

Our expected adjusted diluted earnings per share growth reflects strong double-digit underlying performance, excluding a 400 basis headwind from a higher tax rate in 2025. We expect depreciation and amortization to be approximately $570 million. We expect the portion excluding step-up amortization from our 2012 change in control and subsequent acquisitions to be about $285 million as technology modernization initiatives go into production and start to depreciate. We anticipate net interest expense will be about $200 million for the full year and we expect our adjusted tax rate to be approximately 26.5%.

Capital expenditures are expected to be about 8% of revenue. We continue to expect to incur $100 million to $120 million in onetime charges in 2025 related to the last year of our transformation program. Given those investments, we expect our free cash flow conversion as a percentage of adjusted net income to be 70% in 2025 before improving to 90% plus in 2026.

I will now turn the call back to Chris for closing remarks.

Thank you, Todd. So I'd like to provide some perspective on the recent changes in the mortgage market both in terms of score competition and also distribution. We believe that these changes are a net positive for TransUnion, enabling us to fully leverage our leading trended and alternative data to the benefit of homebuyers.

Additionally, we believe that the introduction of score competition will redistribute the economic value in the mortgage credit market towards data providers and away from scores. And this is what we experienced in all markets where score competition exists.

It's our extensive contributed data from thousands of lenders that forms the foundation of value in mortgage credit decisions, not the score. And we expect the proportion of value associated with data to increase over time now that competition is possible. As a pioneer in trended data and an innovator in the alternative data space, TU will empower mortgage lenders to reward consumers for responsible credit behaviors while preserving the safety and soundness of the mortgage market.

TransUnion is the only bureau with 30 months of trended credit data creating the most complete picture of consumers. And we continue to enhance our mortgage credit report with alternative data, including rental and utility trade lines and short-term lending attributes.

Now VantageScore 4.0 uses trended in alternative data to boost predictive accuracy and to expand financial access, scoring 33 million consumers that were previously credit invisible. And the score is already used by the largest banks and 3,700 institutions in total, including increasingly in securitization. Additionally, VantageScore is the leading credit score for credit education, serving 220 million consumers.

So we believe that the combination of TransUnion's leading trended and alternative data alongside VantageScore 4.0 will shape a new era of more inclusive mortgage access, benefiting homebuyers, lenders and investors. And we provided further details on the importance of TransUnion in the lending ecosystem and the value proposition of the VantageScore in our appendix of this earnings presentation.

So starting in '26, we're expanding our mortgage credit offerings to accelerate VantageScore adoption. First, we'll offer VantageScore 4.0 at $4, significantly below FICO's announced price hike to $10. For customers that adopt Vantage 4.0, the cost for a credit report plus the score in '26 will be similar to the cost of a credit report plus the FICO score in '25.

Now to enable lender choice will also provide a free VantageScore 4.0 for mortgage customers that purchase a FICO for from TransUnion through the end of 2026. We'll also offer multiyear pricing for credit reports and VantageScore 4.0 to promote certainty after multiple years of rapid FICO price increases.

And we'll launch a free VantageScore credit score simulator to empower prospective homebuyers to improve their credit scores and qualify for the best possible mortgage terms. So these offerings provide clear cost savings and predictable pricing for clients, emphasizing that the main value in lending is in the data.

Our actions will preserve the profitability of our mortgage vertical regardless of changes in third-party score delivery models. For TU, VantageScore adoption represents an incremental profit and margin opportunity over time. So looking at the industry broadly, even a modest recovery in mortgage activity would boost already attractive financial results.

Mortgage originations in 2025 are roughly 40% below 2019 levels and at their lowest levels since the middle of the '90s. Despite this volume decline, we have built a strong profit base in mortgage. This year, we expect to deliver $580 million in mortgage revenues or $395 million when excluding the $185 million of no margin FICO royalties.

Now we expect an eventual normalization in mortgage activity with the pace largely determined by interest rates. Lower rates would drive substantial refinancing activity and start to unlock home purchase demand. Currently, over 9 million mortgages have rates above 6% compared to $5 million total mortgage originations in 2024. So if the average rates fall below 6%, we expect a significant increase in market activity.

This normalization would significantly boost our earnings. Every 10% increase in mortgage volumes would add $40 million of adjusted EBITDA and $0.15 to our earnings, a full recovery to 2019 levels equates to $240 million of adjusted EBITDA increase or $0.90 in our earnings. And this represents a 20% increase to 2025 adjusted diluted earnings per share.

Any volume normalization would be in addition to the typical growth drivers in mortgage of pricing and innovation-led new business wins as well as the upside from VantageScore adoption. And lower interest rates would drive incremental volume demands across all lending categories, which also remained below the long-term trends.

So taking this together, we remain confident in navigating this evolving mortgage landscape to maintain our attractive financial profile with upside from VantageScore adoption as well as an eventual recovery in lending volumes.

Now in closing, TransUnion's strong third quarter and year-to-date results highlight the benefits of our multiyear strategic transformation. We view the high single-digit revenue growth in the double-digit underlying EPS growth in each of the last years years as indicative of the long-term earnings power of our business in stable conditions.

And going forward, we're poised to accelerate growth and efficiency powered by our modern technology platform and the most innovative products in our history. We're just beginning to tap the potential in large and growing markets such as credit analytics, fraud, marketing and trusted call solutions. And we've also reinvigorated our consumer business. We see growth upside in each of these businesses because of recent product innovation and our expanded go-to-market adverts.

And this is in addition to any benefit from normalization in US mortgage as well as India returning to its typical growth algorithm. Our industry-leading growth and enhanced free cash flow generation will enable us to accelerate capital returns to shareholders, while continuing to invest thoughtfully in innovation and expansion.

So we plan to share more about our technology transformation, product innovations and accelerating commercial momentum as well as updating our medium-term financial framework at an Investor Day that we will host in early 2026.

And so with that, let me turn it back to Greg.

That concludes our prepared remarks. For the Q&A, we ask that each ask only one question so we can include more participants. Operator, we can begin the Q&A.

Thank you. We will now begin the question-and-answer session. (Operator Instructions)

Andrew Steinerman, JPMorgan.

Good morning. I appreciate the left side of slide 4. This is the slide that breaks down the growth drivers by bar and colored bars in US market. I particularly wanted to ask how much of the US market growth here on slide 4 is coming from FICO pricing pass-through.

And I'm just assuming that is on the green bar of pricing, you correct me if I'm wrong, and while you're looking at the green bars, if you could just comment on the other green bars, the volume growth, that's credit volume growth and the noncredit growth green bars, do you think TransUnion is growing with market or gaining share relative to end market activity?

Good morning Andrew, this is Todd. I'll take that question. So as it pertains to pricing, when we look at that 5%, I would say, good portion of that relates to the mortgage pricing. But there still is pricing that TransUnion does take, and we do have a pretty robust process to have price increases on an annual basis. But say the majority of that is primarily related to mortgage.

If we look at the other green bars, the volumes in particular, do speak to the growth that we have been experiencing within credit. So we articulated that, talk specifically about within financial services, excluding mortgage, saw some really good growth in consumer lending. Credit card and banking also was up a little bit and auto has kind of held its own. Other than that, like we are seeing good volume growth outside within the emerging verticals as well.

If you look at noncredit growth, think of that as our trusted call solution capabilities. Think of that as marketing as well as fraud. And in particular, in the third quarter, we saw very strong growth continue in trusted call solutions. And encouragingly, marketing post a very good solid quarter. And you can see that when you look through to the Emerging Vertical overall growth rate at 7.5%. Just to add on to that, too.

One last thing is that the -- I just talked about the volumes in that first bar, but the bar clearly has wins in there as well, too. So I'd be remiss to not recognize the terrific work that our sales team has done and continuing to build our pipeline, convert to bookings and ultimately, enjoy the revenue recognition that you're seeing here.

Yeah. And look, if I can add my two sentences Andrew. Obviously, to compare our results to the market, you got to do some slicing and dicing for noncomparable lines of businesses and such between the different players. When we isolate it down to financial services performance, we think we're materially outgrowing the market. A lot of it is due to our new innovation.

The FactorTrust score has really reinvigorated our growth across consumer lending, and so yeah, we are gaining share. And when you adjust for mortgage, which is a bit of a content between the several bureaus, our growth rate is more than double that of what we see elsewhere in the market.

Great, thanks, Chris.

Jeff Meuler, Baird.

Yeah, thank you. Good morning. So really nice quarter. They've been good for a while now. I want to ask about the pace of investment. There was a nice EBITDA to go along with really good revenue growth, but the flow-through on the revenue upside was lower than it sometimes is on big revenue beat, especially when you're at 11% underlying growth. So my question, are you incrementally, I guess, reinvesting into strength? And if it's incremental investment, what is it in? Like is it some of the AI initiatives ahead of productivity and revenue benefit? Or what is it? And any framework, updated framework you can give on how to think about margins beyond '25. Thank you.

Yeah. Well, listen, for sure, Andrew, I think you characterized it -- sorry, Jeff, apologies. I think you characterized it right that we are accelerating investments given the financial strength that we're delivering in 2025. And I mean just pulling back the frame a little bit, we're very happy with how we're performing, not just in the quarter, but how we're set up to perform in '25 and really over the past couple of years. We're talking very high single-digit organic compounding growth.

We've got margin expansion. We've got low double-digit EPS growth when you make sensible adjustments to the numbers. And we're highly confident that we're going to deliver on all of these metrics, including our 36% margin guide. I would also point out that our guide for the remainder of the year, the fourth quarter and the full year maintains our prudent conservatism, which I think you guys know means if conditions persist as we have experienced them in the quarter and for most of the year, we would expect to outperform the high end of this guidance.

So in terms of the fall through, look, the strong outperformance has given us a chance to continue our product innovation to invest in AI areas like I highlighted. We had a slide on that in the deck, and I talked about how, where AI is really permeating much of our product and some of our new feature functionality for using our new analytics platform.

But additionally, we're growing our go-to-market effort across all of our new product lines because we want to make sure that we can continue to compound the top line at this level going forward. So hopefully, that gives you what you need.

I think I heard you talk about '26, Andrew. So let me kind of -- sorry, Jeff, I call you Andrew now too. 2026 as far as how we're thinking about margins, I think our expectations are for what we would characterize to be a solid expansion in '26. So if conditions stay the way that they are revenue growth, plus the remaining savings from our transformation program will allow us to achieve that solid margin expansion while also allowing us to invest back in the business. So just like what Chris just talked through, so that's an important point.

Also, we're committed -- just to reiterate a point we made in our prepared remarks to stop the transformation program adjustments. So that will end at the end of 2025. I think it's important to call out here that when we announced that program in November of 2023, we called for that spend to be between $355 million and $375 million. We've managed to that budget, and we've hit our deliverables. So that's been a big focus for us internally.

So really proud of what the team has been able to accomplish there. The other part, when we think about 2026, not forget that we're also planning to reduce our capital expenditures down from about 8% to 6% of revenues. So the margin expansion plus the CapEx coming down to 6% nets us to a 90%-plus free cash flow conversion, which we've had our eyes on since the beginning of this transformation program two years ago.

Yeah, good point.

Thank you.

Faiza Alwy, Deutsche Bank.

Yes, hi, thank you. Good morning. I wanted to ask about the really strong growth you had in Emerging Verticals. And I'm curious how do you think about the sustainability of that growth? I know you're still guiding to mid-single digits for the year. But was there anything sort of onetime related? And maybe if you can remind us around how much of the business has been related and what you're seeing from a new business perspective here?

Yeah. Thanks for the question. And look, there's nothing anomalous in the third quarter results for Emerging Verticals. There's nothing that is onetime or that you need to make an adjustment for. Obviously, it's been a little bit bumpy in the past couple of years as we've been raising our growth rate and emerging from low single to now high single digits.

We've got a stable foundation of revenue performance across almost all the vertical components of emerging. We had to get through some volatility in the tenant employment because of the (inaudible) changes and the like. And the only component, I think, that is not performing right now is public sector, which is relatively small for us, but we used to be able to count on it for low double-digit growth. Dodge kind of interrupted that. Shutdown is probably not going to help.

But there's no reason in the intermediate future with stability that our solutions don't start growing at low double digits again. Now with that said, what's driving the improvements in the growth are, first, insurance. Insurance has been a solid double-digit organic grower for the past couple of years. We're doing exceptionally well there. We've got terrific products, particularly our driver's risk solutions.

And we estimate now with current policy levels that we touch 50% of all policies that are being underwritten in the US. So it's a fantastic and growthful position that will continue. We've also really grown well in our trusted call in our communication solutions. That's, again, a double-digit grower. There's a lot of addressable market ahead of us.

There's a lot of opportunity to expand those solutions internationally. And marketing has been reinvigorated. Marketing has been a target for tremendous reinvestment over these past couple of years. We launched our true audience marketing solution. It's now -- we've gone from just dozens and dozens of point solutions into an integrated end-to-end workflow solutions for marketers.

And our audience data, our onboarding revenues and most importantly, our core identity resolution, which really leads the market are performing exceptionally well. Fraud's contributing investigative solutions, all of them are showing improved revenue performance. So our goal is to get this number up and to really take advantage of some very large and fast-growing markets.

Great, thank you, Chris.

Toni Kaplan, Morgan Stanley.

Thanks so much. Chris, thanks for going through your AI solutions in the prepared remarks. I was hoping you could talk a little bit more about your proprietary data and particularly how you're positioned in the marketing business, but also across other parts of the business. I think you did a great job, but I just wanted to hear more specifics on that. Thanks.

Okay, yeah. Well, thanks for the question. And obviously, AI concerns have permeated the info services space over the past couple of months, and there's been a lot of thought about who's positioned to win and who might be vulnerable.

And as I articulated, in the main deck, I mean we feel like TransUnion in the bureaus overall are really positioned to be beneficiaries of AI because of the breadth and the proprietary nature of the data, the broad contributory network and all of the levels of regulation around this information.

You simply can't go out and crawl the web and get all of this credit information and then credential all of the customers who consume it and then ensure that those customers are only using it in regulatorily approved ways. That can't happen, right? So we've got this proprietary defensible foundation of information. If you look at the marketing space, I mean, we are gathering information in marketing and fraud from literally tens of thousands of different touch points. Many of them are not publicly accessible.

And that information, while it's not regulated by the Fair Credit Reporting Act, it is regulated by the driver's Privacy Protection Act by GLB regulations overall. Again, there are regulatory hurdles or moats, protections around this data. And then our solutions not only take that foundation of data, but they combine all of the exhaust we get from providing marketing, in particular, audience activation and measurement services to the space, and they incorporate that back into the data foundation.

So there's a bit of a network effect that enriches our marketing data and our fraud data that makes it hugely defensible. Now as we build AI on top of that foundation, as we move from advanced machine learning to more AI and generative techniques, it gives us an incremental growth opportunity because, look, the analytics and the insights that consumers drive from our data that leads them to take actions.

A lot of those actions are embedded in software applications upstream decisioning and other workflow applications. Increasingly, the AI agents that we're going to build are going to erode the value of the upstream software applications. And so over time, our business and as you look across our industry, we are going to evolve into integrated workflow platforms driven by proprietary data and analytics. So we strongly believe that AI represents a massive growth unlock for the business and it's just going to take some time for the market to understand this and then recognize it.

Thank you.

Manav Patnaik, Barclays.

Thank you. Chris, I just want to follow up on that last statement you made. I think, yes, the market will take some time to appreciate it. But is it also because it's going to take you guys sometimes to actually show that benefit in the revenue line item? And then maybe to add, just on the cost side, does that help? When can we start seeing that help your margin flow through?

Yeah. Look, fair question, Manav. I mean, look, we've raised our guidance for the fourth quarter, but we didn't do it based on anticipated new AI revenues, right? And so if your perspective is the next quarter, it's going to take a little bit of time. In the intermediate term, you're going to start to see increases in wins and retentions and pricing power increases and absolute new categories of revenue developed quarter-by-quarter as we begin to utilize AI across the product suite.

The other thing I would say is, look, internally, we're using AI to automate a lot of our customer service operations and our dispute resolution operations. We have thousands and thousands of people that service consumers around the world who have questions or concerns about their credit or the scores being calculated based on it. We can do a better job servicing those consumers with AI-enriched processes, and we're investing a lot to make that happen. And so I think that's going to allow us to continually improve service at much greater productivity over time that will be a net positive to our margins going forward.

Thank you.

Ashish Sabadra, RBC Capital Markets.

Thanks for taking my question and congrats on such solid results. I just wanted to ask a few questions on mortgage, questions that we're getting a lot from investors. First one was just around mortgage. Is there opportunity for you to continue to raise prices on your data file even in a FICO direct license model?

Second is just some concerns around B2B. Have you heard anything on that front? And third would be just on the trigger marketing regulation. Could that have any impact to your revenues going forward? Thanks again.

Ashish, could you -- I didn't hear your -- the second component of your question. The first is the change -- the competition and the changes in the distribution model and go-forward pricing power. And the third is about triggers. What was the second?

It's just the three bureau to two bureau, is there any potential risk there? Thank you.

Okay. Look, we've got our mortgage team at the Mortgage Bankers Association meeting, which has been going on Sunday. We've had a ton of client interactions. All three bureaus have had their representatives on stage talking about their new integrated mortgage offerings to counter this latest and very aggressive price increase by FICO. I think you have to just stop for a second and realize that four years ago, the FICO score cost I think it was $0.62. Today, we're talking $10.

And so resellers and lenders are really frustrated by the aggressive price increases that have been put through and put through on the eve of competition for the first time in 30 years in score pricing. Now what we have put forward is a superior score in the Vantage 4.0 that is materially discounted against the incumbent score.

It's a better score because it leverages trended data. It's going to allow us to score 30 million-plus consumers that were previously unscorable, meaning that they couldn't qualify for a GSE mortgage because we were using a score that was point in time data and not trended data and trended data has been the standard for a decade in the mortgage industry. right?

So there's been a real lack of innovation in that regard. So we're putting forth the score. It will allow us to unlock the power of our trended data and alternative data. We estimate 5 million to 6 million more Americans will qualify for GSE-sponsored mortgages going forward. And there is value there that I think TransUnion and the other bureaus will be able to capture while still saving the industry an enormous amount of cost, right? And so the industry is looking for this opportunity.

Now look, for 30 years, the industry has not had choice. And so much of it is calibrated to the FICO classic score. But the industry is hungering for change. They want greater financial inclusion because that means more customers for them to make loans to. The GSEs care about financial inclusion, and they also care about safety and soundness. And for 10 years, they've insisted upon trended data from the bureaus because they know it works better, right?

So now the stars are aligning to really support what I think will be a material share shift over time. Yes, it's going to take some time to warm up the engine. But look, we have already helped a number of clients move off of the FICO score. Synchrony moved to VantageScore for underwriting their card portfolios some years ago. They wrote a white paper on how to do it.

They've had kitchens on how to do it. They securitize those mortgages. Community financial institutions have been under the vice of FICO price increases. They hold a lot of their mortgages on their books. We have been converting many of them over to the Vantage 4 and trended data for years, okay?

So it's not like this can't happen. I think the industry is awakening to the opportunity. I think the entire EV industry is going to start experimenting with this. And I think over time, you're going to see material share shift to Vantage because it works better and it unlocks trended data and the industry is set up with the price increases. So that's the first point.

Now triggers, we've essentially been out of the triggers business for years, right? And so we're not impacted by the changes in regulation or legislation. And look, in terms of the tri-merge, the tri-merge is an important part of the safety and the security of the mortgage lending system in the US. We have proven it out empirically neutral third parties like S&P have analyzed this. And what they've observed is that in recent years, the three bureau files have started to diverge in terms of their data content. This era of accelerating alternative data on the credit files is just going to lead to further divergence.

If you don't pull three files, the chances are you're not going to qualify somebody who could be qualified. It's a misrevenue opportunity. You're also not going to assess the risk as well as you will if you pull three files. And you may end up charging people more on a very large and long-duration credit and that higher rate is going to come down to a massive increase in the interest that a consumer pays. So for a very small cost in the context of this larger transaction, you get greater financial inclusion, greater profitability and greater safety and soundness.

So for all of those reasons, which the FHFA understands very well and there's an enormous amount of support on Capitol Hill for the Tri-Merge. I don't see any changes coming on that horizon.

Very helpful, sir. Thank you very much.

Scott Wurtzel, Wolfe Research.

Hey, good morning guys, and thank you for taking my question. Just wanted to go back to maybe some of the trends you're seeing on the fintech lender side. It sounds like during the quarter itself, trends were pretty stable. But just given some of the noise that we've heard around subprime credit anything. Just wondering if you can maybe talk about some of the trends you've seen since kind of the end of September, early October on that side of the business. Thank you.

Well, look, let me pull back to (inaudible) and just talk about the overall market conditions that we're seeing in the health of the market. I mean look, the broader context is coming out of COVID and coming out of this year of really cheap money in the US. In '22 and '23, we had to deal with declining volumes. In '24 and '25, we've largely had stable but muted lending levels. All lending categories are below the long-term trend.

Mortgage lending is dramatically below the long-term trends. It's back to mid-90s levels. Now I think we're in a period of stable to improving loan volumes. I mean if you look at our results, 11% organic growth and with 13% in US markets alone reflects really good volumes.

Now we're not back to the long-term trend lines. But when I look at my daily volume reports across all categories, I see material volume increases. Part of that is because of the soundness of the market. So it's macro driven, but a lot of it is based on our commercial success, right? And the wins that we're racking up in market and the dramatic performance improvements in our subprime oriented credit scores, right, the FactorTrust scores.

So we're doing really well there, and we see a market that's got decent GDP growth, lowering interest rates, a lot of stability in delinquencies. We have looked really hard here at the nominal debt levels of consumers of all risk tiers. I'm looking at their current levels back to 2019. You see in the media a lot of concern about the nominal increases in consumer leverage. But when you adjust that for inflation and you adjust it for the substantial wage gains, particularly that lower income Americans have enjoyed over this period.

Their net indebtedness in '25 looks pretty much the same as 2019. And I think the banks confirm this. I mean we just had a round of bank reporting. All the results for the industry are quite solid. Lending volumes are increasing. And practically, no one took any increase in their bad debt reserves, right?

So the industry feels good about the condition of the market and the industry feels good about the condition and lendability of the consumer. Now at the lower end in subprime, I mean, look, go back over the last eight quarters, as I to do a media search for you. In every quarter, somebody is talking about instability and subprime, rising delinquencies, et cetera, et cetera. And despite those concerns, some of which are legitimate, we have managed to post market-leading growth in every quarter, right?

So clearly, our foundation for growth is very broad-based across all risk per in the US. The portfolio is really representative of the broader lending ecosystem. It's not skewed towards subprime. If it were, we wouldn't have been able to outgrow the market for the past eight quarters. So those are my thoughts on that topic.

Thank you.

Craig Huber, Huber Research Partners.

Yeah, hi, good morning, thank you. My understanding is out there, the VantageScore has about 5% market share in autos, credit cards, personal loans, et cetera. Obviously, on the nonconforming part of mortgages, I believe it's basically negligible kind of nonconforming piece. When we think about the pricing you guys have come out with for VantageScore for mortgages of $4 you just announced recently (inaudible) obviously came out at $4.50 a price.

And then you talk about it versus $10 per FICO score, that is a huge cost savings. I can see an argument there. But obviously, FICO has a second model out there, right, a brand-new one at $5, but then it's a $33 fee on the back end if the mortgage closes. All this stuff, of course, gets paid by the consumer.

So if I'm the lender -- if I'm the lender here, I'm going to be much more likely to go with the [dollar] option for FICO and then the $33 on the back end that the consumer pays for all that correct, on the lender. So I'm -- in my mind, I'm comparing your $4 number to $5. Am I wrong on that? And also if you could comment on the 5% market share.

Yeah. Well, look, the market share is low in these other areas. But I think that's derived in large part to the monopoly positioning in mortgage. And of course, for FICO, the profitability of the business has driven disproportionately out of mortgage where the pricing is high. And I think now that all of these resellers are being forced to do the analytics behind the VantageScore and conversion, it just creates a very ripe opportunity for share shift. And I think that's how it's going to play out over time.

Now in terms of the success-based model or the booked fee model, and in terms of shifting the calculation of the FICO score via the direct approach. I think that the resellers and the lenders, but particularly the resellers are just starting to understand the complication with administering the model. It comes with a blizzard of complexity, right? The first is just the accuracy of the calculations themselves.

As we've seen in the industry, sometimes there are errors. And when there are errors, the question will be, who's responsible for that error. Secondly, today, none of the resellers are agents of the bureau. That's a status that's very difficult to attain. You have to have considerable cybersecurity investments in scrutiny.

And they've simply been consumers of the data and the output of the score calculation that we provide and then they pass the three of them on to the GSEs or to their lending customers, right? Well, now they're going to have to increase their cybersecurity investments. They're going to have to increase their personnel investments to support potentially consumer dispute inquiries and the legal and the regulatory liability that they're going to have to assume is considerable.

I don't think that any of that was really understood at the initial press release. But based on the feedback that we're getting from the MBA, the resellers are now understanding that, and they really -- they don't really know how to handle that because it is really quite complicated and it is fraught with a number of challenges that can have significant financial consequences.

From your perspective, in 2026, are you viewing that the change that FICO have done for their pricing in the marketplace? From your perspective, given the change of your own pricing, et cetera, that you will be -- it will be neutral to you. In essence, you're raising the price on your credit file for mortgages basically to make up the lost FICO revenue and profit. Am I thinking about that correctly?

Look, yes, look, the measures that we have taken around our mortgage offerings in total actually hold the cost of the credit and the services that we provide related to credit constant between the years, right? And so we expect that we're going to protect our revenue and our profits regardless of who's calculating the FICO score and regardless of which model they choose, right? And then from there, I think we will have revenue growth and margin enhancement as we start to take share from FICO Classic.

So again, I'm sorry, in '26 then you don't think from an EBITDA basis, the changes that FICO put in place here are going to change your outlook for next year?

That is correct.

Okay, thank you very much.

Andrew Nicholas, William Blair.

Hi, good morning. This is Tom Ross on for Andrew Nicholas. I wanted to touch on the trajectory of India growth. I think fourth quarter, you're expecting to exit the year in the high teens growth. I was curious when you -- what you're thinking about like getting back to that rate, could you see it happening next year? And then relatedly, it sounds like it's tarmac was on the commercial lending part of the business. So I was wondering how consumer lending within India track relative to your expectations in the quarter? Thank you.

Well, look, the India situation is very fluid because we're in the middle geopolitically of intense negotiations around tariff and trade terms. And we were very much pivoting back toward high teens growth in India in the fourth quarter when things went a little bit sour in the US imposed a 50% tariff on all imports coming from India.

Now the challenge there is that a good portion of the economy, about 30% is driven by micro, small and medium businesses, very entrepreneurially driven that are also export dependent. And so with this additional cloud hanging over, the banks have slowed lending to that segment, which has flowed through in the form of lower volumes to our leading bureau there, civil, right?

Now again, things change pretty quickly in these trade negotiations could be here a month from now with stability restored and lending volumes increasing. But what we do know is that India continues to be an awesome market. They've got 7% GDP growth, then we've got inflation down to 3%. They have a central bank, the RBI, that is growth-oriented, that has been enabling fintechs that support unsecured retail lenders to resume their operations, which was driving more volume. They've been cutting rates.

So all the macro factors are aligning for a resumption of terrific growth coming out of one of the largest and most attractive markets on the planet. But we have hit a speed bump here with the 50% tariff, and we're just going to have to wait until that gets resolved. I'm confident it will resolve. I think the US and India are natural partners, and there's a tremendous amount of trade that we'll do.

But things do get heated in the course of negotiations. And so that has delayed the full recovery of that market a bit. I'd say the other bright spot in India is that, I mean, look, we have 40% exposure to consumer credit. We're growing in all of our other categories. And we recently launched our analytics platform, TruIQ analytics in India with a lot of interest from major bank clients and I think it's a whole new vector of growth that will both help us defend the massive market share that we have and then generate new revenues additionally.

Hey Tom, I'm going to add on to that. Hopefully, what you're hearing from Chris is the -- just the conviction that we have in the India business and the runway that's ahead for us. You got to think about this longer term, but when we take a step back and we think about just the overall portfolio of TransUnion in the businesses that we have and how diverse they are. I just want to call out, while India is very important to us, it does represent only about 7% of our total revenues.

And what's important to talk about that balance of the portfolio is if you go back to '22 and '23, when the more developed markets of the US, the UK and Canada were in a slowdown because of high inflation and rising interest rates, India business was growing in the 30% range. So right now, there's some things going on in their market that Chris just articulated. So that revenue is down to 5%.

But if you look across the portfolio, now markets like Canada and the UK are leading international growth 11% in the third quarter. And despite all of noise with India, we continue to deliver high single-digit revenue growth with India clearly below trend and our long-term aspirations.

Yeah. In addition to that, I mean, as I outlined in my concluding remarks, there's a number of places in the portfolio where we think we will boost our growth rate based on all the product innovation and based on expanded go-to-market investments. And I would put marketing, fraud, communications, analytics across credit marketing and fraud. I think investigative solutions has got a lot of juice. Of course, India's upside, of course, mortgage is upside.

And let's not forget the consumer business. We've made massive investments to remediate the consumer business. They're starting to bear fruit. Our intermediate goal is to get that back to a mid-single-digit compounder. I feel like we're on the way there. So I mean if you like 11% in market-leading growth, understand that it's on a stable consumer lending foundation today, and there's upside from that, given all of the product innovations in all of those different market areas that I just outlined.

And I think, again, it's important to emphasize that this is a global portfolio. At any point in time, we're going to have strength and weaknesses across it. And if you look at the consistency of our results over the past five years, the worst we've ever done is grow in line with market. But for the most part, we outperform the growth rates in the market. So I think this portfolio is much less risky and far more durable than is currently understood.

All right. Thanks, Chris, Todd. I think that's a good place to end. Thanks for all your questions 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.