2026 Third Quarter Earnings Conference Call - TRANSUNION

Explicit Guidance:

• FY2026 (Full Year):
  • Revenue: $5.131–$5.162 billion (8%–9% organic constant currency growth; 5%–6% excluding FICO royalties).
  • Adjusted EBITDA: $1.808–$1.827 billion (10%–11% growth; margin 35.2%–35.4%).
  • Adjusted EPS: $4.81–$4.88 (12%–13% growth).
  • Net Interest Expense: $235 million (down from $245 million in 2025); expected to increase by ~$60 million in 2027 due to higher SOFR and swap replacement.
  • FICO Royalties Impact: 80 basis points drag on consolidated margin.
  • Capital Expenditures: Unchanged as a % of revenue.
  • Tax Rate: Unchanged.
  • Free Cash Flow Conversion: Expected >90% of adjusted net income.
• Q4 2026:
  • Revenue: $1.264–$1.294 billion (8%–10% growth; 3%–6% organic constant currency; 5% inorganic contribution; 0.5% FX headwind).
  • Adjusted EBITDA: $450–$468 million (8%–12% growth; margin 35.6%–36.2%).
  • Adjusted EPS: $1.15–$1.22 (7%–14% growth).
  • Mortgage Inquiries: Expected to decline >20% sequentially in Q4 and ~10% for the full year.

Business-Segment Outlook:

• Insurance: Expected to generate >$430 million revenue in 2026 (comparable to mortgage business excluding royalties). Projected third consecutive year of double-digit growth with at least high-single-digit growth over the medium term. Growth drivers include recurring policy renewals, wallet share gains, and new contract ramp-ups ($225M annualized wins in core credit vs. $190M base; $150M in driver history vs. $125M base).
• U.S. Financial Services: Non-mortgage segment expected to sustain ~5.5% organic constant currency growth, supported by auto (+13% growth) and fintech, while mortgage volumes face pressure from rising rates.
• International: India expected to return to double-digit growth in Q4 and mid-teens+ organic growth over the next three years. Latin America expected to deliver healthy double-digit growth in Q4. Canada and UK expected to continue outpacing muted market volumes via product expansion.
• Emerging Verticals: Public sector expected to see improved growth due to recent FedRAMP certification for fraud solutions. Tenant/Employment and Media sectors expected to face near-term volume resets and migration-related usage dips, though media booking pipeline remains strong.
• Product Pipeline: Recent launches (TrueIQ, trusted call, branded call display in India) represent ~$350 million revenue potential over the next three years.
• Innovation: Expect 2027 focus on expanding the "OneTrue" platform to Canada, India, and UK, aiming for 94% of global revenue on the common platform by end of 2027.

Market and Competitive Outlook:

• Mortgage Market: Industry volumes at multi-decade lows; additional downside viewed as limited. TransUnion expects to maintain or increase market share due to superior trended data (2.5 years) and neutral positioning.
• FHFA Buy-Merge Standard: Management estimates direct revenue impact at <del>$33 million annually (</del>$0.15 EPS impact) if all FHFA-regulated loans shift, representing <1% of total revenue. Commercial incentives (risk assessment, borrower coverage, loan optionality) are expected to mitigate regulatory change.
• VantageScore Adoption: Expected to continue rising as the unified LLPA grid removes friction; pricing extended at 99 cents through 2028.
• Consumer Credit Conditions: Credit performance stable, though pressures persist in lower-income/subprime segments. Lenders expanding portfolios supported by strong balance sheets.
• Competition: FICO "Preferred" program launch expected to slow migration to VantageScore temporarily but not stop the market shift due to VantageScore's superior performance and lower cost (1/10th of incumbent).

Macro / Industry Outlook:

• Interest Rates: 10-year Treasury at ~5% (up 30 bps since July, 80 bps YTD); 30-year mortgage rate >7%. Expected to moderately reduce auto affordability and lending activity, with less impact on consumer loans and cards.
• Economy: U.S. labor market resilient with high employment but moderating real wage growth. Inflation and rates remain the primary headwinds.
• Housing Market: Soft market with declining inquiries impacting mortgage volumes; lower availability of new homes/apartments pressuring tenant screening volumes.
• Regulatory: Ongoing discussion on tri-merge standard; management views financial exposure as limited.
• Geopolitical/Currency: FX expected to be an immaterial drag on FY2026 guidance; international markets offer diversification against U.S. rate sensitivity.

Strategic Initiatives:

• M&A: Mexico acquisition performing ahead of case (revenue and EBITDA); India and Latin America now two largest international regions.
• Technology: Accelerating migration of U.K. credit customers to "OneTrue" platform (substantial completion by year-end 2026, tail into 2027); 2027 focus on global expansion to Canada, India, UK, and Philippines.
• Capital Allocation: Full-year share repurchases expected to reach ~$500 million; authorization increased to $2 billion. Quarterly dividend increased to $0.135/share (maintaining 10–15% payout ratio).
• Debt Management: Leverage ratio at 2.5x (target range); term loan B-5 fully prepaid; replacing $1.5B interest rate swap (mid-4% range expected).
• Product Launches: Expansion of telematics capabilities (consumer-owned driving score with Cambridge Mobile Telematics); "First Look" mortgage program for early-stage underwriting efficiency.

Risks and Headwinds to Outlook:

• Interest Rate Sensitivity: Higher rates continue to weigh on mortgage inquiries and auto affordability.
• Regulatory Uncertainty: Potential FHFA shift to "buy-merge" standard, though impact deemed limited.
• Litigation Costs: Increased legal and regulatory expenses, primarily related to individual consumer FCRA litigation, expected to continue.
• Migration Risks: Transitional usage dips in media/audience products during migration from legacy platforms to "OneTrue."
• FX Volatility: Foreign exchange fluctuations remain a variable impacting organic growth.
• Macro Softening: Guidance range designed to absorb reasonable market softening; performance at the high end is contingent on trends continuing.

Management Tone on the Future:

• Confidence: High confidence in achieving the high end of guidance; views current performance as evidence of a "diversified, durable, and innovation-led" growth model.
• Strategic Shift: Transitioning from a credit-volatility-dependent business to one with multiple growth vectors (insurance, international, solutions).
• Innovation: Strong emphasis on accelerating product innovation (40+ new products/enhancements YTD) and global platform consolidation to drive future margins and growth.
• Resilience: Confidence in the business's ability to navigate uncertain macro conditions through portfolio diversification and strong balance sheet management.

Miscellaneous:

• Leadership Transition: CFO Todd Sello retiring at end of 2026 (transitioning to advisor role through March 1, 2027); search for new CFO underway.
• Shareholder Returns: Repurchase authorization increased by $1 billion; remaining authorization ~$1.5 billion.
• OneTrue Platform: Expected to drive a "step-change" in revenue performance and cost structure globally once 94% of revenue is migrated.