TransUnion
Q4 2020 Earnings Call Transcript

Published: 16 Feb 2021

[Operator:]

Good day and welcome to the 2020 Fourth Quarter Earnings Conference Call. All participants will be in a listen-only mode. Please note that this event is being recorded. I would now like to turn the conference over to Aaron Hoffman. Please go, ahead.

[Aaron Hoffman:]

Good morning, everyone and thank you for joining us today. I hope that all of you remain safe and healthy. On the call today, we have Chris Cartwright, President and Chief Executive Officer and Todd Cello, Executive Vice President and Chief Financial Officer. We’ve posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website. Our earnings release and the accompanying slides include various schedules, which contain more detailed information about revenue, operating expenses and other items as well as certain non-GAAP disclosures and financial measures, along with the corresponding reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures.

[Chris Cartwright:]

Thanks, Aaron. And let me add my welcome and my best wishes that you and your families are healthy. As we started New Year, I want to once again thanks for more than 8,000 TransUnion associates, who continue to work diligently from their homes throughout this pandemic, in order to support the needs of our customers and consumers in these uncertain times. Our client service hasn't missed a beat and it's all due to their amazing efforts. I also I also appreciate how they've supported TransUnion’s embrace of social justice causes during this time of turmoil and transition in the U.S. We continue to focus on diversity and inclusion among our associates and in the communities we serve. On our last call, I discussed our total impact taskforce, more clearly conveyed the intention of the taskforce, we renamed it Racial Equity Taskforce. While the name is changed, the mission remains the same to combine and connect TransUnion’s efforts to support racial equity and social justice. The taskforce will amplify our advocacy and outreach through consumer tools and support designed to improve access to economic opportunity. For example, we partner with the credit builders alliance, which helps underserved communities to build credit. Additionally, we will double our corporate giving in 2021, in Chicago and Philadelphia, the locations of TransUnion’s two largest offices. We also have reallocated funds from sports partnerships to charities in our communities that support racial equity. We see further opportunities to partner with local organizations that promote grassroots targeted support for underserved communities, such as my block, my hood, my city in Chicago and the Covenant House in Philadelphia. The taskforce will also reexamine the use of data in our analytics and solutions to ensure that all uses are consistent with our values and the goal of financial inclusion in the economies that we serve. To that end, we engaged a specialized consultancy in the fourth quarter of last year to objectively assess our data and model development to identify opportunities to improve our practices.

[Todd Cello:]

Thanks, Chris. We delivered solid results at the high end of our guidance as we benefited from gradual improvement across almost all of our markets as well as the strength and diversity of our portfolio. I'll start with our consolidated results. And for the sake of simplicity, all of the comparisons I discussed today will be against the fourth quarter of 2019 unless noted otherwise. So starting with the income statement, fourth quarter consolidated revenue increased 2% on a recorded and constant currency basis to signal in Tru Optik acquisitions had just under 1 point of impact. Adjusted EBITDA decreased 2% on a reported basis and constant currency basis. Our adjusted EBITDA margin was 38.5%, down about 170 basis points compared with the year ago quarter. As Chris pointed out we have aggressively invested in our business this year and that had some impact on the margin along with the broader macro challenges of the pandemic. Fourth quarter adjusted diluted EPS increased 7%. Our adjusted EBITDA was down slightly, we continue to benefit from reduced interest expense related to our debt refinancing and lower LIBOR rates as well as a lower adjusted tax rate of 21.9%. The lower tax rate reflects our tax planning initiatives and the reduction in the statutory rate in India. Now looking at segment financial performance, the U.S. markets revenue was up 4% compared to the year ago quarter. The two media acquisitions had about 1.5 points of impact on revenue. Our financial services vertical revenue grew 7%. As Chris discussed, we saw improvement in consumer lending continued strength in mortgage as well as stability in card and auto. And to address the significant impact of mortgage in the quarter excluding the cyclical growth the vertical would have declined mid-single digits. Emerging verticals were flat on a reported basis and down 3%, excluding the revenue associated with the two media vertical acquisitions. Growth in public sector, media and tenant and employment screening helped moderate declines in the other verticals. Adjusted EBITDA for U.S. markets decreased 2% as reported in 1% on an organic basis. Adjusted EBITDA margin declined largely as a result of the strategic and operational investments that Chris discussed. The cost to integrate and scale our recent media acquisitions as well as the normal quarter-over-quarter seasonality from the third to the fourth quarter. Consumer Interactive revenue increased 3% driven by growth in the direct channel, adjusted EBITDA for Consumer Interactive was down 2% as we continue to increase in marketing behind the direct channel during the quarter and see solid returns on that investment. So my comments about international, all comparisons will be in constant currency. For the total segment revenue fell 2% as we saw trends improve in most of our regions, as Chris discussed in detail. As we mentioned on our February 2020 call, we invested -- we divested a small business in the U.K. Recipero excluding that divestiture international would have been down only 1% and our U.K. business would have flipped from being down 1% to up 2%. Adjusted EBITDA for international declined 4%. One of the managed strengths of TransUnion is our balance sheet and our ability to rapidly generate cash. This provides us with consistent optionality to make the best decisions for the company and our shareholders. We finished the quarter with $493 million of cash on the balance sheet after voluntarily prepaying $150 million of our term-loans and funding the first tranche of the Tru Optik acquisition and several smaller investments. For clarity, the Tru Optik transaction entails an initial payment and a subsequent smaller earn-out in 2021 based on the performance of the business. At the same time, our net leverage ratio continued to decline from 2.9 times at the end of the third quarter to 2.8 times at the end of December. With our strong balance sheet, we remain in a good position to continue to be proactive in pursuit of additional attractive investments as an important part of our overall long-term growth strategy. So that brings us to our outlook for the first quarter and the full year, which is based on the current market conditions and doesn't incorporate the potential for a much stronger second half driven by the possibility of a more rapid economic recovery. As you've come to expect from us, we won't hopefully build plans based on best case scenarios rather, we'll take a balanced, realistic approach. We firmly believe that doing so is in the best interest of our shareholders as it avoids unnecessary risk. Starting with first quarter revenue, we expect slightly less than 1 point of M&A contribution from Signal and Tru Optik as well as a similar tailwind to revenue from FX. And we expect a 50 basis point benefit to adjusted EBITDA. Revenue is expected to come in between $698 million and $707 million or a 2% to 3% increase. This results in organic constant currency revenue growth being flat to up 1%. Embedded in our revenue guidance is an approximately 3 point benefits from mortgage, which lines up with Chris’s comments about our expectations for a strong first half, followed by headwinds in the second half of the year. Adjusted EBITDA is expected to be between $268 million and $275 million, an increase of 2% to 4%. Adjusted diluted earnings per share are expected to be between $0.78 and $0.81, an increase of 6% to 10%. And for the full year, we expect 50 basis points of benefit from M&A and 1 point of tailwind to revenue from FX. Revenue is expected to be between $2.817 billion to $2.877 billion, up 4% to 6%. Based on the mortgage expectation Chris shared, our guidance includes about 2 points of headwinds from our anticipation of the 10% decline in our mortgage revenue. So on an organic constant currency basis excluding mortgage, the remainder of the business is expected to grow 4% to 6%. I would also like to point out that the cadence of the year will be fairly lumpy. The first quarter should look somewhat similar to the third and fourth quarters of 2020. The second quarter of 2021 should be the strongest on a year-over-year basis given the relatively easy comps. And in the back half, we would expect the benefits of ongoing economic recovery to be offset by mortgage headwinds. Through our business segments, we expect U.S. markets to grow revenue, mid single-digits. Financial services could be flat and emerging verticals to be up high single-digit, including the impacts of mortgage, U.S. markets would be up high single-digit, and financial services would be up mid single-digits. We anticipate that international will grow high single-digits in constant currency as we continue to see a very pace of recovery across our market and we expect Consumer Interactive to be up slightly as the lead aggregators slowly returned to customer acquisition. Adjusted EBITDA is expected to be between $1.083 billion and $1.121 billion up 4% to 7%. We expect 1 point of benefit from FX. Adjusted diluted earnings per share for the year are expected to be between $3.16 and $3.31, up 5% to 10%. I want to wrap up with some thoughts about some of our other annual guidance items. First, we expect our tax rate to be about 23%, which is fairly consistent with the 2020 rate of 22.6%. Second, total depreciation and amortization is expected to be about $375 million, a modest increase from 2020. Excluding the step up from our 2012 change in control and subsequent acquisitions, depreciation and amortization should be approximately $190 million. Third net interest expense should be about $100 million, down about $20 million in 2020. As a result of a lower forward LIBOR curve and our voluntary debt prepayment. Fourth, capital expenditures will be around 8% of revenue. And finally, for the full year 2020, we spent about $19 million on Project Rise. That was added back for our non-GAAP metrics. We expect this add-back to nearly triple in 2021 a significant step up from the first the second year of the project, as we expected, and as if we built significant momentum. I'll now turn the call back to Chris, for some final comments.

[Chris Cartwright:]

Well, thank you, Todd. And to conclude this morning, you've heard more about the meaningful progress we've made in fundamentally improving TransUnion to Project Rise, Global Operations and Solutions. Each delivers immense value to TransUnion over the long-term, and in tandem, they have an even greater potential to help us sustain industry leading top line growth and an attractive and growing margin. At the same time, our business continues to perform well in the midst of some very challenging conditions. I'll end by reiterating I hope that all of you and your families are safe and healthy. And thank you for joining us this morning. So with that, I'll turn the time back to Aaron.

[Aaron Hoffman:]

Great. Thanks, Chris. That concludes our prepared remarks. So for the Q&A, we ask that you each ask only one question so that we can include more participants. And now let's jump into those questions.

[Operator:]

We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. The first question comes from Jeff Meuler with Baird. Please go ahead.

[Jeff Meuler:]

Yes, thank you. On mortgage, what percentage of your consolidated revenue was U.S. mortgage in 2020? And the reason I ask is, I thought it was lower than 20%. But you're saying its 10% market declines about a 2 point headwind, I wouldn't think that there's share shifts given that it's mostly selling to the tri merge resellers. But if you could just clarify what's the exposure and maybe help score the minus 10 two point headwind? Thanks.

[Todd Cello:]

Hey, Jeff. Good morning. And thank you for the question. This is Todd. I'll take that one. So as far as your mortgage earned, historically TransUnion spoken about our overall exposure to U.S. mortgage being roughly maybe 7% to 8% of revenue that went up last year to about 13% which is very -- obviously very significant, but not something that we anticipate that will stay at that level throughout 2021, as we both kind of alluded to in our opening remarks. We do expect mortgage to continue to be relatively stable to maybe slightly decline in the first half of the year. But right now, the visibility that we have with mortgage would just suggest that there would be a slowdown and the way that, again, that we've put it is 10% decline in our mortgage revenues, specifically in -- for the full year and again, that that will temporarily happen in the second half of 2021.

[Jeff Meuler:]

Okay. Thank you.

[Operator:]

The next question comes from Manav Patnaik with Barclays. Please go ahead.

[Manav Patnaik:]

Thank you. Just a broad question, Chris, 2021 was always going to be a lot of moving pieces. And it sounds like you've taken a relatively conservative approach to stock, correct me if I'm wrong there, but just looking out into 2022? Do you see any notable moving pieces perhaps media, gaming, some other categories where you think could be in a notable contributed to the growth to getting you back to kind of what we used to historically.

[Chris Cartwright:]

Yes, good morning, Manav. So as I commented before, I think ‘21 will be a bit of a mixed bag, the first half and the second half will be different. The first half is likely to be choppier just given the state of the public health situation. But in markets like the U.S. as vaccines are rolled-out and I think the population returns to health, you'll see a material strengthening across the different verticals in which we compete. And that leads to a stronger second half. And also I expect that we will roll with some good momentum into 2022. And start to compound the top line, in a manner consistent with what we have done previously. That's certainly the aspiration at this point. I would say that mortgage remains the critical wildcard here, over the course of ‘21. As Todd just said, we are modeling in about a 10% decline in the category. And it has swelled of our revenue, so it's more material than previous. With that said, nobody's crystal ball is perfect. And it is quite material to the financial results that we've outlined in our guidance this morning. So the best I can tell you is, one we provided more detail into how we arrived at the number than we typically would and will ongoing. And two, if we see a material change in our assumptions, we'll certainly communicate with the market quickly because we will have a direct bearing on the results. And then the last thing I would say is look as our economy heals from the pandemic, we start to get back to normal. And I take more of a global perspective here, there are key components of our portfolio that will return to health and growth that have been somewhat uniquely impacted in the pandemic. The first comes in our consumer direct business where 60% of the revenues are focused on providing reports and analytics to indirect players, the marketing lead aggregators for financial services. And as lenders pulled out of the market in terms of client acquisition, their businesses were materially impacted and that became quite a headwind for us. Additionally, as you know we have strong and disproportionate market share in the FinTech space and in consumer lending and that was also an area that I think was the hardest hit of the different financial services verticals in the U.S. And then finally, our international portfolio, which has over $600 million now was a consistent double-digit compound grower. And those three things have been muted, somewhat because of the pandemic. They're all stable now and they're all resuming growth. But again, as the global health situation improves and the pandemic recedes, you're going to see acceleration in those three components, as well as the other piece parts of our portfolio. And I think we're well positioned for recovery. And again, I guess just one concluding remark, if you look at the guidance that we have provided where we've broken out the financial services performance and then attempted to isolate the mortgage component within that, but then also highlighted the growth rates across our emerging verticals portfolio in the U.S., you can see that we're really expecting quite a bit of strengthening across the vast majority of our portfolio in ‘21, some very attractive, high single-digits organic growth rates, but again somewhat muted by the mortgage headwind and the general uncertainty in that category. So I'll pause there Todd, if you want to add anything?

[Todd Cello:]

Yes, Chris. Yes, I think that was a very comprehensive. I would just highlight a couple of more things and I think it just comes again out of our opening remarks. We've deliberately made a significant effort into the media vertical. So we are expecting at least in about ’22 that media will be a meaningful -- start to be a meaningful contributor for us. And as well as our fraud business and as Chris, again spoke about in his openings or comments we've done a significant amount of work to get that on a common platform, rebranded it to true validate our expected on some really good growth there as well as, let's not lose sight of the fact that our FinTech customers have been hit particularly hard by the pandemic and I think our expectation is they'll get more aggressive as we go through ‘21 with their marketing campaigns. I think the key point there is, let's not say that the strong relationships that we have already intact and the leading positions there, and that we fully expect that market, to rebound. So that'll be another really nice growth driver for us in employment too. Then , our insurance and healthcare verticals as well, too, I think are poised to continue to recover this year, but continues so nicely.

[Chris Cartwright:]

Yes, so, I mean, look, Manav, you have touched on a really good question. So the way I think about how we resumed the growth that the markets come to expect from us, it really breaks down into four buckets. The first is that as the pandemic recedes, the underlying geographies and verticals that we serve are going to heal and there's nothing structural that's changed there. Two, will also resume the momentum from our product portfolio that was -- that represents all the investment in innovation that we've accumulated, right? We've got a strong -- we have many generations of product development that are still in the early-to-mid stages of adoption, this market heals, you're going to see those driving growth. On top of it and again, referencing the point Todd just made, we've got other vintages of growth that we're layering on. One is the repositioning of our business, which we'll talk -- we've talked about in some detail, where we're bringing together the multiple fraud assets that we've acquired in creating a single global fraud growth platform focused on the most global segments for our business. We've also invested a lot in data analytics and modeling tools via Prama, we're launching the employment verification in income, vector, we continue to add new data types. And look, there's a multitude of growth categories in addition to what we've done in the media that represents the third component. And again, as always we remain active looking for complimentary M&A internationally we're always hopeful we can find geographies that we can enter. And specifically we can really improve the operations of the credit bureau. And in the U.S. really to fuel our global product development and then we're looking to add capabilities that compliment the needs that we're servicing in our clients. So potentially more than you bargained for, but that's, that's our thoroughly answer.

[Manav Patnaik:]

I appreciate that. Thank you very much.

[Operator:]

The next question comes from Toni Kaplan with Morgan Stanley. Please go ahead.

[Toni Kaplan:]

Thank you. Wanted to ask about verification, how quickly can you ramp up that business? I know you mentioned some wins already in the launch in second half with your MX partnership. Can you just talk about your go-to-market strategy and the differentiation versus competition? And then in terms of records growth, I guess, have you added more records since that initial payroll provider? And what kind of pace do you expect to grow records going forward? I imagine it may be tougher after that sort of initial really large number that you got from that partnership? Thanks.

[Chris Cartwright:]

Yes, sure, Toni. I mean, obviously, this is a really exciting extension, to our product portfolio. And we think we can differentiate by really streamlining access to the credit and the employment and income verification through a common digital connection, right really leveraging the pathways that was established already. But as you know, from my comments, last time around, I tried to caution the market that, this is not a category that we're going to achieve parity with the market leader in one quarter, this is a entry into an area that is strategically important and complimentary, that we're going to put with full weight of our product resources and innovation behind developing a product that really can compete, but that will take time. In the interim, we're in a phase where we are productizing, the data and the pipeline relationships that we've established via , the large payroll processor in MX Technologies. And you're right, Toni, over time, our focus is going to be on broader and broader market coverage, which means you've got to establish more relationships. And then market coverage will be both with payroll processors, potentially other types of data providers, and these financial aggregators that will allow us to cascade broad market coverage across banks FinTech’s, and credit providers. So we're in this for the long haul, we're just -- I'm just not able right now to give you like financial precision on dollar or growth rates. But look, as you know, this is a really big market. I love the competitive dynamics, I love the fact that we can pull together an offering. And we can start attacking and learning and gaining share. And that's our intention.

[Toni Kaplan:]

Thanks a lot.

[Operator:]

The next question comes from Andrew Steinerman with JPMorgan. Please go ahead.

[Andrew Steinerman:]

Hi, it’s Andrew. I'd like to look back at Slide 11 and 12 for the U.S. financial markets, this is the consumer credit activity, which really is broadly up in, not just mortgage, but auto, card consumer lending, this orange line over blue -- over yellow line. And so I'm just a little bit puzzled by the first quarter organic revenue guide of 0 to 1 year-over-year, which is, a bit of a deceleration total company from the 1% you guys just reported? And so given the credit activity, I'm asking, do you see organic revenue growth acceleration in financial services in the first quarter? And if not, why maybe puzzle together the other segments to help us understand the zero to 1 veteran total?

[Todd Cello:]

Hey, good morning, Andrew, This is Todd, let me let me take that question from you. And I think it's an important one to talk through in some more detail. So starting first, when you do look at Slides 11 and 12, it is important to remember that this represents online credit report volumes for our U.S. markets financial services vertical only. And just to give you kind of a perspective on that in 2020 our financial services vertical did about $939 million, so roughly about 35% of our revenues. So just that's important to keep in mind, even though the $939 million the volumes represents a certain percentage of that probably higher than online, but we also do a significant amount of batch work as you know, already, right. That's also part of that number. So I think the way that with that set is context. So I think the thing that's important also to keep in mind is just simply the comparable that we're up against in Q1 of ‘21 compared to last year. At a consolidated basis, if you were to look at Q4, 2019 to Q1, 2020 our growth rate on the consolidated basis went from 9.9 times to 10.8, which was about 1 point of growth. And for our U.S. market, financial services vertical, the growth rate went from 16.5 up to 21.8 in Q1, ‘20. So that's about 5 points of growth. So think about the comparable that that we're up against. So when you look at that then go, okay but now go sequentially from Q4, ‘20, the quarter that we just exited, where our percentage, we grew at 1.5%, now you're looking at our guide or we're calling for flat to up 1 , in Q1 of ‘21. When you get into the decimals on this, that that 1 might actually be maybe 1.5, potentially at the high end. So for all intensive purposes, if we achieve the high, we could be asked for the same growth rate that we experienced in Q4 of ‘20.

[-:]

[Andrew Steinerman:]

Sure. Thank you.

[Operator:]

The next question comes from Gary Bisbee with Bank of America. Please go ahead.

[Gary Bisbee:]

Hey, guys, good morning. This is I think the second quarter in -- either in a row or in the last couple where you've given some numbers around new business wins in U.S. financial services. And I guess I'll ask you a question that was asked last time, if you can help us understand anymore. But how does that 40% increase in dollar value flow through to revenue? Is there anything about that that would make it flow through more slowly, like higher mix of multiyear versus one year anything like that? Because it, yes that's a big number. And maybe the other part of it too that's just new wins? What about losses or what about customers leaving stuff like that? Just help frame how to think about that as a driver of revenue in the next year? Thank you.

[Chris Cartwright:]

Yes, good question, Gary. the first thing I would say is that, in terms of attrition for whatever reasons, there's no change that we're aware of, right. And so there's nothing to really counteract that increase in the estimated annual contract value of the deals that we closed in ‘20. Now, revenue arrival is a different than contracted sales. And it varies based on variety of factors. One is the time it's going to take to integrate to the clients and establish those relationships and in certain cases, how long it takes them to incorporate their data or render our data into their models either marketing or origination or collections, et cetera. So there can be a lag time. Related to that there can also be some time until clients ramped to their full volume potential. I would be remiss if I didn't mention that sometimes salespeople can be overly enthusiastic with the potential deal, size of the deal. Although I can't give you any evidence that their enthusiasm -- their enthusiasm has changed over the course of the pandemic. So look, a 40% increase in dollar close doesn't lead to a 40% increase in the new portion of our revenues in the coming year. But it is a really tremendous indication of the health of our product line, our sales efforts and our client’s health as well. And the other thing I would just mention is that, new wins represent a new layer of revenue that we're laying upon a deep and established foundation. And it's really the volume movements in the foundation have a much more material impact on our revenue in the coming year or in the current period than does the increment, right. So I'll just pause there.

[Gary Bisbee:]

That's helpful. Thank you.

[Operator:]

The next question comes from Andrew Jeffrey with Truist Securities. Please go ahead.

[Andrew Jeffrey:]

Hi, good morning, gentlemen. Appreciate the question and all the comments and color and other a lot of moving pieces here. Chris, I've got a question specifically about your media initiatives. TransUnion has terrific differentiated data and you've done a great job of commercializing it in the past, it strikes me media is one of these spaces that is very competitive. And there have been some companies, we've seen in around FinTech that have tried to crack the code and have maybe been less successful than they would have expected or just paid it. Can you just elaborate on why you think you have the ability to outperform in that vertical?

[Chris Cartwright:]

Yes, sure. Well, up to your point, the media market or the market for digital advertising services is enormous and varied. We have chosen kind of a surgical entry into a portion of that market, where I feel that our matching logic in some differentiated data provides us with an advantage with an opportunity to introduce a best-in-class solution. Now before we had a media vertical, we were supporting different various ad tech companies in matching online and offline data because TransUnion and the Bureau's in general are just really good at that. And we know that our matching logic is superior to the standard that prevails in that marketplace. And so with that experience and that insight we decided to formalize the offering into a specific vertical offering. As we started to gain more experience we realized that we needed to deliver our data, all of our customer identifying data, demographic and segmentation type of data on a different platform with a user friendly access. So immediate clients can come in and slice and dice and create the audiences that they were interested in. And then we can append the digital identity and other offline, characterizing information that they could use to drive their advertising campaigns. When we bought Tru Optik, though we gained a differentiated data set because they are one of the early leaders in the market to provide insight as to which homes are consuming content via which streaming devices via video or audio, right. And so now we have differentiated data sets that we can add to our universe of data in our segmentation tool. And then also combine that with our matching, practical example of it is an advertiser can find out now that a particular home address mine or yours, as Apple TV has Netflix, uses Hulu, et cetera. But they don't know much about the household. With TransUnion, we can do that matching and say that the occupants of the household has certain characteristics, maybe a demographic, care -- just a whole range of kind of marketing, characterizing and segmenting variables. So again, it's our narrow and surgical focus into a portion of this market where I think we're upping the game. That's our value proposition. And that's why we're confident we can achieve growth.

[Andrew Jeffrey:]

Thank you. I appreciate that.

[Operator:]

The next question is from George Mihalos with Cowen. Please go ahead.

[George Mihalos:]

Hey, guys, thanks. Thanks for taking my questions. I just wanted to ask on the Consumer Interactive vertical and specifically the guidance of up slightly for revenue. How should we be thinking about the direct versus indirect throughout the course of 2021? It is there -- is already reason why the indirect shouldn't return to growth by the back half of the year? Thank you.

[Todd Cello:]

Hi, George, good morning. This is Todd. I will take that question for you. So I think what we're anticipating in our Consumer Interactive business is obviously specific to channel. So first, in the direct channel throughout 2020 we did experience a heightened level of consumer interest in monitoring credit. And we took advantage of that by doing some marketing to attract consumers to our webpage and offer those services. And then conversely in the indirect channel as spoken about we've definitely headwinds, it would the lead aggregate, as many of the financial services customers pull back on their marketing activity. So as you get into ‘21, we are expecting probably a more normalized growth level in the direct channel. And so not as high as in ‘20. And then in the indirect channel, we are still expecting some softness in the lead aggregator base softness that we've seen over the last couple of quarters, persist, going forward with the potential for and recovery, probably in – later of the --

[George Mihalos:]

Okay, thank you.

[Operator:]

Next question comes from Shlomo Rosenbaum with Stifel. Please go ahead.

[Shlomo Rosenbaum:]

Hi, good morning. Thank you for taking my question. Hey, Chris, can you talk a little bit more about the reorientation of the fraud business strategically what -- what's involved in that besides pulling it together under one platform or one brand, like what -- I guess on the ground, what are you going to be doing differently, really and the business from what I understand is actually a pretty particularly strong business. And so what's going to change now?

[Chris Cartwright:]

Yes, thanks for the question, Shlomo. Yes, it is a strong business that continues to deliver neither nice growth across all of our markets. As you know from my prior commentary, it's a business that's composed of variety of piece parts, some of which are overlapping or redundant as you look at the different geographies that we serve. And so part of what we're trying to do is or what we have done is we've looked across our portfolio and we said what are the best-in-class within TransUnion product components that we have and how do we integrate those on top of this single product platform with orchestration, with case management, with all of the different reporting and measurement controls that you would like. And look, the ultimate integration around an enterprise architecture, any single product platform, that's going to happen over a period of time because that's heavy lifting engineering type of work, right. And the need to do the work is just a function of the fact that the business developed in the U.S., it developed internationally, we acquire innovation, we acquired a really nice and fast growing business in call credit. And frankly, when you talk about integration there's multiple levels from the kind of more surface to the deep and foundational and we're committed to doing all of it. The next thing is really just a function of the market segments that we're prioritizing. So different types of customers have different fraud needs. And we have a particular strength serving those market segments where they are initiating a relationship, a financial relationship of some nature, where the magnitude of the transactions and the risk associated with transactions over the term of the relationship is going to be somewhat significant. And therefore, the upfront customer identification, device verification and just the general authentication process will take a little bit of time, will be triangulated from multiple different points. Because it's really important to know who you're dealing with, the counterparty you're dealing with and have confidence in that. And so we're focused on that part of the market. And again, this is an enormous and multifaceted market because we have, a great constellation of products that comes together to serve it most effectively. And so that will get most of the focus for our product development. Now that said, we also -- we successfully compete for business, in other segments where what you really need is a super fast, but more superficial level of authentication based on device history, perhaps geo-location and on-site behavior, right. And that could be an ecommerce based retail transaction, where you got really material share, et cetera. But think of those transactions are different from establishing a relationship with a lender or, on-site gaming or gambling where there's just a lot of dollars flowing. So to be successful, we got to concentrate our resources in a particular segment. As we've pulled together these different assets, we've come to appreciate the segments -- the segmentation landscape, if you will, at a more granular level. We will continue to serve the market in its entirety. It's just the product development focus will be more around the segments I described. And those customers that are really looking for broad, authoritative solutions, which we possess, but also assistance from their provider in implementing and configuring the solutions to get best results.

[Shlomo Rosenbaum:]

Okay. Thank you so much.

[Operator:]

The next question comes from Hamzah Mazari with Jefferies. Please go ahead.

[Hamzah Mazari:]

Hey, good morning, thank you. You had touched a little on sort of Project Rise contributing $20 million to $30 million in savings in 2023. But maybe if you could just touch on how to think about global operations and global solutions. What inning are we in terms of seeing those benefits rolled through the P&L? Is that more of a 2023 event too?

[Chris Cartwright:]

Yes, it’s a good question. Yes, I think global operations and global solutions and the later solutions, if you really think of this vector product management layer within TransUnion. They're delivering benefits already. However, as I've mentioned, we're aggressively investing in new product development and entering new markets and also in operational streamlining and automation and all of those things. So we're using some of the early benefits that we're getting from those initiatives to cell phones and accelerate the implementations of full global programs that are going to free up a lot of resources that we will then invest in both product development to accelerate and really secure high single-digit or top line compounding that we aspire to, but also delivering margin improvements to the business. Collectively, Project Rise are the technology retooling the operations and solutions. They are going to have really material impact on how effectively we operate in the market and having spent a year strategizing and implementing which was ‘20 and now going into ‘21, and really accelerate the implementation. I'm really excited in increasing the confidence of the positive impact we're going to have.

[Hamzah Mazari:]

Got it. Thank you.

[Operator:]

Our final question comes from Kevin Mcveigh with Credit Suisse. Please go ahead.

[Kevin Mcveigh:]

Great, thanks so much. Hey, Chris I wonder, given the investments you're making, particularly around and things like that, just about how that impacts your new product innovation. And this might not be able to innovate more effectively, ultimately, what that can lead to the organic growth of the business if those products coming to market?

[Chris Cartwright:]

Yes, good. So I think what you're asking Kevin is, how is the current wave of tech innovation? That's coming out of products, Project Spark, we can call Project Rise and the migration of the cloud and the, standardization around an enterprise architecture, all of that. And the short answer is that, it will definitely speed to market new product ideas, right? Because one will be leveraging IP globally and two by utilizing the public cloud, there's a lot of utility functionality around the acquisition, the care and the maintenance of underlying hardware and connectivity and even security infrastructure that we will purchases and service. There's also components to software development that we can acquire directly from our cloud service providers as services. And so the technology new product development for TransUnion becomes more focused on those areas of unique IP and value add that we bring, as diversified information services provider anchored in credit and all of the unique insights we have around the vertical market needs.

[Aaron Hoffman:]

Excellent. So that that brings us to the end of the call today. Thank you everyone for joining us. We hope again that you are all well doing well and staying safe and healthy. We'll look forward to seeing you and talking with you in the New Year. Have a great rest of the day.

[Operator:]

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