TransUnion
Q1 2018 Earnings Call Transcript

Published: 20 Apr 2018

[Operator:]

Good day everyone and welcome to the TransUnion, First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would like to turn the conference over to Aaron Hoffman, Vice President of Investor Relations. Please go ahead sir.

[Aaron Hoffman:]

Good morning everyone and thank you for joining us today. I’m joined by Jim Peck, President and Chief Executive Officer; and Todd Cello, Executive Vice President and Chief Financial Officer. We've posted our earnings release and slides to accompany this call on the TransUnion Investor Relations web site this morning. Our earnings release includes schedules which contain more detailed information about revenue, operating expenses and other items, including certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are also included in these schedules and as a reminder, today's call will be recorded and a replay will be available on the TransUnion web site. We will also be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements, because of factors discussed in today's earnings release, in the comments made during this conference call and in our most recent Form 10-K, Form 10-Q, and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statements. With that let me turn it over to Jim.

[Jim Peck:]

Thanks Aaron. As I am sure as everyone has already seen this morning we have some additional exciting positive news on top of our strong first quarter financial performance. I will spend most of my time talking about our acquisition of Callcredit in just a moment. First let me quickly highlight our strong start to the year extending the momentum we've had over the past three years. Our teams continue to execute against our strategies and deliver growth well above the underlying markets in which we operate. Once again revenue grew double digits for the total company as well as for each of our segments, similarly adjusted EBITDA and adjusted EPS both increase significantly. In the segments USIS’ performance was outstanding driven by ongoing strength in financial services in health care and in particular we continue to see exceptional results for credit vision and credit vision link, we believe that our suite of ever evolving trend of products has many years of substantial growth still to come in the US alone. In international we continue to see very strong growth in India in January across our global footprint, notably we saw modest revenue growth in the quarter in South Africa. Last year we invested in our technology infrastructure there. This allows us to reduce cost by fully moving [indiscernible] our final legacy mainframe at the same time the technology platform will facilitate the efficient lift and shift of the innovation and capabilities that should stimulate our long term growth there. Seeing South Africa return to growth this quarter is a good sign that the business is starting to stabilize and is heading in the right direction. And finally in consumer interactive, I'm pleased to announce that we recently signed another strategic partnership agreement, this time with American Express. American Express will leverage our crediting dashboard branded as American Express, my credit guide to provide all consumers free access to their credit information, this includes their credit report credit score, factors impacting their score, credibility to help identify identity theft as well as educational tool such as our credit score simulator to improve their financial health. American Express will benefit from a new channel for effectively engaging with existing customers and acquiring new ones. We are very excited about this new strategic relationship in our core financial services market. Taken together our first quarter performance reflects our strong business model that broadly leverages data assets and capabilities across our organization to help us realize strong revenue growth with good incremental margins. While this approach certainly contributes to our strong financial performance, it has also created a more sustainable and diversified growth profile that we believe can deliver relative outperformance through cycles. We are off to a solid start in 2018 and expect to have another very good year. There's no doubt the TransUnion has never been stronger that puts us in an ideal position to make acquisitions that help make a great business even better and position us for outstanding long term growth. Before I delve into the details of the acquisition, I think it makes sense to spend a minute on our successful acquisition strategy and how it has played a key role in our growth over the past 5 or 6 years. We have focused on three key strategies with our acquisitions and I've often found transactions across two or even all three of them. First, we invest in unique and differentiated data assets that can augment the core contributory credit data that we receive in virtually all of our markets that this allows us to create new valuable offerings for our customers while leveraging existing data assets. We've made a series of very successful acquisitions around data going back to late 2013 we bought TLO which utilizes public records data for identity authentication, fraud prevention and debt recovery. We've seen tremendous growth in margin expansion over the past four years and expect additional growth in the future. About a year later we bought LTC, the said asset delivers predictive analytics using alternative data and has been instrumental in the development of credit vision link and other alternative data offerings. In late last year, we have made another alternative data related acquisition with FactorTrust, one of the largest players in the short term lending market. They are essentially a credit bureau for this market and have data on more than 20 million consumers who don't typically show up in the data we receive from traditional lenders. It's more robust view of borrowers as they're called will help us develop the next version of CreditVision Link and enable many other products for our customers. FactorTrsut also expands TransUnion's reach into the short term lending opening a new fast growing market to the breadth of TransUnion’s credit and non-credit risk information solutions. Our second strategy focus is on acquiring new capabilities to expand in our vertical markets. In the healthcare vertical, we bought eScan in late 2013 and that asset is the foundation of our highly successful fast growing coverage discovery business. In 2016, we augmented this business with audits and Auditz and Rtech each of these both arms has provided valuable data that improved our matching algorithms and thus improved our yield. In the insurance vertical, we completed the acquisition of Drivers History in April of 2016 and data DataLink Services in August of last year, together these businesses will allow us to offer a product that pre-screens auto insurance applicants and then seamlessly purchases and incorporates costly motor vehicle reports only when appropriate. We see opportunities to utilize this data in employment screening, data screening collections government and other parts of TransUnion to provide valuable insights of our consumers. Most recently we acquired eBureau which provides rapid development and deployment of custom models and financial services collections and fraud. eBureau has a very broad applicability across virtually every part of TransUnion both domestically and internationally. It is the type of core capability that can drive significant cutting edge innovation. Finally we want to continue to expand our international positions and obviously Callcredit fit squarely into the strategy. Before I come to that, let me remind you about two other international investments that have worked well and give us increased conviction in our ability to successfully add another bureau asset to our portfolio and to run the TransUnion strategic playbook. Going back to 2001, we have partnered with a number of large Indian banks to form CIBIL the first and largest credit bureau in India. We are on 27.5% on CBIL until 2014 when began to aggressively by the equity leading to our current status of 92%. The investment continues to pay off handsomely. India is now our second largest international market and accrue constant currency revenue 24% in 2016 and another 32% in 2017 and we see a long growth path in front of us as the macroeconomic situation is excellent. On top of that we continue to bring innovation into the market with products like CreditVision, CreditView decisioning and more. In February of 2016, we acquired one of the two bureaus in Colombia. We have improved their technology product platform, introduced pricing analytics and products like CreditVision while also bringing new talent to the organization to support our growth plans. After just two years we tracking all of our plans and seeing value creation from the acquisition. And that brings us to Callcredit which is one of the three bureaus in the attractive UK market. I will walk you through the market and the business in just a moment but I want to start with the conclusion. Callcredit is a truly outstanding acquisition for TransUnion, high quality credit bureau assets like Callcredit are scarce of the opportunity to acquire a strong growing foothold in the second largest credit market in the world, there is a win for TransUnion. Callcredit is the second largest and fastest growing bureau in the UK but differentiated assets and technology and candidly there are many parallels to the TransUnion story from 5 or 6 years ago when we consider where the industry is, how the company has evolved and the potential to more fully leverage the core assets of the business through innovation. Similar to TransUnion Callcredit has leverage data and technology to deliver the unique solutions to its customers leading to outsized growth. There is a view that inefficient market assets ultimately find their way to the right owner and I'm absolutely convinced that TransUnion is the best owner for Callcredit. The marriage [ph] of our global capabilities and proven track record of driving growth in international markets with a differentiated position Callcredit and their team has built in a large growing market will contribute to our long term growth equation. We spent considerable time with the Callcredit team and found a strong cultural fit, the team has done an outstanding job in building Callcredit and this is a second largest and fastest growing bureau in the UK. We have great confidence in TransUnion's ability to add value to an already attractive asset. Let me highlight three key dimensions of the acquisition that give us great convection and Callcredit will contribute to the TransUnion’s long term top and bottom line growth. First the core market has experienced underline growth of about 11% per year driven by increased loan volumes and that is expected to continue. The key component of this expectation is the growth of introduction of some of the important trends we benefited from in the US driven by the rapidly expanding digital economy, we are seeing the emergence of fintech lending, fraud solutions and trended data. TransUnion knows how to win in these areas and we have demonstrated the ability to lift and ship products and capabilities to capitalize upon or drive these trends in markets around the world. An example, the Canadian market is at a similar level of maturity as the UK and we've been able to deliver strong above market growth there. In fact we grew constant currency revenue 14% in 2017 and 20% in 2016; this was accomplished in large part by gaining share or expanding the market with innovations like CreditVision and Creditview and extending into new verticals like insurance. All products that have the applicability in the UK. Second, Callcredit has already been outperforming the underlying market and taking share through superior data and technology. This is a high quality asset that only get better as we leverage our global enterprise model and capabilities. Third, we believe there is a meaningful opportunity to optimize the organization and the cost structure of the business just as we did in our own international segment in 2016, we can unlock value by leveraging our global scale and enterprise capabilities. But fundamentally this acquisition is about driving long term growth and leveraging an incredible set of assets and people, there's no doubt that we can improve the margin structure over time. In fact by leveraging our global scale and IP, we expect to realize at least 50 million of cost synergies by the end of 2019 and another 15 million after that. This meaningfully changes the margin structure and the implied valuation of the transaction before contemplating the substantial benefits we will see from revenue growth. Now let's walk through some of the details behind the transaction, starting with the market. By way of background the UK is the second largest Creditview market in the world however Callcredit also plays in adjacent spaces outside of the traditional bureau market taken together, all of Callcredits markets have an addressable market of about 2.4 billion that market grew and an 11% CAGR from 2014 to 2017. Going forward, we expect that total market growth to accelerate slightly driven in large part by strong double digit growth in fraud and decisioning and analytics. The regulatory environment is changing with open banking and general data protection regulations or GDPR. These will be implemented in 2018 and are focused on increasing competition among banks and enhancing consumer privacy rights. They will likely have a neutral to positive impact on our industry as the regulations will drive higher compliance standards and the need for new products among lending institutions. Based in leads, Callcredit is the fastest growing credit bureau in the UK; we estimate that 2017 revenue is approximately 190 million with EBITDA of 63 million. In recent years Callcredit’s EBITDA margin has remained relatively stable at about 30% and the company made significant investments to drive future growth and margin expansion which I will touch on in a moment. While the top of the market is consolidated, Callcredits are the broad base of more than 3,000 customers including the largest financial institutions as well as attractive high growth segments such as alternative finance digital commerce and the public sector. For the past several years, Callcredit has made some important improvements to their business, first they invested heavily in technology to move to a cloud based platform. This has contributed to their market share gains and will enable margin expansion as the company now is industry leading data quality and reliability. Callcredit also brought in new management including many industry experts like their CEO Mike Gordon. This team has done an outstanding job of improving Callcredit’s market position and product pipeline to deliver strong growth. Callcredit is organized around five units; credit services, fraud, decisioning and analytics, marketing services and consumer. Let me walk you through each of them call. Callcredit’s core credit services business represents about half of the company's revenue and they have roughly 32% share of this market. Creditservices leverages Callcredit’s data assets which cover 99% of the UK population to provide traditional credit reporting solutions, portfolio review and monitoring and collection services while the three credit bureaus in the UK operate with data parity, Callcredit has taken a leadership role in the market base on advantages and an income data technology and security services and a leading position in finech lending among the bureaus. The unit also has a market leading affordability assessment tool that analyzes historical consumer behavior and indebtedness to help customers make better lending decisions and comply with regulations. Credit services grew about 7% per year from 2014 to 2017 driven by share shift in banking both with new customer wins and incremental business with existing customers. At the same time like TransUnion, they seen substantial growth in alternative lending for Callcredit also has a market leading position. Callcredit has routinely won head to head comparison and thus new business on the strength of unique data gained from alternative lenders and their superior matching capabilities. Along with cutting edge technology, these are true differentiators in the marketplace, in fact Callcredit recently gained the primary position as three of the major banks and has additional large opportunities in the pipeline. Based on customer feedback, we believe that the market is ready for new products like Creditvision which has the potential to consider really accelerate growth on the top of the strong underlying market trend. There is also a sustained trend toward multi-bureau usage which is still nascent in the UK that should continue to open the door to increase volumes and non-bank customers like utilities and telcos are using more credit information to manage customer and channel risk. Finally, there is a growing demand for new products like Affordability and ID checks. Moving to the second largest business unit about one-third of Callcredits revenue comes from its fraud business which has grown strong, double digits from 2014 to 2017. Callcredit is a market leader in fraud and identity solutions as a result of an array of quality point solutions. We see a real opportunity to strategically bundle these point solutions into a comprehensive suite of products as we've done at TransUnion when we created ID vision. On top of these product related opportunities, the market is growing rapidly and is expected to grow even faster at about 20% per year for at least the next three years as the mobile digital economy continues to grow. Rapid growth in the number of online transactions products becoming more prevalent even as consumers expect more frictionless interactions and are more concerned about fraud, at the same time regulators are requiring greater levels of oversight to combat this problem. Callcredit entrenching and can capitalize on this trend by leveraging valuable data assets, sophisticated analytics and superior technology. We believe we are extremely well positioned to benefit from the underlying growth in the UK the same way we are currently benefiting in our other markets and just like credit services we should be able to outgrow the market given Callcredit and TransUnion leading capabilities. Running on Callcredit portfolio are relatively small decisioning analytics marketing and consumer business units. The decisioning and analytics business unit includes decision engines, a suite and criteria scores and workflow tools among other products. The marketing business is focused on database management enhancement and the consumer business has direct to consumer brand called [indiscernible] products used by a number of banks and lead aggregators that I referenced earlier we have been ruling out our direct to consumer solution credit view internationally in recent years and will do the same in the UK. With that overview done, I'm going to end where I started. With this high level view of why this is such an exciting acquisition for TransUnion, so to recap Callcredits sits as an attractive growing market but a long term trends are pointed in a positive direction we have the opportunity to bring meaningful innovation and capability to the market just so as we've done in Canada, Hong Kong, India Colombia and other international markets and finally we can optimize the cost structure of the business to expand margins over time. Clearly, we're very excited about Callcredit and I believe it will create significant shareholder value, at the same time we continue to pursue other smaller acquisitions that can also have a real impact on our business. I'm confident that our systems and employees are more than capable of integrating additional transactions that they come and that these will fit just as nicely with their clearly defined acquisition strategy as Callcredit and all the deals that have preceded it. Now I will turn the time over to Todd to first provide a few more details on the Callcredit acquisition. He will then walk you through the financials and provide you with updated guidance. Todd?

[Todd Cello:]

Thanks Jim. I'd like to spend a minute talking about our plans to finance Callcredit, the impact on our leverage and the path to unwind the leverage. The purchase price is about £1 billion which is approximately $1.4 billion at today's exchange rate, since we will be raising US dollar funds to pay for the acquisition we are considering options to hedge the foreign currency exposure to avoid a negative impact on the amount of US dollars needed at closing. We expect the transaction to close either a late in the second quarter or early in the third quarter pending regulatory approval, during that time we'll be working on the financing arrangements with a focus on delivering the most efficient and cost effective capital structure for TransUnion. We've already secured firm financing from several banks to allow us to sign and complete the transaction and just to make one point clear we will not issue stock to fund this transaction, that markets remain solid generally and TransUnion has a strong balance sheet and cash flows to support the incremental leverage. We believe we can finance this transaction attractively based on current market conditions and outlook. With the addition of Callcredits adjusted EBITDA and the incremental debt, we estimate that our leverage should be about 4.2 times when we close the transactions. We expect that metric to return to our target of 3.5 times or less by the end of 2019. This should have been largely as a result of the strong expected increase in Callcredits adjusted EBITDA that Jim discussed and finally based on our current assumptions about the business and the financing we expect Callcredit to be roughly EPS neutral in 2018 and creative in 2019 and beyond. As Jim mentioned, we had a strong first quarter. Let me spend the rest of my time in the call walking you through our consolidated and segment results. For the sake of simplicity, all of the comparisons I discuss today will be against the first quarter of 2017 unless noted otherwise. First quarter consolidated revenue increased 18% on a reported basis and 17% on a constant currency basis with strong performance across all three segments. Revenue from acquisitions contributed approximately three points of growth in the quarter. This was related to DataLink services, eBureau and FactorTrust. We also realized about one point of growth roughly $5 million from incremental credit monitoring business from a competitor, so our underlying business grew 14% in the quarter. Adjusted EBITDA increased 18% on a reported basis and 17% on a constant currency basis, however adjusted EBITDA margin was flat largely as a result of two factors. First as expected, we used about two-thirds of the incremental monitoring revenue from a competitor to invest in advertising in marketing and to pending litigation in our international segment. The reminder flow to the bottom line meaning that this incremental revenue had a similar margin to our total business. And second we experienced the normal cost to integrate three acquisitions we made late in the year, DataLink services, eBureau and FactorTrust. The margin impact to the acquisition integration and lower margin profile of the acquired business was about 80 basis points which suggests that the underlying business delivered solid margin expansion. Adjusted diluted EPS increased 34%. The adjusted effective tax rate for the first quarter was 28.1%, slightly below our expectations of 29%. The lower tax rate accounted for 15 points of EPS growth in the quarter meaning that adjusted EPS without the benefits of the lower rate would have still been up 19%. We now expect the rate to be approximately 28% for the full year as we continue to refine the rate to reflect the impact of tax reform. I want to point out that while we're glad to see this year's rate likely drop by about eight points compared to 2017, there is more work that we can do to deliver a lower rate over time, it's too soon to give you an explicit view of where the rate can go but we will continue to prioritize tax planning and to optimize our rate. Let's spend a minute discussing some of the key income statement items, cost of services rose 21% as a result of higher data costs associated with our revenue growth, investments and strategic initiatives and the operating costs related to the acquisitions I mentioned. SG&A increased 13% for many of the same reasons I mentioned in cost to services and also include incremental marketing in consumer interactive and some higher litigation costs. Adjusted operating income was up 17% driven primarily by the increase in revenue. Now looking at segment revenue and adjusted operating income USIS revenue grew 21% driven by strong performance across all three platforms excluding the impact of the acquisitions of DataLink, eBureau and FactorTrust, revenue would have been up 16%. Online data services increased 25% driven by the favorable macroeconomic environment and strength from innovative products like CreditVision, CreditVision link and TLOXP. The three acquisitions I just mentioned are reported in this platform excluding them on line data services would have grown 17%. Marketing services was up 23% due primarily to demand for our new solutions including Creditvision, CreditVision link and digital marketing as well as ongoing strength with Fin Tech customers. In Decision Services revenue grew 8% due to strength in our healthcare vertical. Adjusted operating income for USIS increased 15%. Moving to international, revenue grew 15% or 11% on a constant currency basis, developed markets revenue increased 12% or 8% on a constant currency basis, both Canada and Hong Kong continue to deliver solid growth. Emerging markets revenue increased 17% or 13% on a constant currency basis. We saw strong growth in India and other key markets. Adjusted operating income for international grew 8% on a reported basis and 4% on a constant currency basis. During the quarter, we took a reserve for certain disputed claims that are the subject of litigation, excluding that reserve adjusted operating income would have been up about 9% in constant currency which is more in line with what we would expect given the solid revenue growth. Consumer interactive revenue increased 12% driven by growth in both the indirect and direct channels. Within indirect, we continue to benefit from recent new wins such as chase and into it. Our indirect channel also realized about $5 million of revenue from the onetime incremental credit monitoring business from a competitor excluding this incremental revenue consumer interactive would have grown more than 7%. In the direct channel, we benefited from a greater number of subscribers for the TransUnion credit monitoring due to increased activities starting in September with stronger attention over that time adjusted operating income for consumer interactive grew 11% driven by the increase in revenue. Now moving to the balance sheet, cash and cash equivalence were $154 million at March 31st 2018 and $160 million at December 31st 2017. Total debt including the current portion of long term debt remained relatively flat even after funding acquisitions. Cash from operations rose by almost $36 million in the quarter reflecting the strong cash generation capabilities of our business. Capital expenditures came in at 27 million and free cash flow also increased significantly to about $74 million. Turning now in to our guidance for 2018. A couple of quick points about our assumptions for acquisition and FX impact. For the full year, acquisitions closed in 2017 should add approximately 2 points of revenue growth in about 3 points of impact in the second quarter. The impact of Callcredit is not included in our current guidance we will update you after we close. For FX we expect to have no significant impact in either period. In the spirit of transparency, I also want to point out that the expectation in our guidance is for approximately $15 million of revenue for the full year from the onetime incremental credit monitoring from the competitor. This represents about 50 basis points of growth year over year and we expect the revenue to be about $5 million per quarter for the first three quarters of 2018. We expect to invest at least two-thirds of this revenue and growth oriented initiatives, therefore you can assume that there is limited flow through impact on adjusted EBITDA. For full year 2018, we expect the revenue to come in between 2.17 billion to 2.185 billion up 12% to 13% on a constant currency basis. Adjusted EBITDA is expected to be between 845 million and 855 million up 13% to 14%. At the high end of our guidance, adjusted EBITDA margin is expected to be slightly over 39% up about 40 basis points from 38.7% in 2017. As I mentioned earlier, acquisition integration cost and the initial lower margin structure of the acquisitions is negatively impacting margin. Excluding this impact, our adjusted EBITDA margin would clearly be more in line with the historical flow through from our revenue growth. Adjusted diluted earnings per share for the year are expected to be between $2.37 and $2.41 up 26% to 28%. Of that increase, we estimate our reduced adjusted tax rate of 28% to account for $0.28 per share, excluding this impact adjusted EPS would be up 12% to 13%. Turning to the second quarter of 2018, we expect the following

[Jim Peck:]

Thanks Todd. And our enthusiasm about the acquisition of Callcredit, I don't want to lose sight of the exceptional performance we delivered in the first quarter which led to our ability to raise guidance for the full year. We are well positioned to have another very strong year in 2018. And that allows us to continue to stay aggressive and truly leverage the very unique assets of TransUnion. We have become industry leaders in technology innovation. We built and grown at diverse set of vertical markets. We consistently expanded and refined our global operations by leveraging all of these capabilities across our enterprise, we cannot only win marketplace today but we can even better position ourselves for continued great success over the long term. With the acquisition of Callcredit we have real conviction that we are adding another foundational piece to our long term growth algorithm. This strengthens our ability to consistently deliver top tier revenue growth and attractive expanding margin. With that I will turn the time back to Aaron.

[Aaron Hoffman:]

Thanks Jim. That concludes our prepared remarks. For the Q&A, as always we ask that you each ask only one question so that we can include more participants. And now we will glad to take those questions.

[Operator:]

[Operator Instructions] And our first questioner of today will be Tim McHugh with William Blair, please go ahead with your question.

[Tim McHugh:]

Thank you. First I guess I want to focus on I guess Callcredit just two aspects of the question. One is press release even from the company and some other sources, I have seen suggest that I think they have been quoting £201 million of revenue in 2016 so I think it's not apple to apple comparison but can you reconcile that for people who might see those headlines and I guess you are not buying part of what Callcredit historically reported at their revenue and then secondly I think along those lines, people are trying to do the math on what implied about growth rates at least in the most recent years in 2017. So I don't think you gave that but if you did I apologize for missing it.

[Todd Cello:]

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

[Tim McHugh:]

Okay. Thank you.

[Operator:]

And the next questioner of today will be Manav Patnaik with Barclays. Please go ahead.

[Manav Patnaik:]

Thank you. Good morning guys. I just wanted to see if you could flash out a little bit more in terms of how we should think about quantifying the synergies. It sounds like you are talking about broad revenue and cost, maybe on the cost side just your comments on the meaningful opportunities to optimize and so forth, should we think about that margin heading towards the true margin?

[Jim Peck:]

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

[Operator:]

And our next question today will be Andrew Steinerman with JPMorgan. Please go ahead.

[Andrew Steinerman:]

I was intrigued that Callcredit had a third of its revenue in fraud solutions. I want to make sure that all B2B revenues in terms of fraud solutions and when you turn and look at your own USIS, what percentage of revenues are in fraud solutions and does Callcredit really kind of maybe give ideas to USIS of that has a bigger opportunity in fraud solutions for B2B.

[Jim Peck:]

Good morning. To answer the first part of your question, the fraud solutions are all B2B. They do have some very interesting tools that we believe we can use not only in the US but across all of our portfolio kind of geographies and we also believe there are things we are doing in the US that they are going to be able to use. So we are going to build a best of breed there. I don't believe we point out what the fraud revenue is other than it is growing double digits in the US and we have our whole suite of products and something we are very bullish on. And we are also by the way bullish on Callcredits standalone position in the state. So I think it's only going to get better with some of the things that we can add and I am just repeating myself now and as you said we were going to be able to use some of what they do across our portfolio and these are things we have already talked about and they are really not that hard to do and when I say that I mean they are not hard to leverage in different spaces. So we are quite excited about that, fraud as you know isn't going anywhere and that market is going to continue to grow double digits for as long as I think we can project out.

[Andrew Steinerman:]

Great. Thank you.

[Operator:]

And our next question here will be David Ridley Lane with Bank of America Merrill Lynch. Please go ahead.

[David Ridley Lane:]

Good morning. I know that you cited new products, as the reason for acceleration in USIS, have your win rates new opportunities meaningfully increased over the past six months?

[Jim Peck:]

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

[David Ridley Lane:]

Given the outperformance in the first quarter, do you still expect high single digits revenue growth of USIS or is that expectation moved up with that?

[Todd Cello:]

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

[David Ridley Lane:]

Thank you very much.

[Operator:]

And our next question for today will be Jeff Meuler with Baird. Please go ahead.

[Jeff Meuler:]

Thank you. You have called out that there is superior data, you talked about income data, can you just give us a sense of how broadly they have it on UK consumers, what the source of the data is and then I guess maybe simular to Andrew's question on fraud the potential to port those capabilities and reminder of where else you have income data I think may be South Africa?

[Jim Peck:]

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

[Jeff Meuler:]

Thank you.

[Operator:]

And our next questioner today will be Toni Kaplan with Morgan Stanley. Please go ahead.

[Toni Kaplan:]

Good morning. In the past, you have focused more on growing an emerging markets, does this acquisition change your international strategy to focus more on developed markets as well going forward and just beside from the UK and Lithuania there are other geographies where Callcredit is concentrated? Thanks.

[Jim Peck:]

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

[Toni Kaplan:]

That's helpful. Thank you.

[Operator:]

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

[Andrew Jeffrey:]

Good morning guys. Thanks for taking the question. Nice momentum in indirect and certainly impressive win with AmEx, a marquee customer. Can you frame up what do you think the seeing the TAM is in that market or at least where your share might be and what you think it could be just trying to frame up what you think the long term growth potential is in that business?

[James Peck:]

You are talking about the indirect market?

[Andrew Jeffrey:]

Indirect consumer, yes.

[James Peck:]

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

[Andrew Jeffrey:]

Thanks.

[Operator:]

And the next questioner today will be George Mihalos with Cowen. Please go ahead.

[George Mihalos:]

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

[Todd Cello:]

Hi George. Good morning. Thanks for the question. So marketing services I mean as you noted we had a very strong Q1 and I would characterize it as continued growth that we are seeing first and foremost out of the consumer lending space and we think about – I think about the Fintech players are the big drivers there. Also CreditVision and CreditVision Link and the capabilities there are driving that nice growth rate that we are seeing in marketing services. And I would say that just kind of the traditional marketing and portfolio review business that we do for financial services customer also just continue to be strong. So I think that the net takeaway is I think that consumer lending and CreditVision continue to be strong and that would be the way to kind of think about that credit card. It's a little soft right now from our point of view but it's kind of as expected and as will be talked about during the last call.

[Operator:]

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

[Bill Warmington:]

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

[Todd Cello:]

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

[Bill Warmington:]

Thank you very much.

[Operator:]

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

[Shlomo Rosenbaum:]

Good morning and thank you for taking my questions. The growth was pretty strong throughout the company. One area where it was just broke trend a little on the downside was, which was on the decisions services was first time we have seen below double digit growth and like five years. Can you talk about some of the items that impacted that maybe there is some timing over there, if there is any changes in the markets that you are addressing?

[Todd Cello:]

Good morning Shlomo. I will take that one. So yes you are right. Decision services grew 8% in the quarter as you know that is where we have our healthcare businesses predominately recorded. First, the healthcare business continue to grow at a nice double digit pace, we continue to see great momentum in the back end of the revenue cycle management and in particular with our insurance coverage covered product, that trend continues on and we still feel that there is a quite a bit of runway left with the healthcare business. So what's dragging the number down a little bit is just some underperformance that we have seen predominately in collections and maybe in some of our other, point of service decisioning and the applications are there more legacy type of business, they are kind of flattish right now but when we look forward we fully expect this category to be back add a double digit clip, so when we talk next time that’s what we fully expected to be.

[Shlomo Rosenbaum:]

Okay. Thanks.

[Operator:]

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

[Aaron Hoffman:]

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

[Operator:]

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