We'll get going. I'm Jeff Meuler, Baird's Information Solutions Analyst. Thanks for joining us. Pleased to introduce TransUnion as the next presenting company at the conference. TransUnion's a global consumer information solutions company and credit bureau. With us from the company, Chris Cartwright, CEO since 2019, prior to which he headed the company's largest segment and has a long history of running information solutions businesses. Also with me on stage, Todd Cello, CFO since 2017, been with the company since 1997. Has pretty much run all of their major finance leadership roles. And then Aaron Hoffman from the IR team on stage, and Greg Bardi from the IR team, joining us from the conference. So thank you for being here. It's your first- Mm-hmm. I think investor conference or webcast since a tough quarter and some reduced Q4 guidance. There's been a pullback in your stock, so I just wanted to see if there's anything that you thought you know from your follow-up investor conversations, messages from the Q3 call that you think did not resonate in the way that you thought they would with investors, or anything that you think investors might be overlooking? Yeah. Well, listen, thanks, Jeff, and good to be here. Yeah, certainly it was a difficult and surprising Q3, as many of you know, and it's good to have an opportunity to kinda talk it through holistically. So I think the downturn that we experienced in the Q3 reflects the macroeconomic pressures that have been building on U.S. consumers for really ever since inflation showed up and the Fed started to aggressively increase interest rates, which have increased borrowing costs, which are pinching consumer households. And you know, we guided in the middle of the year after two successful quarters where we beat but didn't raise, you know, trying to prudently de-risk the second half. But then in September, there was a sharp slowdown in the near prime and the subprime segments of consumer lending, but also card issuance, and a slowdown in fintech, which spans across those segments. Additionally, the mix of what we sold in the quarter was more weighted toward non-credit products, which, while still extremely profitable, are lower margin than the credit products, which declined because there was less marketing and origination activities by the banks. Again, kind of isolated in those two segments. So that was surprising. And then from that, the Q4 guide, you know, we wanted to be conservative and de-risk the Q4. The thinking was, look, we'd rather be here in February apologizing for beating those numbers than for a second miss. Then I think the market extrapolated to the full year 2024 in a way, well, frankly, it's much more negative than we think this environment reflects, right? And we'll talk through some of that in detail. I think pulling back from the Q3 and just considering TransUnion as a whole, we continue to grow. We believe our portfolio is engineered to grow and to stay positive, regardless of market conditions. You know, I look to our performance around the world. We have achieved considerable diversification, and that's borne out as the U.S. financial services market has slowed, really since the H2 of 2021, but our emerging verticals in the U.S. have compensated for that decline. Our international portfolio continues to compound at low double digits. And the direct-to-consumer business, which has been undergoing a reset, is becoming less of a drag on the portfolio in total, and we expect will become a positive contributor as we go into next year, right? The level of innovation, I mean, strictly the number of new products that we have to sell, both as a result of what we built, but also what we acquired, is unmatched in our history. And we have been integrating these acquisitions and digesting them, and we're doing a great job at cross-selling. We are really connecting well through our go-to-market efforts with our clients in multiple markets. We still see share gains globally. I mean, if I look to Canada, which has similar economic circumstances to the U.S., we've been able to grow share rapidly there in recent years, but it's really a decade-long of share expansion there. In the U.S, our share has grown dramatically over the past 10 years. We've gone from a third player to what we believe is kind of tied for first in U.S financial services market share. And there's still examples of that in the current year, where at the upper end of the market, we're, you know, increasing our position with certain card issuers. We're competing extremely effectively. So what we saw in the Q3 has nothing to do Our share is strong, our share is stable. And even in the U.K, I mean, the U.K was a difficult quarter. We took a very material writedown. But if you separate the declining elements of the U.K portfolio, which has been short-term, small dollar lending, which the regulators has tried to stamp out of that market, and fintech, we've been gaining share in core mainstream banking since we acquired our way into the U.K. market in 2018. I've spent a good deal of time in that market recently. I'm confident that we are a strong and disruptive player, and we're gonna continue to do well there. We're gonna grow through this period. So there's a lot of positives on the revenue side. But again, the Q3 was a surprise. We look to de-risk the Q4 as best we can. As we sit here today, having closed the books in October, we still feel positive about the Q4 and where we stand against the guide. And again, you know, as we look to 2024, you know, while we can't formally provide 2024 guidance, just taking the Q4 times four gets you to a much more negative place than where we believe the markets are, and certainly our business. That approach doesn't account for the next layer of revenue through all of the selling that we've done this year. It doesn't include the growth momentum from the portfolio, the pricing actions, any of a variety of things that are gonna be additive to the Q4 revenue run rate, right? And then I would say the other part is just on the cost side. We saw our business begin slowing down in the Q2 of 2022. We began curtailing our costs in a variety of areas, certainly personnel. That has continued as the U.S. markets have slowed. Even early in the Q1, kind of unrelated to earnings, we had, you know, a, a personnel action designed to tighten the structure and drive productivity. You can expect that we'll continue to do so as is appropriate for the revenue the business is getting and we'll share more details with you as those actions take place. But I think more importantly, we believe that we're positioned to structurally improve the cost side of our business, and drive margin and productivity going forward. We're gonna do it in two areas. We're going to fully leverage the centers of excellence globally that we've been investing in and staffing up, for several years now. About 30% of our workforce is there. We think there's a final step to take to achieve the right balance between our employees that are in local markets, focused on customer needs and revenue generation, and in the more centralized, efficiency-oriented processing parts of the business. And then secondly, we believe that on the technology side, the combination of our Project Rise migration to the cloud, plus the investment in Neustar and their next generation technology, is gonna allow us to take a material chunk out of our technology costs. Now, we're gonna communicate to the market in the relatively near future. We got to wait for the appropriate time, but it won't be long, and we will provide full details, and it is additive to the current margin trajectory of the business. Capital allocation is probably the last thing I would say. We remain committed to paying down our debt, $75 million in prepayment in Q3, aiming for the same in Q4. We hope to continue that momentum of paydown over 2024 and going forward, and we're committed to getting to 3.5x and ultimately 3x leverage in the near future. When you say you're gonna communicate the structural expense takeouts and the opportunity from them in the relatively near future, does that mean in conjunction with reporting Q4 or potentially ahead of it? Likely ahead of it. Okay. And then when you say you de-risk the guidance, as you said, you also said that you beat Q1 and Q2, and you held the guidance and you thought that would de-risk the back half guidance, and that did not prove to be the case. So can you just be any more clear on what the Q4 guidance is assuming when you say that it's de-risked? Sure, I'll take that question, Jeff. So, yeah, what we factored into our Q4 guide were the conditions that we saw in September that we articulated. Chris just went through the drivers of that, and then we took a more conservative approach. And meaning, you know, we assumed that things would get worse from what we saw in September. And again, that is all just in the spirit of first, we only saw about three weeks of that in September, right? I mean, things were tracking for the most part through July and August. So we were, you know, faced with the situation of, you know, how do you guide the quarter when you really didn't see too much of the impact. So that was why we took what we would consider an overly conservative, you know, perspective for the Q4. Like Chris said, we would much rather be in a situation to talk about beating and apologizing for that, as opposed to dealing with another miss like we had in the Q3. And just to, you know, touch on October, you know, we, y ou know, Chris mentioned this, but just to put a finer point on it, we closed the books on October, and I would just say that, you know, we are pleased with, you know, how the results came in relative to the guide that we provided. I think one of the things the market's wrestling with is there's three credit bureau-centric information solutions companies. One has reported, or two have reported, you and one of your peers, one has not, and we didn't hear as much messaging about a softer September, October from the one that has reported. Can you just talk about what markets maybe you over-indexed to or why you think you might be seeing something different from the one peer that has reported thus far? Yeah, and so what I'd say on that is, you know, the, the areas of additional softness that we experienced, mainly in September, because 80% of the Q3 revenue miss occurred in September, is in the U.S, and it was in consumer lending and card issuance. Now, as for our share, we believe that we've got a very large share of the U.S. market, probably at the top of the market or tied for that, right? And most of you who followed TransUnion know that share gain story has been a part of our recent history. So we think we are broadly reflective of the market in total. There's no material overweight in any particular segment. It's very well-balanced, high, medium, small banks, if you will. With the exception of fintech. As most of you know, we have a very large share of the fintech industry. We've pegged that at about $175 million of our global revenues. fintechs have been materially impacted in this downturn, so if there was any disproportionate impact, it would be there. However, generally, we are reflective of the entirety of the U.S. financial services market, and our share is very stable to increasing at this point. Now, it's always difficult to compare portfolios, right? If you look at the three bureaus, we each have certain unique lines of business that have to be removed before making the comparison. Additionally, the different bureaus have different approaches to reporting what is in common. We report everything in financial services or emerging, and within financial services, we're clearly breaking out consumer lending, card, auto, mortgage, etcetera. And we're including the online pulls, the batch, the Score sales, it's holistic. When you compare to other providers, those piece parts can be in different areas, making it a little bit more difficult to compare. When we unbundle that internally, which obviously we do to benchmark ourselves, we are very comfortable and confident with where we stand in the market, and we see a much less material gap than may be clear from the top-level reporting. When you say that the revenue that you give us is holistic for those big four categories within U.S. financial services, does it also include marketing and pre-screen revenue, and do you overweight within marketing revenue at all relative to others in the market? Well, I don't think we overweight. And again, I just spoke to that, so I won't belabor the point, right? I think we represent the market quite well. For marketing solutions within financial services? Yeah, just to be clear, when you talk about marketing within TransUnion, there's our heritage credit-oriented marketing, which is in financial services. It's all in financial services, and then there would be the new Neustar market spend planning and evaluation, and of course, audience generation components, which is something unique to TransUnion, right? But what we report in financial services would be the online business and the batch business, and batch is marketing pre-screen, it's portfolio reviews, it's collection scoring, it's all of those batch activities, and that's in our financial services revenue. Okay. And I know you said that you've been moving up among some large U.S. financial services clients, and just for, like, the investors in the room that may not be as familiar, a lot of large financial services companies have a primary, a secondary, and maybe a tertiary bureau. Sure. When you say that, you could be moving up from secondary to primary, right? Yeah. Equifax did note that there was a, what they call the large financial institution that onboarded onto, I guess, the EFX Cloud in Q3. Did you have any large financial services customers that you've recently lost as a customer? We did not. And look, share is something that we monitor very closely in our monthly business reviews. Obviously, you know, there's always some movement between competitors, and you're always looking for net measures of progress. I did hear that comment that they made. I'm not clear, you know, which service they're speaking of. They've got a broad portfolio of services, obviously, but we definitely, you know, looked back and looked hard at our market positions, and we see no evidence of that in our portfolio. In the fintech space where, that's one of the markets where you said you do over-index to, that was a market that the other bureaus, to some extent, wanted to compete for- Sure ... and you won it. And, so talk about why you won it, and, do you think it's still a structurally attractive market for you? Well, look, we definitely think it's a structurally attractive market. But what you've seen with fintech, because, you know, lots of consumer lending I'd say almost half of the consumer lending in the U.S. is done by non-depositories. Whenever there's a change in the cost of funds flowing into those depositories, or there's deterioration in the lendability of consumers, you're gonna get a pause. And so whether it's fintech or smaller lenders in that space, they'll stop and evaluate what's going on before they deploy additional capital. So far in the H2, rates went up, you know, 50 basis points already, after going up 20 in the H1. So something has changed. Their cost of funds have increased. There is clear stress in the subprime space, where delinquencies have risen beyond pandemics, and so there's been a pause in that marketplace. Now, look, we serve that market well. We serve all of our clients well. It was hard-won share. It is long-term, growthful share, even if there's a pause right now, even if it's gonna take some time for rates to reach an equilibrium, where they can continue to then find pockets for growth, opportunities to convert increasing card balances and revolving debt into refinance loans. Those opportunities are gonna return, and that's gonna provide us growth upside once we get through this stall. Help us understand how bookings or new product sales are going within financial services to maybe kind of reinforce the point that it's macro headwinds and the structural growth that we've come to expect from TransUnion is still there. Yeah, absolutely. So in 2021 and in 2022, on both the heritage credit product side of the house and in the newer product side of the house, things like Neustar and Sontiq, etc. We set two records for bookings in those years, and we have benefited from the realization of that revenue in the following calendar year. But that's not enough to offset a receding tide from the entirety of your customer base. And as I've spoken to, there's some areas where volume has been going down for a couple of, probably a couple of years now. I expect this year we'll have another strong bookings year. As I sit here, I can't say whether we're gonna break new records, but I think in absolute terms, on both credit and non-credit, it's already a solid year for bookings, and I think we're gonna close strong. And I think it's for two reasons. One, a lot of innovation. The product line is more attractive now than it's ever been, so is our selling effectiveness. We can always do better, we'll continue to do better, but it's strong right now. But then, if you look across financial services, particularly at the upper end of the market, their net interest income is still very strong, right? And so they're interested in investing in solutions that make them more efficient as they look toward the future, and they worry about a slowdown. We're talking about a lot of macro headwinds, but at the end of the day, you grew 3% organic constant currency in Q3. We did. Q4 guidance is still for 2%-3% organic constant currency growth. But we've been getting kind of questions like, what is the overall cyclicality of TransUnion? Has it increased with some of the transactions that you've done? If you can just comment on that, please. Yeah, sure. The short answer is greatly diminished from where we were when we started this journey. Coming out of the great financial crisis, we were very much U.S. focused, B2B credit, if you will. And peak to trough there, there was a 10% decline in revenue. Now, you know, the GFC, those are extremely difficult circumstances. That's not what we're dealing with now. We've had this broad-based slowdown, but employment's still high, there's wage growth, there's a labor shortage, and even if layoffs increase and unemployment goes up, there's still gonna be a lot of dollars flowing through consumers and households and the like, right? So it's a much more stable situation. Since then, we've achieved a lot of diversification. Part of that is global, which is over 20% of our portfolio now. Part of that's in the U.S. where 45% of our U.S. revenue is coming from non-financial services accounts. So we've achieved a lot of geographic, vertical, and product-based diversification, which is why we've continued to grow as the market has slowed from peak levels in the second half of 2021 through now. So I expect that we will remain positive and growthful as we look to the, you know, to the intermediate future. I know you withdrew the 2025 guidance for now, but you were calling for 8%-10%, CAGR growth. Is that still the right way to think of a growth framework for TransUnion? Are there like a handful of, and it's a diversified growth model, but are there a handful of particular markets or products that you would call out as, being, like, meaningful growth drivers in coming years? Sure. Look, we have, Look, so far, the acquisitions have been additive to our growth rate and to our stability because they're bringing more of an even more of a recurring nature, and that's particularly true, with Neustar, and 75% of Sontiq's revenues, approximately, are highly recurring as well. And of course, Argus is more of a subscription model. So, you know, Neustar has been additive to our growth, and this really goes to your prior question, where upon acquisition, there were some concerns that we'd increased the cyclical exposure. But only 20% of Neustar's revenues vary with market cycles, and that's the audience generation and the campaign planning. And we've seen that go negative as the economy has slowed down. But the rest of the portfolio is holding up well, and overall, it makes us more diversified and stable. But we still think the new marketing solutions, our analytic solutions, moving into prospect databases, etc., and of course, the international portfolio, those will drive our growth going forward, in addition to our great credit and trended and alternative data. And we think consumer business is troughing and is gonna become positive as we grow through this change in marketing practices and spend. I know you referenced kind of like the mixed dynamic of selling less very high margin credit products and selling some more of some other products that are currently lower margin. I think a lot of investors are still struggling with, like, the math behind it because the EBITDA dollar guidance came down quite a bit more than the revenue guidance. Sure. Just anything further you can say on that? Yeah, absolutely. I think it's important that we spend a minute on that. So in February of, you know, 2023, we provided our full year guidance, and as Chris has already alluded to, our Q1 results and our Q2 results were ahead of the high end of the guidance. So through the first half of 2023, TransUnion was about $33 million ahead on revenue, but only $10 million ahead on adjusted EBITDA. Again, compared to the high end of the guidance that we provided for Q1 and Q2. The margin on that overage, 33 revenue, 10 EBITDA is about 30%. If you think about the full year guide for adjusted EBITDA, we were guiding at the beginning of the year and the guidance that we had provided to be around 36.3%-36.6%. So clearly, the beats that we had in the H1 of the year were below the guidance for the full year. So what that spoke to was the issue that we faced, and that we talked about on our Q1 call, with the margin on the price increase from a third-party score provider and the impact, you know, that that had. It also had to do with the mix of the business that we were selling. So selling a little bit less credit, which is more profitable, probably no surprise, because that's our heritage, and that we've scaled it up. So that gets you to the H1. If you then look at the Q3 guidance, and you look at it compared to the high end again, we missed revenue by $19 million, and we missed adjusted EBITDA at the high end by $14 million. So if you take the revenue, which I said was $33 million through the H1 favorable, $19 million unfavorable, you're ending up with a positive $14 million. Now, this is the important part on the adjusted EBITDA. So if we were $10 million ahead through the first half, but $14 million off in Q3, that's a negative $4 million on the adjusted EBITDA. So you could see the dynamic that happened, where the adjusted EBITDA ended up being worse than the revenue, just by simply looking at the high guide and our performance to it. Then you enter into the guidance that we provided for the Q4, and what we did is we took down the credit-based products that carry a higher margin. So when you do that, that's how you end up with this disproportionate. Just thought it was important to walk through the pieces there so, you know, you can appreciate, and you could see, you know, based on the guide- Yeah, and those are the financial steps along the way. I think, you know, look, in the big, you know, you guide your certain revenue number, you assume a certain product mix, and those products have differing levels of profitability. Credit at the margin is extremely profitable because the data's contributed. There's not a direct product licensing cost. When we sell more third-party scores, there is a direct pro-rata cost. If we sell more Trusted Call Solutions, we pay the carriers for that data. There's a cost associated with marketing audiences, for example. Now, to be clear, everything we sell is nicely profitable, but if the mix shifts, we're gonna have less, we're gonna have less contribution margin, if you will. Total revenues, less direct cost to get to the contribution margin. That's what happened. If you look at our underlying costs, they've been flat quarter-over-quarter for some period now. And then you volunteered that the EPS run rate from Q4, it's probably over punitive to extrapolate that as the right run rate into 2024. So let's maybe just go into more detail on, like, what the typical building blocks investors should think about when they, like, do their TransUnion models. Because I think there's also some, like, integration expense that falls away. There's the typical structural growth. So just anything further you can say on that, because I think that's an important point that you're volunteering. Yeah, look, that's a really good point, and that again speaks to 2024. And look, we're not in a position to guide fully 2024. We wanna finish 2023. I think you can understand that. But that said, and I like your word over punitive, you can't take the Q4 estimates and times them by four, as I already addressed, right? There's revenue momentum, there's new sales, there's pricing, there's a whole variety of things that influence to the positive. You can't take the EBITDA without the benefit of cost actions, both in the intermediate term, but also structural cost actions, right? That are gonna influence that to the positive. And so as a result, EBITDA, EPS, etc., will most likely be better than where the market consensus is currently. Better than where the market consensus is currently for- Oh, when I say consensus, I don't mean like the average of all of you- Okay ... guys' guides, 'cause I'm not clear on what that is right now. Okay. I just mean general emotion and sentiment. Okay. And then just long-term capital allocation, so why the, the new debt framework? Why not something potentially less, and how do you think about like long-term capital allocation once you get there? Sure. So, Jeff, I think you're referring to the refinance when you talk about the- Well, you did a refinance, but a couple of quarters ago, you also lowered your leverage target. Oh, sure. Maybe just- Let me talk about all of that then. Yeah, so, just as a reminder, at the beginning of 2023, we committed to a target leverage ratio of 3.0x. Since TransUnion's been a public company, going back to 2015, our stated target was 3.5x. So, we're running towards that target at 3.0x. Through the Q3, we were at 3.7x, so we still have a ways to go. As Chris already said, from a, you know, a capital allocation perspective, you know, priority continues to be debt prepayments, which we've made $225 million worth, you know, thus far this year. On October 27th, we closed a refinance of our Term Loan A, as well as an upsize of our revolving credit facility. We were able to secure commitments for about $1.9 billion from our banking partners. And what we did with that $1.9 billion is, first of all, we had to refinance the Term Loan A, which was about $1 billion, and what we did is we upsized that to $1.3 billion, and the reason we did that is because the Term Loan A offers the lowest coupon. So what we did with that incremental $300 million is we prepaid our B6 loans, which is the debt that we incurred for the Neustar acquisition. It carries the highest coupon, so we were able to get some interest expense savings there. From a pricing perspective, we were able to maintain the same pricing on this facility that we had before, which we consider to be a win for us. The only change is at a higher leverage ratio. We'd have to be 4.5 times on the leverage, and I just said we were at 3.7, so we're ways away from that. At that point, you know, it would be SOFR plus 200, as opposed to today, we're at SOFR plus 150. So you know, overall, really positive outcome for TransUnion. Excellent. And that's all the time we have for our questions in this room. Please join me in thanking Chris, Todd, and Aaron. Management will be available for additional questions in a breakout session now, which is in Salon A, towards the ballroom. The next presenting companies at the conference, Trimble, Dover Corp, Sealed Air-