TransUnion, a leading global risk and information solutions company, reported its quarterly financial results for the period ended September 30, 2024. The company’s revenue increased by 12% year-over-year to $1.23 billion, driven by growth in its core businesses, including credit reporting, risk and fraud solutions, and consumer solutions. Net income rose to $243 million, or $1.25 per diluted share, compared to $214 million, or $1.10 per diluted share, in the same period last year. The company’s operating margin expanded to 19.7% from 18.5% in the prior-year period. TransUnion’s cash and cash equivalents increased to $1.14 billion, and its debt-to-equity ratio remained at 0.6. The company’s financial performance was driven by its strategic investments in data analytics, artificial intelligence, and digital transformation, which have enabled it to expand its offerings and improve its operational efficiency.
Financial Performance Highlights for TransUnion
Overview TransUnion is a leading global information and insights company that provides consumer reports, analytics and technology solutions to businesses and consumers. The company operates in two main segments - U.S. Markets and International.
In the U.S. Markets segment, TransUnion provides services to help businesses acquire customers, assess consumer creditworthiness, identify cross-selling opportunities, manage debt portfolios, verify identities and mitigate fraud. Consumers use TransUnion’s services to manage their finances and protect against identity theft.
The International segment provides similar services to businesses in select regions outside the U.S., tailored to the maturity of the credit economy in each country. It also offers consumer services to help people manage their personal finances and guard against identity theft.
Financial Performance For the three months ended September 30, 2024, TransUnion reported revenue of $1,085.0 million, an increase of 12.0% compared to the same period in 2023. This was driven by growth in both the U.S. Markets and International segments.
For the nine months ended September 30, 2024, revenue increased 9.4% to $3,147.0 million compared to the same period in 2023. The increase was again due to growth across both operating segments.
Segment Performance
U.S. Markets In the U.S. Markets segment, revenue increased 12.5% in the third quarter and 8.4% in the first nine months of 2024 compared to the same periods in 2023. This was driven by growth across all three verticals:
Adjusted EBITDA for U.S. Markets increased 9.0% in Q3 and 8.2% YTD, driven by the revenue growth and cost savings from the company’s transformation initiatives, partially offset by higher variable product costs and incentive compensation.
International The International segment also saw strong performance, with revenue increasing 11.3% in Q3 and 13.4% in the first nine months of 2024 compared to the same periods in 2023. This was driven by higher local currency revenue across all regions, partially offset by a slight negative impact from foreign currency exchange rates.
Key drivers of the International revenue growth included:
Adjusted EBITDA for the International segment increased 13.9% in Q3 and 17.4% YTD, primarily due to the higher revenue.
Profitability and Efficiency TransUnion’s Consolidated Adjusted EBITDA, a key measure of underlying profitability, increased 10.5% in Q3 and 10.9% in the first nine months of 2024 compared to the same periods in 2023. This was driven by the revenue growth and cost savings initiatives, partially offset by higher variable product costs and incentive compensation.
Consolidated Adjusted EBITDA margin was 36.3% in Q3 2024, down slightly from 36.8% in Q3 2023, and 35.9% in the first nine months of 2024, up from 35.4% in the same period in 2023. The margin changes reflect the impact of higher variable costs, offset by the benefits of the company’s transformation program.
Adjusted Net Income, which excludes certain one-time and non-cash items, increased 15.3% in Q3 and 15.5% in the first nine months of 2024 compared to the same periods in 2023. This was driven by the higher operating income and lower interest expense, partially offset by an increase in the adjusted tax rate.
Adjusted Diluted Earnings per Share grew 13.9% in Q3 and 14.6% in the first nine months of 2024 versus the prior year periods.
Transformation Initiatives In November 2023, TransUnion announced a transformation plan to optimize its operating model and continue advancing its technology. The key components of this plan are:
Operating Model Optimization: This program will eliminate certain roles, transition job responsibilities to global capability centers, and reduce the company’s facility footprint. TransUnion expects to incur $205-$215 million in one-time costs for this initiative, including $110 million in employee separation expenses, $45 million in facility exit costs, and $55 million in other business optimization expenses.
Accelerated Technology Investment: This is the final phase of TransUnion’s technology transformation, which includes completing Project Rise (a $240 million initiative announced in 2020) and an additional $150-$160 million in incremental expenses to streamline product delivery and leverage cloud-based infrastructure.
In total, TransUnion expects to incur $355-$375 million in one-time, pre-tax expenses related to this transformation plan, with the majority to be incurred by the end of 2024. However, upon completion, the company anticipates generating $120-$140 million in annual savings and reducing capital expenditures from 8% of revenue to 6%.
Financial Position and Liquidity As of September 30, 2024, TransUnion had $643.2 million in cash and cash equivalents, of which $464.1 million was held outside the United States. The company had no outstanding balance on its $600 million Senior Secured Revolving Credit Facility, with $598.8 million available for borrowing.
Cash provided by operating activities was $578.5 million in the first nine months of 2024, up from $443.6 million in the same period of 2023. This increase was primarily due to the improved operating performance, partially offset by employee separation and facility exit payments related to the transformation plan.
Capital expenditures decreased from $213.2 million in the first nine months of 2023 to $198.7 million in the same period of 2024, representing 6% and 7% of revenue, respectively. TransUnion expects capital expenditures to be 8% of revenue in 2024 and 2025 as it invests in its technology infrastructure.
The company’s Leverage Ratio, defined as net debt divided by Adjusted EBITDA, was 3.1x as of September 30, 2024, well within the 5.5x covenant limit under its Senior Secured Credit Facility.
Outlook and Key Risks TransUnion’s financial performance has been impacted by macroeconomic factors, including interest rate changes, inflation, and the overall economic environment. The U.S. Federal Reserve’s actions to raise and then lower interest rates have affected demand for certain credit-related products.
Looking ahead, the company believes the recent interest rate reductions could spur increased demand for rate-sensitive lending products, such as mortgages. However, elevated rates relative to historic levels may still result in depressed consumer spending, which could negatively impact various aspects of TransUnion’s business.
Other key risks facing the company include its ability to maintain data security and integrity, effectively manage costs, successfully execute its transformation initiatives, and adapt to changing regulations and competitive dynamics. Failure to address these risks could have a material adverse impact on TransUnion’s financial condition and results of operations.
Overall, TransUnion delivered strong financial results in the first nine months of 2024, driven by growth across its business segments. The company’s transformation initiatives are expected to enhance its operational efficiency and technology capabilities, positioning it for continued success in the evolving information and insights industry.