UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023March 31, 2024
- OR -
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
001-37470
TransUnion
(Exact name of registrant as specified in its charter)
| | | | | | | | |
| Delaware | | 61-1678417 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification Number) |
| | | | | | | | | | | | | | |
| 555 West Adams, | Chicago, | Illinois | | 60661 |
| (Address of principal executive offices) | | (Zip code) |
312-985-2000
(Registrants’ telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Stock, $0.01 par value | | TRU | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| | | | | | | | | | | | | | |
| ☒ | Large Accelerated Filer | ☐ | Accelerated Filer |
| ☐ | Non-Accelerated Filer | ☐ | Smaller Reporting Company |
| | | ☐ | Emerging Growth Company |
| | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of June 30, 2023,March 31, 2024, there were 193.3194.2 million shares of TransUnion common stock outstanding.
TRANSUNION
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED JUNE 30, 2023MARCH 31, 2024
TABLE OF CONTENTS
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| ITEM 5. OTHER INFORMATION | |
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PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
TRANSUNION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(in millions, except per share data)
| | June 30,
2023 | | December 31,
2022 |
| | March 31,
2024 | | | | March 31,
2024 | | December 31,
2023 |
| Assets | Assets | | | | |
| Current assets: | Current assets: | |
| Current assets: | |
| Current assets: | |
| Cash and cash equivalents | Cash and cash equivalents | | $ | 442.0 | | | $ | 585.3 | |
| Trade accounts receivable, net of allowance of $12.0 and $11.0 | | 672.8 | | | 602.2 | |
| Cash and cash equivalents | |
| Cash and cash equivalents | |
| Trade accounts receivable, net of allowance of $17.6 and $16.4 | |
| Other current assets | Other current assets | | 302.5 | | | 262.7 | |
| Total current assets | Total current assets | | 1,417.3 | | | 1,450.2 | |
| Property, plant and equipment, net of accumulated depreciation and amortization of $763.4 and $711.3 | | 195.2 | | | 218.2 | |
| Property, plant and equipment, net of accumulated depreciation and amortization of $822.5 and $804.4 | |
| Goodwill | Goodwill | | 5,597.3 | | | 5,551.4 | |
| Other intangibles, net of accumulated amortization of $2,496.0 and $2,268.6 | | 3,610.1 | | | 3,675.5 | |
| Other intangibles, net of accumulated amortization of $2,814.1 and $2,719.8 | |
| Other assets | Other assets | | 806.6 | | | 771.0 | |
| Total assets | Total assets | | $ | 11,626.5 | | | $ | 11,666.3 | |
| Liabilities and stockholders’ equity | Liabilities and stockholders’ equity | | | | |
| Current liabilities: | Current liabilities: | |
| Current liabilities: | |
| Current liabilities: | |
| Trade accounts payable | |
| Trade accounts payable | |
| Trade accounts payable | Trade accounts payable | | $ | 320.6 | | | $ | 250.4 | |
| Short-term debt and current portion of long-term debt | Short-term debt and current portion of long-term debt | | 114.6 | | | 114.6 | |
| Other current liabilities | Other current liabilities | | 500.7 | | | 540.5 | |
| Total current liabilities | Total current liabilities | | 935.9 | | | 905.5 | |
| Long-term debt | Long-term debt | | 5,354.5 | | | 5,555.5 | |
| Deferred taxes | Deferred taxes | | 699.7 | | | 762.0 | |
| Other liabilities | Other liabilities | | 174.4 | | | 173.9 | |
| Total liabilities | Total liabilities | | 7,164.5 | | | 7,396.9 | |
| Stockholders’ equity: | Stockholders’ equity: | |
| Common stock, $0.01 par value; 1.0 billion shares authorized at June 30, 2023 and December 31, 2022, 199.4 million and 198.7 million shares issued at June 30, 2023 and December 31, 2022, respectively, and 193.3 million shares and 192.7 million shares outstanding as of June 30, 2023 and December 31, 2022, respectively | | 2.0 | | | 2.0 | |
| Common stock, $0.01 par value; 1.0 billion shares authorized at March 31, 2024 and December 31, 2023, 200.6 million and 200.0 million shares issued at March 31, 2024 and December 31, 2023, respectively, and 194.2 million and 193.8 million shares outstanding as of March 31, 2024 and December 31, 2023, respectively | |
| Common stock, $0.01 par value; 1.0 billion shares authorized at March 31, 2024 and December 31, 2023, 200.6 million and 200.0 million shares issued at March 31, 2024 and December 31, 2023, respectively, and 194.2 million and 193.8 million shares outstanding as of March 31, 2024 and December 31, 2023, respectively | |
| Common stock, $0.01 par value; 1.0 billion shares authorized at March 31, 2024 and December 31, 2023, 200.6 million and 200.0 million shares issued at March 31, 2024 and December 31, 2023, respectively, and 194.2 million and 193.8 million shares outstanding as of March 31, 2024 and December 31, 2023, respectively | |
| Additional paid-in capital | Additional paid-in capital | | 2,345.3 | | | 2,290.3 | |
| Treasury stock at cost; 6.1 million and 6.0 million shares at June 30, 2023 and December 31, 2022, respectively | | (294.4) | | | (284.5) | |
| Treasury stock at cost, 6.4 million and 6.2 million shares at March 31, 2024 and December 31, 2023, respectively | |
| Retained earnings | Retained earnings | | 2,511.5 | | | 2,446.6 | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (202.6) | | | (284.5) | |
| Total TransUnion stockholders’ equity | Total TransUnion stockholders’ equity | | 4,361.8 | | | 4,169.9 | |
| Noncontrolling interests | Noncontrolling interests | | 100.2 | | | 99.5 | |
| Total stockholders’ equity | Total stockholders’ equity | | 4,462.0 | | | 4,269.4 | |
| Total liabilities and stockholders’ equity | Total liabilities and stockholders’ equity | | $ | 11,626.5 | | | $ | 11,666.3 | |
See accompanying notes to unaudited consolidated financial statements.
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of IncomeOperations (Unaudited)
(in millions, except per share data)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | 2023 | | 2022 | | 2023 | | 2022 | | | 2024 | | 2023 |
| Revenue | Revenue | | $ | 968.0 | | | $ | 948.3 | | | $ | 1,908.2 | | | $ | 1,869.5 | |
| Operating expenses | Operating expenses | |
| Cost of services (exclusive of depreciation and amortization below) | Cost of services (exclusive of depreciation and amortization below) | | 365.5 | | | 328.9 | | | 728.2 | | | 650.0 | |
| Cost of services (exclusive of depreciation and amortization below) | |
| Cost of services (exclusive of depreciation and amortization below) | |
| Selling, general and administrative | Selling, general and administrative | | 314.0 | | | 306.3 | | | 616.7 | | | 642.7 | |
| Depreciation and amortization | Depreciation and amortization | | 130.1 | | | 130.6 | | | 259.8 | | | 259.4 | |
| Restructuring | |
| Total operating expenses | Total operating expenses | | 809.6 | | | 765.8 | | | 1,604.7 | | | 1,552.1 | |
| Operating income | Operating income | | 158.4 | | | 182.5 | | | 303.6 | | | 317.4 | |
| Non-operating income and (expense) | Non-operating income and (expense) | |
| Interest expense | |
| Interest expense | |
| Interest expense | Interest expense | | (72.6) | | | (51.9) | | | (144.4) | | | (102.1) | |
| Interest income | Interest income | | 4.3 | | | 1.2 | | | 10.1 | | | 1.9 | |
| Earnings from equity method investments | Earnings from equity method investments | | 4.9 | | | 3.1 | | | 8.0 | | | 6.1 | |
| Other income and (expense), net | Other income and (expense), net | | (18.3) | | | (6.4) | | | (25.0) | | | (18.2) | |
| Total non-operating income and (expense) | Total non-operating income and (expense) | | (81.7) | | | (54.0) | | | (151.4) | | | (112.2) | |
| Income from continuing operations before income taxes | Income from continuing operations before income taxes | | 76.6 | | | 128.5 | | | 152.2 | | | 205.2 | |
| Provision for income taxes | Provision for income taxes | | (19.3) | | | (29.2) | | | (37.9) | | | (53.5) | |
| Income from continuing operations | Income from continuing operations | | 57.3 | | | 99.3 | | | 114.3 | | | 151.7 | |
| Discontinued operations, net of tax | Discontinued operations, net of tax | | (0.2) | | | 0.3 | | | (0.2) | | | — | |
| Net income | Net income | | 57.2 | | | 99.6 | | | 114.1 | | | 151.6 | |
| Less: net income attributable to the noncontrolling interests | Less: net income attributable to the noncontrolling interests | | (3.3) | | | (4.1) | | | (7.6) | | | (7.7) | |
| Net income attributable to TransUnion | Net income attributable to TransUnion | | $ | 53.9 | | | $ | 95.6 | | | $ | 106.5 | | | $ | 143.9 | |
| | Income from continuing operations | | $ | 57.3 | | | $ | 99.3 | | | $ | 114.3 | | | $ | 151.7 | |
| Less: income from continuing operations attributable to noncontrolling interests | | (3.3) | | | (4.1) | | | (7.6) | | | (7.7) | |
| | Basic earnings per common share from: | |
| | Basic earnings per common share from: | |
| | Basic earnings per common share from: | |
| Income from continuing operations attributable to TransUnion | |
| Income from continuing operations attributable to TransUnion | |
| Income from continuing operations attributable to TransUnion | Income from continuing operations attributable to TransUnion | | 54.1 | | | 95.3 | | | 106.8 | | | 143.9 | |
| Discontinued operations, net of tax | Discontinued operations, net of tax | | (0.2) | | | 0.3 | | | (0.2) | | | — | |
| Net income attributable to TransUnion | Net income attributable to TransUnion | | $ | 53.9 | | | $ | 95.6 | | | $ | 106.5 | | | $ | 143.9 | |
| | Basic earnings per common share from: | |
| Diluted earnings per common share from: | |
| Income from continuing operations attributable to TransUnion | |
| Income from continuing operations attributable to TransUnion | |
| Income from continuing operations attributable to TransUnion | Income from continuing operations attributable to TransUnion | | $ | 0.28 | | | $ | 0.49 | | | $ | 0.55 | | | $ | 0.75 | |
| Discontinued operations, net of tax | Discontinued operations, net of tax | | — | | | — | | | — | | | — | |
| Net Income attributable to TransUnion | | $ | 0.28 | | | $ | 0.50 | | | $ | 0.55 | | | $ | 0.75 | |
| Diluted earnings per common share from: | | | | | | | | |
| Income from continuing operations attributable to TransUnion | | $ | 0.28 | | | $ | 0.49 | | | $ | 0.55 | | | $ | 0.75 | |
| Discontinued operations, net of tax | | — | | | — | | | — | | | — | |
| Net Income attributable to TransUnion | | $ | 0.28 | | | $ | 0.49 | | | $ | 0.55 | | | $ | 0.75 | |
| Net income attributable to TransUnion | |
| Weighted-average shares outstanding: | Weighted-average shares outstanding: | | | | | | | | |
| Basic | Basic | | 193.2 | | | 192.5 | | | 192.8 | | | 192.3 | |
| Basic | |
| Basic | |
| Diluted | Diluted | | 194.0 | | | 193.1 | | | 194.0 | | | 193.1 | |
As a result of displaying amounts in millions, and for the calculation of earnings per share, rounding differences may exist in the table above. See accompanying notes to unaudited consolidated financial statements.
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(in millions)
| | Three Months Ended
June 30, | | Six Months Ended June 30, |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | 2023 | | 2022 | | 2023 | | 2022 | | | 2024 | | 2023 |
| Net income | Net income | | $ | 57.2 | | | $ | 99.6 | | | $ | 114.1 | | | $ | 151.6 | |
| Other comprehensive income (loss): | |
| Other comprehensive income: | |
| Foreign currency translation: | |
| Foreign currency translation: | |
| Foreign currency translation: | Foreign currency translation: | |
| Foreign currency translation adjustment | Foreign currency translation adjustment | | 47.9 | | | (135.7) | | | 85.9 | | | (142.3) | |
| Provision for income taxes | | (0.7) | | | (0.6) | | | (1.4) | | | (0.6) | |
| Foreign currency translation adjustment | |
| Foreign currency translation adjustment | |
| Benefit (provision) for income taxes | |
| Foreign currency translation, net | Foreign currency translation, net | | 47.2 | | | (136.3) | | | 84.5 | | | (142.9) | |
| Hedge instruments: | Hedge instruments: | |
| Net change on interest rate swaps | | 42.8 | | | 47.8 | | | (4.6) | | | 190.9 | |
| Benefit (provision) for income taxes | | (10.7) | | | (11.9) | | | 1.1 | | | (47.7) | |
| Net change on interest rate swap | |
| Net change on interest rate swap | |
| Net change on interest rate swap | |
| (Provision) benefit for income taxes | |
| Hedge instruments, net | Hedge instruments, net | | 32.1 | | | 35.9 | | | (3.5) | | | 143.2 | |
| Available-for-sale securities: | | | | | | | | |
| Net unrealized (loss) gain | | (0.1) | | | 0.1 | | | (0.1) | | | 0.1 | |
| Benefit (provision) for income taxes | | — | | | — | | | — | | | — | |
| Available-for-sale securities, net | | (0.1) | | | 0.1 | | | (0.1) | | | 0.1 | |
| Total other comprehensive income (loss), net of tax | | 79.2 | | | (100.3) | | | 80.9 | | | 0.4 | |
| Comprehensive income (loss) | | 136.4 | | | (0.7) | | | 195.0 | | | 152.0 | |
| Total other comprehensive (loss) income, net of tax | |
| Comprehensive income | |
| Less: comprehensive income attributable to noncontrolling interests | Less: comprehensive income attributable to noncontrolling interests | | (2.9) | | | (2.5) | | | (6.6) | | | (6.2) | |
| Comprehensive income (loss) attributable to TransUnion | | $ | 133.5 | | | $ | (3.2) | | | $ | 188.4 | | | $ | 145.8 | |
| Comprehensive income attributable to TransUnion | |
See accompanying notes to unaudited consolidated financial statements.
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in millions)
| | Six Months Ended June 30, |
| 2023 | | 2022 |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | 2024 | | | | 2024 | | 2023 |
| Cash flows from operating activities: | Cash flows from operating activities: | | | | |
| Net income | |
| Net income | |
| Net income | Net income | | $ | 114.1 | | | $ | 151.6 | |
| Less: Discontinued operations, net of tax | Less: Discontinued operations, net of tax | | (0.2) | | | — | |
| Income from continuing operations | Income from continuing operations | | 114.3 | | | 151.7 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | |
| Depreciation and amortization | Depreciation and amortization | | 259.8 | | | 259.4 | |
| Depreciation and amortization | |
| Depreciation and amortization | |
| Loss on repayment of loans | Loss on repayment of loans | | 2.1 | | | 6.5 | |
| Deferred taxes | Deferred taxes | | (71.3) | | | (32.6) | |
| Stock-based compensation | Stock-based compensation | | 45.9 | | | 42.3 | |
| Gain on investments | |
| Other | Other | | 22.8 | | | 13.5 | |
| Changes in assets and liabilities: | Changes in assets and liabilities: | |
| Trade accounts receivable | |
| Trade accounts receivable | |
| Trade accounts receivable | Trade accounts receivable | | (77.0) | | | (61.0) | |
| Other current and long-term assets | Other current and long-term assets | | (28.8) | | | (40.2) | |
| Trade accounts payable | Trade accounts payable | | 67.3 | | | 6.4 | |
| Other current and long-term liabilities | Other current and long-term liabilities | | (42.2) | | | (461.4) | |
| Cash provided by (used in) operating activities of continuing operations | | 292.9 | | | (115.4) | |
| Cash (used in) provided by operating activities of discontinued operations | | (0.2) | | | 0.2 | |
| Cash provided by (used in) operating activities | | 292.7 | | | (115.2) | |
| Cash provided by operating activities | |
| Cash flows from investing activities: | Cash flows from investing activities: | |
| Capital expenditures | |
| Capital expenditures | |
| Capital expenditures | Capital expenditures | | (143.6) | | | (121.3) | |
| Proceeds from sale/maturities of other investments | Proceeds from sale/maturities of other investments | | 22.1 | | | 42.5 | |
| Purchases of other investments | Purchases of other investments | | (32.8) | | | (76.3) | |
| Investments in consolidated affiliates, net of cash acquired | | — | | | (504.0) | |
| Investments in nonconsolidated affiliates | Investments in nonconsolidated affiliates | | (31.9) | | | (14.8) | |
| Other | Other | | 0.1 | | | (2.3) | |
| Cash used in investing activities of continuing operations | | (186.1) | | | (676.2) | |
| Cash used in investing activities of discontinued operations | | — | | | (0.7) | |
| Cash used in investing activities | Cash used in investing activities | | (186.1) | | | (676.9) | |
| Cash flows from financing activities: | Cash flows from financing activities: | |
| Proceeds from Term Loans | |
| Proceeds from Term Loans | |
| Proceeds from Term Loans | |
| Repayments of Term Loans | |
| Repayments of debt | Repayments of debt | | (207.3) | | | (457.3) | |
| Debt financing fees | |
| Proceeds from issuance of common stock and exercise of stock options | Proceeds from issuance of common stock and exercise of stock options | | 9.8 | | | 8.9 | |
| Dividends to shareholders | Dividends to shareholders | | (40.9) | | | (37.2) | |
| Employee taxes paid on restricted stock units recorded as treasury stock | Employee taxes paid on restricted stock units recorded as treasury stock | | (9.9) | | | (29.2) | |
| Payment of contingent consideration | | — | | | (2.8) | |
| Distributions to noncontrolling interests | | (5.9) | | | (4.2) | |
| Cash used in financing activities of continuing operations | | (254.2) | | | (521.8) | |
| Cash used in financing activities | |
| Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | | 4.3 | | | (6.7) | |
| Net change in cash and cash equivalents | Net change in cash and cash equivalents | | (143.3) | | | (1,320.6) | |
| Cash and cash equivalents, beginning of period | Cash and cash equivalents, beginning of period | | 585.3 | | | 1,842.4 | |
| Cash and cash equivalents, end of period | Cash and cash equivalents, end of period | | $ | 442.0 | | | $ | 521.8 | |
See accompanying notes to unaudited consolidated financial statements.
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity (Unaudited)
(in millions)
| | | | | Common Stock | | Paid-In
Capital | | Treasury
Stock | | Retained
Earnings | | Accumulated
Other
Comprehensive
Loss | | Noncontrolling
Interests | | Total | | | Common Stock | | Paid-In
Capital | | Treasury
Stock | | Retained
Earnings | | Accumulated
Other
Comprehensive
Loss | | Noncontrolling
Interests | | Total |
| Shares | | Amount | |
| Balance, December 31, 2021 | | 191.8 | | | $ | 2.0 | | | $ | 2,188.9 | | | $ | (252.0) | | | $ | 2,254.6 | | | $ | (285.4) | | | $ | 98.1 | | | $ | 4,006.2 | |
| | Shares | |
| Balance, December 31, 2022 | |
| Balance, December 31, 2022 | |
| Balance, December 31, 2022 | |
| Net income | Net income | | — | | | — | | | — | | | — | | | 48.3 | | | — | | | 3.7 | | | 52.0 | |
| Other comprehensive income (loss) | Other comprehensive income (loss) | | — | | | — | | | — | | | — | | | — | | | 100.7 | | | (0.1) | | | 100.6 | |
| Stock-based compensation | Stock-based compensation | | — | | | — | | | 20.1 | | | — | | | — | | | — | | | — | | | 20.1 | |
| Employee share purchase plan | Employee share purchase plan | | 0.1 | | | — | | | 10.0 | | | — | | | — | | | — | | | — | | | 10.0 | |
| Exercise of stock options | Exercise of stock options | | — | | | — | | | 0.2 | | | — | | | — | | | — | | | — | | | 0.2 | |
| Vesting of restricted stock units and performance stock units | Vesting of restricted stock units and performance stock units | | 0.8 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Treasury stock purchased | Treasury stock purchased | | (0.3) | | | — | | | — | | | (28.7) | | | — | | | — | | | — | | | (28.7) | |
| Dividends to shareholders | Dividends to shareholders | | — | | | — | | | — | | | — | | | (18.4) | | | — | | | — | | | (18.4) | |
| Balance, March 31, 2022 | | 192.4 | | | $ | 2.0 | | | $ | 2,219.2 | | | $ | (280.8) | | | $ | 2,284.5 | | | $ | (184.7) | | | $ | 101.7 | | | $ | 4,141.9 | |
| Net income | | — | | | — | | | — | | | — | | | 95.6 | | | — | | | 4.1 | | | 99.6 | |
| Other comprehensive income (loss) | | — | | | — | | | — | | | — | | | — | | | (98.8) | | | (1.5) | | | (100.3) | |
| Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | (4.1) | | | (4.1) | |
| Stock-based compensation | | — | | | — | | | 20.5 | | | — | | | — | | | — | | | — | | | 20.5 | |
| Exercise of stock options | | 0.1 | | | — | | | 0.2 | | | — | | | — | | | — | | | — | | | 0.2 | |
| Vesting of restricted stock units and performance stock units | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Treasury stock purchased | | — | | | — | | | — | | | (0.4) | | | — | | | — | | | — | | | (0.4) | |
| Dividends to shareholders | | — | | | — | | | — | | | — | | | (18.6) | | | — | | | — | | | (18.6) | |
| Balance, June 30, 2022 | | 192.5 | | | $ | 2.0 | | | $ | 2,239.9 | | | $ | (281.2) | | | $ | 2,361.5 | | | $ | (283.5) | | | $ | 100.2 | | | $ | 4,138.9 | |
| Balance, March 31, 2023 | |
| | | | | Common Stock | | Paid-In
Capital | | Treasury
Stock | | Retained
Earnings | | Accumulated
Other
Comprehensive
Loss | | Noncontrolling
Interests | | Total | | | Common Stock | | Paid-In
Capital | | Treasury
Stock | | Retained
Earnings | | Accumulated
Other
Comprehensive
Loss | | Noncontrolling
Interests | | Total |
| Shares | | Amount | |
| Balance, December 31, 2022 | | 192.7 | | | $ | 2.0 | | | $ | 2,290.3 | | | $ | (284.5) | | | $ | 2,446.6 | | | $ | (284.5) | | | $ | 99.5 | | | $ | 4,269.4 | |
| | Shares | |
| Balance, December 31, 2023 | |
| Balance, December 31, 2023 | |
| Balance, December 31, 2023 | |
| Net income | Net income | | — | | | — | | | — | | | — | | | 52.6 | | | — | | | 4.3 | | | 56.9 | |
| Other comprehensive income (loss) | Other comprehensive income (loss) | | — | | | — | | | — | | | — | | | — | | | 2.3 | | | (0.6) | | | 1.7 | |
| Stock-based compensation | Stock-based compensation | | — | | | — | | | 20.7 | | | — | | | — | | | — | | | — | | | 20.7 | |
| Employee share purchase plan | Employee share purchase plan | | 0.2 | | | — | | | 10.7 | | | — | | | — | | | — | | | — | | | 10.7 | |
| Exercise of stock options | | 0.1 | | | — | | | 0.5 | | | — | | | — | | | — | | | — | | | 0.5 | |
| Vesting of restricted stock units and performance stock units | Vesting of restricted stock units and performance stock units | | 0.3 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Treasury stock purchased | Treasury stock purchased | | (0.1) | | | — | | | — | | | (7.6) | | | — | | | — | | | — | | | (7.6) | |
| Dividends to shareholders | Dividends to shareholders | | — | | | — | | | — | | | — | | | (20.8) | | | — | | | — | | | (20.8) | |
| Balance, March 31, 2023 | | 193.2 | | | $ | 2.0 | | | $ | 2,322.3 | | | $ | (292.1) | | | $ | 2,478.4 | | | $ | (282.2) | | | $ | 103.2 | | | $ | 4,331.5 | |
| Net income | | — | | | — | | | — | | | — | | | 53.9 | | | — | | | 3.3 | | | 57.2 | |
| Other comprehensive income (loss) | | — | | | — | | | — | | | — | | | — | | | 79.6 | | | (0.4) | | | 79.2 | |
| Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | (5.9) | | | (5.9) | |
| Stock-based compensation | | — | | | — | | | 23.0 | | | — | | | — | | | — | | | — | | | 23.0 | |
| Exercise of stock options | | — | | | — | | | 0.1 | | | — | | | — | | | — | | | — | | | 0.1 | |
| Vesting of restricted stock units and performance stock units | | 0.1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Treasury stock purchased | | — | | | — | | | — | | | (2.3) | | | — | | | — | | | — | | | (2.3) | |
| Dividends to shareholders | | — | | | — | | | — | | | — | | | (20.8) | | | — | | | — | | | (20.8) | |
| Balance, June 30, 2023 | | 193.3 | | | $ | 2.0 | | | $ | 2,345.3 | | | $ | (294.4) | | | $ | 2,511.5 | | | $ | (202.6) | | | $ | 100.2 | | | $ | 4,462.0 | |
| Balance, March 31, 2024 | |
See accompanying notes to unaudited consolidated financial statements.
TRANSUNION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(Tabular amounts in millions, except per share amounts)
1. Significant Accounting and Reporting Policies
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of TransUnion and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and, in our opinion, include all adjustments of a normal recurring nature necessary for a fair statement of the interim periods presented. All significant intercompany transactions and balances have been eliminated. As a result of displaying amounts in millions, rounding differences may exist in the financial statements and footnote tables. The interim results presented are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023.2024. The Company’s year-end Consolidated Balance Sheet data for the year ended December 31, 2023 was derived from audited financial statements. Therefore, these unaudited consolidated financial statements should be read in conjunction with our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, filed with the Securities and Exchange Commission (“SEC”) on February 14, 2023.28, 2024.
During the quarter ended March 31, 2024, we have reorganized our operations to merge our Consumer Interactive operating segment with our U.S. Markets operating segment. This change aligns with our transformation plan for an integrated U.S. business with increased cross-selling activities and common enabling functions to achieve greater cost efficiencies.
In addition, we have changed the responsibility for certain international operations previously managed within the U.S. Markets segment to certain regions within the International segment.
As a result, we have two operating segments, U.S. Markets and International, which are consistent with our reportable segments, and reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated and the manner in which the chief operating decision maker assesses the Company’s performance.
The reporting of certain revenue from the acquisition of Argus Information and Advisory Services, Inc. and Commerce Signals, Inc. (collectively, “Argus”), which was previously reported within our Financial Services vertical, is now reported in Emerging Verticals in the U.S. Markets operating segment. While this change does not impact our operating segments, it does impact our disaggregated revenue disclosures.
We have recast our historical financial information present in this Quarterly Report on Form 10-Q to reflect these changes and conform to our current operating structure.
Unless the context indicates otherwise, any reference in this report to the “Company,” “we,” “our,” “us,” and “its” refers to TransUnion and its consolidated subsidiaries, collectively.
For the periods presented, TransUnion does not have any material assets, liabilities, revenues, expenses or operations of any kind other than its ownership investment in TransUnion Intermediate Holdings, Inc.
Revision of Previously Issued Financial Statements
During the second quarter of 2023, the Company identified an errorerrors in the classification of employeecertain costs related to certain of our recent acquisitions between cost of services and selling, general and administrative in the Consolidated Statements of Income, whichOperations. The errors resulted in thean understatement of cost of services and thean overstatement of selling, general and administrative in equal and offsetting amounts resultingto previously issued quarterly and year-to-date financial statements in 2023, with no impact to total operating expenses, operating income or net income. The identified errors impacted the Company's previously issued 2022 quarterlyincome, and annual financial statements, and quarterly financial statements for the three months ended March 31, 2023. The Company evaluated the error and determined that the related impact was not material to the Consolidated Statements of Income for any prior period and had no impact on the Consolidated Balance Sheet,Sheets, Consolidated StatementsStatement of Comprehensive Income, Consolidated Statements of Cash Flows or the Consolidated Statements of Stockholder’s Equity for any period presented.of those periods. The Company concluded that, while the expense classification errors were not material to any of its financial statements taken as a whole, it should revise the Consolidated Statements of Operations for the periods impacted. Accordingly, the Company has revised the previously issued Consolidated Statements of IncomeOperations for the three and six months ended June 30, 2022March 31, 2023 to correct for such error and these revisions arethe errors as reflected in this Form 10-Q. The Company will also correct previously reported financial information for this error in its future filings, as applicable. A summary of the corrections to the impacted financial statement line items to the Company’s previously issued Consolidated Statements of Income for each affected period is presented in Note 19, “Revision of Previously Issued Financial Statements.”
Principles of Consolidation
The consolidated financial statements of TransUnion include the accounts of TransUnion and all of its controlled subsidiaries. Investments in nonmarketable unconsolidated entities in which the Company is able to exercise significant influence are accounted for using the equity method. Investments in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence, our “Cost Method Investments,” are accounted for at our initial cost, minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Use of Estimates
The preparation of consolidated financial statements and related disclosures in accordance with GAAP requires management to make estimates and judgments that affect the amounts reported. We believe that the estimates used in preparation of the accompanying consolidated financial statements are reasonable, based upon information available to management at this time. These estimates and judgments affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the balance sheet date, as well as the amounts of revenue and expense during the reporting period. Estimates are inherently uncertain and actual results could differ materially from the estimated amounts.
Trade Accounts Receivable
We base our allowance for doubtful accounts estimate on our historical loss experience, our current expectations of future losses, current economic conditions, an analysis of the aging of outstanding receivables and customer payment patterns, and specific reserves for customers in adverse financial condition or for existing contractual disputes.
The following is a roll-forward of the allowance for doubtful accounts for the periods presented:
| | | | | | | | | | | |
| | Six Months Ended June 30, |
| 2023 | | 2022 |
| Beginning balance | $ | 11.0 | | | $ | 10.7 | |
| Provision for losses on trade accounts receivable | 3.0 | | | 2.3 | |
| Write-offs, net of recovered accounts | (2.0) | | | (1.8) | |
| Ending balance | $ | 12.0 | | | $ | 11.2 | |
Long-Lived Assets and Goodwill
We review long-lived asset groups that are subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. We test goodwill for impairment on an annual basis, in the fourth quarter, or more frequently if events or circumstances indicate that the carrying value of one or more of our reporting units exceeds its fair value. We continually monitor events and changes in circumstances such as changes in market conditions and other relevant factors that could indicate that the fair value of our reporting units may more likely than not have fallen below its respective carrying value. The ongoing uncertainty and the unpredictable nature of the macroeconomic environment could impact our estimates and assumptions utilized in our impairment tests, which may result in future impairments that could be material and negatively impact our results of operations.
See Note 5, “Goodwill” and Note 6, “Intangible Assets” for additional information about these assets. | | | | | | | | | | | |
| | Three Months Ended March 31, |
| 2024 | | 2023 |
| Beginning balance | $ | 16.4 | | | $ | 11.0 | |
| Provision for losses on trade accounts receivable | 4.7 | | | 1.3 | |
| Write-offs, net of recovered accounts | (3.5) | | | (1.1) | |
| Ending balance | $ | 17.6 | | | $ | 11.2 | |
Recently Adopted Accounting Pronouncements
There are no recent accounting pronouncements that have been adopted by TransUnion in the secondfirst quarter of 2023.2024.
Recent Accounting Pronouncements Not Yet Adopted
There are no recent accounting pronouncements that applyOn November 27, 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to TransUnion that have not been adopted.
2. Business Acquisition
The following transaction was accountedReportable Segment Disclosures. This ASU updates the requirements for as a business combination under the acquisition method of accounting. The acquisition method requires,segment reporting to include, among other things, disaggregating and quantifying significant segment expenses that assets acquiredare regularly provided to the chief operating decision maker (“CODM”) and liabilities assumed in a business combination generally be recognized at their fair values as of the acquisition date. The determination of fair value requires management to make significant estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets has been recorded as goodwill. The results of operations of this acquisition are included in the measure of segment profit, describing the nature of amounts not separately disaggregated, allowing for additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources, and extending nearly all annual segment reporting requirements to quarterly reporting requirements. The update is effective for annual periods for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application. While we are assessing the impact this guidance will have on our consolidated financial statements fromdisclosures, we do not expect to early adopt this guidance.
On December 14, 2023, the dateFASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. This ASU requires income tax disclosures to include consistent categories and greater disaggregation of acquisition.
Verisk Financial Services
On April 8, 2022, we completed our acquisition of Verisk Financial Services (“VF”), the financial services business unit of Verisk Analytics, Inc. We acquired 100% of the outstanding equity interest of the entities that comprise VF for $505.7 million in cash, including a decrease of $2.3 million recorded subsequent to the acquisition date for certain customary purchase price adjustments. We have retained the leading core businesses of Argus Information and Advisory Services, Inc. and Commerce Signals, Inc. (collectively, “Argus”), and identified several non-core businesses that we classified as held-for-sale as of the acquisition date that we have subsequently divested. See Note 3, “Discontinued Operations,” for a further discussion of these discontinued operations.
Purchase Price Allocation
The purchase price for this acquisition was finalized as of December 31, 2022. As of March 31, 2023, we finalized the valuation of the assets acquired and liabilities assumed, with no significant changesinformation in the amountsrate reconciliations and related disclosures compared withthe disaggregation of income taxes paid by federal, state and foreign, and also for individual jurisdictions that are greater than 5% of total income taxes paid. The update is effective for annual periods for fiscal years beginning after December 31, 2022.15, 2024 on a prospective basis. Early adoption is permitted. We are currently assessing the impact of adopting the updated provisions.
3. Discontinued Operations
Non-core businesses from the VF acquisition
As discussed in Note 2, “Business Acquisition,” on April 8, 2022, we completed the acquisition of VF, which included Argus and several non-core businesses that we classified as held-for-sale as of the acquisition date. We sold these non-core businesses on December 30, 2022, and therefore have no assets or liabilities of these businesses on our consolidated balance sheet for the periods presented. The expenses related to these non-core businesses for the three and six months ended June 30, 2023, were not significant. The selling price of these non-core businesses is subject to customary post-closing adjustments to working capital, which we expect to finalize during 2023, and will be reflected as an adjustment to the gain on sale that will be included in discontinued operations, net of tax.
Healthcare business
On December 17, 2021, we completed the sale of our Healthcare business. During the three and six months ended June 30, 2022, we recorded a $0.5 million true-up to the selling price related to this business, which is reflected in the table below.
Discontinued operations, net of tax
The income from discontinued operations, net of tax, reflected in the table below for the three and six months ended June 30, 2022 is related to the non-core businesses from the VF acquisition as well as an incremental gain on sale of discontinued operations, net of tax, related to our Healthcare business. Discontinued operations, net of tax, as reported on our Consolidated Statements of Income for the three and six months ended June 30, 2022, consisted of the following:
| | | | | | | | | | | | | | |
| (in millions) | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 |
| Revenue | | $ | 10.9 | | | $ | 10.9 | |
| Operating expenses | | | | |
| Cost of services (exclusive of depreciation and amortization below) | | 4.4 | | | 4.7 | |
| Selling, general and administrative | | 4.7 | | | 4.6 | |
| Total operating expenses | | $ | 9.1 | | | $ | 9.3 | |
| Operating loss of discontinued operations | | 1.8 | | | 1.6 | |
| Non-operating income and (expense) | | (1.9) | | | (2.2) | |
| Loss before income taxes from discontinued operations | | $ | (0.1) | | | $ | (0.6) | |
| Provision for income taxes | | (0.1) | | | — | |
| Gain on sale of discontinued operations, net of tax | | 0.5 | | | 0.5 | |
| Discontinued operations, net of tax | | $ | 0.3 | | | $ | — | |
4.2. Other Current Assets
Other current assets consisted of the following:
| | | | | | | | | | | | | | |
| (in millions) | | June 30, 2023 | | December 31, 2022 |
| Prepaid expenses | | $ | 175.6 | | | $ | 145.1 | |
| Marketable securities (Note 16) | | 2.6 | | | 2.6 | |
| Other | | 124.3 | | | 115.0 | |
| Total other current assets | | $ | 302.5 | | | $ | 262.7 | |
Other includes | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| Prepaid expenses | | $ | 146.9 | | | $ | 145.4 | |
| Marketable securities (Note 15) | | 2.6 | | | 2.7 | |
| Other (Note 17) | | 65.2 | | | 127.8 | |
| Total other current assets | | $ | 214.7 | | | $ | 275.9 | |
The decrease in other investments in non-negotiable certificates of deposit that are recorded at their carrying value, which approximates fair value.is due primarily to cash received for indemnification and insurance receivables for certain legal matters.
5.3. Goodwill
Goodwill is allocated to our reporting units, which are an operating segment or one level below an operating segment. Our reporting units consist of U.S. Markets, Consumer Interactive, and the geographic regions of the United Kingdom, Africa, Canada, Latin America, India and Asia Pacific within our International reportable segment.
We test goodwill for impairment on an annual basis in the fourth quarter and monitor throughout the year for impairment triggering events that indicate that the carrying value of one or more of our reporting units exceeds its fair value.
As discussed above in Note 1, “Significant Accounting and Reporting Policies,” we have reorganized certain operations of our business during the quarter ended March 31, 2024, which has resulted in changes to the expected cash flows for certain reporting units. As a result, we have reallocated all of the goodwill from the Consumer Interactive segment to the U.S. Markets segment and have also reallocated a portion of the goodwill from the U.S. Markets segment to certain reporting units in the International segment, including the United Kingdom reporting unit, using the relative fair value allocation approach as reflected in the tables below. We have assessed the recoverability of the goodwill of the impacted reporting units before and after the reallocation and have concluded there was no impairment to goodwill for any of the reporting units impacted by the reorganization.
Goodwill allocated to our reportable segments and changes in the carrying amount of goodwill during the three months ended March 31, 2024, consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Markets | | International | | Consumer Interactive | | Total |
| Balance, December 31, 2023 | $ | 3,602.8 | | | $ | 894.1 | | | $ | 679.1 | | | $ | 5,176.0 | |
| Reallocation of goodwill from segment reorganization | 655.6 | | | 23.5 | | | (679.1) | | | — | |
| Foreign exchange rate adjustment | (0.4) | | | (5.2) | | | — | | | (5.6) | |
| Balance, March 31, 2024 | $ | 4,258.0 | | | $ | 912.4 | | | $ | — | | | $ | 5,170.4 | |
During the six months ended June 30, 2023,first quarter of 2024, aside from the reorganization discussed above, there were no triggering events that required us to re-evaluate whether any of our reporting units arewere impaired. This assessment includesAs of March 31, 2024, the fair value of our United Kingdom reporting unit which we are continuing to monitor given the calculated excess fair value over carrying value was lessis marginally greater than 10% of its carrying value as a result of October 31, 2022, our annual assessment date.
Goodwill allocated to our reportable segmentsthe impairment recorded in the three months ended September 30, 2023 and the changesre-allocation from the segment change discussed above. We believe the assumptions that we used in our impairment assessment in the carrying amount of goodwill during the sixthree months ended June 30, 2023, consistedMarch 31, 2024 for our United Kingdom reporting unit are reasonable and consistent with assumptions that would be used by other marketplace participants. However, such assumptions are inherently uncertain, and a change in assumptions could change the estimated fair value of our United Kingdom reporting unit. Therefore, future impairments of our United Kingdom reporting unit could be required, which could be material to the following:consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | U.S. Markets | | International | | Consumer
Interactive | | Total |
| Balance, December 31, 2022 | $ | 3,602.7 | | | $ | 1,269.6 | | | $ | 679.1 | | | $ | 5,551.4 | |
| Purchase accounting measurement period adjustments | (0.4) | | | — | | | — | | | (0.4) | |
| Foreign exchange rate adjustment | — | | | 46.2 | | | — | | | 46.2 | |
| Balance, June 30, 2023 | $ | 3,602.3 | | | $ | 1,315.8 | | | $ | 679.1 | | | $ | 5,597.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| Gross Goodwill | | Accumulated Impairment | | Net Goodwill | | Gross Goodwill | | Accumulated Impairment | | Net Goodwill |
| U.S Markets | $ | 4,258.0 | | | $ | — | | | $ | 4,258.0 | | | $ | 3,602.8 | | | $ | — | | | $ | 3,602.8 | |
| International | 1,326.4 | | | (414.0) | | | 912.4 | | | 1,308.1 | | | (414.0) | | | 894.1 | |
| Consumer Interactive | — | | | — | | | — | | | 679.1 | | | — | | | 679.1 | |
| Total | $ | 5,584.4 | | | $ | (414.0) | | | $ | 5,170.4 | | | $ | 5,590.0 | | | $ | (414.0) | | | $ | 5,176.0 | |
4. Intangible Assets
Intangible assets are initially recorded at their acquisition cost, or fair value if acquired as part of a business combination, and amortized over their estimated useful lives. Intangible assets consisted of the following:
| | | | June 30, 2023 | | December 31, 2022 | | March 31, 2024 | | December 31, 2023 |
| (in millions) | Gross | | Accumulated
Amortization | | Net | | Gross | | Accumulated
Amortization | | Net |
| Gross | | | Gross | | Accumulated
Amortization | | Net | | Gross | | Accumulated
Amortization | | Net |
| Customer relationships | Customer relationships | $ | 2,058.4 | | | $ | (392.8) | | | $ | 1,665.6 | | | $ | 2,048.6 | | | $ | (330.9) | | | $ | 1,717.7 | |
| Internal use software | Internal use software | 2,083.5 | | | (1,130.9) | | | 952.6 | | | 1,959.8 | | | (1,029.8) | | | 930.0 | |
| Database and credit files | Database and credit files | 1,365.7 | | | (780.9) | | | 584.9 | | | 1,337.7 | | | (725.6) | | | 612.1 | |
| Trademarks, copyrights and patents | Trademarks, copyrights and patents | 587.9 | | | (181.4) | | | 406.5 | | | 587.7 | | | (173.2) | | | 414.5 | |
| Noncompete and other agreements | Noncompete and other agreements | 10.6 | | | (10.1) | | | 0.6 | | | 10.5 | | | (9.1) | | | 1.4 | |
| Total intangible assets | Total intangible assets | $ | 6,106.1 | | | $ | (2,496.0) | | | $ | 3,610.1 | | | $ | 5,944.1 | | | $ | (2,268.6) | | | $ | 3,675.5 | |
Changes in the carrying amount of intangible assets between periods consisted of the following:
| | (in millions) | Gross | | Accumulated Amortization | | Net |
| Balance, December 31, 2022 | $ | 5,944.1 | | | $ | (2,268.6) | | | $ | 3,675.5 | |
| Gross | | | Gross | | Accumulated Amortization | | Net |
| Balance, December 31, 2023 | |
| Developed internal use software | Developed internal use software | 116.3 | | | — | | | 116.3 | |
| Amortization | Amortization | — | | | (209.2) | | | (209.2) | |
| Disposals and retirements | |
| Foreign exchange rate adjustment | Foreign exchange rate adjustment | 45.7 | | | (18.2) | | | 27.5 | |
| Balance, June 30, 2023 | $ | 6,106.1 | | | $ | (2,496.0) | | | $ | 3,610.1 | |
| Balance, March 31, 2024 | |
All amortizable intangible assets are amortized on a straight-line basis, which approximates the pattern of benefit, over their estimated useful lives.
7.5. Other Assets
Other assets consisted of the following:
| | | | | | | | | | | | | | |
| (in millions) | | June 30, 2023 | | December 31, 2022 |
| Investments in affiliated companies (Note 8) | | $ | 285.2 | | | $ | 265.9 | |
| Right-of-use lease assets | | 117.5 | | | 127.4 | |
| Interest rate swaps (Notes 11 and 16) | | 233.1 | | | 237.7 | |
| Note Receivable (Note 16) | | 76.7 | | | 70.3 | |
| Other | | 94.1 | | | 69.7 | |
| Total other assets | | $ | 806.6 | | | $ | 771.0 | |
| | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| Investments in affiliated companies (Note 6) | | $ | 302.8 | | | $ | 291.4 | |
| Right-of-use lease assets | | 103.9 | | | 98.9 | |
| Interest rate swaps (Notes 10 and 15) | | 173.4 | | | 162.3 | |
| Note receivable (Note 15) | | 83.3 | | | 82.0 | |
| Other | | 128.2 | | | 104.8 | |
| Total other assets | | $ | 791.5 | | | $ | 739.4 | |
8.6. Investments in Affiliated Companies
Investments in affiliated companies represent our investment in non-consolidated domestic and foreign entities. These entities are in businesses similar to ours.
We use theFor equity method to account for investments in affiliates where we are able to exercise significant influence. For these investments, we adjust the carrying value for our proportionate share of the affiliates’ earnings, losses and distributions, as well as for purchases and sales of our ownership interest.
We account for nonmarketable investments in equity securities in which we are not able to exercise significant influence,For our Cost Method Investments, at our initial cost, minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. For these investments, we adjust the carrying value for any purchases or sales of our ownership interests. We record any dividends received from these investments as other income in non-operating income and expense.
We have elected to account for our investment in a limited partnership, which is not material, using the net asset value fair value practical expedient. Gains and losses on this investment, which are not material, are included in other income and expense in the consolidated statementsConsolidated Statements of income.Operations.
Investments in affiliated companies consisted of the following:
| | | | | | | | | | | | | | |
| (in millions) | | June 30, 2023 | | December 31, 2022 |
| Cost Method Investments | | $ | 235.0 | | | $ | 213.1 | |
| Equity Method investments | | 46.6 | | | 49.8 | |
| Limited Partnership investment | | 3.6 | | | 3.0 | |
| Total investments in affiliated companies (Note 7) | | $ | 285.2 | | | $ | 265.9 | |
| | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| Cost Method Investments | | $ | 239.2 | | | $ | 233.8 | |
| Equity method investments | | 59.8 | | | 53.9 | |
| Limited partnership investment | | 3.8 | | | 3.7 | |
| Total investments in affiliated companies (Note 5) | | $ | 302.8 | | | $ | 291.4 | |
These balances are included in other assets in the consolidated balance sheets.Consolidated Balance Sheets. The increase in Cost Method Investments is due to three new Cost Method Investments made during the first quarter of 2023, two of which are recorded in our U.S. Markets segment and one in our International segment, partially offset by an impairment loss of $9.1includes a $4.7 million ofgain on a Cost Method Investment in our U.S. MarketsInternational segment.
There were no dividends from equity method investments during the three months ended March 31, 2024 and 2023. Earnings from equity method investments, which are included in other non-operating income and expense, and dividends received from equity method investments consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| Earnings from equity method investments (Note 17) | | $ | 4.9 | | | $ | 3.1 | | | $ | 8.0 | | | $ | 6.1 | |
| Dividends received from equity method investments | | 17.2 | | | 10.1 | | | 17.2 | | | 10.6 | |
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
| Earnings from equity method investments (Note 16) | | $ | 4.7 | | | $ | 3.1 | |
9.7. Other Current Liabilities
Other current liabilities consisted of the following:
| | (in millions) | | June 30, 2023 | | December 31, 2022 |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
| Accrued payroll and employee benefits | Accrued payroll and employee benefits | | $ | 144.1 | | | $ | 208.5 | |
| Accrued legal and regulatory matters (Note 18) | | 127.0 | | | 125.0 | |
| Deferred revenue (Note 13) | | 117.6 | | | 111.9 | |
| Accrued legal and regulatory matters (Note 17) | |
| Deferred revenue (Note 12) | |
| Accrued restructuring (Note 8) | | Accrued restructuring (Note 8) | | 48.6 | | | 64.9 |
| Operating lease liabilities | Operating lease liabilities | | 34.2 | | | 33.7 | |
| Income taxes payable | Income taxes payable | | 22.0 | | | 8.0 | |
| | Other | Other | | 55.7 | | | 53.5 | |
| Total other current liabilities | Total other current liabilities | | $ | 500.7 | | | $ | 540.5 | |
The decrease in accrued payroll and employee benefits is due primarily to bonus, commissions and salaries paid during the first quarter of 20232024 that were earned in 2022.2023. The decrease in accrued legal and regulatory was due primarily to payments made for certain legal and regulatory expenses.
10.8. Restructuring
On November 12, 2023, our Board of Directors (“Board”) approved a transformation plan to optimize our operating model and continue to advance our technology. The transformation plan includes an operating model optimization program that will reduce our global workforce, transition certain job responsibilities to global capability centers, and reduce our facility footprint. The Company expects to record pre-tax expenses associated with the operating model optimization program of approximately $155.0 million from the fourth quarter of 2023 through the end of 2025, consisting of approximately $110.0 million of employee separation expenses and $45.0 million of facility exit expenses, with a majority of the expenses to be incurred by the end of 2024. To date, we have incurred a total of $93.5 million, including $18.2 million recorded in the first quarter of 2024.
The following table summarizes the expenses recorded in the first quarter of 2024.
| | | | | | | | |
| | Three Months Ended March 31, 2024 |
| Employee separation | | $ | 16.8 | |
Facility exit1 | | 1.4 | |
| | |
| Total restructuring expenses | | $ | 18.2 | |
1 Consists of impairments of lease right-of-use (“ROU”) assets.
The following table summarizes the changes in the accrued restructuring reserve during the three months ended March 31, 2024, which are included in other current liabilities on the Consolidated Balance Sheets.
| | | | | | | | | | | |
| Employee Separation Costs | | | | | | |
| Balance, December 31, 2023 | $ | 64.9 | | | | | | | |
| Restructuring expense | 16.8 | | | | | | | |
| Cash payments | (33.0) | | | | | | | |
| Foreign exchange rate adjustment | (0.1) | | | | | | | |
| Balance, March 31, 2024 (Note 7) | $ | 48.6 | | | | | | | |
All restructuring expenses have been recorded in the Corporate unit, as these initiatives are predominantly centrally directed and controlled and are not included in internal measures of segment operating performance.
9. Other Liabilities
Other liabilities consisted of the following:
| | | | | | | | | | | | | | |
| (in millions) | | June 30, 2023 | | December 31, 2022 |
| Operating lease liabilities | | $ | 90.9 | | | $ | 102.0 | |
| Unrecognized tax benefits, net of indirect tax effects (Note 15) | | 41.7 | | | 40.1 | |
| Put option (Note 16) | | 16.0 | | | 10.0 | |
| Deferred revenue (Note 13) | | 8.1 | | | 5.3 | |
| Other | | 17.7 | | | 16.5 | |
| Total other liabilities | | $ | 174.4 | | | $ | 173.9 | |
| | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| Operating lease liabilities | | $ | 89.8 | | | $ | 81.8 | |
| Unrecognized tax benefits, net of indirect tax effects (Note 14) | | 41.0 | | | 40.2 | |
| Deferred revenue (Note 12) | | 16.8 | | | 15.1 | |
| Other | | 19.2 | | | 16.1 | |
| Total other liabilities | | $ | 166.7 | | | $ | 153.2 | |
11.
10. Debt
Debt outstanding consisted of the following:
| | | | | | | | | | | | | | |
| (in millions) | | June 30, 2023 | | December 31, 2022 |
Senior Secured Term Loan B-6, payable in quarterly installments through December 1, 2028, with periodic variable interest (7.47%1 at June 30, 2023 and 6.63%2 at December 31, 2022), net of original issue discount and deferred financing fees of $4.6 million and $26.0 million, respectively, at June 30, 2023, and original issue discount and deferred financing fees of $5.3 million and $29.9 million, respectively, at December 31, 2022 | | $ | 2,272.9 | | | $ | 2,433.7 | |
Senior Secured Term Loan B-5, payable in quarterly installments through November 15, 2026, with periodic variable interest (6.95%1 at June 30, 2023 and 6.13%2 at December 31, 2022), net of original issue discount and deferred financing fees of $2.2 million and $5.4 million, respectively, at June 30, 2023, and original issue discount and deferred financing fees of $2.5 million and $6.2 million, respectively, at December 31, 2022 | | 2,191.3 | | | 2,203.3 | |
Senior Secured Term Loan A-3, payable in quarterly installments through December 10, 2024, with periodic variable interest (6.70%1 at June 30, 2023 and 6.13%2 at December 31, 2022), net of original issue discount and deferred financing fees of $0.9 million and $0.6 million, respectively, at June 30, 2023, and original issue discount and deferred financing fees of $1.3 million and $0.8 million, respectively, at December 31, 2022 | | 1,004.7 | | | 1,033.0 | |
| Finance leases | | 0.1 | | | 0.1 | |
| Senior Secured Revolving Credit Facility | | — | | | — | |
| Total debt | | 5,469.1 | | | 5,670.1 | |
| Less short-term debt and current portion of long-term debt | | (114.6) | | | (114.6) | |
| Total long-term debt | | $ | 5,354.5 | | | $ | 5,555.5 | |
1.Periodic variable interest at Term SOFR, plus a credit spread adjustment, or alternate base rate, plus applicable margin.
2.Periodic variable interest at LIBOR or alternate base rate, plus applicable margin. | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| Senior Secured Term Loan B-5, payable in quarterly installments through November 15, 2026, with periodic variable interest at Term SOFR plus a credit spread adjustment, or alternate base rate, plus applicable margin (7.18% at March 31, 2024 and 7.21% at December 31, 2023), net of original issue discount and deferred financing fees of $1.8 million and $4.3 million, respectively, at March 31, 2024, and of $1.9 million and $4.6 million, respectively, at December 31, 2023 | | $ | 2,173.5 | | | $ | 2,179.4 | |
| Senior Secured Term Loan A-4, payable in quarterly installments through October 27, 2028, with periodic variable interest at Term SOFR plus a credit spread adjustment, or alternate base rate, plus applicable margin (6.93% at March 31, 2024 and 6.96% at December 31, 2023), net of original issue discount and deferred financing fees of $0.4 million and $3.2 million, respectively, at March 31, 2024, and of $0.4 million and $3.4 million, respectively, at December 31, 2023 | | 1,288.2 | | | 1,296.1 | |
| Senior Secured Term Loan B-7, payable in quarterly installments through December 1, 2028, with periodic variable interest at Term SOFR plus a credit spread adjustment, or alternate base rate, plus applicable margin (7.33% at March 31, 2024), net of original issue discount and deferred financing fees of $7.8 million and $18.3 million at March 31, 2024 | | 1,868.9 | | | — | |
| Senior Secured Term Loan B-6, refinanced in the three months ended March 31, 2024 with B-7 loans, with periodic variable interest at Term SOFR plus a credit spread adjustment, or alternate base rate, plus applicable margin (7.72% at December 31, 2023) and original issue discount and deferred financing fees of $3.5 million and $20.0 million, respectively, at December 31, 2023 | | — | | | 1,864.8 | |
| Finance leases | | — | | | 0.1 | |
| Senior Secured Revolving Credit Facility | | — | | | — | |
| Total debt | | 5,330.6 | | | 5,340.4 | |
| Less short-term debt and current portion of long-term debt | | (77.5) | | | (89.6) | |
| Total long-term debt | | $ | 5,253.1 | | | $ | 5,250.8 | |
Senior Secured Credit Facility
On June 15, 2010, we entered into a Senior Secured Credit Facility with various lenders. This facility has been amended several times and currently consists of the Senior Secured Term Loan B-6,B-7, Senior Secured Term Loan B-5, Senior Secured Term Loan A-3A-4 (collectively, the “Senior Secured Term Loans”), and the Senior Secured Revolving Credit Facility.
On December 1, 2021,October 27, 2023, we entered into an agreementexecuted Amendment No. 21 to amend certain provisions of the Senior Secured Credit Facility, and exercise our rightpursuant to draw additional debt inwhich we entered into Senior Secured Term Loan A-4 with an aggregate principal amount of $3,100.0$1.3 billion, the proceeds of which were used to repay Senior Secured Term Loan A-3 in full, repay $300.0 million less original issue discountof Senior Secured Term Loan B-6, and deferredpay the related financing fees of $7.8and expenses. In addition, we increased the borrowing capacity on the Senior Secured Revolving Credit Facility from $300.0 million to $600.0 million and $43.6 million, respectively. Proceedsextended the maturity date from the incremental loan onDecember 10, 2024 to October 27, 2028.
On February 8, 2024, we executed Amendment No. 22 to the Senior Secured Credit Facility, pursuant to which we entered into Senior Secured Term Loan B-7 with an aggregate principal amount of $1.9 billion, the proceeds of which were used to fund the acquisition of Neustar, Inc. (“Neustar”).
In May 2023, we amended the Senior Secured Credit Facility to replace the reference rate from London Interbank Offered Rate (“LIBOR”) to Term Secured Overnight Financing Rate (“Term SOFR”). We applied the practical expedient for reference rate reform to treat the amendment as a continuation of the existing debt agreement.
During the three and six months ended June 30, 2023, we prepaid $75.0 million and $150.0 million, respectively, of ourrepay Senior Secured Term Loan B-6 funded from our cash-on-hand.in full and pay the related financing fees and expenses. In connection with the refinancing, we incurred incremental deferred financing fees of $4.7 million that will be amortized over the new loan term. Senior Secured Term Loan B-7 is a syndicated debt instrument. As a result of the refinancing, we repaid $257.1 million of principal to lenders and received $264.1 million of proceeds from lenders.
We expensed $3.1 million of the unamortized original discount, deferred financing fees, and other related fees to other income and expense in the Consolidated Statements of Operations for the quarter ended March 31, 2024.
During the three months ended March 31, 2023, we expensed $1.0$1.1 million and $2.1 million, respectively, of our unamortized original issue discount and deferred financing fees to other income and expense in our Consolidated StatementStatements of Income. DuringOperations due to the six months ended June 30, 2022, we prepaid $400.0prepayment of $75.0 million of our Senior Secured Term Loan B-6, funded from our cash-on-hand. As a result, we expensed $6.5 million of our unamortized original issue discount and deferred financing fees to other income and expense in our consolidated statement of income.We did not make any debt prepayments during the three months ended March 31, 2024.
As of June 30, 2023,March 31, 2024, we had no outstanding balance under the Senior Secured Revolving Credit Facility and $1.2 million of outstanding letters of credit, and could have borrowed up to the remaining $298.8$598.8 million available.
TransUnion also has the ability to request incremental loans on the same terms under the Senior Secured Credit Facility up to the sum of the greater of $1,000.0 million and 100% of Consolidated EBITDA, minus the amount of secured indebtedness and the amount incurred prior to the incremental loan, and may incur additional incremental loans so long as the senior secured net leverage ratio does not exceed 4.25-to-1, subject to certain additional conditions and commitments by existing or new lenders to fund any additional borrowings.
With certain exceptions, the Senior Secured Credit Facility obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, including its investment in subsidiaries. The Senior Secured Credit Facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. The senior secured net leverage test must be met as a condition to incur additional indebtedness, make certain investments, and may be required to make certain restricted payments. The senior secured net leverage ratio must not exceed 5.5-to-1 at any such measurement date. Under the terms of the Senior Secured Credit Facility, TransUnion may make dividend payments up to the greater of $100 million or 10.0% of Consolidated EBITDA per year, or an unlimited amount provided that no default or event of default exists and so long as the total net leverage ratio does not exceed 4.75-to-1. As of June 30, 2023,March 31, 2024, we were in compliance with all debt covenants.
Interest Rate Hedging
Effective May 31, 2023, we amended all our interest rate swaps to replace the reference rate from LIBOR to Term SOFR. We applied the practical expedient for reference rate reform to continue to apply hedge accounting to the existing relationships.
On November 16, 2022, we entered into interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loan or similar replacement debt. The swaps commenced on December 30, 2022, and expire on December 31, 2024, with a current aggregate notional amount of $1,310.0$1,295.0 million that amortizes each quarter. The swaps require us to pay fixed rates varying between 4.3380% and 4.3870% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges.
On December 23, 2021, we entered into interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loan or similar replacement debt. The swaps commenced on December 31, 2021, and expire on December 31, 2026, with a current aggregate notional amount of $1,576.0$1,564.0 million that amortizes each quarter. The tranche requiresswaps require us to pay fixed rates varying between 1.3800% and 1.3915% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges.
On March 10, 2020, we entered into two interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loans or similar replacement debt. The first swap commenced on June 30, 2020, and expired on June 30, 2022. The second swap commenced on June 30, 2022, and expires on June 30, 2025, with a current aggregate notional amount of $1,090.0$1,075.0 million that amortizes each quarter after it commences. The second swap requires us to pay fixed rates varying between 0.8680% and 0.8800% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges.
On December 17, 2018, we entered into interest rate swap agreements with various counterparties that effectively fixed our variable rate exposure on a portion of our Senior Secured Term Loans or similar replacement debt at 2.702% and 2.706%. These swap agreements expired on December 30, 2022.
The change in the fair value of our hedging instruments, included in our assessment of hedge effectiveness, is recorded in other comprehensive income, and reclassified to interest expense when the corresponding hedged debt affects earnings.
The net change in the fair value of the swaps resulted in an unrealized gain of $42.8$11.1 million ($32.18.3 million, net of tax) and an unrealized loss of $4.6$47.4 million ($3.535.6 million, net of tax) for the three and six months ended June 30,March 31, 2024 and 2023, respectively, recorded in other comprehensive income. The net change in the fair value ofInterest income on the swaps resulted in unrealized gains of $47.8was $31.1 million ($35.923.3 million, net of tax) and $190.9$22.6 million ($143.216.9 million, net of tax) for the three and six months ended June 30, 2022, respectively, recorded in other comprehensive income. The impact of the swaps was a reduction to interest expense for the threeMarch 31, 2024 and six months ended June 30, 2023, of $27.8 million ($20.8 million, net of tax) and $50.4 million ($37.8 million, net of tax), respectively. The impact of the swaps was an increase to interest expense for the three and six months ended June 30, 2022 of $8.6 million ($6.5 million, net of tax) and $22.3 million ($16.7 million, net of tax), respectively. We currently expect to recognize a gain of approximately $117.0$116.5 million as a reduction to interest expense due to our expectation that the variable rate that we receive will exceed the fixed rates of interest over the next twelve months.
Fair Value of Debt
As of June 30, 2023March 31, 2024, the fair value of our Senior Secured Term Loan B-7, excluding original issue discounts and deferred fees was approximately $1,895.0 million. As of December 31, 2022,2023, the fair value of our Senior Secured Term Loan B-6, excluding original issue discounts and deferred fees was approximately $2,300.6 million and $2,450.5 million, respectively.approximately $1,895.1 million. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, the fair value of our Senior Secured Term Loan B-5, excluding original issue discounts and deferred fees was approximately $2,194.9$2,182.2 million and $2,184.4$2,191.5 million, respectively. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, the fair value of our Senior Secured Term Loan A-3,A-4, excluding original issue discounts and deferred fees, was approximately $1,006.3$1,283.8 million and $1,026.6and $1,291.9 million, respectively. The fair values of our variable-rate term loans are determined using Level 2 inputs, based on quoted market prices for the publicly traded instruments.
12.11. Stockholders’ Equity
Common Stock Dividends
In the first quarters of 2024 and second quarter of 2023, we paid dividends of $0.105 per share totaling $20.8 million in each quarter. In the first and second quarter of 2022, we paid dividends of $0.095 per share totaling $18.3$20.8 million, in each quarter.respectively. Dividends declared accrue to outstanding restricted stock units and are paid to employees as dividend equivalents when the restricted stock units vest.
Any determination to pay dividends in the future will be at the discretion of our board of directorsBoard and will depend on a number of factors, including our liquidity, results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directorsBoard deems appropriate. We currently have capacity and intend to continue to pay a quarterly dividend, subject to approval by our board.Board.
Treasury Stock
On February 13, 2017, our board of directorsBoard authorized the repurchase of up to $300.0 million of our common stock over the next 3 years. Our board of directorsBoard removed the three-year time limitation on February 8, 2018. To date, we have repurchased $133.5 million of our common stock and have the ability to repurchase the remaining $166.5 million.
We have no obligation to repurchase additional shares. Any determination to repurchase additional shares will be at the discretion of management and will depend on a number of factors, including our liquidity, results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law, market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, and other factors management deems appropriate. Any repurchased shares will have the status of treasury shares and may be used, if and when needed, for general corporate purposes.
For the three months ended June 30,March 31, 2024 and 2023, and 2022, 0.1 million and less than 0.1 million outstanding employee restricted stock units vested and became taxable to the employees, respectively. For the six months ended June 30, 2023 and 2022, 0.4 million and 0.80.3 million outstanding employee restricted stock units vested and became taxable to the employees, respectively. Employees satisfy their payroll tax withholding obligations in a net share settlement arrangement with the Company.
Preferred Stock
As of June 30, 2023March 31, 2024 and December 31, 2022,2023, we had 100.0 million shares of preferred stock authorized, and no preferred stock issued or outstanding.
13.12. Revenue
We have contracts with two general groups of performance obligations: Stand Ready Performance Obligations and Other Performance Obligations. Our Stand Ready Performance Obligations include obligations to stand ready to provide data, process transactions, access our databases, software-as-a-service and direct-to-consumer products, provide rights to use our intellectual property and other services. Our Other Performance Obligations include the sale of certain batch data sets and various professional and other services.
Most of our Stand Ready Performance Obligations consist of a series of distinct goods and services that are substantially the same and have the same monthly pattern of transfer to our customers. We consider each month of service in this time series to be a distinct performance obligation and, accordingly, recognize revenue over time. For a majority of these Stand Ready Performance Obligations, the total contractual price is variable because our obligation is to process an unknown quantity of transactions, as and when requested by our customers, over the contract period. We allocate the variable price to each month of service using the time-series concept and recognize revenue based on the most likely amount of consideration to which we will be entitled, which is generally the amount we have the right to invoice. This monthly amount can be based on the actual volume of units delivered or a guaranteed minimum, if higher. Occasionally we have contracts where the amount we will be entitled to for the transactions processed is uncertain, in which case we estimate the revenue based on what we consider to be the most likely amount of consideration we will be entitled to and adjust any estimates as facts and circumstances evolve.
For all contracts that include a Stand Ready Performance Obligation with variable pricing, we are unable to estimate the variable price attributable to future performance obligations because the number of units to be purchased is not known. As a result, we use the exception available to forgo disclosures about revenue attributable to the future performance obligations where we recognize revenue using the time-series concept as discussed above, including those qualifying for the right to invoice practical expedient. We also use the exception available to forgo disclosures about revenue attributable to contracts with expected durations of one year or less.
Certain of our Other Performance Obligations, including certain batch data sets and certain professional and other services, are delivered at a point in time. Accordingly, we recognize revenue upon delivery once we have satisfied that obligation. For
certain Other Performance Obligations, including certain professional and other services, we recognize revenue over time, based on an estimate of progress towards completion of that obligation. These contracts are not material.
In certain circumstances we apply the revenue recognition guidance to a portfolio of contracts with similar characteristics. We use estimates and assumptions when accounting for a portfolio that reflect the size and composition of the portfolio of contracts.
Our contracts include standard commercial payment terms generally acceptable in each region, and do not include financing with extended payment terms. We have no significant obligations for refunds, warranties, or similar obligations. Our revenue does not include taxes collected from our customers.
Accounts receivable are shown separately on our balance sheet. Contract assets and liabilities result due to the timing of revenue recognition, billings and cash collections. Contract assets include our right to payment for goods and services already transferred to a customer when the right to payment is conditional on something other than the passage of time, for example, contracts pursuant to which we recognize revenue over time but do not have a contractual right to payment until we complete the contract. Contract assets are included in our other current assets and are not material as of June 30, 2023March 31, 2024 and December 31, 2022.2023.
As most of our contracts with customers generally have a duration of one year or less, our contract liabilities consist of deferred revenue that is primarily short-term in nature. Contract liabilities include current and long-term deferred revenue that is included in other current liabilities and other liabilities. We expect to recognize the December 31, 2022,2023 current deferred revenue balance as revenue during 2023.2024. The majority of our long-term deferred revenue, which is not material, is expected to be recognized in less than two years.
We have certain contracts that have a duration of more than one year. For these contracts, the transaction price allocable to the future performance obligations is primarily fixed but contains a variable component. There is one material fixed fee contract with a durationAs of more than one year, andMarch 31, 2024, the aggregate amount of transaction price attributable to future performance obligations for this contract, welong-term, non-cancelable contracts, excluding variable components, totals approximately $680 million. We expect to recognize revenueapproximately 55% of approximately $117.0 million overthis amount in the next two yearstwelve months ending March 31, 2025, 30% in the twelve months ending March 31, 2026 and $48.8 million15% thereafter.
For additional disclosures about the disaggregation of our revenue see Note 17,16, “Reportable Segments.”
14.13. Earnings Per Share
Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the reported period. Diluted earnings per share reflects the effect of the increase in shares outstanding determined by using the treasury stock method for awards issued under our incentive stock plans.
As of June 30,March 31, 2024 and 2023, and 2022, there were 0.30.8 million and 0.9 million anti-dilutive weighted stock-based awards outstanding.outstanding, respectively. As of June 30,March 31, 2024 and 2023, and 2022, there were approximately 0.50.2 million and 0.20.1 million, respectively, contingently-issuable performance-based stock awards outstanding that were excluded from the diluted earnings per share calculation, because the contingencies had not been met.
BasicIncome from continuing operations attributable to TransUnion and basic and diluted weighted average shares outstanding and earnings per share were as follows:
| | Three Months Ended
June 30, | | Six Months Ended June 30, |
| (in millions, except per share data) | | 2023 | | 2022 | | 2023 | | 2022 |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | 2024 | | | | 2024 | | 2023 |
| Income from continuing operations | Income from continuing operations | | $ | 57.3 | | | $ | 99.3 | | | $ | 114.3 | | | $ | 151.7 | |
| Less: income from continuing operations attributable to noncontrolling interests | Less: income from continuing operations attributable to noncontrolling interests | | (3.3) | | | (4.1) | | | (7.6) | | | (7.7) | |
| Income from continuing operations attributable to TransUnion | Income from continuing operations attributable to TransUnion | | $ | 54.1 | | | $ | 95.3 | | | 106.8 | | | 143.9 | |
| Discontinued operations, net of tax | | (0.2) | | | 0.3 | | | (0.2) | | | — | |
| Net income attributable to TransUnion | | $ | 53.9 | | | $ | 95.6 | | | $ | 106.5 | | | $ | 143.9 | |
| | Basic earnings per common share from: | |
| Income from continuing operations attributable to TransUnion | | $ | 0.28 | | | $ | 0.49 | | | $ | 0.55 | | | $ | 0.75 | |
| Discontinued operations, net of tax | | — | | | — | | | — | | | — | |
| Net Income attributable to TransUnion | | $ | 0.28 | | | $ | 0.50 | | | $ | 0.55 | | | $ | 0.75 | |
| | Diluted earnings per common share from: | |
| Income from continuing operations attributable to TransUnion | | $ | 0.28 | | | $ | 0.49 | | | $ | 0.55 | | | $ | 0.75 | |
| Discontinued operations, net of tax | | — | | | — | | | — | | | — | |
| Net Income attributable to TransUnion | | $ | 0.28 | | | $ | 0.49 | | | $ | 0.55 | | | $ | 0.75 | |
| | Weighted-average shares outstanding: | |
| | Weighted-average shares outstanding: | |
| | | Weighted-average shares outstanding: | Weighted-average shares outstanding: | |
| Basic | Basic | | 193.2 | | | 192.5 | | | 192.8 | | | 192.3 | |
| Basic | |
| Basic | |
| Dilutive impact of stock based awards | Dilutive impact of stock based awards | | 0.8 | | | 0.6 | | | 1.2 | | | 0.9 | |
| Diluted | Diluted | | 194.0 | | | 193.1 | | | 194.0 | | | 193.1 | |
15.14. Income Taxes
For the three months ended June 30, 2023,March 31, 2024, we reported an effective tax rate of 25.2%15.7%, which was higherlower than the 21.0% U.S. federal corporate statutory rate due primarily to the impact of benefits on the remeasurement of deferred taxes due to changes in state apportionment rates, benefits from the foreign rate differential, and the research and development credit, partially offset by
the impact of increases for foreign withholding taxes, uncertain tax positions,
and nondeductible expenses primarily in connection with executive compensation limitations and uncertain tax positions.
For the three months ended March 31, 2023, we reported an effective tax rate of 24.6%, which was higher than the 21.0% U.S. federal corporate statutory rate due primarily to the impact of increases for foreign withholding taxes, uncertain tax positions, nondeductible expenses primarily in connection with executive compensation limitations, and excess tax expenses for stock-based compensation, partially offset by benefits from the foreign rate differential and the research and development credit.
For the six months ended creditJune 30, 2023., we reported an effective tax rate of 24.9%, which was higher than the 21.0% U.S. federal corporate statutory rate due primarily to the impact of increases for foreign withholding taxes, uncertain tax positions, and nondeductible expenses primarily in connection with executive compensation limitations, partially offset by benefits from the foreign rate differential and the research and development credit.
For the three months ended June 30, 2022, we reported an effective tax rate of 22.7%, which was higher than the 21.0% U.S. federal corporate statutory rate due primarily to nondeductible expenses in connection with acquisition costs and executive compensation limitations, state taxes and other rate-impacting items, partially offset by benefits from the research and development credit, excess tax benefits on stock-based compensation and foreign rate differential.
For the six months ended June 30, 2022, we reported an effective tax rate of 26.1%, which was higher than the 21.0% U.S. federal corporate statutory rate due primarily to nondeductible expenses in connection with certain legal and regulatory matters, acquisition costs, executive compensation limitations and state taxes and other rate-impacting items, partially offset by excess tax benefits on stock-based compensation and benefits from the research and development credit.
The gross amount of unrecognized tax benefits, which excludes indirect tax effects, was $46.9$45.9 million as of June 30, 2023March 31, 2024, and $45.1$45.0 million as of December 31, 2022.2023. The amounts that would affect the effective tax rate if recognized are $31.9were $35.2 million as of March 31, 2024, and $30.5$34.5 million respectively.as of December 31, 2023. We classify interest and penalties as income tax expense in the consolidated statementsConsolidated Statements of incomeOperations and their associated liabilities as other liabilities in the consolidated balance sheets.Consolidated Balance Sheets. Interest and penalties on unrecognized tax benefits were $12.0$15.2 million as of June 30, 2023March 31, 2024, and $10.1$14.0 million as of December 31, 2022.2023. We are regularly audited by federal, state and foreign taxing authorities. Given the uncertainties inherent in the audit process, it is reasonably possible that certain audits could result in a significant increase or decrease in the total amounts of unrecognized tax benefits. An estimate of
the range of the increase or decrease in unrecognized tax benefits due to audit results cannot be made at this time. Tax years 2009 and forward remain open for examination in some foreign jurisdictions, 2012 and forward for U.S. federal income tax purposes and 2015 and forward in some state jurisdictions.
16.15. Fair Value
The following table summarizes financial instruments measured at fair value, on a recurring basis, as of June 30, 2023:March 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets | | | | | | | | |
| Interest rate swaps (Notes 7 and 11) | | $ | 233.1 | | | $ | — | | | $ | 233.1 | | | $ | — | |
| Notes Receivable (Note 7) | | 76.7 | | | — | | | 76.7 | | | — | |
| Available-for-sale marketable securities (Note 4) | | 2.6 | | | — | | | 2.6 | | | — | |
| Total | | $ | 312.4 | | | $ | — | | | $ | 312.4 | | | $ | — | |
| | | | | | | | |
| Liabilities | | | | | | | | |
| Put option on Cost Method Investment (Note 10) | | $ | 16.0 | | | $ | — | | | $ | — | | | $ | 16.0 | |
| Total | | $ | 16.0 | | | $ | — | | | $ | — | | | $ | 16.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets | | | | | | | | |
| Interest rate swaps (Notes 5 and 10) | | $ | 173.4 | | | $ | — | | | $ | 173.4 | | | $ | — | |
| Note receivable (Note 5) | | 83.3 | | | — | | | 83.3 | | | — | |
| Available-for-sale marketable securities (Note 2) | | 2.6 | | | — | | | 2.6 | | | — | |
| Total | | $ | 259.3 | | | $ | — | | | $ | 259.3 | | | $ | — | |
The following table summarizes financial instruments measured at fair value, on a recurring basis, as of December 31, 2022:2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets | | | | | | | | |
| Interest rate swaps (Notes 7 and 11) | | $ | 237.7 | | | $ | — | | | $ | 237.7 | | | $ | — | |
| Notes Receivable (Note 7) | | 70.3 | | | — | | | 70.3 | | | — | |
| Available-for-sale marketable securities (Note 4) | | 2.6 | | | — | | | 2.6 | | | — | |
| Total | | $ | 310.6 | | | $ | — | | | $ | 310.6 | | | $ | — | |
| | | | | | | | |
| Liabilities | | | | | | | | |
| Put option on Cost Method Investment (Note 10) | | $ | 10.0 | | | $ | — | | | $ | — | | | $ | 10.0 | |
| Total | | $ | 10.0 | | | $ | — | | | $ | — | | | $ | 10.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets | | | | | | | | |
| Interest rate swaps (Notes 5 and 10) | | $ | 162.3 | | | $ | — | | | $ | 162.3 | | | $ | — | |
| Note receivable (Note 5) | | 82.0 | | | — | | | 82.0 | | | — | |
| Available-for-sale marketable securities (Note 2) | | 2.7 | | | — | | | 2.7 | | | — | |
| Total | | $ | 247.0 | | | $ | — | | | $ | 247.0 | | | $ | — | |
Level 2 instruments consist of foreign exchange-traded corporate bonds, interest rate swaps and notes receivable. Foreign exchange-traded corporate bonds are available-for-sale debt securities valued at their current quoted prices. These securities mature between 2027 and 2033. Unrealized gains and losses on available-for-sale debt securities, which are not material, are included in other comprehensive income. The interest rate swaps fair values are determined using the market standard methodology of discounting the future expected net cash receipts or payments that would occur if variable interest rates rise above or fall below the fixed rates of the swaps. The variable interest rates used in the calculations of projected receipts on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. As discussed in Note 11,10, “Debt,” there are three tranches of interest rate swaps. In December 2022, we sold the non-core businesses of our VF acquisition. A portion of the consideration was in the form of a $72.0 million note receivable. The note receivable accrues interest semiannually at a per annum rate of 10.6% and is payable at maturity. The note matures on June 30, 2025, subject to an option of the note issuer to extend the maturity date for two successive terms of three months each, at an increased rate of interest at each extension. The note was initially recorded at fair value of $70.3 million using an income approach for fixed income securities, where contractual cash flows were discounted to present value at a risk-adjusted rate of return in a lattice model framework. The fair value of the note is determined each period by applying the same approach, considering changes to the risk-adjusted rate of return given observed changes to the interest rate environment, market pricing of credit risk, and issuer-specific credit risk.
Level 3 instruments consist of a put option on a Cost Method Investment. The put option allows the owners of the remaining shares to compel TransUnion to purchase their shares, subject to the fulfillment of certain conditions. The fair value of the put option is determined using a Monte Carlo analysis with assumptions that include revenue projections, volatility rates, discount rates and the option period, among others.
17.16. Reportable Segments
WeAs discussed in Note 1, “Significant Accounting and Reporting Policies,” during the quarter ended March 31, 2024, we reorganized our operations and now have three reportabletwo operating segments, U.S. Markets International, and Consumer Interactive,International, and the Corporate unit, which provides support services to each of the segments. The Company’s operating segments, which are consistent with its reportable segments, reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated and the manner by which the CODM assesses the Company’s performance. Our chief operating decision maker (“CODM”)CODM uses the profit measure of Adjusted EBITDA, on both a consolidated and a segment basis, to allocate resources and assess performance of our businesses.segments. We use Adjusted EBITDA as our profit measure because it eliminates the impact of certain items that we do not consider indicative of operating performance, which is useful to compare operating results between periods. Our board of directorsBoard and executive management team also use Adjusted EBITDA as a compensation measure for both segment and corporate management under our incentive compensation plans. Adjusted EBITDA is also a measure frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours.
The segment financial information below aligns with how we report informationhas been recast to conform to our CODM to assesscurrent operating performancestructure as discussed in Note 1, “Significant Accounting and how we manage the business.Reporting Policies” and Note 3, “Goodwill.” The accounting policies of the segments are the same as described in Note 1, “Significant Accounting and Reporting Policies” and Note 13,12, “Revenue.”
The following is a more detailed description of our reportable segments and the Corporate unit, which provides support services to each segment:unit:
U.S. Markets
The U.S. Markets segment provides consumer reports, actionable insights and analytics to businesses. These businesses and consumers. Businesses use our services to acquire customers, assess consumers’ ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities, and mitigate fraud risk. The core capabilitiesrisk and delivery methods inrespond to data breach events. Consumers use our U.S. Markets segment allow usservices to serve a broad set of customers across industries.manage their personal finances and take precautions against identity theft. We report disaggregated revenue of our U.S. Markets segment for Financial Services, Emerging Verticals and Emerging Verticals.Consumer Interactive.
•Financial Services:The Financial Services vertical consists of our consumer lending, mortgage, autoConsumer Lending, Mortgage, Auto and cardsCard and paymentsPayments lines of business. Our Financial Services clients consist of most banks, credit unions, finance companies, auto lenders, mortgage lenders, FinTechs, and other consumer lenders in the United States. We also distribute our solutions through most major resellers, secondary market players and sales agents. Beyond traditional lenders, we work with a variety of credit arrangers, such as auto dealers and peer-to-peer lenders. We provide solutions across every aspect of the lending lifecycle; customer acquisition and engagement, fraud and ID management, retention and recovery. Our products are focused on mitigating risk and include credit reporting, credit marketing, analytics and consulting, identity verification and authentication and debt recovery solutions. The revenue of Argus is included in Financial Services since the date of the acquisition.
•Emerging Verticals:Emerging Verticals include Technology, Commerce & Communications, Insurance, Tech, Retail and E-Commerce, Telecommunications, Media, Services & Collections, Tenant & Employment Screening, Collections, and Public Sector. Our solutions in these verticals are also data-driven and address the entire customer lifecycle. We offer onboarding and transaction processing products, scoring and analytic products, marketing solutions, fraud and identity management solutions and customer retention solutions.
•Consumer Interactive: Consumer Interactive provides solutions that help consumers manage their personal finances and take precautions against identity theft. Services include paid and free credit reports, scores and freezes, credit monitoring, identity protection and resolution, and financial management for consumers. This vertical also provides solutions that help businesses respond to data breach events. Our products are provided through user-friendly online and mobile interfaces and are supported by educational content and customer support. Our Consumer Interactive vertical serves consumers through both direct and indirect channels.
International
The International segment provides services similar to our U.S. Markets segment to businesses in select regions outside the United States. Depending on the maturity of the credit economy in each country, services may include credit reports, analytics and solutions services, and other value-added risk management services. In addition, we have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services, insurance, automotive, collections, and communications, and are delivered through both direct and indirect channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive vertical in our U.S. Markets segment that help consumers proactively manage their personal finances and take precautions against identity theft.
We report disaggregated revenue of our International segment for the following regions: Canada, Latin America, the United Kingdom, Africa, India, and Asia Pacific.
Consumer Interactive
The Consumer Interactive segment provides solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include paid and free credit reports, scores and freezes, credit monitoring, identity protection and resolution, and financial management for consumers. The segment also provides solutions that help businesses respond to data breach events. Our products are provided through user-friendly online and mobile interfaces and are supported by educational content and customer support. Our Consumer Interactive segment serves consumers through both direct and indirect channels.
Corporate
Corporate provides support services for each of the segments, holds investments, and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the segments remain in Corporate. These costs are typically enterprise-level costs and are primarily administrative in nature.
Selected segment financial information and disaggregated revenue consisted of the following:
| | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Three Months Ended March 31, |
| (in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| | 2024 | | | | 2024 | | 2023 |
| Gross Revenue: | Gross Revenue: | | | | | | | | |
| U.S. Markets: | U.S. Markets: | |
| U.S. Markets: | |
| U.S. Markets: | |
| Financial Services | |
| Financial Services | |
| Financial Services | Financial Services | | $ | 331.9 | | | $ | 331.1 | | | $ | 652.5 | | | $ | 635.3 | |
| Emerging Verticals | Emerging Verticals | | 310.2 | | | 302.3 | | | 610.0 | | | 598.0 | |
| Consumer Interactive | |
| Total U.S. Markets | Total U.S. Markets | | $ | 642.1 | | | $ | 633.4 | | | $ | 1,262.5 | | | $ | 1,233.3 | |
| | International: | International: | |
| International: | |
| International: | |
| Canada | |
| Canada | |
| Canada | Canada | | $ | 35.0 | | | $ | 33.1 | | | $ | 66.5 | | | $ | 63.8 | |
| Latin America | Latin America | | 29.9 | | | 29.5 | | | 58.5 | | | 56.8 | |
| United Kingdom | United Kingdom | | 49.0 | | | 49.6 | | | 96.2 | | | 106.0 | |
| Africa | Africa | | 14.5 | | | 15.6 | | | 29.1 | | | 30.4 | |
| India | India | | 51.0 | | | 40.2 | | | 105.6 | | | 85.3 | |
| Asia Pacific | Asia Pacific | | 22.5 | | | 19.0 | | | 43.3 | | | 35.9 | |
| Total International | Total International | | $ | 201.9 | | | $ | 187.0 | | | $ | 399.1 | | | $ | 378.2 | |
| | Total Consumer Interactive | | $ | 144.0 | | | $ | 147.4 | | | $ | 286.3 | | | $ | 297.0 | |
| | Total revenue, gross | |
| Total revenue, gross | |
| Total revenue, gross | Total revenue, gross | | $ | 988.0 | | | $ | 967.8 | | | $ | 1,948.0 | | | $ | 1,908.5 | |
| | Intersegment revenue eliminations: | Intersegment revenue eliminations: | |
| Intersegment revenue eliminations: | |
| Intersegment revenue eliminations: | |
| U.S. Markets | |
| U.S. Markets | |
| U.S. Markets | U.S. Markets | | $ | (18.2) | | | $ | (17.8) | | | $ | (36.1) | | | $ | (35.5) | |
| International | International | | (1.4) | | | (1.5) | | | (2.8) | | | (2.9) | |
| Consumer Interactive | | (0.5) | | | (0.3) | | | (0.9) | | | (0.5) | |
| Total intersegment eliminations | Total intersegment eliminations | | $ | (20.0) | | | $ | (19.5) | | | $ | (39.8) | | | $ | (39.0) | |
| Total revenue as reported | Total revenue as reported | | $ | 968.0 | | | $ | 948.3 | | | $ | 1,908.2 | | | $ | 1,869.5 | |
A reconciliation of Segment Adjusted EBITDA to income from continuing operations before income taxes for the periods presented is as follows:
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | 2024 | | | | 2024 | | 2023 |
| U.S. Markets Adjusted EBITDA | U.S. Markets Adjusted EBITDA | | $ | 222.1 | | | $ | 234.4 | | | $ | 422.1 | | | $ | 451.1 | |
| International Adjusted EBITDA | International Adjusted EBITDA | | 85.3 | | | 81.0 | | | 171.3 | | | 163.0 | |
| Consumer Interactive Adjusted EBITDA | | 67.7 | | | 68.0 | | | 137.7 | | | 137.0 | |
| Total | Total | | $ | 375.1 | | | $ | 383.5 | | | $ | 731.2 | | | $ | 751.0 | |
| Adjustments to reconcile to income from continuing operations before income taxes: | Adjustments to reconcile to income from continuing operations before income taxes: | |
Corporate expenses1 | Corporate expenses1 | | $ | (36.0) | | | $ | (33.1) | | | $ | (69.8) | | | $ | (66.5) | |
Corporate expenses1 | |
Corporate expenses1 | |
| Net interest expense | Net interest expense | | (68.4) | | | (50.7) | | | $ | (134.3) | | | (100.2) | |
| Depreciation and amortization | Depreciation and amortization | | (130.1) | | | (130.6) | | | $ | (259.8) | | | (259.4) | |
Stock-based compensation2 | | (24.1) | | | (20.3) | | | $ | (46.3) | | | (40.8) | |
| Stock-based compensation | |
Operating model optimization program2 | |
Mergers and acquisitions, divestitures and business optimization3 | Mergers and acquisitions, divestitures and business optimization3 | | (21.5) | | | (14.0) | | | $ | (30.4) | | | (28.6) | |
Accelerated technology investment4 | Accelerated technology investment4 | | (17.6) | | | (8.1) | | | $ | (37.3) | | | (20.1) | |
Net other5 | Net other5 | | (4.1) | | | (2.2) | | | $ | (8.7) | | | (37.9) | |
| Net income attributable to non-controlling interests | Net income attributable to non-controlling interests | | 3.3 | | | 4.1 | | | $ | 7.6 | | | 7.7 | |
| Total adjustments | Total adjustments | | $ | (298.5) | | | $ | (254.9) | | | $ | (579.0) | | | $ | (545.8) | |
| Income from continuing operations before income taxes | Income from continuing operations before income taxes | | $ | 76.6 | | | $ | 128.5 | | | $ | 152.2 | | | $ | 205.2 | |
1.Certain costs that are not directly attributable to one or more of the segments remain in Corporate. These costs are typically enterprise-level costs and are primarily administrative in nature.nature.
2.ConsistedConsists of stock-based compensationrestructuring expenses as presented on our Consolidated Statements of Operations and cash-settled stock-based compensation.other business process optimization expenses.
3.Mergers and acquisitions, divestitures and business optimization consistedexpenses consist of the following adjustments:costs associated with exploratory or executed strategic transactions.
For the three months ended June 30, 2023, a $(9.1) million loss on the impairment of a Cost Method Investment; $(5.5) million of Neustar integration costs; a $(5.1) million adjustment to the fair value of a put option liability related to a minority investment; a $(2.5) million adjustment to a liability from a recent acquisition; $(2.4) million of acquisition expenses; a $2.3 million adjustment to fair value of a note receivable; and $0.7 million of reimbursements for transition services related to divested businesses, net of separation expenses.
For the six months ended June 30, 2023, $(11.5) million of Neustar integration costs; a $(9.1) million loss on the impairment of a Cost Method Investment; a $(5.5) million adjustment to the fair value of a put option liability related to a minority investment; $(5.1) million of adjustments to liabilities from a recent acquisition; $(3.8) million of acquisition expenses; a $2.3 million adjustment to fair value of a note receivable; $1.3 million of reimbursements for transition services related to divested businesses, net of separation expenses; and $0.8 million gain on the disposal of a Cost Method Investment.
For the three months ended June 30, 2022, consisted of the following adjustments: $(9.0) million of acquisition expenses; $(7.7) million of Neustar integration costs; $1.8 million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $0.9 million adjustment to the fair value of a put option liability related to a minority investment.
For the six months ended June 30, 2022, consisted of the following adjustments: $(17.9) million of acquisition expenses; $(16.7) million of Neustar integration costs; $5.3 million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $0.8 million adjustment to the fair value of a put option liability related to a minority investment.
4.Represents expenses associated with our acceleratedAccelerated technology investment to migrate torepresents expenses incurred in connection with the cloud.
5.Net other consistedexpenses consist primarily of the following adjustments:
For the three months ended June 30, 2023, $(1.0) millionother non-operating income and expenses, primarily comprised of deferred loan fees written off as a result of the prepayment on our debt;fee expense from debt prepayments and a $(3.1) million net loss fromrefinancing, currency remeasurement of ouron foreign operations, loan fees and other.other debt financing expenses.
For the six months ended June 30, 2023, $(2.1) million of deferred loan fees written off as a result of the prepayment on our debt; and a $(6.6) million net loss from currency remeasurement of our foreign operations, loan fees and other.
For the three months ended June 30, 2022, $(2.2) million of net other, which includes net losses from currency remeasurement of our foreign operations, loan fees and other.
For the six months ended June 30, 2022, $(28.4) million for certain legal and regulatory expenses; $(6.5) million of deferred loan fees written off as a result of the prepayments on our debt; and $(3.0) million of net other, which includes net losses from currency remeasurement of our foreign operations, loan fees and other.
Earnings from equity method investments included in non-operating income and expense was as follows:
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | 2024 | | | | 2024 | | 2023 |
| U.S. Markets | U.S. Markets | | $ | 1.0 | | | $ | 0.3 | | | $ | 1.1 | | | $ | 0.7 | |
| International | International | | 3.9 | | | 2.8 | | | 7.0 | | | 5.4 | |
| Total (Note 8) | | $ | 4.9 | | | $ | 3.1 | | | $ | 8.0 | | | $ | 6.1 | |
| Total (Note 6) | |
18.17. Contingencies
Legal and Regulatory Matters
We are routinely named as defendants in, or parties to, various legal actions and proceedings relating to our current or past business operations. These actions generally assert claims for violations of federal or state credit reporting, consumer protection or privacy laws, or common law claims related to the unfair treatment of consumers, and may include claims for substantial or indeterminate compensatory or punitive damages, or injunctive relief, and may seek business practice changes. We believe that most of these claims are either without merit or we have valid defenses to the claims, and we vigorously defend these matters or seek non-monetary or small monetary settlements, if possible. However, due to the uncertainties inherent in litigation, we cannot predict the outcome of each claim in each instance.
In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal investigations and inquiries by regulators, we sometimes receive civil investigative demands, requests, subpoenas and orders seeking documents, testimony, and other information in connection with various aspects of our activities.
In view of the inherent unpredictability of legal and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings or investigations are in the early stages, we cannot determine with any degree of certainty the timing or ultimate resolution of legal and regulatory matters or the eventual loss, fines or penalties, if any, that may result from such matters. We establish reserves for legal and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. However, for certain of the matters, we are not able to reasonably estimate our exposure because damages or penalties have not been specified and (i) the proceedings are in early stages, (ii) there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class, (iii) there is uncertainty as to the outcome of similar matters pending against our competitors, (iv) there are significant factual issues to be resolved, and/or (v) there are legal issues of a first impression being presented. The actual costs of resolving legal and regulatory matters, however, may be substantially higher than the amounts reserved for those matters, and an adverse outcome in certain of these matters could have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods. We accrue amounts for certain legal and regulatory matters for which losses were considered to be probable of occurring based on our best estimate of the most likely outcome. It is reasonably possible actual losses could be significantly different from our current estimates. In addition, there are some matters for which it is reasonably possible that a loss will occur, however we cannot estimate a range of the potential losses for these matters.
To reduce our exposure to an unexpected significant monetary award resulting from an adverse judicial decision, we maintain insurance that we believe is appropriate and adequate based on our historical experience. We regularly advise our insurance carriers of the claims, threatened or pending, against us in legal and regulatory matters and generally receive a reservation of rights letter from the carriers when such claims exceed applicable deductibles. We are not aware of any significant monetary claim that has been asserted against us, except for the lawsuit filed by the Consumer Financial Protection Bureau (the “CFPB”) referenced below, that would not have some level of coverage by insurance after the relevant deductible, if any, is met.
As of June 30, 2023March 31, 2024 and December 31, 2022,2023, we have accrued $127.0$105.2 million and $125.0$147.8 million, respectively, for legal and regulatory matters. These amounts were recorded in other accrued liabilities in the consolidated balance sheetsConsolidated Balance Sheets and the associated expenses were recorded in selling, general and administrative expenses in the consolidated statementsConsolidated Statements of income.Operations. Legal fees incurred in connection with ongoing litigation are considered period costs and are expensed as incurred.
CFPB Matters
In June 2021, we received a Notice and Opportunity to Respond and Advise (“NORA”) letter from the Consumer Financial Protection Bureau (“CFPB”),CFPB, informing us that the CFPB’s Enforcement Division was considering whether to recommend that the CFPB take legal action against us and certain of our executive officers. The NORA letter alleged that we failed to comply with and timely implement a Consent Orderconsent order issued by the CFPB in January 2017 (the “Consent“2017 Consent Order”), and further alleged additional violations related to Consumer Interactive’s marketing practices. On September 27, 2021, the Enforcement Division advised us that it had obtained authority to pursue an enforcement action. On April 12, 2022, after failed settlement negotiations with the CFPB related to the matter, the CFPB filed a lawsuit against us, Trans Union LLC, TransUnion Interactive, Inc. (collectively, the “TU Entities”) and the former President of Consumer Interactive, John Danaher, in the United States District Court for the Northern District of Illinois seeking restitution, civil money penalties, and injunctive relief, among other remedies, and alleging that the TU Entities violated the 2017 Consent Order, engaged in deceptive acts and practices in marketing the TransUnion Credit Monitoring product, failed to obtain signed written authorizations from consumers before debiting their bank accounts for the TransUnion Credit Monitoring product and diverted consumers from their free annual file disclosure into paid subscription products. The CFPB further alleges that Mr. Danaher violated the 2017 Consent Order and that we and Trans Union LLC provided substantial assistance to TransUnion Interactive, Inc. in violating the 2017 Consent Order and the law. We continue to believe that our marketing practices are lawful and appropriate and that we have been, and remain, in compliance with the 2017 Consent Order, and we will vigorously defend against allegations to the contrary in such proceedings. We continue to be in active litigation on this matter.
As of June 30, 2023March 31, 2024 and December 31, 2022,2023, we have an accrued liability of $56.0 million in connection with this matter and there is a reasonable possibility that a loss in excess of the amount accrued may be incurred, and such an outcome could have a material adverse effect on our results of operations and financial condition. However, any possible loss or range of loss in excess of the amount accrued is not reasonably estimable at this time. In addition, we have and will continue to incur increased costs litigating this matter.
In March 2022,2024, we received a NORA letter from the CFPB, informing us that the CFPB’s Enforcement Division is considering whether to recommend that the CFPB take legal action against us related to our tenantdispute handling practices and employment screening business, TransUnion Rental Screening Solutions, Inc. (“TURSS”).procedures. The
NORA letter alleges that Trans Union LLC and TURSS violated the Fair Credit Reporting Act by failingAct’s requirements to (i)conduct a reasonable reinvestigation of disputed information and follow reasonable procedures to assure maximum possible accuracy of the information in consumer reports, and (ii) disclose to consumers the sourcesConsumer Financial Protection Act’s prohibition of such information. On July 27, 2022, the CFPB’s Enforcement Division advised us that it had obtained authority to pursue an enforcement action jointly with the Federal Trade Commission (“FTC”). We are finalizing a settlement withunfair, deceptive, and abusive acts or practices. Should the CFPB and the FTC regarding this matter, which includes redress,commence an action against us, it may seek restitution, disgorgement, civil monetary penalties, and certain business process changes. We continue to believe that our acts and practices are lawful. As of June 30, 2023, we have recorded an accrued liability for an immaterial amount in connection with this matter.
In June 2022, the CFPB informed Trans Union LLC that it intended to issue a NORA letter following an investigation relating to alleged violations of law in connection with the placement and lifting of security freezes resulting from certain system issues. We have corrected associated system issues and have processes in place to monitor and address issues going forward. In August 2022, the TU Entities received a NORA letter from the CFPB, informing us that the CFPB’s Enforcement Division is considering whether to recommend that the CFPB take legal action against us. On April 14, 2023, the CFPB’s Enforcement Division advised us that it had obtained authority to pursue an enforcementinjunctive relief or other corrective action. We have engaged in initial settlement discussions. We cannot provide assurance that the CFPB will not ultimately commence a legal action against us in this matter, nor are we able to predict the likely outcome, which could have a material adverse effect on our results of operations and financial condition. As of June 30, 2023,March 31, 2024, we have recorded an accrued liability for an immaterial amount in connection withare not able to reasonably estimate our potential loss or range of loss related to this matter.
Argus Department of Justice Matter
We are cooperatinghave cooperated with an investigation originating from the civil division of the United States Attorney’s Office for the Eastern District of Virginia related to Argus’s use of certain data it collected under certain government contracts. We acquired Argus in connection with our acquisition of VFVerisk Financial Services (“VF”) in April 2022. This matter pertainspertained to alleged conduct that commenced before we acquired Argus. We are cooperatinghave cooperated with Verisk Analytics, Inc. (the “Seller’“Seller”) to respond to the Department of Justice’s (“DOJ”) investigation and, along with the Seller, are engaged in ongoing discussionsfinalized a $37.0 million settlement with the Department of Justice regarding a potential resolution of the matter, with no assurance that the discussions will lead to resolution.DOJ (the “Settlement”).
We cannot predict the timing, outcome, or potential impact of this matter, financial or otherwise. Under the stock purchase agreement Trans Union LLC entered into with the Seller pursuant to which we acquired VF, including Argus, the Seller agreed to indemnify us for certain losses with respect to this matter, including all losses directly resulting from any settlement agreement with the DOJ in connection with this matter, including civil monetarymoney penalties, remediation costs and fees and expenses. During the three months ended March 31, 2024, the Settlement was paid in full to the DOJ and the indemnification receivable was collected.
18. Accumulated Other Comprehensive Loss
The following tables set forth the changes in each component of accumulated other comprehensive loss, net of tax, as of March 31, 2024 and 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Currency
Translation
Adjustment | | Net Unrealized (Loss)/Gain On Hedges | | Net Unrealized
Gain/(Loss) On
Available-for-sale
Securities | | Accumulated Other
Comprehensive Loss |
| Balance, December 31, 2023 | $ | (383.4) | | | $ | 122.0 | | | $ | 0.2 | | | $ | (260.9) | |
| Change | (10.2) | | | 8.3 | | | — | | | (1.9) | |
| Balance, March 31, 2024 | $ | (393.6) | | | $ | 130.3 | | | $ | 0.2 | | | $ | (262.8) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Currency
Translation
Adjustment | | Net Unrealized (Loss)/Gain On Hedges | | Net Unrealized
Gain/(Loss) On
Available-for-sale
Securities | | Accumulated Other
Comprehensive Loss |
| Balance, December 31, 2022 | $ | (463.5) | | | $ | 178.6 | | | $ | 0.2 | | | $ | (284.5) | |
| Change | 37.9 | | | (35.6) | | | — | | | 2.3 | |
| Balance, March 31, 2023 | $ | (425.6) | | | $ | 143.0 | | | $ | 0.2 | | | $ | (282.2) | |
19. Revision of Previously Issued Financial Statements
As discussed in Note 1, “Significant Accounting and Reporting Policies,” the Company identified an errorerrors in the classification of employee costcertain expensess related to certain of our recent acquisitions between cost of services and selling, general and administrative in the Consolidated Statements of Income.Operations. A summary of the corrections to the impacted financial statement line items toof the Company’s previously issued Consolidated StatementsStatement of IncomeOperations previously filed in the Annual Report on Form 10-K and inits unaudited Quarterly Reports on Form 10-Q isfor the period ended March 31, 2023 and the period ended June 30,2023, and in Amendment No. 1 to the Quarterly Report on Form 10-Q/A for the period ended September 30, 2023, are as follows:
| | Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
| (in millions) | | As Previously Reported | | Adjustment | | As Revised | | As Previously Reported | | Adjustment | | As Revised |
| Operating expenses | | | | |
| | Three Months Ended March 31, 2023 | | | | Three Months Ended March 31, 2023 |
| | As Reported | | | | As Reported | | Adjustment | | As Revised |
| Cost of services (exclusive of depreciation and amortization) | Cost of services (exclusive of depreciation and amortization) | | $ | 308.1 | | | $ | 20.8 | | | $ | 328.9 | | | $ | 606.2 | | | $ | 43.9 | | | $ | 650.0 | |
| Selling, general and administrative | Selling, general and administrative | | 327.1 | | | (20.8) | | | 306.3 | | | 686.5 | | | (43.9) | | | 642.7 | |
| Depreciation and amortization | | 130.6 | | | — | | | 130.6 | | | 259.4 | | | — | | | 259.4 | |
| Total operating expenses | Total operating expenses | | $ | 765.8 | | | $ | — | | | $ | 765.8 | | | $ | 1,552.1 | | | $ | — | | | $ | 1,552.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2023 | | Six Months Ended June 30, 2023 |
| | As Reported | | Adjustment | | As Revised | | As Reported | | Adjustment | | As Revised |
| | | | | | | | | | | | |
| Cost of services (exclusive of depreciation and amortization) | | $ | 365.5 | | | $ | 21.5 | | | $ | 387.0 | | | $ | 728.2 | | | $ | 39.6 | | | $ | 767.8 | |
| Selling, general and administrative | | 314.0 | | | (21.5) | | | 292.5 | | | 616.7 | | | (39.6) | | | 577.1 | |
| Total operating expenses | | 809.6 | | | — | | | 809.6 | | | 1,604.7 | | | — | | | 1,604.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 |
| (in millions) | | As Previously Reported | | Adjustment | | As Revised | | As Previously Reported | | Adjustment | | As Revised |
| Operating expenses | | | | | | | | | | | | |
| Cost of services (exclusive of depreciation and amortization) | | $ | 305.6 | | | $ | 32.6 | | | $ | 338.2 | | | $ | 911.7 | | | $ | 76.5 | | | $ | 988.2 | |
| Selling, general and administrative | | 333.6 | | | (32.6) | | | 301.0 | | | 1,020.1 | | | (76.5) | | | 943.6 | |
| Depreciation and amortization | | 129.6 | | | — | | | 129.6 | | | 389.0 | | | — | | | 389.0 | |
| Total operating expenses | | $ | 768.8 | | | $ | — | | | $ | 768.8 | | | $ | 2,320.8 | | | $ | — | | | $ | 2,320.8 | |
| | | Three Months Ended September 30, 2023 | | | | Three Months Ended September 30, 2023 | | Nine Months Ended September 30, 2023 |
| | As Reported | | | | As Reported | | Adjustment | | As Revised | | As Reported | | Adjustment | | As Revised |
| | Twelve Months Ended December 31, 2022 |
| (in millions) | | As Previously Reported | | Adjustment | | As Revised |
| Operating expenses | | |
| Cost of services (exclusive of depreciation and amortization) | |
| Cost of services (exclusive of depreciation and amortization) | |
| Cost of services (exclusive of depreciation and amortization) | Cost of services (exclusive of depreciation and amortization) | | $ | 1,222.9 | | | $ | 105.0 | | | $ | 1,327.9 | |
| Selling, general and administrative | Selling, general and administrative | | 1,337.4 | | | (105.0) | | | 1,232.4 | |
| Depreciation and amortization | | 519.0 | | | — | | | 519.0 | |
| Total operating expenses | Total operating expenses | | $ | 3,079.3 | | | $ | — | | | $ | 3,079.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 |
| (in millions) | | As Previously Reported | | Adjustment | | As Revised | | As Previously Reported | | Adjustment | | As Revised |
| Operating expenses | | | | | | | | | | | | |
| Cost of services (exclusive of depreciation and amortization) | | $ | 324.9 | | | $ | 37.8 | | | $ | 362.7 | | | $ | 298.0 | | | $ | 23.1 | | | $ | 321.1 | |
| Selling, general and administrative | | 340.5 | | | (37.8) | | | 302.7 | | | 359.5 | | | (23.1) | | | 336.4 | |
| Depreciation and amortization | | 129.7 | | | — | | | 129.7 | | | 128.8 | | | — | | | 128.8 | |
| Total operating expenses | | $ | 795.1 | | | $ | — | | | $ | 795.1 | | | $ | 786.3 | | | $ | — | | | $ | 786.3 | |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of TransUnion’s financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, TransUnion’s audited consolidated financial statements, the accompanying notes, “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, as well as the unaudited consolidated financial statements and the related notes presented in Part I, Item 1, of this Quarterly Report on Form 10-Q.
In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed in “Cautionary Notice Regarding Forward-Looking Statements,” and Part II, Item 1A, “Risk Factors.”
References in this discussion and analysis to the “Company,” “we,”, “us,” and “our” refer to TransUnion and its direct and indirect subsidiaries, including TransUnion Intermediate Holdings, Inc., collectively.
Overview
TransUnion is a leading global information and insights company that makes trust possible between businesses and consumers, working to helphelping people around the world access opportunities that can lead to a higher quality of life. That trust is built on TransUnion’s ability to deliver safe, innovative solutions with credibility and consistency. We call this Information for Good.
Grounded in our heritage as a credit reporting agency, we have built robust and accurate databases of information for a large portion of the adult population in the markets we serve. We use our data fusionidentity resolution methodology to link and match an increasing set of disparate data to further enrich our database.expanding high-quality datasets. We use this enriched data and analytics, combined with our expertise, to continuously develop more insightful solutions for our customers, all in accordancewhile maintaining compliance with global laws and regulations. Because of our work, organizations can better understand consumers in order to make more informed decisions, and earn consumer trust through great, personalized experiences, and the proactive extension of the right opportunities, tools and offers. In turn, we believe consumers can be confident that their data identities will result in better offers and opportunities.
We provide solutions that enable businesses to manage and measure credit risk, market to new and existing customers, verify consumer identities, mitigate fraud, and effectively manage call center operations. Businesses embed our solutions into their process workflows to deliver critical insights and enable effective actions. Consumers use our solutions to view their credit profiles, and access analytical tools that help them understand and manage their personal financial information and take precautions against identity theft. Our solutions are based onWe have deep domain expertise across a foundationnumber of data assetsattractive industries, which we also refer to as verticals, including Financial Services, Emerging Verticals and Consumer Interactive. Emerging Verticals consists of Insurance, Tech, Retail and E-Commerce, Telecommunications, Media, Tenant & Employment Screening, Collections, and Public Sector. We have a global presence in over 30 countries and territories across financial, credit, alternative credit, identity, phone activity, digital device information, marketing, bankruptcy, lien, judgment, insurance claims, automotiveNorth America, Latin America, Europe, Africa, India and other relevant information obtained from thousands of sources including financial institutions, private databases and public records repositories.Asia Pacific.
Our addressable market includes the global data and analytics market, which continues to grow as companies around the world increasingly recognize the benefits of data and analytics-based decision making, and as consumers recognize the important role that their data identities play in their ability to procure goods and services. We leverageThere are several underlying trends supporting this market growth, including the proliferation of data, advances in technology and analytics that enable data to be processed more quickly and efficiently to provide business insights, and growing demand for these business insights across industries and geographies. Leveraging our differentiatedestablished position as a leading provider of information and insights, we have grown our business by expanding the breadth and depth of our data, strengthening our analytics capabilities, expanding into complementary adjacent and vertical markets, deepening our solution suite in orderfraud mitigation and marketing, building out our geographic portfolio, investing in technology infrastructure, and enhancing our global operating model. As a result, we believe we are well positioned to expand our share within the markets we currently serve a global customer base across multiple geographies and industry verticals.capitalize on the larger data and analytics opportunity.
Segments
We manage our businessAs discussed in Part 1, Item 1, “Unaudited Consolidated Financial Statements - Notes to Unaudited Consolidated Financial Statements,” Note 1, “Significant Accounting and report our financial results in three reportable segments:Reporting Policies,” the Company reorganized its operations to merge its Consumer Interactive operating segment with its U.S. Markets operating segment. In addition, we have changed the responsibility for certain international operations previously managed within the U.S. Markets segment to certain regions within the International segment. We now report two operating segments, U.S. Markets and Consumer Interactive.International, which are consistent with our reportable segments, and reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated and the manner by which the chief operating decision maker (“CODM”) assesses the Company’s performance. The reporting of certain revenue from the acquisition of Argus Information and Advisory Services, Inc. and Commerce Signals, Inc. (collectively, “Argus”), which was previously reported within our Financial Services vertical, is now
reported in Emerging Verticals in the U.S. Markets operating segment. While this change does not impact our operating segments, it does impact our disaggregated revenue disclosures. See Part I, Item 1 “Notes to Unaudited Consolidated Financial Statements,” Note 17,16, “Reportable Segments” for additional information.information about our operating segments.
U.S. Markets
The U.S. Markets segment provides consumer reports, actionable insights and analytics to businesses. These businesses and consumers. Businesses use our services to acquire customers, assess consumers’ ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities, and mitigate fraud risk. The core capabilitiesrisk and delivery methods inrespond to data breach events. Consumers use our U.S. Markets segment allow usservices to serve a broad set of customers across industries.manage their personal finances and take precautions against identity theft.
International
The International segment provides services similar to our U.S. Markets segment to businesses in select regions outside the United States. Depending on the maturity of the credit economy in each country, services may include credit reports, analytics and technology solutions services and other value-added risk management services. In addition, weWe also have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services, retail credit, insurance, automotive, collections, public sector and communications, and are delivered through both direct and indirect
channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive vertical within our U.S. Markets segment that help consumers proactively manage their personal finances and take precautions against identity theft.
Consumer Interactive
The Consumer Interactive segment provides solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include paid and free credit reports, scores and freezes, credit monitoring, identity protection and resolution, and financial management for consumers. The segment also provides solutions that help businesses respond to data breach events. Our products are provided through user-friendly online and mobile interfaces and are supported by educational content and customer support. Our Consumer Interactive segment serves consumers through both direct and indirect channels.
Corporate
In addition, Corporate provides support services for each of the segments, holds investments, and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the segments remain in Corporate. These costs are typically enterprise-level costs and are primarily administrative in nature.
Factors Affecting Our Results of Operations
The following are certain key factors that affect, or have recently affected, our results of operations:
Macroeconomic and Industry Trends
Our revenues and results of operations have been and can be significantly influenced by general macroeconomic conditions, including but not limited to, interest rates, inflation, housing demand, the availability of credit and capital, employment levels, and consumer confidence.
During the first sixthree months of 2023,2024, the U.S. economy and labor market remained steadyresilient with solid GDP growth, low unemployment, and rising real wages. However,wages, despite the Federal Reserve maintaining higher interest rates in the face of subsiding but still elevated inflation, high energy prices, and continued interest rate increases byinflation. The relative macroeconomic strength of the Federal Reserve have all contributed to constrained economic activity. In addition, liquidity challenges within the banking sector, a slowing housing market, lower GDP growth, softening consumer confidence and global geopolitical events, all added to the deterioration of global macroeconomic conditions and increasing recession fears compared with the post-pandemic rebound of 2021 and 2022. These slowing macroeconomic conditions had a more pronounced impactU.S. was also reflected in our developed markets compared withbroad strength in our emerging markets althoughand improved indicators in the U.K. The U.K. is beginning to show signs of recovery driven by falling inflation leading to support levels of real income and a recovery in economic activity. Additionally, our International segment began to see a slight positive impact offrom foreign exchange rates had a continuing significant impact on our international segment. Therates. In the U.S., the impact of higher interest rates has slowed demand for consumer loans and auto loans, and has been particularly acutemore pronounced in the housing sector, where higher borrowing rates significantly impactsimpact both home affordability, driving down purchase activity, and demand for mortgage loan refinancing. The impact of highercontinued elevated interest rates on slowing aggregate demand is expected to result in increaseda mild increase in unemployment levels over the next year, which is likely to reduce consumer credit activity. At the same time, a slowdown in economic activity and job growth could prompt the Federal Reserve to begin lowering interest rates, which could spur increased demand for rate-sensitive lending products, in particular mortgage loans. These dynamics impact the comparability of our results of operations, including our revenue and expense, between the periods presented below.
The ongoing uncertainty and the unpredictable nature of the macroeconomic environment could have a material adverse impact on various aspects of our business in the future, including our stock price, results of operations and financial condition, including the carrying value of our long-lived assets such as goodwill and intangible assets.
Effects of Inflation
We believe that inflation has had and we expect will continue to have a negative impact on our business and results of operations, including decreased demand for our services resulting from the Federal Reserve and other central banks continuingraising rates. While central banks have paused rate increases and current conditions indicate that they may begin to raisecautiously lower rates from the higher interest rates established to combat inflation, rates that remain higher may result in slowing consumer spending on non-essential goods and services, and consequently lower demand for credit. The impact of elevated but subsiding levels of inflation and the resulting response by the Federal Reserve and other central banks to raisemaintain higher but decreasing interest rates could have a material adverse impact on various aspects of our business in the future.
Developments that Impact Comparability Between Periods
The following developments impact the comparability of our balance sheets, results of operations and cash flows between periods:
On November 12, 2023, our Board of Directors (“Board”) approved a transformation plan to optimize our operating model and continue to advance our technology. We expect to recognize one-time pre-tax expenses associated with this transformation plan of $355.0 to $375.0 million from the fourth quarter of 2023 through the end of 2025, with the majority of costs to be incurred by the end of 2024. All pre-tax expenses will be cash expenditures, other than approximately $15.0 to $20.0 million of non-cash, facility exit costs. In addition, we anticipate capital expenditures to increase to approximately 9% of revenue in 2024 and then return to approximately 8% of revenue for 2025 due to investment in our technology infrastructure in connection with this transformation plan. Upon completion of this plan, we expect to generate annual savings of $120.0 to $140.0 million and reduce our capital expenditures from 8% of revenue to 6%, based on 2023 revenue. The following summarizes initiatives under the transformation plan.
•The incremental investment to advance our technology is the final phase of our accelerated technology investment. We expect to incur one-time, pre-tax expenses of $150.0 to $160.0 million, including approximately $65.0 million in 2024 related to the final year of Project Rise, and approximately $90.0 million of incremental expenses during 2024 and 2025 to streamline our product delivery platforms and leverage the cloud-based infrastructure being established with Project Rise. The accelerated technology investment will fundamentally transform our technology infrastructure by implementing a global, cloud-based approach to streamline product development, increase the efficiency of ongoing operations and maintenance, enable a continuous improvement approach, and provide a single global platform for fulfillment of our product lines. Project Rise was announced in February 2020 and expanded in February 2022, and is expected to be completed in 2024 with a total estimated expense of approximately $240.0 million, including approximately $65.0 million to be incurred in 2024, as discussed above.
For the three months ended March 31, 2024, we incurred total expenses associated with the transformation plan of $24.4 million, comprised of restructuring expenses of $16.8 million for employee separation and $1.4 million for non-cash impairment charges associated with leased facilities, as well as $6.2 million of other business optimization expenses. Employee separation costs and non-cash impairment charges are included in Restructuring expenses in our Consolidated Statements of Operations. Since the inception of the operating model optimization program, we have incurred cumulative expenses of $102.0 million.
We have accrued liabilities for payment of employee separation costs of $48.6 million and $64.9 million as of March 31, 2024 and December 31, 2023, respectively. See Part I, Item 1, “Financial Information - Notes to Unaudited Consolidated Financial Statements,” Note 8, “Restructuring.”
On June 30,February 8, 2024, we executed Amendment No. 22 to the Senior Secured Credit Facility, pursuant to which we entered into Senior Secured Term Loan B-7 with an aggregate principal amount of $1.9 billion, the proceeds of which were used to repay Senior Secured Term Loan B-6 in full and pay the related financing fees and expenses.
On October 27, 2023, March 31,we executed Amendment No. 21 to the Senior Secured Credit Facility, pursuant to which we entered into Senior Secured Term Loan A-4 with an aggregate principal amount of $1.3 billion, the proceeds of which were used to repay Senior Secured Term Loan A-3 in full, repay $300.0 million of Senior Secured Term Loan B-6, and pay the related financing fees and expenses. In addition, we increased the borrowing capacity on the Senior Secured Revolving Credit Facility from $300.0 million to $600.0 million and extended the maturity date from December 10, 2024 to October 27, 2028.
During 2023, December 30, 2022 and January 31, 2022, we prepaid $75.0$250.0 million $75.0 million, $200.0 million and $400.0 million, respectively, of our Senior Secured Term Loan B-6, funded from our cash-on-hand. These transactions affect the comparability of interest expense between 20232024 and 2022,2023, as further discussed in “Results of Operations – Non-Operating Income and (Expense) – Interest Expense” below.
On November 16, 2022, we entered into interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loan or similar replacement debt. These swaps replaced other swaps that expired in December 30, 2022. The swaps commenced on December 30, 2022, and expire on December 31,
2024, with a current aggregate notional amount of $1,310.0 million that amortizes each quarter. The swaps require us to pay fixed rates varying between 4.3380% and 4.3870% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges.
On April 12, 2022, after failed settlement negotiations with the Consumer Financial Protection Bureau (“CFPB”) regarding a certain regulatory matter, the CFPB filed a lawsuit against us, Trans Union LLC, TransUnion Interactive, Inc. and our former President of Consumer Interactive. During the first quarter of 2022, we recorded an incremental $29.5 million of expense related to this matter. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 18, “Contingencies,” for further information about this matter.
On April 8, 2022, we acquired 100% of the equity of the entities that comprised Verisk Financial Services (“VF”). We retained the leading core businesses of Argus, and divested the remaining non-core businesses on December 30, 2022. The results of operations of Argus are included in the U.S. Markets segment in our consolidated statements of income since the date of the acquisition. See Part I, Item 1, “Notes to Consolidated Financial Statements,” Note 2, “Business Acquisition,” and Note 3 “Discontinued Operations,” for additional information.
Key Components of Our Results of Operations
Revenue
We report revenue for our threetwo reportable segments, U.S. Markets International and Consumer Interactive.International. Within the U.S. Markets segments,segment, we report and disaggregate revenue by vertical, which consists of our Financial Services, verticalEmerging and Emerging vertical. Revenue from our acquisition Consumer Interactive
verticals. Within the International segment, we disaggregate revenue by regions, which consists of Canada, Latin America, the United Kingdom, Africa, India, and Asia Pacific. For our Consumer Interactive segment, we do not disaggregate revenue.
Cost of Services
Costs of services include data acquisition and royalty fees, personnel costs related to our databases and software applications, consumer and call center support costs, hardware and software maintenance costs, telecommunication expenses and occupancy costs associated with the facilities where these functions are performed.
Selling, General and Administrative
Selling, general and administrative expenses include personnel-related costs for sales, administrative and management employees, costs for professional and consulting services, advertising and occupancy and facilities expense of these functions.
Non-Operating Income and Expense
Non-operating income and expense includes interest expense, interest income, earnings from equity-method investments, dividends from cost-method investments,Cost Method Investments, fair-value adjustments of equity-method and Cost Method Investments, if any, expenses related to successful and unsuccessful business acquisitions, loan fees, debt refinancing expenses, certain acquisition-related gains and losses and other non-operating income and expenses.
Results of Operations —Three and Six Months Ended June 30,March 31, 2024 and 2023 and 2022
(Tabular amounts in millions, except per share amounts)
For the three and six months ended June 30,March 31, 2024 and 2023, and 2022, our results of operations were as follows:
| | Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| | 2024 vs. 2023 | |
| | 2024 vs. 2023 | |
| | 2024 vs. 2023 | |
| | Three months ended | Change | Six months ended | Change |
| | June 30, | 2023 vs. 2022 | June 30, | 2023 vs. 2022 |
| | | 2023 | | 2022 | | 2023 | | 2022 | | $ | | % |
| Revenue | Revenue | $ | 968.0 | | | $ | 948.3 | | | $ | 19.7 | | | 2.1 | % | $ | 1,908.2 | | | $ | 1,869.5 | | | $ | 38.7 | | | 2.1 | % |
| Revenue | |
| Revenue | |
| Operating expenses | |
| Operating expenses | |
| Operating expenses | Operating expenses | |
Cost of services (exclusive of depreciation and amortization below)1 | Cost of services (exclusive of depreciation and amortization below)1 | 365.5 | | | 328.9 | | | 36.6 | | | 11.1 | % | 728.2 | | | 650.0 | | | 78.1 | | | 12.0 | % |
Cost of services (exclusive of depreciation and amortization below)1 | |
Cost of services (exclusive of depreciation and amortization below)1 | |
Selling, general and administrative1 | |
Selling, general and administrative1 | |
Selling, general and administrative1 | Selling, general and administrative1 | 314.0 | | | 306.3 | | | 7.8 | | | 2.5 | % | 616.7 | | | 642.7 | | | (26.0) | | | (4.0) | % |
| Depreciation and amortization | Depreciation and amortization | 130.1 | | | 130.6 | | | (0.5) | | | (0.4) | % | 259.8 | | | 259.4 | | | 0.4 | | | 0.2 | % |
| Depreciation and amortization | |
| Depreciation and amortization | |
| Restructuring | |
| Restructuring | |
| Restructuring | |
| Total operating expenses | |
| Total operating expenses | |
| Total operating expenses | Total operating expenses | 809.6 | | | 765.8 | | | 43.8 | | | 5.7 | % | 1,604.7 | | | 1,552.1 | | | 52.6 | | | 3.4 | % |
| Operating income | Operating income | 158.4 | | | 182.5 | | | (24.1) | | | (13.2) | % | 303.6 | | | 317.4 | | | (13.9) | | | (4.4) | % |
| Operating income | |
| Operating income | |
| Non-operating income and (expense) | |
| Non-operating income and (expense) | |
| Non-operating income and (expense) | Non-operating income and (expense) | |
| Interest expense | Interest expense | (72.6) | | | (51.9) | | | (20.7) | | | 40.0 | % | (144.4) | | | (102.1) | | | (42.4) | | | 41.5 | % |
| Interest expense | |
| Interest expense | |
| Interest income | |
| Interest income | |
| Interest income | Interest income | 4.3 | | | 1.2 | | | 3.1 | | | nm | 10.1 | | | 1.9 | | | 8.2 | | | nm |
| Earnings from equity method investments | Earnings from equity method investments | 4.9 | | | 3.1 | | | 1.7 | | | 55.7 | % | 8.0 | | | 6.1 | | | 1.9 | | | 30.4 | % |
| Earnings from equity method investments | |
| Earnings from equity method investments | |
| Other income and (expense), net | |
| Other income and (expense), net | |
| Other income and (expense), net | Other income and (expense), net | (18.3) | | | (6.4) | | | (11.8) | | | nm | (25.0) | | | (18.2) | | | (6.9) | | | 37.6 | % |
| Total non-operating income and (expense) | Total non-operating income and (expense) | (81.7) | | | (54.0) | | | (27.8) | | | 51.5 | % | (151.4) | | | (112.2) | | | (39.2) | | | 34.9 | % |
| Total non-operating income and (expense) | |
| Total non-operating income and (expense) | |
| Income from continuing operations before income taxes | Income from continuing operations before income taxes | 76.6 | | | 128.5 | | | (51.9) | | | (40.4) | % | 152.2 | | | 205.2 | | | (53.0) | | | (25.8) | % |
| Provision for income taxes | (19.3) | | | (29.2) | | | 9.9 | | | (33.9) | % | (37.9) | | | (53.5) | | | 15.7 | | | (29.3) | % |
| Income from continuing operations before income taxes | |
| Income from continuing operations before income taxes | |
| Benefit (provision) for income taxes | |
| Benefit (provision) for income taxes | |
| Benefit (provision) for income taxes | |
| Income from continuing operations | |
| Income from continuing operations | |
| Income from continuing operations | Income from continuing operations | 57.3 | | | 99.3 | | | (42.0) | | | (42.3) | % | 114.3 | | | 151.7 | | | (37.3) | | | (24.6) | % |
| Discontinued operations, net of tax | Discontinued operations, net of tax | (0.2) | | | 0.3 | | | (0.5) | | | nm | (0.2) | | | — | | | (0.2) | | | nm |
| Discontinued operations, net of tax | |
| Discontinued operations, net of tax | |
| Net income | |
| Net income | |
| Net income | Net income | 57.2 | | | 99.6 | | | (42.5) | | | (42.6) | % | 114.1 | | | 151.6 | | | (37.5) | | | (24.7) | % |
| Less: net income attributable to noncontrolling interests | Less: net income attributable to noncontrolling interests | (3.3) | | | (4.1) | | | 0.8 | | | (20.1) | % | (7.6) | | | (7.7) | | | 0.2 | | | (2.4) | % |
| Less: net income attributable to noncontrolling interests | |
| Less: net income attributable to noncontrolling interests | |
| Net income attributable to TransUnion | Net income attributable to TransUnion | $ | 53.9 | | | $ | 95.6 | | | $ | (41.6) | | | (43.6) | % | $ | 106.5 | | | $ | 143.9 | | | $ | (37.3) | | | (26.0) | % |
| Net income attributable to TransUnion | |
| Net income attributable to TransUnion | |
nm: not meaningful
As a result of displaying amounts in millions, rounding differences may exist in the table above.
1.We revised prior periodthe Consolidated Statements of IncomeOperations for the three months ended March 31, 2023, to correct the classification of certain employee related expenses between cost of services and selling, general and administrative. See Part I, Item 1, “Notes“Financial Information - Notes to Unaudited Consolidated Financial Statements,” Note 1, “Significant Accounting and Reporting Policies,”Policies” and Note 19, “Revision of Previously Issued Financial Statements.”
Revenue
For the three months ended June 30, 2023,March 31, 2024, revenue increased $19.7$81.0 million, or 2.1%8.6%, compared with the same period in 2022,2023, due primarily to growth in our International and U.S. Marketsboth segments, partially offset by a decrease in our Consumer Interactive segment and a decrease fromincluding an increase of 0.3% due to the impact of foreign currencies.
For the six months ended June 30, 2023, revenue increased $38.7 million, or 2.1%, compared with the same period in 2022, due primarily to a 1.1% increase from our recent acquisitioncurrencies, as further discussed in the U.S. Markets segment and organic growth in our International and U.S. Markets segments, partially offset by a decrease in our Consumer Interactive segment and a decrease from the impactSegment Results of foreign currencies.Operations section below.
Operating Expenses
We revised prior period Consolidated Statements of Income to correct the classification of certain employee related expenses between cost of services and selling, general and administrative. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 1, “Significant Accounting and Reporting Policies,” and Note 19, “Revision of Prior Period Financial Statements.”
Cost of Services
Cost of services increased $36.6 million and $78.1$25.5 million for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022.
2023. The increase was due primarily to:
•an increase of approximately $24.0 million in variable and non-variable product costs resulting from the increase in revenuevolume in our U.S. Markets and Internationalboth segments, and an increase in certain product cost pricing primarily in our U.S. Markets segment;
•an increase of approximately $4.0 million in costs from our acceleratedongoing technology investment;costs;
•an increase in labor costs, including incentive compensation, primarilyof approximately $3.0 million from our operating model optimization program in our U.S. MarketsCorporate unit; and International segments; and
•an increase in operating costsof approximately $1.0 from our April 2022 acquisition in our U.S. Markets segment in the six-month period,
partially offset by:
•the impact of foreign currencies on the expenses of our International operations.operations,
partially offset by:
•a net decrease of approximately $3.0 million in labor costs primarily in our U.S. Markets segment; and
•a decrease of approximately $3.0 million in integration costs of our business acquisitions, an initiative that was completed last year.
Selling, General and Administrative
Selling, general and administrative expenses increased $7.8 million and decreased $26.0$21.0 million for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022.
2023. The increase in the three-month period was due primarily to:
•an increase of approximately $11.0 million in labor costs, including incentive compensation,certain legal and regulatory expenses, primarily in our International segment and in corporate,
partially offset by:
•a decrease in advertising expense;U.S. Markets segment;
•a decreasenet increase of approximately $8.0 million in integration-relatedlabor costs, for our 2021including annual incentive compensation, stock-based incentive compensation and 2022 acquisitionsemployee benefits, primarily in our U.S. MarketsCorporate unit and Consumer Interactive segments;International segment;
•an increase of approximately $4.0 million from our operating model optimization program in our Corporate unit; and
•an increase of approximately $1.0 million from the impact of foreign currencies on the expenses of our International segment.
The decrease in the six-month period was due primarily to:
•a decrease in certain legal and regulatory expenses;
•a decrease in advertising expense, primarily in our Consumer Interactive segment;
•a decrease in integration-related costs for our 2021 and 2022 acquisitions in our U.S. Markets and Consumer Interactive segment; and
•the impact of foreign currencies on the expenses of our International segment.operations,
partially offset by:
•a decrease of approximately $3.0 million in integration costs of our business acquisitions, an increase in labor costs, including incentive compensation, primarily in our International segment and in corporate; and
•an increase in operating costs from our April 2022 acquisition in our U.S. Markets segment.initiative that was completed last year.
Depreciation and Amortization
Depreciation and amortization decreased $0.5 million and increased $0.4$4.3 million for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022.2023 due primarily to the increase in capital expenditures in the past 12 months, including for our accelerated technology investment initiative.
Restructuring
Restructuring expenses relate to our operating model optimization program. For the three months ended March 31, 2024, these expenses include approximately $16.8 million related to employee separation and $1.4 million related to facility exits.
See Part I, Item 1, “Financial Information - Notes to Unaudited Consolidated Financial Statements,” Note 8, “Restructuring,” for additional information.
Non-Operating Income and Expense
Interest expense
On June 30, 2023,For the three months ended March 31, 2023, December 30, 2022 and January 31, 2022, we prepaid $75.0 million, $75.0 million, $200.0 million and $400.0 million, respectively, of our Senior Secured Term Loan B-6, funded from our cash-on-hand. The interest rate on our debt is variable and based on Term SOFR. Approximately 72.2% of this debt is hedged with interest rate swaps.
These factors impact the comparability of2024, interest expense between periods. Our future interest expense could be materially impacted by changes in our variable interest rates to the extent our variable rate debt is not hedged, additional borrowings, or additional prepayments. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 11, “Debt,” for additional information about our debt.
For the three and six months ended June 30, 2023, interest expense increased $20.7decreased $3.1 million and $42.4 million, respectively, compared with the same periodsperiod in 2022.2023. This increasedecrease was due to the impact of an increase in the average periodic variable interest rate on the unhedged portion of our debt, partially offset by a decrease in outstanding principal balance due to the prepayments made in 2022 and 2023.2023, partially offset by an increase in the average periodic variable interest rate on the unhedged portion of our debt.
For the three and six months ended June 30, 2023,Interest income
The change in interest income increased $3.1 million and $8.2 million, respectively,for the current period compared withto the same periods in 2022. This increase was due to interest earned on the note receivable discussed in Note 16, “Fair Value,” and the increase in interest rates.prior period is not significant.
Other income and (expense), net
Other income and (expense), net includes acquisition fees, loan fees, and various other income and expenses.
| | | | | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | | 2023 | | 2022 | | $
Change | | %
Change | | 2023 | | 2022 | | $
Change | | %
Change |
| | |
| | |
| | 2024 | |
| | 2024 | |
| | 2024 | |
| Other income and (expense), net: | |
| Other income and (expense), net: | |
| Other income and (expense), net: | Other income and (expense), net: | | | | | | | | | | | | | | | | |
| Acquisition fees | Acquisition fees | | $ | (2.4) | | | $ | (9.0) | | | $ | 6.6 | | | nm | | $ | (3.8) | | | $ | (17.9) | | | $ | 14.1 | | | nm |
| Loan fees | | (1.5) | | | (0.4) | | | (1.1) | | | nm | | (3.2) | | | (7.3) | | | 4.1 | | | (56.2) | % |
| Acquisition fees | |
| Acquisition fees | |
| Debt related expenses | |
| Debt related expenses | |
| Debt related expenses | |
| Other income (expense), net | |
| Other income (expense), net | |
| Other income (expense), net | Other income (expense), net | | (14.3) | | | 3.0 | | | (17.3) | | | nm | | (18.0) | | | 7.0 | | | (25.0) | | | nm |
| Total other income and (expense), net | Total other income and (expense), net | | $ | (18.3) | | | $ | (6.4) | | | $ | (11.9) | | | nm | | $ | (25.0) | | | $ | (18.2) | | | $ | (6.8) | | | 37.4 | % |
| Total other income and (expense), net | |
| Total other income and (expense), net | |
nm: not meaningful
As a result of displaying amounts in millions, rounding differences may exist in the table above.above.
Acquisition fees
Acquisition fees represent costs we have incurred in each period for various acquisition-related efforts, for both executed and include costs related to our acquisitionexploratory transactions.
Debt-related expenses
For the three months ended March 31, 2024, debt-related expenses included $3.1 million of Argus in 2022.
Loan fees
Loan fees includeunamortized original issue discount, deferred financing fees, written offand other related fees expensed as a result of our debt prepayments made onand refinancing of our debt.Senior Secured Term Loan B-6, and $0.6 million of other debt financing expenses. For the sixthree months ended June 30,March 31, 2023, and 2022, loan feesdebt-related expenses included $2.1$1.1 million and $6.5 million, respectively, of our deferred financing fees written offand other net costs expensed as a result of the $150.0 million and $400.0 millionour debt prepayments of our Senior Secured Term Loan B-6.
Other income and (expense), net
TheFor the three and six and months ended June 30, 2023 includes a $9.1March 31, 2024, other income (expense), net included $(10.9) million loss on the impairment of a Cost Method Investment, a $5.1 million adjustment to the fair value of a put option liabilitypre-acquisition net liabilities related to previous acquisitions and disposals, a minority$4.7 million gain on a cost method investment, gains and losses on other Cost Method investments,$(2.6) million of net currency remeasurement gains and losses, dividends received from Cost Method Investments, and other miscellaneous non-operating income and expense items. For the three months ended March 31, 2023, other income (expense), net included $2.7 million of net currency remeasurement losses and other miscellaneous non-operating income and expense items.
Provision for Income Taxes
For the three months ended June 30, 2023,March 31, 2024, we reported an effective tax rate of 25.2%15.7%, which was higherlower than the 21.0% U.S. federal corporate statutory ratedue primarily to the impact of increases for foreign withholdingbenefits on the remeasurement of deferred taxes uncertain tax positions,
and nondeductible expenses primarilydue to changes in connection with executive compensation limitations, partially offset bystate apportionment rates, benefits from the foreign rate differential, and the research and development credit.credit, partially offset by the impact of increases for foreign withholding taxes, nondeductible expenses primarily in connection with executive compensation limitations and uncertain tax positions.
We have evaluated the impact of the Organization for Economic Cooperation and Development (“OECD”) efforts to implement a global minimum 15% effective tax rate on certain multinational enterprises, commonly known as Pillar Two, and there is not expected to be a significant impact to our 2024 tax rate. As other countries continue to announce changes in their tax laws and regulations based on the Pillar Two proposals and other OECD initiatives, we will continue to evaluate the impact of these proposed and enacted legislative changes to determine the impact on our tax rate for 2024 and beyond.
For the sixthree months ended June 30,March 31, 2023,, we reported an effective tax rate of 24.9%24.6%, which was higher than the 21.0% U.S. federal corporate statutory rate due primarily to the impact of increases for foreign withholding taxes, uncertain tax positions,
and nondeductible expenses primarily in connection with executive compensation limitations, and excess tax expenses for stock-based compensation, partially offset by benefits from the foreign rate differential and the research and development credit.
For the three months ended June 30, 2022, we reported an effective tax rate of 22.7%, which was higher than the 21.0% U.S. federal corporate statutory rate due primarily to nondeductible expenses in connection with acquisition costs and executive compensation limitations, state taxes and other rate-impacting items, partially offset by benefits from the research and development credit excess tax benefits on stock-based compensation and the foreign rate differential.
For the six months ended June 30, 2022, we reported an effective tax rate of 26.1%, which was higher than the 21.0% U.S. federal corporate statutory rate due primarily to nondeductible expenses in connection with certain legal and regulatory matters, acquisition costs, executive compensation limitations and state taxes and other rate-impacting items, partially offset by excess tax benefits on stock-based compensation and benefits from the research and development credit..
Segment Results of Operations—Three and Six Months Ended June 30,March 31, 2024 and 2023 and 2022:
Management, including our chief operating decision maker (“CODM”),CODM, evaluates the financial performance of our businesses based on revenue and segment Adjusted EBITDA. As discussed above, we have reorganized our operations and now have two operating segments, U.S. Markets and International. Prior period amounts have been recast to conform to our current operating structure. For the three and six months ended June 30,March 31, 2024 and 2023, and 2022, our segment revenue, and segment Adjusted EBITDA were as follows:
For the three and six months ended June 30, 2023 and 2022, these key performance indicatorsSegment Adjusted EBITDA Margin were as follows:
Revenue, Adjusted EBITDA and Adjusted EBITDA margin by Segment
| | | Three Months Ended March 31, | |
| | Three Months Ended March 31, | |
| | Three Months Ended March 31, | |
| | | | | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | | 2023 | | 2022 | | $
Change | | %
Change | | 2023 | | 2022 | | $
Change | | %
Change |
| | |
| | 2024 | |
| | 2024 | |
| | 2024 | |
| Revenue: | |
| Revenue: | |
| Revenue: | Revenue: | | | | | | | | | | | | | | | | |
| U.S. Markets gross revenue | U.S. Markets gross revenue | |
| U.S. Markets gross revenue | |
| U.S. Markets gross revenue | |
| Financial Services | |
| Financial Services | |
| Financial Services | Financial Services | | $ | 331.9 | | | $ | 331.1 | | | $ | 0.8 | | | 0.2 | % | | $ | 652.5 | | | $ | 635.3 | | | $ | 17.2 | | | 2.7 | % |
| Emerging Verticals | Emerging Verticals | | 310.2 | | | 302.3 | | | 7.9 | | | 2.6 | % | | 610.0 | | | 598.0 | | | 12.0 | | | 2.0 | % |
| Emerging Verticals | |
| Emerging Verticals | |
| Consumer Interactive | |
| Consumer Interactive | |
| Consumer Interactive | |
| U.S. Markets gross revenue | |
| U.S. Markets gross revenue | |
| U.S. Markets gross revenue | U.S. Markets gross revenue | | $ | 642.1 | | | $ | 633.4 | | | $ | 8.7 | | | 1.4 | % | | $ | 1,262.5 | | | $ | 1,233.3 | | | $ | 29.2 | | | 2.4 | % |
| | International: | International: | |
| | International: | |
| | International: | |
| Canada | |
| Canada | |
| Canada | Canada | | $ | 35.0 | | | $ | 33.1 | | | $ | 1.9 | | | 5.8 | % | | $ | 66.5 | | | $ | 63.8 | | | $ | 2.7 | | | 4.2 | % |
| Latin America | Latin America | | 29.9 | | | 29.5 | | | 0.4 | | | 1.3 | % | | 58.5 | | | 56.8 | | | 1.7 | | | 3.0 | % |
| Latin America | |
| Latin America | |
| United Kingdom | |
| United Kingdom | |
| United Kingdom | United Kingdom | | 49.0 | | | 49.6 | | | (0.6) | | | (1.2) | % | | 96.2 | | | 106.0 | | | (9.8) | | | (9.3) | % |
| Africa | Africa | | 14.5 | | | 15.6 | | | (1.2) | | | (7.4) | % | | 29.1 | | | 30.4 | | | (1.3) | | | (4.2) | % |
| Africa | |
| Africa | |
| India | |
| India | |
| India | India | | 51.0 | | | 40.2 | | | 10.8 | | | 26.9 | % | | 105.6 | | | 85.3 | | | 20.3 | | | 23.8 | % |
| Asia Pacific | Asia Pacific | | 22.5 | | | 19.0 | | | 3.5 | | | 18.4 | % | | 43.3 | | | 35.9 | | | 7.3 | | | 20.5 | % |
| Asia Pacific | |
| Asia Pacific | |
| International gross revenue | International gross revenue | | $ | 201.9 | | | $ | 187.0 | | | $ | 14.9 | | | 8.0 | % | | $ | 399.1 | | | $ | 378.2 | | | $ | 20.9 | | | 5.5 | % |
| | Consumer Interactive | | $ | 144.0 | | | $ | 147.4 | | | $ | (3.4) | | | (2.3) | % | | $ | 286.3 | | | $ | 297.0 | | | $ | (10.7) | | | (3.6) | % |
| International gross revenue | |
| International gross revenue | |
| | Total gross revenue | Total gross revenue | | $ | 988.0 | | | $ | 967.8 | | | $ | 20.2 | | | 2.1 | % | | $ | 1,948.0 | | | $ | 1,908.5 | | | $ | 39.5 | | | 2.1 | % |
| | Total gross revenue | |
| | Total gross revenue | |
| Intersegment revenue eliminations | |
| Intersegment revenue eliminations | |
| Intersegment revenue eliminations | |
| Total revenue as reported | |
| Total revenue as reported | |
| Total revenue as reported | |
| | Adjusted EBITDA: | |
| | Adjusted EBITDA: | |
| | Adjusted EBITDA: | Adjusted EBITDA: | |
| U.S. Markets | U.S. Markets | | 222.1 | | | 234.4 | | | (12.3) | | | (5.2) | % | | 422.1 | | | 451.1 | | | (28.9) | | | (6.4) | % |
| International | | 85.3 | | | 81.0 | | | 4.3 | | | 5.3 | % | | 171.3 | | | 163.0 | | | 8.3 | | | 5.1 | % |
| Consumer Interactive | | 67.7 | | | 68.0 | | | (0.3) | | | (0.5) | % | | 137.7 | | | 137.0 | | | 0.8 | | | 0.6 | % |
| | Adjusted EBITDA margin: | |
| U.S. Markets | |
| U.S. Markets | U.S. Markets | | 34.6 | % | | 37.0 | % | | (2.4) | % | | 33.4 | % | | 36.6 | % | | (3.1) | % |
| International | International | | 42.3 | % | | 43.3 | % | | (1.1) | % | | 42.9 | % | | 43.1 | % | | (0.2) | % |
| Consumer Interactive | | 47.0 | % | | 46.2 | % | | 0.9 | % | | 48.1 | % | | 46.1 | % | | 2.0 | % |
| International | |
| International | |
| | Adjusted EBITDA Margin: | |
| | Adjusted EBITDA Margin: | |
| | Adjusted EBITDA Margin: | |
| U.S. Markets | |
| U.S. Markets | |
| U.S. Markets | |
| International | |
| International | |
| International | |
nm: not meaningful
As a result of displaying amounts in millions, rounding differences may exist in the table above.
We define Adjusted EBITDA Margin for our segments as the segment Adjusted EBITDA divided by segment gross revenue.
U.S. Markets Segment
Revenue
U.S. Markets revenue increased $8.748.9 million, or 1.4%6.6%, and $29.2 million, or 2.4%, for the three and six months ended June 30, 2023, respectively, compared with the same periodsperiod in 2022.2023. The increase was due primarily to an increase in our Financial Services and Emerging verticals, andpartially offset by a 1.7% increasedecrease in the six-month period due to our acquisition of ArgusConsumer Interactive.
Financial Services: Revenue increased $0.8$39.4 million, or 0.2% and $17.2 million, or 2.7% for the three and six months ended June 30, 2023, respectively,12.6%, compared with the same periodsperiod in 2022.2023. Our Mortgage line of business increased in both periods, but more significantly in the three-month period,had strong growth due primarily to price increases, partially offset by volume declines due to higher interest rates. Our Auto line of business also increased in both periods due to price increases and an increase in volumes in the six-month period, with a decline in volume in the three-month period. increases. Our Consumer Lending line of business decreasedincreased due primarily to a change in both periodscustomer mix. And our Auto line of business increased due to macroeconomic uncertainty drivingprice increases and new business wins, partially offset by a decline in marketing activity. And ourbase volume. Our Card and Banking line of business also decreased in both periods, due primarily to a decrease inwas essentially flat for the three-month period from reduced batch activity that was partially offset byquarter. In addition, all lines of business except Auto had an increase in online volumes. We anticipate interest rates will remain high and continue to impact our Financial Services business.batch jobs.
Emerging Verticals: Revenue increased $7.9$12.4 million, or 2.6% and $12.0 million or 2.0%4.4%, for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022. For the three-month period the increase was2023, due primarily to increases in our Technology, Insurance, Servicesall verticals except Tenant & CollectionsEmployment Screening due primarily to increased fraud and Media verticals,identity management solutions and other volume increases. These increases were partially offset by a decrease in the Public Sector andour Tenant and& Employment vertical. For the six-month period, the increase was due to increases in our Technology, Insurance and Services & Collections verticals, partially offset byScreening vertical from a decrease in the Media, Public Sectorvolumes and Tenant and Employment verticals.price concessions.
Adjusted EBITDA
ForConsumer Interactive: Revenue decreased $3.0 million, or 2.1%, compared with the three and six months ended June 30, 2023, Adjusted EBITDA decreased $12.3 million and $28.9 million, respectively, primarily due to higher variable product costs,same period in 2023. A decrease in our Direct channel from slowing demand for paid credit products was partially offset by an increase in our Indirect channel driven by breach revenue.
Adjusted EBITDA
Adjusted EBITDA increased $16.4 million for the three months ended March 31, 2024, compared with the same period in 2023. The increase was primarily due to an increase in revenue, partially offset by higher variable product cost. Adjusted EBITDA margins decreased 0.2% primarily due to the impact of stronger growth in lower margin business and a decreasean increase in certain legal and regulatory expenses in the six-month period.
For the three and six months ended June 30, 2023, Adjusted EBITDA margin decreased, due primarily to a shift in the revenue mix and the lower margin profile of the Argus business.expenses.
International Segment
Revenue
International revenue increased $14.9$32.7 million, or 8.0%, and $20.9 million, or 5.5%16.1%, for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022,2023. The increase was due primarily to higher local currency revenue in all regions except for the United Kingdom, which was essentially flat, driven by increased volumes from improving economic conditions in all regions and new product initiatives, partially offset by a decrease of 5.2% and 7.0% in each respective periodinitiatives. Revenue increased 1.2% from the impact of foreign currencies.
Canada: Revenue increased $1.9$6.0 million, or 5.8%, and $2.7 million, or 4.2%18.8%, for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022.2023. The increase was due primarily to higher local currency revenue from volume increases, new business wins, at a large bank, share-shifts from key customers and other volume increases, partially offset by a decrease in revenue of 5.5%increased batch and 6.2% in each respective periodbreach services. Revenue increased 0.4% from the impact of foreign currencies.
Latin America: Revenue increased $0.4$4.1 million, or 1.3%, and $1.7 million or 3.0%14.2%, for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022.2023. The increase was due primarily to higher local currency revenue from broad-based growth across several of our markets, including ongoing new business wins and expansion of our new solutions, partially offset by the impact of a decreaseone-time contract in revenue of 3.9% and 5.2% in each respective period2023. Revenue increased 7.4% from the impact of foreign currencies.
United Kingdom: Revenue decreased $0.6increased $2.0 million, or 1.2%, and $9.8 million, or 9.3%3.9%, for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022.2023. The decreaseincrease was due primarily drivento an increase of 4.1% from the impact of foreign currency and higher volume, partially offset by the impact of a drop in volume for a one-time contract in the prior year and a decrease in revenue of 0.6% and 4.9% in each respective period from the impact of foreign currencies, partially offset by volume growth from new products at key Financial Services customers.year.
Africa: Revenue decreased $1.2increased $0.5 million, or 7.4%, and $1.3 million, or 4.2%3.5%, for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022.2023. The decreaseincrease was due primarily driven by a 17.6% and 16.4% impact of foreign currencies in each respective period. Excluding the impact of foreign currency, local currency revenue increased due to meaningful new business wins and contract renewals as well as volume growth in emerging countries and emerging verticals. Revenue decreased 8.3% from the impact of foreign currencies.
India: Revenue increased $10.8$16.5 million, or 26.9%, and $20.3 million, or 23.8%30.1%, for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022,2023. The increase was due primarily to higher local currency revenue from strong, broad-based growth inacross all aspects of the business, including online, batch, consumer and commercial credit markets fueled by healthy consumers who continued to spend despite rising inflation, including fraud, employment screening and consumer offerings, partially offset by a decrease of 8.3% and 10.0% in each respective period volumes. Revenue decreased 1.2% from the impact of foreign currencies.
Asia Pacific: Revenue increased $3.5$3.6 million, or 18.4%, and $7.3 million, or 20.5%16.7%, for the three and six months ended June 30, 2023, respectively,March 31, 2024, compared with the same periodsperiod in 2022,2023. The increase was due primarily to higher local currency revenue from increased volumes resulting from improved macroeconomic conditions, including new businessstrong growth in the financial services market, new product adoptionsPhilippines across key banking clients, along with growth in Hong Kong from our FinTech and increased volume in our consumer offerings, partially offset by a decrease of 1.6% and 1.9% in each respective period other clients. Revenue decreased 0.5% from the impact of foreign currencies.
Adjusted EBITDA
For the three and six months ended June 30, 2023, Adjusted EBITDA increased $4.3$19.5 million and $8.3 million, respectively, due primarily to an increase in revenue, partially offset by an increase in labor costs to support growth initiatives in certain regions.
For the three and six months ended June 30, 2023, Adjusted EBITDA margins for the International segment decreased due primarily to an increase in labor costs to support growth initiatives in certain regions, partially offset by an increase in local currency revenue and improving market conditions in most of our regions.
Consumer Interactive Segment
Revenue
Consumer Interactive revenue decreased $3.4 million, or 2.3%, and $10.7 million, or 3.6%, respectively, for the three and six months ended June 30, 2023,March 31, 2024, compared with the same periods period in 2022,2023. The increase was due primarily to a decrease in increased revenue in our direct channelIndia and other regions, as reduced advertising and slowing macroeconomic conditions significantly reduced consumer demand for our paid credit products, partially offset by an increase indiscussed above. Adjusted EBITDA margins increased 2.3% because of higher margin revenue in our indirect channel. In our indirect channel, revenue increased due primarily to higher volumes and new contracts with existing customers, partially offset by a prior year breach services contract.India.
Adjusted EBITDA
Adjusted EBITDA was relatively flat as the decrease in advertising expense was partially offset by a decrease in revenue.
For the three and six months ended June 30, 2023, Adjusted EBITDA margin for the Consumer Interactive segment increased due to a decrease in advertising costs and revenue growth in our indirect channel, partially offset by a decrease in revenue in our direct channel.
Non-GAAP measures—Three and Six Months Ended June 30,March 31, 2024 and 2023 and 2022:
In addition to the GAAP measures discussed above, Management, including our CODM, evaluates the financial performance of our businesses based on the non-GAAP measures Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings per Share, Adjusted Provision for Income Taxes, Adjusted Effective Tax Rate and Leverage Ratio.
Non-GAAP Financial Measures
We present Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings per Share, Adjusted Provision for Income Taxes, Adjusted Effective Tax Rate and Leverage Ratio for all periods presented. These are important financial measures for the Company but are not financial measures as defined by GAAP. These financial measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of GAAP. Other companies in our industry may define or calculate these measures differently than we do, limiting their usefulness as comparative measures. Because of these limitations, these non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP, including operating income, operating margin, effective tax rate, net income (loss) attributable to the Company, diluted earnings per share or cash provided by operating activities. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are presented in the tables below.
We present Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings per Share, Adjusted Provision for Income Taxes and Adjusted Effective Tax Rate as supplemental measures of our operating performance because these measures eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. These are measures frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours.
Our board of directorsBoard and executive management team use Adjusted EBITDA as an incentive compensation measure for most eligible employees and Adjusted Diluted Earnings per Share as an incentive compensation measure for certain of our senior executives.
Under the credit agreement governing our Senior Secured Credit Facility, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to our Leverage Ratio which is partially based on Adjusted EBITDA. Investors also use our Leverage Ratio to assess our ability to service our debt and make other capital allocation decisions.
We define Consolidated Adjusted EBITDA as
Management has excluded the following items from net income (loss) attributable to TransUnion lessin order to calculate Adjusted EBITDA for the periods presented:
•Discontinued operations, net of tax, as reported on our Consolidated Statements of Operations. We exclude discontinued operations, net of tax plus netbecause we believe it does not reflect the underlying and ongoing performance of our business operations.
•Net interest expense plus (less) provision (benefit) is the sum of interest expense and interest income as reported on our Consolidated Statements of Operations.
•Provision for income taxes, plus depreciation as reported on our Consolidated Statements of Operations.
•Depreciation and amortization, plus as reported on our Consolidated Statements of Operations.
•Stock-based compensation is used as an incentive to engage and retain our employees. It is predominantly a non-cash expense. We exclude stock-based compensation plus mergers,because it may not correlate to the underlying performance of our business operations during the period since it is measured at the grant date fair value and it is subject to variability as a result of performance conditions and timing of grants. These expenses are reported within cost of services and selling, general and administrative on our Consolidated Statements of Operations.
•Operating model optimization program represents employee separation costs, facility lease exit costs, and other business process optimization expenses incurred in connection with the transformation plan discussed further in “Results of Operations – Factors Affecting Our Results of Operations.” We exclude these expenses as we believe they are not directly correlated to the underlying performance of our business. Further, these costs will vary and may not be comparable during the transformation initiative as we progress toward an optimized operating model. These costs are reported primarily in selling, general and administrative and restructuring expenses on our Consolidated Statements of Operations.
•Accelerated technology investment includes Project Rise and the final phase of our technology investment announced in November 2023. Project Rise was announced in February 2020 and was originally expected to be completed in 2022. Following our acquisition of Neustar in December 2021, we recognized the opportunity to take advantage of Neustar’s capabilities to enhance and complement our cloud-based technology already under development as part of Project Rise. As a result, we extended Project Rise’s timeline to 2024 and increased the total estimated cost to approximately $240 million. In November 2023, we announced our plans to further leverage Neustar’s technology to standardize and streamline our product delivery platforms and to build a single global platform for fulfillment of our product lines. The additional investment is expected to be approximately $90 million during 2024 and 2025 and represents the final phase of the technology investment in our global technology infrastructure and core customer applications. We expect that the accelerated technology investment will fundamentally transform our technology infrastructure by implementing a global cloud-based approach to streamline product development, increase the efficiency of ongoing operations and maintenance and enable a continuous improvement approach to avoid the need for another major technology overhaul in the foreseeable future. The unique effort to build a secure, reliable and performant hybrid cloud infrastructure requires us to dedicate separate resources in order to develop the new cloud-based infrastructure in parallel with our current on-premise environment by maintaining our existing technology team to ensure no disruptions to our customers. The costs associated with the accelerated technology investment are incremental and redundant costs that will not recur after the program has been completed and are not representative of our underlying operating performance. Therefore, we believe that excluding these costs from our non-GAAP measures provides a better reflection of our ongoing cost structure. These costs are primarily reported in cost of services and therefore do not include amounts that are capitalized as internally developed software.
•Mergers and acquisitions, divestitures and business optimization-relatedoptimization expenses including Neustar integration-relatedare non-recurring expenses plus certain accelerated technology investmentassociated with specific transactions (exploratory or executed) and consist of (i) transaction and integration costs, (ii) post-acquisition adjustments to contingent consideration or to assets and liabilities that occurred after the acquisition measurement period, (iii) fair value and impairment adjustments related to investments and call and put options, (iv) transition services agreement income, and (v) a loss on disposal of a business. We exclude these expenses to migrateas we believe they are not directly correlated to the cloud, plus (less) certainunderlying performance of our business operations and vary depending upon the timing of such transactions. These expenses are reported in costs of services, selling, general and administrative and other income and (expenses), net, on our Consolidated Statements of Operations.
•Net other adjustments principally relate to: (i) deferred loan fee expense from debt prepayments and refinancing, (ii) currency remeasurement on foreign operations, (iii) other debt financing expenses consisting primarily of revolving credit facility deferred financing fee amortization and commitment fees and expenses associated with ratings agencies and interest rate hedging, (iv) legal and regulatory expenses, net, and (v) other non-operating (income). expense. We defineexclude these expenses as we believe they are not directly correlated to the underlying performance of our business and create variability between periods based on the nature and timing of the expense or income. These costs are reported in selling, general and administrative and in non-operating income and expense, net as applicable based on their nature on our Consolidated Statements of Operations.
Consolidated Adjusted EBITDA Margin
Management defines Consolidated Adjusted EBITDA Margin as Consolidated Adjusted EBITDA divided by total revenue as reported.
We define
Adjusted Net Income
Management has excluded the following items from net income attributable to TransUnion in order to calculate Adjusted Net Income as net income (loss) attributable to TransUnion, less discontinuedfor the periods presented:
•Discontinued operations, net of tax plus stock-based compensation, plus mergers, acquisitions, divestitures and business optimization-related expenses, including Neustar integration-related expenses, plus certain accelerated technology investment expenses, plus (less) certain other expenses (income), plus amortization (see Consolidated Adjusted EBITDA above)
•Amortization of certain intangible assets plus or minus presents non-cash amortization expenses related to assets that arose from our 2012 change in control transaction and business combinations occurring after our 2012 change in control. We exclude these expenses as we believe they are not directly correlated to the totalunderlying performance of our business operations and vary dependent upon the timing of the transactions that give rise to these assets. Amortization of intangible assets is included in depreciation and amortization on our Consolidated Statements of Operations.
•Stock-based compensation (see Consolidated Adjusted EBITDA above)
•Operating model optimization program (see Consolidated Adjusted EBITDA above)
•Accelerated technology investment (see Consolidated Adjusted EBITDA above)
•Mergers and acquisitions, divestiture and business optimization (see Consolidated Adjusted EBITDA above)
•Net other is consistent with the definition in Consolidated Adjusted EBITDA above except that other debt financing expenses and certain other miscellaneous income and expense that are included in the adjustment to calculate Adjusted EBITDA are excluded in the adjustment made to calculate Adjusted Net Income.
•Total adjustments for income taxes included in our relates to the cumulative adjustments discussed below for Adjusted Provision for Income Taxes. We defineThis adjustment is made for the reasons indicated in Adjusted Provision for Income Taxes below. Adjustments related to the provision for income taxes are included in the line item by this name on our consolidated statement of operations.
Adjusted Diluted Earnings Per Share
Management defines Adjusted Diluted Earnings per Share as Adjusted Net Income divided by the weighted-average diluted shares outstanding.
Adjusted Provision for Income Taxes
Management has excluded the following items from our provision for income taxes for the periods presented:
•Tax effect of above adjustments represents the income tax effect of the adjustments related to Adjusted Net Income described above. The tax rate applied to each adjustment is based on the nature of each line item. We defineinclude the tax effect of the adjustments made to Adjusted Net Income to provide a comprehensive view of our adjusted net income.
•Excess tax expense (benefit) for stock-based compensation is the permanent difference between expenses recognized for book purposes and expenses recognized for tax purposes, in each case related to stock-based compensation expense. We exclude this amount from the Adjusted Provision for Income Taxes as our provision for income taxes, plus or minusin order to be consistent with the tax impact onexclusion of stock-based compensation from the adjustment included incalculation of Adjusted Net Income, plusIncome.
•Other principally relates to (i) deferred tax adjustments, including rate changes, (ii) infrequent or minus the impact of excessunusual valuation allowance adjustments, (iii) return to provision, tax benefits for share compensation, plus or minus other items that relateauthority audit adjustments, and reserves related to prior periods, such as valuation allowance changes, deferred tax rate
and return-to-provision adjustments, and(iv) other unusualnon-recurring items. We exclude these items because they create variability that are included in our provision for income taxes. We defineimpacts comparability between periods.
Adjusted Effective Tax Rate
Management defines Adjusted Effective Tax Rate as Adjusted Provision for Income Taxes divided by adjusted income from continuing operations before income taxes. We calculate adjusted income from continuing operations before income taxes by excluding the pre-tax adjustments in the calculation of Adjusted Net Income.Income discussed above and noncontrolling interest related to these pre-tax adjustments from income from continuing operations before income taxes.
We define
Leverage Ratio
Management defines Leverage Ratio as net debt divided by Consolidated Adjusted EBITDA for the most recent twelve-month period including twelve months of Adjusted EBITDA from significant acquisitions. Since the Leverage Ratio is calculated on a trailing twelve-month basis, prior period goodwill impairment is excluded as this expense may not directly correlate to the underlying performance of our business operations during that period and may vary significantly between periods. Net debt is defined as total debt less cash and cash equivalents as reported on the balance sheet as of the end of the period.
For the three and six months ended June 30, 2023March 31, 2024 and 2022,2023, these non-GAAP measures were as follows:
Adjusted EBITDA and Adjusted EBITDA Margin:Margin
| | | | Three Months Ended June 30, | Change | | Six Months Ended June 30, | Change |
| | | 2023 vs. 2022 | | 2023 vs. 2022 |
| (dollars in millions) | 2023 | | 2022 | | $ | | % | | 2023 | | 2022 | | $ | | % |
| Reconciliation of net income attributable to TransUnion to consolidated Adjusted EBITDA: | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| 2024 | |
| 2024 | |
| 2024 | |
| Reconciliation of Net income attributable to TransUnion to consolidated Adjusted EBITDA: | |
| Reconciliation of Net income attributable to TransUnion to consolidated Adjusted EBITDA: | |
| Reconciliation of Net income attributable to TransUnion to consolidated Adjusted EBITDA: | |
| Net income attributable to TransUnion | |
| Net income attributable to TransUnion | |
| Net income attributable to TransUnion | Net income attributable to TransUnion | $ | 53.9 | | | $ | 95.6 | | $ | (41.6) | | | (43.5) | % | | $ | 106.5 | | $ | 143.9 | | $ | (37.4) | | | (26.0) | % |
| Discontinued operations, net of tax | Discontinued operations, net of tax | 0.2 | | | (0.3) | | 0.5 | | | nm | | 0.2 | | — | | | 0.2 | | | nm |
| Discontinued operations, net of tax | |
| Discontinued operations, net of tax | |
| Income from continuing operations attributable to TransUnion | |
| Income from continuing operations attributable to TransUnion | |
| Income from continuing operations attributable to TransUnion | Income from continuing operations attributable to TransUnion | $ | 54.1 | | | $ | 95.3 | | $ | (41.2) | | | (43.2) | % | | $ | 106.8 | | $ | 143.9 | | $ | (37.1) | | | (25.8) | % |
| Net interest expense | Net interest expense | 68.4 | | | 50.7 | | 17.7 | | | 34.9 | % | | 134.3 | | 100.2 | | 34.2 | | | 34.1 | % |
| Net interest expense | |
| Net interest expense | |
| Provision for income taxes | |
| Provision for income taxes | |
| Provision for income taxes | Provision for income taxes | 19.3 | | | 29.2 | | (9.9) | | | (33.9) | % | | 37.9 | | 53.5 | | (15.7) | | | (29.3) | % |
| Depreciation and amortization | Depreciation and amortization | 130.1 | | | 130.6 | | (0.5) | | | (0.4) | % | | 259.8 | | 259.4 | | 0.4 | | | 0.2 | % |
| Depreciation and amortization | |
| Depreciation and amortization | |
| EBITDA | |
| EBITDA | |
| EBITDA | EBITDA | $ | 271.8 | | | $ | 305.7 | | $ | (33.9) | | | (11.1) | % | | $ | 538.8 | | $ | 557.1 | | $ | (18.3) | | | (3.3) | % |
| Adjustments to EBITDA: | Adjustments to EBITDA: | |
Stock-based compensation1 | 24.1 | | | 20.3 | | 3.8 | | | 18.9 | % | | 46.3 | | 40.8 | | 5.4 | | | 13.3 | % |
Mergers and acquisitions, divestitures and business optimization2 | 21.5 | | | 14.0 | | 7.5 | | | 53.5 | % | | 30.4 | | 28.6 | | 1.8 | | | 6.3 | % |
Accelerated technology investment3 | 17.6 | | | 8.1 | | 9.5 | | | nm | | 37.3 | | 20.1 | | 17.1 | | | 85.2 | % |
| Adjustments to EBITDA: | |
| Adjustments to EBITDA: | |
Operating model optimization program1 | |
Operating model optimization program1 | |
Operating model optimization program1 | |
| Stock-based compensation | |
| Stock-based compensation | |
| Stock-based compensation | |
Accelerated technology investment2 | |
Accelerated technology investment2 | |
Accelerated technology investment2 | |
Mergers and acquisitions, divestitures and business optimization3 | |
Mergers and acquisitions, divestitures and business optimization3 | |
Mergers and acquisitions, divestitures and business optimization3 | |
| Net other4 | |
| Net other4 | |
| Net other4 | Net other4 | 4.1 | | | 2.2 | | 1.9 | | | 88.1 | % | | 8.7 | | 37.9 | | (29.2) | | | (77.0) | % |
| Total adjustments to EBITDA | Total adjustments to EBITDA | $ | 67.3 | | | $ | 44.6 | | $ | 22.7 | | | 51.0 | % | | $ | 122.7 | | $ | 127.5 | | $ | (4.8) | | | (3.8) | % |
| Total adjustments to EBITDA | |
| Total adjustments to EBITDA | |
| Consolidated Adjusted EBITDA | |
| Consolidated Adjusted EBITDA | |
| Consolidated Adjusted EBITDA | Consolidated Adjusted EBITDA | $ | 339.1 | | | $ | 350.3 | | $ | (11.2) | | | (3.2) | % | | $ | 661.5 | | $ | 684.5 | | $ | (23.1) | | | (3.4) | % |
| | Net income attributable to TransUnion margin | Net income attributable to TransUnion margin | 5.6 | % | | 10.1 | % | | (4.5) | % | | 5.6 | % | | 7.7 | % | | (2.1) | % |
| | Net income attributable to TransUnion margin | |
| | Net income attributable to TransUnion margin | |
Consolidated Adjusted EBITDA margin5 | Consolidated Adjusted EBITDA margin5 | 35.0 | % | | 36.9 | % | | (1.9) | % | | 34.7 | % | | 36.6 | % | | (2.0) | % |
Consolidated Adjusted EBITDA margin5 | |
Consolidated Adjusted EBITDA margin5 | |
nm: not meaningful
As a result of displaying amounts in millions, rounding differences may exist in the table above.
1.ConsistedConsists of stock-based compensation, including amounts which are cash settled.restructuring expenses of $16.8 million related to employee separation costs and $1.4 million related to non-cash facility lease impairments, as well as $6.2 million related to business process optimization expenses included primarily in selling, general and administrative.
2.Represents expenses associated with our accelerated technology investment to migrate to the cloud. There are three components of the accelerated technology investment: (i) building foundational capabilities which includes establishing a modern, API-based and services-oriented software architecture, (ii) the migration of each application and customer data to the new enterprise platform, including the redundant software costs during the migration period, as well as the efforts to decommission the legacy system, and (iii) program enablement, which includes dedicated resources to support the planning and execution of the program. The amounts for each category of cost are as follows:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
| Foundational Capabilities | | $ | 6.8 | | | $ | 10.2 | |
| Migration Management | | 10.1 | | | 7.9 | |
| Program Enablement | | 1.7 | | | 1.6 | |
| Total accelerated technology investment | | $ | 18.5 | | | $ | 19.7 | |
3.Mergers and acquisitions, divestitures and business optimization consisted of the following adjustments:
For the three months ended June 30, 2023, a $9.1 million loss on the impairment of a Cost Method Investment; $5.5 million of Neustar integration costs; a $5.1 million adjustment to the fair value of a put option liability related to a minority investment; a $2.5 million adjustment to a liability from a recent acquisition; $2.4 million of acquisition expenses; a $(2.3) million adjustment to the fair value of a note receivable; and $(0.7) million of reimbursements for transition services related to divested businesses, net of separation expenses.
For the six months ended June 30, 2023, $11.5 million of Neustar integration costs; a $9.1 million loss on the impairment of a Cost Method Investment; a $5.5 million adjustment to the fair value of a put option liability related to a minority investment; $5.1 million of adjustments to liabilities from a recent acquisition; $3.8 million of acquisition expenses; a $(2.3) million adjustment to fair value of a note receivable; $(1.3) million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $(0.8) million gain on the disposal of a Cost Method Investment.
For the three months ended June 30, 2022, $9.0 million of acquisition expenses; $7.7 million of Neustar integration costs; $(1.8) million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $(0.9) million adjustment to fair value of a put option related to a minority investment.
For the six months ended June 30, 2022, $17.9 million of acquisition expenses; $16.7 million of Neustar integration costs; $(5.3) million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $(0.8) million adjustment to the fair value of a put option related to a minority investment.
3.Represents expenses associated with our accelerated technology investment to migrate to the cloud. | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
| Transaction and integration costs | | $ | 2.2 | | | $ | 7.4 | |
| Post-acquisition adjustments | | 6.9 | | | 2.5 | |
| Fair value and impairment adjustments | | 0.1 | | | (0.4) | |
| Transition services agreement income | | — | | | (0.6) | |
| Total mergers and acquisitions, divestitures and business optimization | | $ | 9.2 | | | $ | 8.9 | |
4.Net other consisted of the following adjustments:
For the three months ended June 30, 2023, $1.0 million of deferred loan fees written off as a result of the prepayment on our debt; and a $3.1 million net loss from currency remeasurement of our foreign operations, loan fees and other.
For the six months ended June 30, 2023, $2.1 million of deferred loan fees written off as a result of the prepayment on our debt; and a $6.6 million net loss from currency remeasurement of our foreign operations, loan fees and other.
For the three months ended June 30, 2022, $2.2 million of net other, which includes net losses from currency remeasurement of our foreign operations, loan fees and other.
For the six months ended June 30, 2022, $28.4 million for certain legal and regulatory expenses; $6.5 million of deferred loan fees written off as a result of the prepayments on our debt; and $3.0 million of net other, which includes net losses from currency remeasurement of our foreign operations, loan fees and other. | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
| Deferred loan fee expense from debt prepayments and refinancing | | $ | 3.1 | | | $ | 1.1 | |
| Currency remeasurement on foreign operations | | 2.6 | | | 2.7 | |
| Other debt financing expenses | | 0.6 | | | 0.6 | |
| Other non-operating expense | | 0.2 | | | 0.2 | |
| Total other adjustments | | $ | 6.5 | | | $ | 4.6 | |
5.Consolidated Adjusted EBITDA margin is calculated by dividing Consolidated Adjusted EBITDA by total revenue.
Consolidated Adjusted EBITDA
Consolidated Adjusted EBITDA decreased $11.2 million and $23.1increased $35.8 million for the three and six months ended June 30, 2023,March 31, 2024, compared with the same periods in 2022.
The decrease was 2023, primarily due primarily to:
•to an increase in labor costs as we continue to invest in key strategic growth initiatives; and
•operating costs of our 2022 acquisition,
revenue partially offset by:by higher product costs, employee-related expenses and legal and regulatory expenses.
• a decrease in advertising expense; and
•For the three months ended March 31, 2024, Consolidated Adjusted EBITDA margin increased primarily due to an increase in revenue.
Consolidated Adjusted EBITDA Margin
For the three and six months ended June 30, 2023, Adjusted EBITDA margin decreased due primarily to lower margins from our recent acquisitions and higher variable product costs in our U.S. Markets segment.
Adjusted Net Income and Adjusted Diluted Earnings Per Share
| | Three Months Ended June 30, | Change | | Six Months Ended June 30, | Change |
| 2023 vs. 2022 | | 2023 vs. 2022 |
| (dollars in millions) | 2023 | | 2022 | | $ | | % | | 2023 | | 2022 | | $ | | % |
| Reconciliation of net income attributable to TransUnion to Adjusted Net Income: | | | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| | 2024 vs. 2023 | |
| | 2024 vs. 2023 | |
| | 2024 vs. 2023 | |
| 2024 | |
| 2024 | |
| 2024 | |
| Reconciliation of Net income attributable to TransUnion to Adjusted Net Income: | |
| Reconciliation of Net income attributable to TransUnion to Adjusted Net Income: | |
| Reconciliation of Net income attributable to TransUnion to Adjusted Net Income: | |
| Net income attributable to TransUnion | |
| Net income attributable to TransUnion | |
| Net income attributable to TransUnion | Net income attributable to TransUnion | $ | 53.9 | | | $ | 95.6 | | | $ | (41.6) | | | (43.6) | % | | $ | 106.5 | | | $ | 143.9 | | | $ | (37.3) | | | (26.0) | % |
| Discontinued operations, net of tax | Discontinued operations, net of tax | 0.2 | | | (0.3) | | | 0.5 | | | nm | | 0.2 | | | — | | | 0.2 | | | nm |
| Discontinued operations, net of tax | |
| Discontinued operations, net of tax | |
| Income from continuing operations attributable to TransUnion | |
| Income from continuing operations attributable to TransUnion | |
| Income from continuing operations attributable to TransUnion | Income from continuing operations attributable to TransUnion | $ | 54.1 | | | $ | 95.3 | | | $ | (41.2) | | | (43.2) | % | | $ | 106.8 | | | $ | 143.9 | | $ | (37.2) | | | (25.8) | % |
| Adjustments before income tax items: | Adjustments before income tax items: | |
Stock-based compensation1 | 24.1 | | | 20.3 | | | 3.8 | | | 18.9 | % | | 46.3 | | | 40.8 | | | 5.4 | | | 13.3 | % |
Mergers and acquisitions, divestitures and business optimization2 | 21.5 | | | 14.0 | | | 7.5 | | | 53.5 | % | | 30.4 | | | 28.6 | | | 1.8 | | | 6.3 | % |
| Adjustments before income tax items: | |
| Adjustments before income tax items: | |
Amortization of certain intangible assets1 | |
Amortization of certain intangible assets1 | |
Amortization of certain intangible assets1 | |
Operating model optimization program2 | |
Operating model optimization program2 | |
Operating model optimization program2 | |
| Stock-based compensation | |
| Stock-based compensation | |
| Stock-based compensation | |
Accelerated technology investment3 | Accelerated technology investment3 | 17.6 | | | 8.1 | | | 9.5 | | | nm | | 37.3 | | | 20.1 | | | 17.1 | | | 85.2 | % |
Net other4 | 4.0 | | | 1.8 | | | 2.2 | | | nm | | 7.8 | | | 37.0 | | | (29.3) | | | nm |
Amortization of certain intangible assets5 | 73.9 | | | 78.2 | | | (4.3) | | | (5.5) | % | | 149.1 | | | 154.4 | | | (5.3) | | | (3.4) | % |
Accelerated technology investment3 | |
Accelerated technology investment3 | |
Mergers and acquisitions, divestitures and business optimization4 | |
Mergers and acquisitions, divestitures and business optimization4 | |
Mergers and acquisitions, divestitures and business optimization4 | |
Net other5 | |
Net other5 | |
Net other5 | |
| Total adjustments before income tax items | Total adjustments before income tax items | $ | 141.2 | | | $ | 122.4 | | | $ | 18.8 | | | 15.3 | % | | $ | 270.8 | | | $ | 281.1 | | | $ | (10.2) | | | (3.6) | % |
| Change in provision for income taxes | (28.8) | | | (28.1) | | | (0.6) | | | 2.2 | % | | (55.7) | | | (56.6) | | | 0.9 | | | (1.7) | % |
| Total adjustments before income tax items | |
| Total adjustments before income tax items | |
Total adjustments for income taxes6 | |
Total adjustments for income taxes6 | |
Total adjustments for income taxes6 | |
| Adjusted Net Income | |
| Adjusted Net Income | |
| Adjusted Net Income | Adjusted Net Income | $ | 166.5 | | | $ | 189.5 | | | $ | (23.0) | | | (12.1) | % | | $ | 321.9 | | | $ | 368.3 | | | $ | (46.4) | | | (12.6) | % |
| | Weighted-average shares outstanding: | Weighted-average shares outstanding: | |
| | Weighted-average shares outstanding: | |
| | Weighted-average shares outstanding: | |
| Basic | Basic | 193.2 | | | 192.5 | | | nm | | nm | | 192.8 | | | 192.3 | | | nm | | nm |
| Basic | |
| Basic | |
| Diluted | |
| Diluted | |
| Diluted | Diluted | 194.0 | | | 193.1 | | | nm | | nm | | 194.0 | | | 193.1 | | | nm | | nm |
| | Adjusted Earnings per Share: | Adjusted Earnings per Share: | |
| | Adjusted Earnings per Share: | |
| | Adjusted Earnings per Share: | |
| Basic | |
| Basic | |
| Basic | Basic | $ | 0.86 | | | $ | 0.98 | | | $ | (0.12) | | | (12.5) | % | | $ | 1.67 | | | $ | 1.92 | | | $ | (0.25) | | | (12.8) | % |
| Diluted | Diluted | $ | 0.86 | | | $ | 0.98 | | | $ | (0.12) | | | (12.6) | % | | $ | 1.66 | | | $ | 1.91 | | | $ | (0.25) | | | (13.0) | % |
| Diluted | |
| Diluted | |
| | | | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | Reconciliation of diluted earnings per share from net income attributable to TransUnion to Adjusted Diluted Earnings per Share: | | | | | | | | |
| | 2024 | |
| | 2024 | |
| | 2024 | |
| Reconciliation of Diluted earnings per share from Net income attributable to TransUnion to Adjusted Diluted Earnings per Share: | |
| Reconciliation of Diluted earnings per share from Net income attributable to TransUnion to Adjusted Diluted Earnings per Share: | |
| Reconciliation of Diluted earnings per share from Net income attributable to TransUnion to Adjusted Diluted Earnings per Share: | |
| Diluted earnings per common share from: | |
| Diluted earnings per common share from: | |
| Diluted earnings per common share from: | Diluted earnings per common share from: | |
| Net income attributable to TransUnion | Net income attributable to TransUnion | | $ | 0.28 | | | $ | 0.49 | | | $ | 0.55 | | | $ | 0.75 | |
| Net income attributable to TransUnion | |
| Net income attributable to TransUnion | |
| Discontinued operations, net of tax | |
| Discontinued operations, net of tax | |
| Discontinued operations, net of tax | Discontinued operations, net of tax | | — | | | — | | | — | | | — | |
| Income from continuing operations attributable to TransUnion | Income from continuing operations attributable to TransUnion | | $ | 0.28 | | | $ | 0.49 | | | $ | 0.55 | | | $ | 0.75 | |
| Income from continuing operations attributable to TransUnion | |
| Income from continuing operations attributable to TransUnion | |
| Adjustments before income tax items: | Adjustments before income tax items: | |
Stock-based compensation1 | | 0.12 | | | 0.10 | | | 0.24 | | | 0.21 | |
Mergers and acquisitions, divestitures and business optimization2 | | 0.11 | | | 0.07 | | | 0.16 | | | 0.15 | |
| Adjustments before income tax items: | |
| Adjustments before income tax items: | |
Amortization of certain intangible assets1 | |
Amortization of certain intangible assets1 | |
Amortization of certain intangible assets1 | |
Operating model optimization program2 | |
Operating model optimization program2 | |
Operating model optimization program2 | |
| Stock-based compensation | |
| Stock-based compensation | |
| Stock-based compensation | |
Accelerated technology investment3 | Accelerated technology investment3 | | 0.09 | | | 0.04 | | | 0.19 | | | 0.10 | |
Net other4 | | 0.02 | | | 0.01 | | | 0.04 | | | 0.19 | |
Amortization of certain intangible assets5 | | 0.38 | | | 0.41 | | | 0.77 | | | 0.80 | |
Accelerated technology investment3 | |
Accelerated technology investment3 | |
Mergers and acquisitions, divestitures and business optimization4 | |
Mergers and acquisitions, divestitures and business optimization4 | |
Mergers and acquisitions, divestitures and business optimization4 | |
Net other5 | |
Net other5 | |
Net other5 | |
| Total adjustments before income tax items | Total adjustments before income tax items | | $ | 0.73 | | | $ | 0.63 | | | $ | 1.40 | | | $ | 1.46 | |
| Change in provision for income taxes | | (0.15) | | | (0.15) | | | (0.29) | | | (0.29) | |
| Total adjustments before income tax items | |
| Total adjustments before income tax items | |
Total adjustments for income taxes6 | |
Total adjustments for income taxes6 | |
Total adjustments for income taxes6 | |
| Adjusted Diluted Earnings per Share | Adjusted Diluted Earnings per Share | | $ | 0.86 | | | $ | 0.98 | | | $ | 1.66 | | | $ | 1.91 | |
| Adjusted Diluted Earnings per Share | |
| Adjusted Diluted Earnings per Share | |
As a resultEach component of displaying amounts in millions,earnings per share is calculated independently, therefore, rounding differences may exist in the table above and footnotes below.above.
1.Consisted of stock-based compensation, including amounts which are cash settled.
2.Mergers and acquisitions, divestitures and business optimization consisted of the following adjustments:
For the three months ended June 30, 2023, a $9.1 million loss on the impairment of a Cost Method Investment; $5.5 million of Neustar integration costs; a $5.1 million adjustment to the fair value of a put option liability related to a minority investment; a $2.5 million adjustment to a liability from a recent acquisition; $2.4 million of acquisition expenses; a $(2.3) million adjustment to the fair value of a note receivable; and $(0.7) million of reimbursements for transition services related to divested businesses, net of separation expenses.
For the six months ended June 30, 2023, $11.5 million of Neustar integration costs; a $9.1 million loss on the impairment of a Cost Method Investment; a $5.5 million adjustment to the fair value of a put option liability related to a minority investment; $5.1 million of adjustments to liabilities from a recent acquisition; $3.8 million of acquisition expenses; a $(2.3) million adjustment to fair value of a note receivable; $(1.3) million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $(0.8) million gain on the disposal of a Cost Method Investment.
For the three months ended June 30, 2022, $9.0 million of acquisition expenses; $7.7 million of Neustar integration costs; $(1.8) million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $(0.9) million adjustment to fair value of a put option related to a minority investment.
For the six months ended June 30, 2022, $17.9 million of acquisition expenses; $16.7 million of Neustar integration costs; $(5.3) million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $(0.8) million adjustment to the fair value of a put option related to a minority investment.
3.Represents expenses associated with our accelerated technology investment to migrate to the cloud.
4.Net other consisted of the following adjustments:
For the three months ended June 30, 2023, $1.0 million of deferred loan fees written off as a result of the prepayment on our debt; and a $3.0 million net loss from currency remeasurement of our foreign operations and other.
For the six months ended June 30, 2023, $2.1 million of deferred loan fees written off as a result of the prepayment on our debt; and a $5.7 million net loss from currency remeasurement of our foreign operations and other.
For the three months ended June 30, 2022, $1.8 million of net other, which includes net losses from currency remeasurement of our foreign operations and other.
For the six months ended June 30, 2022, $28.4 million for certain legal and regulatory expenses; $6.5 million of deferred loan fees written off as a result of the prepayments on our debt; and $2.1 million of net other, which includes net losses from currency remeasurement of our foreign operations and other.
5.ConsistedConsists of amortization of intangible assets from our 2012 change-in-control transaction and amortization of intangible assets established in business acquisitions after our 2012 change-in-control transaction.
2.Consists of restructuring expenses of $16.8 million related to employee separation costs and $1.4 million related to non-cash facility lease impairments, as well as $6.2 million related to business process optimization expenses included primarily in selling, general and administrative.
3.Represents expenses associated with our accelerated technology investment to migrate to the cloud. There are three components of the accelerated technology investment: (i) building foundational capabilities which includes establishing a modern, API-based and services-oriented software architecture, (ii) the migration of each application and customer data to the new enterprise platform, including the redundant software costs during the migration period, as well as the efforts to decommission the legacy system, and (iii) program enablement, which includes dedicated resources to support the planning and execution of the program. The amounts for each category of cost are as follows:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
| Foundational Capabilities | | $ | 6.8 | | | $ | 10.2 | |
| Migration Management | | 10.1 | | | 7.9 | |
| Program Enablement | | 1.7 | | | 1.6 | |
| Total accelerated technology investment | | $ | 18.5 | | | $ | 19.7 | |
4.Mergers and acquisitions, divestitures and business optimization consisted of the following adjustments:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
| Transaction and integration costs | | $ | 2.2 | | | $ | 7.4 | |
| Post-acquisition adjustments | | 6.9 | | | 2.5 | |
| Fair value and impairment adjustments | | 0.1 | | | (0.4) | |
| Transition services agreement income | | — | | | (0.6) | |
| Total mergers and acquisitions, divestitures and business optimization | | $ | 9.2 | | | $ | 8.9 | |
5.Net other consisted of the following adjustments:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
| Deferred loan fee expense from debt prepayments and refinancing | | $ | 3.1 | | | $ | 1.1 | |
| Currency remeasurement on foreign operations | | 2.6 | | | 2.7 | |
| Other non-operating (income) and expense | | 0.2 | | | — | |
| Total other adjustments | | $ | 5.9 | | | $ | 3.8 | |
6.Total adjustments for income taxes represents the total of adjustments discussed to calculate the Adjusted Provision for Income Taxes.
Adjusted Net Income
For the three and six months ended June 30, 2023, the decrease inMarch 31, 2024, Adjusted Net Income wasdecreased slightly, due primarily to an increase in interest expense, and a decrease in operating income, partially offset by a decreasean increase in Adjusted Provision for Income Taxes.interest income.
Adjusted Provision for Income Taxes and Adjusted Effective Tax Rate
| | | | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | |
| | 2024 | |
| | 2024 | |
| | 2024 | |
| Income from continuing operations before income taxes | |
| Income from continuing operations before income taxes | |
| Income from continuing operations before income taxes | Income from continuing operations before income taxes | | $ | 76.6 | | | $ | 128.5 | | | $ | 152.2 | | | $ | 205.2 | |
| Total adjustments before income tax items from Adjusted Net Income table above | Total adjustments before income tax items from Adjusted Net Income table above | | 141.2 | | | 122.4 | | | 270.8 | | | 281.1 | |
| Total adjustments before income tax items from Adjusted Net Income table above | |
| Total adjustments before income tax items from Adjusted Net Income table above | |
| Adjusted income from continuing operations before income taxes | |
| Adjusted income from continuing operations before income taxes | |
| Adjusted income from continuing operations before income taxes | Adjusted income from continuing operations before income taxes | | $ | 217.8 | | | $ | 250.9 | | | $ | 423.0 | | | $ | 486.3 | |
| | Reconciliation of provision for income taxes to Adjusted Provision for Income Taxes: | |
| Reconciliation of Provision for income taxes to Adjusted Provision for Income Taxes: | |
| | Reconciliation of Provision for income taxes to Adjusted Provision for Income Taxes: | |
| | Reconciliation of Provision for income taxes to Adjusted Provision for Income Taxes: | |
| Provision for income taxes | |
| Provision for income taxes | |
| Provision for income taxes | Provision for income taxes | | (19.3) | | | (29.2) | | | (37.9) | | | (53.5) | |
| Adjustments for income taxes: | Adjustments for income taxes: | |
Tax effect of above adjustments1 | | (32.6) | | | (28.2) | | | (62.2) | | | (56.6) | |
| Eliminate impact of excess tax expenses/(benefits) for stock-based compensation | | 0.6 | | | (0.8) | | | 2.1 | | | (5.0) | |
Other2 | | 3.2 | | | 0.8 | | | 4.4 | | | 4.9 | |
| Adjustments for income taxes: | |
| Adjustments for income taxes: | |
| Tax effect of above adjustments | |
| Tax effect of above adjustments | |
| Tax effect of above adjustments | |
| Eliminate impact of excess tax expenses for stock-based compensation | |
| Eliminate impact of excess tax expenses for stock-based compensation | |
| Eliminate impact of excess tax expenses for stock-based compensation | |
Other1 | |
Other1 | |
Other1 | |
| Total adjustments for income taxes | Total adjustments for income taxes | | $ | (28.8) | | | $ | (28.1) | | | $ | (55.7) | | | $ | (56.6) | |
| Total adjustments for income taxes | |
| Total adjustments for income taxes | |
| Adjusted Provision for Income Taxes | |
| Adjusted Provision for Income Taxes | |
| Adjusted Provision for Income Taxes | Adjusted Provision for Income Taxes | | $ | (48.1) | | | $ | (57.3) | | | $ | (93.6) | | | $ | (110.2) | |
| | Effective tax rate | Effective tax rate | | 25.2 | % | | 22.7 | % | | 24.9 | % | | 26.1 | % |
| | Effective tax rate | |
| | Effective tax rate | |
| Adjusted Effective Tax Rate | Adjusted Effective Tax Rate | | 22.1 | % | | 22.8 | % | | 22.1 | % | | 22.7 | % |
| Adjusted Effective Tax Rate | |
| Adjusted Effective Tax Rate | |
As a result of displaying amounts in millions, rounding differences may exist in the table above.
1.Tax rates used to calculate the tax expense impact are based on the nature of each item.Other adjustments for income taxes include:
2.Table ofFor the three months ended June 30, 2023, $1.3 million of valuation allowances related to prior periods; $1.2 million of adjustments related to prior periods including audits and return-to-provision; $0.4 million of deferred tax rate adjustments; and $0.3 million of other adjustments.ContentsFor the six months ended June 30, 2023, $1.3 million of other adjustments; $1.2 million of adjustments related to prior periods including audits and return-to-provision; $1.1 million of valuation allowances related to prior periods; and $0.8 million of deferred tax rate adjustments.
For the three months ended June 30, 2022, $0.5 million of other adjustments and $0.3 million of deferred tax rate adjustments.
For the six months ended June 30, 2022, $2.4 million of deferred tax rate adjustments, $2.0 million of other adjustments and $0.5 million of valuation allowances related to prior periods. | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
| Deferred tax adjustments | | $ | (5.1) | | | $ | 0.4 | |
| Valuation allowance adjustments | | 0.2 | | | (0.1) | |
| Return to provision, audit adjustments, and reserves related to prior periods | | (0.9) | | | 0.9 | |
| Other adjustments | | (0.5) | | | — | |
| Total other adjustments | | $ | (6.4) | | | $ | 1.2 | |
Adjusted Provision for Income Taxes
We reported an adjusted tax rate of 22.1% and 22.8%22.5% for the three months ended June 30, 2023 and 2022, respectively, each ofMarch 31, 2024, which is higher than the 21.0% U.S. federal corporate statutory rate, due primarily to increases for state taxes and foreign withholding taxes, partially offset by benefits from the foreign rate differential and the research and development credit.
We reported an adjusted tax rate of 22.1% and 22.7%22.2% for the sixthree months ended MarchJune 30, 2023 and 31, 20222023, respectively, each of which is higher than the 21.0% U.S. federal corporate statutory rate, due primarily to increases for state taxes and foreign withholding taxes, partially offset by benefits from the foreign rate differential and the research and development credit.
Leverage Ratio
| | | | | | | | |
| (dollars in millions) | Trailing Twelve Months Ended June 30, 2023 March 31, 2024 |
Reconciliation of net incomeloss attributable to TransUnion to Adjusted EBITDA: | | |
Net incomeloss attributable to TransUnion | | $ | 232.1 (193.6) | |
| Discontinued operations, net of tax | | (17.2)0.7 | |
IncomeLoss from continuing operations attributable to TransUnion | | $ | 215.0 (193.0) | |
| Net interest expense | | 260.4264.7 | |
| Provision for income taxes | | 104.239.2 | |
| Depreciation and amortization | | 519.4528.7 | |
| EBITDA | | $ | 1,099.0639.6 | |
| Adjustments to EBITDA: | | |
Stock-based compensationGoodwill impairment1
| | $ | 86.5414.0 | |
| Stock-based compensation | | 102.5 | |
Operating model optimization program2 | | 102.0 | |
Accelerated technology investment3 | | 69.4 | |
Mergers and acquisitions, divestitures and business optimization24 | | 52.534.9 | |
Accelerated technology investment3
| | 68.5 | |
Net other45 | | 16.917.0 | |
| Total adjustments to EBITDA | | $ | 224.5739.9 | |
| Leverage Ratio Adjusted EBITDA | | $ | 1,323.51,379.5 | |
| | |
| Total debt | | $ | 5,469.15,330.6 | |
| Less: Cash and cash equivalents | | 442.0433.6 | |
| Net Debt | | $ | 5,027.14,897.0 | |
| | |
Ratio of Net Debt to Net incomeloss attributable to TransUnion | | (25.3) | | 21.7 | |
| Leverage Ratio | | 3.83.5 | |
As a result of displaying amounts in millions, rounding differences may exist in the table above.
1.ConsistedDuring the quarter ended September 30, 2023, we recorded a goodwill impairment of stock-based compensation, including amounts which are cash settled.$414.0 million related to our United Kingdom reporting unit in our International segment.
2.Mergers and acquisitions, divestitures and business optimization consistedConsists of the following adjustments: $27.9restructuring expenses of $88.7 million of Neustar integration costs; a $13.7 million loss on the impairment of Cost Method Investments; $9.6 million of acquisition expenses; a $5.6 million adjustment to the fair value of a put option liability related to a minority investment; a $5.1employee separation costs and $4.8 million adjustment to a liability from a recent acquisition; a $(0.8) million gain on disposal of a Cost Method investment; a $(2.3) million adjustment to the fair value of a note receivable; $(2.8) million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $(3.4)non-cash facility lease impairments, as well as $8.5 million gain related to a government tax reimbursement from a recent business acquisition.process optimization expenses included primarily in selling, general and administrative.
3.Represents expenses associated with our accelerated technology investment to migrate to the cloud. There are three components of the accelerated technology investment: (i) building foundational capabilities which includes establishing a modern, API-based and services-oriented software architecture, (ii) the migration of each application and customer data to the new enterprise platform including the redundant software costs during the migration period, as well as the efforts to decommission the legacy system, and (iii) program enablement, which includes dedicated resources to support the planning and execution of the program. The amounts for each category of cost are as follows:
| | | | | | | | |
| | Trailing Twelve Months Ended March 31, 2024 |
| Foundational Capabilities | | $ | 32.4 | |
| Migration Management | | 31.8 | |
| Program Enablement | | 5.3 | |
| Total accelerated technology investment | | $ | 69.4 | |
4.Mergers and acquisitions, divestitures and business optimization consisted of the following adjustments:
| | | | | | | | |
| | Trailing Twelve Months Ended March 31, 2024 |
| Transaction and integration costs | | $ | 25.7 | |
| Post-acquisition adjustments | | 6.0 | |
| Fair value and impairment adjustments | | 4.8 | |
| Transition services agreement income | | (1.9) | |
| Loss on business disposal | | 0.3 | |
| Total mergers and acquisitions, divestitures and business optimization | | $ | 34.9 | |
4.5.Net other consisted of the following adjustments: a $10.4 million net loss from currency
| | | | | | | | |
| | Trailing Twelve Months Ended March 31, 2024 |
| Deferred loan fee expense from debt prepayments and refinancing | | $ | 11.3 | |
| Currency remeasurement on foreign operations | | 4.7 | |
| Other debt financing expenses | | 2.1 | |
| Other non-operating (income) and expense | | (1.0) | |
| Total other adjustments | | $ | 17.0 | |
Application of Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”). The notes to our consolidated financial statements include disclosures about our significant accounting policies. These accounting policies require us to make certain judgments and estimates in reporting our operating results and our assets and liabilities. See Part II, Item 7, “Application of Critical Accounting Estimates” and Part II, Item 8, Note 1, “Significant Accounting and Reporting Policies” of our foreign operations, loan feesAnnual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and other; and $6.4 million of deferred loan fees written off as a result of the prepaymentsExchange Commission on February 28, 2024, for additional information about our debt.critical accounting estimates.
Liquidity and Capital Resources
Overview
Our principal sources of liquidity are cash flows provided by operating activities, cash and cash equivalents on hand, and our Senior Secured Revolving Line of Credit. Our principal uses of liquidity are working capital, capital expenditures, debt service and other capital structure obligations, business acquisitions, dividends, and other general corporate purposes. We believe our cash-on-hand, cash generated from operations and funds available under the Senior Secured Revolving Line of Credit will be sufficient to fund our planned capital expenditures, debt service and other capital structure obligations, business acquisitions, dividends and operating needs for the foreseeable future. Our ability to maintain adequate liquidity for our operations in the future is dependent upon a number of factors, including our revenue, macroeconomic conditions, our ability to contain costs, including capital expenditures, and to collect accounts receivable, and various other factors, many of which are beyond our control. We will continue to monitor our liquidity position and may elect to raise funds through debt or equity financing in the future to fund significant investments or acquisitions that are consistent with our growth strategy.
Cash and cash equivalents totaled $442.0$433.6 million and $585.3$476.2 million at June 30, 2023,March 31, 2024 and December 31, 2022,2023, respectively, of which $276.8$371.0 million and $303.4$356.4 million was held outside the United States in each respective period. As of June 30, 2023,March 31, 2024, we had no outstanding balance under the Senior Secured Revolving Credit Facility and $1.2 million of outstanding letters of credit and could have borrowed up to the remaining $298.8$598.8 million available.
We also have the ability to request incremental loans on the same terms under the existing Senior Secured Credit Facility up to the greater of an additional $1,000.0 million and 100% of Consolidated EBITDA. In addition, as long as the senior secured net leverage ratio does not exceed 4.25-to-1, we may incur additional incremental loans, subject to certain additional conditions and commitments by existing or new lenders to fund any additional borrowings.
With certain exceptions, the Senior Secured Credit Facility obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, including its investments in subsidiaries. The Senior Secured Credit Facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. The senior secured net leverage test must be met as a condition to incur additional indebtedness, make certain investments, and may be required to make certain restricted payments. The senior secured net leverage ratio must not exceed 5.5-to-1 at any such measurement date.
Each year, the Company may be required to make additional principal payments on the Senior Secured Term Loan B based on excess cash flows of the prior year, as defined in the agreement. There were no excess cash flows for 20222023 and therefore no additional payment will be required in 2023.2024. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 11, “Debt,”10, “Debt” for additional information about our debt.
During the six months ended June 30, 2023, we prepaid $150.0 million of our Senior Secured Term Loan B-6, funded from our cash-on-hand.
In the secondfirst quarter of 2023,2024, we paid dividends of $0.105 per share totaling $20.8 million. Dividends declared accrue to outstanding restricted stock units and are paid to employees as dividend equivalents when the restricted stock units vest. While we currently expect to continue to pay quarterly dividends, any determination to pay dividends in the future will be at the discretion of our board of directorsBoard and will depend on a number of factors, including our liquidity, results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors that our board of directorsBoard deems appropriate. We currently have capacity and intend to continue to pay a quarterly dividend, subject to approval by our board.Board.
On February 13, 2017, our board of directorsBoard authorized the repurchase of up to $300.0 million of our common stock over the next 3 years. Our board of directorsBoard removed the three-year time limitation on February 8, 2018. To date, we have repurchased $133.5 million of our common stock and have the ability to repurchase the remaining $166.5 million.
We have no obligation to repurchase additional shares and the timing, actual number and value of the shares that are repurchased, if any, will be at the discretion of management and will depend on a number of factors, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity and other factors deemed appropriate. Repurchases may be suspended, terminated or modified at any time for any reason. Any repurchased shares will have the status of treasury shares and may be used, if and when needed, for general corporate purposes.
Sources and Uses of Cash
| | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| (in millions) | | 2023 | | 2022 | | Change |
| Cash provided by (used in) operating activities of continuing operations | | $ | 292.9 | | | $ | (115.4) | | | $ | 408.3 | |
| Cash used in investing activities of continuing operations | | (186.1) | | | (676.2) | | | 490.1 | |
| Cash used in financing activities of continuing operations | | (254.2) | | | (521.8) | | | 267.6 | |
| Cash flows of discontinued operations and effect of exchange rate changes on cash and cash equivalents | | 4.1 | | | (7.2) | | | 11.3 | |
| Net change in cash and cash equivalents | | $ | (143.3) | | | $ | (1,320.6) | | | $ | 1,177.3 | |
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 | | Change |
| Cash provided by operating activities | | $ | 54.0 | | | $ | 77.4 | | | $ | (23.4) | |
| Cash used in investing activities | | (62.4) | | | (103.6) | | | 41.2 | |
| Cash used in financing activities | | (31.3) | | | (122.0) | | | 90.7 | |
| Effect of exchange rate changes on cash and cash equivalents | | (2.9) | | | 1.9 | | | (4.8) | |
| Net change in cash and cash equivalents | | $ | (42.6) | | | $ | (146.3) | | | $ | 103.7 | |
Operating Activities
The increasedecrease in cash provided by continuing operationsoperating activities was due primarily to prior year taxes paid on the gain from the divestiture ofemployee separation payments made in connection with our Healthcare business and lower bonus and commission payments in the current year, partially offset by an increase in interest expense.operating model optimization program.
Investing Activities
The decrease in cash used in investing activities of continuing operations was due primarily to the acquisition of Argusa decrease in the prior year.cash used for investments in nonconsolidated affiliates.
Financing Activities
The decrease in cash used in financing activities of continuing operations was due primarily to a decrease in debt prepayments and cash used to pay employee taxes on restricted stock units.prepayments.
Capital Expenditures
We make capital expenditures to grow our business by developing new and enhanced capabilities, to increase the effectiveness and efficiency of the organization and to reduce risks. We make capital expenditures for product development, disaster recovery, security enhancements, regulatory compliance and the replacement and upgrade of existing equipment at the end of its useful life.
Cash paid for capital expenditures increased $22.3decreased $4.1 million, from $121.3$66.5 million for the sixthree months ended June 30, 2022,March 31, 2023, to $143.6$62.4 million for the sixthree months ended June 30, 2023.March 31, 2024. Capital expenditures as a percent of revenue represented 6% and 7% for the three months ended March 31, 2024 and 2023, respectively.
Debt
Hedges
Effective May 31, 2023, we amended all our interest rate swaps to replace the reference rate from LIBOR to Term SOFR. We applied the practical expedient for reference rate reform to continue to apply hedge accounting to the existing relationships.
On November 16, 2022, we entered into interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loan or similar replacement debt. The swaps commenced on December 30, 2022, and expire on December 31, 2024, with a current aggregate notional amount of $1,310.0$1,295.0 million that amortizes each quarter. The swaps require us to pay fixed rates varying between 4.3380% and 4.3870% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges.
On December 23, 2021, we entered into interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loan or similar replacement debt. The swaps commenced on December 31, 2021, and expire on December 31, 2026, with a current aggregate notional amount of $1,576.0$1,564.0 million that amortizes each quarter. The swaps require us to pay fixed rates varying between 1.3800% and 1.3915% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges.
On March 10, 2020, we entered into two tranches of interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loans or similar replacement debt. The first swap commenced on June 30, 2020, and expired on June 30, 2022. The second swap commenced on June 30, 2022, and expires on June 30, 2025, with a current aggregate notional amount of $1,090.0$1,075.0 million that amortizes each quarter after it
commences. The second swap requires us to pay fixed rates varying between 0.8680% and 0.8800% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges.
Effect of Certain Debt Covenants
A breach of any of the covenants under the agreements governing our debt could limit our ability to borrow funds under the Senior Secured Revolving Line of Credit and could result in a default under the Senior Secured Credit Facility. Upon the occurrence of an event of default under the Senior Secured Credit Facility, the lenders could elect to declare all amounts then outstanding to be immediately due and payable, and the lenders could terminate all commitments to extend further credit. If we were unable to repay the amounts declared due, the lenders could proceed against any collateral granted to them to secure that indebtedness.
With certain exceptions, the Senior Secured Credit Facility obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, including its investment in subsidiaries. The Senior Secured Credit Facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. The senior secured net leverage test must be met as a condition to incur additional indebtedness, make certain investments, and may be required to make certain restricted payments. The senior secured net leverage ratio must not exceed 5.5-to-1 at any such measurement date. Under the terms of the Senior Secured Credit Facility, TransUnion may make dividend payments up to the greater of $100 million or 10.0% of Consolidated EBITDA per year, or an unlimited amount provided that no default or event of default exists and so long as the total net leverage ratio does not exceed 4.75-to-1. As of June 30, 2023,March 31, 2024, we were in compliance with all debt covenants.
Our ability to meet our liquidity needs or to pay dividends on our common stock depends on our subsidiaries’ earnings, the terms of their indebtedness, and other contractual restrictions.
For additional information about our debt and hedge, see Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 11,10, “Debt.”
Contractual Obligations
Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20222023 in Part II, Item 8, “Financial Statements and Supplementary Data -– Notes to Consolidated Financial Statements,” Note 12,13, “Debt” and Note 22, “Commitments” for information about our long-term debt obligations, noncancelable lease obligations, and noncancelable purchase obligations as of December 31, 2022.2023.
Recent Accounting Pronouncements
See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 1, “Significant Accounting and Reporting Policies,”Policies” for information about recent accounting pronouncements and the impact on our consolidated financial statements.
Application of Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”). The notes to our consolidated financial statements include disclosures about our significant accounting policies. These accounting policies require us to make certain judgments and estimates in reporting our operating results and our assets and liabilities. See Part II, Item 7, “Application of Critical Accounting Estimates” and Part II, Item 8, Note 1, “Significant Accounting and Reporting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 14, 2023, for additional information about our critical accounting estimates.
Cautionary Notice Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the exhibits hereto, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of TransUnion’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those described in the forward-looking statements. Any statements made in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plans and strategies. These statements often include words such as “anticipate,” “expect,” “guidance,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,” “may,” “will,” “forecast,” “outlook,” “potential,” “continues,” “seeks,” “predicts,” or the negatives of these words and other similar expressions.
Factors that could cause actual results to differ materially from those described in the forward-looking statements, or that could materially affect our financial results or such forward-looking statements include:
•macroeconomic effects and changes in market conditions, including the impact of inflation, risk of recession, and industry trends and adverse developments in the debt, consumer credit and financial services markets;markets, including the impact on the carrying value of our assets in all of the markets where we operate;
•our ability to provide competitive services and prices;
•our ability to retain or renew existing agreements with large or long-term customers;
•our ability to maintain the security and integrity of our data;
•our ability to deliver services timely without interruption;
•our ability to maintain our access to data sources;
•government regulation and changes in the regulatory environment;
•litigation or regulatory proceedings;
•our ability to effectively manage our costs;
•our efforts to execute our transformation plan and achieve the anticipated benefits and savings;
•our ability to remediate existing material weakness in our internal control over financial reporting and maintain effective internal control over financial reporting and disclosure controls and procedures;
•economic and political stability in the United States and international markets where we operate;
•our ability to effectively develop and maintain strategic alliances and joint ventures;
•our ability to timely develop new services and the market’s willingness to adopt our new services;
•our ability to manage and expand our operations and keep up with rapidly changing technologies;
•our ability to acquire businesses, successfully secure financing for our acquisitions, timely consummate our acquisitions, successfully integrate the operations of our acquisitions, control the costs of integrating our acquisitions and realize the intended benefits of such acquisitions;
•our ability to protect and enforce our intellectual property, trade secrets and other forms of unpatented intellectual property;
•our ability to defend our intellectual property from infringement claims by third parties;
•the war in Ukrainegeopolitical conditions and escalating geopolitical tensions as a result of Russia’s invasion of Ukraine;other risks associated with our international operations;
•the ability of our outside service providers and key vendors to fulfill their obligations to us;
•further consolidation in our end-customer markets;
•the increased availability of free or inexpensive consumer information;
•losses against which we do not insure;
•our ability to make timely payments of principal and interest on our indebtedness;
•our ability to satisfy covenants in the agreements governing our indebtedness;
•our ability to maintain our liquidity;
•share repurchase plans; and
•our reliance on key management personnel.
There may be other factors, many of which are beyond our control, that may cause our actual results to differ materially from the forward-looking statements, including factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 20222023, and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K filed with the Securities and Exchange Commission, and in this report under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.
The forward-looking statements contained in this report speak only as of the date of this report. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements to reflect the impact of events or circumstances that may arise after the date of this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no other material changes from the quantitative and qualitative disclosures about market risk included in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
In the normal course of business, we are exposed to market risk, primarily from changes in variable interest rates and foreign currency exchange rates, which could impact our results of operations and financial position. We manage the exposure to this market risk through our regular operating and financing activities. We may use derivative financial instruments, such as foreign currency and interest rate hedges, but only as a risk management tool and not for speculative or trading purposes.
Interest Rate Risk
Our Senior Secured Credit Facility consists of Senior Secured Term Loans and a $300.0$600.0 million Senior Secured Revolving Line of Credit. Interest rates on these borrowings are based, at our election, on Term SOFR plus a credit spread adjustment, or an alternate base rate, subject to floors, plus applicable margins based on applicable net leverage ratios. As of December 31, 2022,2023, essentially all of our outstanding debt was variable-rate debt. We currently have several interest rate hedge instruments that effectively fix our variable interest rate exposure on approximately 72.2%73.8% of our outstanding debt. Based on the amount of unhedged outstanding variable-rate debt, we have a material exposure to interest rate risk. In the future, our exposure to interest rate risk may change due to changes in the amount borrowed, changes in interest rates or changes in the amount we have hedged. The amount of our outstanding debt, and the ratio of fixed-rate debt to variable-rate debt, can be expected to vary as a result of future business requirements, market conditions or other factors. During the second quarter of 2023, aA 10% change in the average 1 month Term SOFR rates utilized in the calculation of our actual interest expense during the quarter would have increased our annual interest expense by $7.3approximately $8.0 million.
See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 11, “Debt,”10, “Debt” for additional information about interest rates on our debt.
Foreign Currency Exchange Rate Risk
A substantial majority of our revenue, expense and capital expenditure activities are transacted in U.S. dollars. However, we transact business in a number of foreign currencies, including British pounds sterling, the South African rand, the Canadian dollar, the Indian rupee, the Colombian peso and the Brazilian real. In reporting the results of our foreign operations, we benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to the foreign currencies.
We are required to translate the assets and liabilities of our foreign subsidiaries that are measured in foreign currencies at the applicable period-end exchange rate in our consolidated balance sheets.Consolidated Balance Sheets. We are required to translate revenue and expenses at the average exchange rates prevailing during the year in our consolidated statementsConsolidated Statements of income.Operations. The resulting translation adjustment is included in other comprehensive income as a component of stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income and expense as incurred.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that
it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this report,March 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective atbecause of the material weakness in internal control over financial reporting discussed below.
Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable assurance level.possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As previously disclosed in our Annual Report on Form 10-K for December 31, 2023, we have identified the following material weakness, which remains unremediated as of March 31, 2024:
We did not design and maintain effective controls over the classification of certain costs between cost of services and selling, general and administrative in the Consolidated Statements of Operations. This material weakness resulted in an error in the classification of certain costs between cost of services and selling, general and administrative, and the revision of the annual financial statements previously issued for 2022 and 2021 and the unaudited interim financial statements previously issued for 2023 and 2022 interim periods.
Additionally, this material weakness could result in misstatements of the aforementioned accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Management’s Remediation Efforts on Classification of Certain Costs between Cost of Services and Selling, General and Administrative Material Weakness
Management is in the process of designing and implementing remediation plans to address the material weakness related to the classification of certain costs between cost of services and selling, general and administrative in the Consolidated Statements of Operations. As part of our remediation activities, we are (1) enhancing our policy for classification of expenses, (2) implementing additional communications and training, (3) improving the process of validating costs to ensure appropriate classification of expenses, and (4) implementing additional controls to monitor the recording of costs across cost of services and selling, general and administrative.
Remediation of Previously Reported Interim Goodwill Material Weakness
Management designed and implemented new processes and controls over interim goodwill impairment assessments, related to the preparation and review of the manual translation of the base year forecast information, and executed these new procedures in connection with the segment change, which required an impairment assessment before and after the segment change, that occurred during the three months ended March 31, 2024. We tested the operating effectiveness of these new controls and have concluded that they are operating effectively.
Changes in Internal Controls over Financial Reporting
During the quarter covered by this report, other than the remediation actions described above, there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
None.
ITEM 1. LEGAL PROCEEDINGS
General
Refer to Part I, Item 3, “Legal Proceedings,” of our Annual Report on Form 10-K for the year ended December 31, 2022,2023, and Part II, Item 1, “Legal Proceedings” of all subsequently filed Quarterly Reports on Form 10-Q, including this Quarterly Report, and Part I, Item 1, Note 1817 “Contingencies,” of this Quarterly Report for a full description of our material pending legal and regulatory matters.
ITEM 1A. RISK FACTORS
In addition toThe following discussion supplements the other information included in this report, you should carefully considerrisk factors affecting the factors discussedCompany as set forth in Part I, Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2022, and any subsequently filed Quarterly Reports on Form 10-Q,2023, as well as the factors identified under “Cautionary Statement Regarding Forward-Looking Statements” at the end of Part I, Item 2 of this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition or future results. The risks described in these reports are not the only risks facing TransUnion. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, and operating results.
Management has determined that our internal control over financial reporting and disclosure controls and procedures were not effective as of March 31, 2024. A failure to maintain effective internal control over financial reporting or disclosure controls and procedures could impact our ability to accurately and timely report our financial results and other material disclosures or otherwise cause us to fail to meet our reporting obligations, which could have a material adverse effect on our operations, investor confidence in our business, and the trading price of our common stock.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. We determined that our internal control over financial reporting and disclosure controls and procedures were not effective as of March 31, 2024 as a result of the material weakness related to an error in the classification of certain expenses between cost of services and selling, general and administrative, as discussed in Part I, Item 4 of this Form 10-Q. This material weakness has not been remediated and accordingly our internal control over financial reporting and disclosure controls and procedures remain ineffective. Management is actively engaged in the planning for, and implementation of, remediation efforts to address our material weakness but there can be no assurance that those efforts will be successful. Refer to Part I, Item 4 for further details of this material weakness and remediation efforts.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As such, if we do not remediate this material weakness in a timely manner, or if additional material weaknesses in our internal control over financial reporting are discovered, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and our financial statements may contain material misstatements or omissions. Additionally, our internal control environment and remediation efforts do not provide absolute assurance with regard to timely detecting or preventing control deficiencies and thus do not insulate us from any failure to meet our financial reporting obligations.
It is possible that additional control deficiencies could be identified by our management or by our independent registered public accounting firm in the future or may occur without being identified. Such a failure could require us to incur the expense of remediation, result in regulatory scrutiny, investigations or enforcement actions, cause investors to lose confidence in our reported financial condition and have a negative effect on the trading price of our common stock, lead to a default under our indebtedness, and otherwise have a material adverse effect on our business, financial condition, results of operations, and cash flows.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Recent Sales of Unregistered Securities
Not applicable.
(b) Use of Proceeds
Not applicable.
(c) Issuer Purchases of Equity Securities
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (a) Total Number of
Shares Purchased | | (b) Average Price
Paid Per Share | | (c) Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs | | (d) Approximate Dollar Value, in millions, of Shares that May Yet Be Purchased Under the Plans or Programs(1) |
| April 1 to April 30 | | 1,004 | | | $ | 64.10 | | | — | | | $ | 166.5 | |
| May 1 to May 31 | | 22,292 | | | 66.78 | | | — | | | $ | 166.5 | |
| June 1 to June 30 | | 10,164 | | | 75.24 | | | — | | | $ | 166.5 | |
| Total | | 33,460 | | | $ | 69.27 | | | — | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Number of Shares Purchased1 | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value, in millions, of Shares that May Yet Be Purchased Under the Plans or Programs(1) |
| January 1 to January 31 | | 998 | | | $ | 53.73 | | | — | | | $ | 166.5 | |
| February 1 to February 29 | | 137,423 | | | 75.27 | | | — | | | $ | 166.5 | |
| March 1 to March 31 | | 3,225 | | | 78.82 | | | — | | | $ | 166.5 | |
| Total | | 141,646 | | | | | — | | | $ | 166.5 | |
Shares shown in column (a) above consist of1. Represents shares that were repurchased from employees for withholding taxes on options exercised and restricted stock units vesting pursuant to the terms of the Company's equity compensation plans and net settled.
(1)2. On February 13, 2017, our board of directorsBoard authorized the repurchase of up to $300.0 million of common stock over the next three years. On February 8, 2018, our board of directorsBoard removed the three-year time limitation. Prior to the secondfourth quarter of 2018,2017, we had purchased approximately $133.5 million of common stock under the program and may purchase up to an additional $166.5 million. Additional repurchases may be made from time to time at management’s discretion at prices management considers to be attractive through open market purchases or through privately negotiated transactions, subject to availability. Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Exchange Act and other applicable legal requirements. We have no obligation to repurchase additional shares, and the timing, actual number and value of the shares that are repurchased, if any, will be at the discretion of management and will depend on a number of factors, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. Repurchases may be suspended, terminated or modified at any time for any reason. Any repurchased shares will have the status of treasury shares and may be used, if and when needed, for general corporate purposes.
ITEM 5. OTHER INFORMATION
On April 28, 2023, Jennifer A. Williams, SeniorMarch 13, 2024, each of Todd M. Cello, Executive Vice President, Chief AccountingFinancial Officer, and Heather J. Russell, Executive Vice President, Chief Legal Officer, adopted a Rule 10b5-1 trading arrangement (“10b5-1 Plan”) that is intended to satisfy the affirmative defense of Rule 10b5-1(c). Mr. Cello’s 10b5-1 Plan is for the sale of up to 25,328 shares of the Company’s common stock until March 14, 2025. Ms. Russell’s 10b5-1 Plan is for the sale of up to 19,818 shares of the Company’s common stock until September 4, 2024.On March 14, 2024, Steven M. Chaouki, President, U.S. Markets, adopted a 10b5-1 Plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 3353,000 shares of the Company’s common stock until April 26,September 30, 2024.
ITEM 6. EXHIBITS
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| | |
| | |
| | Third Amended and Restated Certificate of Incorporation of TransUnion (Incorporated by reference to Exhibit 3.1.2 to TransUnion’s Current Report on Form 8-K filed May 18, 2020). |
| | |
| | FourthFifth Amended and Restated Bylaws of TransUnion amended as of November 18, 2022February 21, 2024 (Incorporated by reference to Exhibit 3.1 to TransUnion’s Current Report on Form 8-K filed November 23, 2022)February 27, 2024).
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| | Amendment No. 2022 to the Credit Agreement, dated as of May 15, 2023,February 8, 2024, by and betweenamong TransUnion Intermediate Holdings, Inc. (f/k/a TransUnion Corp.), Trans Union LLC, the Guarantors, Deutsche Bank Securities Inc., BofA Securities, Inc., Capital One, N.A., JPMorgan Chase Bank, N.A., Royal Bank of Canada and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners, Deutsche Bank AG New York Branch, as administrative agent.agent and collateral agent, and each of the other Lenders party thereto. |
| | |
| | TransUnion Amended and Restated 2015 Omnibus Incentive Plan Grant Notice, ApplicableAward Agreement, with respect to Restricted Stock Units (U.S. Employees) (for awards granted on or after February 21, 2024). |
| | |
| | TransUnion Amended and Restated 2015 Omnibus Incentive Plan Award Agreement, with respect to Performance Share Unit Awards GrantedUnits (U.S. Employees) (for awards granted on June 1, 2023 (Incorporated by reference to Exhibit 10.1 to TransUnion’s Current Report on Form 8-K filed on May 30, 2023)or after February 21, 2024). |
| | |
| | TransUnion Amended and Restated 2015 Omnibus Incentive Plan Award Agreement with respect to Restricted Stock (Outside Directors), effective February 21, 2024. |
| | |
| | TransUnion Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| | TransUnion Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| | TransUnion Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| 101.SCH** | | XBRL Taxonomy Extension Schema Document. |
| | |
| 101.CAL** | | XBRL Taxonomy Extension Calculation Linkbase Document. |
| | |
| 101.LAB** | | XBRL Taxonomy Extension Label Linkbase Document. |
| | |
| 101.PRE** | | XBRL Taxonomy Extension Presentation Linkbase Document. |
| | |
| 101.DEF** | | XBRL Taxonomy Extension Definition Linkbase Document. |
| | |
| 104 | | The cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2023,March 31, 2024, formatted in Inline XBRL (included with Exhibit 101 attachments). |
** Filed or furnished herewith.
† Identifies management contracts and compensatory plans or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| TransUnion |
| | |
JulyApril 25, 20232024 | By | | /s/ Todd M. Cello |
| | | Todd M. Cello |
| | | Executive Vice President, Chief Financial Officer |
| | | (Principal Financial Officer) |
| | | |
JulyApril 25, 20232024 | By | | /s/ Jennifer A. Williams |
| | | Jennifer A. Williams |
| | | Senior Vice President, Chief Accounting Officer
(Principal Accounting Officer) |