TransUnion Holding Company, Inc. — Q1 2014 Form 10-Q
Business and period: The filing covers the three months ended March 31, 2014, and compares results with Q1 2013. TransUnion provides credit information, analytics, risk-management and consumer subscription services through U.S. Information Services (USIS), International and Interactive segments.
Financial results
| Metric | Q1 2014 | Q1 2013 / comparison |
|---|---|---|
| Revenue | $303.4 million | $290.5 million; up 4.4% |
| Operating income / margin | $34.8 million / 11.5% | $44.2 million / 15.2% |
| Net loss attributable to TransUnion Holding | $14.7 million | $6.3 million |
| Adjusted EBITDA (non-GAAP) | $90.6 million | $92.2 million; down 1.7% |
| Cash from operating activities | Used $6.1 million | Provided $13.5 million |
| Capital expenditures | $38.8 million | $16.4 million |
Revenue grew through acquisitions and Interactive growth, partly offset by lower International revenue from currency weakness. Operating expenses rose 9.1% to $268.6 million, including higher acquisition-related costs and depreciation and amortization. Interest expense was $50.8 million, versus $49.8 million.
Segments and material changes
- USIS: Revenue increased 5.7% to $194.2 million; operating income fell to $32.4 million from $43.1 million, and margin declined to 16.7% from 23.5%. Decision Services rose 29.4%, aided by eScan and healthcare activity; Online Data Services rose 3.2%; Credit Marketing Services declined 2.8%.
- International: Revenue decreased 2.9% to $54.1 million, while operating income was $2.2 million versus $2.4 million. Revenue increased 8.6% excluding foreign-exchange effects; currency reduced reported revenue by 10.6%.
- Interactive: Revenue increased 7.8% to $55.1 million; operating income rose to $19.0 million from $15.4 million, with margin improving to 34.5% from 30.1%.
- Cash and cash equivalents declined to $59.4 million from $111.2 million at year-end 2013. Total debt was $2,891.5 million, including $45.7 million current debt; long-term debt was $2,845.8 million.
Liquidity, outlook and other notable items
- Management said cash on hand, operating cash flow and revolving-credit availability should meet liquidity needs for the foreseeable future. At March 31, $28.5 million was drawn on the revolving facility, with $181.5 million of additional availability.
- On April 9, 2014, the company refinanced its secured credit facility, increasing the term loan from approximately $1.12 billion to $1.90 billion, reducing certain rate margins and floors, extending maturities and amending covenants. It planned to use proceeds to redeem $645 million of 11.375% notes on May 9. Management estimated an approximately $30 million net gain and about $45 million in annual cash-interest savings at then-current rates; these are forward-looking estimates.
- Capital expenditures for the rest of 2014 were expected to be higher than in 2013 as a percentage of revenue, reflecting technology-platform upgrades and headquarters improvements. No specific full-year revenue or earnings guidance was provided.
- The company increased its CIBIL ownership from 27.5% to 47.5% in Q1 and had agreements to acquire a further 7.5%; it said regulatory approval to reach 55% was received in May and expected completion in Q2. The TLO acquisition’s purchase-price allocation remained preliminary.
- Management cited mortgage-rate increases and fewer refinancing transactions, currency fluctuations, economic and credit-market conditions, data security and service continuity, regulation, litigation, acquisition integration, and substantial debt and covenant compliance as risks. Litigation outcomes could affect results in a particular period; the filing says certain exposures could not be reasonably estimated.
Investor verification points
- Verify completion and final terms of the planned note redemption and refinancing, including realized interest savings, refinancing gain and covenant changes.
- Track operating cash generation, working-capital needs and elevated capital spending after the Q1 cash decline.
- Assess whether USIS margins recover as acquisition and integration costs develop, and whether International growth offsets currency effects.
- Confirm CIBIL ownership transactions and the final TLO purchase-price allocation; review litigation and regulatory developments.
- Compare GAAP results with management’s non-GAAP Adjusted EBITDA, which excludes specified expenses and is not a substitute for GAAP income or cash flow.