TransUnion 10-Q Summary
Business context and reporting period
TransUnion filed this unaudited Form 10-Q for the quarter ended September 30, 2015. It provides risk and information solutions through U.S. Information Services (USIS), International, and Consumer Interactive. The company completed its IPO on June 30, 2015.
Key financial metrics
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $389.1 million | $338.2 million | $1,120.7 million | $969.1 million |
| Operating income | $60.3 million | $40.8 million | $148.2 million | $107.9 million |
| Operating margin | 15.5% | 12.1% | 13.2% | 11.1% |
| Net income (loss) attributable to TransUnion | $(4.0) million | $(2.6) million | $(13.3) million | $0.6 million |
| Adjusted EBITDA | $140.1 million | $126.3 million | $389.8 million | $338.0 million |
| Cash from operating activities | $89.7 million | $64.5 million | $206.2 million | $110.1 million |
| Capital expenditures | $28.0 million | $43.4 million | $96.3 million | $117.7 million |
At September 30, 2015, cash and equivalents were $128.7 million, total debt was $2,218.7 million, and stockholders’ equity was $1,376.9 million. There were no borrowings on the $210 million revolving credit facility, which was available in full. The company reported compliance with its debt covenants. Adjusted EBITDA is a non-GAAP measure and included $46.5 million of Q3 adjustments, including $33.8 million of debt refinancing expenses.
Material changes versus the prior comparable period
- Q3 revenue grew 15.1%; nine-month revenue grew 15.6%. Management attributed growth to organic gains across segments and acquisitions, partly offset by foreign-currency weakness.
- Q3 USIS revenue increased 13.9%, led by Decision Services (+26.9%). Consumer Interactive revenue rose 37.1%; International revenue was flat as currency effects offset local growth.
- Operating income increased 47.8% in Q3. USIS and Consumer Interactive margins improved; International margin fell to 11.5% from 12.4% in Q3 2014.
- Despite stronger operating results, TransUnion recorded a Q3 attributable net loss of $4.0 million, including $33.8 million of refinancing and early-redemption expenses. Nine-month results also included a $37.6 million refinancing-related expense. Lower interest expense partly offset those costs.
- Operating cash flow rose to $206.2 million for the first nine months, while capital expenditures fell to $96.3 million.
Outlook, management commentary, risks and unusual items
- Management said cash on hand, operating cash generation, and available revolver capacity should meet liquidity needs for the foreseeable future. It expected 2015 capital expenditures to be lower than 2014 as a percentage of revenue, following completion of headquarters improvements.
- The June 2015 refinancing and July redemption of the 9.625% and 8.125% senior notes reduced reported debt versus year-end 2014. The new debt includes variable-rate term loans; the filing notes increased variable-rate debt exposure. Debt totaled $2.22 billion at quarter-end.
- The expiration of a U.S. tax-law look-through provision contributed to tax expense on certain foreign earnings and unusually high effective tax rates. The filing reports a Q3 effective rate of 187.9% and a nine-month rate of (280.5)% on a pretax loss.
- A revised estimate of useful lives for certain technology and facility assets increased depreciation and amortization by $6.9 million in Q3 and $21.8 million for the first nine months, reducing attributable net income by $4.4 million and $14.0 million, respectively.
- Management cited macroeconomic and credit-market conditions, foreign exchange, competition, customer retention, data security and access, regulation, litigation, technology transformation, acquisition integration, liquidity and debt obligations among risks.
- TransUnion received a CFPB Civil Investigative Demand in September concerning industry practices for marketing and providing consumer reports, credit scores and monitoring products. The company said it was cooperating and could not predict the outcome. The filing also describes routine litigation and regulatory matters, whose outcomes and potential losses may be uncertain.
- No formal revenue or earnings guidance is provided in the supplied filing text.
Important facts for investors to verify
- Whether reported revenue and operating-income growth continues after separating organic growth, acquisitions and currency effects.
- The composition and sustainability of Adjusted EBITDA, including the substantial refinancing-related add-backs and other adjustments.
- Debt repayment capacity, covenant headroom, and sensitivity to variable interest rates.
- The outcome and potential financial or operational effects of the CFPB investigation and other litigation or regulatory matters.
- Whether the technology transformation delivers expected efficiencies without further material costs or disruption.