TransUnion Q1 2022 Form 10-Q Summary
Reporting period: Three months ended March 31, 2022; unaudited. Comparisons are with Q1 2021 unless stated otherwise. TransUnion provides credit data, analytics, identity and consumer-finance products across U.S. Markets, International and Consumer Interactive.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $921.3 million | $698.9 million | +31.8% |
| Operating income | $135.0 million | $163.6 million | Down $28.6 million |
| Net income attributable to TransUnion | $48.3 million | $127.9 million | Down 62.2% |
| Diluted EPS | $0.25 | $0.66 | Down $0.41 |
| Adjusted EBITDA, non-GAAP | $334.2 million | $277.5 million | +20.4% |
| Adjusted EBITDA margin, non-GAAP | 36.3% | 39.7% | Down 3.4 percentage points |
| Cash from continuing operating activities | $11.6 million | $127.7 million | Down $116.1 million |
| Capital expenditures | $58.6 million | $40.7 million | Up $17.9 million |
Revenue growth reflected 24.6% growth attributed to recent acquisitions, improving macroeconomic conditions and new products; foreign currency reduced growth. GAAP earnings were pressured by higher operating costs, interest expense and legal and regulatory expenses. Adjusted EBITDA is a company-defined non-GAAP measure and excludes specified costs.
Segments and material changes
- U.S. Markets: Gross revenue rose 42.3% to $599.9 million; Adjusted EBITDA increased 22.6% to $216.7 million. Emerging Verticals revenue more than doubled, substantially reflecting Neustar. Financial Services revenue rose 5.1%; mortgage volumes weakened as interest rates rose.
- International: Gross revenue increased 15.0% to $191.2 million and Adjusted EBITDA rose 14.8% to $82.0 million. Growth was reported across all listed regions, partly offset by unfavorable currency movements.
- Consumer Interactive: Gross revenue increased 14.7% to $149.6 million and Adjusted EBITDA rose 17.8% to $68.9 million, with growth largely reflecting Sontiq.
- The fourth-quarter 2021 acquisitions of Neustar and Sontiq materially affect comparability with Q1 2021. The Healthcare business, sold in December 2021, is presented as discontinued operations; Q1 2021 included $13.3 million of discontinued-operations income, versus a $0.4 million loss in Q1 2022.
Cash, debt and liquidity
Cash and cash equivalents were $1,296.8 million at March 31, 2022, down from $1,842.4 million at year-end. Total debt was $5,946.1 million, down from $6,365.9 million, after a $400 million term-loan prepayment. The company had no revolver borrowings and $299.9 million available, subject to facility terms. It reported compliance with debt covenants. Current assets were $2,168.1 million and current liabilities $1,208.6 million.
Continuing operating cash flow fell to $11.6 million, primarily due to payment of accrued compensation and higher interest payments, partly offset by improved operating performance. Investing used $91.0 million, including $58.6 million of capital expenditures; financing used $467.6 million, primarily reflecting debt prepayments. The company paid $0.095 per share in dividends during the quarter.
Outlook, risks and unusual items
- Management expected positive but slowing global GDP growth for the remainder of 2022, while citing inflation, energy prices, rising interest rates, geopolitical tensions, supply-chain and labor constraints, weaker consumer confidence and continuing COVID-19 uncertainty. No numerical company-wide revenue or earnings guidance is provided in the filing text.
- Management expected mortgage-business declines to continue for the foreseeable future as interest rates rise. It said inflation had not materially affected results to date, but could reduce demand for credit and services.
- On April 8, 2022, after quarter-end, TransUnion acquired Verisk Financial Services for approximately $515 million, funded with cash. In April it also paid approximately $355 million of taxes related to the Healthcare divestiture. These subsequent cash uses are relevant to liquidity after quarter-end.
- The CFPB filed suit on April 12, 2022, alleging violations related to consumer marketing and the 2017 consent order. TransUnion had accrued $56.0 million at March 31; it said additional losses were reasonably possible but not estimable. A separate CFPB inquiry concerned tenant and employment screening; the recorded accrual was immaterial and potential exposure was not estimable.
- Total accrued legal and regulatory liabilities were $113.1 million, up from $85.6 million at year-end. The company cautioned that actual costs may exceed recorded reserves. It had reached a tentative class settlement in Ramirez, subject to court approval.
- TransUnion disclosed a March 2022 incident in which a third party accessed a South African server and certain customer personally identifiable information using an authorized client’s credentials. Services taken offline as a precaution were resumed; the investigation and work with authorities continued.
- Interest-rate exposure remains material: the company said hedges fixed approximately 68% of outstanding debt exposure. Other risks include variable interest rates, foreign exchange, regulation, litigation, cybersecurity and integration of acquisitions.
Important facts for investors to verify
- How much reported growth and future earnings are attributable to acquisitions versus organic performance, and the eventual integration costs and benefits.
- Cash conversion and working-capital trends, particularly whether operating cash flow recovers after the quarter’s compensation and interest payments.
- Debt service and liquidity after the $400 million debt repayment, Verisk acquisition and tax payment, including the effect of higher rates on unhedged borrowings.
- Developments, potential losses and costs associated with the CFPB litigation, screening inquiry, Ramirez settlement and broader legal reserves.
- The scope and consequences of the South African data incident, including any further customer, regulatory or financial impact.