TransUnion's Credit Bureau Business Gives It a Wide Moat

Equity Analyst

Rajiv Bhatia

Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years. 

TransUnion's core business is selling credit reports to U.S. lenders, but as this business is the most mature, the company has sought other avenues of growth. One avenue has been expanding beyond financial institutions into verticals such as insurance, rental screening, collections, and other sectors. The emerging verticals business was 32% of the firm's revenue in 2020, up from 21% of revenue in 2009. We believe this will help TransUnion weather a downturn as this revenue is diversified across industries and less macro-sensitive, though these items may be sensitive to coronavirus-related disruptions. TransUnion has sought to replicate its U.S. playbook internationally, as well. The most intriguing opportunity is in India, which, given the country's large population, could be an evergreen source of growth for the firm. TransUnion's early entry has allowed it to build a commanding market share in this country. While it will probably take many years to fully realize this market's potential, we think the company's leading position provides meaningful long-term upside.

Since its public debut in 2015, TransUnion’s acquisition strategy has run the gamut from smaller bolt-on deals to larger acquisitions. Examples of bolt-on deals include Tru Optik and Signal Digital, which provide data and analytics for digital marketing. TransUnion's larger deals include its $1.4 billion acquisition of U.K. credit bureau Callcredit in 2018, its $3.1 billion acquisition of Neustar in 2021, and its $638 million of Sontiq in 2021. We believe TransUnion’s acquisitions have generally made strategic sense and have not weakened the firm’s moat.

Business Strategy & Outlook

TransUnion’s data is critical to the underwriting decisions of its customers (often banks), and the price of its services is negligible relative to the loan amounts at risk. We estimate that North American credit bureaus’ revenue represents about 1-2 basis points of total household debt. Because the accuracy and completeness of data is critical to credit decisions, lenders often pull from more than one credit bureau and we do not believe pricing is the primary factor for choosing a credit bureau. 

We believe the barriers to entering the credit bureau business are high, as replicating a database of millions of customers would be incredibly difficult. As the credit bureaus’ data is based on the voluntary reporting of thousands of financial institutions, it’s unlikely that a startup credit bureau, particularly with heightened data security concerns, could convince banks to share consumer information. 

TransUnion’s U.S. business (roughly 65% of the firm’s revenue) is split roughly evenly between traditional financial services (mortgage, auto, credit cards, and so on) and emerging verticals (insurance and other industries). Mortgage-related revenue makes up less than 10% of the firm’s revenue. Government agencies (Fannie and Freddie) currently require a credit report from all three bureaus, known as a “tri-merge” report. Given that the bulk of mortgages are agency compliant, using TransUnion (along with Equifax and Experian) is essentially a requirement for a mortgage lender. However, in October 2022, the Federal Housing Administration announced that it will work toward moving from a “tri-merge” to a “bi-merge” which would only require two credit bureau pulls. The timeline for this change is unclear. Outside of mortgage, TransUnion’s credit reports are deeply entrenched in auto lenders’ and credit card issuers’ workflows.

The 20% of firmwide revenue that TransUnion generates outside the United States tends to be at similar adjusted EBITDA margins as the firm overall. TransUnion’s non-U.S. business is well diversified across geographies, with the U.K. representing about one quarter of international revenue. Canada, Latin America, and India each represent about 15%-25% of international revenue, and the remaining revenue is split between Africa and Asia-Pacific. Through its stake in CIBIL, TransUnion has a leading position in India, which we believe is one of the company’s largest long-term opportunities. 

TransUnion generates roughly 15% of its revenue from its consumer interactive segment. It takes a two-prong approach, selling directly to consumers (direct channel) as well as through third-party partners such as Credit Karma (indirect). We view this segment as a natural extension of credit bureau operations and an additional path to monetize the moat surrounding legacy operations.

Wide

Economic Moat

TransUnion

TransUnion engages in the provision of information and risk management solutions. It also provides consumer reports, risk scores, analytical services and decision making capabilities to businesses. The firm operates through the following segments: U.S. Markets, International, Consumer Interactive, and Corporate. The U.S. Markets segment provides consumer reports, risk scores, analytical services and decision making capabilities to businesses. The International segment provides credit reports, analytics and decision making services and other value-added risk management services. The Consumer Interactive segment offers solutions that help consumers manage their personal finances and take precautions against identity theft. The Corporate segment provides support services to each segment, holds investments and conducts enterprise functions. The company was founded on February 15, 2012, and is headquartered in Chicago, IL.

Earnings data Q1 2024

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TransUnion engages in the provision of information and risk management solutions. It also provides consumer reports, risk scores, analytical services, and decision-making capabilities to businesses. It operates through the following segments: U.S. Markets, International, Consumer Interactive, and Corporate. The U.S. Markets segment provides consumer reports, risk scores, analytical services, and decision-making capabilities to businesses. The International segment provides credit reports, analytics and decision-making services and other value-added risk management services. The Consumer Interactive segment offers solutions that help consumers manage their personal finances and take precautions against identity theft. The Corporate segment provides support services to each segment, holds investments, and conducts enterprise functions. The company was founded on February 15, 2012, and is headquartered in Chicago, IL.

CHICAGO, Jan. 31, 2023 (GLOBE NEWSWIRE) -- TransUnion (NYSE: TRU) has announced a strategic investment in Bud Financial Limited (Bud), a leader in Open Banking and data intelligence. This dynamic partnership will help drive innovation and growth in the personal finance market and support better outcomes for consumers, with greater financial inclusion.

TransUnion Announces Investment in Bud to Drive Innovation and Growth in Open Banking

CHICAGO, Jan. 30, 2023 (GLOBE NEWSWIRE) -- TransUnion (NYSE: TRU) announced that Linda Zukauckas has been appointed to its Board of Directors, effective today.

TransUnion Appoints Linda Zukauckas to its Board of Directors

RESTON, Va.--( BUSINESS WIRE )--Neustar Inc., a TransUnion company, has been named a winner in Juniper Research's Future Digital Awards for Telco Innovation 2023. Neustar received a Gold Award for “Best Robocall Mitigation Solution” in the Security & Fraud Innovation category for its Enterprise Certified Caller (ECC) solution. Part of the Neustar Trusted Call Solutions suite, ECC enables enterprises to digitally sign and authenticate outbound calls with the highest possible attestation levels. By extending STIR/SHAKEN capabilities from the enterprise to the terminating service provider, ECC gives businesses more control over their outbound telephone numbers and allows them to work more closely with service providers to prevent fraud and call blocking of legitimate calls.

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CHICAGO, Jan. 13, 2023 (GLOBE NEWSWIRE) -- TransUnion (NYSE: TRU) will publish its financial results for the fourth quarter ended December 31, 2022, in a press release to be issued by 6:00 a.m. Central Time (CT) on Tuesday, February 14, 2023. The company will hold a conference call on the same day at 8:30 a.m. Central Time (CT) to discuss its financial results. The press release and a live webcast of the earnings conference call will be available on the TransUnion Investor Relations website at http://www.transunion.com/tru.

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CHICAGO, Jan. 03, 2023 (GLOBE NEWSWIRE) -- TransUnion (NYSE: TRU) completed the previously announced sale of G2 Web Services, Inc. (“G2”), Lundquist Consulting, Inc. (“LCI”) and Fintellix India Private Limited (“Fintellix”), to an affiliate of Stellex Capital Management LLC (“Stellex”), a global, multi sector investment firm for $176 million of consideration, subject to customary purchase price adjustments.

TransUnion Completes Sale of G2, LCI and Fintellix to Stellex Capital Management for $176 million

NEW YORK--( BUSINESS WIRE )--An affiliate of Stellex Capital Management LLC (“Stellex”) has acquired G2 Web Services, Inc. (“G2”), Lundquist Consulting, Inc. (“LCI”) and Fintellix India Private Limited (“Fintellix”, together with G2 and LCI, the “Platform”) from TransUnion (NYSE: TRU).

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SAN DIEGO--( BUSINESS WIRE )--Shareholder rights law firm Robbins LLP is investigating TransUnion (NYSE: TRU) to determine whether certain TransUnion officers and directors violated securities laws and breached fiduciary duties to shareholders. TransUnion is a well-known credit reporting agency, which describes itself as a “leading global information and insights company that makes trust possible between businesses and consumers, working to help people around the world access opportunities that can lead to a higher quality of life.”

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CHICAGO, Dec. 15, 2022 (GLOBE NEWSWIRE) -- TransUnion (NYSE: TRU) announced today that it has been named as a Leader in The Forrester Wave™ Identity Verification Solutions, Q4 2022. TransUnion is one of only three companies to receive that designation in this report.

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TransUnion says its latest forecast indicates delinquency rates for credit cards and personal loans could surge next year to highs not seen in more than a decade.

Credit card, personal loan delinquencies expected to surge in 2023: TransUnion

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LOS ANGELES--( BUSINESS WIRE )--Glancy Prongay & Murray LLP (“GPM”), a leading national shareholder rights law firm, today announces that it has commenced an investigation of potential claims against the board of directors of TransUnion (“TransUnion” or the “Company”) (NYSE: TRU) concerning whether the board of directors breached its fiduciary duties to TransUnion shareholders.

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TransUnion TRU shares are trading higher by 4.02% to $63.18 Tuesday morning after the company agreed to sell G2 Web Services, Lundquist Consulting and Fintellix India to an affiliate of Stellex Capital Management for $176M.

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RESTON, Va.--( BUSINESS WIRE )--First Orion and Hiya join Neustar, Inc., a TransUnion company, and Transaction Network Services (TNS) to form a strategic partnership advancing the industry's call vetting and authentication standards with a single framework across the largest carriers in North America. This partnership helps enable secure, trusted calls to more than 285 million mobile devices and the 90 million households that rely on landline phone service.

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CHICAGO, Dec. 13, 2022 (GLOBE NEWSWIRE) -- TransUnion (NYSE: TRU) has signed a definitive agreement to sell G2 Web Services, Inc. (“G2”), Lundquist Consulting, Inc. (“LCI”) and Fintellix India Private Limited (“Fintellix”), to an affiliate of Stellex Capital Management LLC (“Stellex”), a global, multi sector investment firm with offices in New York, Detroit, Pittsburgh and London with over $2.6 billion in assets under management.

TransUnion Announces Agreement to Sell G2, LCI and Fintellix to Stellex Capital Management for $176 million

Los Angeles, California--(Newsfile Corp. - December 9, 2022) - The Schall Law Firm, a national shareholder rights litigation firm, announces that it is investigating claims on behalf of investors of TransUnion ("TransUnion" or "the Company") (NYSE: TRU) for violations of the securities laws.The investigation focuses on whether the Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.

ONGOING INVESTIGATION ALERT: The Schall Law Firm Announces it Is Investigating Claims Against TransUnion and Encourages Investors with Losses to Contact the Firm

NEW YORK--( BUSINESS WIRE )--Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, is investigating potential claims against TransUnion (NYSE: TRU) on behalf of long-term stockholders following a class action complaint that was filed against TransUnion on November 30, 2022. Our investigation concerns whether the board of directors of TransUnion have breached their fiduciary duties to the company.

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Los Angeles, California--(Newsfile Corp. - December 8, 2022) - The Schall Law Firm, a national shareholder rights litigation firm, announces that it is investigating claims on behalf of investors of TransUnion ("TransUnion" or "the Company") (NYSE: TRU) for violations of the securities laws.The investigation focuses on whether the Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.

INVESTIGATION NOTICE: The Schall Law Firm Announces it is Investigating Claims Against TransUnion and Encourages Investors with Losses to Contact the Firm

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