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Good morning, and welcome to the TransUnion 2026 Second Quarter Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Greg Bardi, Senior Vice President, Investor Relations. Please go ahead, sir.
Good morning, and thank you for attending today. Joining me on the call are Chris Cartwright, President and Chief Executive Officer; and Todd Cello, Executive Vice President and Chief Financial Officer. We posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website this morning, and they can also be found in the current report on Form 8-K that we filed this morning. Our earnings release and the accompanying slides include various schedules, which contain more detailed information about revenue, operating expenses and other items, as well as certain non-GAAP disclosures and financial measures along with the corresponding reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures. Today's call will be recorded and a replay will be available on our website. We will also be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements because of factors discussed in today's earnings release and the comments made during this conference call and in our most recent Form 10-K, Forms 10-Q and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statement. With that, let me turn it over to Chris.
Thank you, Greg, and good morning, everyone, and welcome to our Q2 earnings call. Let me outline the agenda for this morning. First, I'm going to review our second quarter results and the increased guidance for full year 2026. Then we'll get into an example of how we are driving innovation-led diversified and scalable growth across the business using U.S. financial services as an example of this strategy in action. Then I'll hand it over to Todd, who will go into the details on Q2 and provide the third quarter guide and also the full year '26 guide. So turning to the second quarter. Again, we delivered strong results exceeding our guidance for revenue, adjusted EBITDA and adjusted diluted earnings per share. Our organic constant currency revenue grew 10% and above our 8% to 9% guidance, which marks our tenth consecutive quarter of at least high single-digit growth. And if you exclude FICO mortgage royalties, the organic revenue grew 7%, which is also above our expectations. Now in U.S. markets, revenue increased 11%. Financial Services again led the way, up 18% or 10% excluding FICO mortgage royalties. We delivered broad-based growth across lending types driven by sales momentum across credit and noncredit solutions alongside some modest volume growth and pricing actions. Emerging verticals grew 9% in the quarter, led by double-digit growth in insurance as well as high single-digit growth in technology, retail and e-commerce. International revenues accelerated to 6% organically, driven by our largest markets. Canada again posted strong results at 10%, and India and the U.K. also grew high single digits. In India, strong new business wins and gradually improving credit volumes drove a return to growth. Additionally, our recently acquired bureau in Mexico continues to track well ahead of our acquisition case on both revenue and adjusted EBITDA. Revenue growth translated into 13% adjusted diluted earnings per share growth, and we increased our share repurchases in the second quarter and through July, bringing our year-to-date total to roughly $150 million. We retain ample capacity for additional repurchases in the second half of the year under our $1 billion authorization and we also reduced our leverage ratio to 2.6x in the quarter due to strong adjusted EBITDA growth. Now our strong first half performance has allowed us to raise our full year guidance. We now expect 8% to 9% organic constant currency revenue growth, 10% to 11% adjusted EBITDA growth and 11% to 12% adjusted diluted earnings per share growth. Our 11% to 12% adjusted diluted earnings per share guidance represents an increase from our prior 9% to 11% assumption. So our guidance balances operating overperformance in the first half and constructive ongoing trends in the market with appropriate conservatism given it's still an uncertain macro environment. Across our markets, we continue to experience consumer resilience and broadly stable market volumes. Specific to the U.S., lenders are cautiously optimistic and anticipate modest loan growth, which is supported by strong consumer credit performance. We continue to monitor inflation levels and interest rates and their potential impacts on consumer behavior and loan demand. The 10-year treasury yield is now approaching 4.7%, that's up roughly 50 basis points from the start of the year. While this has modestly pressured mortgage activity, impacts across the remainder of our portfolio have been limited. If the current trends continue, we expect performance to be at or slightly above the high end of our guidance. At the same time, our range is designed to absorb a reasonable level of market softening. Todd is going to provide more details on this in the guidance assumptions later. Our strong results and guidance reflect consistent execution against the growth strategy we outlined in February, unlocking the full potential of OneTru and accelerating innovation in AI-enabled solutions and translating these capabilities into commercial momentum across our portfolio. So let me highlight the milestones against each of these priorities. First, on the platform modernization, we continue to make really good progress. We have materially increased U.S. credit customer migrations to OneTru during the quarter. At this point, roughly 60% of our U.S. match activity and 30% of online customers are now running on OneTru. That's over 4,000 U.S. credit customers now migrated. We continue to convert the most complex activity first while maintaining an emphasis on minimizing customer disruption. We expect to complete the U.S. migrations by the end of this year. Additionally, we continue to extend the OneTru platform and solutions internationally. We have now deployed OneTru instances in Canada, the U.K. and India to support the launch of our TruIQ analytics platform. We also launched TruValidate, our fraud solution, in the U.K. and trusted call solutions in Canada and India, creating new local market opportunities for these global products. OneTru is enabling us to increase our innovation velocity. Across the enterprise, we launched 40 new products and AI-powered enhancements in the first half alone, contributing significantly to our sales pipeline. Beyond this innovation, we're also deploying at scale internally to improve our productivity. We are already seeing gains by using these tools across key employee groups, including average gains of over 25% for our software engineers and data scientists and early experimentation shows more than 20% within our consumer support operations. These successes reinforce our confidence in the broader opportunity to drive AI efficiencies that can enhance our margins and fund future growth investments. Now these platform and innovation investments are increasing commercial momentum across solutions and within verticals and geographies. In the first half of the year, core credit, excluding FICO mortgage royalties, and fraud each grew in the high single digits, driven by traction in TruIQ, alternative data and trusted call solutions. Marketing Solutions also grew mid-single digits, supported by strong identity performance with acceleration expected in the second half. Together, OneTru and our global solutions strategy are increasing our innovation, expanding addressable opportunities and supporting scalable revenue growth. Now let's have a case study of this strategy in action, focusing on U.S. financial services where platform modernization, product innovation and deeper customer engagement are translating into sustained outperformance. Within U.S. Financial Services, growth has consistently exceeded underlying market volumes. Excluding mortgage, Financial Services has grown at a 9% compound annual growth rate, outpacing the roughly 2% average growth in U.S. consumer credit originations and real GDP growth over the same period. We have sustained this outperformance across multiple operating environments. U.S. financial services, excluding mortgage, has delivered high single-digit or greater growth, except for modest pullbacks during the pandemic and in the '23 and 2024 consumer lending slowdown. This track record reflects the strength of our U.S. credit data and expanded solution suite, which have enabled outperformance across market cycles. Growth is increasingly driven by share gains, pricing and innovation, not simply underlying lending activity. One reason we've been able to consistently outgrow the market is the increasing diversification of our financial services business. At almost two-thirds of financial services revenue, CoreCredit remains the foundation of the franchise. We continue to grow our share on the strength of our leading trended data and attributes as well as our differentiated and insight-led engagement model. Building from that foundation, more than one-third of revenue now comes from solutions outside traditional credit reports and scores. These newer revenue streams represent faster-growing opportunities that are often less directly tied to lending origination volumes. Roughly 12% of revenue comes from alternative data like FactorTrust, as well as our TruIQ analytics enablement suite. These solutions serve lenders' increasing appetite for alternative data sets and AI-enabled analytic tools to activate our data at scale. Another 24% of revenue comes from noncredit solutions, most notably trusted call solutions and our modernized marketing and fraud solutions. This intentional diversification has expanded our position beyond CoreCredit to make us a broader partner for clients across the customer life cycle. We help them reach the right consumers, improve engagement, mitigate fraud, manage portfolios and make better decisions. This combination of CoreCredit leadership and complementary adjacent growth opportunities is a real differentiator for TransUnion. The benefits of our diversified growth strategy are evident in our recent performance. Over the last two years, U.S. Financial Services, excluding mortgage, has grown at a roughly 10% compound annual growth rate with contributions from across the product portfolio. CoreCredit is growing low double digits annually. This growth exceeds lending volume growth, reflecting customers' continued preference for our differentiated trended data and analytics. Our alternative data and analytics are growing in the low teens annually, led by FactorTrust and new wins for our TruIQ suite. The maturation of TruIQ provides a new opportunity to further increase growth. Noncredit solutions are growing at a high single-digit annual rate with room for further acceleration. Trusted call solutions, in particular, has been the standout, growing over 50% annually within financial services. We see increased revenue and bookings momentum within marketing and fraud. These solutions address a growing set of mission-critical use cases. AI will increase demand for proprietary data analytics and decisioning capabilities, areas where we are well positioned. Over time, we expect increased AI sophistication to drive higher data consumption, stronger demand for TruIQ analytics and faster adoption of our marketing and fraud tools. Taken together, these trends position us to continue growing above underlying market volumes. Financial Services now benefits from multiple growth vectors, a broader addressable market and a more diversified revenue base than at any point in our history. With that as context of how our strategy is driving commercial success, I'm going to pass it to Todd, who will detail Q2 performance and our refreshed guidance. Todd?
Thanks, Chris, and let me add my welcome to everyone. Starting with the quarter, revenue exceeded the high end of guidance by $27 million and adjusted EBITDA exceeded by $11 million led by stronger-than-expected performance in U.S. nonmortgage financial services, emerging verticals and international. U.S. mortgage was roughly in line with expectations despite rising interest rates throughout the quarter. Total revenue increased 15% on a reported basis and 10% on an organic constant currency basis led by U.S. financial services and emerging verticals. Excluding FICO mortgage royalties, organic growth was 7%. Adjusted EBITDA increased 12%. Adjusted EBITDA margin was 34.8%, slightly better than guidance and down 90 basis points year-over-year. The impact of FICO mortgage royalties accounted for the entirety of the year-over-year decline, with underlying margins up modestly. Acquisitions had an immaterial impact on consolidated margins as Mexico delivered better-than-anticipated adjusted EBITDA performance. Adjusted diluted earnings per share was $1.23, up 13% year-over-year and $0.08 ahead of the high end of our guidance. In the second quarter, U.S. markets revenue grew 11% on an organic constant currency basis versus the prior year. Growth was diversified across our verticals, supported by strong first half bookings and retention as well as continued demand for both credit and noncredit solutions. Financial Services revenue grew 18% or 10% excluding FICO mortgage royalties. In core nonmortgage financial services, revenue grew 8% with healthy growth across lending types. As Chris discussed, growth reflects a mix of healthy lending activity, pricing, new wins and increasing adoption of our broader solution set. Credit card and banking rose 6% on lending volume growth and new wins from trusted call solutions. Consumer lending grew 8% with strong fintech performance and sustained consumer demand. Auto was up 8%, driven by pricing and new wins across our solutions. Auto growth outpaced declining industry volumes, lapping last year's tariff-related pull forward in purchase activity. In mortgage, revenue grew 37%. Excluding FICO royalties, mortgage growth was 15% versus inquiries down 7% and with outperformance due to pricing actions and non tri-bureau revenues. Growth was in line with expectations even as volumes came in modestly lower as rates increased during the quarter. Within mortgage, we recently added new alternative credit attributes from FactorTrust to our mortgage credit file at no additional cost to customers. This enhancement reflects our continued focus on helping mortgage lenders develop a more complete and actionable view of borrower behavior. Additionally, VantageScore usage in mortgage was a highlight in the quarter with a meaningful increase in adoption. At the start of the year, less than 5% of our mortgage credit inquiries included VantageScore. That figure is now closer to 30% across more than 900 lenders and increasing each month. Most activity remains dual pulls with VantageScore and FICO, but we are beginning to see increased VantageScore-only usage including certain mortgages requiring mortgage insurance. Importantly, our 2026 guidance continues to assume no benefit from VantageScore adoption. That said, the momentum we are seeing gives us greater confidence in the long-term opportunity as the market moves through testing, validation and operational readiness. Turning to emerging verticals, growth accelerated to 9% and was led by our eighth straight quarter of double-digit growth in insurance as well as trusted call solution strength across our verticals. Within insurance, we experienced robust demand across our solution suite. Credit-based marketing continues to strengthen. Consumer shopping remains active and we drove growth across CoreCredit, trended history and trusted call solutions. Tech, retail and e-commerce, where a significant portion of our marketing and fraud revenue resides, grew high single digits with emerging verticals, insurance and tech, retail and e-commerce accounting for over half of the revenue. Across our other emerging verticals, public sector and media grew mid-single digits, tenant and employment returned to growth and the Telco vertical declined modestly. Consumer Interactive declined 3%, in line with our expectations as growth in the indirect channel was offset by declines in the direct channel. In international, all revenue growth comparisons are on an organic constant currency basis. International revenue accelerated from flat growth in the first quarter to 6% in the second quarter. Overall results reflected strength in developed markets and improving trends across emerging markets, including an inflection in India and moderating headwinds in Asia Pacific. Starting with India, revenue accelerated to 8% growth, slightly ahead of our expectations. We experienced gradually improving volumes over the course of the quarter supported in part by the recent government-backed program to support commercial lending. We also delivered very strong new wins in the quarter. We continue to monitor the Indian market with cautious optimism about the trajectory. We expect similar growth in the third quarter with acceleration in the fourth quarter as comparisons ease. Canada grew 10%, reflecting healthy activity across financial services as well as strong growth in fintechs and insurance. Pay grew 9%, outpacing modest market growth driven by share gains and new business wins across banking and fintech. Latin America improved to 5% organic growth with double-digit growth in Brazil and modest and improving growth in Colombia and other markets. Africa also grew 5%, with broad-based growth across verticals and regions. Asia Pacific declined 7% with the rate of decline improving versus the first quarter as we finished lapping prior year one-time contracts; we expect Asia Pacific to return to growth in the second half of the year. Within our international business, transition to Mexico continues to strongly outperform our acquisition case in the first few months of ownership. Over the last several years, TransUnion de Mexico has grown at a double-digit compound annual growth rate, supported by a growing economy, favorable demographics and meaningful room for further formal credit penetration. Growth has been stronger than its Latin American peers over the last two years, reflecting not only these credit market fundamentals, but also Mexico's fiscal and monetary stability as well as its accelerating near-shoring activity supported by its proximity to the United States. We are now applying TransUnion's global product, technology and commercial playbooks to accelerate growth beyond market volumes. Let me detail our early priorities as we integrate Mexico into TransUnion. First, we are enhancing our data foundation. Our long-standing relationships with the largest Mexican banks and fintechs have created the market's leading data coverage, quality and predictive depth. That foundation includes nearly 600 million trade lines with positive and unique data representing 90% of the total. Under Mexico's regulatory framework, those positive data trade lines are not shared with competitors, creating a structural advantage. We are building on this advantage by introducing new trended scores and attributes, expanding alternative data sets and eventually migrating Mexico to OneTru to unlock greater scalability. Second, we are accelerating innovation. We plan to bring our leading global capabilities to Mexico over the course of the next year, including TruIQ Analytics, TruValidate and our credit education tools. Third, we are enhancing client engagement. In core financial services, we are strengthening relationships with leading lenders via deeper analytics consulting. At the same time, we plan to use our data advantages and faster innovation to win in our already fast-growing fintech and retail verticals. In summary, Mexico is performing ahead of plan, and we are building on that momentum with multiple opportunities to deploy our global capabilities. We believe this combination positions us on the path to drive sustained and scalable growth. Turning back to the enterprise, operating performance is translating into strong cash generation, improved balance sheet flexibility and greater capacity for capital return. We ended the second quarter with $5.6 billion of debt and $839 million of cash. Our leverage ratio decreased to 2.6x. During the second quarter and through July, we accelerated our pace of repurchases. Year-to-date, we have repurchased 2.1 million shares at an average share price of roughly $71 for a total of roughly $150 million. We continue to view share repurchases as a highly attractive use of capital at current valuation levels. For the remainder of 2026, we plan to continue executing on our disciplined capital allocation framework with a current bias toward capital return to shareholders. Based on current conditions, we expect the pace of second half repurchases to be at least comparable to the first half. We also remain committed to reducing our leverage ratio toward our long-term target of under 2.5x. Before getting into guidance details, I want to reiterate our disciplined guidance philosophy. Our increase in full year guidance reflects strong performance in the first half of the year. A continuation of those trends would position us to deliver at or slightly above the high end of our range while the range preserves flexibility to manage ongoing market uncertainty. In the third quarter, we are guiding revenue to be between $1.292 billion and $1.310 billion, up 11% to 12%. Growth is comprised of 6% to 8% organic constant currency growth and a 4.5 percentage point contribution from acquisitions. We expect 4% to 5.5% organic growth, excluding FICO mortgage royalties. Importantly, the implied sequential deceleration from 7%, excluding FICO in the second quarter, is entirely related to our non-FICO mortgage revenue reflecting greater year-over-year declines in inquiry volumes. We expect non-mortgage organic growth to be at or slightly above the 6% rate that we delivered in the second quarter. In other words, the deceleration does not reflect a change in core non-mortgage trends. We are guiding adjusted EBITDA to $455 million to $463 million, up 7% to 9% and implying a margin of 35.2% to 35.4%. Underlying margins expand by 20 to 40 basis points, offset by an 80 basis point drag from FICO royalties and a 60 basis point impact from acquisitions. We expect adjusted diluted earnings per share to be between $1.18 and $1.21, up 7% to 10%. For full year guidance, we expect revenue to be between $5.127 billion and $5.162 billion, up 12% to 13%. Our raised guidance reflects strong growth from our Mexico acquisition as well as modestly higher non-mortgage organic growth due to strong first half performance. Acquisitions now at 4% and FX has an immaterial impact on our guidance. We expect organic constant currency revenue growth of 8% to 9% or 5% to 6% excluding FICO mortgage royalties. Our segment level assumptions are broadly unchanged. Mortgage revenue growth guidance of 28% for the full year or 6% excluding FICO is unchanged since February. Mortgage revenue exceeded our expectations in the first half, particularly in the first quarter when mortgage rates briefly dipped below 6%. As mortgage rates have moved back above 6.5%, we have derisked our second half assumptions. Our conservative assumptions provide us flexibility to deliver these growth rates even if rates increase modestly from current levels. We now anticipate mid- to high single-digit inquiry declines for the full year, including low double-digit declines in the second half of the year. We continue to expect pricing actions and revenue beyond traditional tri-bureau reports to drive outperformance versus underlying volumes. At the same time, stronger momentum across the remainder of the portfolio helps offset our more conservative second half mortgage assumptions. We expect adjusted EBITDA to be between $1.807 billion to $1.827 billion in 2026, up 10% to 11%, which results in a margin of 35.2% to 35.4%, down 60 to 80 basis points. Underlying margins are expected to expand by 50 to 70 basis points driven by revenue flow-through and remaining transformation savings. This strong underlying expansion is offset by a 90 basis point drag from FICO royalties and a 40 basis point impact from our acquisitions. We anticipate adjusted diluted earnings per share to be $4.75 to $4.83, up 11% to 12%. This represents an increase from prior guidance of 9% to 11% growth. All other guidance items, including depreciation and amortization, net interest expense, adjusted tax rate and capital expenditures as a percent of revenue are unchanged from April. With that context, I will now turn the call back to Chris for closing remarks.
Thank you, Todd. Recapping in the second quarter, we beat guidance with double-digit revenue and earnings growth, reflecting the strength we're seeing in the U.S. market and our improving trends in international. We raised the full year '26 guidance but we maintain prudent assumptions around the macro environment. We now expect 8% to 9% organic constant currency revenue growth and 11% to 12% adjusted diluted EPS. This performance would reflect our third consecutive year of at least high single-digit organic constant currency revenue growth and double-digit adjusted diluted EPS growth. We executed well against our 2026 strategic priorities, most notably with substantial migrations of our U.S. credit customers to OneTru as well as an accelerating pace of product launches, enhancements and international rollout of the OneTru platform. Our investments in platform modernization, innovation and our unique data assets are translating into diversified and above-market growth rates as our business becomes increasingly driven by scalable innovation, share gains and diversification. We are growing our free cash flow generation as well as our capacity to return capital to our shareholders. With that, it's back to you, Greg.
That concludes our prepared remarks. Operator, we can begin the Q&A.
分析師問答
Operator, we will now begin the question-and-answer session.
I guess I'm struggling to understand how the non-mortgage organic upside and momentum gets adjusted in the guidance. And if that's just baked in as increased conservatism. I ask because the mortgage full year revenue guidance is unchanged, and it looks like most of the revenue guidance range is the outperformance in Mexico and increased M&A contribution. So if you could just help me with that.
This is Todd. I'll take that question for you. In essence, what we've done with guidance for mortgage is we've maintained our full year guide that we came into the year with where we were calling for 28% growth all in, and 6% when you exclude the FICO mortgage royalty and that contemplates a decline of volume from mid- to high single digits. To go back a little bit, in the first half of the year, particularly in the first quarter, we had outperformance in mortgage. When you go back to January and February, the 30-year mortgage rate was about 6%. With geopolitical tensions, the 10-year treasury yield rose and as a result the 30-year also went up, which had an impact on our volumes. As far as the way that we're looking at mortgage, we're being conservative with our assumptions. We are looking at where the 30-year is today, and it is the highest that it's been all year. Our guidance for mortgage contemplates being at that level or perhaps a little bit worse, meaning rates might be higher than they were in the first half. In essence, that provides us with flexibility to deliver these results even if rates do increase slightly. The other part, and I think this addresses your question specific to the non-mortgage part of our business, is that in the second quarter we delivered 6% growth and we're contemplating a similar trajectory for the third quarter. So look at the performance we're very pleased with within core financial services, a very strong quarter for us, emerging verticals at 9% as well as the international portfolio, including India returning to growth at 8%, Canada at 10% and the U.K. at 9%—there are good tailwinds as we go into the second half of the year. But the market remains uncertain, so we are taking a prudently conservative approach towards our guidance. As we said in our prepared remarks and what we've put on the slide, we would orient you to the high end of that guidance and more than likely if the current conditions persist, we'll be above the high end of that guidance.
Yes. To emphasize a couple of those points, we feel like we're well positioned to deliver on this raised full year guide, at or above the high end. The conditions we're experiencing across the business and in mortgage support that. We have built in some margin for error, some margin for deceleration in mortgage in the second half because, as Todd pointed out, rates are higher by about 50 basis points. We are positioned to absorb some deceleration in mortgage volumes that would come with higher rates and still deliver at the high end of the guidance. This is prudently conservative, and we've parked that conservatism disproportionately in mortgage because mortgage is the most rate sensitive. To be clear, we are experiencing consistent trends in July with what we experienced in the second quarter. If those trends persist, we will overperform and we'll be back in the third quarter making further guidance adjustments upward.
I was hoping you could expand on if you're seeing demand for your data sets given acceleration in AI agents? Which particular areas are customers ramping up demand in terms of data versus a few quarters ago? I expect that's a trend you're seeing, so I wanted to touch on which specific areas.
Toni, it is a trend we've been seeing and highlighted previously. AI and agentic customers tend to consume more data—the models and their predictiveness improve with more curated and authoritative data that we provide. We expect that to accelerate as more lenders experiment and adopt AI modeling techniques across their lending analytics life cycle. We are well positioned with product innovation in AI to support that work with our analytics orchestrator and agentic framework, which we demonstrated at Investor Day. We're using agentic AI on our foundation of data to automate much of the model building and prediction that lenders typically do on their own or many segments currently do not do. Net-net, AI is a positive growth tailwind: it's stimulating greater data consumption, and the agentic layer we're building on top of our TruIQ analytics foundation will expand our TAM and allow us to take over some work that's either done by our lending clients or not done currently by other players in the ecosystem.
Chris, in your prepared remarks you suggested that marketing solutions, TruAudience revenue growth should accelerate in the second half of the year from the mid-single-digit revenue growth in the second quarter. What's driving that dynamic about the acceleration in the second half?
There is some seasonality in the marketing business, particularly in the fourth quarter when many publishing players turn to TransUnion for market share and marketing effectiveness studies that they then use in their media sales cycles. We're making greater inroads across the publishing ecosystem as a neutral measurement provider. We're also getting traction with TruAudience, the suite we've migrated onto OneTru. We're converting legacy customers onto TruAudience, which is a more powerful, streamlined and integrated product set that enables cross-sell and upsell. The pipeline build and bookings, particularly in identity, audience, and spend planning and measurement are growing. We see that momentum building and expect a better second half of the year.
I wanted to hone in on India a bit further—nice sequential uptick there. Can you speak to what you're seeing on the ground from an economic and commercial perspective and how you're thinking about the rest of the year with a nice uptick in Q2 now under your belt?
Excited to talk about India. Volumes in consumer and commercial lending are stabilizing, which is positive. The macro remains attractive with GDP growth and reasonable inflation. There have been macro shocks that interrupted growth over recent quarters, but the volume of unsecured lending—along with card originations—appears to have found a floor and we're now in a more stable environment. On the commercial side, government support programs are enabling better activity, particularly for smaller and medium-sized businesses. We're now moving sideways to slightly upwards in market volumes, which allows our products to gain traction. Competitively, we're doing well—the team posted our largest quarter of new sales ever in India. We redeveloped our principal consumer and commercial credit scores, which are performing better and keeping our relevance. We're expanding data contributions from furnishers and the types of data we receive, improving model predictiveness. We demonstrate to lenders the value of using our data throughout the lending cycle, which helps win share. We also have successfully implemented TruIQ in India; there's significant interest and bookings momentum. We're expanding trusted call solutions by securing the necessary carrier relationships and getting good traction. So it's product-driven revenue growth plus strong competitive execution in CoreCredit.
I wanted to ask about consumer lending more specifically within Financial Services. Growth slowed a bit this quarter—was that just a function of tougher comps given a few quarters of double-digit growth? And can you talk about the fintech environment and how sensitive that business is to rising interest rates—was that a factor this quarter?
Consumer lending and card and auto have not been particularly sensitive to interest rates within the reasonable range we've seen—mortgage is far more rate sensitive. The slowdown you referenced mostly reflects tougher comps as those businesses were growing rapidly year-over-year. The absolute growth remains consistent and healthy; it's the base getting larger. Over the last two years we've seen a resurgence in growth as funding returned to fintechs and they diversified funding sources to meet market demand. The pullback in '22-'23 was an abnormal retrenchment given very high rates then. The fintech model—borrowing from capital markets or other funding sources—is durable and has been part of the lending landscape for decades. We're confident we can continue good growth in consumer lending.
I wanted to ask about the EBITDA front. The guidance implies a step-up from Q2 to Q3, but a much more material step-up from Q3 to Q4. Can you talk about what's driving that improvement in margins going forward?
Thanks, Ashish. If you look at our adjusted EBITDA margins, in Q2 we finished at 34.8%, down 90 basis points year-over-year, wholly attributable to the FICO mortgage royalty. Our underlying margins, excluding that royalty and M&A, expanded modestly. For Q3 guidance, the high end is 35.4%—that implies a 100 basis point decline year-over-year, with FICO at about an 80 basis point drag and M&A, specifically Mexico, about a 60 basis point drag. Net of that, underlying margins are improving by 20 to 40 basis points in Q3. For the full year, we call for 35.4%, down 60 basis points, but underlying, excluding FICO and M&A, we're forecasting 50 to 70 basis points of expansion driven by revenue flow-through and transformation savings. The implied step-up into Q4 comes from several items: a conservative posture on mortgage volume (mortgage is a lower-margin product, so less of it improves margin), more growth from financial services excluding mortgage which has higher margin flow-through, and accelerating international growth—India is expected to accelerate. Also, our expense base, excluding the FICO mortgage royalty, is roughly flat quarter-to-quarter, which supports margin improvement as revenue grows.
The point about the expense base is important. We recently completed a multi-year tech modernization and cost restructuring on time and within initial budget. Holding expenses flat despite underlying growth in many areas shows that program worked and has removed material costs. We're now starting to see that benefit. Additionally, on India, you'll see a nice increase in growth in Q3 and Q4 because the business is reaccelerating and comparisons are getting easier, so you'll see stronger percentage growth in the second half.
Given that a competitor recently announced the acquisition of the second largest credit bureau in Mexico, can you comment on your positioning in the region long term? It was a strong contribution for you in the quarter, but how could that competitive move impact your long-term strategy in Mexico?
Mexico is an exciting development for TransUnion. We had been a minority investor and a tech provider to the bureau in Mexico for over 25 years, and now we own the leading bureau with the top market position in the Mexican data archives. Since acquisition, TransUnion de Mexico has consistently outperformed growth and profit expectations and is compounding revenue in the low double digits. It's a great entry position with terrific market coverage, and we have a lot of work to do there—same for our competitor. Mexico today operates with a fairly basic level of credit data and analytics. We're positioned to broaden contributions from a wider range of furnishers, push deeper into fintech, bring alternative credit data sets to market and do it all on OneTru, which we will roll out into Mexico. We're bringing TruIQ analytics immediately, layering it over the current tech stack to service clients more deeply and generate incremental revenues. It's a large, underpenetrated market and we believe there is room for multiple players to do well. We're confident in our ability to deliver value and grow sustainably.
Thanks for the U.S. Financial Services breakout in your prepared remarks. Just curious about the non-CoreCredit pieces—how do you think about expanding that portion longer term? You noted growth rates and that about 36% of Financial Services revenue is outside CoreCredit. What's your strategy there around investment or M&A to make that a bigger percentage of the business?
Good question, Manav. Our growth in financial services is diversified. CoreCredit is foundational—leading trended data with broad attributes and deep history. We've extended downmarket and into alternative data sets. We'll continue to expand organically and inorganically where it makes sense. We've also acquired capabilities, such as from Neustar, to deepen our marketing and fraud offerings and are cross-selling into financial services. There's further opportunity with identity solutions to become a system of record for lenders' data hygiene and identity resolution. Importantly, TruIQ closed the gap in analytics capabilities; it's performing well in the U.S. and has expanded into India, Canada and the U.K., with Mexico following. Those core markets represent about 95% of TransUnion's revenue. So yes, we will continue to diversify and invest to grow non-CoreCredit revenue as a larger percentage of the business, using both organic innovation and selective M&A when it aligns with our strategy.
Pivoting to VantageScore adoption—moving from ~5% to ~30% adoption in mortgage inquiries, much of it dual pull, but some is single-pull. Can you unpack what's driving that acceleration in terms of end cohorts, lender types, or other dynamics? More detail on what you're seeing would be helpful.
The data we shared reflects adoption across more than 900 customers, so it's fairly broad-based. This is a period of experimentation and calibration by lenders, resellers and other participants including GSEs and mortgage insurers. At the start of the year we didn't include VantageScore revenue in our guidance and that posture remains unchanged in this raised guidance. We're focused on helping the market adopt VantageScore. There's a big opportunity for lenders to access a more predictive score at a lower price, improving their economics and potentially benefiting consumers. Most players are experimenting; larger players that stand to gain the most are leading the efforts. Many participants are calibrating risk models and updating operational systems to include multiple scores. This year is one of testing and validation, and the market is highly engaged. Adoption and experimentation indicate meaningful tailwinds for VantageScore in the quarters and years ahead.
Chris, you mentioned increased instances of lenders adopting VantageScore-only usage. Can you talk more about what you're seeing in terms of cohorts or lender types that are moving to single-score usage versus those maintaining dual pulls?
There are some players, still a minority, that are using only VantageScore today, and the percentage using only Vantage is increasing. Many of the largest players are leading the move to a single score once they're through the experimentation and calibration phase. A relatively small percentage of mortgages are Vantage-only today, but that share is growing rapidly. Given the breadth of experimentation, we're seeing real tailwinds. I'm confident that in coming quarters we'll see continued share adoption that will flow through metrics around Vantage adoption and utilization across mortgage origination and securitization.
All right. Chris, any final remarks?
We discussed OneTru adoption earlier—it's progressing well. We're highly confident we'll have the entirety of the U.S. credit market converted by the end of the year, most sooner. We're also migrating marketing and fraud clients from legacy applications onto OneTru, which is an enormous proof point that the platform can be rolled out globally. Next up are our principal markets in Canada, India, the U.K. and Mexico, where we want to move quickly because of the opportunity. Once we complete that, expected roughly within the next two years, approximately 95% of our business will run on a common software platform, generating significant economies of scale that are unique in the industry and allowing us to continue growing margins while accelerating innovation. This modernization and transformation is working. We're diversifying the business to drive sustainable growth, gaining share through innovation, improving cash flow metrics and increasing capacity to return capital to shareholders while investing in top-line growth. There's a lot of momentum and we'll keep delivering quarter-by-quarter.
All right, Chris. I think that's a good place to end. Everyone, thanks for the time today, and have a great rest of your day.
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