Morningstar | Mortgage Headwinds Slow TransUnion’s Growth in First Quarter
TransUnion’s growth was a little slow in the first quarter, but we see nothing that alters our long-term view and will maintain our narrow moat rating and $69 fair value estimate. Overall, revenue was up 15% year over year, or 6% excluding currency effects and acquisitions. The organic level is a bit below our long-term expectations.Domestic credit bureau operations were the biggest drag in the quarter, posting a 3% year-over-year organic growth rate. Revenue related to the financial sector was the main culprit, with this area up only 1% year-over-year on an organic basis. Management attributed this to two factors. First, due to increasing interest rates, mortgage activity is falling. This is no surprise, and we think that refinancing volumes will ultimately settle at a lower level than the industry has generally seen in the post-crisis period, but also that this will be a one-time issue. We expect the pressure to ease a bit as the company moves through the year. Management also pointed to some weakness on the marketing side, as uncertainty over the direction of capital markets led to a pause in marketing efforts, although this situation more recently has improved. Overall, we attribute the drop-off in growth to temporary market conditions and are not overly concerned.
International results remain a bright spot and support our view that the most value-creative long-term opportunity for TransUnion and its peers lies in replicating their business model in new markets. Excluding currency effects and acquisitions, international revenue was up 17% year over year. We remain encouraged by progress in India, which was up 51% year over year on a constant currency basis. While it will take a long time to fully realize, we believe India has by far the greatest long-term potential for the credit bureaus, and TransUnion holds a dominant market share position in the country.
Adjusted EBITDA margin for the quarter was 38.3%, compared with 37.7% last year. We continue to believe that the company’s solid long-term growth prospects and the scalable nature of the business model will allow for margin improvement over time.
TransUnion is an information and insights company. The company provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses. The company has the following reportable segments: United States Markets, which provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses; International, which provides services similar to its United States Markets segment to businesses in select regions outside the United States; and Consumer Interactive, which provides solutions that help consumers manage their personal finances and take precautions against identity theft.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
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