S-1 1 d867590ds1.htm S-1 S-1
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As filed with the Securities and Exchange Commission on March 30, 2015

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

TransUnion

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   7320   61-1678417
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

555 West Adams Street Chicago, Illinois 60661 (312) 985-2000 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

John W. Blenke, Esq. Executive Vice President, Corporate General Counsel and Corporate Secretary TransUnion 555 West Adams Street Chicago, Illinois 60661 (312) 985-2000 (Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

With copies to:

Richard A. Fenyes, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017-3954
(212) 455-2000
 

Cathy A. Birkeland, Esq.

Michael A. Pucker, Esq.

Latham & Watkins LLP
330 North Wabash Avenue, Suite 2800
Chicago, Illinois 60611
(312) 876-7700

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

Proposed

Maximum

Aggregate

Offering Price(1)(2)

Amount of
Registration Fee

Common Stock, par value $0.01 per share

  $100,000,000   $11,620.00

 

 

(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”).
(2) Includes additional shares that the Underwriters have the option to purchase to cover over-allotments, if any. See “Underwriting (Conflicts of Interest).”

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion. Dated March 30, 2015

 

             Shares

 

 

 

LOGO

TransUnion

Common Stock

 

 

This is an initial public offering of shares of common stock of TransUnion. We are offering                     shares of our common stock.

Prior to this offering, there has been no public market for our common stock. We currently estimate that the initial public offering price per share will be between $         and $        . We intend to apply to list our common stock on                     under the symbol “                     .” After the completion of this offering, affiliates of Advent International Corporation (“Advent”) and Goldman, Sachs & Co. (“GS”, and together with Advent, the “Sponsors”) will continue to own a majority of the voting power of all outstanding shares of our common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the                     . See “Principal Stockholders.”

Investing in our common stock involves risk. See “Risk Factors” on page 21 to read about factors you should consider before buying shares of our common stock.

 

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

     Per Share      Total  

Initial public offering price

   $                    $                

Underwriting discounts and commissions

   $         $     

Proceeds, before expenses, to us(1)

   $         $     

 

(1)  See “Underwriting Conflicts of Interest.”

To the extent that the underwriters sell more than                     shares of common stock, the underwriters have the option to purchase up to an additional                     shares from us at the initial price to public, less the underwriting discounts and commissions, within 30 days of the date of this prospectus.

 

 

The underwriters expect to deliver the shares against payment in New York, New York on                     , 2015.

Joint Book-Running Managers

 

Goldman, Sachs & Co.   J.P. Morgan   BofA Merrill Lynch     Deutsche Bank Securities   

 

RBC Capital Markets

  Wells Fargo Securities   Credit Suisse

Co-Managers

 

Evercore ISI

      Stifel

 

Prospectus dated                 , 2015.


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TABLE OF CONTENTS

Prospectus

 

     Page  

Industry and Market Data

     ii   

Non-GAAP Financial Measures

     ii   

Trademarks

     iii   

Prospectus Summary

     1   

Risk Factors

     21   

Special Note Regarding Forward-Looking Statements

     41   

Use of Proceeds

     43   

Dividend Policy

     44   

Dilution

     45   

Capitalization

     47   

Selected Historical Consolidated Financial Data

     49   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     55   

Business

     81   

Management

     107   

Principal Stockholders

     136   

Certain Relationships and Related Party Transactions

     140   

Description of Indebtedness

     146   

Description of Capital Stock

     150   

Shares Eligible for Future Sale

     158   

Certain United States Federal Income and Estate Tax Consequences to Non-U.S. Holders

     161   

Underwriting (Conflicts of Interest)

     164   

Legal Matters

     171   

Experts

     171   

Where You Can Find More Information

     171   

Index to Consolidated Financial Statements

     F-1   

 

 

Through and including                    , 2015 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

 

We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

Unless otherwise indicated or the context otherwise requires, financial data in this prospectus reflects the consolidated business and operations of TransUnion and its consolidated subsidiaries.

The consolidated financial statements of TransUnion included in this prospectus are presented in U.S. Dollars rounded to the nearest million, with amounts in this prospectus rounded to the nearest million. Therefore, discrepancies in the tables between totals and the sums of the amounts listed may

 

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occur due to such rounding. The accounting policies set out in the audited consolidated financial statements contained elsewhere in this prospectus have been consistently applied to all periods presented.

 

 

INDUSTRY AND MARKET DATA

This prospectus includes industry and trade association data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry publications and surveys and other information available to us. Some data is also based on our good faith estimates, which are derived from management’s knowledge of the industry and independent sources.

NON-GAAP FINANCIAL MEASURES

This prospectus contains “non-GAAP financial measures” that are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles in the United States (“GAAP”). Specifically, we make use of the non-GAAP financial measures “Adjusted EBITDA” and “Adjusted Net Income.”

Adjusted EBITDA

Adjusted EBITDA represents:

 

    net income or loss, plus:

 

    net interest expense;

 

    income tax provision (benefit);

 

    depreciation and amortization;

 

    stock-based compensation;

 

    discontinued operations, if any; and

 

    other adjustments of the type described in note 4 to “Selected Historical Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Twelve Months Ended December 31, 2014, 2013 and 2012—Key Performance Measures.”

Adjusted Net Income

Adjusted Net Income represents:

 

    net income or loss, plus:

 

    amortization of certain intangible assets;

 

    stock-based compensation; and

 

    other adjustments of the type described in note 4 to “Selected Historical Consolidated Financial Data.”

We believe Adjusted EBITDA and Adjusted Net Income are useful tools for investors and other users of our financial statements to help assess our operating performance, and our ability to incur and

 

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service indebtedness, maintain current operating levels of capital assets and acquire additional operations and businesses. We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our operating performance because they eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. Also, Adjusted EBITDA and Adjusted Net Income are measures frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure under our incentive plan. Furthermore, under the credit agreement governing our senior secured credit facility and the indentures governing our senior notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to a ratio based on Adjusted EBITDA.

Adjusted EBITDA does not reflect our interest, income tax, depreciation, amortization, stock-based compensation, discontinued operations and certain other income and expense, and Adjusted Net Income does not reflect amortization of certain intangible assets, stock-based compensation and certain other income and expense, all net of tax. Other companies in our industry may calculate Adjusted EBITDA and Adjusted Net Income differently than we do, limiting their usefulness as comparative measures. Because of these limitations, Adjusted EBITDA and Adjusted Net Income should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not measures of financial condition or profitability under GAAP. Adjusted EBITDA excludes capital expenditures and should not be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance, and Adjusted Net Income should not be considered as an alternative to operating income or net income as an indicator of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA and Adjusted Net Income is net income attributable to the Company. See note 4 to “Selected Historical Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Twelve Months Ended December 31, 2014, 2013 and 2012—Key Performance Measures.”

TRADEMARKS

We own or have the right to use the trademarks, service marks and trade names that we use in connection with the operation of our business, including the TransUnion name and logo and other names and marks that identify our products and services. Other trademarks, service marks and trade names used in this prospectus are, to our knowledge, the property of their respective owners. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are listed without the ® and ™ symbols, but such omissions are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names.

 

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PROSPECTUS SUMMARY

This summary highlights certain significant aspects of our business and this offering. This is a summary of information contained elsewhere in this prospectus, is not complete and does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus, including the information presented under the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” and the consolidated financial statements and the notes thereto, before making an investment decision. This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from future results contemplated in the forward-looking statements as a result of certain factors such as those set forth in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Unless the context indicates otherwise, all references herein to “TransUnion,” the “Company,” “we,” “us” and “our” refers to TransUnion and its consolidated subsidiaries, including TransUnion Intermediate Holdings, Inc. (“TransUnion Intermediate”). The historical financial statements and financial data included in this prospectus are those of TransUnion and its consolidated subsidiaries or, prior to the formation of TransUnion, to TransUnion Intermediate and its consolidated subsidiaries.

Our Company

TransUnion is a leading global risk and information solutions provider. Our mission is to help people worldwide access opportunities that lead to a higher quality of life. Businesses embed our solutions into their process workflows to optimize their risk-based decisioning and to drive better financial outcomes. Consumers use our solutions to view their credit profiles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft. We are differentiated by our comprehensive and unique datasets, our next-generation technology and our analytics and decisioning capabilities, which enable us to deliver insights across the entire consumer lifecycle. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data, which allows us to better predict behaviors, assess risk and address a broader set of business issues for our customers. We have deep domain expertise across a number of attractive industry verticals, including financial services, insurance and healthcare, as well as a global presence in over 30 countries across North America, Africa, Latin America and Asia.

Our addressable market includes the big data and analytics market, which continues to grow as companies around the world recognize the benefits of building an analytical enterprise where decisions are made based on data and insights, and as consumers recognize the importance that data and analytics play in their ability to procure goods and services and protect their identities. International Data Corporation (“IDC”) estimates worldwide spending on big data and analytics services to be approximately $52 billion in 2014, growing at a projected compounded annual growth rate (“CAGR”) of approximately 15% from 2014 through 2018. There are several underlying trends supporting this market growth, including the creation of large amounts of data, advances in technology and analytics that enable data to be processed more quickly and efficiently to provide business insights, and growing demand for these business insights across industries and geographies. Leveraging our 47-year operating history and our established position as a leading provider of risk and information solutions, we have evolved our business by investing in a number of strategic initiatives, such as transitioning to the latest big data and analytics technologies, expanding the breadth and depth of our data, strengthening our analytics capabilities and enhancing our business processes. As a result, we believe we are well positioned to expand our share within the markets we currently serve and capitalize on the larger big data and analytics opportunity.

 

 

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We believe that we have the capabilities and assets, including comprehensive and unique datasets, advanced technology and analytics, to provide differentiated solutions to our customers. We have over 30 petabytes of data, growing at an average rate of over 25% each year since 2010, representing over one billion consumers globally. We obtain financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from an average of 90,000 data sources, including financial institutions, private databases and public records repositories. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. Our next-generation technology allows us to quickly and efficiently integrate our data with our analytics and decisioning capabilities to create and deliver innovative solutions to our customers and to quickly adapt to changing customer needs. Our deep analytics expertise, which includes our people as well as tools such as predictive modeling and scoring, customer segmentation, benchmarking and forecasting, enables businesses and consumers to gain better insights into their risk and financial data. Our decisioning capabilities, which are generally delivered on a software-as-a-service platform, allow businesses to interpret data and apply their specific qualifying criteria to make decisions and take actions. Collectively, our data, analytics and decisioning capabilities allow businesses to authenticate the identity of consumers, effectively determine the most relevant products for consumers, retain and cross-sell to existing consumers, identify and acquire new consumers and reduce loss from fraud. Similarly, our capabilities allow consumers to see how their credit profiles have changed over time, understand the impact of financial decisions on their credit scores, manage their personal information and take precautions against identity theft.

We leverage our differentiated capabilities in order to serve a broad set of customers across multiple geographies and verticals. We have a global customer base of over 65,000 businesses and 35 million consumers. We offer our solutions to business customers in financial services, insurance, healthcare and other industries. Our customer base includes many of the largest companies in each of the primary industries we serve. For example, in the United States, we contract with nine of the ten largest banks, all of the top five credit card issuers, all of the top twenty-five auto lenders, fourteen of the fifteen largest auto insurance carriers, thousands of healthcare providers and federal, state and local government agencies. We have been successful in leveraging our brand, our expertise and our solutions in our global operations and have a leading presence in several high-growth international markets, including India, Hong Kong and Africa.

We believe we have an attractive business model that has highly recurring and diversified revenue streams, low capital requirements, significant operating leverage and strong and stable cash flows. The proprietary and embedded nature of our solutions and the integral role that we play in our customers’ decision-making processes have historically translated into high customer retention and revenue visibility. For example, our top ten financial institution customers have an average tenure of over ten years. We continue to demonstrate organic growth by further penetrating existing customers, innovating new solutions and gaining new customers. We have a diversified portfolio of businesses across our segments, reducing our exposure to cyclical trends in any particular industry or geography. We operate primarily on a contributory data model in which we typically obtain updated information at little or no cost and own most of our data. We augment this data with a growing set of public record and alternative data as we expand into new solutions and adjacencies. We also directly manage and control our technology, which provides us with an efficient cost structure and allows us to benefit from economies of scale. Additionally, our technology investments enable us to grow and expand our business with low incremental cost, providing significant operating leverage.

 

 

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Our total revenues increased from $1,183.2 million for the year ended December 31, 2013 to $1,304.7 million for the year ended December 31, 2014, representing year-over-year growth of 10.3%. Our Adjusted EBITDA (as defined below in note 4 to “Selected Historical Consolidated Financial Data”) increased from $408.5 million for the year ended December 31, 2013 to $451.6 million for the year ended December 31, 2014, representing year-over-year growth of 10.6%.

Our Evolution

Our business has a 47-year operating history and a long track record of providing risk and information solutions to businesses and consumers while continuing to innovate to meet their changing needs. Since our founding as a provider of regional credit reporting services, we have built a comprehensive database of U.S. consumers and used that as a base to expand our operations. We have strengthened our analytics and decisioning capabilities and acquired complementary datasets enabling us to enhance our solutions, diversify our revenue base and expand into high-growth verticals. We have grown our global presence to over 30 countries and also expanded the reach of our consumer solutions by partnering with other market leaders and innovators.

As part of our continued evolution, we have invested in a number of strategic initiatives that we believe will allow us to cater to the growing demand for data and analytics, provide differentiated solutions and better serve our customers. These initiatives include:

 

    Investing in our Technology:    Technology is at the core of our solutions. We have made significant investments since 2012 to modernize our infrastructure and to transition to the latest big data and analytics technologies. Our next-generation technology enhances our ability to organize and handle high volumes of disparate data, improves delivery speeds, provides better availability and strengthens product development capabilities, while lowering our overall cost structure and allowing us to maintain focus on information security. Our investment strategy has been to build capabilities and leverage them across multiple geographies and verticals.

 

    Expanding our Data:    We have continued to invest in the breadth and depth of our data. We introduced the concept of trended data to provide the trajectory of a consumer’s risk profile, used public records data to enhance the scope of business issues we can address and incorporated alternative data into our databases to better assess risk for banked and unbanked consumers. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records datasets. All of these initiatives improve the quality of our data, provide deeper insights into risk and allow us to create differentiated solutions for our customers.

 

    Strengthening our Analytics Capabilities:    We have strengthened our analytics capabilities by leveraging our next-generation technology and expanded data, utilizing more advanced tools and growing our analytics team. This has allowed us to create solutions that produce greater insights and more predictive results, which help our customers make better decisions. In addition, our strengthened analytics capabilities have shortened time-to-market to create and deliver these solutions to our customers.

 

    Broadening our Target Markets:    We have grown our target markets by establishing a presence in attractive high-growth international markets, entering new verticals and expanding the reach of our consumer offerings. Our capabilities enable us to develop scalable products that we are able to deploy across new markets and verticals.

 

    Enhancing our Business Processes and Capabilities:    We have enhanced our business processes and capabilities to support our growth. We have hired additional industry experts and implemented a global sales force effectiveness program, which have allowed us to create and sell new vertical-specific solutions. We have also recently refreshed our company brand to reinforce our global position as a trusted, consumer-friendly company.

 

 

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We believe that our ongoing focus on evolving with the market and with our customers’ needs ensures continued improvement in our overall services to businesses and consumers. Leveraging our trusted brand, global scale and strong market position in the verticals we serve will allow us to capitalize on business opportunities worldwide and contribute to our long-term growth.

Our Market Opportunity

We believe there is a long-term trend of businesses and consumers using data and analytics to make more informed decisions and manage risk more effectively, resulting in a large and rapidly growing market. According to a September 2014 report from IDC, spending on business analytics services worldwide is projected to reach approximately $52 billion in 2014 and is projected to grow at a CAGR of approximately 15% from 2014 through 2018. We believe there are several key trends in the global macroeconomic environment affecting the geographies and verticals we serve that will create increasing demand for our solutions:

 

    Rapid Growth in Data Creation and Application:    Larger and more diversified datasets are now assembled faster while the breadth of analytical applications and solutions has expanded. Companies are increasingly relying on business analytics and big data technologies to help process this data in a cost-efficient manner. In addition, non-traditional sources of structured and unstructured data have become important in deriving alternative metrics. The proliferation of smartphones and other mobile devices also generates enormous amounts of data tied to consumers, activities and locations. We believe that the demand for targeted data and sophisticated analytical solutions will continue to grow meaningfully as businesses seek real-time access to more granular views of consumer populations and more holistic views on individual consumers.

 

    Advances in Technology and Analytics Unlocking the Value of Data:    Ongoing advances in data collection, storage and analytics technology have contributed to the greater use and value of data and analytics in decision making. As businesses have gained the ability to rapidly aggregate and analyze data, they increasingly expect access to real-time data and analytics from their information providers as well as solutions that fully integrate into their workflows. We believe this has made sophisticated technology critical for gaining and retaining business in the risk and information services industry.

 

    Greater Adoption of Big Data Solutions across Verticals and Adjacent Markets:    With the proliferation of data, we believe companies across different verticals and adjacent markets recognize the value of risk information and analytical tools, particularly when tailored to their specific needs. For example, in financial services, there is an emergence of new specialty finance companies, such as peer-to-peer lending platforms and online balance sheet lenders, which utilize sophisticated risk assessment tools that leverage data, such as behavioral data, transactional data and employment and credit information. In the insurance industry, as consumers increasingly obtain quotes from multiple insurers in an effort to lower their costs, insurers are trying to improve the accuracy of their risk assessments and initial quotes. In the healthcare industry, greater patient financial responsibility, focus on cost management and regulatory supervision are driving healthcare providers to use data and related analytics tools to better manage their revenue cycle.

 

   

Increasing Lending Activity in Emerging International Markets:    As economies in emerging markets continue to develop and mature, we believe there will continue to be favorable socio-economic trends, such as an increase in the size of the middle class and a significant increase in the use of financial services by under-served and under-banked consumers. In addition, credit penetration is relatively low in emerging markets when compared

 

 

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to developed markets. The widespread adoption and use of mobile phones in emerging markets have also enabled greater levels of financial inclusion and access to banking and credit. We expect the populations in emerging markets to continue to become more credit active, resulting in increased demand for our services.

 

    Increased Management and Monitoring of Personal Financial Information and Identity Protection by Consumers:    Demand for consumer solutions is rising with higher consumer awareness of the importance and usage of their credit information, increased risk of identity theft due to data breaches and more readily available free credit information. The annual growth in the number of consumers subscribing to a credit monitoring or identity protection service has been almost 20% over the last several years. In addition, the proliferation of mobile devices has made data much more accessible and enabled consumers to manage their finances and monitor their information in real-time. We believe these trends will continue to fuel growth for our consumer business.

 

    Heightened Risk Environment and Compliance Requirements for Businesses:    The increasing number and complexity of regulations make operations for businesses more challenging. The granularity of information required and the frequency and timeliness of data to fulfill compliance requirements have also increased significantly, placing an additional burden on companies’ reporting systems. Further, there is a heightened focus on reducing fraud and losses and protecting consumer privacy, particularly given the increasing threat of cybercriminals.

Our Competitive Strengths

Comprehensive and Unique Datasets

We have over 30 petabytes of data, growing at an average rate of over 25% each year since 2010, representing over one billion consumers globally. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. We believe that our data is unique and differentiates us from our competitors. We own several proprietary datasets such as consumer credit information, driver violation history, healthcare eligibility information, business data and rental payment history. Internationally, our data assets also encompass alternative data, such as the voter registry in India and the vehicle information databases in South Africa. We have also acquired public record datasets, which are time consuming and difficult for others to obtain and associate with the correct person. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data, which allows us to better predict behaviors, assess risk and address a broader set of business issues for our customers.

Next-generation Technology

Our transformation to next-generation technology allows us to continually improve our overall services to businesses and consumers and ensures that we are well positioned to differentiate our datasets and capabilities.

 

    Powerful Big Data Capabilities:    Our technology gives us the ability to process, organize and analyze high volumes of data across multiple operating systems, databases and file types as well as to deal with both structured and unstructured data that changes frequently.

 

    Enhanced Linking and Matching:    Because our data matching technology is able to interrelate data across disparate sources, industries and time periods, we believe that we are able to create differentiated datasets and provide our customers with comprehensive insights that allow them to better evaluate risk.

 

 

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    Greater Efficiency:    From ingestion of data to distribution of analytics and insights, our next-generation technology enables a faster time to market.

 

    Advanced Platform Flexibility:    Our technology offers a high degree of flexibility, speed and customization of our solutions, via capabilities like graphical development and business rules environments, and allows easy integration with our customers’ workflows. We manage and control our technology instead of outsourcing it, which provides us with the flexibility to prioritize changes and to quickly implement any updates to our applications and solutions.

 

    Lower Operating Costs:    Our technology investments have lowered our overall cost to maintain and develop our systems, allowing us to redeploy significantly more resources to support revenue generating initiatives, such as vertical expansion and new product development.

Sophisticated and Flexible Analytics and Decisioning Capabilities

We have developed sophisticated and flexible analytics and decisioning capabilities by investing in technology, tools and people. Our technology allows us to quickly build sophisticated analytics and decisioning functionality that caters to our customers’ evolving needs. Our analysts leverage our next-generation technology and data matching capabilities to gain real-time access to our entire dataset across different data sources and run analyses across this data while remaining compliant with permitted data use. Our analysts are equipped with a diverse modeling and analytical toolkit which allows them to quickly build and deploy these capabilities. We have an experienced analytics team with substantial industry experience, complemented by a deep knowledge of consumer credit data. Our team is highly qualified with advanced degrees or doctorates in statistics, math, finance or engineering, and is instrumental in understanding customer requirements, sourcing raw data and turning that data into solutions that provide insights and decisions to solve our customers’ problems.

Innovative and Differentiated Solutions

We consistently focus on innovation to develop new and enhanced solutions that meet the evolving needs of our customers. We believe our specialized data, analytics and decisioning services and collaborative approach with our customers differentiate us from our competitors. Our solutions are often scalable across different customers, geographies and verticals. Recent examples of our innovative and differentiated solutions include:

 

    AdSurety:    AdSurety is a digital marketing solution that allows our customers to identify an audience across a network of 135 million U.S. consumers, display personalized messages to that audience and measure the effect. The network leverages our offline-to-online matching technology, which increases reach with greater targeting certainty.

 

    CreditVision:    We continue to enhance our credit data by including new data fields, enriching values in existing data fields and expanding account history. Our enhanced credit data has been combined with hundreds of algorithms to produce CreditVision, a market-leading solution that provides greater granularity and evaluates consumer behavior patterns over time. This results in a more predictive view of the consumer, increases the total population of consumers who can effectively be scored and helps consumers gain improved pricing.

 

   

Insurance Coverage Discovery:    For our healthcare customers, we offer the Insurance Coverage Discovery solution, which enables the discovery of previously unidentified health insurance coverage to help our customers recover uncompensated care costs. Our proprietary technology identifies patient accounts covered by Medicaid, Supplemental Security Income,

 

 

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Medicare and TRICARE as well as commercial insurance benefits at the time of service and also monitors an account for up to three years for retroactive eligibility that providers may have missed.

 

    TLOxp:    TLOxp leverages our data matching capabilities across thousands of data sources to identify and investigate relationships among specific people, assets, locations and businesses. This allows us to offer enhanced due diligence, threat assessment, identity authentication and fraud prevention and detection solutions and to expand our solutions into new verticals such as government and law enforcement.

Deep and Specialized Industry Expertise

We have deep expertise in a number of attractive industry verticals including financial services, insurance and healthcare. Our expertise has allowed us to develop sophisticated vertical-specific solutions within these targeted industries that play an integral role in our customers’ decision-making processes and are often embedded into their workflows. Our team includes industry experts with significant experience in the verticals that we target and relationships with leading companies in those verticals. We also possess regulatory compliance expertise across the industries that we serve. Together, this provides us with a comprehensive understanding of business trends and insights for customers in these verticals, allowing us to build solutions that cater to these customers’ specific requirements. We have been able to apply our industry knowledge, data assets, technology and analytics capabilities to develop new solutions and revenue opportunities within key verticals.

Leading Presence in Attractive International Markets

We have been operating internationally for over 30 years and have strong global brand recognition. We have strategically targeted attractive markets in both developed and emerging economies and have a diversified global presence in over 30 countries and a leading presence in several attractive international markets across North America, Africa, Latin America and Asia. We have local, senior management in many of our international markets, and we believe this provides us with deeper insights into these markets and stronger relationships with our customers. We have leveraged our brand, operating history, global footprint and technology infrastructure to establish new credit bureaus in several international markets, such as Canada in 1989, India in 2001 and the Philippines in 2011. Once established, our model is to expand the services we offer within these markets and then move into adjacent emerging markets. In addition, we have been able to leverage our technology and experience from our U.S. operations to develop and grow our international operations.

Proven and Experienced Management Team

Our senior management team has a track record of strong performance and significant expertise in the markets we serve, with an average of over twenty years of industry experience. We continue to attract and retain experienced management talent for our businesses. Our team has deep knowledge of the data and analytics sector and expertise across the various industries that we serve. Our team has overseen our expansion into new industries and geographies while managing ongoing strategic initiatives, including our significant technology investments. As a result of the sustained focus of our management team, we have been successful in consistently driving growth, both organically and through acquiring and integrating businesses.

 

 

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Our Growth Strategy

Enhance Underlying Data, Technology and Analytics Capabilities to Develop Innovative Solutions

As the demand for big data and analytics solutions grows across industries and geographies, we will continue to expand the scope of our underlying data, improve our tools and technology and enhance our analytics and decisioning capabilities to provide innovative solutions that address this demand. As the needs of businesses and consumers evolve, we plan to continue to help them meet their challenges, which our recent investments in data, technology and analytics enable us to do more quickly and efficiently. For example, we enhanced our solutions with incremental data such as rental trade lines, additional contact data and auto asset data in order to address a broader set of customer requirements. Our recent technology investments have also reduced the time to market for new solutions, in certain instances from several weeks to a few days, which allow us to react quickly to customer requirements. We also intend to continue to take advantage of strategic partnerships to develop innovative services that differentiate us from our competitors.

Further Penetrate Existing Industry Verticals with Current and New Solutions

We are a leading provider of risk and information solutions in several industry verticals today, including financial services, insurance and healthcare. We believe there is significant opportunity for further growth within these industries by expanding the number of customers to whom we sell our current solutions as well as by creating innovative new solutions that we can use to grow our presence in these industries. We focus on developing new solutions that address evolving customer needs within our industry verticals. For example, in the financial services vertical, we developed CreditVision, which provides customers with a time-based risk trend and increases the total eligible population of consumers. In order to more effectively address these opportunities, we have redeployed and reallocated our sales resources to focus either on new customer opportunities or on selling additional services and solutions to existing customers. With our leading market positions, existing strong relationships in financial services, insurance and healthcare verticals and with our consumer partners, we believe we have the opportunity to further penetrate our existing customer base and capture a greater proportion of their spending across the consumer lifecycle.

Establish Positions in New, Adjacent Industry Verticals

In addition to increasing penetration in industries where we have a substantial presence, we also intend to create solutions that address customer needs in attractive new industries. Our strategy is to develop new solutions for a specific application, industry vertical or geography and then deploy them to other markets where they may be applicable. We believe that our capabilities allow us to quickly create and deliver solutions to new industries and geographies where information-based analytics and decisioning capabilities are currently underutilized. For example, our strong position in financial services and insurance verticals has allowed us to establish a presence in the healthcare vertical to capitalize on the increasing demand for data and analytics solutions. We have created innovative solutions that automate the insurance and payment processes at the beginning of the revenue cycle, help payers analyze claims-related data, facilitate performance reporting and help patients make informed decisions. Similarly, we are targeting other verticals such as government, rental screening and investigative services, where we see an opportunity to leverage our existing data, analytics and decisioning capabilities.

 

 

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Table of Contents

Expand our Presence in Attractive International Markets

We believe international markets present a significant opportunity for growth, as these economies continue to develop and their populations become more credit active. We leverage solutions developed in the United States and deploy them to international markets, after localizing them to individual market requirements. In markets where we have established a presence in a particular vertical, we will expand further into adjacent verticals, such as insurance and consumer solutions. We intend to expand into new geographic markets by forming alliances with financial services institutions, industry associations and other local partners, and by pursuing strategic acquisitions. Across all our international expansion initiatives, we will continue to leverage our next-generation technology to drive speed to market, scale and differentiation.

Continue to Broaden Reach in Consumer Market through Direct and Indirect Channels

Growth in our consumer business has outpaced the market. We expect this trend to continue, due to a rising consumer appetite for information and increasing demand for our solutions from existing and new partners. We currently serve over 35 million consumers in the United States directly and through indirect channels. We recognized that more consumers could be reached through multiple channels and business models. Therefore, our strategy is to enable partners by providing them with data and analytics to support their services. Our growth plans focus both on increasing our own member base as well as expanding our reach through partnerships. For our direct consumers, we continually develop new products, features and services. We will also continue to improve the consumer experience with more user-friendly interfaces, better customer service and education. For partners, we will leverage our flexible model, technology and innovative solutions to grow with new and existing customers and enter new verticals. We believe that partnerships not only enable us to build our own business quickly and effectively, but they also expand the market and provide us access to new consumer segments.

Pursue Strategic Acquisitions

We will continue to pursue acquisitions to accelerate growth within our existing businesses and diversify into new businesses. We are focused primarily on opportunities that are strategic to us, including opportunities that expand our geographic footprint, increase the breadth and depth of our datasets, enhance our services, provide us with industry expertise in our key verticals or deepen our presence in our international markets. From time to time we may also seek to increase our investments in foreign entities in which we hold a minority interest. We have a strong track record of integrating acquisitions and driving long-term value creation, and we will continue to maintain a disciplined approach to pursuing acquisitions.

Risks Related to Our Business and this Offering

Investing in our common stock involves substantial risk, and our ability to successfully operate our business is subject to numerous risks, including those that are generally associated with operating in the consumer credit and information management industry. Any of the factors set forth under “Risk Factors” may limit our ability to successfully execute our business strategy. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth under “Risk Factors” in deciding whether to invest in our common stock.

 

 

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Corporate Information

TransUnion Holding Company, Inc. was formed in Delaware by affiliates of Advent International Corporation (“Advent”) and Goldman, Sachs & Co. (“GS”, and together with Advent, the “Sponsors”) on February 15, 2012. On April 30, 2012, TransUnion Corp. was acquired by TransUnion Holding Company, Inc. and became TransUnion Holding Company, Inc.’s wholly-owned subsidiary. We refer to these transactions and related financing transactions as the “2012 Change in Control Transaction.” As a result of the 2012 Change in Control Transaction, each of Advent and GS currently own approximately 48.9% of our common stock.

On March 26, 2015, TransUnion Holding Company, Inc. was renamed TransUnion and TransUnion Corp. was renamed TransUnion Intermediate Holdings, Inc. After giving effect to this offering, each of Advent and GS will beneficially own approximately             % of our issued and outstanding common stock (assuming no exercise of the underwriters’ option to purchase additional shares) or         % of our issued and outstanding common stock (assuming full exercise of the underwriters’ option to purchase additional shares).

Our principal executive offices are located at 555 West Adams Street, Chicago, Illinois, 60661, and our telephone number is (312) 985-2000. We maintain a website at www.transunion.com. The information contained on our website or that can be accessed through our website neither constitutes part of this prospectus nor is incorporated by reference herein.

 

 

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Corporate Structure

The following diagram illustrates our corporate structure after giving effect to the consummation of this offering and the repayment with proceeds from this offering of a portion of the 9.625% Senior Notes as described under “Use of Proceeds,” assuming (i) an initial public offering price of $             per share, the midpoint of the initial public offering range indicated on the cover of this prospectus, and (ii) no exercise by the underwriters of their over-allotment option.

 

LOGO

 

(1) As of December 31, 2014, we had $600.0 million principal amount of 9.625%/10.375% Senior PIK Toggle Notes due 2018 (the “9.625% Senior Notes”) outstanding. See “Management’s Discussion and Analysis of Financial Condition and Results from Operations—Liquidity and Capital Resources—Debt—9.625% Senior Notes.” We intend to use a portion of the proceeds of this offering to redeem $             million aggregate principal amount of the 9.625% Senior Notes for an amount equal to 100.0% of their face value, plus accrued and unpaid interest to, but not including, the redemption date. See “Use of Proceeds.”
(2) As of December 31, 2014, we had $400.0 million aggregate principal amount of 8.125%/8.875% Senior PIK Toggle Notes due 2018 (the “8.125% Senior Notes”) outstanding. See “Management’s Discussion and Analysis of Financial Condition and Results from Operations—Liquidity and Capital Resources—Debt—8.125% Senior Notes.”
(3) TransUnion Intermediate Holdings, Inc., along with certain wholly owned domestic subsidiaries, guarantee Trans Union LLC’s senior secured credit facilities.
(4) At December 31, 2014, our Senior Secured Credit Facilities consisted of (i) a $1,900.0 million term loan facility that matures on April 9, 2021 and (ii) a $190.0 million senior secured revolving credit facility maturing on April 9, 2019, including both a letter of credit sub-facility and a swingline loan sub-facility. As of December 31, 2014, we had $50.0 million in borrowings outstanding under the senior secured revolving credit facility and the aggregate outstanding principal amount of the senior secured term loan facility was $1,881.5 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt—Senior Secured Credit Facility.”

 

 

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Table of Contents

The Offering

 

Common stock offered

                    shares.

 

Underwriters’ option to purchase additional shares of common stock

                    shares.

 

Common stock to be outstanding immediately after this offering

                    shares (or                     shares if the underwriters exercise in full their option to purchase additional shares).

 

Use of proceeds

We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and commissions and expenses payable by us, will be approximately $         million (or approximately $         million, if the underwriters exercise in full their option to purchase additional shares), based on the assumed initial public offering price of $         per share, which is the mid-point of the range set forth on the cover page of this prospectus. For a sensitivity analysis as to the offering price and other information, see “Use of Proceeds.”

 

  We intend to use the net proceeds from this offering to redeem $         million in aggregate principal amount of the 9.625% Senior Notes at a redemption price of 100.0%. See “Use of Proceeds.”

 

Risk factors

See “Risk Factors” beginning on page 21 and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

 

Dividend policy

After completion of this offering, we do not intend to pay cash dividends on our common stock. We may, in the future, decide to pay dividends on our common stock, subject to the discretion of our Board of Directors and other factors. In the event we decide to pay dividends in the future, our ability to pay dividends will be limited by covenants in our senior secured credit facilities and the indentures governing our senior notes. See “Dividend Policy” and “Description of Indebtedness.”

 

         ticker symbol

“            ”

 

 

12


Table of Contents

Conflicts of interest

Because Goldman, Sachs & Co. is an underwriter and its affiliates collectively own in excess of 10% of the our issued and outstanding common stock, Goldman, Sachs & Co. is deemed to have a “conflict of interest” under Rule 5121 of the Financial Industry Regulatory Authority (“Rule 5121”). Rule 5121 requires that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence in respect thereto, subject to certain exceptions which are not applicable here.                      will serve as a qualified independent underwriter within the meaning of Rule 5121 in connection with this offering. For more information see “Underwriting (Conflicts of Interest).”

Unless we indicate otherwise or the context otherwise requires, all information in this prospectus:

 

    assumes (1) no exercise of the underwriters’ option to purchase additional shares of our common stock; (2) an initial public offering price of $         per share, the mid-point of the initial public offering range indicated on the cover of this prospectus.

 

 

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Table of Contents

Summary Historical Consolidated Financial Data

The table below presents our summary historical consolidated financial data as of the dates and for the periods indicated. We have derived the summary historical consolidated financial data for the four months ended April 30, 2012, the period from the date of our inception, February 15, 2012, through December 31, 2012 and for each of the twelve months ended December 31, 2013 and December 31, 2014 and as of December 31, 2013 and December 31, 2014 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary historical consolidated financial data as of December 31, 2012 from our audited historical financial statements, which are not included in this prospectus.

As a result of the 2012 Change in Control Transaction, the accompanying historical financial statements and summary historical consolidated financial data are presented on a Successor and Predecessor basis. The historical financial information for TransUnion Intermediate reflects the consolidated results of TransUnion Intermediate and its subsidiaries prior to the 2012 Change in Control Transaction (the “Predecessor”). The historical financial information for TransUnion reflects the stand-alone results of its operations from its date of inception and the consolidated results of TransUnion Intermediate and its subsidiaries after April 30, 2012 (the “Successor”).

Our historical results are not necessarily indicative of future operating results. Because the data in this table is only a summary and does not provide all of the data contained in our consolidated financial statements, the information should be read in conjunction with “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

 

     Predecessor     Successor  
     Four
Months
Ended
April 30,

2012
    From
Inception
Through
December 31,

2012
    Twelve
Months
Ended
December 31,

2013
    Twelve
Months
Ended
December 31,
2014
 
    

(in millions, other than per share data)

 

Income Statement Data:

        

Revenue

   $ 373.0      $ 767.0      $ 1,183.2      $ 1,304.7   

Operating expenses

          

Cost of services

     172.0        298.2        472.4        499.1   

Selling, general and administrative

     172.0        212.6        354.8        436.0   

Depreciation and amortization

     29.2        115.0        186.8        241.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  373.2      625.8      1,014.0      1,176.3   

Operating income (loss)

  (0.2   141.2      169.2      128.4   

Non-operating income and expense

  (63.7   (138.5   (195.1   (130.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  (63.9   2.7      (25.9   (1.8

Provision (benefit) for income taxes

  11.5      (6.6   (2.3   (2.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  (52.4   (3.9   (28.2   (4.4

Less: net income attributable to noncontrolling interests

  (2.5   (4.9   (6.9   (8.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to the Company

$ (54.9 $ (8.8 $ (35.1 $ (12.5
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

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Table of Contents
     Predecessor     Successor  
     Four
Months
Ended
April 30,

2012
    From
Inception
Through
December 31,

2012
    Twelve
Months
Ended
December 31,

2013
    Twelve
Months
Ended
December 31,
2014
 
     (in millions, other than per share data)  

Net earnings (loss) per share:

        

Basic

   $ (1.84   $ (0.08   $ (0.32   $ (0.11

Diluted

     (1.84     (0.08     (0.32     (0.11

Weighted average shares outstanding:

          

Basic

     29.8        109.7        109.9        110.5   

Diluted

     29.8        109.7        109.9        110.5   

Cash Flow:

          

Net cash provided by (used in):

          

Operating activities

   $ 52.4      $ 47.0      $ 143.4      $ 154.3   

Investing activities

     (19.6     (1,547.1     (367.0     (276.0

Financing activities

     (45.0     1,655.1        187.3        91.9   

Balance sheet data (at end of period):

          

Cash and cash equivalents

       $ 154.3      $ 111.2      $ 77.9   

Working capital(1)

         192.9        115.9        145.1   

Total assets

         4,378.8        4,492.3        4,665.8   

Total debt(2)

         2,680.9        2,866.9        2,939.9   

Total liabilities

         3,568.0        3,760.2        3,894.7   

Total stockholders’ equity

         796.1        714.5        747.7   

Other Financial Data:

          

Adjusted EBITDA(3)

   $ 126.2      $ 277.4      $ 408.5      $ 451.6   

Adjusted Net Income(3)

     34.0        82.8        101.9        118.3   

The summary financial data presented above is impacted by the 2012 Change in Control Transaction.

 

(1) Working capital is defined as current assets less current liabilities, excluding debt.
(2) Total debt includes long-term debt, short-term debt and current maturities of long-term debt.
(3) Adjusted EBITDA is defined as Net Income (loss) attributable to the Company before net interest expense, income tax provision (benefit), depreciation and amortization and other adjustments noted below. Adjusted Net Income is defined as Net Income (loss) attributable to the Company before amortization of certain intangible assets and other adjustments noted below. We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our operating performance because they eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. Also, Adjusted EBITDA and Adjusted Net Income are measures frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure under our incentive plan. Furthermore, under the credit agreement governing our senior secured credit facility and the indentures governing our senior notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to a ratio based on Adjusted EBITDA. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt” and “Description of Indebtedness.”

Adjusted EBITDA does not reflect our interest, income tax, depreciation, amortization, stock-based compensation and certain other income and expense, and Adjusted Net Income does not

 

 

15


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reflect amortization of certain intangible assets, stock-based compensation and certain other income and expense, all net of tax. Other companies in our industry may calculate Adjusted EBITDA and Adjusted Net Income differently than we do, limiting their usefulness as comparative measures. Because of these limitations, Adjusted EBITDA and Adjusted Net Income should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not measures of financial condition or profitability under GAAP. Adjusted EBITDA excludes capital expenditures and should not be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance, and Adjusted Net Income should not be considered as an alternative to operating income or net income as an indicator of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA and Adjusted Net Income is net income attributable to the Company.

The following table provides a reconciliation from Net Income (loss) attributable to the Company to Adjusted EBITDA for the four months ended April 30, 2012, the period from the date of our inception through December 31, 2012 and the twelve months ended December 31, 2013 and December 31, 2014.

 

     Predecessor     Successor  
     Four
Months
Ended
April 30,
2012
    From
Inception
Through
December 31,
2012
    Twelve
Months
Ended
December 31,
2013
    Twelve
Months
Ended
December 31,
2014
 
     (dollars in millions)  

Net income (loss) attributable to the

        

Company

   $ (54.9   $ (8.8   $ (35.1   $ (12.5

Net interest expense

     39.9        124.2        195.9        186.7   

Income tax (benefit) provision

     (11.5     6.6        2.3        2.6   

Depreciation and amortization

     29.2        115.0        186.8        241.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  2.7      237.0      349.9      418.0   

Stock-based compensation(a)

  92.7      2.3      6.3      8.0   

Mergers and acquisitions, divestitures and business optimization(b)

  25.3      30.4      25.0      19.7   

Technology transformation(c)

            4.5      18.7   

Other(d)

  5.5      7.7      22.8      (12.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

$ 126.2    $ 277.4    $ 408.5    $ 451.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

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Table of Contents

The following table provides a reconciliation from Net Income (loss) attributable to the Company to Adjusted Net Income for the four months ended April 30, 2012, the period from the date of our inception through December 31, 2012 and the twelve months ended December 31, 2013 and December 31, 2014.

 

     Predecessor     Successor  
     Four
Months
Ended
April 30,
2012
    From
Inception
Through
December 31,
2012
    Twelve
Months
Ended
December 31,
2013
    Twelve
Months
Ended
December 31,
2014
 
     (dollars in millions)  

Net income (loss) attributable to the

        

Company

   $ (54.9   $ (8.8   $ (35.1   $ (12.5

Stock-based compensation(a)

     92.7        2.3        6.3        8.0   

Mergers and acquisitions, divestitures and business optimization(b)

     25.3        30.4        25.0        19.7   

Technology transformation(c)

                   4.5        18.7   

Other(d)

     2.2        5.1        20.9        (16.0

Amortization of certain intangible assets(e)

            87.1        130.7        161.8   

Change in provision for income taxes(f)

     (31.3     (33.3     (50.4     (61.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Net Income

$ 34.0    $ 82.8    $ 101.9    $ 118.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  (a) Stock-based compensation items consisted of the following:

 

     Predecessor     Successor  
     Four
Months
Ended
April 30,
2012
    From
Inception
Through
December 31,
2012
     Twelve
Months
Ended
December 31,
2013
     Twelve
Months
Ended
December 31,
2014
 
     (dollars in millions)  

Stock-based compensation

   $ 2.0      $ 2.3       $ 6.3       $ 8.0   

Accelerated stock-based compensation(i)

     90.7                          
  

 

 

   

 

 

    

 

 

    

 

 

 

Total stock-based compensation items

$ 92.7    $ 2.3    $ 6.3    $ 8.0   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

  (i) Represented accelerated stock-based compensation expenses as a result of the 2012 Change in Control Transaction.

 

 

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Table of Contents
  (b) Mergers and acquisitions, divestitures and business optimization consisted of the following:

 

     Predecessor     Successor  
     Four
Months
Ended
April 30,
2012
    From
Inception
Through
December 31,
2012
     Twelve
Months
Ended
December 31,
2013
     Twelve
Months
Ended
December 31,
2014
 
     (dollars in millions)  

Mergers, acquisitions and

          

divestitures(i)

   $ 24.3      $ 19.7       $ 9.5       $ (11.9

Mergers and acquisitions integration(ii)

     1.0        2.3         3.0         15.8   

Business optimization(iii)

            8.4         12.5         15.8   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total mergers and acquisitions, divestitures and business optimization items

$ 25.3    $ 30.4    $ 25.0    $ 19.7   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

  (i) For Predecessor and Successor 2012, consisted of acquisition-related expenses primarily related to the 2012 Change in Control Transaction and for Predecessor 2012 costs related to our abandoned initial public offering process. For 2013, consisted of $10.5 million of acquisition-related expenses and a credit of $1.0 million for other miscellaneous items. For 2014, consisted of $22.2 million of remeasurement gains of our previously held equity interests upon purchase and consolidation of Credit Information Bureau (India) Limited (“CIBIL”) and L2C, Inc. (“L2C”) partially offset by $2.9 million of acquisition-related expenses, a $4.1 million impairment charge for a cost-method investment that sold its assets and liquidated during 2014 and $3.3 million of other miscellaneous items.
  (ii) Represented merger and acquisition integration costs for companies and assets purchased between 2012 and 2014.
  (iii) For Successor 2012 and for 2013, primarily consisted of certain severance, sign-on, relocation and executive search costs. For 2014, primarily consisted of certain severance and facility wind-down costs.

 

  (c) Technology transformation consisted of the following:

 

     Predecessor     Successor  
     Four
Months
Ended
April 30,
2012
    From
Inception
Through
December 31,
2012
     Twelve
Months
Ended
December 31,
2013
     Twelve
Months
Ended
December 31,
2014
 
     (dollars in millions)  

Technology transformation

          

project(i)

   $   —      $       $ 4.5       $ 8.5   

Acceleration of technology agreement(ii)

                            10.2   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total technology transformation items

$    $    $ 4.5    $ 18.7   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

  (i) Represented costs associated with a project to transform our technology infrastructure.

 

 

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Table of Contents
  (ii) Represented accelerated fees for a data matching service contract that we have terminated and in-sourced as part of the transformation to our technology infrastructure.

 

  (d) Other consisted of the following:

 

     Predecessor     Successor  
     Four
Months
Ended
April 30,
2012
    From
Inception
Through
December 31,
2012
    Twelve
Months
Ended
December 31,
2013
    Twelve
Months
Ended
December 31,
2014
 
     (dollars in millions)  

Debt refinance(i)

   $      $      $ 2.5      $ (33.1

Legal and regulatory matters

     2.4        (2.4     5.2        8.1   

Operating expense tax matters(ii)

                   2.9        3.9   

Consulting study fees(iii)

            4.4        5.3        1.8   

Currency remeasurement(iv)

     (0.2            0.8        1.1   

Hedge mark-to-market(v)

                          0.3   

Other(vi)

            3.1        4.2        1.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other items affecting Adjusted Net Income

  2.2      5.1      20.9      (16.0

Loan fees and unused line of credit fees

  3.1      2.2      1.4      1.9   

Other non-operating income and expense

  0.2      0.4      0.5      1.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other items affecting Adjusted EBITDA

$ 5.5    $ 7.7    $ 22.8    $ (12.8
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  (i) For 2013, represented debt refinancing expenses. For 2014, represented debt refinancing activity consisting of a gain on the prepayment of debt, net of prepayment premium and expenses.
  (ii) Represented expenses for sales and use tax matters and payroll tax matters.
  (iii) Represented fees for consulting studies related to our strategic initiatives.
  (iv) Represented currency remeasurement of our foreign operations.
  (v) Represented mark-to-market activity related to ineffectiveness of our interest rate hedge.
  (vi) For Successor 2012, represented $1.5 million in payment card industry (“PCI”) expenses and $1.6 million of other miscellaneous items. For 2013, represented $3.3 million in PCI expenses and $0.9 million of other miscellaneous items. For 2014, represented other miscellaneous items.

 

 

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  (e) Amortization of certain intangible assets consisted of the following:

 

     Predecessor     Successor  
     Four
Months
Ended
April 30,
2012
    From
Inception
Through
December 31,
2012
     Twelve
Months
Ended
December 31,
2013
     Twelve
Months
Ended
December 31,
2014
 
     (dollars in millions)  

Amortization of intangible assets from 2012 Change in Control

   $     —      $ 86.9       $ 128.0       $ 142.2   

Amortization of intangible assets from acquisitions(i)

            0.2         2.7         19.6   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total amortization of certain intangible assets

$    $ 87.1    $ 130.7    $ 161.8   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

  (i) Represented amortization of acquired intangible assets that were established through acquisitions subsequent to the 2012 Change in Control Transaction.

 

  (f) Change in provision for income taxes consisted of the following:

 

     Predecessor     Successor  
     Four
Months
Ended
April 30,
2012
    From
Inception
Through
December 31,
2012
    Twelve
Months
Ended
December 31,
2013
    Twelve
Months
Ended
December 31,
2014
 
     (dollars in millions)  

Tax effect of adjustments in (a), (b), (c), (d) and (e)(i)

   $ (40.6   $ (41.8   $ (62.6   $ (75.7

Eliminate impact of adjustments for unremitted foreign earnings(ii)

     8.4        7.8        10.5        0.5   

Eliminate impact of acquisition-related items(iii)

                          10.7   

Other(iv)

     0.9        0.7        1.7        3.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total change in provision for income taxes

$ (31.3 $ (33.3 $ (50.4 $ (61.4
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  (i) Represented the tax effect of adjustments in (a), (b), (c), (d) and (e). The tax rates used to calculate the tax expense impact were based on the nature of each item.
  (ii) Represented elimination of the impact of certain adjustments related to our deferred tax liability for unremitted foreign earnings, including a discrete change from foreign tax credit to foreign tax deduction methodology in 2014 and accrued withholding taxes on earnings from lower-tier foreign subsidiaries.
  (iii) Represented elimination of the impact of certain acquisition-related items, principally deferred taxes established related to our pre-consolidated CIBIL investment.
  (iv) Represented elimination of the impact of state tax rate changes on deferred taxes, valuation allowances on foreign net operating losses and valuation allowances on capital losses.

 

 

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RISK FACTORS

An investment in our common stock involves risk. You should carefully consider the following risks as well as the other information included in this prospectus, including “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes, before investing in our common stock. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. However, the selected risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations. In such a case, the trading price of the common stock could decline and you may lose all or part of your investment in our Company.

Risks Related to Our Business

Our revenues are concentrated in the U.S. consumer credit and financial services industries. When these industries or the broader financial markets experience a downturn, demand for our services and revenues may be adversely affected.

Our largest customers, and therefore our business and revenues, depend on favorable macroeconomic conditions and are impacted by the availability of credit, the level and volatility of interest rates, inflation, employment levels, consumer confidence and housing demand. In addition, a significant amount of our revenues are concentrated among certain customers and in distinct geographic regions, particularly in the United States. Our product offerings are also concentrated by varying degrees across different industries, particularly the financial services and insurance industries in the United States where we derive approximately 66% of our U.S. Information Services (“USIS”) segment revenues. Our customer base suffers when financial markets experience volatility, illiquidity and disruption, which has occurred in the past and which could reoccur, including as a result of concerns regarding the debt ceiling and the government spending debate in the United States. Such market developments, and the potential for increased and continuing disruptions going forward, present considerable risks to our business and operations. Changes in the economy have resulted, and may continue to result, in fluctuations in volumes, pricing and operating margins for our services. For example, the banking and financial market downturn that began to affect our business in 2008 caused a greater focus on expense reduction by our customers and led to a decline in their account acquisition mailings, which resulted in reduced revenues from our marketing programs. In addition, financial institutions tightened lending standards and granted fewer mortgage loans, student loans, automobile loans and other consumer loans. As a result, we experienced a reduction in our credit report volumes. If businesses in these industries experience economic hardship, we cannot assure you that we will be able to generate future revenue growth. In addition, if consumer demand for financial services and products and the number of credit applications decrease, the demand for our services could also be materially reduced. These types of disruptions could lead to a decline in the volumes of services we provide our customers and could negatively impact our revenue and results of operations.

We are subject to significant competition in the markets in which we operate and we may face significant competition in the new markets that we plan to enter.

The market for our services is highly competitive, and we may not be able to compete successfully against our competitors, which could impair our ability to sell our services. We compete on the basis of differentiated solutions, datasets, analytics capabilities, ease of integration with our customers’ technology, stability of services, customer relationships, innovation and price. Our regional and global competitors vary in size, financial and technical capability, and in the scope of the products and services they offer. Some of our competitors may be better positioned to develop, promote and sell their products. Larger competitors may benefit from greater cost efficiencies and may be able to win

 

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business simply based on pricing. We consistently face downward pressure on the pricing of our products, which could result in reduced prices for certain products, or a loss of market share. Our competitors may also be able to respond to opportunities before we do, by taking advantage of new technologies, changes in customer requirements or market trends.

Our Consumer Interactive segment experiences competition from emerging companies. For example, prior to 2008, Equifax and Experian were our top competitors for direct-to-consumer credit services, such as credit reports and identity theft protection services. In the past few years, there has been an influx of other companies offering similar services, some of whom leverage the free services mandated by law to be provided by nationwide credit reporting agencies. These developments have resulted in increased competition.

Many of our competitors have extensive customer relationships, including relationships with our current and potential customers. New competitors, or alliances among competitors, may emerge and gain significant market share. Existing or new competitors may develop products and services that are superior to ours or that achieve greater market acceptance. If we are unable to respond to changes in customer requirements as quickly and effectively as our competition, our ability to expand our business and sell our services may be adversely affected.

Our competitors may be able to sell services at lower prices than us, individually or as part of integrated suites of several related services. This ability may cause our customers to purchase from our competitors rather than from us. Price reductions by our competitors could also negatively impact our operating margins or harm our ability to obtain new long-term contracts or renewals of existing contracts on favorable terms. Additionally, some of our customers may develop products of their own that replace the products they currently purchase from us, which would result in lower revenue.

We also expect that there will be significant competition in the new markets that we plan to enter. We cannot assure you that we will be able to compete effectively against current and future competitors. If we fail to successfully compete, our business, financial condition and results of operations may be adversely affected.

Our relationships with key long-term customers may be materially diminished or terminated.

We have long-standing relationships with a number of our customers, many of whom could unilaterally terminate their relationship with us or materially reduce the amount of business they conduct with us at any time. Market competition, customer requirements, customer financial condition and customer consolidation through mergers or acquisitions also could adversely affect our ability to continue or expand these relationships. There is no guarantee that we will be able to retain or renew existing agreements, maintain relationships with any of our customers on acceptable terms or at all or collect amounts owed to us from insolvent customers. Our customer agreements relating to our core credit reporting service offered through our USIS segment are terminable upon advance written notice (typically ranging from 30 days to six months) by either us or the customer, which provides our customers with the opportunity to renegotiate their contracts with us or to award more business to our competitors. The loss of one or more of our major customers could adversely affect our business, financial condition and results of operations.

Data security and integrity are critically important to our business, and breaches of security, unauthorized access to or disclosure of confidential information, disruption, including distributed denial of service (“DDoS”) attacks or the perception that confidential information is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

We own and host a large amount of sensitive and confidential consumer information including financial information, personally identifiable information and protected health information. This data is

 

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often accessed through secure transmissions over public and private networks, including the internet. Despite our physical security, implementation of technical controls and contractual precautions to identify, detect and prevent the unauthorized access to and alteration and disclosure of our data, we cannot assure you that systems that access our services and databases will not be compromised or disrupted, whether as a result of criminal conduct, DDoS attacks or other advanced persistent attacks by malicious actors, including hackers, nation states and criminals, breaches due to employee error or malfeasance, or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility failures or natural disasters or other catastrophic events. We must continually monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Several recent, highly publicized data security breaches and DDoS attacks have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems. Unauthorized disclosure, loss or corruption of our data or inability of our customers to access our systems could disrupt our operations, subject us to substantial legal liability, result in a material loss of business and significantly harm our reputation.

As a nationwide consumer credit reporting company in the United States and a global provider of risk and information solutions, we collect, store and transmit files on over one billion consumers. These files may contain non-public personal information, public health information and other information, and we have implemented technical and physical security policies, procedures and systems we believe are reasonably designed to protect this information from unauthorized access. However, due to the sensitive nature of the information we collect, store and transmit, it is not unusual for efforts to occur (coordinated or otherwise) by unauthorized persons to attempt to obtain access to our systems or data, or to inhibit our ability to deliver products or services to a consumer or a business customer.

In the fourth quarter of 2014, we were subjected to a DDoS attack on the network connectivity that we use to service our consumer customers and deliver products in North America. A DDoS attack is an attempt to intentionally paralyze a computer network by flooding it with data sent simultaneously from many individual computers. The impact on our business was minimal and we did not experience any loss of data as a result of the attack. In March 2013, one or more individuals illegally accessed several celebrities’ individual consumer files by obtaining considerable amounts of non-public personal information about those celebrities from other sources unaffiliated with TransUnion. With that information, the perpetrators were able to successfully impersonate these celebrities in online connections and fraudulently obtained their credit reports, principally from AnnualCreditReport.com, the website maintained by TransUnion and the other nationwide consumer credit reporting agencies through which consumers may obtain their free credit report once every twelve months from each of the nationwide consumer credit reporting companies. As a result of this incident, we added additional controls that strengthened our authentication parameters.

Due to concerns about data security and integrity, a growing number of legislative and regulatory bodies have adopted consumer notification and other requirements in the event that consumer information is accessed by unauthorized persons and additional regulations regarding the use, access, accuracy and security of such data are possible. In the United States, federal and state laws provide for over 40 disparate notification regimes, all of which we are subject to. Complying with such numerous and complex regulations in the event of unauthorized access would be expensive and difficult, and failure to comply with these regulations could subject us to regulatory scrutiny and additional liability.

 

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If we experience system failures, personnel disruptions or capacity constraints, or our customers do not modify their systems to accept new releases of our distribution programs, the delivery of our services to our customers could be delayed or interrupted, which could harm our business and reputation and result in the loss of revenues or customers.

Our ability to provide reliable service largely depends on our ability to maintain the efficient and uninterrupted operation of our computer network, systems and data centers, some of which have been outsourced to third-party providers. In addition, we generate a significant amount of our revenues through channels that are dependent on links to telecommunications providers. Our systems, personnel and operations could be exposed to damage or interruption from fire, natural disasters, power loss, war, terrorist acts, civil disobedience, telecommunication failures, computer viruses, DDoS attacks or human error. We may not have sufficient redundant operations to cover a loss or failure of our systems in a timely manner. Any significant interruption could severely harm our business and reputation and result in a loss of revenue and customers. Additionally, from time to time we send our customers new releases of our distribution programs, some of which contain security updates. Any failure by our customers to install these new releases could expose our customers to computer security risks.

We could lose our access to data sources which could prevent us from providing our services.

Our services and products depend extensively upon continued access to and receipt of data from external sources, including data received from customers, strategic partners and various government and public records repositories. In some cases, we compete with our data providers. Our data providers could stop providing data, provide untimely data or increase the costs for their data for a variety of reasons, including a perception that our systems are insecure as a result of a data security breach, budgetary constraints, a desire to generate additional revenue or for regulatory or competitive reasons. We could also become subject to increased legislative, regulatory or judicial restrictions or mandates on the collection, disclosure or use of such data, in particular if such data is not collected by our providers in a way that allows us to legally use the data. If we were to lose access to this external data or if our access or use were restricted or were to become less economical or desirable, our ability to provide services could be negatively impacted, which would adversely affect our reputation, business, financial condition and results of operations. We cannot provide assurance that we will be successful in maintaining our relationships with these external data source providers or that we will be able to continue to obtain data from them on acceptable terms or at all. Furthermore, we cannot provide assurance that we will be able to obtain data from alternative sources if our current sources become unavailable.

Our business is subject to various governmental regulations, laws and orders, compliance with which may cause us to incur significant expenses or reduce the availability or effectiveness of our solutions, and the failure to comply with which could subject us to civil or criminal penalties or other liabilities.

Our businesses are subject to regulation under the Fair Credit Reporting Act (together with regulations thereunder, “FCRA”), the Gramm-Leach-Bliley Act (the “GLBA”), the Driver’s Privacy Protection Act (the “DPPA”), the Health Insurance Portability and Accountability Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Federal Trade Commission Act (the “FTC Act”) and various other international, federal, state and local laws and regulations. See “Business—Legal and Regulatory Matters” for a description of select regulatory regimes to which we are subject. These laws and regulations, which generally are designed to protect the privacy of the public and to prevent the misuse of personal information available in the marketplace, are complex, change frequently and have tended to become more stringent over time. We already incur significant expenses in our attempt to ensure compliance with these laws. Currently, public concern is high with regard to the operation of credit reporting agencies in the United States, as well as the collection, use, accuracy, correction and sharing of personal information, including Social Security numbers, dates of birth, financial information, medical information, department of motor vehicle data and other behavioral data. In addition, many consumer

 

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advocates, privacy advocates, legislatures and government regulators believe that existing laws and regulations do not adequately protect privacy and have become increasingly concerned with the use of this type of personal information. As a result, they are lobbying for further restrictions on the dissemination or commercial use of personal information to the public and private sectors. Additional legislative or regulatory efforts in the United States, or an action by Executive Order of the President of the United States, could further regulate credit reporting agencies and the collection, use, communication, access, accuracy, obsolescence, sharing, correction and security of this personal information. Similar initiatives are underway in various other countries in which we do business. In addition, any perception that our practices or products are an invasion of privacy, whether or not consistent with current or future regulations and industry practices, may subject us to public criticism, private class actions, reputational harm, or claims by regulators, which could disrupt our business and expose us to increased liability.

Public concern regarding identity theft also has led to more transparency for consumers as to what is in their credit reports. We provide credit reports and scores and monitoring services to consumers for a fee, and this income stream could be reduced or restricted by legislation that requires us to provide these services to consumers free of charge. For example, under U.S. federal law today, we are required to provide consumers with one credit report per year free of charge. Legislation has been introduced from time to time that would require us to provide credit scores to consumers without charge.

The following legal and regulatory developments also could have a material adverse effect on our business, financial condition or results of operations:

 

    amendment, enactment or interpretation of laws and regulations that restrict the access and use of personal information and reduce the availability or effectiveness of our solutions or the supply of data available to customers;

 

    changes in cultural and consumer attitudes in favor of further restrictions on information collection and sharing, which may lead to regulations that prevent full utilization of our solutions;

 

    failure of data suppliers or customers to comply with laws or regulations, where mutual compliance is required;

 

    failure of our solutions to comply with current laws and regulations; and

 

    failure of our solutions to adapt to changes in the regulatory environment in an efficient, cost-effective manner.

Changes in applicable legislation or regulations that restrict or dictate how we collect, maintain, combine and disseminate information, or that require us to provide services to consumers or a segment of consumers without charge, could adversely affect our business, financial condition or results of operations. In the future, we may be subject to significant additional expense to ensure continued compliance with applicable laws and regulations and to investigate, defend or remedy actual or alleged violations. Any failure by us to comply with applicable laws or regulations could also result in significant liability to us, including liability to private plaintiffs as a result of individual or class action litigation, or may result in the cessation of our operations or portions of our operations or impositions of fines and restrictions on our ability to carry on or expand our operations. Moreover, our compliance with privacy laws and regulations and our reputation depend in part on our customers’ adherence to privacy laws and regulations and their use of our services in ways consistent with consumer expectations and regulatory requirements. Certain of the laws and regulations governing our business are subject to interpretation by judges, juries and administrative entities, creating substantial uncertainty for our business. We cannot predict what effect the interpretation of existing or new laws or regulations may have on our business. See “Business—Legal and Regulatory Matters.”

 

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The Consumer Financial Protection Bureau (the “CFPB”) has supervisory and examination authority over our business and may initiate enforcement actions with regard to our compliance with federal consumer financial laws.

The CFPB, which was established under the Dodd-Frank Act and commenced operations in July 2011, has broad authority over our business. This includes authority to issue regulations under federal consumer financial protection laws, such as under FCRA and other laws applicable to us and our financial customers. The CFPB is authorized to prevent “unfair, deceptive or abusive acts or practices” through its regulatory, supervisory and enforcement authority.

In 2012, credit reporting companies like us became subject to a federal supervision program for the first time under the CFPB’s authority to supervise and examine certain nondepository institutions that are “larger participants” of the consumer credit reporting market. The CFPB conducts examinations and investigations, and may issue subpoenas and bring civil actions in federal court for violations of the federal consumer financial laws including FCRA. In these proceedings, the CFPB can seek relief that includes: rescission or reformation of contracts, restitution, disgorgement of profits, payment of damages, limits on activities and civil money penalties of up to $1.0 million per day for knowing violations. The CFPB has initiated periodic examinations of us and the consumer credit reporting industry, which could result in new regulations or enforcement actions or proceedings.

There continues to be uncertainty as to how the CFPB’s strategies and priorities, including in both its examination and enforcement processes, will impact our business and our results of operations going forward. Actions by the CFPB could result in requirements to alter or cease offering affected products and services, making them less attractive and restricting our ability to offer them.

Although we have committed resources to enhancing our compliance programs, actions by the CFPB or other regulators against us could result in reputational harm. Our compliance costs and legal and regulatory exposure could increase materially if the CFPB or other regulators enact new regulations, change regulations that were previously adopted, modify through supervision or enforcement past regulatory guidance, or interpret existing regulations in a manner different or stricter than have been previously interpreted.

Regulatory oversight of our contractual relationships with certain of our customers may adversely affect our business.

In October 2013, the Office of the Comptroller of the Currency (the “OCC”) issued updated guidance to national banks and federal savings associations on assessing and managing risks associated with third-party relationships, which include all business arrangements between a bank and another entity, by contract or otherwise. The guidance requires banks to exercise comprehensive oversight throughout each phase of a bank’s business arrangement with third-party service providers, and instructs banks to adopt risk management processes commensurate with the level of risk and complexity of its third-party relationships. The OCC expects especially rigorous oversight of third-party relationships that involve certain “critical activities.” In light of this guidance, our existing or potential financial services customers subject to OCC regulation may continue to revise their third-party risk management policies and processes and the terms on which they do business with us, which may adversely affect our relationship with such customers.

The outcome of litigation, inquiries, investigations, examinations or other legal proceedings in which we are involved, in which we may become involved, or in which our customers or competitors are involved could subject us to significant monetary damages or restrictions on our ability to do business.

Legal proceedings arise frequently as part of the normal course of our business. These may include individual consumer cases, class action lawsuits and inquiries, investigations, examinations,

 

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regulatory proceedings or other actions brought by federal (e.g., the CFPB and the United States Federal Trade Commission (“FTC”)) or state (e.g., state attorneys general) authorities or by consumers. The scope and outcome of these proceedings is often difficult to assess or quantify. Plaintiffs in lawsuits may seek recovery of large amounts and the cost to defend such litigation may be significant. There may also be adverse publicity and uncertainty associated with investigations, litigation and orders (whether pertaining to us, our customers or our competitors) that could decrease customer acceptance of our services or result in material discovery expenses. In addition, a court-ordered injunction or an administrative cease-and-desist order or settlement may require us to modify our business practices or may prohibit conduct that would otherwise be legal and in which our competitors may engage. Many of the technical and complex statutes to which we are subject, including state and federal credit reporting, medical privacy and financial privacy requirements, may provide for civil and criminal penalties and may permit consumers to maintain individual or class action lawsuits against us and obtain statutorily prescribed damages. Additionally, our customers might face similar proceedings, actions or inquiries, which could affect their business and, in turn, our ability to do business with those customers. While we do not believe that the outcome of any pending or threatened legal proceeding, investigation, examination or supervisory activity will have a material adverse effect on our financial position, such events are inherently uncertain and adverse outcomes could result in significant monetary damages, penalties or injunctive relief against us.

For example, in a matter captioned White, et al, v. Experian Information Solutions, Inc., the plaintiffs sought class action status against Equifax, Experian and us in connection with the reporting of delinquent or charged-off consumer debt obligations on a consumer report after the consumer was discharged in a bankruptcy proceeding. Without admitting any wrongdoing, in 2009 we agreed to a settlement of this matter by paying money damages of $17.0 million per defendant and voluntarily changing certain of our operational practices. These changes require us to update certain delinquent records when we learn, through the collection of public records, that the consumer has received an order of discharge in a bankruptcy proceeding.

See “Business—Legal Proceedings” for further information regarding other material pending litigation or investigations.

We are currently implementing a multi-year technology infrastructure transformation. If we do not successfully implement this transformation, we may not achieve anticipated cost savings.

We have made significant investments since 2012 to modernize our infrastructure. In the third quarter of 2013, we began a specific strategic initiative to transform our technology to the latest big data and analytics capabilities. We may not be able to implement our strategic initiative in accordance with our expectations, which may result in an adverse impact on our business and financial results. As an organization, we may not have the capacity or ability to successfully accomplish this initiative in the timeframe we desire, or at all. This initiative is complex, will require a continued commitment to investment that we may not be willing to provide and may cost more than we currently anticipate. In addition, our expectation for future income is based in part upon our assumptions regarding our ability to achieve this strategic initiative. If we fail to complete this strategic initiative, or if it takes longer to complete than we currently expect, we may not achieve the cost savings we currently anticipate.

Our ability to expand our operations in, and the portion of our revenue derived from, markets outside the United States is subject to economic, political and other inherent risks, which could adversely impact our growth rate and financial performance.

Over the last several years, we have derived a growing portion of our revenues from customers outside the United States, and it is our intent to continue to expand our international operations. We have sales and technical support personnel in numerous countries worldwide. We expect to continue to add personnel internationally to expand our abilities to deliver differentiated services to our international

 

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customers. Expansion into international markets will require significant resources and management attention and will subject us to new regulatory, economic and political risks. Moreover, the services we offer in developed and emerging markets must match our customers’ demand for those services. Due to price, limited purchasing power and differences in the development of consumer credit markets, there can be no assurance that our services will be accepted in any particular developed or emerging market, and we cannot be sure that our international expansion efforts will be successful. The results of our operations and our growth rate could be adversely affected by a variety of factors arising out of international commerce, some of which are beyond our control. These factors include:

 

    currency exchange rate fluctuations;

 

    foreign exchange controls that might prevent us from repatriating cash to the United States;

 

    difficulties in managing and staffing international offices;

 

    increased travel, infrastructure, legal and compliance costs of multiple international locations;

 

    foreign laws and regulatory requirements;

 

    terrorist activity, natural disasters and other catastrophic events;

 

    restrictions on the import and export of technologies;

 

    difficulties in enforcing contracts and collecting accounts receivable;

 

    longer payment cycles;

 

    failure to meet quality standards for outsourced work;

 

    unfavorable tax rules;

 

    political and economic conditions in foreign countries, particularly in emerging markets;

 

    the presence and acceptance of varying level of business corruption in international markets;

 

    varying business practices in foreign countries; and

 

    reduced protection for intellectual property rights.

For example, in 2014 and 2013, the revenues from our International segment were negatively impacted by 6.9% and 7.6%, respectively, primarily as a result of the weakening South African rand and the Canadian dollar. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Twelve Months Ended December 31, 2014, 2013 and 2012—Revenue—International Segment.” As we continue to expand our business, our success will partially depend on our ability to anticipate and effectively manage these and other risks. Our failure to manage these risks could adversely affect our business, financial condition and results of operations.

We depend, in part, on strategic alliances, joint ventures and acquisitions to grow our business. If we are unable to make strategic acquisitions and develop and maintain these strategic alliances and joint ventures, our growth may be adversely affected.

An important focus of our business is to identify business partners who can enhance our services and enable us to develop solutions that differentiate us from our competitors. We have entered into several alliance agreements or license agreements with respect to certain of our datasets and services and may enter into similar agreements in the future. These arrangements may require us to restrict our use of certain of our technologies among certain customer industries, or to grant licenses on terms that ultimately may prove to be unfavorable to us, either of which could adversely affect our business, financial condition or results of operations. Relationships with our alliance agreement partners may include risks due to incomplete information regarding the marketplace and commercial strategies of our partners, and our alliance agreements or other licensing agreements may be the subject of contractual

 

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disputes. If we or our alliance agreements’ partners are not successful in maintaining or commercializing the alliance agreements’ services, such commercial failure could adversely affect our business.

In addition, a significant strategy for our international expansion is to establish operations through strategic alliances or joint ventures with local financial institutions and other partners. We cannot provide assurance that these arrangements will be successful or that our relationships with our partners will continue to be mutually beneficial. If these relationships cannot be established or maintained, it could negatively impact our business, financial condition and results of operations. Moreover, our ownership in and control of our foreign investments may be limited by local law.

We also selectively evaluate and consider acquisitions as a means of expanding our business and entering into new markets. We may not be able to acquire businesses we target due to a variety of factors such as competition from companies that are better positioned to make the acquisition. Our inability to make such strategic acquisitions could restrict our ability to expand our business and enter into new markets which would limit our ability to generate future revenue growth. Additionally, given some of our equity interests in various companies, we may be limited in our ability to require or influence such companies to make acquisitions or take other actions that we believe to be in our or their best interests. Our inability to take such actions could have a material impact on our revenues or earnings.

If we are unable to develop successful new services in a timely manner, or if the market does not adopt our new services, our ability to maintain or increase our revenue could be adversely affected.

In order to keep pace with customer demands for increasingly sophisticated service offerings, to sustain expansion into growth industries and to maintain our profitability, we must continue to innovate and introduce new services to the market. The process of developing new services is complex and uncertain. Our industry solutions require extensive experience and knowledge from within the relevant industry. We must commit significant resources to this effort before knowing whether the market will accept new service offerings. Additionally, our business strategy is dependent on our ability to expand into new markets and to bring new products to market. We may not successfully enter into new markets or execute on our new services because of challenges in planning or timing, technical hurdles, difficulty in predicting market demand, changes in regulation or a lack of appropriate resources. Additionally, even if we successfully develop new products, our existing customers might not accept these new products or new markets might not adopt our products due to operational constraints, high switching costs or general lack of market readiness. Failure to successfully introduce new services to the market could adversely affect our reputation, business, financial condition and results of operations.

If we fail to maintain and improve our systems, our data matching technology, and our interfaces with data sources and customers, demand for our services could be adversely affected.

In our markets, there are continuous improvements in computer hardware, network operating systems, programming tools, programming languages, operating systems, data matching, data filtering and other database technologies and the use of the internet. These improvements, as well as changes in customer preferences or regulatory requirements, may require changes in the technology used to gather and process our data and deliver our services. Our future success will depend, in part, upon our ability to:

 

    internally develop and implement new and competitive technologies;

 

    use leading third-party technologies effectively;

 

    respond to changing customer needs and regulatory requirements, including being able to bring our new products to the market quickly; and

 

    transition customers and data sources successfully to new interfaces or other technologies.

 

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We cannot provide assurance that we will successfully implement new technologies, cause customers or data furnishers to implement compatible technologies or adapt our technology to evolving customer, regulatory and competitive requirements. If we fail to respond, or fail to cause our customers or data furnishers to respond, to changes in technology, regulatory requirements or customer preferences, the demand for our services, the delivery of our services or our market reputation could be adversely affected. Additionally, our failure to implement important updates could affect our ability to successfully meet the timeline for us to generate cost savings resulting from our investments in improved technology. Failure to achieve any of these objectives would impede our ability to deliver strong financial results.

When we engage in acquisitions, investments in new businesses or divestitures of existing businesses, we will face risks that may adversely affect our business.

We may acquire or make investments in businesses that offer complementary services and technologies. Acquisitions may not be completed on favorable terms and acquired assets, data or businesses may not be successfully integrated into our operations. Any acquisitions or investments will include risks commonly encountered in acquisitions of businesses, including:

 

    failing to achieve the financial and strategic goals for the acquired business;

 

    paying more than fair market value for an acquired company or assets;

 

    failing to integrate the operations and personnel of the acquired businesses in an efficient and timely manner;

 

    disrupting our ongoing businesses;

 

    distracting management focus from our existing businesses;

 

    acquiring unanticipated liabilities;

 

    failing to retain key personnel;

 

    incurring the expense of an impairment of assets due to the failure to realize expected benefits;

 

    damaging relationships with employees, customers or strategic partners;

 

    diluting the share value of existing stockholders; and

 

    incurring additional debt or reducing available cash to service our existing debt.

Any divestitures will be accompanied by the risks commonly encountered in the sale of businesses, which may include:

 

    disrupting our ongoing businesses;

 

    reducing our revenues;

 

    losing key personnel;

 

    distracting management focus from our existing businesses;

 

    indemnification claims for breaches of representations and warranties in sale agreements;

 

    damaging relationships with employees and customers as a result of transferring a business to new owners; and

 

    failure to close a transaction due to conditions such as financing or regulatory approvals not being satisfied.

These risks could harm our business, financial condition or results of operations, particularly if they occur in the context of a significant acquisition or divestiture. Acquisitions of businesses having a significant presence outside the United States will increase our exposure to the risks of conducting operations in international markets.

 

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We may be unable to protect our intellectual property adequately or cost-effectively, which may cause us to lose market share or force us to reduce our prices. We also rely on trade secrets and other forms of unpatented intellectual property that may be difficult to protect.

Our success depends, in part, on our ability to protect and preserve the proprietary aspects of our technology and services. If we are unable to protect our intellectual property, including trade secrets and other unpatented intellectual property, our competitors could use our intellectual property to market and deliver similar services, decreasing the demand for our services. We rely on the patent, copyright, trademark, trade secret and other intellectual property laws of the United States and other countries, as well as contractual restrictions, such as nondisclosure agreements, to protect and control access to our proprietary intellectual property. These measures afford limited protection, however, and may be inadequate. We may be unable to prevent third parties from using our proprietary assets without our authorization or from breaching any contractual restrictions with us. Enforcing our rights could be costly, time-consuming, distracting and harmful to significant business relationships. Claims that a third party illegally obtained and is using trade secrets can be difficult to prove, and courts outside the United States may be less willing to protect trade secrets. Additionally, others may independently develop non-infringing technologies that are similar or superior to ours. Any significant failure or inability to adequately protect and control our proprietary assets may harm our business and reduce our ability to compete.

We may face claims for intellectual property infringement, which could subject us to monetary damages or limit us in using some of our technologies or providing certain services.

There has been substantial litigation in the United States regarding intellectual property rights in the information technology industry. We cannot be certain that we do not infringe on the intellectual property rights of third parties, including the intellectual property rights of third parties in other countries, which could result in a liability to us. Historically, patent applications in the United States and some foreign countries have not been publicly disclosed until eighteen months following submission of the patent application, and we may not be aware of currently filed patent applications that relate to our products or processes. If patents are later issued on these applications, we may be liable for infringement. In the event that claims are asserted against us, we may be required to obtain licenses from third parties (if available on acceptable terms or at all). Any such claims, regardless of merit, could be time consuming and expensive to litigate or settle, divert the attention of management and materially disrupt the conduct of our business, and we may not prevail. Intellectual property infringement claims against us could subject us to liability for damages and restrict us from providing services or require changes to certain products or services. Although our policy is to obtain licenses or other rights where necessary, we cannot provide assurance that we have obtained all required licenses or rights. If a successful claim of infringement is brought against us and we fail to develop non-infringing products or services, or to obtain licenses on a timely and cost-effective basis, our reputation, business, financial condition and results of operations could be adversely affected.

If our outside service providers and key vendors are not able to or do not fulfill their service obligations, our operations could be disrupted and our operating results could be harmed.

We depend on a number of service providers and key vendors such as telecommunication companies, software engineers, data processors, software and hardware vendors and providers of credit score algorithms, who are critical to our operations. These service providers and vendors are involved with our service offerings, communications and networking equipment, computer hardware and software and related support and maintenance. Although we have implemented service-level agreements and have established monitoring controls, our operations could be disrupted if we do not successfully manage relationships with our service providers, if they do not perform or are unable to perform agreed-upon service levels, or if they are unwilling to make their services available to us at reasonable prices. If our service providers and vendors do not perform their service obligations, it could adversely affect our reputation, business, financial condition and results of operations.

 

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There may be further consolidation in our end-customer markets, which may adversely affect our revenues.

There has been, and we expect there will continue to be, merger, acquisition and consolidation activity in our customer markets. If our customers merge with, or are acquired by, other entities that are not our customers, or that use fewer of our services, our revenue may be adversely impacted. In addition, industry consolidation could affect the base of recurring transaction-based revenue if consolidated customers combine their operations under one contract, since most of our contracts provide for volume discounts. In addition, our existing customers might leave certain geographic markets, which would no longer require them to purchase certain products from us and, consequently, we would generate less revenue than we currently expect.

To the extent the availability of free or relatively inexpensive consumer information increases, the demand for some of our services may decrease.

Public and commercial sources of free or relatively inexpensive consumer information have become increasingly available and this trend is expected to continue. Public and commercial sources of free or relatively inexpensive consumer information, including free credit information from lead generation companies and from banks, may reduce demand for our services. To the extent that our customers choose not to obtain services from us and instead rely on information obtained at little or no cost from these public and commercial sources, our business, financial condition and results of operations may be adversely affected.

If we experience changes in tax laws or adverse outcomes resulting from examination of our tax returns, it could adversely affect our results of operations.

We are subject to federal, state and local income and other taxes in the United States and in foreign jurisdictions. From time to time the United States federal, state, local and foreign governments make substantive changes to tax rules and the application thereof, which could result in materially higher corporate taxes than would be incurred under existing tax law or interpretation and could adversely impact profitability. State and local tax authorities have strengthened their efforts to increase revenues through changes in tax law, including laws regarding nexus and apportionment for sales and income taxes.

Consequently, significant judgment is required in determining our worldwide provision for income taxes. Our future effective tax rates and the value of our deferred tax assets could be adversely affected by changes in tax laws. In addition, we are subject to the examination of our income tax returns and other tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from such examinations to determine the adequacy of our provision for income taxes and reserves for other taxes. Although we believe we have made appropriate provisions for taxes in the jurisdictions in which we operate, changes in the tax laws or challenges from tax authorities under existing tax laws could adversely affect our business, financial condition and results of operations.

We are subject to losses from risks for which we do not insure.

For certain risks, we do not maintain insurance coverage because of cost and/or availability. Because we retain some portion of insurable risks, and in some cases retain our risk of loss completely, unforeseen or catastrophic losses in excess of insured limits could materially adversely affect our business, financial condition and results of operations.

 

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We have a substantial amount of debt which could adversely affect our financial position and prevent us from fulfilling our obligations under the debt instruments.

As of December 31, 2014, the book value of our debt was approximately $2.9 billion consisting of $1.0 billion aggregate principal amount of senior PIK toggle notes and $1.9 billion of outstanding borrowings under Trans Union LLC’s senior secured credit facility. We may also incur significant additional indebtedness in the future. Our substantial indebtedness may:

 

    make it difficult for us to satisfy our financial obligations, including with respect to the notes and our other indebtedness;

 

    limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;

 

    limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;

 

    require us to use a substantial portion of our cash flow from operations to make debt service payments;

 

    expose us to the risk of increased interest rates as certain of our borrowings, including Trans Union LLC’s senior secured credit facility, are at variable rates of interest;

 

    limit our flexibility to plan for, or react to, changes in our business and industry;

 

    place us at a competitive disadvantage compared with our less-leveraged competitors; and

 

    increase our vulnerability to the impact of adverse economic and industry conditions.

In addition, the credit agreement governing Trans Union LLC’s senior secured credit facility and the indentures governing the TransUnion senior unsecured PIK toggle notes contain restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interest. See “Description of Indebtedness.” Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all of our debt.

Despite our current level of indebtedness, we may still be able to incur additional indebtedness. This could exacerbate the risks associated with our substantial indebtedness.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indentures and credit agreements governing our debt will limit, but not prohibit, us or our subsidiaries from incurring additional indebtedness, and the additional indebtedness incurred in compliance with these restrictions could be substantial. If we incur any additional debt, the priority of that debt may impact the ability of existing debt holders to share ratably in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us, subject to collateral arrangements. These restrictions will also not prevent us from incurring obligations that do not constitute indebtedness. In addition, the capacity under the Trans Union LLC senior secured credit facility may be increased by an additional $450.0 million plus an additional amount of indebtedness under the senior secured credit facility or separate facilities permitted by the senior secured credit facility so long as certain financial conditions are met, subject, in each case, to certain conditions and receipt of commitments by existing or additional financial institutions or institutional lenders. These additional amounts, as well as amounts outstanding under the existing senior secured credit facility, would be secured indebtedness and, therefore, effectively senior to our notes. If new indebtedness is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.

 

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We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments due on our debt obligations or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic, industry and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control as discussed above. We may be unable to maintain a level of cash flow from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flow and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to implement any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The credit agreement governing Trans Union LLC’s senior secured credit facility and the indentures governing our senior PIK toggle notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. In addition, under the covenants of the credit agreement governing our senior secured credit facility, TransUnion Intermediate is restricted from making certain payments, including dividend payments to TransUnion.

Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations.

If we cannot make our scheduled debt payments, we will be in default and all outstanding principal and interest on our debt may be declared due and payable, the lenders under Trans Union LLC’s senior secured credit facility could terminate their commitments to loan money, Trans Union LLC’s secured lenders (including the lenders under Trans Union LLC’s senior secured credit facility) could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.

We may not be able to attract and retain the skilled employees that we need to support our business.

Our success depends on our ability to attract and retain experienced management, sales, research and development, analytics, marketing and technical support personnel. If any of our key personnel were unable or unwilling to continue in their present positions, it may be difficult to replace them and our business could be seriously harmed. If we are unable to find qualified successors to fill key positions as needed, our business could be seriously harmed. The complexity of our services requires trained customer service and technical support personnel. We may not be able to hire and retain such qualified personnel at compensation levels consistent with our compensation structure. Some of our competitors may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expense replacing employees and our ability to provide quality services could diminish, resulting in a material adverse effect on our business. See “Management” for additional information.

 

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Risks Related to this Offering and Ownership of Our Common Stock

An active public market for our common stock may not develop following this offering, which could limit your ability to sell your shares of our common stock at an attractive price, or at all.

Prior to this offering, there has been no public market for our common stock. We cannot predict the extent to which investor interest in our Company will lead to the development of an active trading market in our common stock or how liquid that market might become. An active public market for our common stock may not develop or be sustained after the offering. We have applied to have our common stock listed on the                             , but we cannot assure you that our application will be accepted. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all.

You will incur immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering.

Prior stockholders have paid substantially less per share for our common stock than the price in this offering. The initial public offering price of our common stock is substantially higher than the net tangible book deficit per share of outstanding common stock prior to completion of the offering. Based on our net tangible book deficit as of December 31, 2014 and upon the issuance and sale of             shares of common stock by us at an initial public offering price of $         per share, if you purchase our common stock in this offering, you will pay more for your shares than the amounts paid by our existing stockholders for their shares and you will suffer immediate dilution of approximately $         per share in net tangible book value. Dilution is the amount by which the offering price paid by purchasers of our common stock in this offering will exceed the pro forma net tangible book value per share of our common stock upon completion of this offering. If the underwriters exercise their option to purchase additional shares, or if outstanding options to purchase our common stock are exercised, you will experience additional dilution. You may experience additional dilution upon future equity issuances or the exercise of stock options to purchase common stock granted to our employees, executive officers and directors under our 2015 Omnibus Incentive Plan or other omnibus incentive plans. See “Dilution.”

Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly, and you may not be able to resell your shares at or above the initial public offering price, in response to a number of factors, such as those listed in “—Risks Related to Our Business”, and the following, most of which we cannot control:

 

    quarterly variations in our operating results compared to market expectations;

 

    changes in preferences of our customers;

 

    announcements of new products or significant price reductions by us or our competitors;

 

    size of the public float;

 

    stock price performance of our competitors;

 

    publication of research reports about our industry;

 

    changes in market valuations of our competitors;

 

    fluctuations in stock market prices and volumes;

 

    default on our indebtedness;

 

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    actions by competitors;

 

    changes in senior management or key personnel;

 

    changes in financial estimates by securities analysts;

 

    negative earnings or other announcements by us or other credit reporting agencies;

 

    downgrades in our credit ratings or the credit ratings of our competitors;

 

    issuances of capital stock; and

 

    global economic, legal and regulatory factors unrelated to our performance.

The initial public offering price of our common stock will be determined by negotiations between us and the underwriters based upon a number of factors and may not be indicative of prices that will prevail following the consummation of this offering. Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the initial public offering price. As a result, you may suffer a loss on your investment.

In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares.

In connection with this offering, we, our executive officers and directors and the holders of substantially all of our common stock prior to this offering have agreed with the underwriters, other than shares being sold in this offering and subject to certain exceptions, not to dispose of or hedge any of the shares of common stock or securities convertible into or exchangeable for, or that represent the right to receive, shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of representatives of the underwriters, subject to certain exceptions and extensions. See “Underwriting (Conflicts of Interest).” Upon completion of this offering, we will have                     shares of common stock outstanding (or                     shares if the underwriters exercise in full their option to purchase

 

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additional shares). Of the outstanding shares, the                     shares sold in this offering (or                     shares if the underwriters exercise in full their option to purchase additional shares) will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), except for any shares of our common stock that may be held or acquired by us, our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. Of the remaining outstanding                     shares, representing         % of our total outstanding shares of common stock following this offering,                     will be deemed restricted securities. All of these                     shares will be subject to the lock-up period. Restricted securities may be sold in the public market only if they are registered under the Securities Act or they qualify for an exemption from registration, such as the exemptions available under Rule 144 or 701 under the Securities Act, which rules are summarized in “Shares Eligible for Future Sale.”

In addition,                     shares of common stock will be eligible for sale upon exercise of vested options. As soon as practicable following this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register all shares of common stock subject to outstanding stock options and the shares of common stock subject to issuance under the 2015 Omnibus Incentive Plan to be adopted in connection with this offering. Any such Form S-8 registration statements will automatically become effective upon filing. We expect that the initial registration statement on Form S-8 will cover shares of common stock. Once these shares are registered, they can be sold in the public market upon issuance, subject to restrictions under the securities laws applicable to resales by affiliates.

Upon the expiration of the lock-up agreements described above,          shares held by our affiliates would be subject to volume, manner of sale and other limitations under Rule 144. In addition, pursuant to a registration rights agreement entered into in connection the 2012 Change in Control Transaction, we granted the Sponsors the right, subject to certain conditions, to require us to register the sale of their shares of our common stock under the Securities Act and we granted the Sponsors and certain members of management piggyback registration rights providing them the right to have us include the shares of our common stock they own in any registration by the Company. By exercising their registration rights and selling a large number of shares, the selling stockholders could cause the prevailing market price of our common stock to decline. Following completion of this offering, the shares covered by registration rights would represent approximately         % of our outstanding common stock (or         %, if the underwriters exercise in full their option to purchase additional shares). Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. See “Shares Eligible for Future Sale.”

As restrictions on resale end or if these stockholders exercise their registration rights, the market price of our shares of common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities.

In the future, we may also issue our securities if we need to raise capital in connection with a capital expenditure or acquisition. The amount of shares of our common stock issued in connection with a capital expenditure or acquisition could constitute a material portion of our then-outstanding shares of common stock. Any perceived excess in the supply of our shares in the market could negatively impact our share price and any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to you.

 

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Anti-takeover provisions in our organizational documents might discourage, delay or prevent acquisition attempts for us that you might consider favorable.

Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.

These provisions provide for, among other things:

 

    a classified Board of Directors with staggered three-year terms;

 

    the ability of our Board of Directors to issue one or more series of preferred stock;

 

    advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;

 

    certain limitations on convening special stockholder meetings;

 

    the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if the Sponsors and their affiliates beneficially own, in the aggregate, less than 40% in voting power of the stock of the Company entitled to vote generally in the election of directors; and

 

    that certain provisions may be amended only by the affirmative vote of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if the Sponsors and their affiliates beneficially own, in the aggregate, less than 40% in voting power of the stock of the Company entitled to vote generally in the election of directors.

These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. See “Description of Capital Stock.”

We do not expect to pay any cash dividends for the foreseeable future.

The continued operation along with the service of our debt will require substantial funding. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Additionally, our operating subsidiaries are currently restricted from paying cash dividends by the agreements governing our indebtedness, and we expect these restrictions to continue in the future. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.

Maintaining our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members, and any failure to maintain financial controls could result in our financial statements becoming unreliable.

In becoming a public company, we will incur significant legal, accounting, insurance and other expenses that we did not incur as a private company, including costs associated with public company governance and reporting requirements. We also have incurred and will continue to incur costs

 

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associated with the Sarbanes-Oxley Act of 2002 and related rules implemented by the Securities and Exchange Commission (“SEC”) and in the future will incur costs in connection with listing on the                     . The expenses incurred by public companies for reporting and corporate governance purposes have been generally increasing.

Our efforts to comply with these rules and regulations have significantly increased our legal and financial reporting costs, including costs associated with the hiring of additional personnel. In addition, these laws and regulations could also make it more difficult and costly for us to obtain or renew certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to the delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and related rules and regulations, our management is required to report on the effectiveness of our internal control over financial reporting. Our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in the second annual report we file with the SEC following completion of this offering. We will continue to test our internal controls in connection with the Section 404 requirements and could, as part of that documentation and testing, identify material weaknesses, significant deficiencies or other areas for further attention or improvement. Any failure to maintain the adequacy of internal control over financial reporting, or any consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could cause the market value of our common stock to decline.

We will be a “controlled company” within the meaning of the             rules and the rules of the SEC. As a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.

After completion of this offering, affiliates of the Sponsors will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the             . Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

    the requirement that a majority of the Board of Directors consist of “independent directors” as defined under the rules of the             ;

 

    the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

    the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

    the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees.

 

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Following this offering, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors, our nominating/corporate governance committee and compensation committee will not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the             .

In addition, on June 20, 2012, the SEC adopted Rule 10C-1 under the Exchange Act (“Rule 10C-1”) to implement provisions of the Dodd-Frank Act pertaining to compensation committee independence and the role and disclosure of compensation consultants and other advisers to the compensation committee. The                      has since adopted amendments to its existing listing standards to comply with provisions of Rule 10C-1, and on January 11, 2013, the SEC approved such amendments. The amended listing standards require, among others, that:

 

    compensation committees be composed of fully independent directors, as determined pursuant to new and existing independence requirements;

 

    compensation committees be explicitly charged with hiring and overseeing compensation consultants, legal counsel and other committee advisers; and

 

    compensation committees be required to consider, when engaging compensation consultants, legal counsel or other advisers, certain independence factors, including factors that examine the relationship between the consultant or adviser’s employer and us.

As a “controlled company,” we will not be subject to these compensation committee independence requirements.

Affiliates of our Sponsors will own the majority of the equity interests in us and may have conflicts of interest with us or the holders of our common stock.

Investment funds affiliated with our Sponsors currently control our company interests and a majority of the seats on our board of directors. As a result, affiliates of our Sponsors have the ability to prevent any transaction that requires the approval of the board of directors regardless of whether our management believe that any such transaction is in our best interests. For example, affiliates of our Sponsors could collectively cause us to make acquisitions that increase the amount of our indebtedness or to sell assets, or could cause us to issue additional capital stock or declare dividends. So long as investment funds affiliated with our Sponsors continue to own a significant amount of our equity interests or otherwise control a majority of our board of directors, the Sponsors will continue to be able to effectively control our decisions. In addition, the Sponsors have no obligation to provide us with any additional debt or equity financing.

The Sponsors are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us or that supply us with goods and services. The Sponsors may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. Holders of our common stock should consider that the interests of the Sponsors may differ from their interests in material respects.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the exhibits hereto, contains “forward-looking statements” within the meaning of federal securities laws. Any statements made in this prospectus that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plans and strategies. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,” “may,” “will,” “forecast” and other similar expressions.

Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that factors affecting our actual financial results could cause actual results to differ materially from those expressed in the forward-looking statements. Factors that could materially affect our financial results or such forward-looking statements include, among others, the risks, uncertainties and factors set forth below under “Risk Factors,” and the following factors:

 

    macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets;

 

    our ability to provide competitive services and prices;

 

    our ability to retain or renew existing agreements with large or long-term customers;

 

    our ability to maintain the security and integrity of our data;

 

    our ability to deliver services timely without interruption;

 

    our ability to maintain our access to data sources;

 

    government regulation and changes in the regulatory environment;

 

    litigation or regulatory proceedings;

 

    regulatory oversight of certain “critical activities”;

 

    our ability to effectively manage our costs;

 

    economic and political stability in international markets where we operate;

 

    our ability to effectively develop and maintain strategic alliances and joint ventures;

 

    our ability to timely develop new services and the market’s willingness to adopt our new services;

 

    our ability to manage and expand our operations and keep up with rapidly changing technologies;

 

    our ability to timely complete our multi-year technology transformation;

 

    our ability to make acquisitions and integrate the operations of acquired businesses;

 

    our ability to protect and enforce our intellectual property, trade secrets and other forms of unpatented intellectual property;

 

    our ability to defend our intellectual property from infringement claims by third parties;

 

    the ability of our outside service providers and key vendors to fulfill their obligations to us;

 

    further consolidation in our end-customer markets;

 

    the increased availability of free or inexpensive consumer information;

 

    losses against which we do not insure;

 

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    our ability to make timely payments of principal and interest on our indebtedness;

 

    our ability to satisfy covenants in the agreements governing our indebtedness;

 

    our ability to maintain our liquidity;

 

    our reliance on key management personnel; and

 

    our Sponsors controlling us.

There may be other factors, many of which are beyond our control, that may cause our actual results to differ materially from the forward-looking statements, including factors disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus. You should evaluate all forward-looking statements made in this prospectus in the context of these risks and uncertainties.

The forward-looking statements contained in this prospectus speak only as of the date of this prospectus. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements, to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $         million from the sale of                     shares of our common stock in this offering, assuming an initial public offering price of $             per share, the mid-point of the estimated price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise in full their option to purchase additional shares, the net proceeds to us will be approximately $         million.

We intend to use the net proceeds from this offering to redeem $         million in aggregate principal amount of the 9.625% Senior Notes at a redemption price of 100.0%.

An increase or decrease of 1,000,000 shares from the expected number of shares to be sold by us in this offering, assuming no change in the assumed initial offering price per share, the mid-point of the range on the cover of this prospectus, would increase or decrease our net proceeds from this offering by $         million. A $1.00 increase or decrease in the assumed initial offering price of $         per share, based on the mid-point of the estimated price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by $         million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 

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DIVIDEND POLICY

We do not intend to pay cash dividends on our common stock in the foreseeable future. We may, in the future, decide to pay dividends on our common stock. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our financial condition, capital requirements, restrictions contained in current or future financing instruments and other factors that our board of directors deem relevant. Additionally our ability to pay dividends is limited by restrictions on the ability of our operating subsidiaries to make distributions, including restrictions under the terms of the agreements governing our debt. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt” and “Description of Indebtedness” for a description of the restrictions on our ability to pay dividends. We did not declare or pay dividends to the holders of our common stock in the twelve months ended December 31, 2014 and December 31, 2013.

 

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DILUTION

If you invest in our common stock in this offering, your ownership interest in us will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the adjusted net tangible book value per share of our common stock after this offering. Dilution results from the fact that the per share offering price of the common stock is substantially in excess of the book value per share attributable to the shares of common stock held by existing stockholders.

Our net tangible book deficit as of December 31, 2014 was approximately $(2,572.0) million, or $(            ) per share of our common stock. We calculate net tangible book value per share by taking the amount of our total tangible assets, reduced by the amount of our total liabilities, and then dividing that amount by the total number of shares of common stock outstanding.

After giving effect to our sale of the shares in this offering at an initial public offering price of $             per share, the mid-point of the estimated price range set forth on the cover page of this prospectus and after deducting estimated underwriting discounts and commissions, our adjusted net tangible book deficit on December 31, 2014 would have been $(        ) million, or $(        ) per share of our common stock. This amount represents an immediate increase in net tangible book value (or a decrease in net tangible book deficit) of          per share to existing stockholders and an immediate and substantial dilution in net tangible book value of $         per share to new investors purchasing shares in this offering at the initial public offering price.

The following table illustrates this dilution on a per share basis:

 

Assumed initial public offering price per share

$     

Net tangible book value (deficit) per share as of December 31, 2014

$ (            )   
  

 

 

    

Increase in tangible book value per share attributable to new investors

$     

Adjusted net tangible book value (deficit) per share after this offering

$ (            )   
     

 

 

 

Dilution per share to new investors

$ (            )   
     

 

 

 

Dilution is determined by subtracting adjusted net tangible book value per share of common stock after the offering from the initial public offering price per share of common stock.

If the underwriters exercise in full their option to purchase additional shares, the adjusted net tangible book deficit per share after giving effect to the offering would be $(        ) per share. This represents an increase in adjusted net tangible book value (or a decrease in net tangible book value deficit) of $         per share to the existing stockholders and dilution in adjusted net tangible book value of $         per share to new investors.

Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions and offering expenses payable by us, a $1.00 increase or decrease in the assumed initial offering price of $         per share, the mid-point of the range set forth on the cover page of this prospectus, would increase or decrease the net tangible book value attributable to new investors purchasing shares in this offering by $         per share and the dilution to new investors by $         per share and increase or decrease the adjusted net tangible book value per share after the offering by $         per share.

The following table summarizes, as of December 31, 2014, the differences between the number of shares purchased from us, the total consideration paid to us, and the average price per share paid by existing stockholders and by new investors. As the table shows, new investors purchasing shares in this offering will pay an average price per share substantially higher than our existing stockholders

 

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paid. The table below assumes an initial public offering price of $         per share, the mid-point of the range set forth on the cover of this prospectus, for shares purchased in this offering and excludes underwriting discounts and commissions and estimated offering expenses payable by us:

 

     Shares Purchased     Total Consideration  
     Number    %     Amount      %     Avg /Share  

Existing stockholders

                   $                                 $                

New investors

                                   $     
  

 

    

 

 

      
           $                
  

 

    

 

 

      

If the underwriters were to fully exercise the underwriters’ option to purchase             additional shares of our common stock, the percentage of shares of our common stock held by existing stockholders who are directors, officers or affiliated persons would be         % and the percentage of shares of our common stock held by new investors would be         %.

The foregoing tables and calculations are based on the number of shares of our common stock outstanding as of December 31, 2014 and excludes:

 

                shares of common stock issuable upon exercise of stock options outstanding as of December 31, 2014 at a weighted average exercise price of $         per share under our equity incentive plans; and

 

                additional shares of common stock reserved for future issuance under the 2015 Omnibus Incentive Plan.

To the extent any of these outstanding options are exercised, there will be further dilution to new investors. To the extent all of such outstanding options had been exercised as of December 31, 2014, the as adjusted net tangible book deficit per share after this offering would be $(        ), and total dilution per share to new investors would be $        .

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2014:

 

    on an actual basis; and

 

    on an as adjusted basis to give effect to (1) the sale by us of approximately             shares of our common stock in this offering, after deducting estimated underwriting discounts and commissions and offering expenses payable by us; and (2) the payment of estimated fees and expenses (other than underwriting discounts and commissions) in connection with this offering at an assumed initial public offering price of $         per share, the mid-point of the price range set forth on the cover page of this prospectus and (3) the application of the estimated net proceeds from the offering, as described in “Use of Proceeds,” at an assumed initial public offering price of $         per share, the mid-point of the estimated price range set forth on the cover page of this prospectus.

You should read this table in conjunction with the information contained in “Use of Proceeds,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Indebtedness,” as well as the consolidated financial statements and the notes thereto included elsewhere in this prospectus.

 

     As of December 31, 2014
     Actual     As adjusted(1)
    

(dollars in millions, except

par value)

Cash and cash equivalents

   $ 77.9     
  

 

 

   

 

Debt:

Senior Secured Credit Facilities

Senior Secured Revolving Credit Facility

  50.0   

Senior Secured Term Loan

  1,881.5   

9.625% Senior Notes due 2018

  600.0   

8.125% Senior Notes due 2018(2)

  398.7   

Other

  9.7   
  

 

 

   

 

Total debt

$ 2,939.9   
  

 

 

   

 

Stockholders’ equity:

Common stock, $0.01 par value (200.0 million shares authorized,
111.4 million issued and 110.9 million outstanding, actual, respectively;             shares authorized and             shares issued and outstanding, as adjusted, respectively)

$ 1.1   

Additional paid-in capital

  1,138.0   

Treasury stock at cost; 0.5 million shares

  (4.3

Accumulated deficit

  (430.2

Accumulated other comprehensive income (loss)

  (117.5
  

 

 

   

 

Total TransUnion stockholders’ equity

  587.1   

Noncontrolling interests

  160.6   
  

 

 

   

 

Total equity

  747.7   
  

 

 

   

 

Total capitalization

$ 3,687.6   
  

 

 

   

 

 

(1)

To the extent we change the number of shares of common stock sold by us in this offering from the shares we expect to sell or we change the initial public offering price from the assumed initial offering price of $         per share, the mid-point of the estimated price range set forth on the cover

 

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  page of this prospectus, or any combination of these events occurs, the net proceeds to us from this offering and each of the total stockholders’ equity and total capitalization may increase of decrease. A $1.00 increase or decrease in the assumed initial public offering price per share of the common stock, assuming no change in the number of shares of common stock to be sold, would increase or decrease the net proceeds that we receive in this offering and each of total stockholders’ equity and total capitalization by approximately $         . An increase or decrease of 1,000,000 shares in the expected number of shares to be sold in the offering, assuming no change in the assumed initial offering price per share, would increase or decrease our net proceeds from this offering and our total stockholders’ equity and total capitalization by approximately $         .
(2) Reflects unamortized original issue discount of $1.3 million.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

Set forth below is our selected historical consolidated financial data as of the dates and for the periods indicated.

We have derived the selected historical consolidated financial data for the four months ended April 30, 2012, the period from the date of our inception, February 15, 2012, through December 31, 2012 and for each of the twelve months ended December 31, 2013 and December 31, 2014 and as of December 31, 2013 and December 31, 2014 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected historical consolidated financial data as of December 31, 2012 from our audited historical consolidated financial statements, which are not included in this prospectus. We have derived the selected historical consolidated financial data for each of the twelve months ended December 31, 2010 and December 31, 2011 and as of December 31, 2010 and December 31, 2011 from the Predecessor’s audited historical consolidated financial statements, which are not included in this prospectus.

As a result of the 2012 Change in Control Transaction, the accompanying historical financial statements and summary historical consolidated financial data are presented on a Successor and Predecessor basis. The historical financial information for TransUnion Intermediate reflects the consolidated results of the Predecessor. The historical financial information for TransUnion reflects the stand-alone results of its operations from its date of inception and the consolidated results of the Successor.

Our historical results are not necessarily indicative of future operating results. The following table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

 

  Predecessor   Successor  
  Twelve
Months
Ended
December 31,
2010
  Twelve
Months
Ended
December 31,
2011
  Four
Months
Ended
April 30,
2012
  From
Inception
Through
December 31,
2012
  Twelve
Months
Ended
December 31,
2013
  Twelve
Months
Ended
December 31,
2014
 
  (in millions, other than per share data)  

Income Statement Data:

Revenue

$ 956.5    $ 1,024.0    $ 373.0    $ 767.0    $ 1,183.2    $ 1,304.7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

 

Cost of services

  395.8      421.5      172.0      298.2      472.4      499.1   

Selling, general and administrative

  263.0      264.5      172.0      212.6      354.8      436.0   

Depreciation and amortization

  81.6      85.3      29.2      115.0      186.8      241.2   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  740.4      771.3      373.2      625.8      1,014.0      1,176.3   

Operating income (loss)

  216.1      252.7      (0.2   141.2      169.2      128.4   

Non-operating income and expense

  (133.1   (185.6   (63.7   (138.5   (195.1   (130.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

  83.0      67.1      (63.9   2.7      (25.9   (1.8

Provision (benefit) for income taxes

  (46.3   (17.8   11.5      (6.6   (2.3   (2.6
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

  36.7      49.3      (52.4   (3.9   (28.2   (4.4

Discontinued operations, net of tax

  8.2      (0.5                    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  44.9      48.8      (52.4   (3.9   (28.2   (4.4

Less: net income attributable to noncontrolling interests

  (8.3   (8.0   (2.5   (4.9   (6.9   (8.1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to the Company

$ 36.6    $ 40.8    $ (54.9 $ (8.8 $ (35.1 $ (12.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) per share:

 

Basic

$ 0.72    $ 1.37    $ (1.84 $ (0.08 $ (0.32 $ (0.11

Diluted

$ 0.71    $ 1.36    $ (1.84 $ (0.08 $ (0.32 $ (0.11

Dividends per share:

 

Basic

               $ 3.41             

Diluted

               $ 3.41             

Weighted average shares outstanding:

 

Basic

  51.1      29.8      29.8      109.7      109.9      110.5   

Diluted

  51.3      29.9      29.8      109.7      109.9      110.5   

 

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  Predecessor   Successor  
  Twelve
Months
Ended
December 31,
2010
  Twelve
Months
Ended
December 31,
2011
  Four
Months
Ended
April 30,
2012
  From
Inception
Through
December 31,
2012
  Twelve
Months
Ended
December 31,
2013
  Twelve
Months
Ended
December 31,
2014
 
  (in millions, other than per share data)  

Cash Flow:

Net cash provided by (used in):

Operating activities(1)

$ 204.6    $ 204.5    $ 52.4    $ 47.0    $ 143.4    $ 154.3   

Investing activities

  70.4      (181.6   (19.6   (1,547.1   (367.0   (276.0

Financing activities

  (290.5   (41.2   (45.0   1,655.1      187.3      91.9   

Balance sheet data (at end of period):

 

Cash and cash equivalents

$ 131.2    $ 107.8      $ 154.3    $ 111.2    $ 77.9   

Working capital(2)

  171.2      175.7        192.9      115.9      145.1   

Total assets

  954.2      1,005.8        4,378.8      4,492.3      4,665.8   

Total debt(3)

  1,606.0      1,601.2        2,680.9      2,866.9      2,939.9   

Total liabilities

  1,816.2      1,830.2        3,568.0      3,760.2      3,894.7   

Total stockholders’ equity

  (862.0   (824.4     796.1      714.5      747.7   

Other Financial Data:

 

Adjusted EBITDA(4)

$ 126.2    $ 277.4    $ 408.5    $ 451.6   

Adjusted Net Income(4)

  34.0      82.8      101.9      118.3   

The selected financial data presented above is impacted by the 2012 Change in Control Transaction.

 

(1) Net cash provided by operating activities in the year ended December 31, 2011 does not include $1.3 million in cash used in operating activities of certain discontinued operations.
(2) Working capital is defined as current assets less current liabilities, excluding debt.
(3) Total debt includes long-term debt, short-term debt and current maturities of long-term debt.
(4) Adjusted EBITDA is defined as Net Income (loss) attributable to the Company before net interest expense, income tax provision (benefit), depreciation and amortization and other adjustments noted below. Adjusted Net Income is defined as Net Income (loss) attributable to the Company before amortization of certain intangible assets and other adjustments noted below, all net of tax. We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our operating performance because they eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. Also, Adjusted EBITDA and Adjusted Net Income are measures frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure under our incentive plan. Furthermore, under the credit agreement governing our senior secured credit facility and the indentures governing our senior notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to a ratio based on Adjusted EBITDA. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt” and “Description of Indebtedness.”

Adjusted EBITDA does not reflect our interest, income tax, depreciation, amortization, stock-based compensation and certain other income and expense, and Adjusted Net Income does not reflect amortization of certain intangible assets, stock-based compensation and certain other income and expense, all net of tax. Other companies in our industry may calculate Adjusted EBITDA and Adjusted Net Income differently than we do, limiting their usefulness as comparative measures. Because of these limitations, Adjusted EBITDA and Adjusted Net Income should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not measures of financial condition or profitability under GAAP. Adjusted EBITDA excludes capital expenditures and should not be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance, and

 

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Adjusted Net Income should not be considered as an alternative to operating income or net income as an indicator of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA and Adjusted Net Income is net income attributable to the Company.

The following table provides a reconciliation from Net Income (loss) attributable to the Company to Adjusted EBITDA for the four months ended April 30, 2012 of the Predecessor, the period from the date of our inception through December 31, 2012 and the twelve months ended December 31, 2013 and December 31, 2014.

 

    Predecessor      Successor  
    Four
Months
Ended
April 30,
2012
     From
Inception
Through
December 31,
2012
    Twelve
Months
Ended
December 31,
2013
    Twelve
Months
Ended
December 31,
2014
 
    (dollars in millions)  

Net income (loss) attributable to the

        

Company

  $ (54.9    $ (8.8   $ (35.1   $ (12.5

Net interest expense

    39.9         124.2        195.9        186.7   

Income tax (benefit) provision

    (11.5      6.6        2.3        2.6   

Depreciation and amortization

    29.2         115.0        186.8        241.2   
 

 

 

    

 

 

   

 

 

   

 

 

 

EBITDA

  2.7      237.0      349.9      418.0   

Stock-based compensation(a)

  92.7      2.3      6.3      8.0   

Mergers and acquisitions, divestitures and business optimization(b)

  25.3      30.4      25.0      19.7   

Technology transformation(c)

            4.5      18.7   

Other(d)

  5.5      7.7      22.8      (12.8
 

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

$ 126.2    $ 277.4    $ 408.5    $ 451.6   
 

 

 

    

 

 

   

 

 

   

 

 

 

The following table provides a reconciliation from Net Income (loss) attributable to the Company to Adjusted Net Income for the four months ended April 30, 2012 of the Predecessor, the period from the date of our inception through December 31, 2012 and the twelve months ended December 31, 2013 and December 31, 2014.

 

    Predecessor      Successor  
    Four
Months
Ended
April 30,
2012
     From
Inception
Through
December 31,
2012
    Twelve
Months
Ended
December 31,
2013
    Twelve
Months
Ended
December 31,
2014
 
    (dollars in millions)  

Net income (loss) attributable to the

        

Company

  $ (54.9    $ (8.8   $ (35.1   $ (12.5

Stock-based compensation(a)

    92.7         2.3        6.3        8.0   

Mergers and acquisitions, divestitures and business optimization(b)

    25.3         30.4        25.0        19.7   

Technology transformation(c)

                   4.5        18.7   

Other(d)

    2.2         5.1        20.9        (16.0

Amortization of certain intangible assets(e)

            87.1        130.7        161.8   

Change in provision for income taxes(f)

    (31.3      (33.3     (50.4     (61.4
 

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted Net Income

$ 34.0    $ 82.8    $ 101.9    $ 118.3   
 

 

 

    

 

 

   

 

 

   

 

 

 

 

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(a) Stock-based compensation items consisted of the following:

 

    Predecessor      Successor  
    Four
Months
Ended
April 30,
2012
     From
Inception
Through
December 31,
2012
     Twelve
Months
Ended
December 31,
2013
     Twelve
Months
Ended
December 31,
2014
 
    (dollars in millions)  

Stock-based compensation

  $ 2.0       $ 2.3       $ 6.3       $ 8.0   

Accelerated stock-based compensation(i)

    90.7                           
 

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation items

$ 92.7    $ 2.3    $ 6.3    $ 8.0   
 

 

 

    

 

 

    

 

 

    

 

 

 

 

  (i) Represented accelerated stock-based compensation expenses as a result of the 2012 Change in Control Transaction.

 

(b) Mergers and acquisitions, divestitures and business optimization consisted of the following:

 

    Predecessor      Successor  
    Four
Months
Ended
April 30,
2012
     From
Inception
Through
December 31,
2012
     Twelve
Months
Ended
December 31,
2013
     Twelve
Months
Ended
December 31,
2014
 
    (dollars in millions)  

Mergers, acquisitions and divestitures(i)

  $ 24.3       $ 19.7       $ 9.5       $ (11.9

Mergers and acquisitions integration(ii)

    1.0         2.3         3.0         15.8   

Business optimization(iii)

            8.4         12.5         15.8   
 

 

 

    

 

 

    

 

 

    

 

 

 

Total mergers and acquisitions, divestitures and business optimization items

$ 25.3    $ 30.4    $ 25.0    $ 19.7   
 

 

 

    

 

 

    

 

 

    

 

 

 

 

  (i) For Predecessor and Successor 2012, consisted of acquisition-related expenses primarily related to the 2012 Change in Control Transaction and for Predecessor 2012 also included costs related to our abandoned initial public offering process. For 2013, consisted of $10.5 million of acquisition-related expenses and a credit of $1.0 million for other miscellaneous items. For 2014, consisted of $22.2 million of remeasurement gains of our previously held equity interests upon purchase and consolidation of CIBIL and L2C partially offset by $2.9 million of acquisition-related expenses, a $4.1 million impairment charge for a cost-method investment that sold its assets and liquidated during 2014 and $3.3 million of other miscellaneous items.
  (ii) Represented merger and acquisition integration costs for companies and assets purchased between 2012 and 2014.
  (iii) For Successor 2012 and for 2013, primarily consisted of certain severance, sign-on, relocation and executive search costs. For 2014, primarily consisted of certain severance and facility wind-down costs.

 

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(c) Technology transformation consisted of the following:

 

    Predecessor      Successor  
    Four
Months
Ended
April 30,
2012
     From
Inception
Through
December 31,
2012
     Twelve
Months
Ended
December 31,
2013
     Twelve
Months
Ended
December 31,
2014
 
    (dollars in millions)  

Technology transformation project(i)

  $   —       $   —       $ 4.5       $ 8.5   

Acceleration of technology agreement(ii)

                            10.2   
 

 

 

    

 

 

    

 

 

    

 

 

 

Total technology transformation items

$    $    $ 4.5    $ 18.7   
 

 

 

    

 

 

    

 

 

    

 

 

 

 

  (i) Represented costs associated with a project to transform our technology infrastructure.
  (ii) Represented accelerated fees for a data matching service contract that we have terminated and in-sourced as part of the transformation to our technology infrastructure.

 

(d) Other consisted of the following:

 

    Predecessor     Successor  
    Four
Months
Ended
April 30,
2012
    From
Inception
Through
December 31,
2012
    Twelve
Months
Ended
December 31,
2013
    Twelve
Months
Ended
December 31,
2014
 
    (dollars in millions)  

Debt refinance(i)

  $      $      $ 2.5      $ (33.1

Legal and regulatory matters

    2.4        (2.4     5.2        8.1   

Operating expense tax matters(ii)

                  2.9        3.9   

Consulting study fees(iii)

           4.4        5.3        1.8   

Currency remeasurement(iv)

    (0.2            0.8        1.1   

Hedge mark-to-market(v)

                         0.3   

Other(vi)

           3.1        4.2        1.9   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other items affecting Adjusted Net Income

  2.2      5.1      20.9      (16.0

Loan fees and unused line of credit fees

  3.1      2.2      1.4      1.9   

Other non-operating income and expense

  0.2      0.4      0.5      1.3   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other items affecting Adjusted EBITDA

$ 5.5    $ 7.7    $ 22.8    $ (12.8
 

 

 

   

 

 

   

 

 

   

 

 

 

 

  (i) For 2013, represented debt refinancing expenses. For 2014, represented debt refinancing activity consisting of a gain on the prepayment of debt, net of prepayment premium and expenses.
  (ii) Represented expenses for sales and use tax matters and payroll tax matters.
  (iii) Represented fees for consulting studies related to our strategic initiatives.
  (iv) Represented currency remeasurement of our foreign operations.
  (v) Represented mark-to-market activity related to ineffectiveness of our interest rate hedge.
  (vi) For Successor 2012, represented $1.5 million in PCI expenses and $1.6 million of other miscellaneous items. For 2013, represented $3.3 million in PCI expenses and $0.9 million of other miscellaneous items. For 2014, represented other miscellaneous items.

 

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(e) Amortization of certain intangible assets consisted of the following:

 

    Predecessor      Successor  
    Four
Months
Ended
April 30,
2012
     From
Inception
Through
December 31,
2012
     Twelve
Months
Ended
December 31,
2013
     Twelve
Months
Ended
December 31,
2014
 
    (dollars in millions)  

Amortization of intangible assets from

          

2012 Change in Control

  $   —       $ 86.9       $ 128.0       $ 142.2   

Amortization of intangible assets from acquisitions(i)

            0.2         2.7         19.6   
 

 

 

    

 

 

    

 

 

    

 

 

 

Total amortization of certain intangible assets

$    $ 87.1    $ 130.7    $ 161.8   
 

 

 

    

 

 

    

 

 

    

 

 

 

 

  (i) Represented amortization of acquired intangible assets that were established through acquisitions subsequent to the 2012 Change in Control Transaction.

 

(f) Change in provision for income taxes consisted of the following:

 

    Predecessor      Successor  
    Four
Months
Ended
April 30,
2012
     From
Inception
Through
December 31,
2012
    Twelve
Months
Ended
December 31,
2013
    Twelve
Months
Ended
December 31,
2014
 
    (dollars in millions)  

Tax effect of adjustments in (a), (b), (c),

        

(d) and (e)(i)

  $ (40.6    $ (41.8   $ (62.6   $ (75.7

Eliminate impact of adjustments for unremitted foreign earnings(ii)

    8.4         7.8        10.5        0.5   

Eliminate impact of acquisition-related items(iii)

                          10.7   

Other(iv)

    0.9         0.7        1.7        3.1   
 

 

 

    

 

 

   

 

 

   

 

 

 

Total change in provision for income taxes

$ (31.3 $ (33.3 $ (50.4 $ (61.4
 

 

 

    

 

 

   

 

 

   

 

 

 

 

  (i) Represented the tax effect of adjustments in (a), (b), (c), (d) and (e). The tax rates used to calculate the tax expense impact were based on the nature of each item.
  (ii) Represented elimination of the impact of certain adjustments related to our deferred tax liability for unremitted foreign earnings, including a discrete change from foreign tax credit to foreign tax deduction methodology in 2014 and accrued withholding taxes on earnings from lower-tier foreign subsidiaries.
  (iii) Represented elimination of the impact of certain acquisition-related items, principally deferred taxes established related to our pre-consolidated CIBIL investment.
  (iv) Represented elimination of the impact of state tax rate changes on deferred taxes, valuation allowances on foreign net operating losses, and valuation allowances on capital losses.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with “Summary Historical Consolidated Financial Data,” “Selected Historical Consolidated Financial Data” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including but not limited to those described in the “Risk Factors” section of this prospectus. Actual results may differ materially from those contained in any forward-looking statements. You should read “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Information presented for the twelve months ended December 31, 2014 and December 31, 2013, the period from the date of our inception through December 31, 2012 and the four months ended April 30, 2012 is derived from our audited consolidated financial statements for those periods included elsewhere in this prospectus.

Overview

We are a leading global risk and information solutions provider. Our mission is to help people worldwide access opportunities that lead to a higher quality of life. We accomplish this by helping businesses optimize their risk-based decisions and by enabling consumers to better understand and manage their personal information. Businesses embed our solutions into their process workflows to manage risk and to drive better business outcomes. Consumers use our solutions to view their credit profiles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft. We have deep domain expertise across a number of attractive industry verticals, including financial services, insurance and healthcare, as well as a global presence in over 30 countries across North America, Africa, Latin America and Asia.

We obtain financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from an average of 90,000 data sources, including financial institutions, private databases and public records repositories. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. Our deep analytics expertise, which includes our people as well as tools such as predictive modeling and scoring, customer segmentation, benchmarking and forecasting, enables businesses and consumers to gain better insights into their risk and financial data. Our decisioning capabilities, which are generally delivered on a software-as-a-service platform, allows businesses to interpret data and apply their specific qualifying criteria to make decisions and take action with respect to their customers. Collectively, our data, analytics and decisioning capabilities allow businesses to authenticate the identity of consumers, effectively determine the most relevant products for consumers, retain and cross-sell to existing consumers, identify and acquire new consumers and reduce loss from fraud. Similarly, our capabilities allow consumers to see how their credit profiles have changed over time, understand the impact of financial decisions on their credit scores and manage their personal information as well as to take precautions against identity theft.

Segments

We manage our business and report our financial results in three operating segments: USIS, International and Consumer Interactive.

 

   

USIS provides consumer reports, risk scores, analytical and decisioning services to businesses. These businesses use our services to acquire new customers, assess consumer

 

55


Table of Contents
 

ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. The core capabilities and delivery platforms in our USIS segment allow us to serve a broad set of customers and business issues. We offer our services to customers in financial services, insurance, healthcare and other industries.

 

    The International segment provides services similar to our USIS segment to businesses in select regions outside the United States. Depending on the maturity of the credit economy in each country, services may include credit reports, analytics and decisioning services and other value-added risk management services. In addition, we have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services, insurance, automotive, collections and communications, and are delivered through both direct and indirect channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive segment that help consumers proactively manage their personal finances.

 

    Consumer Interactive offers solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include credit reports and scores, credit monitoring, fraud protection and resolution and financial management. Our products are provided through user friendly online and mobile interfaces and supported by educational content and customer support. Our Consumer Interactive segment serves over 35 million consumers through both direct and indirect channels.

In addition, Corporate provides shared services for the Company and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the operating segments remain in Corporate. These costs are typically for enterprise-level functions and are primarily administrative in nature.

Factors Affecting Our Results of Operations

The following are certain key factors that affect, or have recently affected, our results of operations:

Macroeconomic and Industry Trends

Our revenues are significantly influenced by general macroeconomic conditions, including the availability of affordable credit and capital, interest rates, inflation, employment levels, consumer confidence and housing demand. For the past three years, in the United States and other markets, we have seen continuing signs of improved economic conditions and increased market stabilization. In the United States, we also saw improvement in the consumer lending market, including mortgage refinancings resulting from low long-term mortgage rates, an improving housing market, increased auto loans and an increase in demand for our marketing services. These factors helped drive improved financial results in all of our segments in 2014 and 2013. The economic and market improvements were tempered by continuing concern about economic conditions that has limited consumer spending and has put pressure on growth in our businesses. In addition, the continued strengthening of the U.S. dollar has diminished the operating results reported by our International operations during 2014 and 2013.

Our revenues are also significantly influenced by industry trends, including the demand for information services in financial services, insurance, healthcare and other industries we serve. Companies are increasingly relying on business analytics and big data technologies to help process this data in a cost-efficient manner. As customers have gained the ability to rapidly aggregate and analyze data generated by their own activities, they are increasingly expecting access to real-time data

 

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and analytics from their information providers as well as solutions that fully integrate into their workflows. As economies in emerging markets continue to develop and mature, we believe there will continue to be favorable socio-economic trends, such as an increase in the size of the middle class and a significant increase in the use of financial services by under-served and under-banked customers. Demand for consumer solutions is rising with higher consumer awareness of the importance and usage of their credit information, increased risk of identity theft due to data breaches and more readily available free credit information. The increasing number and complexity of regulations, including new capital requirements and the Dodd-Frank Act, make operations for businesses more challenging.

Effects of Inflation

We do not believe that inflation has had a material effect on our business, results of operations or financial condition.

2012 Change in Control Transaction

TransUnion was formed on February 15, 2012, as a vehicle to acquire TransUnion Intermediate on April 30, 2012. In connection with the 2012 Change in Control Transaction, the Company recognized significant stock-based compensation expense in 2012 due to the accelerated vesting of outstanding options and a significant increase in depreciation and amortization expense as a result of the step-up in basis to fair value of the assets and liabilities of the Company following the 2012 Change in Control Transaction. See the notes to our consolidated financial statements included in this prospectus and the operating expense discussion below for additional information.

Recent Developments

During the fourth quarter of 2014, the Company borrowed $50.0 million against the senior secured revolving line of credit to partially fund acquisitions as discussed under “—Recent Acquisitions and Partnerships” below.

On April 9, 2014, the Company refinanced and amended its senior secured credit facility. The refinancing resulted in an increase of the outstanding term loan from $1,120.5 million to $1,900.0 million. The excess proceeds were used to redeem entire $645.0 million outstanding balance of the 11.375% senior notes (the “11.375% Senior Notes”) issued by TransUnion Financing Corp and Trans Union LLC including unpaid accrued interest, a prepayment premium and transaction fees. We refer to these transactions collectively as the 2014 Refinancing Transaction. The redemption of the 11.375% Senior Notes resulted in a net gain of $45.8 million recorded in the second quarter of 2014 in other income and expense in the consolidated statements of income, consisting of the unamortized 2012 Change in Control Transaction fair value increase in the notes of $89.4 million less an early redemption premium and other costs totaling $43.6 million. The refinancing of the senior secured credit facility resulted in $12.7 million of refinancing fees and other net costs, expensed and recorded in other income and expense in the second quarter of 2014 in the consolidated statements of income. We also incurred $5.0 million of new deferred financing fees that were recorded in other current assets and other assets in the consolidated balance sheets. See our consolidated financial statements and the related notes included in this prospectus and “—Liquidity and Capital Resources” below for additional information.

 

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Recent Acquisitions and Partnerships

We selectively evaluate acquisitions and partnerships as a means to expand our business and international footprint and to enter new markets. During the past three years we completed the following acquisitions:

 

    On November 12, 2014, we acquired an 87.5% ownership interest in Drivers History Information Sales, LLC (“DHI”). DHI collects traffic violation and criminal court data. The results of operations of DHI, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date of acquisition.

 

    On October 17, 2014, we increased our equity interest in L2C from 11.6% to 100%. L2C provides predictive analytics generally focused on the unbanked market using alternative data. The results of operations of L2C, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date we obtained control.

 

    In 2014, we increased our equity interest in CIBIL from 27.5% to 55.0%. This additional purchase resulted in our consolidation of CIBIL. CIBIL’s results of operations, which are not material, are included as part of our International segment in our consolidated statements of income since May 21, 2014, the date we obtained control.

 

    Effective January 1, 2014, we acquired the remaining 30% equity interest in our Guatemala subsidiary, Trans Union Guatemala, S.A. (TransUnion Guatemala) from the minority shareholders. As a result of this acquisition, we no longer record net income attributable to noncontrolling interests for this subsidiary.

 

    On December 16, 2013, we acquired a 100% ownership interest in certain assets of TLO, LLC (“TLO”). TLO provides data solutions for due diligence, threat assessment, identity authentication, fraud prevention, and debt recovery. The results of operations of TLO, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition.

 

    On September 4, 2013, we acquired a 100% ownership interest in e-Scan Data Systems, Inc. (“eScan”). eScan provides data solutions for hospitals and healthcare providers to efficiently capture uncompensated care costs in their revenue management cycle programs. The results of operations of eScan, which are not material, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition.

 

    In 2011, we acquired an 80% ownership interest in Crivo Sistemas em Informática S.A. (“Crivo”), marking our entry into the Brazilian market. On March 1, 2013, we acquired an 80% ownership interest in Data Solutions Serviços de Informática Ltda. (“ZipCode”) further expanding our footprint in Brazil. ZipCode provides data enrichment and registry information solutions for companies in Brazil’s information management, financial services, marketing and telecommunications industries. The results of operations of ZipCode, which are not material, have been included as part of our International segment in our consolidated statements of income since the date of the acquisition. In January 2015, we acquired the remaining ownership interests in ZipCode and Crivo.

 

    On May 29, 2012, we acquired an 85% ownership interest in Credit Reference Bureau (Holdings) Limited (“CRB”). During the third quarter of 2013, we acquired the remaining 15% ownership interest. CRB operates collections and credit bureau businesses and has locations in eight African countries, giving us a strategic presence in seven new African countries. The results of operations of CRB, which are not material, have been included as part of our International segment in our consolidated statements of income since May 29, 2012.

 

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Table of Contents

Key Components of Our Results of Operations

Revenue

We derive our USIS segment revenue from three operating platforms: Online Data Services, Marketing Services and Decision Services. Online Data Services encompass services delivered in real-time using both credit and public record datasets. We also provide online reports that link public record datasets for qualified businesses seeking to locate consumers, specific assets or investigate relationships among consumers, businesses and locations. Collectively, the reports, characteristics and scores, with variations tailored for specific industries, form the basis of Online Data Services. We also provide online services to help businesses manage fraud and authenticate a consumer’s identity when they initiate a new business relationship. Additionally, we provide data to businesses to help them satisfy “know your customer” compliance requirements and to confirm an individual’s identity. Marketing Services help our customers develop marketing lists of prospects via direct mail, web and mobile. Our databases are used by our customers to contact individuals to extend firm offers of credit or insurance. We provide portfolio review services, which are periodic reviews of our customers’ existing accounts, to help our customers develop cross-selling offers to their existing customers and monitor and manage risk in their existing consumer portfolios. We also provide trigger services which are daily notifications of changes to a consumer profile. Decision Services, our software-as-a-service offerings, includes a number of platforms that help businesses interpret data and predictive model results and apply their customer-specific criteria to facilitate real-time automated decisions at the time of customer interaction. Our customers use Decision Services to evaluate business risks and opportunities, including those associated with new consumer credit and checking accounts, insurance applications, account collection, patient registrations and apartment rental requests.

We report our International segment revenue in two categories: developed markets and emerging markets. Our developed markets are Canada and Hong Kong. Our emerging markets include Africa, Latin America, Asia Pacific and India. In 2014, we reclassified Puerto Rico to emerging markets to align it with the rest of the Latin America region. Prior years’ revenue has been reclassified accordingly.

Consumer Interactive offers solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include credit reports and scores, credit monitoring, fraud protection and resolution and financial management. Our products are provided through user friendly online and mobile interfaces and supported by educational content and customer support.

Cost of Services

Costs of services include data acquisition and royalty fees, costs related to our databases and software applications, consumer and call center support costs, hardware and software maintenance costs, telecommunication expenses and occupancy costs associated with the facilities where these functions are performed.

Selling, General and Administrative

Selling, general and administrative expenses include personnel-related costs for sales, administrative and management employees, costs for professional and consulting services, advertising and occupancy and facilities expense of these functions.

Non-Operating Income and Expense

Non-operating income and expense includes interest expense, interest income, earnings from equity-method investments, dividends from cost-method investments, expenses related to successful and unsuccessful business acquisitions, loan fees, debt refinancing expenses, certain acquisition-related gains and losses and other non-operating income and expenses.

 

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Table of Contents

Results of Operations—Twelve Months Ended December 31, 2014, 2013 and 2012

As a result of the 2012 Change in Control Transaction, the historical financial statements and information are presented on a Successor and Predecessor basis. The historical financial information for TransUnion Intermediate reflects the consolidated results of TransUnion Intermediate and its subsidiaries prior to the 2012 Change in Control Transaction (the “Predecessor”). The historical financial information for TransUnion reflects the stand-alone results of its operations from its date of inception and the consolidated results of TransUnion Intermediate and its subsidiaries after April 30, 2012 (the “Successor”).

The 2012 Change in Control Transaction was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. The guidance prescribes that the basis of the assets acquired and liabilities assumed be recorded at fair value to reflect the purchase price. Periods after the 2012 Change in Control Transaction are not comparable to prior periods due primarily to the additional amortization of intangibles resulting from the fair value adjustments of the assets acquired and liabilities assumed and interest expense resulting from the additional debt incurred to finance the transaction. In addition, the Predecessor incurred significant stock-based compensation expense and acquisition costs related to the 2012 Change in Control Transaction.

To facilitate comparability of 2013 to 2012, we present below the combination of TransUnion consolidated results from the date of inception, February 15, 2012, through December 31, 2012, TransUnion Intermediate Predecessor consolidated results for the four months ended April 30, 2012 and certain pro forma adjustments that give effect to the 2012 Change in Control Transaction as if it occurred on January 1, 2012 (pro forma results for the year ended December 31, 2012), and compare those pro forma results with the consolidated TransUnion 2013 results. We present the 2012 information in this format to assist readers in understanding and assessing the trends and significant changes in our results of operations on a comparable basis to 2013. We believe this presentation is appropriate because it provides a more meaningful comparison and more relevant analysis of our results of operations for 2013 compared with 2012, than a presentation of historical 2013 results for TransUnion compared with historical 2012 results of TransUnion from the date of inception through December 31, 2012, and a separate comparison of historical 2013 results for TransUnion compared with historical 2012 results of TransUnion Intermediate for the four months ended April 30, 2012, would provide. The following table sets forth our historical results of operations for the periods indicated below:

 

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  Twelve
Months Ended
December 31,
2014
  Twelve
Months
Ended
December 31,
2013
  Successor
Date of
Inception
Through
December 31,
2012
  Predecessor
Four Months
Ended
April 30,
2012
  2012 Pro
Forma
Adjustments
  Pro Forma
Twelve Months
Ended
December 31,
2012
  Change  
2014 vs. 2013   2013 vs. Pro
Forma 2012
 
$   %   $   %  
  (dollars in millions)  

Revenue

$ 1,304.7    $ 1,183.2    $ 767.0    $ 373.0    $    $ 1,140.0    $ 121.5      10.3 $ 43.2      3.8

Operating expenses

Cost of services (exclusive of depreciation and amortization below)

  499.1      472.4      298.2      172.0           470.2      26.7      5.7   2.2      0.5

Selling, general and administrative

  436.0      354.8      212.6      172.0           384.6      81.2      22.9   (29.8   (7.7 )% 

Depreciation and amortization(1)

  241.2      186.8      115.0      29.2      43.5      187.7      54.4      29.1   (0.9   (0.5 )% 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total operating expenses

  1,176.3      1,014.0      625.8      373.2      43.5      1,042.5      162.3      16.0   (28.5   (2.7 )% 

Operating income expenses (loss)

  128.4      169.2      141.2      (0.2   (43.5   97.5      (40.8   (24.1 )%    71.7      73.5

Non-operating income and expense

Interest expense(1)

  (190.0   (197.6   (125.0   (40.5   (13.0   (178.5   7.6      3.8   (19.1   (10.7 )% 

Interest income

  3.3      1.7      0.8      0.6           1.4      1.6      94.1   0.3      21.4

Earnings from equity method investments

  12.5      13.7      8.0      4.1           12.1      (1.2   (8.8 )%    1.6      13.2

Other income and (expense), net

  44.0      (12.9   (22.3   (27.9        (50.2   56.9      441.1   37.3      74.3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total non-operating income and expense

  (130.2   (195.1   (138.5   (63.7   (13.0   (215.2   64.9      33.3   20.1      9.3

Income (loss) from operations before income taxes

  (1.8   (25.9   2.7      (63.9   (56.5   (117.7   24.1      93.1   91.8      78.0

(Provision) benefit for income taxes(1)(2)

  (2.6   (2.3   (6.6   11.5      21.5      26.4      (0.3   (13.0 )%    (28.7   (108.7 )% 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net income (loss)

  (4.4   (28.2   (3.9   (52.4   (35.0   (91.3   23.8      84.4   63.1      69.1

Less: net income attributable to noncontrolling interests

  (8.1   (6.9   (4.9   (2.5        (7.4   (1.2   (17.4 )%    0.5      6.8
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net income (loss) attributable to the Company

$ (12.5 $ (35.1 $ (8.8 $ (54.9 $ (35.0 $ (98.7 $ 22.6      64.4 $ 63.6      64.4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

nm: not meaningful

(1) The depreciation and amortization, interest expense and income tax expense pro forma adjustments give effect to the 2012 Change in Control Transaction as if it had occurred on January 1, 2012.
(2) Estimated tax impact of pro forma adjustments at 38%.

 

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Key Performance Measures

Management, including our chief operating decision maker, evaluates the financial performance of our businesses based on a variety of key indicators. These indicators include the non-GAAP measure Adjusted EBITDA and the GAAP measures revenue, cash provided by operating activities and cash paid for capital expenditures. In order to more closely align the definition of Adjusted EBITDA to the definition we use as a supplemental measure of our operating performance as well as a compensation measure under our incentive plan, we have included additional adjustments to our previously defined Adjusted EBITDA. Such additional adjustments consist of expenses for mergers and acquisitions integration, business optimization, our technology transformation project, operating expense tax matters, consulting study fees related to our strategic initiatives and other expenses. All periods have been presented in the table below under our new definition of Adjusted EBITDA. For the twelve months ended December 31, 2014, 2013 and 2012, these key indicators were as follows:

 

    Twelve months ended
December 31,
    Change  
      2014 vs. 2013     2013 vs Pro
Forma 2012
 
    2014     2013     Pro Forma
2012
    $     %     $     %  
    (dollars in millions)  

Revenue

  $ 1,304.7      $ 1,183.2      $ 1,140.0      $ 121.5        10.3   $ 43.2        3.8

Reconciliation of net income (loss) attributable to the Company to Adjusted EBITDA(1):

             

Net income (loss) attributable to the Company

  $ (12.5   $ (35.1   $ (98.7   $ 22.6        64.4   $ 63.6        64.4

Net interest expense

    186.7        195.9        177.1        (9.2     (4.7 )%      18.8        10.6

Income tax provision (benefit)

    2.6        2.3        (26.4     0.3        13.0     28.7        108.7

Depreciation and amortization

    241.2        186.8        187.7        54.4        29.1     (0.9     (0.5 )% 
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

EBITDA

  418.0      349.9      239.7      68.1      19.5   110.2      46.0

Stock-based compensation

  8.0      6.3      4.3      1.7      27.0   2.0      46.5

Accelerated stock-based compensation(2)

            90.7           nm      (90.7   (100.0 )% 

Mergers, acquisitions and divestitures(3)

  (11.9   9.5      44.0      (21.4   nm      (34.5   (78.4 )% 

Mergers and acquisitions integration(4)

  15.8      3.0      3.3      12.8      nm      (0.3   (9.1 )% 

Business optimization(5)

  15.8      12.5      8.4      3.3      26.4   4.1      48.8

Technology transformation project(6)

  8.5      4.5           4.0      88.9   4.5      nm   

Acceleration of technology agreement(7)

  10.2                10.2      nm           nm   

Debt refinance(8)

  (33.1   2.5           (35.6   nm      2.5      nm   

Legal and regulatory matters

  8.1      5.2           2.9      55.8   5.2      nm   

Operating expense tax matters(9)

  3.9      2.9           1.0      34.5   2.9      nm   

Consulting study fees(10)

  1.8      5.3      4.4      (3.5   (66.0 )%    0.9      20.5

Currency remeasurement(11)

  1.1      0.8      (0.2   0.3      37.5   1.0      nm   

Hedge mark-to-market(12)

  0.3                0.3      nm           nm   

Loan fees and unused line of credit

  1.9      1.4      5.3      0.5      35.7   (3.9   (73.6 )% 

Other non-operating income and expense

  1.3      0.5      0.6      0.8      160.0   (0.1   (16.7 )% 

Other(13)

  1.9      4.2      3.1      (2.3   (54.8 )%    1.1      35.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA(1)

$ 451.6    $ 408.5    $ 403.6    $ 43.1      10.6 $ 4.9      1.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other metrics:

Cash provided by operating activities

$ 154.3    $ 143.4    $ 99.4    $ 10.9      7.6 $ 44.0      44.3

Cash paid for capital expenditures

  155.2      81.7      69.2      73.5      90.0   12.5      18.1

 

nm: not meaningful

(1)

Adjusted EBITDA is defined as Net Income (loss) attributable to the Company before net interest expense, income tax provision (benefit), depreciation and amortization and other adjustments noted in the table above. We present Adjusted EBITDA as a supplemental measure of our operating performance because it eliminates the impact of certain items that we do not consider indicative of our cash operations and ongoing operating

 

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  performance. Also, Adjusted EBITDA is a measure frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure under our incentive plan. Furthermore, under the credit agreement governing our senior secured credit facility and the indentures governing our senior notes, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to a ratio based on Adjusted EBITDA. See “—Liquidity and Capital Resources—Debt” and “Description of Indebtedness.” Adjusted EBITDA does not reflect our capital expenditures, interest, income tax, depreciation, amortization, stock-based compensation and certain other income and expense. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Adjusted EBITDA is not a measure of financial condition or profitability under GAAP and should not be considered as an alternative to cash flows from operating activities, as a measure of liquidity or as an alternative to operating income or net income as indicators of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA is net income attributable to the Company. The following table provides a reconciliation from Net Income (loss) attributable to the Company to Adjusted EBITDA for the twelve months ended December 31, 2014 and December 31, 2013, the period from the date of our inception through December 31, 2012 and the four months ended April 30, 2012 of the Predecessor.
(2) Represented accelerated stock-based compensation expenses as a result of the 2012 Change in Control Transaction.
(3) Consisted of acquisition-related expenses primarily related to the 2012 Change in Control Transaction. Also included costs related to our abandoned initial public offering process. For 2013, included $10.5 million of acquisition-related expenses and a credit of $1.0 million for other miscellaneous items. For 2014, included $22.2 million of remeasurement gains of our previously held equity interests upon purchase and consolidation of CIBIL and L2C partially offset by $2.9 million of acquisition-related expenses, a $4.1 million impairment charge for a cost-method investment that sold its assets and liquidated during 2014 and $3.3 million of other miscellaneous items.
(4) Consisted of merger and acquisition integration costs for companies and assets purchased between 2012 and 2014.
(5) For 2012 and 2013, primarily consisted of certain severance, sign-on, relocation and executive search costs. For 2014, primarily consisted of certain severance and facility wind-down costs.
(6) Represented costs associated with a project to transform our technology infrastructure.
(7) Represented accelerated fees for a data matching service contract that we have terminated and in-sourced as part of the transformation to our technology infrastructure.
(8) For 2013, represented debt refinancing expenses. For 2014, represented debt refinancing activity consisting of a gain on the prepayment of debt, net of prepayment premium and expenses.
(9) Represented expenses for sales and use tax matters and payroll tax matters.
(10) Represented fees for consulting studies related to our strategic initiatives.
(11) Represented currency remeasurement of our foreign operations.
(12) Represented mark-to-market activity related to ineffectiveness of our interest rate hedge.
(13) For 2012, represented $1.5 million in PCI expenses and $1.6 million of other miscellaneous items. For 2013, represented $3.3 million in PCI expenses and $0.9 million of other miscellaneous items. For 2014, represented other miscellaneous items.

 

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Revenue

For 2014, revenue increased $121.5 million, or 10.3%, compared with 2013 due to revenue from our 2014 and 2013 acquisitions in our USIS and International segments and organic growth in all of our segments, partially offset by the impact of weakening foreign currencies in our International segment. Acquisitions accounted for an increase in revenue of 6.4%. The impact of weakening foreign currencies accounted for a decrease in revenue of 1.4%. Excluding the impact of the recent acquisitions and weakening foreign currencies, consolidated revenue increased 5.3% compared with the prior year. For 2013, revenue increased $43.2 million, or 3.8%, compared with 2012 due to revenue from our 2013 and 2012 acquisitions in our USIS and International segments and organic growth in all operating segments, partially offset by the impact of weakening foreign currencies in our International segment. The impact of weakening foreign currencies accounted for a decrease in revenue of 1.6%. Excluding the impact of the recent acquisitions and weakening foreign currencies, consolidated revenue increased 3.9% compared with the prior year. Revenue by segment and a more detailed explanation of revenue within each segment were as follows:

 

    Twelve months ended
December 31,
    Change  
      2014 vs. 2013     2013 vs. Pro
Forma 2012
 
    2014     2013     Pro Forma 2012     $     %     $     %  
    (dollars in millions)  

U.S. Information Services:

             

Online Data Services

  $ 545.6      $ 505.9      $ 495.6      $ 39.7        7.8   $ 10.3        2.1

Marketing Services

    134.5        126.0        132.3        8.5        6.7     (6.3     (4.8 )% 

Decision Services

    138.5        108.7        97.6        29.8        27.4     11.1        11.4
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total U.S. Information Services

  818.6      740.6      725.5      78.0      10.5   15.1      2.1

International:

Developed Markets

  90.9      86.9      83.7      4.0      4.6   3.2      3.8

Emerging Markets

  164.6      152.0      150.7      12.6      8.3   1.3      0.9
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total International

  255.5      238.9      234.4      16.6      6.9   4.5      1.9

Consumer Interactive

  230.6      203.7      180.1      26.9      13.2   23.6      13.1
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total revenue

$ 1,304.7    $ 1,183.2    $ 1,140.0    $ 121.5      10.3 $ 43.2      3.8
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

USIS Segment

For 2014, USIS revenue increased $78.0 million, or 10.5%, compared with 2013, with increases in all of the platforms due to improved market conditions and a 7.6% increase in revenue from our acquisitions of eScan and TLO in 2013 and L2C and DHI in 2014. For 2013, USIS revenue increased $15.1 million, or 2.1%, compared with 2012, with increases in online credit reports and decision services due to improved market conditions and an increase of 1.4% from our acquisitions of eScan in September of 2013 and TLO in December of 2013, partially offset by a decrease in marketing services.

Online Data Services.    For 2014, online data services revenue increased $39.7 million, or 7.8%, compared with 2013 due primarily to revenue from our acquisition of TLO and a 3.2% increase in online credit report unit volume. Increases in credit report unit volume in the financial services, insurance and other markets were partially offset by a decrease in volume in the resellers market, primarily in the first six months of 2014, due to higher mortgage interest rates and the resulting decline in refinancings. A change in the mix of products sold resulted in a slight decrease in average pricing for online credit reports in 2014. For 2013, online data services revenue increased $10.3 million, or 2.1%, compared with 2012 due primarily to a 1.5% increase in online credit report unit volume, primarily in the financial services and resellers markets, as conditions in the consumer and housing credit markets improved throughout the year. A change in the mix of products sold resulted in a slight increase in average pricing for online credit reports in 2013.

 

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Marketing Services.    Marketing services revenue increased $8.5 million, or 6.7%, in 2014 and decreased $6.3 million, or 4.8%, in 2013 compared with prior periods. For 2014, the increase was due to an increase in custom datasets and archive information in the insurance and financial services markets. For 2013, the decrease was due to a decrease in demand for custom datasets and archive information and lower batch revenue, primarily in the financial services market.

Decision Services.    For 2014 and 2013, decision services revenue increased $29.8 million, or 27.4%, and $11.1 million, or 11.4%, respectively, compared with prior periods. The increase in both years was due primarily to revenue from our acquisition of eScan.

International Segment

For 2014, International revenue increased $16.6 million, or 6.9%, compared with 2013. The increase was due to higher local currency revenue from increased volumes in all regions and revenue from our acquisitions of CIBIL and ZipCode, partially offset by a 6.9% decrease in revenue from the impact of weakening foreign currencies. Incremental revenue from our acquisition of CIBIL and ZipCode accounted for an 8.2% increase in International revenue in 2014. Excluding the impact of foreign currencies and acquisitions, International revenue increased 5.7% compared with the prior year. For 2013, International revenue increased $4.5 million, or 1.9%, compared with 2012. The increase was due to higher local currency revenue from increased volumes in most regions, substantially offset by a decrease of 7.6% from the impact of weakening foreign currencies. Incremental revenue from our acquisitions of ZipCode in March 2013 and CRB in May 2012 accounted for an increase in revenue of 2.9%. Excluding the impact of recent acquisitions and foreign currencies, International revenue increased 6.6% compared with the prior year.

Developed Markets.    For 2014, developed markets revenue increased $4.0 million, or 4.6%, compared with 2013, due to higher volumes in both regions, partially offset by a decrease of 4.7% from the impact of the weakening Canadian dollar. Excluding the impact of weakening foreign currencies, developed markets revenue increased 9.3% compared with the prior year. For 2013, developed markets revenue increased $3.2 million, or 3.8%, compared with 2012, due to higher volumes in both regions, partially offset by a decrease of 2.0% from the impact of the weakening Canadian dollar. Excluding the impact of weakening foreign currencies, developed markets revenue increased 6.0% compared with the prior year.

Emerging Markets.    For 2014, emerging markets revenue increased $12.6 million, or 8.3%, compared with 2013, due to higher volumes in all regions and the inclusion of revenue from our CIBIL and ZipCode acquisitions, partially offset by a decrease of 8.1% from the impact of weakening foreign currencies, primarily the South African rand. Incremental revenue from our acquisitions of CIBIL and ZipCode accounted for an increase in revenue of 12.8%. Excluding the impact of recent acquisitions and foreign currencies, emerging markets revenue increased 3.6% compared with the prior year. For 2013, emerging markets revenue increased $1.3 million, or 0.9%, compared with 2012, due to increased volumes in all regions and the revenue from our acquisitions of ZipCode and CRB, substantially offset by a decrease of 10.6% from the impact of weakening foreign currencies, primarily the South African rand. Incremental revenue from our acquisitions of ZipCode and CRB accounted for an increase in revenue of 4.4%. Excluding the impact of recent acquisitions and foreign currencies, emerging markets revenue increased 7.0% compared with the prior year.

Consumer Interactive Segment

For 2014 and 2013, Consumer Interactive revenue increased $26.9 million, or 13.2%, and $23.6 million, or 13.1%, respectively, compared with prior periods. These increases were due primarily to an increase in the average number of subscribers and volume in our indirect channel.

 

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Operating Expenses

Operating expenses for the periods reported were as follows:

 

     Twelve months ended
December 31,
     Change  
        2014 vs. 2013     2013 vs. Pro
Forma 2012
 
     2014      2013      Pro Forma
2012
     $      %     $     %  
     (dollars in millions)  

Cost of services

   $ 499.1       $ 472.4       $ 470.2       $ 26.7         5.7   $ 2.2        0.5

Selling, general and administrative

     436.0         354.8         384.6         81.2         22.9     (29.8     (7.7 )% 

Depreciation and amortization

     241.2         186.8         187.7         54.4         29.1     (0.9     0.5
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

   

Total operating expenses

$ 1,176.3    $ 1,014.0    $ 1,042.5    $ 162.3      16.0 $ (28.5   (2.7 )% 
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

   

Cost of Services

For 2014, cost of services increased $26.7 million compared with 2013. The increase was due primarily to:

 

    operating and integration costs associated with our USIS and International acquisitions;

 

    an acceleration of $10.2 million of fees recorded for a data matching service contract that we have terminated and in-sourced as part of the transformation to our technology infrastructure;

 

    severance charges in our Corporate unit and USIS segment related to the consolidation and subsequent closure of our California-based contract center; and

 

    costs associated with strategic initiatives;

partially offset by:

 

    the impact of weakening foreign currencies on the 2014 expenses of our International segment.

For 2013, cost of services increased $2.2 million compared with 2012. The increase was due primarily to:

 

    an increase in variable product costs in our Consumer Interactive segment resulting from the increase in revenue;

 

    labor costs for investments in strategic initiatives primarily in our USIS segment; and

 

    operating and integration costs associated with our USIS and International acquisitions;

substantially offset by:

 

    $21.5 million of accelerated stock-based compensation expense recorded in 2012 by TransUnion Intermediate Predecessor resulting from the 2012 Change in Control Transaction; and

 

    the impact of weakening foreign currencies on the 2013 expenses of our International segment.

Selling, General and Administrative

For 2014, selling, general and administrative expenses increased $81.2 million compared with 2013. The increase was due primarily to:

 

    operating and integration costs associated with our USIS and International acquisitions;

 

    expense of $8.1 million for certain legal and regulatory matters in our Corporate unit and International segment; and

 

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    severance charges in our Corporate unit and USIS segment related to the consolidation and subsequent closure of our California-based contract center;

partially offset by:

 

    the impact of weakening foreign currencies on the 2014 expenses of our International segment.

For 2013, selling, general and administrative expenses decreased $29.8 million compared with 2012. The decrease was due primarily to:

 

    $69.2 million of additional stock-based compensation expense recorded in 2012 by TransUnion Intermediate Predecessor resulting from the 2012 Change in Control Transaction; and

 

    the impact of weakening foreign currencies on the 2013 expenses of our International segment;

partially offset by:

 

    an increase in labor costs for investments in strategic initiatives primarily in our USIS and International segments;

 

    an increase in advertising expense in our Consumer Interactive segment;

 

    operating and integration costs associated with our USIS and International acquisitions; and

 

    an increase in legal and regulatory costs in our USIS segment.

See our consolidated financial statements and the related notes included in this prospectus for further information about the impact of the 2012 Change in Control Transaction.

Depreciation and amortization

For 2014, depreciation and amortization increased $54.4 million. In July 2014, we revised the remaining useful lives of certain internal-use software, equipment, leasehold improvements and the corporate headquarters facility to align with the expected completion dates of our strategic initiatives to transform our technology infrastructure and corporate headquarters facility. As a result, depreciation and amortization increased $17.5 million during 2014. Depreciation and amortization increases of $19.6 million from recent business acquisitions and other increases primarily related to additional capital expenditures for our strategic initiatives also impacted the increase in 2012.

For 2013, compared with pro forma 2012, depreciation and amortization was flat but 2012 included a $43.5 million pro forma adjustment to reflect additional depreciation and amortization that would have resulted had the 2012 Change in Control Transaction occurred on January 1, 2012, instead of April 30, 2012. See our consolidated financial statements and the related notes included in this prospectus for further information about the portion of the purchase price allocated to tangible and intangible assets and their estimated useful lives.

 

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Operating Income and Operating Margins

 

     Twelve months ended
December 31,
    Change  
       2014 vs. 2013     2013 vs. Pro
Forma 2012
 
     2014     2013     Pro Forma
2012
    $     %     $      %  
     (dollars in millions)  

USIS operating income

   $ 112.8      $ 154.7      $ 124.1      $ (41.9     (27.1 )%    $ 30.6         24.7

International operating income

     22.2        19.5        13.6        2.7        13.8     5.9         43.4

Consumer Interactive operating income

     85.5        65.6        60.0        19.9        30.3     5.6         9.3

Corporate operating loss

     (92.1     (70.6     (100.2     (21.5     30.5     29.6         29.5
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

    

Total operating income

  128.4      169.2      97.5      (40.8   (24.1 )%    71.7      73.5
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

    

Operating Margin:

USIS

  13.8   20.9   17.1   (7.1 )%    3.8

International

  8.7   8.2   5.8   0.5   2.4

Consumer Interactive

  37.1   32.2   33.3   4.9   (1.1 )% 

Total operating margin

  9.8   14.3   8.6   (4.5 )%    5.7

For 2014, consolidated operating income decreased $40.8 million. This decrease was due primarily to:

 

    operating and integration costs associated with our USIS and International acquisitions;

 

    an increase of $54.4 million in depreciation and amortization due primarily to our recent acquisitions and our strategic initiative to transform our technology infrastructure and corporate headquarters facility;

 

    an increase in variable product costs due to the increase in revenue;

 

    an acceleration of $10.2 million of fees recorded in our USIS segment for a data matching service contract that we have terminated and in-sourced as part of the transformation of our technology infrastructure;

 

    expense of $8.1 million for certain legal and regulatory matters in our Corporate unit and International segment;

 

    severance charges in our Corporate unit and USIS segment related to the consolidation and subsequent closure of our California-based contract center; and

 

    the impact of weakening foreign currencies on the 2014 results of our International segment;

partially offset by:

 

    the increase in revenue in all segments, including revenue from the recent acquisitions.

For 2014, margins for the USIS segment decreased due primarily to additional depreciation and amortization resulting from revising the remaining useful lives of certain assets, the operating, integration and depreciation and amortization expenses of our recent acquisitions, severance charges and the accelerated fees for canceling the data matching service, partially offset by the increase in revenue. Margins for the International segment were relatively flat as the additional depreciation and amortization from revising the remaining useful lives of certain asset and the operating, integration and depreciation and amortization expenses of our recent acquisitions was mostly offset by the increase in revenue. Margins in our Consumer Interactive segment increased due to the increase in revenue.

 

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For 2013 compared to pro forma 2012, consolidated operating income increased $71.7 million. This increase was due primarily to:

 

    accelerated stock-based compensation expense of $90.7 million recorded by TransUnion Intermediate Predecessor in 2012 as a result of the 2012 Change in Control Transaction; and

 

    the increase in revenue;

partially offset by:

 

    operating and integration costs association with our USIS and International acquisitions;

 

    an increase in labor costs for investments in strategic initiatives primarily in our USIS and International segments;

 

    an increase in variable product costs and advertising in our Consumer Interactive segment;

 

    an increase in legal and regulatory costs in our USIS segment; and

 

    the impact of weakening foreign currencies on the 2013 results of our International segment.

For 2013 compared to pro forma 2012, margins for the USIS segment decreased due primarily to an increase in labor costs for investments in strategic initiatives including integration costs of recent acquisitions, and an increase in legal and regulatory costs, partially offset by the accelerated stock-based compensation expense recorded in 2012 and the increase in revenue. Margins for the International segment decreased due primarily to an increase in labor costs for investments in strategic initiatives including integration costs for our recent acquisitions, partially offset by the accelerated stock-based compensation expense recorded in 2012. Margins for the Consumer Interactive segment decreased due primarily to the increase in advertising, partially offset by the accelerated stock-based compensation recorded in 2012.

Non-Operating Income and Expense

 

    Twelve months ended
December 31,
    Change  
      2014 vs. 2013     2013 vs. Pro
Forma 2012
 
    2014     2013     Pro Forma
2012
    $     %     $     %  
    (dollars in millions)  

Interest expense

  $ (190.0   $ (197.6   $ (178.5   $ 7.6        3.8   $ (19.1     (10.7 )% 

Interest income

    3.3        1.7        1.4        1.6        94.1     0.3        21.4

Earnings from equity method investments

    12.5        13.7        12.1      $ (1.2     (8.8 )%    $ 1.6        13.2

Other income and expense, net:

             

Loan fees

    (14.6     (3.8     (5.0     (10.8     nm        1.2        24.0

Acquisition fees

    (2.9     (10.5     (42.2     7.6        72.4     31.7        75.1

Dividends from cost method investments

    0.8        0.7        0.6        0.1        14.3     0.1        16.7

Other income (expense), net

    60.7        0.7        (3.6     60.0        nm        4.3        119.4
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total other income and expense, net

  44.0      (12.9   (50.2   56.9      nm      37.3      74.3
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Non-operating income and expense

$ (130.2 $ (195.1 $ (215.2 $ 64.9      33.3 $ 20.1      9.3
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

nm: not meaningful

Other income and expense, net, was significantly impacted by the 2014 Refinancing Transaction and the 2012 Change in Control Transaction. See our consolidated financial statements and the related notes included in this prospectus for additional information.

 

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For 2014, interest expense decreased $7.6 million compared with 2013. A decrease in interest expense due to the early redemption of the 11.375% Senior Notes in the second quarter of 2014 was partially offset by additional interest expense resulting from the increase in the average principal balance of the senior secured credit facility in 2014 compared with 2013. For 2013 compared with pro forma 2012, interest expense increased $19.1 million, due primarily to interest on the 8.125% Senior Notes issued in November 2012, and interest on the additional borrowings under the Trans Union LLC senior secured term loan in 2013. Pro forma 2012 interest expense included a pro forma adjustment of $13.0 million to reflect additional interest expense that would have been incurred had the TransUnion Holding 9.625% notes that were issued to partially fund the 2012 Change in Control Transaction been issued on January 1, 2012, instead of in March 21, 2012. See our consolidated financial statements and the related notes included in this prospectus for additional information about our interest expense.

For 2014, loan fees included $12.7 million of refinancing fees and other net costs expensed as a result of refinancing our senior secured credit facility. For 2012, loan fees included a $2.7 million fee for a bridge loan commitment for the 2012 Change in Control Transaction.

Acquisition fees represent costs we have incurred for various acquisition-related efforts. For 2014, acquisition fees included costs related to our acquisitions of DHI, L2C and CIBIL and costs of other acquisition efforts. For 2013, acquisition fees included costs related to our acquisitions of ZipCode, eScan and TLO and other acquisition efforts. For 2012, acquisition fees include $36.5 million of costs related to the 2012 Change in Control Transaction and $3.0 million of initial public offering related expenses that were previously capitalized but written off in the first quarter of 2012 as we formally withdrew our registration statement on Form S-1 as a result of the 2012 Change in Control Transaction, and costs of other acquisition efforts. Of the $36.5 million 2012 Change in Control Transaction costs, $15.6 million was incurred by the Successor and $20.9 million was incurred by the Predecessor.

For 2014, other income (expense), net included a net gain of $45.8 million resulting from the early redemption of the 11.375% Senior Notes consisting of the unamortized 2012 Change in Control Transaction fair value increase in the notes of $89.4 million less an early redemption premium and other costs totaling $43.6 million, a $22.2 million gain resulting from remeasuring our previously held equity interests in CIBIL and L2C under the accounting guidance for acquisitions achieved in stages, an impairment charge of $4.1 million related to a cost-method investment that has sold its assets and liquidated, a loss of $0.3 million on the swap that no longer qualifies for hedge accounting and other income and expenses.

Provision for Income Taxes

For 2014 and 2013, we reported a loss before income taxes with income tax expense, resulting in a negative effective tax rate for both periods. This rate was lower than the 35% U.S. federal statutory rate due primarily to tax on our foreign earnings that are not considered indefinitely reinvested outside the United States.

For the pro forma twelve months ended December 31, 2012, pro forma income tax expense includes a pro forma reduction of income tax expense that would have resulted had the 2012 Change in Control Transaction occurred on January 1, 2012. See the pro forma 2012 depreciation and amortization and the interest expense discussions above for further information on the 2012 pro forma adjustments.

For the period of inception through December 31, 2012, the effective tax rate was 244.4%. This rate was higher than the 35% U.S. federal statutory rate due primarily to the lapse of the look-through rule and the reduction in available foreign tax credits, the unfavorable impact of changes to our accrual

 

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on certain undistributed earnings of the Company’s controlled foreign subsidiaries and tax non-deductibility of certain costs incurred in connection with the 2012 Change in Control Transaction, partially offset by a favorable tax rate differential on the Company’s foreign earnings.

For the four months ended April 30, 2012, we reported a loss before income taxes. The effective tax rate for this period of 18.0% was lower than the 35% U.S. federal statutory rate due primarily to the impact of recording tax expense on our undistributed foreign earnings, the non-deductibility of certain costs incurred in connection with the 2012 Change in Control Transaction and limitations on our foreign tax credits.

Effective January 1, 2012, the look-through provision under subpart F of the United States Internal Revenue Code expired. Consequently, beginning in 2012, we recorded tax expense for the U.S. income tax we would incur in the absence of the look-through rule. As part of the American Taxpayer Relief Act of 2012 enacted into law on January 2, 2013, the look-through provision was retroactively reinstated to January 1, 2012, and we reversed the tax expense we recorded for subpart F in 2012 during the first quarter of 2013. The look-through rule is effective for 2013 and 2014 as well.

As a result of the 2012 Change in Control Transaction and increased debt service requirements resulting from the additional debt incurred by TransUnion, we asserted at December 31, 2012, that all undistributed foreign earnings from certain controlled foreign corporations accumulated as of April 30, 2012, were not indefinitely reinvested outside the United States. Accordingly, in 2012 we recorded a deferred tax liability for the full estimated U.S. tax cost, net of related foreign tax credits, associated with remitting these earnings back to the United States. In 2014, we modified this assertion due to changes in the Company’s capital structure. We now assert that $118.7 million of earnings from our Canadian, South African and Netherlands subsidiaries and CIBIL are not indefinitely reinvested outside the United States.

Significant Changes in Assets and Liabilities

Goodwill increased $114.2 million at December 31, 2014, compared with December 31, 2013, due primarily to the purchase price allocations for CIBIL, DHI and L2C, partially offset by adjustments for foreign currency translation. See our consolidated financial statements and the related notes included in this prospectus for additional information.

Liquidity and Capital Resources

Overview

Our principal sources of liquidity are cash flows provided by operating activities, cash and cash equivalents on hand, and our senior secured revolving line of credit. Our principal uses of liquidity are working capital, capital expenditures, debt service and other general corporate purposes. We believe our cash on hand, cash generated from operations, and funds available under the senior secured revolving line of credit will be sufficient to fund our planned capital expenditures, debt service obligations and operating needs for the foreseeable future. We may, however, elect to raise funds through debt or equity financings in the future to fund significant investments or acquisitions that are consistent with our growth strategy. TransUnion Intermediate pays cash dividends to TransUnion to fund its debt service obligations.

Cash and cash equivalents totaled $77.9 million at December 31, 2014, of which $50.6 million was held outside the United States. Cash and cash equivalents totaled $111.2 million at December 31, 2013, of which $80.6 million was held outside the United States. The balance retained in cash and cash equivalents is consistent with our short-term cash needs and investment objectives. As of December 31, 2014, we had outstanding borrowings of $50.0 under our senior secured revolving line

 

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of credit and could borrow up to an additional $140.0 million. Beginning in 2015, under the amended senior secured term loan, we will be required to make additional principal payments based on the previous year’s excess cash flows. See our consolidated financial statements and the related notes included in this prospectus for additional information.

As of December 31, 2014, the Company intends to keep all foreign earnings of controlled entities except for approximately $118.7 million permanently reinvested in operations outside of the United States as these earnings are not needed to fund our current or expected domestic operations. Accordingly, under ASC 740-30 we have recorded a deferred tax liability of approximately $41.6 million as of December 31, 2014, on the earnings of the controlled entities that we expect to repatriate.

Sources and Uses of Cash

 

  Twelve
Months
Ended
December 31,
2014
  Twelve
Months
Ended
December 31,
2013
  TransUnion
Successor

Date of
Inception
Through
December 31,
2012(1)
  TransUnion
Intermediate
Predecessor
Four Months
Ended
April 30,
2012
  2012 Pro
Forma
Adjustments(2)
  Pro Forma
Twelve
Months
Ended
December 31,
2012
  2014 vs.
2013
Change
  2013 vs.
Pro Forma
2012
Change
 
  (dollars in millions)  

Cash provided by operating activities

  $ 154.3      $ 143.4      $ 47.0      $ 52.4      $ (13.0   $ 86.4      $ 10.9      $ 57.0   

Cash used in investing activities

    (276.0     (367.0     (1,547.1     (19.6            (1,566.7     91.0        1,199.7   

Cash provided by (used in) financing activities

    91.9        187.3        1,655.1        (45.0            1,610.1        (95.4     (1,422.8

Effect of exchange rate changes on cash and cash equivalents

    (3.5     (6.8     (0.7     0.8               0.1        3.3        (6.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in cash and cash equivalents

  $ (33.3   $ (43.1   $ 154.3      $ (11.4   $ (13.0   $ 129.9      $ 9.8      $ (173.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Cash used in investing activities for TransUnion date of inception through December 31, 2012, is net of the cash of TransUnion Intermediate Predecessor on April 30, 2012, acquired by TransUnion in connection with the 2012 Change in Control Transaction.
(2) The pro forma adjustment to 2012 cash provided by operating activities represents the additional interest expense that would have been incurred had the 2012 Change in Control Transaction occurred on January 1, 2012. No cash tax savings would have occurred because the additional interest expense would have increased the net loss.

Operating Activities

For 2014, the increase in cash provided by operating activities was due primarily to the increase in revenue and decrease in interest expense, partially offset by the increase in cash operating expenses and working capital. For 2013 compared with pro forma 2012, the increase in cash provided by operating activities was due primarily to cash used in 2012 to pay option holders cash consideration based on the value of their options in connection with the 2012 Change in Control Transaction, partially offset by the increase in interest expense.

Investing Activities

For 2014, the decrease in cash used in investing activities was due primarily to a decrease in cash used for acquisitions, partially offset by an increase in cash paid for capital expenditures. For 2013, the decrease in cash used in investing activities was due primarily to cash used in 2012 to fund the 2012 Change in Control Transaction, partially offset by cash used for acquisitions in 2013.

 

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Financing Activities

For 2014, the decrease in cash provided by financing activities was due primarily to the 2014 Refinancing Transaction prepayment premium and fees and a decrease in net borrowings. For 2013, the decrease in cash provided by financing activities was due primarily to equity and debt proceeds received in 2012 to fund the 2012 Change in Control Transaction, partially offset by the dividend paid in 2012 and proceeds from borrowings against our senior secured credit facility in 2013.

Capital Expenditures

We make capital expenditures to grow our business by developing new and enhanced capabilities, to increase the effectiveness and efficiency of the organization and to reduce risks. We make capital expenditures for product development, disaster recovery, security enhancements, regulatory compliance, and the replacement and upgrade of existing equipment at the end of its useful life. During the third quarter of 2013, we began a strategic initiative to transform our technology infrastructure to enable growth, promote innovation and provide a competitive advantage. We are also in the process of making improvements to our corporate headquarters facility.

For 2014, cash paid for capital expenditures increased $73.5 million compared with 2013 due primarily to the ongoing strategic initiatives to transform our technology infrastructure and to upgrade our corporate headquarters facility. On an accrual basis, our capital expenditures were $163.0 million in 2014 compared with $96.3 million in 2013. For 2013, cash paid for capital expenditures increased $12.5 million, from $69.2 million in 2012 to $81.7 million in 2013. On an accrual basis, our capital expenditures were $96.3 million in 2013 compared with $66.7 million in 2012. We expect total capital expenditures to be lower in 2015 than 2014 as a percentage of revenue as we reduce our spending to transform our technology infrastructure and improve our corporate headquarters.

Debt

Senior Secured Credit Facility

On June 15, 2010, the Company entered into a senior secured credit facility with various lenders. The credit facility consists of a senior secured term loan and a senior secured revolving line of credit. On April 9, 2014, we refinanced and amended our senior secured credit facility. The refinancing resulted in an increase of the outstanding term loan from $1,120.5 million to $1,900.0 million. The amendment, among other things, reduced the interest rate floor and margins, reduced the amount available under the revolving line of credit from $210.0 million to $190.0 million, extended the maturity dates, and changed certain covenant requirements. The additional borrowings were used in part to repay all amounts outstanding under the existing revolving line of credit and to pay fees and expenses associated with the refinancing transaction. On May 9, 2014, the remaining borrowings were used to redeem the entire $645.0 million outstanding balance of the 11.375% Senior Notes issued by TransUnion Financing Corp and Trans Union LLC including unpaid accrued interest and a prepayment premium. We refer to these transactions collectively as the “2014 Refinancing Transaction.” The 2014 Refinancing Transaction resulted in a net gain of $33.1 million recorded in the consolidated statement of income, consisting of a gain of $45.8 million on the early redemption of the 11.375% Senior Notes less $12.7 million of refinancing fees and other net costs expensed as a result of refinancing our senior secured credit facility. The 2014 Refinancing Transaction is expected to result in a reduction in cash paid for interest of approximately $45 million annually, less a reduction in the amortized fair value premium, for a net reduction to interest expense of approximately $20 million annually at current interest rates.

Interest rates on the refinanced term loan are based on the London Interbank Offered Rate (“LIBOR”) unless otherwise elected, and subject to a floor of 1.00%, plus a margin of 2.75% or 3.00%

 

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depending on our senior secured net leverage ratio. Under the refinanced term loan, the Company is required to make principal payments of 0.25% of the refinanced original principal balance at the end of each quarter, with the remaining balance due April 9, 2021. The Company will also be required to make additional payments beginning in 2015 based on excess cash flows of the prior year. Depending on the senior secured net leverage ratio for the year, a principal payment of between zero and fifty percent of the excess cash flows will be due the following year.

During the fourth quarter of 2014, the Company borrowed $50.0 million against the senior secured revolving line of credit to partially fund acquisitions. As of December 31, 2014, we had outstanding borrowings of $50.0 under our senior secured revolving line of credit and could borrow up to an additional $140.0 million.

Under the covenants of the instruments governing our senior secured debt, TransUnion Intermediate is restricted from making certain distribution payments to TransUnion.

Interest rates on the refinanced revolving line of credit are based on LIBOR unless otherwise elected, and subject to a floor of 1.00%, plus a margin of 2.50% or 2.75% depending on our senior secured net leverage ratio. There is a 0.375% or 0.50% annual commitment fee, depending on our senior secured net leverage ratio, payable quarterly based on the undrawn portion of the revolving line of credit. The commitment under the revolving line of credit expires on April 9, 2019.

With certain exceptions, the obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, including its investment in subsidiaries. The credit facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. As of December 31, 2014, we were in compliance with all of the loan covenants.

On April 30, 2012, we entered into swap agreements that effectively fixed the interest payments on a portion of the then existing term loan at 2.033%, plus the applicable margin, beginning March 28, 2013. Under the swap agreements, which we had designated as cash flow hedges, we paid a fixed rate of interest of 2.033% and received a variable rate of interest equal to the greater of 1.50% or the 3-month LIBOR. The net amount paid or received was recorded as an adjustment to interest expense. As a result of the April 9, 2014 credit facility amendment, the swaps were no longer expected to be highly effective and no longer qualify for hedge accounting. The total fair value of the swap instruments as of April 9, 2014 of $1.6 million was recorded in other liabilities in the consolidated balance sheet. The corresponding net of tax loss of $1.0 million was recorded in accumulated other comprehensive income and is being amortized to interest expense on a straight-line basis through December 29, 2017, the remaining life of the swaps. Changes in the fair value of the swaps after April 9, 2014 through December 31, 2014, resulted in a loss $0.3 million recorded in other income and expense for the year ended December 31, 2014.

11.375% Senior Notes

In connection with a transaction in 2010 in which our previous owners sold a controlling stake in us, on June 15, 2010, we issued $645.0 million principal amount of 11.375% Senior Notes due on June 15, 2018. As a result of the 2012 Change in Control Transaction, a purchase accounting fair value adjustment increase of $124.2 million was allocated to the 11.375% Senior Notes . These notes were repaid in full on May 9, 2014, from the incremental proceeds borrowed on our senior secured credit facility resulting in a net gain of $45.8 million.

 

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9.625% Senior Notes

In connection with the acquisition of TransUnion Intermediate, on March 21, 2012, TransUnion issued $600.0 million principal amount of 9.625% Senior Notes, in a private placement to certain investors. Pursuant to an exchange offer completed in October 2012, these notes were registered with the SEC. TransUnion is required to pay interest on the 9.625% Senior Notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case TransUnion will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes (such increase being referred to as “PIK,” or paid-in-kind interest) to the extent described in the indenture.

The indenture governing the 9.625% Senior Notes contains nonfinancial covenants that include restrictions on our ability to pay dividends or distributions, repurchase equity, prepay junior debt, make certain investments, incur additional debt, issue certain stock, incur liens on property, merge, consolidate or sell certain assets, enter into transactions with affiliates, and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments to TransUnion. As of December 31, 2014, we were in compliance with all covenants under the indenture.

8.125% Senior Notes

On November 1, 2012, TransUnion issued $400.0 million principal amount of 8.125% Senior Notes at an offering price of 99.5% in a private placement to certain investors. The proceeds were used to pay a $373.8 million dividend to our shareholders and to pay various costs associated with issuing the debt and obtaining consents from our existing debt holders. Pursuant to an exchange offer completed in August 2013, these notes were registered with the SEC. TransUnion is required to pay interest on the 8.125% Senior Notes in cash unless certain conditions described in the indenture governing the notes are satisfied, in which case TransUnion will be entitled to pay interest for such period by increasing the principal amount of the notes or by issuing new notes to the extent described in the indenture.

The indenture governing the 8.125% Senior Notes and the nonfinancial covenants are substantially identical to those governing the 9.625% Senior Notes. As of December 31, 2014, we were in compliance with all covenants under the indenture.

Effect of certain debt covenants

A breach of any of the covenants under the agreements governing our debt could limit our ability to borrow funds under the Trans Union LLC senior secured revolving line of credit and could result in a default under the Trans Union LLC senior secured credit facility or the indentures governing the TransUnion senior unsecured PIK toggle notes. Upon the occurrence of an event of default under the Trans Union LLC senior secured credit facility or the indentures governing the TransUnion senior unsecured PIK toggle notes, the Trans Union LLC lenders, or the holders of the TransUnion senior unsecured PIK toggle notes, as the case may be, could elect to declare all amounts outstanding under the applicable indebtedness to be immediately due and payable, and the lenders could terminate all commitments to extend further credit under our senior secured credit facility. If we were unable to repay the amounts declared due, the lenders could proceed against any collateral granted to them to secure that indebtedness. We have pledged substantially all of the Trans Union LLC assets as collateral under the senior secured credit facility. If the lenders under the senior secured credit facility accelerate the repayment of borrowings, or the holders of the TransUnion senior unsecured PIK toggle notes accelerate repayment of the notes, we may not have sufficient assets to repay the debt due. See “Risk Factors.”

TransUnion’s ability to meet its liquidity needs or to pay dividends on its common stock depends on its subsidiaries’ earnings, the terms of their indebtedness, and other contractual restrictions. Trans

 

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Union LLC, the borrower under the senior secured credit facility, is not permitted to declare any dividend or make any other distribution, subject to certain exceptions including compliance with a fixed charge coverage ratio and a basket that depends on TransUnion Intermediate’s consolidated net income.

Our senior secured credit facility includes a senior secured net leverage ratio covenant which must be tested as a condition to incur additional indebtedness. The ratio must also be tested at the end of any fiscal quarter for which we have a line of credit borrowing outstanding in excess of 30% of the revolving credit commitment. As of December 31, 2014, this covenant, if it applied, would have required us to maintain a senior secured net leverage ratio on a pro forma basis equal to, or less than, 6.00-to-1. As of December 31, 2014, we were in compliance with our senior secured net leverage ratio covenant.

Under the covenants of the instruments governing our senior debt, TransUnion Intermediate is restricted from making certain distribution payments to TransUnion.

For additional information about our debt, see our consolidated financial statements and the related notes included in this prospectus.

Contractual Obligations

Consolidated future minimum payments for noncancelable operating leases, purchase obligations and debt repayments as of December 31, 2014, are payable as follows:

 

     Operating
leases
     Purchase
obligations
     Debt
repayments(1)
     Loan fees and
interest payments(1)
     Total  
     (in millions)  

2015

   $ 12.8       $ 182.0       $ 74.0       $ 170.2       $ 439.0   

2016

     9.9         31.9         23.4         164.2         229.4   

2017

     7.0         11.1         19.4         170.7         208.2   

2018

     5.4         6.7         1,019.0         123.8         1,154.9   

2019

     5.0         1.1         19.0         83.9         109.0   

Thereafter

     11.8         2.5         1,790.7         108.8         1,913.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Totals

$ 51.9    $ 235.3    $ 2,945.5    $ 821.6    $ 4,054.3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) We intend to use the net proceeds from this offering to redeem $                 million in aggregate principal amount of the 9.625% Senior Notes, which will reduce our annual interest expense through June 2018 by $                 million.

Purchase obligations to be repaid in 2015 include $106.5 million of trade accounts payable that were included in the consolidated balance sheet as of December 31, 2014. Purchase obligations include commitments for outsourcing services, royalties, data licenses, maintenance and other operating expenses. Loan fees and interest payments are estimates based on the interest rates in effect at December 31, 2014, and the contractual principal paydown schedule, excluding any excess cash flow prepayments that may be required. See our consolidated financial statements and the related notes included in this prospectus for additional information about our interest payments.

Off-Balance Sheet Arrangements

As of December 31, 2014, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

 

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Application of Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with GAAP. The notes to our consolidated financial statements include disclosures about our significant accounting policies. These accounting policies require us to make certain judgments and estimates in reporting our operating results and our assets and liabilities. The following paragraphs describe the accounting policies that require significant judgment and estimates due to inherent uncertainty or complexity.

Goodwill and Indefinite-Lived Intangibles

Due to the 2012 Change in Control Transaction, the value of goodwill increased significantly, as the excess of the purchase price paid for TransUnion Intermediate over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill and allocated to each of our reporting units.

As of December 31, 2014, our consolidated balance sheet included goodwill of $2,023.9 million. As of December 31, 2014, we had no other indefinite-lived intangible assets. We test goodwill and indefinite-lived intangible assets for impairment on an annual basis, in the fourth quarter, or on an interim basis if an indicator of impairment is present. For goodwill, we compare the fair value of each reporting unit to its carrying amount to determine if there is potential goodwill impairment. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of its goodwill. For other indefinite-lived intangibles, if any, we compare the fair value of the asset to its carrying value to determine if there is an impairment. If the fair value of the asset is less than its carrying value, an impairment loss is recorded.

We use discounted cash flow techniques to determine the fair value of our reporting units, goodwill and other indefinite-lived intangibles. The discounted cash flow calculation requires a number of significant assumptions, including projections of future cash flows, exchange rates and an estimate of the appropriate discount rates. The projections of future cash flows used to assess the fair value of the reporting units are based on the internal operating plans reviewed by management and significant shareholders. The projections of future exchange rates were based on the current exchange rates at the time the projections were prepared. The estimated discount rates were based on the risk-free rate of interest and estimated risk premiums for the reporting units at the time the impairment analysis was prepared. We believe our current estimates of fair value are based on assumptions that are reasonable and consistent with assumptions that would be used by other marketplace participants. Such estimates are, however, inherently uncertain, and estimates using different assumptions could result in significantly different results, and a potential impairment charge for one or more of our reporting units that could adversely affect our results of operations.

During 2014, 2013 and 2012, there were no impairments of goodwill or other indefinite-lived intangible assets. As of December 31, 2014, our estimates of fair value for each reporting unit exceeded the carrying amount of the corresponding reporting unit. The estimated fair value of our Latin America reporting unit exceeded its carrying amount by 5%. A 10% increase in the discount rate or a 10% decrease in the estimated cash flows of the reporting unit could not have resulted in an impairment in any reporting unit other than the Latin America reporting unit.

Long-Lived Depreciable and Amortizable Assets

In connection with the 2012 Change in Control Transaction, all long-lived depreciable and amortizable assets were recorded at fair value and the carrying value of certain fixed assets and all intangible assets increased significantly.

 

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As of December 31, 2014, our consolidated balance sheet included fixed assets of $304.8 million, $181.4 million net of accumulated depreciation, and long-lived intangible assets of $2,347.4 million, $1,939.6 million net of accumulated amortization. We review long-lived assets subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized equal to the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the consolidated balance sheet, and reported at the lower of the carrying amount or fair value, less costs to sell, and are no longer depreciated. When a long-lived asset group is tested for recoverability, we also review depreciation estimates and methods. Any revision to the remaining useful life of a long-lived asset resulting from that review is also considered in developing estimates of future cash flows used to test the asset for recoverability. We typically use a discounted cash flow model when assessing the fair value of our asset groups. The discounted cash flow calculation requires a number of significant assumptions, including projections of future cash flows and an estimate of our discount rate.

When events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, we use estimates of future cash flows to determine recoverability and base such estimates on assumptions that are reasonable and consistent with assumptions that would be used by other marketplace participants. Such estimates, however, are inherently uncertain and estimates using different assumptions, or different valuation techniques, could result in significantly different results. During 2014, 2013 and 2012, there were no material impairment charges.

Legal Contingencies

As of December 31, 2014, our consolidated balance sheet included an accrual of $17.8 million for pending or anticipated claims of our operations. In the ordinary course of business, we are involved in various legal proceedings relating to our current or past business operations. In the ordinary course of business, we are also subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both form and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. We regularly review all litigation and regulatory matters to determine whether a loss is probable and, if probable, can be reasonably estimated. If a loss is probable and can be reasonably estimated, an appropriate reserve is accrued and included in other current liabilities. We make a number of significant judgments and estimates related to these contingencies, including the likelihood that a liability has been incurred, and an estimate of that liability. See our consolidated financial statements and the related notes included in this prospectus for additional information about our legal contingencies.

We believe the judgments and estimates used are reasonable, but events may arise that were not anticipated and the outcome of a contingency may differ significantly from what is expected.

Income Taxes

As of December 31, 2014, TransUnion’s consolidated balance sheet included current deferred tax assets of $51.2 million, noncurrent deferred tax liabilities of $676.8 million and unrecognized tax benefits of $0.3 million. Certain deferred tax assets (including net operating loss carryforwards) may be deducted from taxable income in computing our federal income tax liability. If, in the future, we undergo an ownership change as described in Section 382(g) of the United States Internal Revenue Code, our ability to recover such deferred tax assets may be limited. Additionally, we are required to record current and deferred tax expense, deferred tax assets and liabilities resulting from temporary differences, and unrecognized tax benefits for uncertain tax positions. We make certain judgments and estimates to determine the amounts recorded, including future tax rates, future taxable income, whether it is more likely than not a tax position will be sustained, and the amount of the unrecognized tax benefit to record.

 

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We believe the judgments and estimates used are reasonable, but events may arise that were not anticipated and the outcome of tax audits may differ significantly from what is expected.

Stock-Based Compensation

For the year ended December 31, 2014, we recorded $10.6 million of stock-based compensation expense. For the year ended December 31, 2013, we recorded $6.9 million of stock-based compensation expense. For the year ended December 31, 2012, we recorded $93.0 million of stock-based compensation expense, including $88.0 million in connection with the 2012 Change in Control Transaction. The fair value of each award was determined by various methods including independent valuations of our common stock based on discounted cash flow and selected comparable public company analysis, the Black-Scholes valuation model, and risk-neutral Monte Carlo valuation models. The various valuation models required management to make a number of significant assumptions, including the fair value of our stock, projections of future cash flows and an estimate of our cost of capital, volatility rates, expected life of awards and risk-free interest rates. We believe the determination of fair value was based on assumptions and estimates that are reasonable and consistent with what would be used by other marketplace participants to determine fair value. Valuations, however, are inherently uncertain and valuations using different assumptions and estimates, or different valuation techniques, could result in significantly different values. See our consolidated financial statements and the related notes included in this prospectus.

Recent Accounting Pronouncements

For information about recent accounting pronouncements and the potential impact on our consolidated financial statements, see the related notes to our consolidated financial statements included in this prospectus.

Compensation Arrangements to be Adopted in Connection with This Offering

In connection with this offering, our Board of Directors expects to adopt, and our stockholders expect to approve, the 2015 Omnibus Incentive Plan prior to the completion of the offering.

Quantitative And Qualitative Disclosures About Market Risk

In the normal course of business we are exposed to market risk, primarily from changes in variable interest rates and foreign currency exchange rates, which could impact our results of operations and financial position. We manage the exposure to this market risk through our regular operating and financing activities. We may use derivative financial instruments, such as foreign currency and interest rate hedges, but only as a risk management tool and not for speculative or trading purposes.

Interest Rate Risk

Our senior secured credit facility consists of a seven-year senior secured term loan (“term loan”) and a $190.0 million senior secured revolving line of credit (“revolving line of credit”). Interest rates on these borrowings are based, at Trans Union LLC’s election, on LIBOR or an alternate base rate, subject to a floor, plus an applicable margin based on the senior secured net leverage ratio. As of December 31, 2014, 65.7% of TransUnion’s outstanding debt was variable-rate debt. As of December 31, 2014, our variable-rate debt had a weighted-average interest rate of 3.99% and a weighted-average life of 6.20 years. For all of 2014, the variable rate on our senior secured term loan was below the floor, and a 10% change in the interest rate on that loan would not have changed our interest expense. During 2014, during the time the revolving line of credit had an outstanding balance,

 

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the variable rate was below the floor, and a 10% change in the interest rate on that loan would not have changed our interest expense.

On April 30, 2012, we entered into swap agreements that effectively fixed the interest payments on a portion of the term loan at 2.033%, plus the applicable margin, beginning March 28, 2013. Under the swap agreements, which we have designated as cash flow hedges, we pay a fixed rate of interest and receive a variable rate of interest equal to the greater of 1.50% or the 3-month LIBOR. The net amount to be paid or received has been and will continue to be recorded as an adjustment to interest expense. As a result of the April 9, 2014 credit facility amendment, the swaps were no longer expected to be highly effective and no longer qualify for hedge accounting. The total fair value of the swap instruments as of April 9, 2014 of $1.6 million was recorded in other liabilities in the consolidated balance sheet. The corresponding net of tax loss of $1.0 million was recorded in accumulated other comprehensive income and is being amortized to interest expense on a straight-line basis through December 29, 2017, the remaining life of the swaps. Changes in the fair value of the swaps after April 9, 2014, resulted in a loss of $0.3 million recorded in other income and expense for the year ended December 31, 2014.

The total notional amount of the swaps at December 31, 2014, was $412.5 million and is scheduled to decrease as scheduled principal payments are made on the term loan. The cash flows on the hedge instrument began on June 28, 2013, and we do not expect to elect a non-LIBOR loan or to pay down our term loan below the notional amount of the swaps in the next 12 months.

Based on the amount of outstanding variable-rate debt, we have a material exposure to interest rate risk. In the future our exposure to interest rate risk may change due to changes in the amount borrowed, changes in interest rates, or changes in the amount we have hedged. The amount of our outstanding debt, and the ratio of fixed-rate debt to variable-rate debt, can be expected to vary as a result of future business requirements, market conditions or other factors.

See “Liquidity and Capital Resources—Debt—Senior Secured Credit Facility” for additional information about interest rates on our debt.

Foreign Currency Exchange Rate Risk

A substantial majority of our revenue, expense and capital expenditure activities are transacted in U.S. dollars. However, we transact business in a number of foreign currencies, including the South African rand, Canadian dollar, Indian rupee and Brazilian real. We have minimal euro-based transactions. In reporting the results of our foreign operations, we benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to the foreign currencies.

We are required to translate the assets and liabilities of our foreign subsidiaries that are measured in foreign currencies at the applicable period-end exchange rate in our consolidated balance sheets. We are required to translate revenue and expenses at the average exchange rates prevailing during the year in our consolidated statements of income. The resulting translation adjustment is included in other comprehensive income, as a component of stockholders’ equity. We include transactional foreign currency gains and losses in other income and expense in our consolidated statements of income.

In 2014, revenue from foreign operations was $255.5 million, and foreign operating income was $22.2 million. A 10% change in the value of the U.S. dollar relative to a basket of the currencies for all foreign countries in which we had operations during 2014 would have changed our revenue by $25.6 million and our operating income by $2.2 million.

A 10% change in the value of the U.S. dollar relative to a basket of currencies for all foreign countries in which we had operations would not have had a significant impact on our 2014 realized foreign currency transaction gains and losses.

 

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BUSINESS

Overview

TransUnion is a leading global risk and information solutions provider. Our mission is to help people worldwide access opportunities that lead to a higher quality of life. Businesses embed our solutions into their process workflows to optimize their risk-based decisioning and to drive better financial outcomes. Consumers use our solutions to view their credit profiles and access analytical tools that help them understand and manage their personal information and take precautions against identity theft. We are differentiated by our comprehensive and unique datasets, our next-generation technology and our analytics and decisioning capabilities, which enable us to deliver insights across the entire consumer lifecycle. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data, which allows us to better predict behaviors, assess risk and address a broader set of business issues for our customers. We have deep domain expertise across a number of attractive industry verticals, including financial services, insurance and healthcare, as well as a global presence in over 30 countries across North America, Africa, Latin America and Asia.

Our addressable market includes the big data and analytics market, which continues to grow as companies around the world recognize the benefits of building an analytical enterprise where decisions are made based on data and insights, and as consumers recognize the importance that data and analytics play in their ability to procure goods and services and protect their identities. IDC estimates worldwide spending on big data and analytics services to be approximately $52 billion in 2014, growing at a projected compounded annual growth rate (“CAGR”) of approximately 15% from 2014 through 2018. There are several underlying trends supporting this market growth, including the creation of large amounts of data, advances in technology and analytics that enable data to be processed more quickly and efficiently to provide business insights, and growing demand for these business insights across industries and geographies. Leveraging our 47-year operating history and our established position as a leading provider of risk and information solutions, we have evolved our business by investing in a number of strategic initiatives, such as transitioning to the latest big data and analytics technologies, expanding the breadth and depth of our data, strengthening our analytics capabilities and enhancing our business processes. As a result, we believe we are well positioned to expand our share within the markets we currently serve and capitalize on the larger big data and analytics opportunity.

We believe that we have the capabilities and assets, including comprehensive and unique datasets, advanced technology and analytics to provide differentiated solutions to our customers. We have over 30 petabytes of data, growing at an average rate of over 25% each year since 2010, representing over one billion consumers globally. We obtain financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from an average of 90,000 data sources, including financial institutions, private databases and public records repositories. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. Our next-generation technology allows us to quickly and efficiently integrate our data with our analytics and decisioning capabilities to create and deliver innovative solutions to our customers and to quickly adapt to changing customer needs. Our deep analytics expertise, which includes our people as well as tools such as predictive modeling and scoring, customer segmentation, benchmarking and forecasting, enables businesses and consumers to gain better insights into their risk and financial data. Our decisioning capabilities, which are generally delivered on a software-as-a-service platform, allow businesses to interpret data and apply their specific qualifying criteria to make decisions and take actions. Collectively, our data, analytics and decisioning capabilities allow businesses to authenticate the identity of consumers, effectively determine the most relevant products for consumers, retain and cross-sell to existing consumers, identify and acquire new consumers and reduce loss from fraud. Similarly, our capabilities allow consumers to see how their credit profiles have

 

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changed over time, understand the impact of financial decisions on their credit scores and manage their personal information as well as to take precautions against identity theft.

We leverage our differentiated capabilities in order to serve a broad set of customers across multiple geographies and verticals. We have a global customer base of over 65,000 businesses and 35 million consumers. We offer our solutions to business customers in financial services, insurance, healthcare and other industries. Our customer base includes many of the largest companies in each of the primary industries we serve. For example, in the United States, we contract with nine of the ten largest banks, all of the top five credit card issuers, all of the top twenty-five auto lenders, fourteen of the fifteen auto insurance carriers, thousands of healthcare providers and federal, state and local government agencies. We have been successful in leveraging our brand, our expertise and our solutions in our global operations and have a leading presence in several high-growth international markets, including India, Hong Kong and Africa.

We believe we have an attractive business model that has highly recurring and diversified revenue streams, low capital requirements, significant operating leverage and strong and stable cash flows. The proprietary and embedded nature of our solutions and the integral role that we play in our customers’ decision-making processes have historically translated into high customer retention and revenue visibility. For example, our top ten financial institution customers have an average tenure of over ten years. We continue to demonstrate organic growth by further penetrating existing customers, innovating new solutions and gaining new customers. We have a diversified portfolio of businesses across our segments, reducing our exposure to cyclical trends in any particular industry or geography. We operate primarily on a contributory data model in which we typically obtain updated information at little or no cost and own most of our data. We augment this data with a growing set of public record and alternative data as we expand into new solutions and adjacencies. We also directly manage and control our technology, which provides us with an efficient cost structure and allows us to benefit from economies of scale. Additionally, our technology investments enable us to grow and expand our business with low incremental cost, providing significant operating leverage.

Our total revenues increased from $1,183.2 million for the year ended December 31, 2013 to $1,304.7 million for the year ended December 31, 2014, representing year-over-year growth of 10.3%. Our Adjusted EBITDA (as defined below in note 4 to “Selected Historical Consolidated Financial Data”) increased from $408.5 million for the year ended December 31, 2013 to $451.6 million for the year ended December 31, 2014, representing year-over-year growth of 10.6%.

Our Evolution

Our business has a 47-year operating history and a long track record of providing risk and information solutions to businesses and consumers while continuing to innovate to meet their changing needs. Since our founding as a provider of regional credit reporting services, we have built a comprehensive database of U.S. consumers, which created a unique and highly valuable base to build solutions that span many industry verticals and customer processes. From this base, we expanded our operations by targeting new customers, industry verticals and geographies and also entering into the consumer space. We have strengthened our analytics and decisioning capabilities and acquired complementary datasets enabling us to enhance our solutions, diversify our revenue base and expand into high-growth verticals, such as healthcare and insurance. We have grown our global presence to over 30 countries, creating credit reporting agencies in new geographies and establishing strong international footholds from which we could expand into other emerging markets. We also expanded the reach of our consumer solutions by partnering with other market leaders and innovators.

 

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As part of our continued evolution, we have invested in a number of strategic initiatives that we believe will allow us to cater to the growing demand for data and analytics, provide differentiated solutions and better serve our customers. These initiatives include:

 

    Investing in our Technology:    Technology is at the core of the solutions we provide to our customers. We have made significant investments since 2012 to modernize our infrastructure and to transition to the latest big data and analytics technologies which enable us to be quicker, more efficient and more cost-effective. Our next-generation technology enhances our ability to organize and handle high volumes of disparate data, improves delivery speeds, provides better availability and strengthens product development capabilities, while lowering our overall cost structure and allowing us to maintain our focus on information security. Our investment strategy has been to build capabilities and leverage them across multiple geographies and verticals.

 

    Expanding our Data:    We have continued to invest in the breadth and depth of our data. We introduced the concept of trended data to provide the trajectory of a consumer’s risk profile, used public records data to enhance the scope of business issues we can address and incorporated alternative data into our databases to better assess risk for banked and unbanked consumers. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data. All of these initiatives improve the quality of our data, provide deeper insights into risk and allow us to create differentiated solutions for our customers.

 

    Strengthening our Analytics Capabilities:    We have strengthened our analytics capabilities by leveraging our next-generation technology and expanded data, utilizing more advanced tools and growing our analytics team. This has allowed us to create solutions that produce greater insights and more predictive results, which help our customers make better decisions. In addition, our strengthened analytics capabilities have shortened our time-to-market to create and deliver these solutions to our customers.

 

    Broadening our Target Markets:    We have grown our target markets by establishing a presence in attractive high-growth international markets such as India and the Philippines, entering new verticals such as government and investigative services in the United States and expanding the reach of our consumer offerings by partnering with traditional and emerging providers in new verticals. Our capabilities enable us to develop scalable products that we are able to deploy across new markets and verticals.

 

    Enhancing our Business Processes and Capabilities:    We have enhanced our business processes and capabilities to support our growth. We have hired additional industry experts, which has allowed us to create and sell new vertical-specific solutions that address our customers’ needs. Our global sales force effectiveness program reallocates our sales resources more effectively and increases our sales team’s coverage of customers across our target markets. In conjunction with our other initiatives, we have also recently refreshed our company brand to reinforce our global position as a trusted, consumer-friendly company.

We believe that our ongoing focus on evolving with the market and with our customers’ needs ensures continued improvement in our overall services to businesses and consumers. Leveraging our trusted brand, global scale and strong market position in the verticals we serve will allow us to capitalize on business opportunities worldwide and contribute to our long-term growth.

 

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Our Market Opportunity

We believe there is a long-term trend of businesses and consumers using data and analytics to make more informed decisions and manage risk more effectively, resulting in a large and rapidly growing market. According to a September 2014 report from IDC, spending on business analytics services worldwide is projected to reach approximately $52 billion in 2014 and is projected to grow at a CAGR of approximately 15% from 2014 through 2018.

 

LOGO

 

(1) Numbers have been rounded

Source: IDC Worldwide Business Analytics Services 2014-2018 Forecast, September 2014

We believe there are several key trends in the global macroeconomic environment affecting the geographies and verticals we serve that will create increasing demand for our solutions:

 

    Rapid Growth in Data Creation and Application:    Larger and more diversified datasets are now assembled faster while the breadth of analytical applications and solutions has expanded. Companies are increasingly relying on business analytics and big data technologies to help process this data in a cost-efficient manner. In addition, non-traditional sources of structured and unstructured data have become important in deriving alternative metrics. The proliferation of smartphones and other mobile devices also generates enormous amounts of data tied to consumers, activities and locations. We believe that the demand for targeted data and sophisticated analytical solutions will continue to grow meaningfully as businesses seek real-time access to more granular views of consumer populations and more holistic views on individual consumers.

 

    Advances in Technology and Analytics Unlocking the Value of Data:    Ongoing advances in data collection, storage and analytics technology have contributed to the greater use and value of data and analytics in decision making. As businesses have gained the ability to rapidly aggregate and analyze data, they increasingly expect access to real-time data and analytics from their information providers as well as solutions that fully integrate into their workflows. We believe this has made sophisticated technology critical for gaining and retaining business in the risk and information services industry.

 

    Greater Adoption of Big Data Solutions across Verticals and Adjacent Markets:    With the proliferation of data, we believe companies across different verticals and adjacent markets recognize the value of risk information and analytical tools, particularly when tailored to their specific needs.

 

   

Financial Services Industry:    The combination of increased regulatory capital, additional compliance costs and the overhang of legacy assets is pushing large segments of

 

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small-to-medium-sized business and consumer lending out of the banking sector, and resulting in the creation of new specialty finance companies, such as peer-to-peer lending platforms and online balance sheet lenders, which are actively filling the void. These technology-enabled lending platforms provide access to credit in a fast and efficient manner by utilizing sophisticated risk assessment tools that leverage data, such as behavioral data, transactional data and employment and credit information. At the same time, traditional financial services companies are also increasing the use of applications and data in order to address regulatory requirements, lower operating costs and better serve their customers.

 

    Insurance Industry:    As consumers increasingly obtain quotes from multiple insurers in an effort to lower their costs, insurers are trying to improve the accuracy of their risk assessments and initial quotes. For example, insurance carriers are using driver violation data to uncover offenses that will impact pricing earlier in the quoting process so consumers have a more accurate view of the premiums they will be charged.

 

    Healthcare Industry:    Greater patient financial responsibility, focus on cost management and regulatory supervision are driving healthcare providers to use data and related analytics tools to better manage their revenue cycle. For example, to reduce collection risks, healthcare providers seek information about their patients’ insurance coverage and ability to pay at the time of registration. In addition, insurance discovery tools are being utilized to optimize accounts receivable management, maximize collections and minimize uncompensated care

 

    Increasing Lending Activity in Emerging International Markets:    As economies in emerging markets continue to develop and mature, we believe there will continue to be favorable socio-economic trends, such as an increase in the size of the middle class and a significant increase in the use of financial services by under-served and under-banked consumers. In addition, credit penetration is relatively low in emerging markets when compared to developed markets. For example, using our database of information compiled from financial institutions as a benchmark of credit activity, we estimate that less than 15% of the adult population in India is currently credit active. Furthermore, the widespread adoption and use of mobile phones in emerging markets have enabled greater levels of financial inclusion and access to banking and credit. We expect the populations in emerging markets to continue to become more credit active, resulting in increased demand for our services.

 

    Increased Management and Monitoring of Personal Financial Information and Identity Protection by Consumers:    Demand for consumer solutions is rising with higher consumer awareness of the importance and usage of their credit information, increased risk of identity theft due to data breaches and more readily available free credit information. The annual growth in the number of consumers subscribing to a credit monitoring or identity protection service has been almost 20% over the last several years. In addition, the proliferation of mobile devices has made data much more accessible, enabling consumers to manage their finances and monitor their information in real-time. We believe these trends will continue to fuel growth for our consumer business.

 

    Heightened Risk Environment and Compliance Requirements for Businesses:    The increasing number and complexity of regulations, including new capital requirements and the Dodd-Frank Wall Street Reform and Consumer Protection Act, make operations for businesses more challenging. The granularity of information required and the frequency and timeliness of data to fulfill compliance requirements have also increased significantly, placing an additional burden on companies’ reporting systems. Further, there is a heightened focus on reducing fraud and losses and protecting consumer privacy, particularly given the increasing threat of cybercriminals.

 

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Our Competitive Strengths

Comprehensive and Unique Datasets

Our long operating history and leadership in the industry have allowed us to build comprehensive and unique data assets that would be difficult for a new market entrant to replicate. We have over 30 petabytes of data, growing at an average rate of over 25% each year since 2010, representing over one billion consumers globally. We obtain financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from an average of 90,000 data sources, including financial institutions, private databases and public records repositories. We refine, standardize and enhance this data using sophisticated algorithms to create proprietary databases. We keep our data current by processing approximately 3.6 billion updates each month, and we continue to identify opportunities to acquire additional data. We believe that our data is unique and differentiates us from our competitors. We own several proprietary datasets such as consumer credit information, driver violation history, healthcare eligibility information, business data and rental payment history. Internationally, our data assets also encompass alternative data, such as the voter registry in India with over 750 million records and the vehicle information database in South Africa with over 18 million vehicle records. We have also acquired public record datasets, which are time consuming and difficult for others to obtain and associate with the correct person. We believe we are the only provider of scale in the United States to possess both nationwide consumer credit data and comprehensive, diverse public records data, which allows us to better predict behaviors, assess risk and address a broader set of business issues for our customers.

Next-generation Technology

Our transformation to next-generation technology allows us to continually improve our overall services to businesses and consumers and ensures that we are well positioned to differentiate our datasets and capabilities. We believe that our strategic initiative to build next-generation technology capabilities has resulted in increased throughput, improved data matching, greater efficiency, advanced platform flexibility and lower operating costs.

 

    Powerful Big Data Capabilities:    Our technology gives us the ability to process, organize and analyze high volumes of data across multiple operating systems, databases and file types as well as to deal with both structured and unstructured data that changes frequently. We process billions of transactions and trillions of data transformations on a daily basis.

 

    Enhanced Linking and Matching:    Because our data matching technology is able to interrelate data across disparate sources, industries and time periods, we believe that we are able to create differentiated datasets and provide our customers with comprehensive insights that allow them to better evaluate risk. For example, our TLOxp solution leverages these data matching capabilities across various datasets to identify and investigate relationships among people, assets, locations and businesses, allowing us to offer enhanced due diligence, threat assessment, identity authentication and fraud prevention and detection solutions.

 

    Greater Efficiency:    From ingestion of data to distribution of analytics and insights, our next-generation technology enables a faster time to market. For example, our platform now allows for data profiling, cleansing and ingestion of data ten times faster and can be done in a self-service approach by non-IT power users, allowing us to significantly reduce overall production times for new products.

 

    Advanced Platform Flexibility:    Our technology offers a high degree of flexibility, speed and customization of our solutions, via capabilities like graphical development and business rules environments, and allows easy integration with our customers’ workflows. We manage and control our technology instead of outsourcing it, which provides us with the flexibility to prioritize changes and to quickly implement any updates to our applications and solutions.

 

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    Lower Operating Costs:    Our technology investments have lowered our overall cost to maintain and develop our systems, allowing us to redeploy significantly more resources to support revenue generating initiatives, such as vertical expansion and new product development.

Sophisticated and Flexible Analytics and Decisioning Capabilities

We have developed sophisticated and flexible analytics and decisioning capabilities by investing in technology, tools and people. Our technology allows us to quickly build sophisticated analytics and decisioning functionality that caters to our customers’ evolving needs. Our analysts leverage our next-generation technology and data matching capabilities to gain real-time access to our entire dataset across different data sources and run analyses across this data while remaining compliant with permitted data use. Our analysts are typically able to create data samples for model development, model validations and custom analyses in less than one day using self-serve data access. Our analysts are equipped with a diverse modeling and analytical toolkit, such as visualization and machine learning, which allows them to quickly build and deploy these capabilities. For example, our team was able to build a new loan consolidation model in our CreditVision solution in less than one day using our advanced tools, instead of a typical development time of four to five weeks with legacy tools and technology. We have an experienced analytics team with substantial industry experience, complemented by a deep knowledge of consumer credit data. Our team is highly qualified with advanced degrees or doctorates in statistics, math, finance or engineering, and is instrumental in understanding customer requirements, sourcing raw data and turning that data into solutions that provide insights and decisions to solve our customers’ problems.

Innovative and Differentiated Solutions

We consistently focus on innovation to develop new and enhanced solutions that meet the evolving needs of our customers. We believe our specialized data, analytics and decisioning services and collaborative approach with our customers differentiate us from our competitors. Our solutions are often scalable across different customers, geographies and verticals. Recent examples of our innovative and differentiated solutions include:

 

    AdSurety:    AdSurety is a digital marketing solution that allows our customers to identify an audience across a network of 135 million U.S. consumers, display personalized messages to that audience and measure the effect. The network leverages our offline-to-online matching technology, which increases reach with greater targeting certainty.

 

    CreditView:    CreditView is a first-to-market interactive dashboard that provides consumers with credit education and information in a comprehensive, user-friendly format. Consumers are able to easily see how their credit profiles have changed over time as well as simulate the impact of financial decisions on their credit score.

 

    CreditVision:    We continue to enhance our credit data by including new data fields, enriching values in existing data fields and expanding account history. Our enhanced credit data has been combined with hundreds of algorithms to produce CreditVision, a market-leading solution that provides greater granularity and evaluates consumer behavior patterns over time. This results in a more predictive view of the consumer, increases the total population of consumers who can effectively be scored and helps consumers gain improved pricing.

 

    DecisionEdge:    DecisionEdge is a software-as-a-service decisioning offering which allows businesses to identify and authenticate customers, interpret data and predictive model results, and apply customer-specific criteria to facilitate real-time, automated decisions at the point of consumer interaction.

 

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    Insurance Coverage Discovery:    For our healthcare customers, we offer the Insurance Coverage Discovery solution, which enables the discovery of previously unidentified health insurance coverage to help our customers recover uncompensated care costs. Our proprietary technology identifies patient accounts covered by Medicaid, Supplemental Security Income, Medicare and TRICARE as well as commercial insurance benefits at the time of service and monitors an account for up to three years for retroactive eligibility that providers may have missed.

 

    SmartMove:    SmartMove allows independent landlords to screen applicants on a real-time basis by pushing the screening information of the individual renter to the landlord, based on the consent of the renter. The solution is delivered through our mobile channel and through our partners and provides independent landlords with convenient access to the same quality information provided to large property management firms.

 

    TLOxp:    TLOxp leverages our data matching capabilities across thousands of data sources to identify and investigate relationships among specific people, assets, locations and businesses. This allows us to offer enhanced due diligence, threat assessment, identity authentication and fraud prevention and detection solutions and to expand our solutions into new verticals such as government and law enforcement.

Deep and Specialized Industry Expertise

We have deep expertise in a number of attractive industry verticals including financial services, insurance and healthcare. Our expertise has allowed us to develop sophisticated vertical-specific solutions within these targeted industries that play an integral role in our customers’ decision-making processes and are often embedded into their workflows. Our team includes industry experts with significant experience in the verticals that we target and relationships with leading companies in those verticals. We also possess regulatory compliance expertise across the industries that we serve. Together, this provides us with a comprehensive understanding of business trends and insights for customers in these verticals, allowing us to build solutions that cater to these customers’ specific requirements. We have been able to apply our industry knowledge, data assets, technology and analytics capabilities to develop new solutions and revenue opportunities within key verticals. For example, in financial services, our differentiated position allowed us to anticipate the increased demand for alternative consumer lending providers such as peer-to-peer lending platforms, and we created solutions that catered to these emerging providers. In insurance, we partnered with a vehicle history data provider to launch a vehicle history score that helps insurance carriers further segment risk based on the attributes of a specific automobile. In healthcare, we developed a solution that allows healthcare providers to search for additional health insurance coverage and recover additional uncompensated care costs, lowering their overall cost of operation.

Leading Presence in Attractive International Markets

We have been operating internationally for over 30 years and have strong global brand recognition. We have strategically targeted attractive markets in both developed and emerging economies and have a diversified global presence in over 30 countries and a leading presence in several attractive international markets across North America, Africa, Latin America and Asia. We have local, senior management in many of our international markets, and we believe this provides us with deeper insights into these markets and stronger relationships with our customers. We have leveraged our brand, operating history, global footprint and technology infrastructure to establish new credit bureaus in several international markets, such as Canada in 1989, India in 2001 and the Philippines in 2011. Once established, our model is to expand the services we offer within these markets and then move into adjacent emerging markets. For example, we have used our operations in Hong Kong to expand into other ASEAN countries, and we have used our operations in South Africa to expand into

 

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neighboring African countries. In addition, we have been able to leverage our technology and experience from our U.S. operations to develop and grow our international operations. For example, we have expanded our CreditVision product into Canada and Hong Kong, expanded our interactive business in Hong Kong and South Africa and implemented DecisionEdge across more than 600 active solutions in over 10 countries.

Proven and Experienced Management Team

Our senior management team has a track record of strong performance and significant expertise in the markets we serve, with an average of over twenty years of industry experience. We continue to attract and retain experienced management talent for our businesses. Our team has deep knowledge of the data and analytics sector and expertise across the various industries that we serve. Our team has overseen our expansion into new industries and geographies while managing ongoing strategic initiatives, including our significant technology investments. As a result of the sustained focus of our management team, we have been successful in consistently driving growth, both organically and through acquiring and integrating businesses.

Our Growth Strategy

Enhance Underlying Data, Technology and Analytics Capabilities to Develop Innovative Solutions

As the demand for big data and analytics solutions grows across industries and geographies, we will continue to expand the scope of our underlying data, improve our tools and technology and enhance our analytics and decisioning capabilities to provide innovative solutions that address this demand. As the needs of businesses and consumers evolve, we plan to continue to help them meet their challenges, which our recent investments in data, technology and analytics enable us to do more quickly and efficiently. For example, we enhanced our solutions with incremental data such as rental trade lines, additional contact data and auto asset data in order to address a broader set of customer requirements. Our recent technology investments have also reduced the time to market for new solutions, in certain instances from several weeks to a few days, which allow us to react quickly to customer requirements. We also intend to continue to take advantage of strategic partnerships to develop innovative services that differentiate us from our competitors.

Further Penetrate Existing Industry Verticals with Current and New Solutions

We are a leading provider of risk and information solutions in several industry verticals today, including financial services, insurance and healthcare. We believe there is significant opportunity for further growth within these industries by expanding the number of customers to whom we sell our current solutions as well as by creating innovative new solutions that we can use to grow our presence in these industries. We focus on developing new solutions that address evolving customer needs within our industry verticals. For example, in the financial services vertical, we developed CreditVision, which provides customers with a time-based risk trend and increases the total eligible population of consumers. Similarly, in the insurance vertical, we introduced the DriverRisk solution that integrates with the Drivers History violation database to cost effectively identify drivers with ratable violations, resulting in unique insights into driver risk and reduced costs and higher returns for insurance carriers. In order to more effectively address these opportunities, we have redeployed and reallocated our sales resources to focus either on new customer opportunities or on selling additional services and solutions to existing customers. With our leading market positions, existing strong relationships in financial services, insurance and healthcare verticals and with our consumer partners, we believe we have the opportunity to further penetrate our existing customer base and capture a greater proportion of their spending across the consumer lifecycle.

 

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Establish Positions in New, Adjacent Industry Verticals

In addition to increasing penetration in industries where we have a substantial presence, we also intend to create solutions that address customer needs in attractive new industries. Our strategy is to develop new solutions for a specific application, industry vertical or geography and then deploy them to other markets where they may be applicable. We believe that our capabilities allow us to quickly create and deliver solutions to new industries and geographies where information-based analytics and decisioning capabilities are currently underutilized. For example, our strong position in financial services and insurance verticals has allowed us to establish a presence in the healthcare vertical to capitalize on the increasing demand for data and analytics solutions. We have created innovative solutions that automate the insurance and payment processes at the beginning of the revenue cycle, help payers analyze claims-related data, facilitate performance reporting and help patients make informed decisions. Similarly, we are targeting other verticals such as government, rental screening and investigative services, where we see an opportunity to leverage our existing data, analytics and decisioning capabilities.

Expand our Presence in Attractive International Markets

We believe international markets present a significant opportunity for growth, as these economies continue to develop and their populations become more credit active. We have significant scale in some of the world’s fastest growing markets, which positions us well to take advantage of the favorable dynamics in these regions. We leverage solutions developed in the United States and deploy them to international markets, after localizing them to individual market requirements. For example, after launching CreditVision in the United States, we expanded our offerings with a similar solution in Canada and Hong Kong. In markets where we have established a presence in a particular vertical, we will expand further into adjacent verticals, such as insurance and consumer solutions. We intend to expand into new geographic markets by forming alliances with financial services institutions, industry associations and other local partners, and by pursuing strategic acquisitions. Across all our international expansion initiatives, we will continue to leverage our next-generation technology to drive speed to market, scale and differentiation.

Continue to Broaden Reach in Consumer Market through Direct and Indirect Channels

Growth in our consumer business has outpaced the market. We expect this trend to continue, due to a rising consumer appetite for information and increasing demand for our solutions from existing and new partners. We currently serve over 35 million consumers in the United States directly and through indirect channels. We recognized that more consumers could be reached through multiple channels and business models. Therefore, our strategy is to enable partners by providing them with data and analytics to support their services. Our growth plans focus both on increasing our own member base as well as expanding our reach through partnerships. For our direct consumers, we continually develop new products, features and services. We will also continue to improve the consumer experience with more user-friendly interfaces, better customer service, and education. For partners, we will leverage our flexible model, technology and innovative solutions to grow with new and existing customers and enter new verticals. We believe that partnerships not only enable us to build our own business quickly and effectively, but they also expand the market and provide us access to new consumer segments.

Pursue Strategic Acquisitions

We will continue to pursue acquisitions to accelerate growth within our existing businesses and diversify into new businesses. We are focused primarily on opportunities that are strategic to us, including opportunities that expand our geographic footprint, increase the breadth and depth of our datasets, enhance our services, provide us with industry expertise in our key verticals or deepen our

 

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presence in our international markets. For example, we expanded into new countries such as Brazil and Chile and enhanced our domestic healthcare offerings through various acquisitions. Other recent examples include our December 2013 acquisition of TLO’s assets, providing data solutions leveraging proprietary public records data for identity authentication, fraud prevention and debt recovery, our November 2014 acquisition of DHI, a provider of traffic violations and criminal court data, and our October 2014 acquisition of L2C, an innovator in predictive analytics using alternative data that is able to provide risk perspectives on non-traditional and non-credit active consumers. From time to time, we may also seek to increase our investments in foreign entities in which we hold a minority interest, as we did with CIBIL in India in 2014. We have a strong track record of integrating acquisitions and driving long-term value creation, and we will continue to maintain a disciplined approach to pursuing acquisitions.

Segment Overview

We manage our business and report our financial results in three operating segments: USIS, International and Consumer Interactive. We also report expenses for Corporate, which provides shared services and conducts enterprise functions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 17 to our consolidated financial statements included elsewhere in this prospectus for further information about our segments.

USIS

USIS provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. These businesses use our services to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud.

USIS leverages our comprehensive data assets, data matching expertise and predictive analytics to develop and deliver solutions across multiple vertical markets.

 

    Comprehensive Data Assets:    Our credit database contains the name and address of substantially all of the U.S. credit-active population, a listing of their existing credit relationships and their timeliness in repaying debt obligations. The information in our database is voluntarily provided by thousands of credit-granting institutions and other data furnishers. We enhance our data assets with alternative credit sources such as rental payments and utility payments. We also actively source information from courts, government agencies and other public records including suits, liens, judgments, bankruptcies, professional licenses, real property, vehicle ownership, other assets, driver violations, criminal records and contact information. Our databases are updated, reviewed and monitored on a regular basis.

 

    Data Matching Expertise:    We have data matching capabilities and expertise that allow us to build and maintain comprehensive consumer credit profiles from disparate data sources, enhancing the value of our databases and resulting in better prediction of risk. We have also developed data fusion capabilities that allow us to interrelate relevant data and identify relationships among individuals, locations, assets and businesses across our datasets.

 

    Predictive Analytics:    Our predictive analytics capabilities allow us to analyze our proprietary datasets and provide insights to our customers to allow them to drive better business decisions. Our tools allow customers to investigate past behavior, reasonably predict the likelihood of future events and strategize actions based on those predictions. We have numerous tools such as predictive modeling and scoring, customer segmentation, benchmarking, forecasting, fraud modeling and campaign optimization, all of which caters to specific customer requirements. Our predictive analytics capabilities are developed by an analytics team with deep industry experience and a broad array of specialized qualifications.

 

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Our core capabilities leverage our next-generation technology, which has a common code base and allows us to build solutions once and deploy them multiple times across different verticals. We use varying combinations of these core capabilities and provide services to our customers through three delivery platforms, which are Online Data Services, Marketing Services and Decision Services.

Online Data Services

Online Data Services encompass services delivered in real-time, using both credit and public record datasets. These services include credit reports and predictive scores delivered to qualified businesses to help them assess the risk of prospective consumers seeking to access credit or insurance. We also provide online reports that link public record datasets for qualified businesses that seek to locate consumers or specific assets, or investigate relationships among consumers, businesses and locations. Collectively, the reports, characteristics and scores, with variations tailored for specific industries, form the basis of Online Data Services. We also provide online services to help businesses manage fraud and authenticate a consumer’s identity when they initiate a new business relationship. Our fraud database, which is updated daily, contains data elements such as addresses and Social Security numbers from multiple sources that alert businesses to identities associated with known or suspected fraudulent activity. Additionally, we provide data to businesses to help them satisfy “know your customer” compliance requirements and to confirm an individual’s identity. Revenue from Online Data Services accounted for approximately 67% of our USIS revenue in 2014.

Marketing Services

Marketing Services help businesses proactively acquire new customers, cross-sell to existing customers and monitor and manage risk in their existing portfolios. We help our customers develop marketing lists of prospects via direct mail, web and mobile. Our databases are used by our customers to contact individuals to extend firm offers of credit or insurance. We provide portfolio review services, which are periodic reviews of our customers’ existing accounts, to help our customers develop cross-selling offers to their existing customers and monitor and manage risk in their existing consumer portfolios. We also provide trigger services which are daily notifications of changes to a consumer profile. Revenue from Marketing Services accounted for approximately 16% of our USIS revenue in 2014.

Decision Services

Decision Services, our software-as-a-service offerings, include a number of platforms that help businesses interpret data and predictive model results and apply their customer-specific criteria to facilitate real-time automated decisions at the time of customer interaction. Our customers use Decision Services to evaluate business risks and opportunities, including those associated with new consumer credit and checking accounts, insurance applications, account collection, patient registrations and apartment rental requests. Revenue from Decision Services accounted for approximately 17% of our USIS revenue in 2014.

These core capabilities and delivery platforms in our USIS segment allow us to serve a broad set of customers and business issues. We offer our services to customers in the financial services, insurance, healthcare and other industries. In financial services we serve nine of the top ten banks in all facets of the customer lifecycle from acquisition through account management to collections. For example, our customers use our CreditVision solutions, which is based on 30 months of time series data and delivered across all our platforms, to bring insight to the velocity and magnitude of change in consumer risk over time, allowing them to segment risk with greater precision. We also recently introduced AdSurety digital marketing capabilities that allow banks to deliver personalized messages on the Internet, increasing reach with measurable results. In insurance, fourteen of the top fifteen auto

 

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insurance carriers use TransUnion services to improve the speed and accuracy of quoting and underwriting policies, improving the consumer shopping experience and lowering costs for the carriers. We do this by providing pre-fill services that use our data assets to populate an application once basic identity information is supplied by the consumer, then use our driver violation data, insurance and asset risk scores, and fraud detection tools to provide a quote that is more consistent with the final premium than previous methods used. In healthcare, thousands of healthcare providers and over 1,000 hospitals use our revenue cycle management solutions to verify patients’ identity, check insurance eligibility and the patients’ capacity to pay, estimate patient payment amounts and if needed, qualify patients for federal, state and local entitlement programs.

International

The International segment provides services similar to our USIS segment to businesses in select regions outside the United States. Depending on the maturity of the credit economy in each country, services may include credit reports, analytics and decisioning services and other value-added risk management services. In addition, we have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services, insurance, automotive, collections and communications, and are delivered through both direct and indirect channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive segment to help consumers proactively manage their personal finances. The two market groups in the International segment are as follows:

Developed Markets

We offer online data services, marketing services and decision services in Canada and Hong Kong. Revenue from these developed markets accounted for approximately 36% of our International revenue in 2014.

Canada:    We have operated in Canada since 1989 and are one of only two nationwide consumer reporting agencies in the Canadian market. We operate across multiple verticals in Canada with leading positions in insurance, collections and automotive and a growing presence in financial services. Our Canadian customer base encompasses some of the largest companies in their verticals, including two of the three largest banks, the top seven credit card issuers, the top ten insurance companies and four of the top automotive manufacturers. We have recently grown our operations in Canada by acquiring new customers and we expect to continue to grow by introducing innovative new solutions, such as CreditVision and DecisionEdge, by increasing our presence with existing customers and by growing our market share with businesses and consumers.

Hong Kong:    We have had a majority ownership interest in the principal consumer credit reporting company in Hong Kong since 1998. We are a primary supplier of data and value-added solutions to the top ten banks in Hong Kong. Additionally, we use our established operations in Hong Kong as a base to expand into other emerging markets in the Asia Pacific region. We expect to continue to grow and transform the Hong Kong business by offering analytics, identity management, decisioning and consumer solutions.

Emerging Markets

Together with our unconsolidated subsidiaries, we also provide online data services, marketing services and decision services in emerging markets, such as South Africa, Brazil, India and other countries in the Africa, Latin America and Asia Pacific regions. Once credit databases are established in these markets, we can introduce services that have demonstrated success in developed markets. We believe that our flexible approach to forming local partnerships has allowed us to establish a

 

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foothold in certain emerging markets where our major competitors have not, such as in India and the Philippines. We also believe that our presence in emerging markets helps foster the growth and development of economies in these markets, thereby resulting in an accelerated demand for credit information services and analytics. Revenue from emerging markets accounted for approximately 64% of our International revenue in 2014.

Africa:    We launched our operations in Africa by entering South Africa in 1993. We are highly diversified and serve a variety of industries through traditional consumer credit reporting services, insurance solutions, auto information solutions, commercial credit information services and consumer solutions in South Africa. We are a primary risk and information solutions provider in South Africa for the top four leading banks, the top ten retailers, the top seven dealer groups and the top five insurers. We manage the database of all personal claims, policy and vehicle information on behalf of the South African Insurance Association and offer innovative solutions throughout the policy lifecycle. We believe that our vehicle information database, which has over 18 million vehicle records and includes unique vehicle identifier codes, is the most extensive vehicle database in South Africa, and differentiates us from other providers. Our leading presence in South Africa has allowed us to expand into surrounding countries including Kenya, Namibia, Swaziland, Botswana, Mozambique, Zambia, Rwanda, Malawi and Uganda. We intend to roll out our next-generation technology to our African operations, which will make us the only provider with a big data platform in Africa and will provide us with further competitive advantages.

Latin America:    We have been active in Latin America since 1985 when we entered the Puerto Rican market, and we have operations in several Central and South American countries, including a strong presence in the Dominican Republic and a 26% ownership interest in Trans Union de México, S.A., the primary credit reporting agency in Mexico. In Guatemala, we maintain a centralized database that services Guatemala, Honduras, Nicaragua and Costa Rica. We expanded our footprint in Latin America through our acquisition of majority interests in a Chilean credit reporting agency in 2010, a Brazilian decisioning services provider in 2011 and a Brazilian data enrichment and registry information services provider in 2013. In Brazil, which is our largest operation in Latin America, we are the largest provider in decisioning with over 100 customers and over 25 million transactions processed monthly across key industry verticals. Our customer base in Brazil includes two of the top four private banks, eighteen of the top twenty automotive insurance carriers, five of the top ten telecommunication companies and the largest Latin America online sales site. One of our differentiated capabilities in Brazil is our “data driver technology”, which allows us to access hundreds of public data sources, such as the Receita Federal (tax record information). We also own ZipCode, which is the most extensive alternative database in Brazil with information on over 190 million consumers and 29 million companies, and is a leading industry data source for collections and marketing.

India:    In 2003, we partnered with prominent Indian financial institutions to create CIBIL, the first consumer and business credit reporting agency in India. In 2014, we acquired a majority interest in CIBIL and now include their results in our consolidated financial statements. We are CIBIL’s sole technology, analytics and decision services provider for its consumer risk information services business. In the absence of a comprehensive national ID, we created an innovative matching algorithm that allowed us to create the most extensive consumer credit database in India. Our credit database includes information on over 200 million consumers and over 10 million business entities. In addition, we own or have access to several non-credit data sources that we use to enhance our solutions. These include the national voters registry with over 750 million records and the national ID database with over 500 million records, as well as other sources such as the confirmed and suspected fraud registry, property registry and tax ID database. We offer a suite of risk and information solutions across the credit lifecycle for banks, telecommunication companies and insurance companies. Our suite of offerings includes analytics and decisioning solutions that enable our customers to make faster decisions. We are the primary risk and information solutions provider for financial institutions in India

 

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and our customers include all of the top fifteen private banks. We developed and launched the first generic credit score for India in 2007, which is the most widely used and adopted credit score across the financial services industry in India. In addition to our business solutions, we also offer online credit scores and reports to consumers and are in the process of building additional capabilities in the consumer interactive area.

Asia Pacific:    Our operations in Asia Pacific include markets such Thailand, Singapore, Malaysia, China and the Philippines. Asia Pacific is a growing market with increasing demand for credit driven by a rising middle class that offers significant growth potential in analytics and decisioning. Using Hong Kong as a base, we have leveraged our global intellectual property to expand to other countries in the Asia Pacific region. For example, we launched the first consumer credit reporting agency in the Philippines in 2011 in partnership with the top-five credit card issuers in that market. We leverage our global intellectual property to scale very quickly and our solutions are now used for lending decisions by over 25% of the major banks in the Philippines. We have built credit risk scores for the National Credit Bureau of Thailand, in which we have a 12% ownership interest, Credit Bureau of Singapore and Credit Bureau of Malaysia. We also have a presence in China, where we currently provide fraud and authentication solutions to financial institutions.

Consumer Interactive

Consumer Interactive offers solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include credit reports and scores, credit monitoring, fraud protection and resolution and financial management. Our products are provided through user friendly online and mobile interfaces and are supported by educational content and customer support. Our Consumer Interactive segment serves over 35 million consumers through both direct and indirect channels.

Direct:    We offer services directly to consumers, primarily on a subscription basis through websites and mobile applications. Product features include credit reports, credit scores and analysis, alerts to changes in credit information, debt analysis, identity protection services, insurance scores and the ability to restrict third-party access to a consumer’s TransUnion credit report. We complement these features with educational content that explains how credit and financial data is used in various industries to evaluate consumers and how a consumer’s financial choices impact this evaluation. Our integrated, data-driven marketing strategy spans multiple channels including television, paid search, online display and email, which allows us to acquire high quality consumers cost effectively.

Indirect:    We also offer our services to business partners who combine them with their own offerings and sell them to consumers and businesses in such areas as financial services, retail credit monitoring, identity protection and insurance. We have a broad suite of products and services that include many of the product features, education content and customer support offered in our direct channel. We have taken a proactive and flexible partnership approach which has resulted in many long-standing relationships with other market leaders and innovators. We currently provide services to the largest providers of free credit information, the leading identity protection provider and the leading credit monitoring retailer. Through these partnerships, we have significantly expanded the overall market as well as the reach of our business.

Corporate

Corporate provides support services to each operating segment, holds investments and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the operating segments remain in Corporate. These costs are primarily enterprise-level costs and are administrative in nature.

 

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Markets and Customers

We have a highly diversified customer base, with our largest customer accounting for approximately 3% of revenue in 2014 and 3% of revenue in 2013. Our top ten customers accounted for approximately 20% of revenue in 2014 and 20% of revenue in 2013. Our customers include companies across multiple industries, including financial services, insurance and healthcare. A substantial portion of our revenue is derived from companies in the financial services industry.

We have a presence in over 30 countries including the United States, South Africa, Brazil, Canada, Hong Kong, India, and other countries in Africa, Asia and Latin America. The following table summarizes our revenue based on the region where the revenue was earned:

 

     Approximate percent
of consolidated revenue
 
     2014     2013     2012  

United States

     80     80     79

International

     20     20     21

The following table summarizes our assets based on the segment in which such assets are held as of the dates shown below:

 

     December 31,
2014
     December 31,
2013
     December 31,
2012
 
     (in millions)  

U.S. Information Services

   $ 2,932.8       $ 2,894.7       $ 2,685.3   

International

     1,268.1         1,166.8         1,199.0   

Consumer Interactive

     268.8         268.3         271.9   

Corporate

     196.1         162.5         164.5   
  

 

 

    

 

 

    

 

 

 

Total

$ 4,665.8    $ 4,492.3    $ 4,320.7   
  

 

 

    

 

 

    

 

 

 

We market our services primarily through our own sales force. We have dedicated sales teams for our largest customers focused by industry group and geography. These dedicated sales teams provide strategic account management and direct support to customers. We use shared sales teams to sell our services to mid-size customers. These sales teams are based in our headquarters office and in field offices strategically located throughout the United States and abroad. Smaller customers’ sales needs are serviced primarily through call centers. We also market our services through indirect channels such as resellers, who sell directly to businesses and consumers. Our interactive direct-to-consumer services are sold primarily through our website.

Seasonality

Seasonality in the USIS segment is correlated to volumes of online credit data purchased by our financial services and mortgage customers, and our sales have generally been higher during the second and third quarters. Seasonality in our International segment is driven by local economic conditions and relevant macroeconomic market trends. In our Consumer Interactive segment, demand for our products is usually higher in the first half of the year, impacted by seasonality and our advertising spend.

 

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Competition

The market for our services is highly competitive. We primarily compete on the basis of differentiated solutions, datasets, analytics capabilities, ease of integration with our customers’ technology, stability of services, customer relationships, innovation and price. We believe that we compete favorably in each of these categories. Our competitors vary based on the business segment, industry vertical and geographical market that our solutions address.

In our USIS segment, our competition generally includes Equifax, Experian and LexisNexis, in addition to certain competitors whom we only compete with in specific verticals. For example, we compete with FICO in the financial services vertical, with Solera and Verisk in the insurance vertical, with Emdeon, IMS Health, Inovalon and Trizetto in the healthcare vertical and with LifeLock in the fraud solutions market.

In our International segment, we generally compete with Equifax and Experian directly or indirectly through their subsidiaries or investments. We also compete with other competitors that may focus on a particular vertical, country or region.

In our Consumer Interactive segment, we generally compete with Equifax, Experian, FICO and LifeLock as well as emerging businesses, some of whom offer free credit information.

In addition to these competitors, we also compete with a number of other companies that may offer niche solutions catering to more specific customer requirements.

We believe the services we provide to our customers reflect our understanding of our customers’ businesses, the depth and breadth of our data and the quality of our analytics and decisioning capabilities. By integrating our services into our customers’ workflows, we ensure efficiency, continuous improvement and long-lasting relationships.

Information Technology

Technology

The continuous operation of our information technology systems is fundamental to our business. Our information technology systems collect, refine, access, process, deliver and store the data that is used to provide our solutions. Customers connect to our systems using a number of different technologies, including secured internet connections, virtual private networks and dedicated network connections. Control and management of the technology that operates our business is critical to our success and to this end, we directly control and manage all of our technology and infrastructure. Our technology relies on several third-party best-of-breed solutions as well as proprietary software and tools which we integrate into our platforms. We control our technology and infrastructure, which allows us to prioritize any changes and control the roll-out of any upgrades or changes. We contract with various third-party providers to help us maintain and support our systems.

We have established technology Centers-of-Excellence that utilize similar tools and technology in order to provide scale and efficiency in modifying existing applications and developing new applications for our businesses. We deploy new development methodologies to enable rapid delivery of solutions and increase our speed-to-market. Our technology team includes both our own employees as well as additional resources from third-party providers.

We believe that our technology is at the core of our innovative solutions, and we have continued to invest in our technology to ensure our market leadership. We have recently made significant

 

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investments to transition our technology infrastructure to the latest big data and analytics technologies. We believe that our next-generation platform enables us to be quicker, more efficient and more cost-effective across each step of our process chain, including receiving, consolidating and updating data, implementing analytics and decisioning capabilities, creating innovative solutions, delivering those solutions to our customers and incorporating customer feedback. Our platform has significant scale and capacity and enables us to deliver high-quality solutions to our customers. Our next-generation technology infrastructure gives us the ability to organize and handle high volumes of disparate data, improves our delivery speeds, increases availability and enhances our product development capabilities, while at the same time lowering our overall cost structure.

Data Centers and Business Continuity

In order to create redundancy and increase resiliency, we utilize multiple data centers in all of our major markets. We generally employ similar technologies and infrastructures in each data center to enable the optimal sharing of technical resources across geographies.

We maintain a framework for business continuity that includes written policies requiring each business and operating unit to identify critical functions. Our businesses and operating units have processes in place that are designed to maintain such functions in case there is a disruptive event. We also have a specific disaster recovery plan that will take effect if critical infrastructure or systems fail or become disabled.

As part of our program, each business unit’s continuity plan is periodically updated and stored in a centralized database. These plans are monitored and reviewed by our compliance team. From time to time, our compliance team tests one or more of these plans using desktop exercises or in connection with actual events, for example during recent severe weather events in Chicago, Illinois. We also periodically test the state of preparedness of our most critical disaster recovery procedures. For our primary U.S. data center we have system redundancy plans that allow for the transfer of capacity in the event there is a failure of computer hardware or a loss of our primary telecommunications line or power source. We maintain a recovery site in Northlake, Illinois, which is designed to recover the majority of our operational capacity in a scenario which makes our primary data center inoperable.

Security

The security and protection of non-public consumer information is one of our highest priorities. We have a written information security program based on the ISO/IEC 27001:2013 standard with dedicated personnel charged with overseeing that program. Our information security program incorporates continuous improvement methodology and evaluates threats, industry events and asset values to help us appropriately adjust security controls. We employ a wide range of physical and technical safeguards that are designed to provide security around the collection, storage, use, access and delivery of information we have in our possession. These safeguards include firewalls, intrusion protection and monitoring, anti-virus and malware protection, vulnerability threat analysis, management and testing, advanced persistent threat monitoring, forensic tools, encryption technologies, data transmission standards, contractual provisions, customer credentialing, identity and access management, data loss, access and anomaly reports and training programs for associates. We, with other global financial services organizations, including U.S. nationwide consumer credit reporting companies, share cyber threat and attack information through our participation in the Financial Information Sharing and Analysis Council (“FS-ISAC”) and other forums that may be targeted at our industry to better understand and monitor our systems and our connectivity to our customers, as well as how specific solutions that were implemented to protect against such attacks are performing. We undergo SSAE 16 reviews annually, and several of our major customers routinely audit our security

 

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controls. We conduct an annual Payment Card Industry Data Security Standard (PCI-DSS) compliance program and remain PCI certified. Additionally, we also hire third parties to conduct independent information security assessments.

Intellectual Property and Licensing Agreements

Our intellectual property is a strategic advantage and protecting it is critical to our business. Because of the importance of our intellectual property, we treat our brand, software, technology, know-how, concepts and databases as proprietary. We attempt to protect our intellectual property rights under the trademark, copyright, patent, trade secret and other intellectual property laws of the United States and other countries, as well as through the use of licenses and contractual agreements, such as nondisclosure agreements. While we hold various patents, we do not rely primarily on patents to protect our core intellectual property. Through contractual arrangements, disclosure controls and continual associate training programs, our principal focus is to treat our key proprietary information and databases as trade secrets. Also, we have registered certain trademarks, trade names, service marks, logos, internet URLs and other marks of distinction in the United States and foreign countries, the most important of which is the trademark TransUnion name and logo. This trademark is used in connection with most of the services we sell and we believe it is a known mark in the industry.

We own proprietary software that we use to maintain our databases and to develop and deliver our services. We develop and maintain business-critical software that transforms data furnished by various sources into databases upon which our services are built. We also develop and maintain software to manage our consumer interactions, including providing disclosures and resolving disputes. In all business segments, we develop and maintain software applications that we use to deliver services to our customers, through a software-as-a-service model. In particular, we develop and maintain decisioning technology infrastructure that we host and integrate into our customers’ workflow systems to improve the efficiency of their operations.

We license certain data and other intellectual property to other companies on arms-length terms that are designed to protect our rights to our intellectual property. We generally use standard licensing agreements and do not provide our intellectual property to third parties without a nondisclosure and license agreement in place.

We also license certain intellectual property that is important for our business from third parties. For example, we license credit-scoring algorithms and the right to sell credit scores derived from those algorithms from third parties for a fee.

Employees

As of December 31, 2014, we employed approximately 4,200 employees throughout the world. Other than certain employees in Brazil, none of our employees is currently represented by a labor union or have terms of employment that are subject to a collective bargaining agreement. We consider our relationships with our employees to be good and have not experienced any work stoppages.

Properties

Our corporate headquarters and main data center are located in Chicago, Illinois, in an office building that we own. We also own a data center building in Hamilton, Ontario, Canada. As of December 31, 2014, we lease space in approximately 80 other locations, including office space and additional data centers. These locations are geographically dispersed to meet our sales and operating needs. We anticipate that suitable additional or alternative space will be available at commercially reasonably terms for future expansion.

 

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Legal and Regulatory Matters

Compliance with legal and regulatory requirements is a top priority. Numerous laws govern the collection, protection, dissemination and use of the non-public personal information we have in our possession. These laws are enforced by federal, state and local regulatory agencies, foreign regulatory authorities and, in some instances, through private civil litigation.

We proactively manage our compliance with laws and regulations through a dedicated legal and compliance team that is generally locally sourced and tasked to ensure that enterprise standards are followed. To that end, we have legal and compliance personnel situated at business operations in the United States, Brazil, Canada, Hong Kong and South Africa. All such personnel report directly to the functional department leaders, who are located in our corporate offices in Chicago, Illinois. Through the legal and compliance functions, we provide training to our associates, monitor all material laws and regulations, routinely review internal processes to determine whether business practice changes are warranted, assist in the development of new services, and promote regular meetings with principal regulators and legislators to establish transparency of our operations and create a means to understand and react should any issues arise. In addition, as a controlled financial company of a U.S. bank holding company, we have committed to implement certain compliance programs as directed by that bank holding company pursuant to the stockholders’ agreement entered into by the Company and our principal shareholders.

U.S. Data and Privacy Protection

Our U.S. operations are subject to numerous laws that regulate privacy, data security and the use of consumer credit or an individual’s healthcare information. Certain of these laws provide for civil and criminal penalties for the unauthorized release of, or access to, this protected information. The laws and regulations that affect our U.S. business include, but are not limited to, the following:

 

    FCRA:    FCRA applies to consumer credit reporting agencies, including us, as well as data furnishers and users of consumer reports. FCRA promotes the accuracy, fairness and privacy of information in the files of consumer reporting agencies that engage in the practice of assembling or evaluating information relating to consumers for certain specified purposes. FCRA limits what information may be reported by consumer reporting agencies, limits the distribution and use of consumer reports, establishes consumer rights to access and dispute their own credit files, requires consumer reporting agencies to make available to consumers a free annual credit report and imposes many other requirements on consumer reporting agencies, data furnishers and users of consumer report information. Violation of FCRA can result in civil and criminal penalties. The law contains an attorney fee shifting provision to provide an incentive to consumers to bring individual or class action lawsuits against a consumer reporting agency for violations of FCRA. Regulatory enforcement of FCRA is under the purview of the FTC, the CFPB and state attorneys general, acting alone or in concert with one another.

 

    State Fair Credit Reporting Acts:    Many states have enacted laws with requirements similar to FCRA. Some of these state laws impose additional, or more stringent, requirements than FCRA. FCRA preempts some of these state laws but the scope of preemption continues to be defined by the courts.

 

   

The Dodd-Frank Act:    A central purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) is to protect consumers from abusive financial services practices, and for other purposes.” An important new regulatory body created by Title X of the Dodd-Frank Act is the CFPB. The CFPB, through rulemaking, confirmed that the Company is subject to the examination and supervision of the CFPB, and such examinations began in 2012.

 

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In addition to transferring authority under certain existing laws to the CFPB and providing it with examination and supervisory authority, the Dodd-Frank Act also prohibits unfair or deceptive acts or practices (“UDAAP”) with respect to consumer finance and provides the CFPB with authority to enforce those provisions. The CFPB has stated that its UDAAP authority may allow it to find statutory violations even where a specific regulation does not prohibit the relevant conduct.

 

    GLBA:    The GLBA regulates the receipt, use and disclosure of non-public personal information of consumers that is held by financial institutions, including us. Several of our datasets are subject to GLBA provisions, including limitations on the use or disclosure of the underlying data and rules relating to the technological, physical and administrative safeguarding of non-public personal information. Violation of the GLBA can result in civil and criminal liability. Regulatory enforcement of the GLBA is under the purview of the FTC, the federal prudential banking regulators, the SEC and state attorneys general, acting alone or in concert with each other.

 

    DPPA:    The DPPA requires all states to safeguard certain personal information included in licensed drivers’ motor vehicle records from improper use or disclosure. Protected information includes the driver’s name, address, phone number, Social Security Number, driver identification number, photograph, height, weight, gender, age, certain medical or disability information and, in some states, fingerprints, but does not include information on vehicular accidents, driving violations and driver’s status. The DPPA limits the use of this information sourced from S