10-Q 1 transunion-20190331x10q.htm 10-Q Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 10-Q
 
 
 
  
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
- OR -
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number:
001-37470

 
 
TransUnion
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
61-1678417
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
555 West Adams, Chicago, IL
 
60661
(Address of principal executive offices)
 
(Zip code)
312-985-2000
(Registrants’ telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
 
x  YES
 
o  NO
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 
 
x  YES
 
o  NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
 
 
x  Large accelerated filer
 
¨ Accelerated filer
 
 
¨  Non-accelerated filer
 
¨ Smaller reporting company
 
 
 
 
¨ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
 
o  YES
 
x  NO
 
As of March 31, 2019, there were 187.3 million shares of TransUnion common stock outstanding.






TRANSUNION
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 2019
TABLE OF CONTENTS
 

2


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRANSUNION AND SUBSIDIARIES
Consolidated Balance Sheets
(in millions, except per share data)
 
March 31,
2019
 
December 31,
2018
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
200.9

 
$
187.4

Trade accounts receivable, net of allowance of $14.1 and $13.5
470.0

 
456.8

Other current assets
166.5

 
136.5

Current assets of discontinued operations
55.8

 
60.8

Total current assets
893.2

 
841.5

Property, plant and equipment, net of accumulated depreciation and amortization of $388.0 and $366.2
214.5

 
220.3

Goodwill
3,354.1

 
3,293.6

Other intangibles, net of accumulated amortization of $1,280.5 and $1,206.7
2,512.8

 
2,548.1

Other assets
201.2

 
136.3

Total assets
$
7,175.8

 
$
7,039.8

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Trade accounts payable
$
171.8

 
$
169.9

Short-term debt and current portion of long-term debt
79.0

 
71.7

Other current liabilities
274.2

 
284.1

Current liabilities of discontinued operations
20.9

 
22.8

Total current liabilities
545.9

 
548.5

Long-term debt
3,951.8

 
3,976.4

Deferred taxes
479.6

 
478.0

Other liabilities
121.6

 
54.7

Total liabilities
5,098.9

 
5,057.6

Stockholders’ equity:
 
 

Common stock, $0.01 par value; 1.0 billion shares authorized at March 31, 2019 and December 31, 2018, 192.2 million and 190.0 million shares issued at March 31, 2019 and December 31, 2018, respectively, and 187.3 million shares and 185.7 million shares outstanding as of March 31, 2019 and December 31, 2018, respectively
1.9

 
1.9

Additional paid-in capital
1,967.6

 
1,947.3

Treasury stock at cost; 4.8 million and 4.2 million shares at March 31, 2019 and December 31, 2018, respectively
(177.0
)
 
(139.9
)
Retained earnings
418.8

 
363.1

Accumulated other comprehensive loss
(229.4
)
 
(282.7
)
Total TransUnion stockholders’ equity
1,981.9

 
1,889.7

Noncontrolling interests
95.0

 
92.5

Total stockholders’ equity
2,076.9

 
1,982.2

Total liabilities and stockholders’ equity
$
7,175.8

 
$
7,039.8


See accompanying notes to unaudited consolidated financial statements.

3


TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
(in millions, except per share data)
 
 
Three Months Ended 
 March 31,
 

2019

2018
Revenue

$
619.3

 
$
537.4

Operating expenses

 
 
 
Cost of services (exclusive of depreciation and amortization below)

208.1

 
182.3

Selling, general and administrative

195.7

 
163.3

Depreciation and amortization

93.5

 
66.6

Total operating expenses

497.2

 
412.2

Operating income

122.1

 
125.2

Non-operating income and (expense)

 
 
 
Interest expense

(45.0
)
 
(22.6
)
Interest income

1.5

 
0.8

Earnings from equity method investments

3.8

 
2.3

Other income and (expense), net

(6.8
)
 
(2.7
)
Total non-operating income and (expense)

(46.5
)
 
(22.2
)
Income from continuing operations before income taxes

75.5

 
103.0

Provision for income taxes

(0.6
)
 
(27.6
)
Income from continuing operations
 
74.9

 
75.4

Discontinued operations, net of tax
 
(1.6
)
 

Net income

73.4

 
75.4

Less: net income attributable to the noncontrolling interests

(2.4
)
 
(2.3
)
Net income attributable to TransUnion

$
70.9

 
$
73.1

 
 
 
 
 
Income from continuing operations
 
$
74.9

 
$
75.4

Less: income from continuing operations attributable to noncontrolling interests
 
(2.4
)
 
(2.3
)
Income from continuing operations attributable to TransUnion
 
72.5

 
73.1

Discontinued operations, net of tax
 
(1.6
)
 

Net income attributable to TransUnion
 
$
70.9

 
$
73.1

 
 
 
 
 
Basic earnings per common share from:






Income from continuing operations attributable to TransUnion
 
$
0.39

 
$
0.40

Discontinued operations, net of tax
 
(0.01
)
 

Net Income attributable to TransUnion
 
$
0.38

 
$
0.40

Diluted earnings per common share from:
 
 
 
 
Income from continuing operations attributable to TransUnion
 
$
0.38

 
$
0.38

Discontinued operations, net of tax
 
(0.01
)
 

Net Income attributable to TransUnion
 
$
0.37

 
$
0.38

Weighted-average shares outstanding:






Basic

186.6

 
183.7

Diluted

191.0

 
190.1

As a result of displaying amounts in millions, rounding differences may exist in the table above.
See accompanying notes to unaudited consolidated financial statements.

4


TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Unaudited)
(in millions)
 
 
Three Months Ended 
 March 31,
 
2019
 
2018
Net income
$
73.4

 
$
75.4

Other comprehensive income (loss):
 
 
 
         Foreign currency translation:
 
 
 
               Foreign currency translation adjustment
66.3

 
15.0

               Expense for income taxes
(0.2
)
 
(0.6
)
         Foreign currency translation, net
66.1

 
14.4

         Hedge instruments:
 
 
 
               Net change on interest rate cap
(4.6
)
 
9.9

               Net change on interest rate swap
(13.8
)
 

               Cumulative effect of adopting ASU 2017-12
1.0

 

               Benefit (expense) for income taxes
4.6

 
(2.5
)
         Hedge instruments, net
(12.8
)
 
7.4

         Available-for-sale debt securities:
 
 
 
              Net unrealized loss

 

              Benefit for income taxes

 

         Available-for-sale debt securities, net

 

Total other comprehensive income (loss), net of tax
53.3

 
21.8

Comprehensive income
126.7

 
97.2

Less: comprehensive income attributable to noncontrolling interests
(2.5
)
 
(2.4
)
Comprehensive income attributable to TransUnion
$
124.2

 
$
94.8

See accompanying notes to unaudited consolidated financial statements.


5


TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in millions)
 
Three Months Ended March 31,
 
2019

2018
Cash flows from operating activities:



Net income
$
73.4


$
75.4

Add: loss from discontinued operations, net of tax
1.6



Income from continuing operations
74.9


75.4

Adjustments to reconcile net income to net cash provided by operating activities:



Depreciation and amortization
93.5


66.6

Amortization and (gain) loss on fair value of hedge instrument


(0.7
)
Impairment of Cost Method Investment, net
5.3

 
1.6

Equity in net income of affiliates, net of dividends
(3.3
)

(1.6
)
Deferred taxes
(0.2
)

0.2

Amortization of discount and deferred financing fees
1.6


0.7

Stock-based compensation
9.9


9.5

Payment of contingent obligation
(0.4
)
 

Provision for losses on trade accounts receivable
1.8


1.8

Other
0.1


(0.2
)
Changes in assets and liabilities:
 

 
Trade accounts receivable
(11.4
)

(18.6
)
Other current and long-term assets
(16.1
)

(2.2
)
Trade accounts payable


(3.7
)
Other current and long-term liabilities
(29.5
)

(27.8
)
Cash provided by operating activities of continuing operations
126.2


101.0

Cash used in operating activities of discontinued operations
(2.4
)


Cash provided by operating activities
123.8


101.0

Cash flows from investing activities:



Capital expenditures
(41.9
)

(26.9
)
Proceeds from sale of trading securities
3.3


1.8

Purchases of trading securities
(1.5
)

(1.5
)
Proceeds from sale of other investments
6.8


3.4

Purchases of other investments
(14.4
)

(7.2
)
Other
(3.2
)

(0.1
)
Cash used in investing activities of continuing operations
(50.9
)

(30.5
)
Cash used in investing activities of discontinued operations

 

Cash used in investing activities
(50.9
)
 
(30.5
)
Cash flows from financing activities:



Payments of senior secured revolving line of credit


(30.0
)
Repayments of debt
(18.8
)

(11.5
)
Proceeds from issuance of common stock and exercise of stock options
10.1


9.4

Dividends to shareholders
(14.4
)


Employee taxes paid on restricted stock units recorded as treasury stock
(36.8
)

(0.4
)
Cash used in financing activities
(59.9
)

(32.5
)
Effect of exchange rate changes on cash and cash equivalents
0.5


0.5

Net change in cash and cash equivalents
13.5


38.5

Cash and cash equivalents, beginning of period
187.4


115.8

Cash and cash equivalents, end of period
$
200.9


$
154.3

As a result of displaying amounts in millions, rounding differences may exist in the table above.

See accompanying notes to unaudited consolidated financial statements.

6


TRANSUNION AND SUBSIDIARIES
Consolidated Statement of Stockholders’ Equity (Unaudited)
(in millions)


 
 
Common Stock
 
Paid-In
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
 
 
Shares
 
Amount
 
 
 
 
 
 
Balance, December 31, 2017
 
183.2

 
$
1.9

 
$
1,863.5

 
$
(138.8
)
 
$
137.4

 
$
(135.3
)
 
$
95.9

 
$
1,824.6

Net income
 

 

 

 

 
73.1

 

 
2.3

 
75.4

Other comprehensive income
 

 

 

 

 

 
21.7

 
0.1

 
21.8

Stock-based compensation
 

 

 
8.9

 

 

 

 

 
8.9

Employee share purchase plan
 
0.1

 

 
4.8

 

 

 

 

 
4.8

Exercise of stock options
 
0.7

 

 
5.3

 

 

 

 

 
5.3

Treasury stock purchased
 

 

 

 
(0.4
)
 

 

 

 
(0.4
)
Cumulative effect of adopting
Topic 606, net of tax
 

 

 

 

 
(6.0
)
 

 
(0.1
)
 
(6.1
)
Cumulative effect of adopting
ASC 2016-16
 

 

 

 

 
(2.2
)
 

 

 
(2.2
)
Balance, March 31, 2018
 
184.0

 
$
1.9

 
$
1,882.5

 
$
(139.2
)
 
$
202.3

 
$
(113.6
)
 
$
98.2

 
$
1,932.1


 
 
Common Stock
 
Paid-In
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
 
 
Shares
 
Amount
 
 
 
 
 
 
Balance, December 31, 2018
 
185.7

 
$
1.9

 
$
1,947.3

 
$
(139.9
)
 
$
363.1

 
$
(282.7
)
 
$
92.5

 
$
1,982.2

Net income
 

 

 

 

 
70.9

 

 
2.4

 
73.4

Other comprehensive income
 

 

 

 

 

 
53.2

 
0.1

 
53.3

Stock-based compensation
 

 

 
9.2

 

 

 

 

 
9.2

Employee share purchase plan
 
0.1

 

 
6.9

 

 

 

 

 
6.9

Exercise of stock options
 
0.5

 

 
4.2

 

 

 

 

 
4.2

Vesting of restricted stock units
 
1.6

 

 

 

 

 

 

 

Treasury stock purchased
 
(0.6
)
 

 

 
(37.1
)
 

 

 

 
(37.1
)
Dividends to shareholders
 

 

 

 

 
(14.2
)
 

 

 
(14.2
)
Cumulative effect of adopting
ASU 2017-12
 

 

 

 

 
(1.0
)
 

 

 
(1.0
)
Balance, March 31, 2019
 
187.3

 
$
1.9

 
$
1,967.6

 
$
(177.0
)
 
$
418.8

 
$
(229.4
)
 
$
95.0

 
$
2,076.9

As a result of displaying amounts in millions, rounding differences may exist in the table above.
See accompanying notes to unaudited consolidated financial statements.


7


TRANSUNION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. Significant Accounting and Reporting Policies
Basis of Presentation
Unless the context indicates otherwise, any reference in this report to the “Company,” “we,” “our,” “us,” and “its” refers to TransUnion and its consolidated subsidiaries, collectively.
The accompanying unaudited consolidated financial statements of TransUnion and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation have been included. All significant intercompany transactions and balances have been eliminated. The operating results of TransUnion for the periods presented are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. These unaudited consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (“SEC”) on February 14, 2019.
Subsequent Events
Events and transactions occurring through the date of issuance of the financial statements have been evaluated by management and, when appropriate, recognized or disclosed in the financial statements or notes to the consolidated financial statements.
Principles of Consolidation
The consolidated financial statements of TransUnion include the accounts of TransUnion and all of its controlled subsidiaries. Investments in nonmarketable unconsolidated entities in which the Company is able to exercise significant influence are accounted for using the equity method. Investments in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence, our “Cost Method Investments,” are accounted for at our initial cost, minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Recently Adopted Accounting Pronouncements
On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842). During 2018 and 2019, the FASB issued additional guidance related to the new standard. This series of comprehensive guidance, among other things, requires us to record the discounted present value of all future lease payments as a liability on our balance sheet, as well as a corresponding “right-of-use” (“ROU”) asset, which is an asset that represents the right to use or control the use of a specified asset for the lease term, for all long-term leases. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We have adopted this guidance effective January 1, 2019, on a modified retrospective basis, as of the beginning of the period adopted, including the package of practical expedients available per paragraph 842-10-65-1(f). On March 31, 2019, and on each reporting date thereafter, we recognize an operating lease liability and offsetting ROU asset on our Consolidated Balance Sheet, with no other impact to our Consolidated Financial Statements. See Note 5, “Other Assets,” Note 7 “Other Current Liabilities,” Note 8, “Other Liabilities” and Note 10, “Leases” for additional information and the new required disclosures.
On August 28, 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new standard is intended to improve and simplify accounting rules around hedge accounting. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods therein. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness. For our cash flow hedges, this means that the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is now recorded in other comprehensive income, and reclassified to earnings in the same income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings. We have adopted this ASU and related amendments effective January 1, 2019, and have applied the modified retrospective transition method that allows for a cumulative-effect adjustment to reclassify cumulative ineffectiveness previously recorded in other comprehensive income to retained earnings in the period of adoption. The adjustment was not material to our consolidated financial statements.
On February 14, 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. These amendments provide an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (the “Act”) is recorded. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods therein. We have elected to not reclassify the

8


stranded tax effects within accumulated other comprehensive income to retained earnings and therefore there is no impact on our consolidated financial statements.
On August 27, 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. These amendments modify the disclosure requirements in Topic 820 by removing, adding or modifying certain fair value measurement disclosures. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods therein. This new guidance only impacts our disclosures, with no impact to our current disclosures.
Recent Accounting Pronouncements Not Yet Adopted
On June 16, 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In addition, these amendments require the measurement of all expected credit losses for financial assets, including trade accounts receivable, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods therein. We are currently assessing the impact this guidance will have on our consolidated financial statements.
2. Business Acquisitions
Callcredit Acquisition
On June 19, 2018, we acquired 100% of the equity of Callcredit Information Group, Ltd. (“Callcredit”) for $1,408.2 million in cash, funded primarily by additional borrowings against our Senior Secured Credit Facility. See Note 9, “Debt,” for additional information about our Senior Secured Credit Facility. There was no contingent consideration resulting from this transaction. Callcredit, founded in 2000, is a United Kingdom-based information solutions company that, like TransUnion, provides data, analytics and technology solutions to help businesses and consumers make informed decisions. International expansion is a key growth strategy for TransUnion, and we expect to leverage strong synergies across TransUnion’s and Callcredit’s business models and solutions.
We have identified and categorized certain operations of Callcredit that we do not consider core to our business as discontinued operations of our International segment as of the date of acquisition. These discontinued operations consist of businesses that do not align with our stated strategic objectives. As of the date of this filing, we have closed on the sale of three of the businesses and expect to sell the remaining two businesses within one year of our acquisition date. We do not expect to have a significant continuing involvement with any of these operations after the date of disposal. We have categorized the assets and liabilities of these discontinued operations on separate lines on the face of our balance sheet and in the table below. These amounts are based on estimates that will be refined as we complete the fair-value allocation of the purchase price of Callcredit.

9


Purchase Price Allocation
The allocation of the purchase price to the identifiable assets acquired and liabilities assumed is preliminary pending finalization of our fair value assessment, including the fair value of the discontinued operations, which we expect to complete within one year from the date of acquisition. Any changes to these preliminary estimates could be significant. The preliminary fair value on the acquisition date of the assets acquired and liabilities assumed as of March 31, 2019, consisted of the following:
(in millions)
 
Fair Value
Trade accounts receivable
 
$
19.7

Property and equipment
 
3.2

Goodwill(1)
 
754.8

Identifiable intangible assets
 
720.1

All other assets
 
51.0

Assets of discontinued operations(2)
 
53.6

Total assets acquired
 
1,602.4

 
 
 
All other liabilities
 
(174.6
)
Liabilities of discontinued operations(2)
 
(19.6
)
Net assets of the acquired company
 
$
1,408.2

(1)
For tax purposes, we estimate that none of goodwill is tax deductible.
(2)
We have categorized certain businesses of Callcredit as discontinued operations in our consolidated financial statements. The preliminary fair value of assets and liabilities of these discontinued operations include an estimate of the fair value of the identifiable intangible assets and goodwill of these entities acquired. We will revise these estimates as we finalize our analysis of these discontinued operations and purchase price allocation.

We recorded the excess of the purchase price over the preliminary fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed as goodwill in a new reportable unit in our International segment. The purchase price of Callcredit exceeded the preliminary fair value of the net assets acquired primarily due to growth opportunities, the assembled workforce, synergies associated with internal use software and other technological and operational efficiencies.

10


Identifiable Amortizable Intangible Assets
The preliminary fair values of the amortizable intangible assets acquired consisted of the following as of March 31, 2019:
(in millions)
 
Estimated Useful Life
 
Fair Value
Database and credit files
 
15 years
 
$
502.0

Customer relationships
 
15 years
 
155.0

Technology and software
 
5 years
 
62.4

Trademarks
 
2 years
 
0.7

Total identifiable assets
 
 
 
$
720.1

We estimate the preliminary weighted-average useful life of the identifiable intangible assets to be approximately 14.1 years, resulting in an approximate amortization of $51.0 million per year.
Acquisition Costs
As of March 31, 2019, we have incurred approximately $20.2 million of related-acquisition costs, including $19.9 million incurred in prior years. These costs include investment banker fees, legal fees, due diligence and other external costs that we have recorded in other income and expense. We will incur additional acquisition-related costs, including legal fees, valuation fees and other professional fees in the next several quarters that we will record in other income and expense.
iovation, Inc.; Healthcare Payment Specialists, LLC; and Rubixis, Inc. Acquisitions
During the second quarter of 2018, we acquired 100% of the equity of iovation, Inc. (“iovation”) and Healthcare Payment Specialists, LLC (“HPS”). During the fourth quarter of 2018, we acquired 100% of the equity of Rubixis, Inc. (“Rubixis”). iovation is a provider of advanced device identity and consumer authentication services that helps businesses and consumers safely transact in a digital world. HPS provides expertise and technology solutions to help medical care providers maximize Medicare reimbursements. Rubixis is an innovative healthcare revenue cycle solutions company that helps providers maximize reimbursement from insurance payers. The results of operations of iovation, HPS, and Rubixis, which are not material to our consolidated financial statements, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition. The allocation of the purchase price to the identifiable assets acquired and liabilities assumed for these acquisitions is preliminary pending the preparation and our review of the fair value assessments, which we expect to complete within one year of the acquisition dates.
Based on the preliminary purchase price allocations for these acquisitions, we recorded approximately $244.4 million of goodwill and $228.8 million of amortizable intangible assets in addition to what we recorded for Callcredit as discussed above. We estimate the weighted-average useful lives of the iovation, HPS, and Rubixis amortizable intangible assets to be approximately 12.1 years.

11


3. Fair Value
The following table summarizes financial instruments measured at fair value, on a recurring basis, as of March 31, 2019:
(in millions)
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 











Trading securities
 
$
11.6

 
$
9.3

 
$
2.3

 
$

Interest rate caps
 
10.7

 

 
10.7

 

Available-for-sale debt securities
 
2.9

 

 
2.9

 

Total
 
$
25.2

 
$
9.3

 
$
15.9

 
$

 
 
 
 
 
 
 
 
 
Liabilities
 


 
 
 
 
 
 
Interest rate swaps
 
$
(24.6
)
 
$

 
$
(24.6
)
 
$

Contingent consideration
 
(1.8
)
 

 

 
(1.8
)
Total
 
$
(26.4
)
 
$

 
$
(24.6
)
 
$
(1.8
)
Level 1 instruments consist of exchange-traded mutual funds. Exchange-traded mutual funds are trading securities valued at their current market prices. These securities relate to the nonqualified deferred compensation plan held in trust for the benefit of plan participants.
Level 2 instruments consist of pooled separate accounts, foreign exchange-traded corporate bonds and interest rate caps and swaps. Pooled separate accounts are designated as trading securities valued at net asset values. These securities relate to the nonqualified deferred compensation plan held in trust for the benefit of plan participants. Foreign exchange-traded corporate bonds are available-for-sale debt securities valued at their current quoted prices. These securities mature between 2027 and 2033. The interest rate caps and swaps fair values are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps and swaps, taking into consideration the cash payments related to financing the premium of the interest rate caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. See Note 9, “Debt,” for additional information regarding interest rate caps and swaps.
All unrealized gains and losses on trading securities are included in net income, while unrealized gains and losses on available-for-sale debt securities are included in other comprehensive income. There were no other-than-temporary gains or losses on available-for-sale debt securities and there were no significant realized or unrealized gains or losses on any of our securities for any of the periods presented.
Level 3 instruments consist of contingent obligations related to companies we have acquired with remaining maximum payouts totaling $3.8 million. These obligations are contingent upon meeting certain quantitative or qualitative performance metrics through 2019, and are included in other current liabilities on our balance sheet. The fair values of the obligations are determined based on an income approach, using our expectations of the future expected earnings of the acquired entities. We assess the fair value of these obligations each reporting period with any changes reflected as gains or losses in selling, general and administrative expenses in the consolidated statements of income. During the three months ended March 31, 2019, we recorded expenses of $0.9 million as a result of changes to the fair value of these obligations.

12


4. Other Current Assets
Other current assets consisted of the following:
(in millions)
 
March 31, 
 2019
 
December 31,
2018
Prepaid expenses
 
$
86.5

 
$
77.1

Other investments
 
37.4

 
23.6

Other receivables
 
14.5

 
14.3

Income taxes receivable
 
9.4

 
5.5

Marketable securities
 
2.9

 
2.9

Contract assets
 
1.0

 
1.0

Deferred financing fees
 
0.6

 
0.6

Other
 
14.2

 
11.5

Total other current assets
 
$
166.5

 
$
136.5

Other investments include non-negotiable certificates of deposit that are recorded at their carrying value. Other receivables include amounts recoverable under insurance policies for certain litigation costs. See Note 12, “Revenue,” for a further discussion about our contract assets.
5. Other Assets
Other assets consisted of the following:
(in millions)
 
March 31, 
 2019
 
December 31, 2018
Investments in nonconsolidated affiliates
 
$
80.5

 
$
81.9

Right-of-use lease assets
 
72.8

 

Marketable securities
 
11.6

 
12.4

Interest rate caps
 
10.7

 
16.5

Other investments
 
7.1

 
12.4

Notes receivable from affiliated companies
 
5.0

 
1.0

Deposits
 
4.0

 
3.8

Deferred financing fees
 
1.5

 
1.6

Other
 
8.0

 
6.7

Total other assets
 
$
201.2


$
136.3

See Note 6, “Investments in Affiliated Companies,” for additional information about our investment in affiliated companies. On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). As a result, we have recorded an ROU lease assets, which represent the fair value of the right to use our long-term leased assets over their lease terms. See Note 10, “Leases,” for additional information about our right-of-use lease assets. See Note 9, “Debt,” for additional information about our interest rate caps. Other investments include non-negotiable certificates of deposit that are recorded at their carrying value.
6. Investments in Nonconsolidated Affiliates
Investments in nonconsolidated affiliates represent our investment in nonconsolidated domestic and foreign entities. These entities are in businesses similar to ours, such as credit reporting, credit-scoring, decisioning services and credit-monitoring services.
We use the equity method to account for nonmarketable investments in affiliates where we are able to exercise significant influence. For these investments, we adjust the carrying value for our proportionate share of the affiliates’ earnings, losses and distributions, any impairments, as well as for purchases and sales of our ownership interest.
We account for nonmarketable investments in equity securities in which we are not able to exercise significant influence, our Cost Method Investments, at our initial cost, minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. For these investments, we adjust the carrying value

13


for any purchases or sales of our ownership interests. We record any dividends received from these investments as other income in non-operating income and expense.
During 2019, we recorded a $5.3 million loss on the impairment of an investment in a nonconsolidated affiliate that we account for as a Cost Method Investment. The impairment was included in other income and expense in the consolidated statements of income. There were no material gain or loss adjustments to our investments in affiliated companies during the three months ended March 31, 2018.
Investments in affiliated companies consisted of the following:
(in millions)
 
March 31, 
 2019
 
December 31,
2018
Equity method investments
 
$
47.8

 
$
44.0

Cost Method Investments
 
32.7

 
37.9

Total investments in affiliated companies
 
$
80.5


$
81.9

These balances are included in other assets in the consolidated balance sheets.
Earnings from equity method investments, which are included in non-operating income and expense, and dividends received from equity method investments consisted of the following:
 
 
Three Months Ended 
 March 31,
(in millions)
 
2019
 
2018
Earnings from equity method investments
 
3.8

 
2.3

Dividends received from equity method investments
 
0.5

 
0.7

There were no dividends received from Cost Method Investments for the three months ended March 31, 2019 and 2018.
7. Other Current Liabilities
Other current liabilities consisted of the following:

(in millions)
 
March 31, 
 2019
 
December 31,
2018
Deferred revenue
 
$
108.4

 
$
73.1

Accrued payroll
 
62.5

 
102.5

Accrued legal and regulatory
 
32.5

 
33.2

Accrued employee benefits
 
21.9

 
35.1

Operating lease liabilities
 
17.6

 

Income taxes payable
 
8.3

 
17.0

Accrued interest
 
3.6

 
2.5

Contingent consideration
 
1.8

 
1.2

Other
 
17.6

 
19.5

Total other current liabilities
 
$
274.2

 
$
284.1

Deferred revenue increased primarily due to annual minimum billings, primarily in our United Kingdom business, that we have a contractual right to invoice. See Note 12, “Revenue,” for additional information about our deferred revenue. The decrease in accrued payroll was due primarily to the payment of accrued bonuses during the first quarter of 2019 that were earned in 2018. On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). As a result, we have recorded the discounted present value of all future lease payments over the terms of the corresponding leases as a liability for our long-term leases. See Note 8, “Other Liabilities” for the long-term portion of this liability and Note 10, “Leases” for additional information about our leases. See Note 3, “Fair Value,” for additional information related to our contingent consideration obligations.

14


8. Other Liabilities
Other liabilities consisted of the following:
(in millions)
 
March 31, 
 2019
 
December 31, 2018
Operating lease liabilities
 
$
61.6

 
$

Interest rate swap
 
24.6

 
10.7

Unrecognized tax benefits
 
19.6

 
19.6

Retirement benefits
 
12.0

 
10.2

Income tax payable
 
1.9

 
5.0

Deferred revenue
 
0.6

 
0.9

Contingent consideration
 

 
0.1

Other
 
1.3

 
8.2

Total other liabilities
 
$
121.6

 
$
54.7

On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). As a result, we have recorded the discounted present value of all future lease payments over the terms of the corresponding leases as a liability for our long-term leases. See Note 7, “Other Current Liabilities” for the current portion of this liability and Note 10, “Leases” for additional information about our leases. See Note 9, “Debt,” for additional information about our interest rate swap.
9. Debt
Debt outstanding consisted of the following:
(in millions)
 
March 31, 
 2019
 
December 31,
2018
Senior Secured Term Loan B-3, payable in quarterly installments through April 9, 2023, with periodic variable interest at LIBOR or alternate base rate, plus applicable margin (4.50% at March 31, 2019, and 4.52% at December 31, 2018), net of original issue discount and deferred financing fees of $4.7 million and $4.4 million, respectively, at March 31, 2019, and original issue discount and deferred financing fees of $5.0 million and $4.6 million, respectively, at December 31, 2018
 
$
1,887.5

 
$
1,892.0

Senior Secured Term Loan A-2, payable in quarterly installments through August 9, 2022, with periodic variable interest at LIBOR or alternate base rate, plus applicable margin (4.25% at March 31, 2019, and 4.27% at December 31, 2018), net of original issue discount and deferred financing fees of $2.6 million and $3.4 million, respectively, at March 31, 2019, and original issue discount and deferred financing fees of $2.8 million and $3.6 million, respectively, at December 31, 2018
 
1,159.0

 
1,166.0

Senior Secured Term Loan B-4, payable in quarterly installments through June 19, 2025, with periodic variable interest at LIBOR or alternate base rate, plus applicable margin (4.50% at March 31, 2019, and 4.52% at December 31, 2018), net of original issue discount and deferred financing fees of $2.3 million and $10.3 million, respectively, at March 31, 2019, and original issue discount and deferred financing fees of $2.3 million and $10.7 million, respectively, at December 31, 2018
 
979.9

 
982.0

Senior Secured Revolving Line of Credit
 

 

Other notes payable
 
3.7

 
7.3

Finance leases
 
0.7

 
0.8

Total debt
 
4,030.8

 
4,048.1

Less short-term debt and current portion of long-term debt
 
(79.0
)
 
(71.7
)
Total long-term debt
 
$
3,951.8


$
3,976.4


15


Senior Secured Credit Facility
On June 15, 2010, we entered into a senior secured credit facility with various lenders. This facility has been amended several times and currently consists of the Senior Secured Term Loan A-2, the Senior Secured Term Loan B-3, the Senior Secured Term Loan B-4 and the Senior Secured Revolving Line of Credit.
On June 19, 2018, we borrowed an additional $800.0 million against our Senior Secured Term Loan A-2 and $600.0 million against a new tranche 4 of our Senior Secured Term Loan B (“Senior Secured Term Loan B-4”) to fund the acquisition of Callcredit. On June 29, 2018, we borrowed an additional $400.0 million of our Senior Secured Term Loan B-4 to fund another acquisition and to repay a portion of our Senior Secured Revolving Line of Credit.
As of March 31, 2019, we had no outstanding balance under the Senior Secured Revolving Line of Credit and $0.1 million of outstanding letters of credit, and could have borrowed up to the remaining $299.9 million available.
TransUnion also has the ability to request incremental loans on the same terms under the existing senior secured credit facility up to the greater of an additional $675.0 million and 100% of Consolidated EBITDA. Consolidated EBITDA is reduced to the extent that the senior secured net leverage ratio is above 4.25-to-1. In addition, so long as the senior secured net leverage ratio does not exceed 4.25-to-1.0, we may incur additional incremental loans, subject to certain additional conditions and commitments by existing or new lenders to fund any additional borrowings. 
With certain exceptions, the senior secured credit facility 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 senior secured 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. The senior secured net leverage test must be met as a condition to incur additional indebtedness, make certain investments, and may be required to make certain restricted payments. The senior secured net leverage ratio must not exceed 5.5-to-1 at any such test date. TransUnion may make dividend payments up to an unlimited amount under the terms of the senior secured credit facility provided that no default or event of default exists and so long as the total net leverage ratio does not exceed 4.75-to-1. As of March 31, 2019, we were in compliance with all debt covenants.
On December 17, 2018, we entered into interest rate swap agreements with various counterparties that effectively fixed our LIBOR exposure on a portion of our existing senior secured term loans or similar replacement debt at approximately 2.647% to 2.706% . We have designated these swap agreements as cash flow hedges. The current aggregate notional amount under these agreements is $1,445.0 million, decreasing each quarter until the second agreement terminates on December 30, 2022.
On December 18, 2015, we entered into interest rate cap agreements with various counterparties that effectively cap our LIBOR exposure on a portion of our existing senior secured term loans or similar replacement debt at 0.75% beginning June 30, 2016. We have designated these cap agreements as cash flow hedges. The current aggregate notional amount under these agreements is $1,443.9 million and will decrease each quarter until the agreement terminates on June 30, 2020. In July 2016, we began to pay the various counterparties a fixed rate on the outstanding notional amounts of between 0.98% and 0.994% and receive payments to the extent LIBOR exceeds 0.75%.
Based on how the fair value of interest rate caps are determined, the earlier interest periods have lower fair values at inception than the later interest periods, resulting in less interest expense being recognized in the earlier periods compared with the later periods. Any payments we receive to the extent LIBOR exceeds 0.75% is also reclassified from other comprehensive income to interest expense in the period received.
In accordance with ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, the new guidance eliminates the requirement to separately measure and report hedge ineffectiveness. For our cash flow hedges, this means that the entire change in the fair value of the hedging instrument included in our assessment of hedge effectiveness is now recorded in other comprehensive income, and reclassified to interest expense when the corresponding hedged debt affects earnings.
The change in the fair value of the swaps resulted in an unrealized loss of $13.8 million ($10.4 million, net of tax) for the three months ended March 31, 2019, recorded in other comprehensive income. Interest expense on the swaps in the three months ended March 31, 2019 was expense of $0.5 million ($0.3 million net of tax). We expect to recognize a loss of approximately $3.9 million as interest expense due to our expectation that LIBOR will exceed the fixed rates of interest over the next twelve months.
The change in the fair value of the caps resulted in an unrealized loss of $4.6 million ($3.4 million. net of tax) and gain of $9.9 million ($7.4 million, net of tax) for the three months ended March 31, 2019 and 2018, respectively, recorded in other comprehensive income. Interest expense reclassified from other comprehensive income to interest expense related to the fair value of the portion of the caps expiring in the three months ended March 31, 2019 and 2018, was income of $1.6 million ($1.0 million net of tax) and

16


expense of $0.2 million ($0.1 million net of tax), respectively. We expect to reclassify a gain of approximately $3.2 million from other comprehensive income to interest expense related to the fair value of the portion of the caps expiring and payments received to the extent LIBOR exceeds 0.75% in the next twelve months.
Fair Value of Debt
As of March 31, 2019, the fair value of our variable-rate Senior Secured Term Loan A-2, excluding original issue discounts and deferred fees, approximates the carrying value. As of March 31, 2019, the fair value of our Senior Secured Term Loan B-3 and B-4, excluding original issue discounts and deferred fees, was $1,885.9 million and $980.7 million, respectively. The fair values of our variable-rate term loans are determined using Level 2 inputs, based on quoted market prices for the publicly traded instruments.
10. Leases
Upon adoption of Topic 842 on January 1, 2019, our lease obligations consisted of operating leases for office space and data centers and a small number of finance leases for equipment. Our operating leases have remaining lease terms of up to 13.5 years, with a weighted-average remaining lease term of 5.9 years. We have options to extend many of our operating leases for an additional period of time and options to terminate early several of our operating leases. The lease term consists of the non-cancelable period of the lease, periods covered by options to extend the lease if we are reasonably certain to exercise the option, periods covered by an option to terminate the lease if we are reasonably certain not to exercise the option, and periods covered by an option to extend or not to terminate the lease in which the exercise of the option is controlled by the lessor.
On the commencement date of an operating lease, we record an ROU asset, which represents our right to use or control the use of a specified asset for the lease term, and an offsetting lease liability, which represents our obligation to make lease payments arising from the lease, based on the present value of the net fixed future lease payments due over the initial lease term. We use an estimate of our incremental borrowing rate as the discount rate to determine the present value of the net fixed future lease payments, except for leases where the interest rate implicit in the lease is readily determinable. Upon adoption and as of March 31, 2019, the weighted-average discount rate used to calculate the present value of the fixed future lease payments was 5.7%.
Both Topic 842 and the predecessor lease accounting guidance under ASU 840 require us to expense the net fixed payments of operating leases on a straight-line basis over the lease term. Topic 842 requires us to include any built up deferred or prepaid rent balance resulting from the difference between the straight-line expense and the cash payments as a component of our ROU asset. Also included in our ROU asset is any monthly prepayment of rent. Our rent expense is typically due on the first day of each month, and we typically pay rent several weeks before it is due, so at any given month end, we will have a prepaid rent balance that is included as a component of our ROU asset.
Most of our operating leases contain variable non-lease components consisting of maintenance, insurance, taxes and similar costs of the office space we occupy. We have adopted the practical expedient to not separate these non-lease components from the lease components and instead account for them as a single lease component for all of our leases. We straight-line the net fixed payments of operating leases over the lease term and expense the variable lease payments in the period in which we incur the obligation to pay such variable amounts. These variable lease payments are not included in our calculation of our ROU assets or lease liabilities.
We have no significant short-term leases, finance leases, or subleases.
ROU assets are included in Other Assets, and operating lease liabilities are included in Other Current Liabilities and Other Liabilities in our Consolidated Balance Sheet. Finance lease assets are included in Property, Plant and Equipment, and finance lease liabilities are included in the Current Portion of Long-term Debt and Long-term Debt in our Consolidated Balance Sheet. See Note 7, “Other Current Liabilities,” Note 8,” Other Liabilities,” and note 9, “Debt,” for additional information about these items.
Our operating lease costs, including fixed, variable and short-term lease costs, were $7.2 million and $5.5 million for the three months ended March 31, 2019 and 2018, respectively. Cash paid for operating leases are included in operating cash flows, and were $7.6 million and $5.0 million for the three months ended March 31, 2019 and 2018, respectively. Our finance lease amortization expense, interest expense, and cash paid were not significant for the reported periods.
We have adopted the package of transition practical expedients which allows us to not reassess our existing lease classifications, initial direct costs, and whether or not an existing contract contains a lease.
We have elected to use the portfolio approach to assess the discount rate we use to calculate the present value of our future lease payments. Using this approach does not result in a materially different outcome compared with applying separate discount rates to each lease in our portfolio.

17


We have adopted an accounting policy to recognize rent expense for short-term leases, those leases with initial lease terms of twelve months or less, on a straight-line basis in our income statement.
Future fixed payments for non-cancelable operating leases and finance leases in effect as of March 31, 2019, are payable as follows:
(in millions)
 
Operating Leases
 
Finance Leases
 
Total
2019
 
$
15.6

 
$
0.4

 
$
16.0

2020
 
20.7

 
0.3

 
21.0

2021
 
16.9

 
0.1

 
17.0

2022
 
10.8

 

 
10.8

2023
 
8.8

 

 
8.8

Thereafter
 
20.4

 

 
20.4

Less imputed interest
 
(14.0
)
 
(0.1
)
 
(14.1
)
Totals
 
$
79.2

 
$
0.7

 
$
79.9

11. Stockholders’ Equity
Common Stock
On February 13, 2018, we announced that our board of directors has approved a dividend policy pursuant to which we intend to pay quarterly cash dividends on our common stock. On February 21, 2019, the board of directors declared a dividend of $0.075 per share to holders of record as of the close of business on March 7, 2019. The total dividend declared was $14.3 million, of which $14.0 million was paid on March 22, 2019, with the remainder due as dividend equivalents to employees who hold restricted stock units when and if those units vest. In the first quarter of 2019, we also paid $0.4 million of dividend equivalents that were declared in 2018 to employees whose restricted stock units vested in 2019 and reversed $0.1 million of dividend equivalents previously declared but forfeited in the first quarter of 2019.
Treasury Stock
During the first quarter of 2019, 1.6 million outstanding employee restricted stock units vested and became taxable to the employees. The employees used 0.6 million shares of the vested stock to satisfy their payroll tax withholding obligations in a net share settlement arrangement whereby the employees received 1.0 million of the shares and gave TransUnion the remaining 0.6 million shares that we have recorded as treasury stock. We remitted cash equivalent to the $36.8 million vest date value of the treasury stock to the respective governmental agencies in settlement of the employee withholding tax obligations.
Preferred Stock
We have 100.0 million shares of preferred stock authorized. No preferred stock had been issued or was outstanding as of March 31, 2019.
12. Revenue
All of our revenue is derived from contracts with customers and is reported as revenue in the Consolidated Statement of Income. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under ASC Topic 606. We have contracts with two general groups of performance obligations: those that require us to stand ready to provide goods and services to a customer to use as and when requested (“Stand Ready Performance Obligations”) and those that do not require us to stand ready (“Other Performance Obligations”). Our Stand Ready Performance Obligations include obligations to stand ready to provide data, process transactions, access our databases, software-as-a-service and direct-to-consumer products, rights to use our intellectual property and other services. Our Other Performance Obligations include the sale of certain batch data sets and various professional and other services.
Most of our Stand Ready Performance Obligations consist of a series of distinct goods and services that are substantially the same and have the same monthly pattern of transfer to our customers. We consider each month of service in this time series to be a distinct performance obligation and, accordingly, recognize revenue over time. For a majority of these Stand Ready Performance Obligations the total contractual price is variable because our obligation is to process an unknown quantity of transactions, as and when requested by our customers, over the contract period. We allocate the variable price to each month of service using the time-series concept and recognize revenue based on the most likely amount of consideration to which we will be entitled, which is generally the amount we have the right to invoice. This monthly amount can be based on the actual volume of units delivered or

18


any guaranteed minimum, if higher. Occasionally we have contracts where the amount we will be entitled to for the transactions processed is uncertain, in which case we estimate the revenue based on what we consider to be the most likely amount of consideration we will be entitled to, and true-up any estimates as facts and circumstances evolve.
Certain Stand Ready Performance Obligation fees result from contingent fee based contracts that require us to provide services before we have an enforceable right to payment. For these performance obligations, we recognize revenue at the point in time the contingency is met and we have an enforceable contract and right to payment.
Certain of our Stand Ready Performance Obligation contracts include non-recurring, non-refundable up-front fees to cover our costs of setting up files or configuring systems to enable our customers to access our services. These fees are not fees for distinct performance obligations. When these fees are insignificant in relation to the total contract value we recognize such fees as revenue when invoiced. If such fees are significant we recognize them as revenue over the duration of the contract, the period of time for which we have contractually enforceable rights and obligations. For contracts where such fees are for a distinct performance obligation, we recognize revenue as or when the performance obligation is satisfied.
For all contracts that include a Stand Ready Performance Obligation with variable pricing, we are unable to estimate the variable price attributable to future performance obligations because the number of units to be purchased is not known. As a result, we use the exception available to forgo disclosures about revenue attributable to the future performance obligations where we recognize revenue using the time-series concept as discussed above, including those qualifying for the right to invoice practical expedient. We also use the exception available to forgo disclosures about revenue attributable to contracts with expected durations of one year or less.
Certain of our Other Performance Obligations, including certain batch data sets and certain professional and other services, are delivered at a point in time. Accordingly, we recognize revenue upon delivery, once we have satisfied that obligation. For certain Other Performance Obligations, including certain professional and other services, we recognize revenue over time, based on an estimate of progress towards completion of that obligation.
In certain circumstances we apply the guidance in ASC Topic 606 to a portfolio of contracts with similar characteristics. We use estimates and assumptions when accounting for a portfolio that reflect the size and composition of the portfolio of contracts.
Our contracts generally include standard commercial payment terms generally acceptable in each region, and do not include financing with extended payment terms. We have no significant obligations for refunds, warranties, or similar obligations. Our revenue does not include taxes collected from our customers.
Accounts receivable are shown separately on our balance sheet. Contract assets and liabilities result due to the timing of revenue recognition, billings and cash collections. Contract assets include our right to payment for goods and services already transferred to a customer when the right to payment is conditional on something other than the passage of time, for example contracts where we recognize revenue over time but do not have a contractual right to payment until we complete the contract. Contract assets are included in our other current assets and are not material as of March 31, 2019. Contract liabilities include current and long-term deferred revenue which are included in other current liabilities and other liabilities. We expect to recognize the December 31, 2018 current deferred revenue as revenue during 2019. The long-term deferred revenue is not significant.
For additional disclosures about the disaggregation of our revenue see Note 15, “Reportable Segments”.
13. Earnings Per Share
Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the reported period. Diluted earnings per share reflects the effect of the increase in shares outstanding determined by using the treasury stock method for awards issued under our incentive stock plans.
As of March 31, 2019, there were 0.2 million anti-dilutive stock-based awards outstanding. There were 1.3 million contingently-issuable stock-based awards outstanding that were excluded from the diluted earnings per share calculation because the contingencies had not been met.
As of March 31, 2018, there were 0.1 million anti-dilutive stock-based awards outstanding. There were no contingently-issuable stock-based awards outstanding that were excluded from the diluted earnings per share calculation because the contingencies had not been met.

19


Basic and diluted weighted average shares outstanding and earnings per share were as follows:
 
 
Three Months Ended 
 March 31,
(in millions, except per share data)
 
2019
 
2018
Income from continuing operations
 
$
74.9

 
$
75.4

Less: income from continuing operations attributable to noncontrolling interests
 
(2.4
)
 
(2.3
)
Income from continuing operations attributable to TransUnion
 
72.5

 
73.1

Discontinued operations, net of tax(1)
 
(1.6
)
 

Net income attributable to TransUnion
 
$
70.9

 
$
73.1

 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
Income from continuing operations attributable to TransUnion
 
$
0.39

 
$
0.40

Discontinued operations, net of tax
 
(0.01
)
 

Net Income attributable to TransUnion
 
$
0.38

 
$
0.40

Diluted earnings per common share from:
 
 
 
 
Income from continuing operations attributable to TransUnion
 
$
0.38

 
$
0.38

Discontinued operations, net of tax
 
(0.01
)
 

Net Income attributable to TransUnion
 
$
0.37

 
$
0.38

Weighted-average shares outstanding:
 
 
 
 
Basic
 
186.6

 
183.7

Diluted
 
191.0

 
190.1

(1)
Discontinued operations for the three months ended March 31, 2018 is zero.

20


14. Income Taxes
For the three months ended March 31, 2019, we reported an effective tax rate of 0.8%, which was lower than the 21% U.S. federal statutory rate due primarily to $21.0 million of excess tax benefits on stock-based compensation and $7.9 million of valuation allowance releases on foreign tax credit carryforwards, partially offset by $13.7 million of various foreign, state and federal tax impacts.
For the three months ended March 31, 2018, we reported an effective tax rate of 26.8%, which was higher than the 21% U.S. federal statutory rate due primarily to $14.2 million of tax expense related to the impact of the Act, foreign rate differential, and unrecognized tax benefits, partially offset by $8.2 million of excess tax benefits on stock-based compensation.
The total amount of unrecognized tax benefits was $19.6 million as of March 31, 2019, and $19.6 million as of December 31, 2018. The amounts that would affect the effective tax rate if recognized are $12.3 million and $12.3 million, respectively. There were no significant liabilities for accrued interest for taxes or accrued tax penalties as of March 31, 2019, or December 31, 2018. We are regularly audited by federal, state and foreign taxing authorities. Given the uncertainties inherent in the audit process, it is reasonably possible that certain audits could result in a significant increase or decrease in the total amounts of unrecognized tax benefits. An estimate of the range of the increase or decrease in unrecognized tax benefits due to audit results cannot be made at this time. Generally, tax years 2010 and forward remain open for examination in some foreign jurisdictions, 2011 and forward in some state jurisdictions, and tax years 2012 and forward remain open for examination for U.S. federal income tax purposes.
15. Reportable Segments
Over the past few years, we have completed a significant number of acquisitions that have transformed our business. We have also developed a significant number of new product offerings that have further diversified our portfolio of businesses. As a result of the evolution of our business, we have changed the disaggregated revenue and our measure of segment profit (Adjusted EBITDA) information that we provide to our chief operating decision makers (our “CODM”) to better align with how we manage the business. Accordingly, our disclosures around the disaggregation of our revenue and the measure of segment profit have been recast for all periods presented in this Quarterly Report on Form 10-Q to conform to the information used by our CODM. We have not changed our reportable segments and these changes do not impact our consolidated results.
We have three reportable segments, U. S. Information Services (“USIS”), International, and Consumer Interactive, and the Corporate unit, which provides support services to each of the segments. Our CODM uses the profit measure of Adjusted EBITDA, on both a consolidated and segment basis, to allocate resources and assess performance of our businesses. We use Adjusted EBITDA as our profit measure because it eliminates the impact of certain items that we do not consider indicative of operating performance, which is useful to compare operating results between periods. Our board of directors and executive management team also use Adjusted EBITDA as a compensation measure for both segment and corporate management under our incentive compensation plans. Adjusted EBITDA is also a measure frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours.
We define Adjusted EBITDA as net income (loss) attributable to each segment plus (less) loss (income) from discontinued operations, plus net interest expense, plus (less) provision (benefit) for income taxes, plus depreciation and amortization, plus (less) certain deferred revenue acquisition revenue-related adjustments, plus stock-based compensation, plus mergers, acquisitions, divestitures and business optimization-related expenses including Callcredit integration-related expenses, plus (less) certain other expenses (income).
The segment financial information below aligns with how we report information to our CODM to assess operating performance and how we manage the business. The accounting policies of the segments are the same as described in Note 1, “Significant Accounting and Reporting Policies” and Note 12, “Revenue.”
The following is a more detailed description of our three reportable segments and the Corporate unit, which provides support services to each segment:
U.S. Information Services
U.S. Information Services (“USIS”) provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. These businesses use our services to acquire new customers, assess consumers’ 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 methods in our USIS segment allow us to serve a broad set of customers across industries. We report disaggregated revenue of our USIS segment for the following verticals:
Financial Services: The financial services vertical consists of our consumer lending, mortgage, auto and cards and payments lines of business. Our financial services clients consist of most banks, credit unions, finance companies, auto lenders, mortgage lenders, online-only lenders (FinTech), and other consumer lenders in the United States. We also distribute our solutions through most major resellers, secondary market players and sales agents. Beyond traditional

21


lenders, we work with a variety of credit arrangers, such as auto dealers and peer-to-peer lenders. We provide solutions across every aspect of the lending lifecycle; customer acquisition and engagement, fraud and ID management, retention and recovery. Our products are focused on mitigating risk and include credit reporting, credit marketing, analytics and consulting, identity verification and authentication and debt recovery solutions.
Emerging Verticals: Emerging verticals include healthcare, insurance, collections, property management, public sector and other diversified markets. Our solutions in these verticals are similar to the solutions in our financial services vertical and also address the entire customer lifecycle. We offer onboarding and retention solutions, transaction processing products, scoring products, marketing solutions, analytics and consulting, identity management and fraud solutions, and revenue optimization and collections solutions.
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 services, decisioning capabilities, 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.
We report disaggregated revenue of our International segment for the following regions: Canada, Latin America, the United Kingdom, Africa, India and Asia Pacific.
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 consumers through both direct and indirect channels.
Corporate
In addition, Corporate provides support services for each of the segments, holds investments, and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the segments remain in Corporate. These costs are typically enterprise-level costs and are primarily administrative in nature.

22



Selected segment financial information and disaggregated revenue consisted of the following:
 
Three Months Ended March 31,
 
(in millions)
2019
 
2018
 
Revenue:
 
 
 
 
U.S. Information Services:
 
 
 
 
Financial Services
$
189.1

 
$
182.6

 
Emerging Verticals
179.7

 
159.7

 
Total U.S. Information Services
368.8

 
342.3

 
 
 
 
 
 
International:
 
 
 
 
Canada
23.0

 
21.7

 
Latin America
25.3

 
25.2

 
United Kingdom
42.2

 

 
Africa
15.0

 
17.0

 
India
27.7

 
20.2

 
Asia Pacific
12.8

 
11.8

 
Total International
146.0

 
95.9

 
 
 
 
 
 
Total Consumer Interactive
123.4

 
117.9

 
 
 
 
 
 
Total revenue, gross
$
638.2

 
$
556.1

 
 
 
 
 
 
Intersegment revenue eliminations:
 
 
 
 
U.S. Information Services
$
(17.5
)
 
$
(17.4
)
 
International
(1.2
)
 
(1.2
)
 
Consumer Interactive
(0.2
)
 
(0.2
)
 
Total intersegment eliminations
(18.9
)
 
(18.8
)
 
Total revenue as reported
$
619.3

 
$
537.4

 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
U.S. Information Services
$
142.0

 
$
133.4

 
International
65.0

 
33.0

 
Consumer Interactive
60.2

 
56.9

 
Corporate
(28.3
)
 
(20.6
)
 
Consolidated Adjusted EBITDA
$
238.9

 
$
202.6

 
As a result of displaying amounts in millions, rounding differences may exist in the table above.

23


A reconciliation of net income attributable to TransUnion to Adjusted EBITDA for the periods presented is as follows:
 
 
Three Months Ended March 31,
(in millions)
 
2019
 
2018
Reconciliation of net income attributable to TransUnion to Adjusted EBITDA:
 
 
 
 
Net income attributable to TransUnion
 
$
70.9

 
$
73.1

Discontinued operations
 
1.6

 

Net income from continuing operations attributable to TransUnion
 
72.5

 
73.1

Net interest expense
 
43.5

 
21.8

Provision (benefit) for income taxes
 
0.6

 
27.6

Depreciation and amortization
 
93.5

 
66.6

EBITDA
 
210.0

 
189.2

Adjustments to EBITDA:
 
 
 
 
Acquisition revenue-related adjustments
 
4.2

 

Stock-based compensation
 
12.7

 
10.8

Mergers and acquisitions, divestitures and business optimization
 
11.3

 
3.3

Other
 
0.7

 
(0.6
)
Total adjustments to EBITDA
 
28.9

 
13.5

Consolidated Adjusted EBITDA
 
$
238.9

 
$
202.6

As a result of displaying amounts in millions, rounding differences may exist in the table above.
Earnings from equity method investments included in non-operating income and expense for the periods presented were as follows:
 
 
Three Months Ended 
 March 31,
(in millions)
 
2019
 
2018
U.S. Information Services
 
$
0.6

 
$
0.7

International
 
3.2

 
1.6

Total
 
$
3.8

 
$
2.3


24


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of TransUnion’s financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, TransUnion’s audited consolidated financial statements, the accompanying notes, “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2018, as well as the unaudited consolidated financial statements and the related notes presented in Part I, Item 1, of this Quarterly Report on Form 10-Q.
In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed below in “Cautionary Notice Regarding Forward-Looking Statements,” and Part II, Item 1A, “Risk Factors.”
References in this discussion and analysis to “the Company,” “we,” “us” and “our” refer to TransUnion and its direct and indirect subsidiaries, collectively.
Overview
TransUnion is a leading global risk and information solutions provider to businesses and consumers. We provide consumer reports, risk scores, analytical services and decisioning capabilities to businesses. Businesses embed our solutions into their process workflows 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. 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 largest provider of risk and information solutions 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 industries, which we also refer to as verticals, including financial services, healthcare, insurance and specialized risk. We have a global presence in over 30 countries and territories across North America, Latin America, the United Kingdom, Africa, India and Asia Pacific.
Our solutions are based on a foundation of financial, credit, alternative credit, identity, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information from approximately 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, allow 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
Over the past few years, we have completed a significant number of acquisitions that have transformed our business. We have also developed a significant number of new product offerings that have further diversified our portfolio of businesses. As a result of the evolution of our business, we have changed the disaggregated revenue and our measure of segment profit (Adjusted EBITDA) information that we provide to our chief operating decision makers (our “CODM”) to better align with how we manage the business. Accordingly, our disclosures around the disaggregation of our revenue and the measure of segment profit have been recast for all periods presented in this Quarterly Report on Form 10-Q to conform to the information used by our CODM. We have not changed our reportable segments and these changes do not impact our consolidated results. Part 1, Item 1, Note 15, “Reportable Segments,” for further information about this change.
We manage our business and report disaggregated revenue and financial results in three reportable segments: U.S. Information Services, International and Consumer Interactive.
The U.S. Information Services (or “USIS”) segment provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. These businesses use our services to acquire new customers, assess consumers’ 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 methods in our USIS segment

25


allow us to serve a broad set of customers across industries. We report disaggregated revenue of our USIS segment for the financial services and emerging verticals.
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 services, decisioning capabilities, 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.
We report disaggregated revenue of our International segment for the following regions: Canada, Latin America, the United Kingdom, Africa, India and Asia Pacific.
The Consumer Interactive segment 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 consumers through both direct and indirect channels.
In addition, Corporate provides shared services for each of the segments, holds investments, raises capital, and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the segments remain in Corporate. These costs are typically enterprise-level costs 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 can be significantly influenced by general macroeconomic conditions, including the availability of credit and capital, interest rates, inflation, employment levels, consumer confidence and housing demand. In the markets where we compete, we have generally seen good economic conditions and increased market stabilization over the past few years. In the United States, we continue to see a healthy, well-functioning consumer lending market driven by the exceptionally strong labor market and continuing strong consumer confidence. Demand for consumer solutions continues to be strong due to consumer awareness of the risk of identity theft due to data breaches and increasingly available free credit information. These positive signs have been tempered by a significant deterioration in the mortgage market, although we have begun to see improvements due to the recent declines in mortgage rates and recent improvements in new and existing home sales. There also continues to be uncertainty around trade policies and global economic growth. In addition, we saw a slowdown in our customer’s marketing activity early in the first quarter, as they assessed the momentum of the U.S. economy and trajectory of interest rates. Internationally, we continue to see strong growth in key markets, tempered by uncertainty in our Africa region and ongoing concern over Brexit. Also, weakening foreign currencies, primarily in Africa, India and Latin America, resulted in a decline in results for the first quarter of 2019 compared with the same period in 2018.
Our revenues are also significantly influenced by industry trends, including the demand for information services in financial services, healthcare, insurance and other industries we serve. Companies are increasingly relying on business analytics and big-data technologies to help process 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 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 currently 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 complexity of regulations, including from the Consumer Financial Protection Bureau (“CFPB”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act and new capital requirements, continue to 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.
Recent Developments
On December 17, 2018, we entered into interest rate swap agreements with various counterparties that fixes our LIBOR exposure on an additional portion of our existing senior secured term loans or similar replacement debt at approximately 2.647% to 2.706%. 

26


During the second quarter of 2018, we borrowed a significant amount of additional debt against our senior secured credit facility to fund the purchase of three acquisitions as discussed in “Recent Acquisitions and Partnerships” below. During the second quarter of 2018, we borrowed a total of $125.0 million under the Senior Secured Revolving Line of Credit to fund an acquisition and for general corporate purposes. On June 19, 2018, we borrowed an additional $800.0 million against our Senior Secured Term Loan A-2 and $600.0 million against a new tranche 4 of our Senior Secured Term Loan B (“Senior Secured Term Loan B-4”) to fund the acquisition of Callcredit. On June 29, 2018, we borrowed an additional $400.0 million of our Senior Secured Term Loan B-4 to fund another acquisition and to repay a portion of our Senior Secured Revolving Line of Credit. Our net incremental borrowings during the second quarter of 2018 was $20.0 million under the Senior Secured Revolving Line of Credit.
On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842).This guidance, among other things, requires us to record the future discounted present value of all future lease payments as a liability on our balance sheet, as well as a corresponding “right-to-use” asset, which is an asset that represents the right to use or control the use of a specified asset for the lease term, for all long-term leases. See Part 1, Item 1, Note 10, “Leases,” for additional information about our leases.
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 2018, we completed the following acquisitions, including those that impact the comparability of our 2019 results with our 2018 results:
On October 15, 2018, we acquired 100% of the equity of Rubixis, Inc. (“Rubixis”). Rubixis is an innovative healthcare revenue cycle solutions company that helps providers maximize reimbursement from insurance payers. Rubixis brings specialized expertise in the management of denials and underpayments, two significant pain points for healthcare providers. The results of operations of Rubixis, which are not material to our consolidated financial statements, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition. 
On June 29, 2018, we acquired 100% of the equity of iovation, Inc. (“iovation”). iovation is a provider of advanced device identity and consumer authentication services that helps businesses and consumers safely transact in a digital world. The results of operations of iovation, which are not material to our consolidated financial statements, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition. 
On June 22, 2018, we increased our noncontrolling interest investment in SavvyMoney, Inc. (“SavvyMoney”). Our initial investment in SavvyMoney was made on August 30, 2016. SavvyMoney is a provider of credit information services for bank and credit union users. We measure our investment in SavvyMoney at our initial cost, minus any impairments, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments in SavvyMoney, with any adjustments recorded in other income and expense. We will record any future dividends in other income and expense when received.
On June 19, 2018, we acquired 100% of the equity of Callcredit Information Group, Ltd. (“Callcredit”). Callcredit is a United Kingdom-based information solutions company founded in 2000 that provides data, analytics and technology solutions to help businesses and consumers make informed decisions. The results of operations of Callcredit have been included as part of our International segment in our consolidated statements of income since the date of the acquisition. See Part II, Item 8, “Notes to Consolidated Financial Statements,” Note 2, “Business Acquisitions,” for further information about this acquisition.
On June 1, 2018, we acquired 100% of the equity of Healthcare Payment Specialists, LLC (“HPS”). HPS provides expertise and technology solutions to help medical care providers maximize Medicare reimbursements. The results of operations of HPS, which are not material to our consolidated financial statements, have been included as part of our USIS segment in our consolidated statements of income since the date of the acquisition. 
Key Components of Our Results of Operations
Revenue
The following is a more detailed description of how we derive and report revenue for our three reportable segments:

27


U.S. Information Services
U.S. Information Services (or “USIS”) provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. These businesses use our services to acquire new customers, assess consumers’ 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 methods in our USIS segment allow us to serve a broad set of customers across industries. We report disaggregated revenue of our USIS segment for the following verticals:
Financial Services: The financial services vertical consists of our consumer lending, mortgage, auto and cards and payments lines of business. Our financial services clients consist of most banks, credit unions, finance companies, auto lenders, mortgage lenders, online-only lenders (FinTech), and other consumer lenders in the United States. We also distribute our solutions through most major resellers, secondary market players and sales agents. Beyond traditional lenders, we work with a variety of credit arrangers, such as auto dealers and peer-to-peer lenders. We provide solutions across every aspect of the lending lifecycle: customer acquisition and engagement, fraud and ID management, retention and recovery. Our products are focused on mitigating risk and include credit reporting, credit marketing, analytics and consulting, identity verification, and authentication and debt recovery solutions.
Emerging Verticals: Emerging verticals include healthcare, insurance, collections, property management, public sector and other diversified markets. Our solutions in these verticals are similar to the solutions in our financial services vertical and also address the entire customer lifecycle. We offer onboarding and retention solutions, transaction processing products, scoring products, marketing solutions, analytics and consulting, identity management and fraud solutions, and revenue optimization and collections solutions.
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 services, decisioning capabilities, 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.
We report disaggregated revenue of our International segment for the following regions: Canada, Latin America, the United Kingdom, Africa, India and Asia Pacific.
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 consumers through both direct and indirect channels.
Cost of Services
Costs of services include data acquisition and royalty fees, personnel 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, impairments of equity-method and cost-method investments, if any, 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.

28


Results of Operations
Key Performance Measures
Over the past few years, we have completed a significant number of acquisitions that have transformed our business. We have also developed a significant number of new product offerings that have further diversified our portfolio of businesses. As a result of the evolution of our business, we have changed the disaggregated revenue and our measure of segment profit (Adjusted EBITDA) information that we provide to our chief operating decision makers (our “CODM”) to better align with how we manage the business. Accordingly, our disclosures around the disaggregation of our revenue and the measure of segment profit have been recast for all periods presented in this Quarterly Report on Form 10-Q to conform to the information used by our CODM. We have not changed our reportable segments and these changes do not impact our consolidated results. Part 1, Item 1, Note 15, “Reportable Segments,” for further information about this change.
Management, including our CODM, evaluates the financial performance of our businesses based on a variety of key indicators. These indicators include the GAAP measures of revenue, segment Adjusted EBITDA, cash provided by operating activities and cash paid for capital expenditures and the non-GAAP measures Adjusted Revenue and consolidated Adjusted EBITDA. For the three months ended March 31, 2019 and 2018, these key indicators were as follows:
 
Three Months Ended March 31,
(dollars in millions)
2019
 
2018
 
$
Change
 
%
Change
Revenue:
 
 
 
 
 
 
 
Consolidated revenue as reported
$
619.3

 
$
537.4

 
$
81.9

 
15.2
 %
Acquisition revenue-related adjustments(1)
4.2

 

 
4.2

 
n/m

Consolidated Adjusted Revenue(2)
$
623.5

 
$
537.4

 
$
86.1

 
16.0
 %
 
 
 
 
 
 
 
 
USIS gross revenue
$
368.8

 
$
342.3

 
$
26.5

 
7.7
 %
Acquisition revenue-related adjustments(1)
0.2

 

 
0.2

 
n/m

USIS gross Adjusted Revenue(2)
$
369.0

 
$
342.3

 
$
26.7

 
7.8
 %
 
 
 
 
 
 
 
 
International gross revenue
$
146.0

 
$
95.9

 
$
50.1

 
52.2
 %
Acquisition revenue-related adjustments(1)
4.0

 

 
4.0

 
n/m

International gross Adjusted Revenue(2)
$
150.0

 
$
95.9

 
$
54.1

 
56.4
 %
 
 
 
 
 
 
 
 
Consumer Interactive gross revenue
$
123.4

 
$
117.9

 
$
5.4

 
4.6
 %
 
 
 
 
 
 
 
 
Adjusted EBITDA(2):
 
 
 
 
 
 
 
Reconciliation of net income attributable to TransUnion to Adjusted EBITDA(2):
 
 
 
 
 
 
 
Net income attributable to TransUnion
$
70.9

 
$
73.1

 
$
(2.2
)
 
(3.0
)%
Discontinued operations
1.6

 

 
1.6

 
n/m

Net income from continuing operations attributable to TransUnion
72.5

 
73.1

 
(0.6
)
 
(0.8
)%
Net interest expense
43.5

 
21.8

 
21.6

 
99.2
 %
Provision (benefit) for income taxes
0.6

 
27.6

 
(27.1
)
 
(97.9
)%
Depreciation and amortization
93.5

 
66.6

 
26.9

 
40.4
 %
EBITDA
210.0

 
189.2

 
20.9

 
11.0
 %
Adjustments to EBITDA:
 
 
 
 
 
 
 
Acquisition revenue-related adjustments(1)
4.2

 

 
4.2

 
n/m

Stock-based compensation(3)
12.7

 
10.8

 
1.9

 
17.4
 %
Mergers and acquisitions, divestitures and business optimization(4)
11.3

 
3.3

 
8.0

 
n/m

Other(5)
0.7

 
(0.6
)
 
1.3

 
n/m

Total adjustments to EBITDA
28.9

 
13.5

 
15.4

 
114.1
 %
Consolidated Adjusted EBITDA(2)
$
238.9

 
$
202.6

 
$
36.3

 
17.9
 %

29


 
Three Months Ended March 31,
(dollars in millions)
2019
 
2018
 
$
Change
 
%
Change
USIS Adjusted EBITDA
$
142.0

 
$
133.4

 
$
8.7

 
6.5
%
International Adjusted EBITDA
65.0

 
33.0

 
31.9

 
96.6
%
Consumer Interactive Adjusted EBITDA
60.2

 
56.9

 
3.3

 
5.8
%
Corporate
(28.3
)
 
(20.6
)
 
(7.6
)
 
36.9
%
Consolidated Adjusted EBITDA(2)
$
238.9

 
$
202.6

 
$
36.3

 
17.9
%
 
 
 
 
 
 
 
 
Other metrics:
 
 
 
 
 
 
 
Cash provided by operating activities of continuing operations
$
126.2

 
$
101.0

 
$
25.2

 
25.0
%
Capital expenditures
$
(41.9
)
 
$
(26.9
)
 
$
(15.0
)
 
55.8
%
nm: not meaningful
As a result of displaying amounts in millions, rounding differences may exist in the table above.
1.
This adjustment represents certain non-cash adjustments related to acquired entities, predominantly adjustments to increase revenue resulting from purchase accounting reductions to deferred revenue we record on the opening balance sheets of acquired entities. Deferred revenue results when a company receives payment in advance of fulfilling their performance obligations under contracts. Business combination accounting rules require us to record deferred revenue of acquired entities at fair value if we are obligated to perform any future services under these contracts. The fair value of this deferred revenue is determined based on the direct and indirect incremental costs of fulfilling our performance obligations under these contracts, plus a normal profit margin. Generally, this fair value calculation results in a reduction to the purchased deferred revenue balance. The above adjustment includes an estimate for the increase in revenue equal to the difference between what the acquired entities would have recorded as revenue and the lower revenue we record as a result of the reduced deferred revenue balance. This increase is partially offset by an estimated decrease to revenue for certain acquired non-core customer contracts that are not classified as discontinued operations that will expire within approximately one year from the date of acquisition. We present Adjusted Revenue as a supplemental measure of our revenue because we believe it provides meaningful information regarding our revenue and provides a basis to compare revenue between periods. In addition, our board of directors and executive management team use Adjusted Revenue as a compensation measure under our incentive compensation plans. The table above provides a reconciliation for revenue to Adjusted Revenue. The estimated adjustments to revenue are subject to change as we finalize the fair value assessments of the deferred revenue acquired with recent acquisitions and as we complete our assessment of the non-core customer contracts.
2.
We define Adjusted Revenue as GAAP revenue adjusted for certain acquisition-related deferred revenue and non-core contract-related revenue. We define Adjusted EBITDA 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 Revenue as a supplemental measure of revenue because we believe its provides a basis to compare revenue between periods. 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 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 compensation plan. Furthermore, under the credit agreement governing our senior secured credit facility, 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.” 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 TransUnion. The table above provides a reconciliation from our net income (loss) attributable to TransUnion to consolidated Adjusted EBITDA for the three months ended March 31, 2019 and 2018.
3.
Consisted of stock-based compensation and cash-settled stock-based compensation.

30


4.
For the three months ended March 31, 2019, consisted of the following adjustments: a $5.3 million loss on the impairment of an investment in a nonconsolidated affiliate; $4.2 million of Callcredit integration costs; a $0.9 million adjustment to contingent consideration expense from previous acquisitions; and $0.9 million of acquisition expenses.
For the three months ended March 31, 2018, consisted of the following adjustments: $1.7 million of acquisition expenses and a $1.6 million loss on the impairment of an investment in a nonconsolidated affiliate.
5.
For the three months ended March 31, 2019, consisted of the following adjustments: a $0.3 million loss from currency remeasurement of our foreign operations; and $0.4 million of loan fees.
For the three months ended March 31, 2018 consisted of the following adjustments: a $(0.7) million gain from currency remeasurement of our foreign operations; a $(0.7) million mark-to-market gain related to ineffectiveness of our interest rate hedge; $0.4 million of fees incurred in connection with a secondary offering of shares of TransUnion common stock by certain of our stockholders; and $0.4 million of loan fees.
Revenue
Revenue increased $81.9 million for the three months ended March 31, 2019 compared with the same period in 2018, due to organic growth in all of our segments, including both the USIS financial services and emerging verticals and most of the International regions, revenue from our recent acquisitions in our USIS and International segments, and revenue from new product initiatives, partially offset by the impact of weakening foreign currencies on revenue from our International segment. Acquisitions accounted for an increase in revenue of 11.1%. The impact of weakening foreign currencies accounted for a decrease in revenue of 1.6%.
Revenue by segment and a more detailed explanation of revenue within each segment are as follows:
 
Three months ended March 31,
 
Change
(in millions)
2019
 
2018
 
$
 
%
 
USIS:
 
 
 
 
 
 
 
 
     Financial Services
$
189.1

 
$
182.6

 
$
6.5

 
3.6
 %
 
     Emerging Verticals
179.7

 
159.7

 
20.0

 
12.5
 %
 
USIS gross revenue
368.8

 
342.3

 
26.5

 
7.7
 %
 
 
 
 
 
 
 
 
 
 
International:
 
 
 
 
 
 
 
 
     Canada
23.0

 
21.7

 
1.3

 
5.9
 %
 
     Latin America
25.3

 
25.2

 
0.1

 
0.3
 %
 
     United Kingdom
42.2

 

 
42.2

 
n/m

 
     Africa
15.0

 
17.0

 
(2.0
)
 
(11.8
)%
 
     India
27.7

 
20.2

 
7.5

 
37.4
 %
 
     Asia Pacific
12.8

 
11.8

 
1.0

 
8.5
 %
 
International gross revenue
146.0

 
95.9

 
50.1

 
52.2
 %
 
 
 
 
 
 
 
 
 
 
Consumer Interactive gross revenue
123.4

 
117.9

 
5.4

 
4.6
 %
 
 
 
 
 
 
 
 
 
 
Total gross revenue
$
638.2

 
$
556.1

 
$
82.0

 
14.8
 %
 
 
 
 
 
 
 
 
 
 
Intersegment revenue eliminations:
 
 
 
 
 
 
 
 
USIS
$
(17.5
)
 
$
(17.4
)
 
$
(0.1
)
 
0.4
 %
 
International
(1.2
)
 
(1.2
)
 

 
(1.9
)%
 
Consumer Interactive
(0.2
)
 
(0.2
)
 

 
30.2
 %
 
Total intersegment revenue eliminations
(18.9
)
 
(18.8
)
 
(0.1
)
 
0.5
 %
 
Total revenue as reported
$
619.3

 
$
537.4

 
$
81.9

 
15.2
 %
 
nm: not meaningful
As a result of displaying amounts in millions, rounding differences may exist in the table above.

31


USIS Segment
USIS revenue increased $26.5 million compared with the same period in 2018, due primarily to increases in revenue from both verticals, including an increase of 5.2% from recent acquisitions.