Experian plc (EXPN) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Experian's First Quarter Trading Update Webcast and Conference Call. [Operator Instructions] Please be advised that this conference is being recorded. I would now like to hand the conference over to your first for today, Mr. Brian Cassin, Chief Executive Officer. Please go ahead, sir.

Thank you, operator. Hello, everybody, and welcome to our Q1 trading update call. I'm here, as usual, with Lloyd, who will take you through the financial performance after my opening remarks. We've had a good start to the year with continued new business strength and accelerating potential across a range of AI-enabled opportunities, Q1 total revenue growth was 10% at actual rates, 8% at constant currency and organic revenue growth was 7%. Organic revenue growth was 7% in North America. In Latin America, we've continued to see strong momentum, which was up 12%. U.K. & I delivered 5% growth and EMEA Asia Pacific was up 1%. The Globally, B2B organic revenue growth was 9% and Consumer Services growth of 3% was impacted by the wind-down of 2 North America breach contracts that we've previously discussed. Turning to the regional highlights, starting with North America. Financial Services delivered another strong quarter, up 13%, building on our excellent FY '26 for client renewals. Growth was broad-based across credit, fraud, verifications and mortgage. And while clients continue to monitor credit quality and the like of inflation risks, the lending environment remains relatively stable with solid growth in bank lending and originations and stable to modestly improving delinquencies, supporting growth in unsecured credit volumes. Client momentum also remains strong. Pipelines are healthy, and we reached an important milestone with all 10 of our largest strategic clients now live on Ascend, further strengthening our leadership and platform and analytics. We're now building on that foundation by moving new agentic AI applications into pilot and expanding adoption of mobile Risk Manager, our GenA-enabled compliance monitoring solution. We continue to see focus by our financial services clients on strong AI governance and explainability to meet regulatory requirements as well as on strengthening fraud capabilities in response to the rise in fraud attacks, both are creating growth opportunities for Experian. In mortgage, 11 of the top 15 mortgage lenders are now accessing VantaCore 4.0. These lenders collectively make up nearly 30% of the total mortgage market demonstrating strong interest in Vantage score amongst these large lenders. Performance across the verticals was also strong, was up 8%, led by Health & Automotive. In health, growth was driven by continued adoption of patient Accurate, which is our AI-powered registration platform and a record level of implementations. In automotive, we continue to strengthen our competitive position through new client wins led by AutoCheck. In Consumer Services, we continue to execute our strategy of reaching consumers across every channel, leveraging our trusted financial health brand, organic revenue growth was 2% lower, which reflects the end of the 2 data bridge products. Excluding data bridge growth was consistent with last quarter across the product verticals and with good growth in insurance and personal loans and some softness in credit cards. We are focused on extending the Experian brand beyond our own channels, and we're making good progress with a growing pipeline of partnerships to expand access to our products either, for example, is now live on Snapchat supporting consumer credit education and we have established a steady cadence of app launches in at EPG while advancing partnerships with other leading LLM to deliver compelling compliant consumer experiences. At the same time, we continue to deepen our existing panels and enhance membership benefits, most recently in mortgage, where the integration of [indiscernible] is progressing well. In Latin America, organic revenue growth was 12%, with strong performances in both Brazil and Spanish Latin America. B2B delivered a strong quarter, which is up 9%. In Brazil, we have enhanced our market position in fraud following last year's Clear sale integration. And more recently, we added ID Well, which further strengthens our identity assets. Our expanded capabilities are driving higher adoption across our strategic clients with expansions across major Brazilian banks and telecommunications providers while also helping us capture new opportunities in new client segments. We're also continuing to expand our proposition for SMEs, where performance has also been very strong. Consumer Services delivered another very strong quarter with organic revenue growth of 22%. Growth was broad-based, driven by continued audience expansion and a growing product portfolio. Our credit marketplace performed very strongly, supported by the expansion of private payroll lending, while we continue to grow premium subscriptions and delivered another strong quarter for Lymphonome, helping consumers renegotiate debt and consolidate loans. In the U.K. and Ireland, organic revenue growth was 5%, with B2B also up 5%. We continue to make good progress through competitive wins and client upsell driving further penetration of the Ascend Sandbox with new use cases, expanded fraud use cases and some growth and verifications. This resulted in broad-based growth across credit, fraud and data quality despite a relatively subdued lending environment. Consumer Services delivered 7% organic revenue growth, supported by strong audience engagement and good growth in premium subscriptions, driven by continued product enhancements as well as further progress in marketplace. In EMEA and Asia Pacific, organic revenue growth is 1%, primarily reflecting the timing of deliveries against the prior year comparator, we expect Q2 to be at a more normalized level of growth. We continue to make good strategic progress with new products and traction across the region, supporting future growth opportunities. And with that, I will now hand it over to Lloyd.

Thanks, Brian, and good morning, everyone. As seen, we made a good start to FY '27, with Q1 organic revenue growth of 7% in the middle of our 6% to 8% guidance range for the year. in line with our expectations. And excluding data breach, organic revenue growth in the first quarter was 8%. Total revenue growth was 8% at constant exchange rates and 10% at actual exchange rates. Acquisitions contributed around 1 percentage point to growth and foreign exchange was a tailwind of around 2 percentage points. By segment, Group B2B organic revenue growth was 9% with Financial Services up 9% and verticals up 7%. Group Consumer Services grew 2%, reflecting the roll-off of the 2 North American breach contracts we mentioned at our full year results. And overall, underlying traded trends were stable and in line with our expectations. Turning to the regions. In North America, organic revenue growth was 7% with total revenue growth of 8%, B2B growth was 11%. And as you'll recall, in the first quarter last year, we had some one-off revenue in North America Financial Services, which we lapped in the quarter. Excluding that, all of the trading trends were stable in line with those that we reported in May. Financial Services grew 13%, supported by Ascend analytics solutions, broad prevention products, mortgage profiles and stable underlying client activity. Mortgage trends were in line with the fourth quarter with volumes slightly higher and revenue up in the 45% to 50% range. Within Verticals, revenue grew 8%, in line with the second half of last year, with continued strength in Health and Automotive. Consumer Services was 2% lower, reflecting the completion of the roll-off in the 2 long-term data bridge contracts that we reported last quarter. Excluding data breach, Consume Service trends were in line with last quarter, with strong growth in personal loans and insurance and softness in credit cards. In Latin America, as expected, we saw a good quarter of organic growth and total constant currency revenue growth up 12% at actual exchange rates, revenue grew 25%. B2B reported good growth, up 9% with Financial Services also up 9%, supported by commercial momentum across our strategic clients in Brazil. including identity and fraud as well as strong progress in our SME channel and agri finance. Pipelines continue to be strong. and that really underpins our expectations for the full year of double-digit organic revenue growth in Latin America. Consumer Services delivered another very strong quarter, up 22%, driven by [indiscernible], premium and marketplace, including the ongoing expansion of payroll lending. And we also completed the acquisition of ID War on July 1, which further strengthens our fraud and digital identity capabilities in Brazil. In the U.K. and Ireland, organic revenue growth was 5%, with total constant currency growth of 7%, including the contribution from KYC360. B2B grew 5%, supported by good progress with new business wins and continued excellent progress with our Ascend platform. Consumer Service grew 7% and with marketplace growth supported by higher engagement following the launch of the new 1250 credit score and continued subscription product enhancements. As Brian mentioned, EMEA Asia Pacific, organic revenue growth was 1%. And mainly reflecting our prior year comparatives, and we expect growth to be higher through the rest of the year. And turning finally to the outlook. Our full year expectations and modeling considerations are changed. For FY '27, we continue to expect organic revenue growth in the range of 6% to 8%, with an inorganic contribution of around 1%. And based on current rates, we expect foreign exchange to be a tailwind of 1% to 2% for both revenue and benchmark EBIT, and we continue to expect the progression of around 50 basis points in organic potent currency margin production. With that, I'll hand you back to Brian.

Great. Thanks, Lloyd. In summary, we started the year well, delivering a good performance in Q1. We're executing strongly against our strategy and are encouraged by the opportunities ahead. We continue to see favorable trends driving great assumption of proprietary data, expanded distribution channels, new addressable markets and enhanced productivity. Together, these drivers strengthen our confidence in the growth opportunity ahead and we continue to expect strong growth in FY '27 consistent with our previous guidance. With that, we'll now open the line for questions. We will be grateful that you could limit yourselves to 2 questions each so that we can get to as many people as possible. Operator, over to you.

[Operator Instructions] and now we're going to take the first question. And it comes line of Andy Grobler from BNP Paribas.

Just a couple from me, if that's okay. Firstly, on the B2C market in the U.S. Can you just talk about the underlying conditions from a macro perspective and how those are evolving? And with that, any change in the competitive dynamics in that market? And then secondly, for mortgage, I know it's not huge, but it's a decent driver of growth. What are you seeing in terms of Vantage and FICO Direct? Is there any conversion? And what do you expect through the remainder of this calendar year, please?

Thanks, Andy. Just on the mortgage, I don't think that we're seeing anything different to what we talked to you just a few weeks ago. in May, nothing fundamentally new on the direct channel. The only thing I think that we pointed out last time was the trial that's ongoing. We continue to see activity through that. but nothing fundamentally changed from just a few weeks ago. And then on the underlying conditions from a macro perspective, as it applies to, I think, your question was in relation to B2C, but I think it applies across the board, B2C and B2B. We're not really seeing any significant change in the macro positions. We call them stable. I think that continues. The underlying conditions are good -- okay to good. And it's only 8 weeks since we spoke to back in May, and nothing really has fundamentally changed. Lloyd, would you add anything to that?

No, I think very stable. If you -- I mentioned in the remarks, if you look inside our marketplace business, loans growth continues to be very strong. Insurance had a good start to the year. And in credit cards, that was a bit softer, but that's really isolated to 1 or 2 clients that we talked about a few weeks ago and in May. Overall marketplace in North America was very slightly stronger, up from 1% growth in Q4 to 2% in Q2. I mean that -- we see that as stable. Membership was very slightly better at 2% growth versus 1% in Q4. Again, that really underpins our stable our sale commentary.

And in terms of competitive dynamics, has anything changed or is expected to change in the near term in that market?

No, I think it's a straight answer to that, Andy, nothing's changed. Yes, market remains structured as well. Again, no real difference to what we talked to you 8 weeks ago about. Obviously, haven't seen any results from competitors yet. So -- but as far as we can see, it's pretty much the same as it was.

Now we're going to take our next question and the question comes line of Suhasini Varanasi from Goldman Sachs.

My first question is on the comment you made that all of your 10 largest clients are on the asset platform today. I just wanted to get some color on what they've been using before, whether you think competitors products, where the in-sourcing and therefore, they shifted to Ascend. Some color there would be great. And then second 1 on the U.S. B2C business. Sorry, just to go back to the previous question. What would it take to get to high single-digit growth underlying, just a force? Is it maybe a small rebound on cyclical activity auto insurance, et cetera, has been doing well, but overall growth is still low single digits. So I'm just trying to understand the moving parts to get you to high single-digit growth there.

On Ascend, I think we've talked a lot about as we expand into the different things that Ascend do, the biggest thing that we're displacing is internal labor. Often, these are isolated bits of analytics inside the bank. As we've moved into model risk measure, that's compliance activity, et cetera. So these are Ascend is really a groundbreaking product that replaces lots of individual pieces of analytics and spreadsheets and other things inside the bank. That's really why actually the penetration has been so rapid. It's a very strong, both productivity and effectiveness business case that we provide for our clients. On B2C, I think as we've talked to you in the past, you have -- if you think about membership, membership is often countercyclical. So that's often been 1 of the things that's helped us be very resilient in consumer business at times when credit availability is low. So I think it really depends on what we see for the outlook for the overall lending environment. the build-out of our insurance vertical last year was, I think, more of a stabilizing year after some strong growth, but we started the year really well. And I think the membership product, we've got some interesting new product releases that are coming out through this year. So we're feeling positive about how that develops. But I think we'll obviously report as we go through the strong progress.

Now we're going to take our next question. And it comes from Andrew Ripper from Panmure Liberum.

Two questions from me. First of all, LATAM, you mentioned you got a good pipeline and B2B growth accelerated. Do you think we're sort of through that slightly sticky period you had the last couple of years where market growth seems to have been constrained by the tightening of the rate cycle and is your expectation over the medium term a double-digit growth sustainable in the region? And then second question, I appreciate, Brian, probably things have moved on a lot in the last 6 or 7 weeks. But I just wonder if you could go back to the gene development initiatives you've got going on in relation to the Ascend platform and [indiscernible] commerce. I think you launched your agent earlier on this year. Can you give us a sort of sense of what benefit you're expecting from those over the course of the year, what client interest and takeup has been like?

Great. Thanks, Andrew. On the LatAm growth, I think we do expect that growth to be sustainable. I think the market conditions have not really changed that much. I think what you're seeing is I know there's sort of a wave of new business opportunities for us, partly coming out of the clear sale integration, which is going very well. So I think we're just executing well against a similar environment, I think, is will be the answer. So we feel pretty confident about that. On the Agentic side, we continue to make progress on Agent Trust, and that is further engagement with the ecosystem of partners that are needed to really embed this as part of the truly operating sort of system in the market. Those conversations continue. They're gaining traction. We are close to signing up additional participants in that. So I would say progress is good. Further tests continue. We have prototypes of the product and we're demonstrating that in lots of different places. So progress is good. And I think we'll hear more of that as we go through the rest of the year. On Ascend, we launched what we call the Send Agentic operating system at Money2020 just a few weeks ago. That's an operating system that sits on the Ascend platform, which allows agents to interact with that platform in a really powerful way. The reception to that has been really fantastic. There's lots of engagement on it. So we're excited about that property. We did talk about that in May. We knew we were ready -- we haven't got it launched at the time that we announced our results in May, we knew that was coming up. So again, we continue to make really good progress on building out the Agentic capabilities across all of our portfolio. This is a really great example. And as we've reported, you can see that the engagement in the same platform is -- continues to be incredibly strong and, in many cases, actually accelerating.

We're going to take our next question. And the question comes line of Simon Clinch from Rothschild & Co Redburn.

So just a couple of questions here. First of all, I was wondering if you could just help us think about the cadence of growth in the U.S. consumer business through the rest of this year. The puts and takes we need to think about going forward. So we know the contracts from those 2 data breaches are rolling off. But I think that other sort of onetime impacts that we might need to consider when thinking about the overall growth relative to the underlying core, which I believe is -- which was 3% last quarter. So if we can start with that, please, that would be great. And then as a follow-up, I'd be interested to hear just in terms of the mortgage market and the FICO revenues you have, could you help us break out sort of what the mortgage revenue growth is if you excluded the FICO revenues from that and get a sense of what that growth is as well?