TransUnion (TRU) Earnings Call Transcript & Summary

Good morning, everyone. I'm Toni Kaplan, the Head of U.S. Business Services Research here at Morgan Stanley. And joining me today is Matt Spiegel, VP of Digital Marketing Solutions at TransUnion; and we also have Aaron Hoffman, Head of Investor Relations at TransUnion. Before we begin, I need to read the following disclaimer. Please note that this webcast is from Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you are a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So now that we have that over with, we're talking about media today. So this is a newer area of focus for TransUnion, which presents a significant long-term opportunity for the company. Matt joined TransUnion in 2018 to lead this vertical. And prior to that, he served as the Managing Director of Media Link, where he was responsible for leading the company in digital marketing, media and technology innovation. And prior to working at Media Link, he was Founder and CEO of Resolution Media Omnicom search media -- search marketing agency. So Matt, thank you so much for joining us today. We're really lucky to have you, just given the intense focus that TransUnion is focusing on media right now.

And I think when people think about TransUnion, they're not really normally thinking about the media vertical, but it's become such a priority recently. And just to level set for the audience, can you just first provide a high-level overview of the vertical and the client demand that you're solving for?

Yes. Sure. Well, thanks, Toni. Thanks for having me, and I look forward to the conversation. Yes, I mean, as I think undoubtedly, much of your audience knows, TransUnion has always been focused on being -- going to market in a very vertically focused way, that we know that when we focus on like-minded companies, we can offer unique value. And when we think about that as it relates to the media industry, the way I think to best think about it is we're working with companies that are either in the business of creating, distributing or monetizing content and/or they're in the business of helping marketers advertise around that content. And so what does that mean? That means that our client base is everything from your big media companies to [Technical Difficulty] your AdTech and MarTech, those 2 big agencies to your streaming media companies. So it's those types of companies we're talking about calling on. And we're predominantly focused on solving 2 primary problems or 2 -- or solving for 2 opportunities. One is the customer acquisition opportunity, which is as many of these media companies become more direct-to-consumer companies, they're looking for more data intelligence and identity information around how to reach the right consumers, and we're providing the intelligence and technology solutions for that. And then secondly, all of these companies are having to meet their marketers' demands, right? So not just their own marketing, but their marketing clients as they advertise on their properties. Those companies are all seeking information to become more precise, more people-based marketers, more household-driven, accurate, again, that precision people-based marketing journey, and so we're helping enable them to do that as well. So again, either helping them acquire new customers or keep more marketing dollars and solve for the problems of that.

Great. And tell us why media was sort of the right vertical at this moment. Was it that the assets were so good on their own and you found ways to put them together in a better way? Or was there a real specific objective to get bigger in digital marketing solutions?

Yes. Good question. And a little bit of both, right? I mean so as you kind of highlighted, some of my background has been really the intersection of data and technology in the media and marketing industry really throughout my career and always looking at new ways that that's going to be applied to the industry. And having come last several years before [Audio Gap] background, I had gotten to see a lot of the evolution happening in the industry and was fortunate enough to do some work with TransUnion. And what I saw at the time and what I know new leadership recognized was that there were some really inherent assets that we were playing with, which are truly unique. And we typically break them down to 3 core things. One is just our ability to have a really comprehensive and accurate view of individual and household level identity, and that truly is a unique asset of ours. The second is a really, really deep expertise in data science and specifically around matching disparate data sets, so matching and linking different identity signals. And then three, a really rich history of being able to manage businesses in a regulated environment and having a really big compliance engine, which, of course, is becoming more and more important in kind of the media and marketing ecosystem. And so we knew we had those assets that were only becoming more important in this category. And so we started from there, but we also recognized that to be as relevant as we wanted to be, we were going to have to build some new capabilities. And so that's a lot is what we -- we'll talk about no doubt about some of the acquisitions we've made and -- to really round out that solution set. But -- so it was really kind of twofold. One is, hey, these assets that we -- TransUnion uniquely has, will only become more valuable. And we specifically see, of course, the changing consumer and patterns of us, our lives becoming more "digitized". And so we also had a desire to specifically figure out how to be relevant in "marketing solutions" as well. And at the intersection of that was really why we recognize this opportunity to be a player within this media industry as well.

That's great. And you just mentioned the acquisitions, recently bought TruSignal and Tru Optik. Maybe you could just talk about what capabilities came to TransUnion through those acquisitions, just given that you've sort of had this recently some really good acquisitions in this space.

Yes. Yes, sure. So as we just -- obviously just highlighted, we had those assets. [Audio Gap] technology tools that being relevant in the kind of this modern marketing ecosystem required. And so as -- what we did over the last couple of years was look to fill in both specific products, and I'll list a couple, but also the team. And so I just would highlight as we think about what we've acquired over these last 18 months is it wasn't just about what we were buying today, but about what we were being able to build as a result of putting these pieces together. And so when we acquired TruSignal about 18 months ago, we got some great baseline technology around an audience building, kind of an audience segmentation engine with some great API infrastructure that was embedded into other ad technology tools. The company Signal that we acquired this summer had really focused on company-owned or often referred to as first-party data assets and the collection of those assets in the real time, both collection and distribution of data across different properties. And then Tru Optik had become the leader in all things, kind of streaming media, often thought about as OTT, right, connected TV world, which really for us was hugely important because we believe strongly in that the -- a huge wave that's coming is all around the connected home, right? And so really, if you put these pieces together, again, we've acquired a team of great people to help us build. We've acquired a handful of different disparate kind of products and a whole bunch of technology infrastructure that, again, allows us -- our swim lane -- what we know very clearly is our unique lane here is around identity and audience intelligence. It's helping people know which households and which individuals to reach and giving people the tools to slice and dice that intelligence and apply it. And so our acquisition is going to round out a lot of those kind of core capabilities and give us a whole team of people to make sure we're staying kind of at the head of the curve against those desires.

Great. And are there any other capabilities that you feel would really round out the portfolio? Should we expect there to be a lot more M&A coming within the media space?

Not tomorrow. We're certainly -- I think we're very pleased with all that we've put together over the last 18 months and certainly, again, a couple of big acquisitions this summer. Our focus immediately is putting those pieces together and really innovating from within at this point. But listen, I think as we grow and as we have success, no doubt, there will be more opportunities for us to find companies that fit within our portfolio. And so certainly, would -- far from saying never, but now, our immediate focus is not about looking at additional acquisitions, it is recognizing -- and I think we've put together a again, a pretty solid team and a pretty solid suite of products. And our mission that you'll see from us over the next little while is building that out and growing the vertical.

Great. And could you talk about the competitive landscape? Who are the primary competitors in this space? Is it unique for a financial company to be in this space? And does that give you any advantages?

Yes. Well, we -- as a company like TransUnion definitely has advantages in this space for sure, and it comes back to those core assets, which we know are unique to TransUnion. A lot of companies in this "digital ecosystem", the digital start-ups, if you will, don't have the types of capabilities and assets that we do. And so that is certainly unique. Are we alone in our traditional competitor set that have been in this business? No, but I think we're running a pretty unique strategy here. But whether you look at the likes of an Experian or an Equifax or a New Star or a Live Ramp or many start-ups, right? there's certainly a whole list of companies that are looking to solve this connection of identity and audience intelligence products that the media and marketing industry needs. So yes, there's competition. I think, again, our particular focus, specifically around our investment around the connected home, I think it's going to put us at a leadership position for where this business is headed. So again, I suppose the answer to your question is not fully unique, a little bit unique, but certainly us coming to the marketplace here gives us pretty -- a substantial asset that we know companies can't easily replicate. We're building the products that the digital ecosystem has traditionally expected. It's much easier for us to do that than it is for a lot of digital companies to replicate the assets that TransUnion is bringing to the market.

That's great. And within info services, Nielsen and Verisk come to mind as being relevant here. Nielsen being focused on audience segmentation with regard to TV advertising and Verisk with spend analytics and marketing targeting models. So do you compete with them? Do you partner with them? Or is what you're doing completely separate from what they're doing?

Yes. It's a good question. Well, listen, way more partnership than competition, although this industry is certainly full of coopetition. And I often talk about it this way, there's a venn diagram in this industry of companies that have overlapping capabilities. And we often think about it though is what's the primary mission of a specific organization. Our mission, as an example, if you compare against Nielsen, it's not at all to be a measurement company, we're really focused on our swim lane around that, again, identity and audience intelligence. That should help feed the Nielsens of the world for them to do good measurement. So again, at a macro basis, there will be points of time in a company the size of TransUnion or a size of Nielsen, where, sure, there are going to be pockets of competition, but much more, we're about partnering with companies like that. And again, we recognize that we want to be an ecosystem player. Again, we want to be best-in-class in the things we know we're good at and then provide enabling technologies, right, really be that empowerment layer that inside tools that can be white-labeled so that the Nielsens, the Verisks of the world can do what they do, which is, again, that analytics, that marketing, that segmentation analysis even stronger. And so yes, listen, there might be times when you would find a particular client that would say, hey, we're pitted against each other, but by and large, those are partners, not competitors.

Great. And then if we spoke about how the Healthcare and Insurance businesses are now around $200 million. Can you just put that in perspective in terms of the total TAM for the media business? And how we should be thinking about a time line for reaching maybe a level like that?

Well, I think I'd get in a lot of trouble if I gave you a time line on that level, but what I can say is we certainly see a many billion-dollar TAM. There's a huge market opportunity here, right? And listen, quite clearly, I think TransUnion has demonstrated that we have serious growth ambitions in this category. We've made some material investments. We see a big opportunity. We see a market that's in flux, right? We could get into a bunch of stuff around, the death of the cookie and the changing dynamics of Apple and Google's browser status. And so -- and all of our consumer behavior, right, as we become more and more digitized, all that has massive impacts. And so I don't have a time line for you, but we see, again, a several, several billion-dollar market opportunity here, and we're going to continue to look to grow aggressively. And yes, I'll have to leave it at that, but we certainly see big opportunities.

Great. And just also on sort of the idea of TransUnion creating verticals and sort of places they really weren't before, is there anything from the buildup of the Healthcare and Insurance verticals that helps in terms of paving a way for Media to become sort of a [indiscernible]?

Yes. Yes. Yes. So absolutely. There's really a good playbook within TransUnion about how we go about doing this. And again, I think it just starts with the fact that we focus on these vertical businesses. And I explain to many people that -- and certainly, and my peers are not as historically familiar with TransUnion. And I talk about how many people in the marketing industry often think about verticalization from a sales perspective. And I say, no, it's really much more than that. It really is about understanding the business category in a much richer way. And so number one, just starting with the fact that we focus on these vertical businesses helps. Number two, we've been huge on -- TransUnion's got a whole blueprint for creating client advisory boards, client summits, right? So really engaging with clients in those vertical categories, bringing them part of the mix, doing a ton of thought leadership is a key piece of this. And so yes, like there's a whole model here that I think we're going to continue to leverage that demonstrates that when you really understand client needs, I mean, that's really, at the end of the day, what this is all about, right? Find like-minded customers, solving similar problems, hire the people that have expertise in that category that can speak to those client problems in-depth and then apply our products through that model. That's the blueprint of TransUnion, and we're certainly running that similar playbook here in this category.

That's great. And just given the theme of the conference, life after COVID, is there anything in the Media space that you see materially changing right now? Maybe it's just growing shift to streaming or something like that. But could you just talk about how that influences your strategy?