TransUnion ($TRU)

Good morning, and welcome, everyone. Thanks for joining us at our 42nd Strategic Decisions Conference. My name is Kelsey Zhu, I'm the information services analyst at Autonomous. With me on stage today, I'm very pleased to welcome Chris Cartwright, the President and CEO of TransUnion.

Thank you. Good to be here. .

Thanks so much for joining us again.

Always a pleasure.

So Chris, I know we have a lot to talk about today. There's macro, there's consumer, there's AI, there's the whole credit score transition topics. I want to pick your brain on. But I think a good place to start is, you obviously had 9 consecutive quarters of delivering organic revenue growth of high single digit and above. In the last quarter, your growth actually accelerated to 11%. So this is definitely outperforming the type of credit volume trends we've seen in the market. Could you maybe just tell us a little bit more about what's structurally different in TransUnion's portfolio today that's driving all the strong performance?

Okay. Just a bit about TransUnion because I know there are some generalists in the audience, and I want to level set before I answer your very good question. So we're one of the 3 large global credit reporting and consumer information companies, if you will. We operate in 30 countries around the world. Roughly 80% of the revenue comes out of the U.S., where our business is a mix, like half credit and then half the combination of marketing, fraud mitigation, public records and communications solutions. We have been undergoing a transformation in the past 4 years, along 2 key dimensions. The first, through a series of acquisitions that we made in late '21, early '22, and we significantly expanded our product capabilities. So obviously, we're steeped in credit and credit analytics tradition. But now we're also very good at digital marketing enablement and online and phone-based fraud mitigation, and all these services are unified now on a common technology platform called OneTru, and it's really that technology innovation and standardization. That's the second leg of our transformation. And it's going to allow us to change our operating model from one where we have independent technology stacks across these 30 countries that are essentially doing very similar things for the same industries, for the same customers with common information to a global configurable platform, which is 2 things for us. One, any country or as we migrate countries to that platform, suddenly, all the services that it enables become available, many for the first time in those countries. So we're launching new growth path, if you will. But secondly, we're getting cost scale because we won't be doing the same things redundantly around the world, which is really just a function of being a 50-year-old business that expanded country by country, one bank consortium at a time. Now you mentioned that we've been growing well, and our growth is accelerating and it's above market volumes. And that's all true. And I'd say it's a function really of a couple of things. One, really, since we became a public company in the summer of 2015, with only a couple of exceptions, this business has been able to grow high single to low double digit organically. The only exceptions to that would be 2020, the COVID year, followed by 13% growth in a full recovery, which took us to kind of peak lending volumes in the super low interest rate environment, the ZIRP environment as you folks call it, before inflation spiked dramatically in Q2 of '22. And then we had an aggressive Fed response, 500 bps of rate escalation, which put consumer lending volumes in a recession for the next 6 quarters, if you will. And during that period, we grew 3%. In '24 and '25, we accelerated again to 7% and 8% organic growth ex FICO. And this year, we're trending hopefully as good or better. We'll get to some of that update later. So the point of taking you through that brief history is to say that this is a growthful market. And the data that we're providing and the analytics we're providing is dimensional and growthful and can sustain that level of growth independent of the second reason that we're growing to the top of the market is, we now have a lot more things to sell the market segments that we serve, whether that's our financial services market in the U.S. or a range of what we call emerging markets like telecom or technology, retail, e-commerce, the media segment, et cetera, et cetera, et cetera. There are over 20 different market segments that we organize ourselves around the U.S. And now we can sell them credit, marketing, fraud, identity verification and resolution, direct-to-consumer credit enablement, investigative solutions a whole range of different products. So it's a function of growth for markets, product diversification, solid tech execution.

That's a really helpful summary. Thanks so much for that, Chris. I guess, a good place for us to start diving into some of the macro consumer debates. It's really just -- I feel like we've been having conversation around a K-shaped economy for a while now. So what's the latest in terms of the health of U.S. consumers and specifically for subprime categories? Could you just give us a quick update what you're seeing in the market?

For sure, happy to. So the K-shaped economy is real. The middle is transitioning. However, it's not necessarily a negative story or nearly as negative as it's often portrayed. We recently just produced some analysis that shows that the primary driver of this K-shape is that folks in the middle of the credit spectrum are migrating upward and becoming near prime, prime and super prime. And it's less that they're deteriorating and ending up in the subprime. So the percentage growth at the bottom of the K, people transitioning from the middle of the subprime, is materially less than the percentage growth of consumers whose credit is improving and they're getting structurally more stable. Now look, it's a different question about whether that kind of divergence between lower income, higher risk borrowers in the latter is good or bad. But I think oftentimes, there's the sentiment that it's all negative and consumers are moving from the middle to subprime, which, in fact, they're not. Now over the past quarters, we've looked hard at the performance of recent loan originations within the subprime space. And their vintage curves, their performance curves are very consistent with the prior year. There's been no -- there's been no concerning increase in loan delinquencies. There's been some modest tick up but you would expect that given that lenders expanded their loan boxes and made more loans into the subprime space last year than they did previously as their confidence that segment increased and continues to this day. And lenders are managing their risk. In large part, they are taking on more customers in the subprime space. They're making a higher volume of loans but they're also making a lot of small dollar bets to determine the consumers ability to service the debt over time and to mitigate their own risk. So we don't see any red flags. We don't see any concerns with the performance of loan portfolios among subprime borrowers at this point.

So consumers are relatively healthy still. We're still in this benign credit card.

I mean, look -- yes, I definitely understand the macroeconomic concerns, right? There's an enormous number of uncertainties, which we'll discuss. But consumers are still highly employed -- and there are still some real wage gains above inflation. Now of course, inflation may spike. We don't know. That's a big part of the uncertainty anxiety. But through April and through May, when I look at the performance of our business, our portfolio throughout the U.S., it's completely consistent with how we've been guiding investors year-to-date from the initial guide for the full year to the first quarter earnings results, we're very much on track to deliver what we guided to. .

Got it. And you mentioned that some of the lenders are expanding the credit box a little bit. I was wondering if you can talk a little bit more about consumer credit origination volume trends that you're seeing across products, but also just the environment we're in right now, I don't know if it's correct to call it like hire for longer or hold for longer, are lenders still expanding that credit box how are you thinking about the impact of higher for longer on your portfolio? .

Sure. Well, look, as I mentioned, -- and as you know, we outperformed our guidance, the high end of our guidance substantially in the first quarter. And because we saw the uncertainties building, and we wanted to be very confident with investors that we could deliver the full year guide, we chose to bank the overperformance and increase our contingencies, if you will. And those contingencies were already adequate because we started the year by issuing what we call a prudently conservative guide. And we were also very clear in the first quarter earnings that if market volumes across the lending categories held, we would expect to overperform the high end of the guide to some degree. And we don't see any changes in the lending volume across card, auto, consumer lending, even the fintech component and mortgage that would prevent us from doing so really through the middle of May. So I mean, we're feeling pretty good about that. Now of course, there have been any number of macro uncertainties in the recent year or 18 months. There have been concerns about the inflationary impact of tariffs, obviously, that didn't nearly manifest itself to the degree that some had thought concerned about increased levels of deficit spending that proved to be pretty manageable and inflation was down to the high 2s, maybe 3 level. But then, of course, the conflict in Iran and the lack of oil flowing through the Strait and all of that is a whole another different contributor, and we just have to see how that is going to manifest itself. But I guess the point is, sitting here in late May, it has not manifested itself negatively in our business volumes to any degree.

Got it. So stable volume trends is what we're seeing.

Yes.

So I guess 1 of the main investor debates or conversations we've been having this year on information companies is really the AI impact on the whole sector. And I do want to talk about AI disruption risk and competitive landscape and things like that. But I think oftentimes, people don't really ask about or really debate about the AI upside to some of these information services companies. And I thought a good place to start there is just in your last investor presentation deck, you highlighted AI-enabled customers are actually consuming more data, and that's a positive impact on TransUnion. I was wondering if you can talk us through some of that, what you're seeing and the potential revenue uplift that you could see from this AI implementation?

Yes, for sure. So I mean, look, as a first principle, I think we can all agree that AI can do very powerful things with access to quality curated, relevant information at scale. And that's no different in my part of the information services industry, credit reporting and marketing and fraud services and the like than anywhere else, legal research or market information or medical publishing. The difference is that the information that we provide as our business foundation is very difficult to access. -- you need to have tens of thousands of relationships in the U.S. market. Those are individually contracted. Those are managed on a monthly basis ongoing. You have to have a legal permissible use to gather the information and then you have to be very careful about who you allow to access it. You have got to monitor the manner in which they're using it, and this all takes place under a very tight clear and punitive legal and regulatory framework. And I think that creates a considerable barrier to entry because you simply can't get access to the credit information for the AI to do with. The other problem is that generative AI isn't really applicable to core credit decisioning because it's legally required that you'd be able to expose the full audit trail of how a loan decision was made and inform the consumer of that. And that's not possible with generative AI. However, you can still leverage AI and machine learning in order to accelerate the development of predictive models that is really the basis, the purpose of all of this credit information. So as I look at our business, it's a very large and defensible moat around credit information. There is a similar moat around the marketing and the fraud data that we provide because much of that signal comes from broad global industry consortiums that we've built with hundreds of companies, and we have years and years of data there. And so that's a difficult barrier to access. AI principally gets us information in the foundational models by crawling the Internet, crawling publicly available sources and doing broad content licensing deals and the like. And none of the information that we provide is really accessible in that way. So I feel like, first, the data layer, the intelligence foundation for our business, if you will, exists behind very material barriers to entry. But the purpose of the data is to use it to build models that can better predict the future, better predict outcomes, outcomes for loans or marketing campaigns or certain fraud prevention techniques. And so we can employ that type of technology to more rapidly refresh and deploy models in much less time at much lower cost, which is going to allow us to do more of it and better service the full spectrum of our clients. Now when you think about a Bureau like TransUnion in the U.S., we have thousands of clients. Some of them are very large and sophisticated, and they really just need our data and understanding about what data is available for their own modeling and internal efforts. We call that the do-it-yourself segment of the market. There's an equally large segment that need our assistance. That's the do-it-with-me segment of the market. And there's a third equally large segment, that really wants our help, wants us to do it for them, right? So those 3 growth segments, there's an opportunity for us to really expand the range of services that we can provide them based on the acquisition and the integration of all of these products on a common platform, but also the depth to which we provide. I mean right now, a typical lender may only refresh their loan origination model once a year, right, because it's difficult and it is somewhat costly to do it. With AI and with the tech innovation of bringing all of our data together on a common platform, we can refresh those origination models or the cross-sell models or delinquency and collection treatment models, whatever aspect of the lending life cycle you want to focus on, we can do it more frequently and more effectively in a forward deployed partnership with our clients. And so it's going to enable us to really change the manner in which we serve our clients from more reactive and at their request to proactive and enabling. And that's really something that wasn't possible before AI in the application of it across our data sets.

Got it. There's a lot to dive into there. At TransUnion, when you think about your AI implementation initiatives and processes I guess how much of that is focused on internal cost save opportunities? How much of that is focused on externally driving, whether it's new products, new client segments, that you weren't able to previously in the pre-AI world. Maybe talk us through some of the initiatives that you're really excited about across credit, marketing, fraud, consumer.

Well, first, just as we were discussing. I guess I'm probably most excited about the ability to use our data and AI in combination to service our clients credit fraud marketing, identity resolution, data hygiene needs, more proactively, more holistically than we could previously and really kind of transform the frequency and depth with which we do that. And I think that's an enormous revenue growth opportunity for us. And when you were at our recent Investor Day, a number of investors commented to me that they've been to the website, and they've seen demos of the agents that we've created to orchestrate and accelerate analytics and model development. So we can now build all those predictive models in a fraction of the time that it took previously. Our large analytics consulting organization, which is a key enabler of our data usage is like orders of magnitude more productive, and that's -- they're going to become more forward-facing, more kind of forward engineering and consultative than before. And I think that it will enable a lot of growth because, I mean, look, the truth is our business and our industry has evolved a lot in recent years. We're not just about credit. We are broad, global diversified consumer data and insights companies, but most of our clients don't appreciate all that we can help them with. And so this is a great way to both evangelize the things that we can do, but also deliver real value analytically. So that's the first thing AI is accelerating that I'm super excited about. Now obviously, software development and data science is one of the most critical things that we do is our internal manufacturing process, if you will. I'd say 60% of my global head count is in those 2 areas. And those associates are more productive because of AI support and the whole spectrum of software development activities. We estimate between 20% and 50%, and that's definitely true on the analytics modeling side where things like our analytics orchestrator are driving orders of magnitude, productivity increases. Now we're in the early days of applying artificial intelligence to some of our consumer and customer support operations. I do think, eventually, you will see nice savings flow from that. But when I think about savings and the potential for them across the portfolio in the medium term, AI will be an important part of that. But remember, because we've been investing on the technological side to build a global product platform, 1 true and most of our business will run on 1 true in the medium term, that's going to allow me to to dramatically reshape my product, my technology organization where today, I'm running on separate individual technology stacks in each of the 30 countries that I operate in around the world, that's going to be replaced by a global configurable tech stack enabled by all of our proprietary data, and I can deploy that in markets around the world. So our business model is going to evolve from the sum of vertically integrated multi-domestic pieces to one that is globally architected and run on a global product platform, but also an internal operational platform that shared across our business in different markets. So just deploying all of that, which we've created over the past 4 years, we're in full rollout mode. That means material structural cost reductions that we'll use to accelerate revenue through sales deployment and new innovation, but also flow through to bottom line margin enhancements. And then in addition to that, we're going to apply AI.

So have you thought about the sizing of that medium-term cost opportunity that you highlighted? Because 1 of the key steps that you mentioned is 20% to 50% uplift in productivity for developers. So it's also a question of like how much of that do you reinvest? How much of that do you get back to margins? So maybe just tell us a little bit more about how you think about that.

Yes. And so the blended estimate on improved productivity for my developers is, say, 30%. But if you talk to any CEO in information services, they will tell you that they're either their innovation pipeline or their internal efficiency pipeline that requires software development to fulfill it ideally needs more than a 30% productivity boost. So it's great that they're more productive. I can absorb all of that productivity and drive faster innovation and faster innovation deployment and a better operational tech stack and use that to become more efficient rather than downsizing any employees, right? I'm going to take the -- I'm going to -- I'm going to use it as a productivity enabler and then implement those benefits. But look, we had an Investor Day recently. The medium-term guide calls for improving margins basis points a year over the next 3 to 4 years. That's in addition to a 240 bps improvement in margin that's transpired over the past 4 years. That was largely masked by -- the price increases that FICO was putting through that were included in our revenue. And again, that's revenue upon which we have no margin, right? So it was masking the operational leverage and the revenue flow-through that we were seeing in the business. Now that we can break that out, investors can see that, indeed, our margins have improved a lot over the past for years. And to get to really what you're asking, can I outperform the 50 basis points. What I would say is this, putting uncertainties aside, if I could count on 7% to 9% compounding revenue growth, and a lot of that is it's coming through with a good mix of credit. I have a lot of flow through to profit, that coupled with the structural cost reductions makes me highly confident in the 50 bps as a floor.

Got it. Super helpful. And we'll come back to FICO in just a second. Maybe one last question on AI. And I know, Chris, you touched on this at the beginning of this AI discussion about your competitive -- clear competitive advantages in the credit space. And maybe tell us a little bit more about how you think about AI native competitors in fraud, marketing, consumer? And how are you thinking about TransUnion's competitive advantages there?

Yes, absolutely. So I mean I grew up in Information Services. I probably have worked for 25-plus years in different information services companies or conglomerates that had legal, tax, financial, medical, health care, data, et cetera. And so I keep track on what's going on in a lot of these spaces. And again, as a rule, where the information is broadly accessible, then new AI competitors can come in challenge. The competitive dynamics in the industry, and you're seeing different variants of that as you look broadly across the space. Now that's not to say that the incumbents that have a massive advantage in terms of the data they've got and their domain expertise won't respond and compete very effectively over time. You don't see that dynamic in credit because of the moat around the credit data and its mission criticality and the high regulatory content is so substantial. In the marketing world or in the fraud world, there are various AI-enabled competitors that have been there for quite some time. I'd say the advantage that we have as an incumbent is all of the proprietary data that we get from the industry consortiums that we've created in fraud and marketing. In fraud, we've got this 1.5 decades consortium of companies that use our software to detect potential fraudulent behavior on their e-commerce servers and then they report that to us. And we may have a large device reputational network that is proprietary. It is a considerable moat to providing online fraud detection. In the phone world, that data comes from the carriers. We're 1 of 2 scaled players in providing phone authentication. And then any other flavor of fraud mitigation, be it biometric or knowledge-based authenticators et cetera, et cetera. We either originate market-leading solutions in those areas or we have a full range of partnerships, and we take all of that signal of potential fraud and it goes into the OneTru data foundation and our clients can build rapidly, very sophisticated AI enabled models to score the likelihood of fraud in the transaction. So in short, it's the combination of our architecture and our analytics sophistication, fueled by a lot of proprietary data even in areas like fraud or marketing that gives us an advantage against new players that come up that are really just leveraging somebody else's AI capability.

Got it. So scaled data and...

Scale proprietary data, modern tech stack, AI sophistication, deep client relationships, forward engineering organization in a massive domain wrapper.

Got it.

So look, when people think about AI and the potential disruption that often come at it first from is this theoretically possible? The answer is sure, it's theoretically possible. The second question should be, is this economically viable given the advantage of entrenched players and their technological sophistication and the clear motivation we all have to be excellent at this. And I think there's a lot of fallout when you consider economic viability against large sophisticated entrenched competitors.

It's very well said. Thanks so much, Chris. I guess switching gears to talk about the credit score transition that's taking place right now, maybe a good place to start. It's just the VantageScore pilot program that FHFA Director Bill Pulte has announced a few weeks ago. We heard about this 21 approved lenders. We heard various different things about the loan level pricing adjustments for VantageScore. I guess like from your seat, what are you hearing from lenders, MBS investors, regulators, how is the pilot program going?

Sure. Yes. Well, no shortage of things to talk about in the mortgage room, particularly around the implementation in earnest of score competition. which I think is a really great and healthy thing for the U.S. mortgage market, simply because the VantageScore is a next-generation score based on trended and alternative data and develop with modern scoring techniques. It's a very good score. It performs very well against the incumbent. The challenge, of course, is that current processes are designed in consideration of only one score for over 30 years. And the way I would characterize it is we're in the early days of working through all of the adjustments all of the learnings, all of the human behavioral change that has to happen to enable share shift and competition at scale. The good news is that the FHFA -- this is for real, this is happening. There is massive interest among lenders, amongst lenders in the '21 or some of the largest mortgage originators in the U.S., people like EWM, people like Rocket Mortgage, a variety of the largest banks, et cetera. And there's just a tremendous proven tangible appetite for change, given the massive price increases that have been put through by the incumbent not only over the last 4 years, but in the -- really since 2006 forward when Vantage was formed to create a counterweight to their monopoly, right? And so there's just no doubt that there's market demand for this. There's no doubt that the score is better. And of course, it's going to take some time to work it through. But that's all happening because there's a tremendous economic incentive on behalf of the lenders for it to happen. And score improvements contributes to overall safety and soundness as well, which the FHFA wants to happen. And most importantly, the FHFA is also very focused on reducing loan transaction costs, and so a score that costs $0.99 versus one that costs $10 or $5 plus a contingency on a successful borrower. These are material dollars that can be taken out of the system that aren't contributing a lot to the economics.

I guess what are the remaining hurdles for a full-scale implementation for VantageScore? I mean it's great that there are 21 approved lenders, but there are hundreds of other smaller lenders in the market. So I guess like what's your expectation around both VantageScore full-scale implementation time line and maybe FICO 10T implementation time line as well?

Well, the FHFA has said that they hope to certify FICO 10T over the summer at some point. And we'll see if they can deliver on that frame. And I expect that FICO 10T will be a materially more performance score than FICO Classic because it takes advantage of the alternative data and the trended data that the bureaus provide. And ultimately, it's the data that determines the effectacy of the score. It's not the magic of the score. So that's what we understand on that development. But I think we're in a prolonged period of transition, and this is my estimation based on what I gather from a variety of sources. This isn't some definitive proclamation by the -- but the FHFA is working at this in earnest. The GSEs are ready, and we'll probably take the majority of this year to continue to educate and refine the process because there are multiple players in this mortgage origination through securitization process. They have to be brought along. There are some systems adjustments that have to take place. Those are all -- this is a large change management process, and it's going to take some time. . And I think that's why, look, it was prudent that each of the bureaus came out and assumed no adoption Vantage over the course of this year and said, let's make '26 a year about learning and change management. I'm sure some of that will continue into '27. I do think there will be some share adoption of Vantage in '26, you're seeing that. But this is not a flip to switch. This is not a single event becomes the aha moment that proves that nothing will ever change. I think those are all kind of wishful in unrealistic assumptions. The fact is it's going to change. There's going to be score competition. There's a tremendous economic incentive to adopt Vantage. And and it's just going to take some time to work it through.

Got it. I guess in the non-mortgage verticals across credit card, auto, personal loans, what type of market share has VantageScore been able to gain over the years? And what's your medium-term expectation for VantageScore market share gains in mortgage?

Yes, look, that's a good pivot because oftentimes the FICO versus advantage discussion is framed in a way where, it's as if Vantage is this new thing that has just appeared on the scene. Vantage has been around since 2006. Vantage is significantly used in consumer lending. There's a major card issuer Synchrony that for not quite a decade now has been fully on Vantage, originating, securitizing, you see it in auto as well. We've had a nice business amongst community financial institutions that originate a whole a lot of mortgage and moving to Vantage because of price escalations from the incumbent, right? So it's known, it's used across 4,000 banks. It's the most frequently pulled score or offered score in consumer education. And so what I think will happen is, I think the share that exists outside of mortgage exists for a large reason because of the halo effect of the monopoly that exists in mortgage. -- as that monopoly becomes competition and share begins to balance between the 2 players, I think it will have a knock-on effect on share dynamics in these other lending categories.

So I guess one of the main initiatives or projects that Director Pulte is really excited about is just reducing closing costs. So under that -- or in this general operating environment, how should we think about pricing for Vantage score and credit data in the next few years?

We just focused on the score for this time. I mean, look, we operate in countries around the world. We produce scores. There are some other third-party scores that we would distribute in 1 kit or another. But around the world, there are no other scores that sell for the price point of a FICO score in U.S. mortgage markets, right? I think that's just a function of a lack of competition. I'm very comfortable with the score where we're at. I don't think this is a time to worry about pricing or revenue realization. It's -- let's be supportive of industry change. Let's lay the foundation for real competition going forward and enable share shift. And then over time, I mean, look, any revenue we get from a score is additive to our P&L currently. And within our business, we have fully decoupled our data revenues versus third-party scores, right? And so FICO is at Liberty to manage their business as they see fit. We're more than happy to calculate the score on our data behind our firewalls, if that's what the client wants. We're more than happy to support FICO's direct licensing program. If I could wave 1 and 100% of FICO score calculation is shifted to resellers or clients. I'm fine with that. My economics, my revenue, my profit is unchanged. I just my margin goes up a lot because I no longer have to book zero-margin FICO revenue in my P&L. So I mean, I think it's important to understand that decoupling that's been achieved over the past year or 2. And again, we're focused on share shift and share adoption. So pricing will remain what it is today for the long foreseeable future. And we will continue to take the very reasonable price increases that we have put through, both TransUnion and our bureau competitors that really reflect significant investment in innovation. I mean, remember, just recently, we had Director Pulte and Director Turner of HUD, celebrating score competition, celebrating the use of alternative and trended data. And you have to remember that, that moment was made possible by 20 years of patient investing by the bureaus and creating a credit score alternative and creating trended and alternative data. And so the fact that we have put through some price increases and we'll continue to do so on our product reflects a lot of underlying innovation and investment that's taken place over 2 decades. -- to get to this point.

Got it. Maybe just 1 last question on mortgage. I do want to touch on the whole Tri-Merge Biomer single-file underwriting debates. And we've seen, I think, the FHA has already said that MR requirement remains for the time being when we're going through the credit score transitions. So I guess, worst key scenario, if we do move from trimer to either Biomer or single fall underwriting, could you just talk us through TransUnion's competitive advantage in the credit data space?

Yes. Look, there's a number of ways to come at this. But I think we have to start with likelihood in severity, right? Because investors get concerned when they hear regulators make comments that while not about the Tri-Merge necessarily raise some question about further potential change. It's my belief, it's our belief based on any number of discussions we've had in and around Washington, and in particular, within the FHFA within the GSEs, within the HUD, within the treasury, within the administration within capital -- well, across Capitol Hill, there is firm and broad support for the Tri-Merge. It is highly unlikely that there will be any shift. And at this point, really the only people who are advocating a change is the Mortgage Bankers Association. And I appreciate their circumstances. This is the past 5 years, it's been very difficult to be a mortgage broker or a mortgage originator. Volumes are dramatically below the curve. So I understand why they want to try to find cost reductions wherever they can. But it's imprudent to go to a single pole or even a by merge because you lose a lot of important data, a lot of predictive signal that helps you, one, determine fraud; and two, most accurately price the mortgage for the consumer that you're trying to win and then ultimately to the GSEs to whom you want to sell the loan. So there's a strong economic reason for lenders to pull multiple scores and the Tri-Merge. So there's a strong overall safety and soundness argument in support of it. But let's say, even if it does happen, right? Well, look, we love our mortgage business. We love the Tri-Merge component. We value all of the components of our revenue stream. But it wouldn't be that material to our overall P&L, right? We will be over $5 billion. We will be approaching $1.9 billion in EBITDA. When you look at the component of our business, that is from the Tri-Merge at underwriting, it's a relatively modest portion, particularly because we're not talking about it all going away. We're talking about the potential reduction from 3 to 2 and perhaps some price competition. And I would just remind everybody, we just went through this over the past 2 years right? The FHFA said you no longer have to pull at qualification, 3 credit reports in order to get a signal from the GSEs about whether they would buy this conforming a mortgage, you could just pull 1 and the market has over 2 years, reached an equilibrium of pulling more than 2. And I would say that our mortgage revenues have grown very nicely over this period. Our share is stable to growing, and I don't think investors have really noticed the change. So if the same thing were to happen and again, it's a super low probability at mortgage underwriting, when I don't think it's nothing that we wouldn't grow through in a single year.

That's very helpful. Switching gears to international markets. The 2 markets I definitely want to touch on is Mexico and India. In Mexico, you just completed the acquisition of TransUnion to Mexico, maybe is more about what attracted you to that asset in the first place. what kind of revenue or cost synergy are you expecting? And how should we think about the medium-term growth algo and margin profile of this business?

Well, from the get-go, Mexico, will be accretive to our overall growth rate and our overall profit margins. Even as we're integrating the business this year and not separating out integration costs, right? So it's a very profitable and attractive market and asset, and it's 1 that we've been in for over 25 years. We own 26% of the bureau over this period. We wanted to buy fully into it, but the Mexican banks wanted to retain the asset at that point. and we were their technology partner. Finally, circumstances presented themselves where we could acquire the Bureau in full, and we have. But -- the way it stands today is it's a very basic bureau. It's got good data coverage across the large banks and the smaller banks and fintech as well. But we will materially broaden the coverage and we will replatform it from the legacy tech stack, which is considerably behind OneTru, which will bring the range of our credit analytics sophistication into the Mexican market coupled with all of our marketing, fraud, consumer enablement and identity resolution capabilities, all of which are native and integrated to the 1 true platform. So in short, we're going to enable a lot better credit functionality plus a whole range of additive complementary functionality in the Mexican market and all taken to market with the thought leadership and the partner problem-solving orientation that we have in every market in which we compete. Mexico is a big market. It's fast-growing. -- traditional financial services are underpenetrated. And what we do, both on the data and analytics side is a real enablement for economic growth and financial inclusion. So I think Mexico will become 1 of the real bright spots in the portfolio over time.

Speaking of bright spots, I guess India has been a key growth driver in TransUnion's portfolio for so many years. And I guess sometime in 2023, I think the end of 2023, we had the RBI's cooling action, and now we're just getting out of this bottom up the cycle. Maybe tell us a little bit more about how you think about the recovery trajectory for TransUnion's India business in '26, '27? And what level of new normal in terms of medium-term growth rate can we expect for that business?

Well, sure. Well, look, first things first. The good news is we are recovering in India in the second quarter as we expected and as we guided to, which puts us on track for the full year recovery that we're forecasting in 2026, you characterized the RBI actions is cooling actions in 2023. I think that's exactly right. We had been growing at about 30% a year for 3 years. It was fueled by a lot of economic growth. a lot of lending activity, particularly online unsecured new-to-credit lending activity and the RBI became concerned about some of those practices and perhaps that it was a bit overdone. The good news is despite the cooling measures that they put in place, which actually worked really well, much to our volume detriment -- the delinquencies of the loans that were originated in that period have been very stable, right? So it didn't manifest itself as a lending problem, a loan problem, but it definitely cooled the market -- what you saw replacing it and what has helped that market return to growth or gold loans, which unfortunately don't require a lot of credit pools, although we're starting to introduce some analytics around that. Aside from that, personal lending, card lending, et cetera, has bottomed and is starting to grow, and that's why we're starting to see the improvements in our results. So I feel like you're going to see some good organic growth over the remaining quarters of this year that get us back on track. Obviously, India is a fantastic market to have this fantastic and large share business in -- and I would expect, I mean, medium-term guidance. I mean it's mid-teens plus. And I don't know that we have provided medium-term guidance necessarily on India, but I'm just -- I'm love to get too far ahead of the next quarter because I just want to start to see more of this recovery. But look, things are still strong in India, a massive productive population, underpenetrated, in traditional financial products, a sophisticated regulatory and government that wants to build a world-class financial services industry and a heck of a lot of GDP growth. So I'm thrilled with that position.

SP1 Got it. Maybe just 1 last question before we wrap. How are you thinking about capital allocation capital allocation between buybacks, debt payment, M&A?

Sure, well. Look, our debt is in very good shape. Even post acquisition of Mexico, we're at about 2.8x. We will easily go down beneath our target of 2.5x leverage by the end of this year. We really want to focus a lot of energies on share buybacks. Unfortunately, the growth of the hyperscalers and the frenzy around all components of the AI stack is sucking a lot of oxygen out of information services. Some fear of AI displacement is also impacting information services, and we want to buy back shares to the greatest extent possible. I expect that we will buy back roughly the same amount of shares this year as we did in '25 where we started to accelerate it, but that's only because we had to pay for the Mexico acquisition this year. Next year, we've got all of our free cash flow, which is now solidly above 90%. And if we're still in this position, we're -- there's a big share value dislocation, we'll be aggressive in buying back shares. .

Got it. This is all super helpful. Thank you so much for sharing with us today.

Thanks for hosting.

Thanks for everyone for coming.