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Torch Energy Royalty: Transunion Reports First Quarter 2016 Results

The following excerpt is from the company's SEC filing.

Revenue of

$406 million

, an increase of

15 percent

18 percent

on a constant currency basis) compared with the first quarter of 2015

Adjusted EBITDA of

$141 million

23 percent

26 percent

Adjusted Diluted Earnings per Share of

in the first quarter of 2015

- TransUnion (NYSE: TRU, the “Company”) today announced financial results for the quarter ended March 31, 2016.

Total revenue was

on a constant currency basis) compared with the first quarter of 2015. Acquisitions accounted for a 1 percent increase in revenue. Net income attributable to TransUnion was

$13 million

compared with a net loss attributable to TransUnion of

$7 million

in the first quarter of 2015. Diluted earnings per share were

$(0.04)

in the first quarter of 2015.

Adjusted EBITDA was

on a constant currency basis) compared with the first quarter of 2015. Adjusted Net Income was

$58 million

, an increase of 96 percent compared with the first quarter of 2015. Adjusted Diluted Earnings per Share were

“TransUnion is off to a strong start in 2016, delivering another quarter of double-digit revenue and Adjusted EBITDA growth with over 200 basis points of margin expansion,” said Jim Peck, TransUnion’s president and chief executive officer. “All three segments exceeded expectations by executing on our strategy, which is generating broad based and balanced growth from our core business, new product growth initiatives, and from our higher growth verticals and markets. This robust performance enabled us to raise our full year guidance for revenue, Adjusted EBITDA and Adjusted EPS. Our pipeline of innovation is focused on driving value for our customers and positions us well for long-term growth.”

Segment Results

U.S. Information Services (USIS)

USIS revenue was

$247 million

, an increase of 13 percent compared with the first quarter of 2015.

Online Data Services revenue was

$161 million

, an increase of 10 percent over prior year.

Marketing Services revenue was

$37 million

, an increase of 12 percent over prior year.

Decision Services revenue was

$49 million

, an increase of 25 percent over prior year.

Operating income was

$30 million

, an increase of 9 percent compared with the first quarter of 2015. Adjusted Operating Income was

$77 million

, an increase of 13 percent compared with the first quarter of 2015.

International

International revenue was

$68 million

7 percent

(increase of

22 percent

on a constant currency basis) compared with the first quarter of 2015. Acquisitions accounted for a 5 percent increase in revenue.

Developed markets revenue was

$23 million

11 percent

19 percent

on a constant currency basis) over prior year.

Emerging markets revenue was

$45 million

on a constant currency basis) over prior year. Acquisitions accounted for an 8 percent increase in revenue.

$5 million

85 percent

compared with the first quarter of 2015. Adjusted Operating Income was

$17 million

37 percent

Consumer Interactive

Consumer Interactive revenue was

$106 million

, an increase of 25 percent compared with the first quarter of 2015.

$40 million

, an increase of 51 percent compared with the first quarter of 2015. Adjusted Operating Income was

$42 million

, an increase of 46 percent compared with the first quarter of 2015.

Liquidity and Capital Resources

Cash and cash equivalents were

$150 million

at March 31, 2016 and

$133 million

at December 31, 2015. Total debt, including the current portion of long-term debt, increased to

$2.4 billion

at March 31, 2016 compared with

$2.2 billion

at December 31, 2015, primarily due to funding the acquisition of CIFIN.

For the three months ended March 31, 2016, cash provided by operating activities was

for the same period in 2015, due primarily to the increase in revenue along with a decrease in cash paid for interest. Cash used in investing activities was

$35 million

for the same period in 2015, due primarily to the acquisition of CIFIN. Capital expenditures were

$31 million

for the same period in 2015. Cash provided by financing activities was

$136 million

compared to

$29 million

for the same period in 2015, due primarily to the incremental borrowing on term loan B under our existing credit facility to fund the CIFIN acquisition.

2016 Full Year Outlook

For the full year of 2016, we are raising our revenue, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Diluted Earnings per Share guidance as follows. Consolidated revenue is expected to be between $1.63 billion and $1.65 billion, an increase of 10 to 12 percent on a constant currency basis. Adjusted EBITDA is expected to be between $600 million and $610 million, an increase of 16 to 18 percent on a constant currency basis. Adjusted EBITDA margin is expected to be approximately 37 percent, an increase of approximately 200 basis points. Adjusted Diluted Earnings per Share is expected to be between $1.30 and $1.34, an increase of 19 to 23 percent.

Consistent with our previous full year guidance, we expect approximately 2 percent revenue growth from acquisitions as well as approximately 2 percent declines in revenue and Adjusted EBITDA due to foreign exchange rates.

2016 Second Quarter Outlook

For the second quarter of 2016, consolidated revenue is expected to be between $405 million and $410 million, an increase of 10 to 11 percent on a constant currency basis compared with the second quarter of 2015. Adjusted EBITDA is expected to be between $145 million and $150 million, an increase of 11 to 15 percent on a constant currency basis. Adjusted Diluted Earnings per Share is expected to be between $0.31 and $0.33, an increase of 15 to 22 percent.

This guidance includes approximately 2 percent revenue growth from acquisitions as well as approximately 3 percent declines in revenue and Adjusted EBITDA due to foreign exchange rates.

Footnotes

In the first quarter of 2016, we moved our direct to consumer reseller business and reallocated certain other costs related to our consumer facing business in the U.S. from our USIS segment to our Consumer Interactive segment. These changes better reflect the evolution of our consumer facing business in the U.S. and how we manage that business. As a result, we modified our segment reporting effective the first quarter of 2016. The segment results below have been recast to reflect these changes for all periods presented. These changes do not impact our consolidated results. Refer to our investor relations website,

www.transunion.com/tru

where we have posted a schedule that shows this new basis of accounting for each quarter back to the first quarter of 2014 for additional information.

Earnings Webcast Details

In conjunction with this release, TransUnion will host a conference call and webcast today at 4:00 p.m. Central time to discuss the business results for the quarter and certain forward-looking information. This session may be accessed at

A replay of the call will also be available at this website following the conclusion of the call.

About TransUnion

TransUnion is a leading global risk and information solutions provider to businesses and consumers. The Company provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. Businesses embed its 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 its 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.

Availability of Information on TransUnion’s Website

Investors and others should note that TransUnion routinely announces material information to investors and the marketplace using SEC filings, press releases, public conference calls, webcasts and the TransUnion Investor Relations website. While not all of the information that the Company posts to the TransUnion Investor Relations website is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media, and others interested in TransUnion to review the information that it shares on

Non-GAAP Financial Measures

This earnings release presents certain growth rates on schedule 1 assuming foreign currency exchange rates are consistent between years. This allows financial results to be evaluated without the impact of fluctuations in foreign currency exchange rates. This earnings release also presents Adjusted EBITDA, Adjusted EBITDA Margin, segment Adjusted Operating Income, segment Adjusted Operating Margin, Adjusted Effective Tax Rate, Adjusted Net Income (Loss) and Adjusted Diluted Earnings per Share. These are important financial measures for the Company but are not financial measures as defined by GAAP. We present these financial measures as supplemental measures of our operating performance because we believe they provide meaningful information regarding our performance and provide a basis to compare operating results between periods. In addition, our board of directors and executive management team use Adjusted EBITDA as a compensation measure. These financial measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of GAAP. Other companies in our industry may define or calculate these measures differently than we do, limiting their usefulness as comparative measures. Because of these limitations, these non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP, including operating income, operating margin, effective tax rate, net income (loss) attributable to the Company, earnings per share or cash provided by operating activities. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the attached Schedules.

Adjusted EBITDA is defined as net income (loss) attributable to TransUnion plus net interest expense, plus (less) provision (benefit) for income taxes, plus depreciation and amortization, plus stock-based compensation, plus mergers and acquisitions, divestitures and business optimization expenses, plus technology transformation expenses, plus (less) certain other expenses (income). Adjusted Operating Income is defined as operating income plus stock-based compensation, plus mergers and acquisitions, divestitures and business optimization expenses, plus technology transformation expenses, plus (less) certain other expenses (income), plus amortization of certain intangible assets. Adjusted Effective Tax Rate is defined as adjusted provision for income taxes divided by adjusted income before income taxes. Adjusted Net Income is defined as net income (loss) attributable to TransUnion plus stock-based compensation, plus mergers and acquisitions, divestitures and business optimization expenses, plus technology transformation expenses, plus (less) certain other expenses (income), plus amortization of certain intangible assets, plus or minus changes in provision for income taxes. Adjusted Earnings per Share is defined as Adjusted Net Income divided by weighted-average shares outstanding.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of TransUnion’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those described in the forward-looking statements. Any statements made in this earnings release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,” “may,” “will,” “forecast,” “outlook,” “potential,” “continues,” “seeks,” “predicts,” or the negative of these words and other similar expressions. Factors that could cause actual results to differ materially from those described in the forward-looking statements include macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets; our ability to provide competitive services and prices; our ability to retain or renew existing agreements with large or long-term customers; our ability to maintain the security and integrity of our data; our ability to deliver services timely without interruption; our ability to maintain our access to data sources; government regulation and changes in the regulatory environment; litigation or regulatory proceedings; regulatory oversight of “critical activies,” our ability to effectively manage our costs; economic and political stability in international markets where we operate; our ability to effectively develop and maintain strategic alliances and joint ventures; our ability to timely develop new services and the market’s willingness to adopt our new services; our ability to manage and expand our operations and keep up with rapidly changing technologies; our ability to timely complete our multi-year technology transformation; our ability to make acquisitions and integrate the operations of acquired businesses; our ability to protect and enforce our intellectual property, trade secrets and other forms of unpatented intellectual property; our ability to defend our intellectual property from infringement claims by third parties; the ability of our outside service providers and key vendors to fulfill their obligations to us; further consolidation in our end-customer markets; the increased availability of free or inexpensive consumer information; losses against which we do not insure; our ability to make timely payments of principal and interest on our indebtedness; our ability to satisfy covenants in the agreements governing our indebtedness; our ability to maintain our liquidity; our reliance on key management personnel; our controlling stockholders; and other one-time events and other factors that can be found in our Annual Report on Form 10-K for the year ended December 31, 2015, as modified in any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K, which are filed with the Securities and Exchange Commission and are available on TransUnion’s website (

www.transunion.com/tru)

and on the Securities and Exchange Commission’s website (

). Many of these factors are beyond our control. The forward-looking statements contained in this earnings release speak only as of the date of this earnings release. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements to reflect the impact of events or circumstances that may arise after the date of this earnings release.

For More Information

E-mail:

Investor.Relations@transunion.com

Telephone:

312.985.2860

TRANSUNION AND SUBSIDIARIES

Consolidated Balance Sheets

(in millions, except per share data)

March 31,

December 31,

Unaudited

Assets

Current assets:

Trade accounts receivable, net of allowance of $3.7 and $4.2

Other current assets

Total current assets

Property, plant and equipment, net of accumulated depreciation and amortization of $186.5 and $174.3

Goodwill, net

2,105.9

1,983.4

Other intangibles, net of accumulated amortization of $672.7 and $615.3

1,846.3

1,770.1

Other assets

Total assets

4,729.6

4,442.8

Liabilities and stockholders’ equity

Current liabilities:

Trade accounts payable

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

Other current liabilities

Total current liabilities

Long-term debt

2,309.5

2,160.7

Deferred taxes

Other liabilities

Total liabilities

3,275.4

3,072.9

Redeemable noncontrolling interests

Stockholders’ equity:

Common stock, $0.01 par value; 1.0 billion shares authorized at March 31, 2016 and December 31, 2015, 183.1 million and 183.0 million shares issued at March 31, 2016 and December 31, 2015, respectively, and 182.5 million shares and 182.3 million shares outstanding as of March 31, 2016 and December 31, 2015, respectively

Additional paid-in capital

1,839.5

1,850.3

Treasury stock at cost; 0.7 million shares at March 31, 2016 and December 31, 2015

Accumulated deficit

(411.7

(424.3

Accumulated other comprehensive loss

(185.3

(191.8

Total TransUnion stockholders’ equity

1,239.7

1,231.4

Noncontrolling interests

Total stockholders’ equity

1,387.7

1,367.0

Total liabilities and stockholders’ equity

Consolidated Statements of Income (Loss) (Unaudited)

Three Months Ended

March 31,

Operating expenses

Cost of services (exclusive of depreciation and amortization below)

Selling, general and administrative

Depreciation and amortization

Total operating expenses

Non-operating income and expense

Interest expense

Interest income

Earnings from equity method investments

Other income and (expense), net

Total non-operating income and expense

Income (loss) before income taxes

(Provision) benefit for income taxes

Net income (loss)

Less: net income attributable to the noncontrolling interests

Net income (loss) attributable to TransUnion

Earnings per share:

Weighted average shares outstanding:

Consolidated Statements of Cash Flows (Unaudited)

(in millions)

Cash flows from operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Amortization and loss on fair value of hedge instrument

Equity in net income of affiliates, net of dividends

Amortization of discount on term loans

Amortization of deferred financing fees

Stock-based compensation

Provision for losses on trade accounts receivable

Changes in assets and liabilities:

Other current and long-term assets

Other current and long-term liabilities

Cash provided by operating activities

Cash flows from investing activities:

Proceeds from sale of trading securities

Purchases of trading securities

Proceeds from sale of other investments

Purchases of other investments

Acquisitions and purchases of noncontrolling interests, net of cash acquired

(129.1

Acquisition-related deposits

(161.0

Cash flows from financing activities:

Proceeds from Senior Secured Term Loan B

Proceeds from senior secured revolving line of credit

Payments of senior secured revolving line of credit

(145.0

Repayments of debt

Proceeds from issuance of common stock and exercise of stock options

Debt financing fees

Excess tax benefit

Distributions to noncontrolling interests

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

SCHEDULE 1

As Reported and Constant Currency Growth Rates - Unaudited

Three Months Ended March 31, 2016 Percent Change

Consolidated:

Revenue as reported

Revenue constant currency

Operating income constant currency

Adjusted Operating Income constant currency

Adjusted EBITDA constant currency

International:

International Consolidated

Developed Markets

Emerging Markets

Constant currency percentage changes assume foreign currency exchange rates are consistent between years. This allows financial results to be evaluated without the impact of fluctuations in foreign currency exchange rates.

SCHEDULE 2

EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin - Unaudited

(dollars in millions)

Reconciliation of net income (loss) attributable to TransUnion to Adjusted EBITDA

Net interest expense

Provision (benefit) for income taxes

Adjustments to EBITDA:

Mergers and acquisitions, divestitures and business optimization

Technology transformation

Total adjustments to EBITDA

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

Consisted of stock-based compensation and cash-settled stock-based compensation.

For the three months ended March 31, 2016, consisted of the following adjustments to operating income: a $0.1 million adjustment to contingent consideration expense from previous acquisitions; a $0.1 million loss on divestitures of two small business operations; and a $(0.3) million adjustment to business optimization expenses. For the three months ended March 31, 2016 , consisted of the following adjustments to non-operating income and expense: $5.6 million of acquisition expenses.

For the three months ended March 31, 2015, consisted of the following adjustments to operating income: a $0.4 million adjustment to contingent consideration expense from previous acquisitions. For the three months ended March 31, 2015, consisted of the following adjustments to non-operating income and expense: $0.1 million of acquisition expenses.

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

For the three months ended March 31, 2016, consisted of the following adjustments to non-operating income and expense: $0.1 million of currency remeasurement of our foreign operations; a $0.7 million mark-to-market loss related to ineffectiveness of our interest rate hedge; $0.3 million of loan fees; $1.0 million of fees connected to the filing of our secondary registration statement; and $(0.1) million of miscellaneous.

For the three months ended March 31, 2015, consisted of the following adjustments to non-operating income and expense: $0.7 million of currency remeasurement of our foreign operations; a $0.9 million mark-to-market loss related to ineffectiveness on our interest rate hedge; $0.4 million of loan fees; and $0.2 million of miscellaneous.

SCHEDULE 3

Adjusted Net Income and Adjusted Earnings Per Share - Unaudited

Adjustments before income tax items:

Amortization of certain intangible assets

Total adjustments before income tax items

Change in provision for income taxes per schedule 4

Adjusted Earnings per Share:

Weighted-average shares outstanding:

For the three months ended March 31, 2016, consisted of the following adjustments to operating income: a $0.1 million adjustment to contingent consideration expense from previous acquisitions; a $0.1 million loss on divestitures of two small business operations; and a $(0.3) million adjustment to business optimization expenses. For the three months ended March 31, 2016, consisted of the following adjustments to non-operating income and expense: $5.6 million of acquisition expenses.

For the three months ended March 31, 2016, consisted of the following adjustments to non-operating income and expense: $0.1 million of currency remeasurement of our foreign operations; a $0.7 million mark-to-market loss related to ineffectiveness of our interest rate hedge; $1.0 million of fees connected to the filing of our secondary registration statement; and $(0.1) million of miscellaneous.

For the three months ended March 31, 2015, consisted of the following adjustments to non-operating income and expense: $0.7 million of currency remeasurement of our foreign operations; and a $0.9 million mark-to-market loss related to ineffectiveness on our interest rate hedge.

Consisted of amortization of intangible assets from our 2012 change in control and amortization of acquired intangible assets that were established subsequent to our 2012 change in control.

For the three months ended March 31, 2015, all outstanding stock awards were anti-dilutive since we reported a net loss attributable to TransUnion on a GAAP basis in those periods. On an as-adjusted basis, we reported net income in all periods and reflect the weighted-average diluted shares outstanding for all periods in the table above. In addition, as of March 31, 2016, there were 0.2 million anti-dilutive weighted shares outstanding and 6.5 million contingently issuable market-based stock awards excluded from the diluted earnings per share calculations because the market conditions had not been met.

SCHEDULE 4

Effective Tax Rate and Adjusted Effective Tax Rate - Unaudited

Total adjustments before income taxes per Schedule 3

Adjusted income before income taxes

Adjustments for income taxes:

Tax effect of above adjustments

Eliminate impact of adjustments for unremitted foreign earnings

Total adjustments for income taxes

Adjusted provision for income taxes

Effective tax rate

Tax rates used to calculate the tax expense impact are based on the nature of each item.

Eliminates impact of certain adjustments related to our deferred tax liability for unremitted earnings, including the lapse of the look-through rule under Subpart F of the Internal Revenue Code.

Eliminates the impact of state tax rate changes on deferred taxes, valuation allowances on foreign net operating losses, and valuation allowances on capital losses and other discrete adjustments.

SCHEDULE 5

Adjusted Operating Income, Operating Margin and Adjusted Operating Margin - Unaudited

Revenue:

Online Data Services

Marketing Services

Decision Services

Total USIS

Developed Markets

Emerging Markets

Total International

Total revenue, gross

Intersegment revenue eliminations:

USIS Online

International Developed Markets

International Emerging Markets

Total intersegment revenue eliminations

Total revenue as reported

Gross operating income by segment:

USIS operating income

International operating income

Consumer Interactive operating income

Corporate operating loss

Total operating income

Intersegment operating income eliminations:

Total eliminations

Reconciliation of operating income to Adjusted Operating Income:

Mergers and acquisitions, divestitures and business optimization

Technology transformation

Adjusted USIS Operating Income

Adjusted International Operating Income

Adjusted Consumer Interactive Operating Income

Adjusted Corporate Operating Income

Total operating income adjustments

Total Adjusted Operating Income

Operating margin

Total operating margin

Total Adjusted Operating Margin

For the three months ended March 31, 2016, consisted of the following adjustments to operating income: a $0.1 million adjustment to contingent consideration expense from previous acquisitions (USIS); a $0.1 million loss on divestitures of

two small business operations (International); and a $(0.3) million adjustment to business optimization expenses (Corporate).

For the three months ended March 31, 2015, consisted of the following adjustments to operating income: a $0.4 million adjustment to contingent consideration expense from previous acquisitions (USIS).

Consisted of amortization of intangible assets from our 2012 change in control and amortization of acquired intangible assets that were established after our 2012 change in control.

Segment operating margin and Adjusted Operating Margin calculated using segment gross revenue. Consolidated operating margin and Adjusted Operating Margin calculated using as reported revenue.

SCHEDULE 6

Segment Depreciation and Amortization - Unaudited

Depreciation and amortization:

USIS

International

Consumer Interactive

Corporate

Total depreciation and amortization

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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