2022 Q2 Form 10-Q Financial Statement

#000155203322000048 Filed on July 26, 2022

View on sec.gov

Income Statement

Concept 2022 Q2 2021 Q4 2021 Q2
Revenue $948.3M $789.8M $728.2M
YoY Change 30.23% 20.89% 24.03%
Cost Of Revenue $308.1M $239.0M $234.7M
YoY Change 31.27% -6.02% 7.37%
Gross Profit $640.2M $410.1M $493.5M
YoY Change 29.73% -7.72% 18.69%
Gross Profit Margin 67.51% 51.92% 67.77%
Selling, General & Admin $327.1M $261.5M $199.8M
YoY Change 63.71% 27.62% -0.65%
% of Gross Profit 51.09% 63.76% 40.49%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $130.6M $88.40M $98.40M
YoY Change 32.72% -6.46% 8.25%
% of Gross Profit 20.4% 21.56% 19.94%
Operating Expenses $765.8M $349.9M $527.7M
YoY Change 45.12% 16.83% 3.37%
Operating Profit $182.5M $114.0M $200.4M
YoY Change -8.93% -11.49% 89.06%
Interest Expense $51.90M -$29.10M $25.60M
YoY Change 102.73% 28.76% -23.58%
% of Operating Profit 28.44% -25.53% 12.77%
Other Income/Expense, Net -$54.00M -$22.00M -$19.70M
YoY Change 174.11% -358.82% -36.25%
Pretax Income $128.5M -$11.50M $180.7M
YoY Change -28.89% -109.02% 94.3%
Income Tax $29.20M $1.800M $58.60M
% Of Pretax Income 22.72% 32.43%
Net Earnings $95.60M $1.017B $127.6M
YoY Change -25.08% 900.39% 86.28%
Net Earnings / Revenue 10.08% 128.82% 17.52%
Basic Earnings Per Share $0.50 $5.31 $0.67
Diluted Earnings Per Share $0.49 $5.27 $0.66
COMMON SHARES
Basic Shares Outstanding 192.5M shares 191.4M shares
Diluted Shares Outstanding 193.1M shares 192.8M shares

Balance Sheet

Concept 2022 Q2 2021 Q4 2021 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $524.9M $1.846B $529.4M
YoY Change -0.85% 271.93% 7.84%
Cash & Equivalents $521.8M $1.842B $526.2M
Short-Term Investments $3.100M $3.100M $3.200M
Other Short-Term Assets $308.6M $231.6M $215.0M
YoY Change 43.53% 48.37% 7.82%
Inventory
Prepaid Expenses $167.7M $136.2M $120.6M
Receivables $636.3M $558.0M $511.8M
Other Receivables $0.00 $0.00 $0.00
Total Short-Term Assets $1.494B $2.632B $1.253B
YoY Change 19.21% 79.08% 17.69%
LONG-TERM ASSETS
Property, Plant & Equipment $218.3M $247.7M $209.3M
YoY Change 4.3% 12.74% 2.95%
Goodwill $5.587B $5.526B $3.455B
YoY Change 61.7% 71.25% 5.32%
Intangibles $3.815B $3.771B $2.211B
YoY Change 72.53% 73.51% -1.6%
Long-Term Investments $42.50M $46.10M $44.00M
YoY Change -3.41% 0.0% 13.99%
Other Assets $637.7M $459.0M $266.2M
YoY Change 139.56% 106.29% 16.14%
Total Long-Term Assets $10.38B $10.00B $6.142B
YoY Change 69.03% 71.23% 3.05%
TOTAL ASSETS
Total Short-Term Assets $1.494B $2.632B $1.253B
Total Long-Term Assets $10.38B $10.00B $6.142B
Total Assets $11.88B $12.64B $7.395B
YoY Change 60.59% 72.81% 5.27%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $281.0M $270.2M $212.2M
YoY Change 32.42% 39.86% 7.17%
Accrued Expenses $64.40M $66.80M $44.50M
YoY Change 44.72% 69.11% 55.59%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00 $0.00
YoY Change
Long-Term Debt Due $114.6M $114.6M $69.30M
YoY Change 65.37% 106.49% 24.42%
Total Short-Term Liabilities $916.0M $1.357B $601.8M
YoY Change 52.21% 102.6% 3.37%
LONG-TERM LIABILITIES
Long-Term Debt $5.805B $6.251B $3.273B
YoY Change 77.36% 83.93% -8.4%
Other Long-Term Liabilities $190.8M $232.9M $181.8M
YoY Change 4.95% 10.8% -21.33%
Total Long-Term Liabilities $5.996B $6.484B $3.455B
YoY Change 73.55% 79.67% -9.19%
TOTAL LIABILITIES
Total Short-Term Liabilities $916.0M $1.357B $601.8M
Total Long-Term Liabilities $5.996B $6.484B $3.455B
Total Liabilities $7.737B $8.629B $4.488B
YoY Change 72.41% 84.55% -6.29%
SHAREHOLDERS EQUITY
Retained Earnings $2.362B $2.255B $1.160B
YoY Change 103.56% 140.52% 52.3%
Common Stock $2.242B $2.191B $2.136B
YoY Change 4.97% 4.82% 3.76%
Preferred Stock
YoY Change
Treasury Stock (at cost) $281.2M $252.0M $249.2M
YoY Change 12.84% 17.1% 17.44%
Treasury Stock Shares 5.900M shares 5.600M shares 5.600M shares
Shareholders Equity $4.039B $3.908B $2.805B
YoY Change
Total Liabilities & Shareholders Equity $11.88B $12.64B $7.395B
YoY Change 60.59% 72.81% 5.27%

Cashflow Statement

Concept 2022 Q2 2021 Q4 2021 Q2
OPERATING ACTIVITIES
Net Income $95.60M $1.017B $127.6M
YoY Change -25.08% 900.39% 86.28%
Depreciation, Depletion And Amortization $130.6M $88.40M $98.40M
YoY Change 32.72% -6.46% 8.25%
Cash From Operating Activities -$126.4M $148.1M $235.7M
YoY Change -153.63% -35.38% -7.17%
INVESTING ACTIVITIES
Capital Expenditures -$62.70M -$66.10M -$53.90M
YoY Change 16.33% -19.78% 18.2%
Acquisitions
YoY Change
Other Investing Activities -$523.2M -$1.939B -$20.30M
YoY Change 2477.34% 6094.25% -55.29%
Cash From Investing Activities -$585.9M -$2.005B -$74.20M
YoY Change 689.62% 1663.32% -18.46%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -54.20M 2.994B -70.30M
YoY Change -22.9% -1700.96% 89.49%
NET CHANGE
Cash From Operating Activities -126.4M 148.1M 235.7M
Cash From Investing Activities -585.9M -2.005B -74.20M
Cash From Financing Activities -54.20M 2.994B -70.30M
Net Change In Cash -766.5M 1.137B 91.20M
YoY Change -940.46% -1690.21% -27.5%
FREE CASH FLOW
Cash From Operating Activities -$126.4M $148.1M $235.7M
Capital Expenditures -$62.70M -$66.10M -$53.90M
Free Cash Flow -$63.70M $214.2M $289.6M
YoY Change -122.0% -31.26% -3.31%

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<div style="margin-top:9pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:700;line-height:120%">Use of Estimates</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">The preparation of consolidated financial statements and related disclosures in accordance with GAAP requires management to make estimates and judgments that affect the amounts reported. We believe that the estimates used in preparation of the accompanying consolidated financial statements are reasonable, based upon information available to management at this time. </span><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">These estimates and judgments affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the balance sheet date, as well as the amounts of revenue and expense during the reporting period. Estimates are inherently uncertain and actual results could differ materially from the estimated amounts.</span></div>
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LossContingencyDisclosures
Contingencies<div style="margin-top:6pt;text-align:justify"><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:700;line-height:120%">Legal and Regulatory Matters</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">We are routinely named as defendants in, or parties to, various legal actions and proceedings relating to our current or past business operations. These actions generally assert claims for violations of federal or state credit reporting, consumer protection or privacy laws, or common law claims related to the unfair treatment of consumers, and may include claims for substantial or indeterminate compensatory or punitive damages, or injunctive relief, and may seek business practice changes. We believe that most of these claims are either without merit or we have valid defenses to the claims, and we vigorously defend these matters or seek non-monetary or small monetary settlements, if possible. However, due to the uncertainties inherent in litigation, we cannot predict the outcome of each claim in each instance.</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal inquiries by these regulators, we routinely receive requests, subpoenas and orders seeking documents, testimony, and other information in connection with various aspects of our activities.</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">In view of the inherent unpredictability of legal and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings or investigations are in the early stages, we cannot determine with any degree of certainty the timing or ultimate resolution of legal and regulatory matters or the eventual loss, fines or penalties, if any, that may result from such matters. We establish reserves for legal and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. However, for certain of the matters, we are not able to reasonably estimate our exposure because damages have not been specified and (i) the proceedings are in early stages, (ii) there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class, (iii) there is uncertainty as to the outcome of similar matters pending against our competitors, (iv) there are significant factual issues to be resolved, and/or (v) there are legal issues of a first impression being presented. The actual costs of resolving legal and regulatory matters, however, may be substantially higher than the amounts reserved for those matters, and an adverse outcome in certain of these matters could have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods. We accrue amounts for certain legal and regulatory matters for which losses were considered to be probable of occurring based on our best estimate of the most likely outcome. It is reasonably possible actual losses could be significantly different from our current estimates. In addition, there are some matters for which it is reasonably possible that a loss will occur, however we cannot estimate a range of the potential losses for these matters. Legal fees incurred in connection with ongoing litigation are considered a period cost and are expensed as incurred.</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">To reduce our exposure to an unexpected significant monetary award resulting from an adverse judicial decision, we maintain insurance that we believe is appropriate and adequate based on our historical experience. We regularly advise our insurance carriers of the claims (threatened or pending) against us in the course of litigation and generally receive a reservation of rights letter from the carriers when such claims exceed applicable deductibles. We are not aware of any significant monetary claim that has been asserted against us in the course of pending litigation that would not have some level of coverage by insurance after the relevant deductible, if any, is met.</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">As of June 30, 2022 and December 31, 2021, we have accrued $113.0 million and $85.6 million, respectively, for anticipated claims. These amounts were recorded in other accrued liabilities in the consolidated balance sheets and the associated expenses were recorded in selling, general and administrative expenses in the consolidated statements of income. Legal fees incurred in connection with ongoing litigation are considered period costs and are expensed as incurred.</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">The following discussion describes material developments in previously disclosed material legal and regulatory matters that occurred in the six months ended June 30, 2022. Refer to Part II, Item 8, Footnote 22, “Contingencies” of our Annual Report on </span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">Form 10-K for the year ended December 31, 2021, for a full description of our material pending legal and regulatory matters at that time.</span></div><div style="margin-top:12pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:700;line-height:120%">Ramirez v. Trans Union LLC</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">On January 24, 2022, we reached a tentative class settlement with the plaintiffs, which has been preliminarily approved by the court on July 19, 2022. We expect this matter to be resolved by the end of 2022.</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">Accordingly, in 2021, we revised the amount of the probable loss that we previously estimated, resulting in a reduction of our estimated liability and partially offsetting insurance receivable, and a corresponding net reduction recorded in selling, general and administrative expense for the year end December 31, 2021.</span></div><div style="margin-top:6pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:700;line-height:120%">CFPB Matters</span></div><div style="margin-top:6pt;text-align:justify"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">In June 2021, we received a Notice and Opportunity to Respond and Advise (“NORA”) letter from the Consumer Financial Protection Bureau (“CFPB”), informing us that the CFPB’s Enforcement Division was considering whether to recommend that the CFPB take legal action against us and certain of our executive officers. The NORA letter alleged that we failed to comply with and timely implement a Consent Order issued by the CFPB in January 2017 (the “Consent Order”), and further alleged additional violations related to Consumer Interactive’s marketing practices. On September 27, 2021, the Enforcement Division advised us that it had obtained authority to pursue an enforcement action. On April 12, 2022, after failed settlement negotiations with the CFPB related to the matter, the CFPB filed a lawsuit against us, Trans Union LLC, TransUnion Interactive, Inc. (collectively, the “TU Entities”) and the former President of Consumer Interactive, John Danaher, in the United States District Court for the Northern District of Illinois seeking restitution, civil money penalties, and injunctive relief, among other remedies, and alleging that the TU Entities violated the Consent Order, engaged in deceptive acts and practices in marketing the TransUnion Credit Monitoring product, failed to obtain signed written authorizations from consumers before debiting their bank accounts for the TransUnion Credit Monitoring product and diverted consumers from their free annual file disclosure into paid subscription products. The CFPB further alleges that Mr. Danaher violated the Consent Order and that we and Trans Union LLC provided substantial assistance to TransUnion Interactive, Inc. in violating the Consent Order and the law. We continue to believe that our marketing practices are lawful and appropriate and that we have been, and remain, in compliance with the Consent Order, and we will vigorously defend against allegations to the contrary in such proceedin</span><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">gs. On July 8, 2022, the TU Entities and Mr. Danaher each filed a motion to dismiss the lawsuit.</span></div><div style="margin-top:6pt;text-align:justify"><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">As of June 30, 2022, we have an accrued liability of $56.0 million, compared with $26.5 million as of December 31, 2021, in connection with this matter and there is a reasonable possibility that a loss in excess of the amount accrued may be incurred, and such an outcome could have a material adverse effect on our results of operations and financial condition. However, any possible loss or range of loss in excess of the amount accrued is not reasonably estimable at this time. In addition, we will incur increased costs litigating this matter.</span></div><div style="margin-top:6pt;text-align:justify"><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">In March 2022, we received a NORA letter from the CFPB, informing us that the CFPB’s Enforcement Division is considering whether to recommend that the CFPB take legal action against us related to our tenant and employment screening business, TransUnion Rental Screening Solutions, Inc. (“TURSS”). The NORA letter alleges that Trans Union LLC and TURRS violated the Fair Credit Reporting Act by failing to (i) follow reasonable procedures to assure maximum possible accuracy of information in consumer reports and (ii) disclose to consumers the sources of such information. We believe that our acts and practices are lawful and we intend to vigorously defend against any allegations to the contrary. Should the CFPB commence an action against us, it may seek restitution, disgorgement, civil monetary penalties, injunctive relief or other corrective action. We cannot provide assurance that the CFPB will not ultimately commence a legal action against us in this matter, nor are we able to predict the likely outcome of any such action. As of June 30, 2022, we have recorded an accrued liability for an immaterial amount in connection with this matter. There is a possibility that a loss in excess of amounts accrued may be incurred; however, the possible loss or range of loss is not estimable at this time.</span></div><div style="margin-top:6pt;text-align:justify"><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">In June 2022, the CFPB informed Trans Union LLC that it intends to issue a NORA letter following an investigation relating to potential violations of law in connection with the placement and lifting of security freezes resulting from certain system issues. As of the date of this disclosure, Trans Union LLC has not received the NORA letter and has not otherwise been informed of the allegations the CFPB may make. We have corrected associated system issues and have processes in place to monitor and address issues going forward. Should the CFPB commence an action against us, it may seek restitution, disgorgement, civil monetary penalties, injunctive relief or other corrective action. We cannot provide assurance that the CFPB will not ultimately commence a legal action against us in this matter, nor are we able to predict the likely outcome of any such action. As of June 30, 2022, we are not able to reasonably estimate our potential loss or range of loss related to this matter. </span></div><div style="margin-top:6pt;text-align:justify"><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:700;line-height:120%">Argus Department of Justice Matter</span></div><div style="margin-top:6pt;text-align:justify"><span style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">We are cooperating with an inquiry originating from the civil division of the United States Attorney’s Office for the Eastern District of Virginia related to Argus’s historical use of certain data it collected under certain government contracts. We acquired Argus in connection with our acquisition of VF in April 2022. This matter pertains to alleged conduct that occurred before we acquired Argus. We cannot predict the timing, outcome, or potential impact of this matter, financial or otherwise. Under the stock purchase agreement Trans Union LLC entered into with Verisk Analytics, Inc. (the “Seller”) pursuant to which we acquired VF, including Argus, the Seller agreed to indemnify us for certain losses with respect to this matter, including all losses directly resulting from any settlement agreement in connection with this matter, including civil monetary penalties, remediation costs and fees and expenses.</span></div>
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