Manav Patnaik : Thank you. Chris, I was hoping, maybe along the same lines, talk a little bit about your fintech customer base. There’s a lot of chat, of course, given the specific banks that failed and whether that’s, a great exposure for those customer base that you have and the unique insight into them. So, can you just share some, whether – whether they’re struggling or some of them have to shut down? Or just, what’s going on there and how that impacts your business with them?
Todd Cello: Hey, good morning. Manav, this is Todd. I’m going to take that question. So, first of all is, as it pertains to the Silicon Valley Bank and Signature Bank failures, I would say that TransUnion had virtually no revenue exposure to either bank. I think what’s important to remember as well too is that, TransUnion’s customer base in our core Financial Services. And this is excluding Neustar and Argus, about a third of our revenues come from our top 20 customers, another third come from our 21st to 100 customers. And then another third of those come from thousands of other customers. So the point there is, we have a very nice diversified base of customers. We’re not necessarily upheld in a kind of situation with one particular customer.
As it pertains to the, failures of themselves, I would say that TransUnion saw no direct impact of it. However, we did see an indirect effect and that’s just the tightening, the tighter of lending that what Chris has already articulated and we talked about it in our prepared remarks this morning. In particular, just again as a reminder, just to caution that we’re taking with Card, Consumer Lending and which we’ve reflected in our updated guidance. When we look specifically, at our Consumer Lending LLB with in Financial Services, Consumer Lending, it’s where our fintechs residers is probably most held. And I think what’s important to remember here is that the growth rectory of the – of this Consumer Lending business has been particularly strong in 2021.
We saw really strong growth in ‘22 that growth continued in the mid-teens. And, right now, we’re calling for a high-single-digit decline with that customer base. So what does all that mean? What it means is, on a compounded annual growth rate basis, we’re talking about a mid-teen performance for this customer base for the last three years, which is pretty exceptional. And I think what’s important also to remember with the fintechs is that this isn’t a linear business. But what they will do is, they will outperform overall lending market over time. A couple other things I think are important to call out with this customer base is, there still demand, both on the customer side as well as on the consumer side and capital is available. Just what we’re living through right now is that, our customers are just being more selective as well as their investors are.
And what’s encouraging to us is, we’ve embraced the fintechs since the very beginning and the customers here in this space have gotten more sophisticated and they want to buy our broad based solution suite, which we’ve only done nothing, but enhance due to our recent acquisitions of Neustar and Argus. And the last point here is, the BNPL part of this area is still growing nicely.
Operator: The next question comes from Faiza Alwy with Deutsche Bank. Please go ahead.
Faiza Alwy : Yes, hi. Good morning. Todd, I wanted to ask about the margins in the back half of the year. Your 2Q guide is indicating that we’re going to see huge margin expansion and the back half. And I think you’ve talked about Neustar and others synergies coming through in the back half and maybe give us a bit more color around what are some of the puts and takes to think about?
Todd Cello: I’d be happy to, Faiza. Thank you for the question. So, just kind of grown is in the numbers, our margin in the first quarter was 34.3% and the guidance that we just provided for Q2 is contemplating 34.8% to 35% on the margin. And in the full year it’s 36.3% to 36.6%. So, if you take the, kind of the high, of that and figure out what the second half would be for roughly estimating, we need about a 38% adjusted EBITDA margin in the second half. So it’s about 300 basis points higher than the high end of our 2Q guide. Okay, so how are we going to do that? Well, first is just our revenue expectations I think I can’t stop without saying. But the second part of that is the synergies pertaining to Neustar only. We spoke about that during our February call.
We – of the number, we initially said that the overall synergies and when we announced the acquisition back September 2021 that’s going to be $70 million. Back in February, we increased the number to $80 million just based on what we have accomplished in the pretty good line of sight that we have in achieving that. In addition, to the revenue and the synergies, we’re also being very proactive on the cost management side, as we’re navigating a very uncertain market. So first we are focused only on making critical hires in areas of strategic importance to us. We’ve tightened our travel and entertainment and we’ve eliminated significant one-time spend in our specific consulting engagements. In addition to all of that what also gives us the conviction in the margin that we’re also seeing the early benefits of our global approach towards operating TransUnion through our global capability centers, as well as the early benefits that we’re continuing to enjoy for our technology transformation which we refer to as Project Rise.
Operator: The next question comes from Toni Kaplan with Morgan Stanley. Please go ahead.
Toni Kaplan: Thanks so much. I was just hoping you could put a finer point on the trajectory of the market trends. What are you seeing in terms of consumer demand and lender tightening credit so far in April versus January or February? And also just to get a directional sense April versus second half of March? Thanks.
Christopher Cartwright : Well, Toni, we’ll try and offer you a little bit of color on that. I mean, going back to the period of bank instability that we experienced about a month back, I think, while certainly the bank failure – the failures we experienced and then some of the incremental pressure, it’s unfortunate. That was really – it was really more fear-driven I think and amplified across our many media touchpoints. From what I’ve read, since then, and from what we’ve seen, while there could be some implications on liquidity and just available capital to loan from the conventional banking segment, that’s likely to be just kind of small. And I think as I mentioned earlier, in and around the crisis, we saw some wobble in daily volume figures.
But I wouldn’t say it was material and or that it’s been particularly material since. But I think it’s also important understand that demand for credit for consumers remains strong and to the degree that it can’t be satisfied from conventional bank lenders, alternative funding sources are going to come into the market. They may replenish available funding in the fintech space. We have seen this. We’ve experienced it several times, particularly with the fintech lenders where whatever there’s market uncertainty, fintech pulls back very quickly. It takes a period of time from the, – from the supply side to decide which lenders they want to back and what degree and what price, right? But I would expect that to be a kind of quarterly disruption in supply meeting demand and that that’s going to correct itself.
And you’re going to continue to see at consistent level of lending activity over the course of this year, despite the turmoil on the Bank segment and just the general uncertainty in the environment.
Operator: The next question comes from Ashish Sabadra with RBC Capital Markets. Please go ahead.
