Good day, and thank you for standing by. Welcome to the Experian's third quarter trading update webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Brian Cassin, Chief Executive Officer. Please go ahead, sir.
Thank you very much. Hello, everybody, and welcome to our Q3 trading update call. I'm here, as usual, with Lloyd, who will take you through the trading performance after my opening remarks. We continued to grow well in Q3, which came in at the upper end of our expectations, supported by strong execution and new product performance. Total revenue growth was 9% at actual rates, 7% at constant exchange rates, and organic revenue growth was 6%. All regions delivered growth, with 13% organic growth in Latin America and robust performances elsewhere. By segment, Consumer Services, where we now reach 182 million free members globally, delivered double-digit organic growth, and B2B was 5% up. So it was an encouraging performance all around.
Let me touch on some of the regional Q3 highlights, starting with North America, where sequentially, organic revenue growth improved to 5%. There are positive contributions in our CI/BI business line from Ascend, Clarity, and Employment Verification Services. Credit conditions are similar to when we last spoke in November. The precise timing of credit issuance recovery is up for debate, but it feels like we are at or close to a trough. Across our client, the pattern of activity has not changed much.
We've grown our position with larger clients, helped by our platform strategy and by expansions to new categories of client spend. And performance across subprime lenders and Fintechs is more of a mix, with volumes down in some of these segments. Other parts of our B2B portfolio have performed well, especially Automotive and Health, supported by new product contributions and expanded client engagements.
Our market position in Consumer Services has strengthened further. Organic revenue growth of 9% is a very good outcome and has been helped by the diversity of the portfolio. We again added to our free member count to take it to 69 million, and when credit supply fully recovers, this will represent a very attractive scaled audience for lenders, and we expect this, plus the progress we've made with Experian Activate, to support a strong recovery in the credit marketplace at that time.
Right now, we see different approaches by lenders in the credit marketplace, similar to when we last spoke. On the other hand, our premium services have continued to perform well, and there was strength in Partner Solutions. We're very encouraged by the progress that we've made in insurance. Turning now to Latin America, which delivered 13% organic revenue growth.
As expected, Q3 growth in Brazil stepped up sequentially as deals that we had expected in Q2 were signed in Q3. Positive data, scores, attributes, analytics, fraud, and PowerCurve all contributed to growth in B2B. We're very pleased with progress in our agribusiness vertical, which has also progressed very strongly. Spanish Latin America also contributed very favorably. Consumer Services has had another strong quarter, up 26%. Free memberships for Latin America reached a noteworthy milestone of 100 million members. Revenue has benefited from a record performance for Limpa Nome, as well as from an increased contribution from PagVeloz, our payment platform. The U.K. delivered another resilient quarter with organic revenue growth of 3%. In B2B, the notable call-out is the 9% organic revenue growth we delivered in the U.K. CI/BI business line.
In a market where credit issuance contracted by 5%, this is a very strong result. We continue to deliver a strong new business performance with either increased share of wallet or through new client wins. We expect clients now to monitor consumer health indicators closely to judge when to resume new credit issuance. There is some evidence that this is starting to happen in the mortgage sector as interest rates expectations fall. Our new products have resonated very well with clients. We have more to come, and when the recovery happens, we're going to be very well placed. Consumer Services is still the weak spot in the U.K. portfolio but has started to stabilize. We're very focused on making improvements to the consumer proposition and to position this business well for recovery.
Q3 was another good quarter for EMEA Asia Pacific, which delivered organic revenue growth of 7%. We had some very good performances across our markets, with notable call-outs being Italy, Australia, and India. All markets have also shown revenue growth contributions from new product innovation, so we've made very good progress with a much more sustainable trajectory. And with that, I'll now hand it over to Lloyd for the financials.
Thanks, Brian. Brian, and good morning, everyone. As you've seen, we delivered good growth at the upper end of our expectations for Q3, with organic revenue growth of 6% and continuing the trend of significantly outperforming the volume growth in our core lending markets. We saw good growth in the U.S. Bureau, continued strength in the U.K. and Brazil Bureau, and stronger-than-expected activity in our North America data breach business within the North America Consumer business. B2B globally grew by 5%, while B2C grew very well at 10%. We continued our trajectory of membership growth, adding 4 million in the quarter, taking us to 182 million members overall.
Acquisitions added 1% to growth, and exchange rates were a 2% tailwind following strength in the Brazilian real and pound sterling, meaning total revenue at actual exchange rates grew by 9%. Turning to the performance by region, beginning with North America, where organic revenue was up 5%, with B2B up 3% and Consumer Services up 9%. Data was up 3%.
The bureau business, excluding mortgage, grew 3%, improving from the growth we saw in the first half, as we saw strength in Ascend, which delivered another great quarter, and Clarity Services, where alternative lending remained strong. Core bureau volumes continued to be down modestly. Mortgage revenue was down 6% on volumes down 22%, which was in line with our expectations. Automotive had another strong quarter, growing 10%, with good performances across credit and marketing.
Targeting was up 3%, as strength in our digital propositions helped to offset softer volume demand from the retail vertical. Decisioning was up 4%, with health delivering another strong quarter of 7% growth, following double-digit growth in eligibility transactions and good performances across all other product suites. During the quarter, we completed a bolt-on acquisition in our health business that adds to our propositions in revenue cycle management.
Decision Analytics was down 1%, principally due to the timing of key deals, while volumes in the Fraud and ID business continued to perform well, and we expect a stronger finish to the year in Q4. Consumer Services was up 9% for the quarter. The subscription business delivered another good quarter of growth, up mid-single digit, following continued enhancements to the offering.
Overall, U.S. marketplace was down mid-single digit, consistent with the year-to-date trends and reflecting continued weak credit supply. Partner Solutions grew strongly in the quarter as we saw a lot of activity and won a number of deals for breach support services. Moving on to Latin America, where organic revenue was up 13%. At constant exchange rates, total revenue was up 17%, including acquisitions.
And factoring in an FX tailwind during the quarter, revenue grew 25%. B2B was up 10% organically, while Consumer Services delivered organic growth of 26%. Data grew 9% organically, with 10% growth in the bureau, as our clients continued to adopt positive data scores and analytics. Our decisioning business also grew strongly at 12%, as clients benefited from our cloud-based decisioning tools and Fraud and ID management capabilities. Consumer Services grew 26% organically.
Nome continued to show strength, delivering another double-digit quarter. Our payment service, PagVeloz, grew very strongly as we engaged more members and increased volume. Turning to the U.K., which saw 3% organic revenue growth. Factoring in a tailwind from exchange rates, total growth at actual rates was 9%. B2B grew 3%, while Consumer Services was flat against last year. Data grew 9% during the quarter, and within this, the bureau had a great quarter, up 9%, continuing the strength from Q2 and significantly outperforming a weak market backdrop, with credit issuance down mid-single digit across the quarter. We continue to generate sizable new business wins and drive growth from product initiatives centered around Ascend and affordability propositions.
Decisioning was down 6% on last year, as we lapped some large deals in the prior year and as we continued to shift from on-premise to cloud-based products and contracts. Consumer Services was flat, showing an improving trend on Q2 across both the subscription and marketplace. And moving on to EMEA and Asia Pacific, where organic revenue grew 7%, with decisioning growing 17%. New product innovation revenue is growing well, and key markets like Australia, India, and Italy continue to perform strongly. So turning now to our near-term expectations. With our good performance in the first three quarters, we now expect full-year ongoing organic revenue growth to be in the upper half of our previous guidance range, so 5%-6%.
We've also made a couple of bolt-on acquisitions in the half, in the North America health business and in our Brazil fraud business, which together we expect to add around 0.5% to revenue growth this year. With these acquisitions, we're updating our interest guidance range to $130 million-$135 million, a $5 million increase on the previous guidance to account for the acquisition spend. All other aspects of our guidance for this year remain unchanged. With that, I'll hand you back to Brian.
Thanks, Lloyd. So in summary, Q3 was a very good quarter and puts us on track to deliver FY 2024 organic revenue growth of between 5%-6%. Achieving this will add to our strong track record of resilience in the face of macro challenges. We progressed our strategic initiatives, and we've improved our market positions during this time, and we expect recovery eventually to add to our performance. With that, we're going to open up the line for questions. So back to you, operator.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To restore your question, please press star one and one again. We will now go to our first question. Your first question today comes from the line of James Rose from Barclays. Please go ahead.
Hi there, morning. I've got two, please. The first is on data breach services within North America Consumer. Could you sort of help us understand what these are and what your services are there, and perhaps give us an indication of the revenue contribution to the third quarter versus the second quarter there? And then secondly, to come back to the core bureau in North America, the sort of slight step up you've seen there. Is that down to, would you say, just your own products rather than market volumes? How would you characterize the behavior of your bigger customers there? Thank you.
Great. Thanks, James. Deal with the first one. Data breach services are really resolution services for companies that have experienced data breaches. They will typically put in front of the consumers affected some form of service, which would include free credit monitoring and so on. Typically, you know, they will engage us or another provider to do that. So we've quite a large business actually in data breach resolution services, which is within our Partner Solutions business. If you think about it, it's really a sort of almost a white label consumer proposition because you effectively are giving credit report monitoring alerts and identity monitoring as well as part of that package. So that's what that product does.
It's a bit lumpy because obviously it's dependent upon, you know, one, the volume of data breaches that actually happen in the market, and two, our win rate. While we know that the level of data breaches has increased substantially over time, you know, I think also there's an element of overlap sometimes in the market between consumers that are impacted, but pretty good quarter from that perspective. Yeah, Lloyd on the-
Yeah, just to add on that, James, your question on the size. So you saw North America Consumer step up from mid-single digit to high single digit. If you reversed out the increase for data breach, it would be more mid-single digit. So that you saw some strength there in this quarter. And as we look ahead, we're not assuming that that repeats in the fourth quarter, and we think the fourth quarter overall for the group looks a lot like the third quarter, so around 6%, but without those data breach services in there.
On the second one, the step up in the bureau volumes, Lloyd?
Yeah, I think, it, it's quite a fine balance around volumes. I think, core lending markets, it's only six or six weeks or so since we reported, and, a lot of that's the holiday period, so we've not really seen a lot of change in that period. But our innovations continue to progress well. So it's more things like, the progress in, in the Ascend platform, which, had a great quarter. And we continue to see, good, good progress on the build-out of that suite.
Very clear. Thank you both.
Thank you. We will now go to the next question. Your next question comes from the line of Annelies Vermeulen from Morgan Stanley. Please go ahead.
Hi, good morning. I have two questions, please. So, I just wanted to delve into a little bit more about those assumptions around the 6% for Q4. You know, you've obviously mentioned that you don't expect the data breach piece to repeat in Q4. So, I suppose, what else do you assume for Q4 in terms of improvement or recovery in other parts to get to that 6%? I appreciate there's comp effects to consider, but, what are any color on the moving parts for that? And another related question, you know, why are you confident that those data breach are only one time, and could those in fact repeat in Q4, potentially?
And then just secondly, on capital allocation, you know, with, you know, you, I think you're still expecting to end the year, below your target leverage range. So perhaps you could comment on the environment for acquisitions, and, and how you see that piece developing as we move into full year 25. Are you still seeing good opportunities and, and is there any change in the target areas that you're focusing on? Thank you.
Great, thank you. Do you want to deal with the questions one and two?
Yeah, sure. So on Q4, obviously, you know, things move around a little bit quarter to quarter. We think that the data breach revenue that we had in Q3, it's associated with contracts that we won and built in Q3. So those contracts won't repeat, but of course, we're trying to win other contracts. So we could see more of that in Q4, but it's not assumed in our 6%. Elsewhere, we have, I mentioned in my remarks, we expect a bit of a tick up in some of the decisioning revenue in the fourth quarter, on the third, and a little bit of seasonality in Marketplace. This is traditionally when we get a better revenue performance from Marketplace, albeit the backdrop of the environment is a bit soft. So I think fairly confident in that 6% for Q4.
Then just coming back on the capital allocation question, I mean, there's really no change. We've done two relatively modest acquisitions since we spoke to you last in November, one in health and one in fraud in Brazil, both of which, you know, are absolutely in the areas of strategic focus for us. We don't expect any change really to the, you know, to the areas that we will remain focused on.
And, you know, I think the environment, as we commented in November, has gotten a little bit better, and obviously we've concluded, you know, two small acquisitions since then. So we remain, relatively, I think, optimistic that, you know, that could be interesting developments for us next year. But again, each one of these things is an individual acquisition, and you never quite know whether they're gonna happen or not, so we retain the same focus.
That's great. Thank you very much.
Thank you. We will now go to the next question. Your next question comes from the line of Harry Martin from Bernstein. Please go ahead.
Yeah, good morning, everyone. A couple from me as well. The first one, you called out the Clarity Services business a couple of times, on the call and in the release. I wondered if you could talk about the drivers of, of growth here for a business skewing to alternative data and, and short-term subprime-type lending, and what you, you see as the larger opportunity here. And then just a, a big picture question on growth, really.
You know, the business is running at 6% organic growth with credit conditions, volumes not strong by any means, as you mentioned. So how much faster does this business grow, in a normal environment? And maybe if you could reflect on some of the countercyclical parts that may fall away a little bit as well. It'd be good to just understand, you know, where you see the longer term growth algorithm as well.
Yeah, thanks for those questions. Yeah, we have called out Clarity a couple of times. I think we talked about it a bit in November. You know, this serves a segment of the market which is really sort of deep subprime. And I think it might be counterintuitive, but actually, if you think about the strength of the employment in the economy, these are typically people that'd be working in service industry jobs, for example. They've always accessed these services. And because employment has remained strong, you've continued to see, you know, very healthy lending in that segment. And indeed, actually, as you've seen tightening at the sort of prime or near prime, the sort of available opportunity for lenders in that segment has actually become bigger.
So they, you know, what would look like maybe a sort of near prime customer might look like a not a great credit to a prime operator, to, you know, somebody who's typically operating in the Clarity market, they look like a very good credit. So it's one of those sort of interesting dynamics that happens in an economy that's not sort of, you know, moving at a uniform pace.
And I think it's a consequence of the sort of unusual nature of the credit downturn, if you wanna call it that, that we've seen last year. Because pockets of the market have remained strong, and strangely enough, the pockets of the market that have stayed very strong have been the very top and almost the very bottom. But I think it's when you think about the employment aspect of that, it makes more sense. And then on the growth outlook, Lloyd?
Yeah, I think you called out a really important point, Harry, which is, you know, despite the fact that we've got soft volumes in core lending markets, particularly in the U.S. and the U.K. That shows, I think, the strength of the diversified portfolio, but also the innovations that we've been bringing to market, which we've talked to you about for a number of years. You can see that we're significantly outperforming the volume growth in those core markets. When we started this year, we talked about $1.1 billion of U.S. revenue was short-term volumetric in nature, and we saw that go from high single digit to mid-single digit decline over about a 12-month period.
So it's hard to call what a normal period is, but I think from that math, you can work out that if that reverses, it's pretty accretive to growth. Now, what often happens in those volume markets is when it turns on, it turns on quickly. And we also have, I think, some strong fundamentals in our marketplace business that are also structural in nature, that we expect to expand over time. So we're pretty optimistic that when a volumetric recovery comes, that would be positive for our business. Of course, the timing we can't call. I think we'll have to wait and see how that evolves. But six percent with those soft volumes, we feel pretty positive, and it shows the strength of the portfolio.
Thanks very much.
Thank you. Once again, if you would like to ask a question, please press star one and one on your telephone keypad. We will now go to your next question. Your next question comes from the line of Suhasini Varanasi from Goldman Sachs. Please go ahead.
Hi. Good morning. Thank you for taking my questions. Just one from me, please. I appreciate it's a bit early to be thinking about FY 2025, but given the start that you've seen to this year, maybe could you give some color on how you feel our trends compared to consensus expectations, which is looking for about 7% organic growth? Just some color there would be helpful. Thank you.
Yeah, Suhasini, I think we'll obviously come back in May with our full year results and guide, and guide for next year. When we look at consensus, I think it has a bit of a structure that we've seen this year, which is a broad range. So, just under 7% consensus, but a range of five to nine. I think what that tells you is different views on the timing of volume recovery. And that's pretty hard to call. As I've outlined, with finishing this year at 6%, despite the volume weakness, it bodes well for when that volume recovery comes, but the timing, we can't really call. So we'll update in May on our expectations for next year.
Thank you.
Thank you. We will now go to the next question. Your next question comes from the line of Andrew Ripper from Liberum. Please go ahead.
Yeah, morning, everybody. Well done on the quarter. A couple from me. First of all, just sort of finishing off on North America, Brian, I think at the interims, you were talking about how the sort of change in the lending environment had helped you in terms of the sort of tier ones doing relatively well, which you had a bigger exposure to than some of your U.S. peers. What do you feel the outlook is for this calendar year? Sort of bearing in mind, obviously, it's a new financial year for a lot of the lenders. Do you think the outlook is still the same, tier ones continue to gain share?
Yeah. Hey, Andrew. I think it's, I mean, it's only six weeks or about just over eight weeks since we spoke to you, so there's not a whole lot has changed. So, you know, you could take it as read that the market still looks pretty much as it did when we spoke to you back in November. I think you saw quite recently results coming out from the big banks in the U.S., and you can see that all the big banks are doing really well. But they're still cautious. You know, I think as you'd expect, around the trajectory of interest rates, around the, you know, the sort of residual path of the economy in 2024, how much of a hangover we have.
So we don't really expect much of a change in short term to you know how people are behaving. I mean, I think we will learn a lot in Q4, because as you say, it's a new financial year for banks, and some of them may be you know may want to get a little bit more progressive and you know and start to acquire a bit more progressively. But we'll have to see.
You know, certainly I think as we go through the year and if there is if the soft landing does occur, I think you're gonna see a relaxation of people's you know people's you know caution. And, you know, as I said, very different circumstances exist across the spectrum, but on the whole, the banking system is in very good shape, and particularly at the top end of the market. So no real change to that, but let's see what happens in Q4.
Thank you. And then I just wanted to ask about the rate cycle. Expectations now are for rates to sort of come off in the second half of this year. There's already been some interest rate reductions in Brazil. Has that sort of affected the market backdrop? Have you seen any improvement in Brazil as a result of that? And how do you think it would affect the volumetric side of the business? Do you need more than sort of 25-50 basis points to stimulate activity, or is it difficult to judge based on your experience of previous interest rate cycles?
Well, I think it's really a timing issue, and I think it's a confidence issue. On their own, a 25 basis point drop in interest rates doesn't make any difference in the light of the hikes that we've seen, particularly during the last calendar year. You know, but I think if that signaled a path to lower rates for longer, then I think you'd probably see a change in sentiment. I think the other thing I would say is, just as it took some time for interest rate increases to work through the system, it also takes a bit of time for interest rate decreases to work through the system.
And that's, you know, that's everything from adjustment to risk profiles to consumer behavior. So it's positive, but I think it would be, you know, overoptimistic to expect an immediate response to that. And I think it also depends on whether it's followed through with a, you know, longer-term outlook for lower rates.
Thank you.
Thank you. We will now go to the next question. Your next question comes from the line of Simona Sarli from Bank of America. Please go ahead.
Yes, good morning, gentlemen, and thanks for taking my questions. I have a couple of them. So first of all, it is a clarification on the U.S. mortgages, and I appreciate it is only 2% of your revenues. But we have seen the volume decline sequentially improving from -30% in Q2 to -22%. Nevertheless, your revenue or your revenue decline has accelerated sequentially. So if you could please explain that in the context of the FICO price increases. And also, if you could please talk a little bit about your expectation and for the U.S. mortgage businesses in calendar 2024 and 2025. That's the first one. Thanks.
Hi, Simona. I think, yeah, the overall position of the mortgage business, as you say, it's quite a small business for us. We've seen fairly consistent mid-20s declines in volume this year. As you say, it was 22% down in Q3. We expect it to be about the same, about mid-20s down in Q4 also. And then the pricing difference, it can be anywhere around 20% beneficial to that. It depends on the mix of the various resellers, et cetera, that in an individual period, but it's about the same. So Q4, we expect to be fairly similar to Q3, so mid-20s decline in volume and low to mid-single digit decline in revenue. We'll provide an outlook for our next fiscal year in May.
Thank you. And the second question is actually a follow-up to what Andrew was asking, and it's related to B2B in Latin America. So clearly, we have seen that there was a very strong sequential acceleration in B2B organic growth in Q3 versus Q2. How much of that would you say, even high level, could be potentially related to rate cuts versus instead market share gains in data analytics and the positive credit data? Thanks.
Yeah, Simona, if you remember at the end of Q2, we commented that a couple of contracts we signed in early Q3 rather than in Q2. So Q2 was a little softer, and Q3, we saw the revenue flow over. So I think when you look at those sequential numbers, you have to adjust for that. And when you stand back, what you can see is a pretty consistent, strong teen-level growth in Brazil. I think on the impact of interest rate changes, I think what you have to reflect on a bit is how that affects the felt interest rates in consumer markets. And remember, the credit spreads between the base rate and the consumer felt interest rates is very material in Brazil.
So what's driving how people feel interest rates is much more the deregulation of the lending markets, the availability of positive data, the different products that people can gain access to with the democratization of data. That has a much bigger impact than small changes in the base rate at this sort of level.
Thank you.
Thank you. We will now take our last question for today. Your last question for today comes from the line of Andrew Grobler from BNP Paribas. Please go ahead.
Hi, good morning. Just a couple of quick ones from me, if I may, as well. Firstly, on the acquisitions, could you just give a bit more detail, just, I guess, for modeling purposes of the scale of the two businesses that you bought in expectation for revenue contribution next year? And then secondly, in the U.K., you know, really good progress there against the market. To what extent do you think you've got a kind of embedded competitive advantage here from your product suite, or is it about service and data as well, or is it a combination of all of those factors? So underlying, you know, what is driving that market share gain and how sustainable will that be? Thank you very much.
On the acquisitions [cross talk ].
Yeah. Sorry.
So just in terms of the acquisition contribution, no, not a lot to add. These are you know fairly small bolt-ons. So overall, it adds about 0.5% to organic revenue growth this year for about half a year. So it'll add another 0.5% for next year across the first half. And similar to EBIT, and then it adds about GBP 5 million to our interest charge. So some small changes there, really. A couple of bolt-ons there. It's in the fraud space in Brazil, so really supporting the build-out of our fraud and analytical services, and in the revenue cycle management, particularly around Coverage Discovery. This is insurance Coverage Discovery inside the health business in North America.
Andy, on your second question, specific to the U.K., I mean, the point I'd make, I suppose, which is true for the whole of 2023 and Q3, obviously, as well, which is, if you look at our revenues in our core bureau businesses, they are outstripping volume in the market quite substantially. So we always get this question, the extent to which our business is sort of, you know, the regression analysis between activity, the market, and our growth rate. And I think you can see we are outpacing that quite significantly. In the U.K., it's quite marked. We think that the volume issuance in the market is down 5%, and obviously, our business is growing really strongly. That is a combination of all of the things that you mentioned.
You know, we, we do believe we have sustainable competitive advantage across the quality of our data, but also the product sets that we, you know, that we have, in market and the products that we're bringing to market, and increasingly, our ability to sort of stitch them together from sort of origination through to customer management, through to collections, increasingly using, using the Ascend platform capabilities across lots of different use cases for our clients, means it's sort of really changing the dynamic of how we compete there. So we're very optimistic, I think, about our position there, and I think, it is the result of, of a lot of work. You also mentioned things like service and so on.
Obviously, you'll, you know, you've been around a while, Andy. You'll remember a few years back, you know, we, we did actually have, you know, some issues which are more really related to stability of the technology environment in the U.K. Those have all been solved. That's made a huge difference. So it's really fighting on all of those fronts, which has put us in a position to deliver those kind of results, and long may it continue.
Thank you very much.
Thank you. That was our last question for today. I'll hand back for closing remarks.
Great. Well, thank you, everybody, for joining us today. Thanks for the questions. I hope you all have a good day, and we look forward to speaking to you again in May with our full year results. Thank you very much.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.